Best of the Week
Most Popular
1.The Brexit War! EU Fearing Collapse Set to Stoke Scottish Independence Proxy War - Nadeem_Walayat
2.London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - Nadeem_Walayat
3.The BrExit War, Game Theory Strategy for What UK Should Do to Win - Nadeem_Walayat
4.Goldman Sachs Backing A Copper Boom In 2017 - OilPrice_Com
5.Trump to Fire 50 US Cruise Missiles To Erase Syrian Chemical Attack Air Base, China Next? - Nadeem_Walayat
6.US Stock Market Consolidation Time - Rambus_Chartology
7.Stock Market Investors Stupid is as Stupid Goes - James_Quinn
8.Gold in Fed Interest Rate Hike Cycles- Zeal_LLC
9.The BrExit War - Britain Intelligence Super Power Covert War With the EU - Nadeem_Walayat
10.Marc Faber: Euro to Strengthen, Dollar to Weaken, Gold and Emerging Markets to Outperform - MoneyMetals
Last 7 days
Billionaire Investor Paul Tudor Jones Says Stock Market Valuation Is “Terrifying” And He Is Right - 26th Apr 17
The Great BrExit Divides - Britain, USA and France - 26th Apr 17
10 Facts That Show Our Taxes Are Worse Than You Thought - 26th Apr 17
What Trump’s Next 100 Days Will Look Like - 26th Apr 17
G20: SURPASSING THE 2nd GLOBAL STEEL CRISIS - 26th Apr 17
What A War With North Korea Would Look Like - 25th Apr 17
Pensions Are On The Way Out But Retirement Funds Are Not Working Either - 25th Apr 17
Frank Holmes : Gold Could Hit $1,500 in 2017 Amid Imbalances & Weak Supply - 25th Apr 17
3 Reasons Why “Spring Forward, Fall Back” Also Applies To Gold - 25th Apr 17
SPX may be Aiming at the Cycle Top Resistance - 25th Apr 17
Walmart Stock Extending Higher - Elliott Wave Trend Forecast - 25th Apr 17
Google Panics and KILLS YouTube to Appease Mainstream Media and Corporate Advertisers - 25th Apr 17
Gold Price Is 1% Shy of Ripping Higher - 25th Apr 17
Exchange-Traded Funds Make Decisions Easy - 25th Apr 17
Trump Is Among The Institutionally Weakest National Leaders In The World - 25th Apr 17
3 Maps That Explain the Geopolitics of Nuclear Weapons - 25th Apr 17
Risk on Stock Market French Election Euphoria - 24th Apr 17
Fear Campaign Against Americans Continues Nuclear Attack Drills in New York City - 24th Apr 17
Is the Stock Market Bounce Over? - 24th Apr 17
This Could Be One Of the Biggest Winners Of The Electric Car Boom - 24th Apr 17
Le Pen Shifts Political Landscape- The Rise of New French Gaullism  - 24th Apr 17
IMF Says Austerity Is Over - Surplus or Stimulus - 24th Apr 17
EURUSD at a Critical Point in Wave Structure - 23rd Apr 17
Stock Market Grand Super Cycle Overview While SPX Correction Continues - 23rd Apr 17
Robert Prechter Talks About Elliott Waves and His New Book - 23rd Apr 17
Le Pen, Melenchon French Election Stock, Bond and Euro Markets Crash - 22nd Apr 17
Why You Are Not An Investor - 22nd Apr 17
Gold Price Upleg Momentum Building - 22nd Apr 17
Why Now Gold and Silver Precious Metals? - 22nd Apr 17
4 Maps That Signal Central Asia Is at Risk of War - 22nd Apr 17
5 Key Steps For A Comfortable Retirement From Former Wall Street Trader - 22nd Apr 17
Can Marine Le Pen Win? French Presidential Election Forecast 2017 - 21st Apr 17
Why Stock Market Investors May Soon Be In For A Rude Awakening - 21st Apr 17
Median US Household’s Wealth Has Declined by 40% Since 2007 - 21st Apr 17
Silver, Platinum and Palladium as Investments – Research Shows Diversification Benefit - 21st Apr 17
U.S. Stock Market and Gold, Post Tomahawks and MOAB - 21st Apr 17
An In Depth Look at the Precious Metals Complex - 20th Apr 17
The Real Story of China’s Strong First-Quarter Growth - 20th Apr 17
3 Types Of Life-Changing Crisis That Make You Wish You Had Some Gold - 20th Apr 17
The Truth is a Dangerous Thing - 20th Apr 17
2 Choke Points That Threaten Oil Trade Between Persian Gulf And East Asia - 20th Apr 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

The True U.S. National Debt

Interest-Rates / US Debt Aug 25, 2010 - 03:26 AM GMT

By: James_Quinn

Interest-Rates Best Financial Markets Analysis ArticleWhen I read Paul Krugman and the other Keynesian boneheads saying that our debt is not a problem, they quote figures about our debt of $13.3 trillion versus our GDP of $14.6 trillion not being so bad. That is only 91% of GDP. They point to World War II when our national debt reached 120% of GDP. They say everything worked out after that.


