[cobran20]

Another milestone for the bankrupt one!

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US debt, net of all settlements for all already completed bond auctions, is now at precisely $15,182,756,264,288.80. Why is this relevant? Because the latest annualized US GDP, according to the BEA, was $15,180,900,000.00. Which means that, as of today, total US debt to GDP is 100.012%. Congratulations America: you are now in the triple digit "debt to GDP" club!

(naturally, this is using purely "on the books" data. If one adds the NPV of all US liabilities, and adjusts GDP for such things as today's housing contraction, then the magical triple digit threshold was breached long, long ago).

[wulfgar]

You're not bankrupt until your creditors finally freak!

US treasuries debt itself has grown by about 10% pa on average for the last 10 years. At the same time major foreign holdings of US treasury debt have grown by an average of 16.4% for the 10 years.

The US is increasingly dependent on the good will of strangers.

So the real clue is the extent to which a certain foreign country will buy US debt.

Total foreign holdings are in the region of 4.7 trillion. The FED system of banking holds well over 5 trillion. That leaves the American market and semi-government holding 5 trillion.

[Solomon]

I've been thinking a little about debt to GDP as a measure of economic health.
In a deflationary environment, I'm not sure that it can be relied upon.
As a country deflates, the debt certainly gradually reduces, but the corresponding Gross Domestic Product also declines.
That ratio therefore is likely to stay the same for a consider period of time, even though the economic health of the country might be improving or otherwise.
The other part of this equation is that in a deflationary environment the GDP will be adversely affected by various industries cutting back production, but debt remains to be paid.
So from either perspective, other measures may be better indicators of a country's health during a depression.

One other thing that I've considered is that in a deflationary environment different industries are required.
Necessities dictate over luxuries, for instance.
Low cost effective industries over large scale expensive.
This all impacts upon how GDP is measured.

[wulfgar]

Solomon, on 27 December 2011 - 12:56 PM, said:

I've been thinking a little about debt to GDP as a measure of economic health.
In a deflationary environment, I'm not sure that it can be relied upon.
As a country deflates, the debt certainly gradually reduces, but the corresponding Gross Domestic Product also declines.

You've only recently meditated on this one?

Yes quite simple, the dead beat nations of the glorious West charge up the GDP figure by simply borrowing. Just as I'd be rich for a short while if a concern was happy to lend me 50 or a 100 million. As was noted with Greece, once they stop lending you money your souffle economy hits the skids.

There is 'hard dollar' and 'soft dollar'. The money involved in international purchases is 'hard dollar', the stuff in your domestic economy is 'soft dollar'.

An electric tea kettle might cost 5 or 10 from China.........you pay 25 or 50......but the real article is the tea kettle......Myers value adding doesn't count for much in reality.

The US imports 500 bil of oil each year. For arguments sake let's say Americans spend 500 bil on junk food each year. Which is more valuable?.....correct the oil.....Americans could live without junk food.......losing 2/3rd's of their oil consumption would be a lot trickier. The 500 bil of GDP on junk food is souffle.