You act as if that 72% consumption = ipods. http://www.bea.gov/newsreleases/national/gdp/2008/pdf/gdp407f.pdf page 8. Durable goods are quite discretionary. I'll give you weakness there. Thats 7% of GDP. And amongst nondurable goods, I'll give you 1/2 of clothing and shoes as discretionary (1.3% GDP). How about half of Other too, just to give you the benefit of the doubt. Thats 2.7% GDP. And for Services: Recreation + Other, lets cut that in half: Thats 6.4% of GDP. So I think it would be fair to say that our 'frothy consumption' that will be possibly wiped out by a debt-burdened consumer is: 7 + 1.3 + 2.7 + 6.4 17.4% (I'll round it up to 20% for you) -> 20% of GDP. People always need to eat, heat their homes, etc. Those components of GDP will always be here regardless of what the dollar is doing. Just because they are called consumption doesn't mean they are on the margin (ipods). Chop another 10% off of the current GDP from the investment section in related sector downsizing that reacts to decreased consumption and recessionary pullback. That still gives you a 10T+ GDP against 5T of debt... (from current 13.8). Still manageable and nothing worth panicking about. If the dollar goes to 0, it will have nothing to do with our treasury debt. It will be because of some political event unforeseen ...
Discretionary. Drop weekly eating out, lawn mower man, house cleaner, trugreen, cut back on cable tv to basic service, cable internet to DSL, kids cellphones are gone......the list goes on. new car this year forget it....house maintance that can wait...