Well lets analyze that comparison for just a second. In 1945, Europe, Russia and Asia lay in ruins. The devastation was epic. The United States stood alone as the only unscathed country in the world. America became the manufacturer to the world. We rebuilt Europe and Asia. Our GDP soared, as our National Debt declined from $269 billion in 1946 to $255 billion in 1951, remaining below $300 billion until 1963.

Today our reported National Debt is $13.362 TRILLION. This is the first big lie. There are two entities named Fannie Mae and Freddie Mac that happen to be 80% owned by the US government. Anyone who thinks these two companies can operate without the backing of the US Government is delusional. The US taxpayer is on the hook for these two disastrously run companies. Somehow, government accounting doesn’t require their debt to be considered the responsibility of the US taxpayer. This is a fraud, pure and simple. Their debt is our debt.

According to their latest 10Q filed in early August (links below), their debts are:

Fannie Mae    $3.257 Trillion

Freddie Mac   $2.345 Trillion

The true National Debt of the United States is $18.964 Trillion. Therefore, our debt as a percentage of GDP is really 130%. This is beyond the level reached during World War II. We are no longer the manufacturer to the world. We are the consumer to the world. The country adds $4 Billion per day to the National Debt. Our GDP is stagnating with future growth no better than 2% being realistic.

Kenneth Rogoff and Carmen Reinhart, after analyzing data over 200 years throughout the world, have concluded that once debt reaches 90% of GDP, a tipping point is reached. Crisis and collapse will ensue.

“After looking at data from 44 countries spanning 200 years, they’ve concluded that at ratios of debt to GDP up to 90%, there’s not much correlation between government debt and economic growth. Above 90%, however, median economic growth rates fall by one percentage point and average economic growth rates fall by about four percentage points. That makes the 90% level a kind of make-or-break point for countries that are hoping to grow their way out of debt. If the government debt load climbs above 90% of GDP, economic growth slows so much that growth is no longer a viable solution to reducing that debt. Above the 90% level, governments serious about reducing their debt load have to increasingly rely on “solutions” such as reducing wages and depreciating their currencies, which might over time increase global economic competitiveness enough to give a boost to national economic growth. In the short to medium term, however, these “solutions” inflict real pain on the citizens of the countries since they reduce standards of living.”

The U.S. is well beyond the tipping point. By the time Obama exits Washington DC in 2012, the ratio will be 140% of GDP. That is if the currency collapse doesn’t happen first.

Join me at www.TheBurningPlatform.com to discuss truth and the future of our country.

By James Quinn

quinnadvisors@comcast.net

James Quinn is a senior director of strategic planning for a major university. James has held financial positions with a retailer, homebuilder and university in his 22-year career. Those positions included treasurer, controller, and head of strategic planning. He is married with three boys and is writing these articles because he cares about their future. He earned a BS in accounting from Drexel University and an MBA from Villanova University. He is a certified public accountant and a certified cash manager.

These articles reflect the personal views of James Quinn. They do not necessarily represent the views of his employer, and are not sponsored or endorsed by his employer.

© 2010 Copyright James Quinn - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

James Quinn Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

gAnton
25 Aug 10, 18:39
This Is Not Your Grandfather's GNP

Fannie and Fredie are a good start. Include Medicare and Social Security shortfalls, student loans, bank deposit insurance, etc., and the figure would get a little "better". I'm sure that there's many more "off the books" federal liabilities that we're not going to hear about for a while.

Also, this is not 1945. As opposed to 1945, federal debt is growing and federal income is decreasing, both very rapidly, Forty-nine US states were not bankrupt, and at the end of World War II half the population wasn't on food stamps. (Although there was an employment adjustment period due to slowing production of armaments. But the majority of the unemployed were woman who in those times would not have been working were it not for the war, and the adjustment had no negative effect on civilian goods productivity).

In addition,the current growing foreign trade in-balance is very disturbing for a number of reasons.

It's very true that "Figures don't lie, but liars sure enough do figure" (e.g. unemployment figures). But sometimes the liars just keep their mouths shut


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife