Posted: 5/24/2017 11:23:22 AM EDT
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An economic expert I am not but I think my simple dumbass can understand this situation is not good.
I came across a list of countries that listed debt as a percentage of GDP. For 2016 the USA public debt was 73.8% of the GDP. Gross government debt was 106.71%. Meaning our government debt was just over 1 times the amount of money we as a country generate (income). So my question is how the hell is our bond rating still AA+? Hell how are we even in the A's at all? If my debt was over the amount I brought home and I applied for a loan I'd be laughed at all the way out of the bank. Just to put it in prospective in 2016 Japans public debt was 234.7% of the GDP and gross government debt was 237.918% of the GDP. Now I don't know what Japans bond rating is (I should probably google that) but how the fuck are they not in the same rating class as bubba who's on his 3rd bankruptcy and has a credit score of 300? |
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https://en.wikipedia.org/wiki/Deficit_spending
In short - the rules that apply to little people do not apply to governments. |
| I get that we're a deficit spending country, most of the world is. But at what point do we go from hey it's ok to over spend and build credit to holy shit I've spent enough to for several lifetimes. In other words why stop at just 106.71% of GDP why not make it 10 times the GDP? That way our bond rating will be AAA+++ squared to the infinity. |
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Quoted:
I get that we're a deficit spending country, most of the world is. But at what point do we go from hey it's ok to over spend and build credit to holy shit I've spent enough to for several lifetimes. In other words why stop at just 106.71% of GDP why not make it 10 times the GDP? That way our bond rating will be AAA+++ squared to the infinity. |
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Quoted:
do you have a mortgage on your house and loans for your vehicles? can you pay that debt off with one years earnings? if you can't, do you feel you are bankrupt or in trouble? |
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do you have a mortgage on your house and loans for your vehicles? can you pay that debt off with one years earnings? if you can't, do you feel you are bankrupt or in trouble? |
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2 Words ... Fiat currency.
The government can inflate it's way out of debt, and that's exactly what all governments do. By the way OP, our rising debt to GDP ratio has been reflected in the Bond rating you cite. We were downgraded in 2011. There are still warnings of another downgrade and currently a negative outlook. So people are not overlooking this FWIW. |
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2 Words ... Fiat currency. The government can inflate it's way out of debt, and that's exactly what all governments do. By the way OP, our rising debt to GDP ratio has been reflected in the Bond rating you cite. We were downgraded in 2011. There are still warnings of another downgrade and currently a negative outlook. So people are not overlooking this FWIW. |
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If my debt was over the amount I brought home and I applied for a loan I'd be laughed at all the way out of the bank. You can borrow a few times more than your gross income to purchase a house and many people do. It depends on your demonstrated ability to pay debt and the security you offer the lender. A primary residence is considered very good security. |
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It's just unbelievable how far we are out of tune from reality. They have a whole host of economic tools in their bag to delay the inevitable and string it along. Be thankful that you see that reality now and that they are so good at what they do. It gives you time to prepare. 
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Quoted:
An economic expert I am not but I think my simple dumbass can understand this situation is not good. I came across a list of countries that listed debt as a percentage of GDP. For 2016 the USA public debt was 73.8% of the GDP. Gross government debt was 106.71%. Meaning our government debt was just over 1 times the amount of money we as a country generate (income). So my question is how the hell is our bond rating still AA+? Hell how are we even in the A's at all? If my debt was over the amount I brought home and I applied for a loan I'd be laughed at all the way out of the bank. Just to put it in prospective in 2016 Japans public debt was 234.7% of the GDP and gross government debt was 237.918% of the GDP. Now I don't know what Japans bond rating is (I should probably google that) but how the fuck are they not in the same rating class as bubba who's on his 3rd bankruptcy and has a credit score of 300? Japan is A1 rating. |
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Your ratings are based on current growth, plan to address debts, and buyers of the debt.
