Is U.S. Debt Really All That Bad, Comparatively Speaking?

Your contrarian alarm should always go off whenever everyone in the world agrees on a market outlook. The same thus might apply to the outlook on the US dollar and America's financial health. Is the US debt really all that bad, relative to other countries in the world? If many other countries have similar amounts of debt relative to their GDPs, then how is the dollar doomed against their currencies?

Also, beyond debt to GDP, one needs to consider long-term growth factors as well. The US doesn't face a demographic time bomb the way China does, or a purely dying population as Japan. The graphic below, courtesy of Visual Economics, sheds some light on the US debt situation relative to some other high debt nations in the world.

Comments

[athena:]

Nice chart except that the US debt is actually over 11 trillion currently and projected to hit 20 trillion very soon.

Aug 28 05:00 AM

[The Hammer:]

Yeah your number are a little outdated . Fed debt has rocketed upwards in the last 3 years.
We are in a fed debt bubble now. You can't print your way to prosperity...eventually the ponzi collapes.
And Bernanke is hailed as a hero. This guy is a bum destroying future generations.

Aug 28 06:06 AM

[Dave Wrixon:]

Not only that the GDP yardstick is increasingly made up of Government Spending. Measuring what the owes as a percentage of what it squanders is not very meaningful.

GDP is an appalling misguiding way of making comparisons about national performance. It would be much better to do it simply as a percentage of total tax revenue. Of course that would still beg the question as to whether levels of tax revenues are sustainable, but it much better to measure debt against net income rather than simply turnover. Many organisations with massive turnovers are not making any money at all. How useful would it have been for example to measure GMs debt against its gross Revenue?

Aug 28 07:15 AM

[ggirard:]

To elaborate on Dave Wrixon's comment above, the notion of using GDP in any debt assessment is doubly confounded when we look at recent econonomic dynamics in the U.S. today. Spending is increasing rapidly with no sign of a major reversal in this trend; at the same time, tax receipts have dropped off by over 20% with no persuasive data to suggest that they will grow significantly for years to come. Over time, GDP growth becomes more of an indicator of gov't spending increases than anything else. We know today that there will NEVER come a time when we will have the revenue surplus to repay any significant amount of our debt. Inevidably, we approach the day (soon) when it grows to the point where our stagnant revenues cannot pay the interest on the growing debt while meeting even the most basic of our operating needs. As I understand it, the increased degree of money printing leading up to this cataclysm of default will leave us wrangline with the same fate that comes to all fiat currencies: total collapse through hyperinflation. I am no economist; however it doesn't take an economist to look at avaible information and come to believe that this cataclysmic default is perhaps a year or two in the future rather than a decade.

Aug 28 08:07 AM