China is buying a lot of our debts so the ratios are acceptable. Cutting gov spending is one of the biggest ways to cut debt ratios. Under Obama the debt to gdp skyrocketed... BIGLY. |
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meh,
What percentage of your income is your mortgage? For most people it is 2.5 to 3.5 times yearly salary. Only in this case the .gov is only paying the interest and no plan on when to start paying the principal, and it keeps applying for more loans every year 
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The US dollar is both a fiat currency (they can print more, but the key is to do so in a very predictable and relatively slow fashion)
and the reserve currency (nearly everyone has to use it to make payments globally.) Bond ratings are about risks, especially risks to repayment of the bond. Given the two points above, it is very, very very likely that the bond will get repaid (basically there's nothing that would really stop that from happening short of WW3.) Ergo high bond rating. The other quirky thing about being a reserve currency is when you inflate your money supply like we do, it basically is a tax on money held -- including all that USD used in global trade -- e.g. we get to export our inflation. That works OK until you do it enough that people don't want you to be the reserve currency anymore. (Look back, before the US, it was the British Pound, and before them, France, etc. See here. Also governments get to work on much longer timelines and have taxation powers, and that's figured into the ratings as well. Find a government that overprints on a whim, is 400% debt to GDP, and not a reserve currency and no one will touch it -- that's how you get places like Zimbabwe. |
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I get the housing thing about it obviously costing more than my income. But my monthly payment isn't more than 35% of my income and all of my debts and bills total sure as shit isn't greater than 1 time of my income. |
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Hi,
I'm no financial guru but I believe the current debt is around 120% of the GDP. 18Trillion GDP vs 21Trillion debt depending on whose numbers you use they vary. This is a great question because in my opinion it means big trouble. The US can barely pay the interest on this debt. The amount of money flying out the window to pay debt is staggering. Paying off the debt (I have doubts if it's even possible) would make America great again. ETA: I just checked the US Debt clock. The debt is 164% of GDP. http://www.usdebtclock.org/ |
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We'll keep getting away with it as long the dollar remains the world's reserve currency.
For international trade purposes, everybody wants dollars. When Russia sells something to, say, Mexico, do you think they want payment in pesos? Fuck no, they only accept dollars, just like (almost) everybody else. This makes our debt one of the safest investments in the world. When rich people all over the world need somewhere to park some of their money with low return and virtually no risk, they buy American Treasury bonds. We get to live high on the hog using the rest of the world's wealth to finance things. In return, they get a safe place to park their money where it won't be stolen or devalued. Until something comes along and threatens the primacy of the dollar, it's a sweet fuckin' deal all around. |
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You have to remember that it's a race as well.
If we don't spend and keep ahead, the next guy will take the credit risk and surpass us (is the thinking). Combine this with production-multipliers like inventing technologies, and we engage in the race toward "free/low-cost" food, water, energy, transportation, etc... thereby nullifying the accumulated debt. Imagine running up $100Bazillion in debt, but you invent a cure for cancer. The world will pay you $200Bazillion for it. It's the nature of our nature. Someone out there is always willing to take a greater risk... |
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While debt to GDP is a metric for financial 'health' it is often blown way out out proportion.
The PRESENT value of government benefits is NOT actual debt. Computing a present value on it and treating it as such is pretty much meaningless. The trick is we DO NOT have to pay it ALL next year. The inability of Incongruous Assembled to control major portions of the spending is the issue. As can be seen when growth stalls for ANY reason all H breaks loose. At least one major 'school' of economic though t has been wrong over and over again. And then always complains that 'You did not spend enough.' " The problem with socialism is that you eventually run out of other peoples money!" - Margaret Thatcher It has failed over and over but foolish excuses and a 'new' version will work next time we are promised. "Those who cannot remember the past are condemned to repeat it. ” George Santayana, Life of Reason, Reason in Common Sense, Scribner's, 1905, page 284 While it is never EXACTLY the same failing to correctly identify WHY a failure occurred will just repeat the problem. When the only solution is always spending MORE money the problem is probably not well identified. |
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The real answer - our debt is denominated in US dollar, which we can print.
Countries with low credit ratings usually have debt denominated in currencies other than their own, which they cannot print. It's impossible to default when you own the printing presses. |
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To admit that the daddy war bucks of the world is insolvent would send the world into complete and total anarchy.
Look what Greece......GREECE..... did to the world economy and it is a non-starter on the world's stage. Completely irrelevant to the world economy. The domino effect of the US default would be worse than any nuclear bomb. |
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I'm not a financial guru but I have an opinion.
Short answer: The United States is the world's safest financier and the biggest defense against hostile nations. Long answer: Our debt is backed by the full faith and credit of the United States being 'the people of the United States. As long as we are productive, not destructive and our government services the debt at a minimum then creditors will continue to lend. Here lies the problem: The people of the united states will eventually be overwhelmed by the responsibility of servicing the unmitigated, uncontrollable, non serviceable debt which will then cause destructive measures to be taken on a mass scale. When that happens, peaceful transitions of power will be a thing of the past. We got a taste of that in this election. Debt at some point will become a burden and a curse instead of a convenience. |
