Rising Debt May Cause Sun to Set on U.S. Economy: Chart of Day

Discussion in 'Economics' started by ByLoSellHi, Sep 17, 2009.

  1. http://www.bloomberg.com/apps/news?pid=20601109&sid=aj6qdHrVNXhk

    Rising Debt May Cause Sun to Set on U.S. Economy: Chart of Day
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    By David Wilson

    Sept. 17 (Bloomberg) --
    As an economic power, the U.S. may go the way of the British Empire because of the government’s increasing debt burden, according to Richard A. Posner, an economist and federal judge.

    The CHART OF THE DAY shows how the public debt, or the national debt aside from liabilities for entitlement programs, has climbed in the past year. The chart goes back to March 2005, when the U.S. Treasury started giving daily updates on the debt.

    Public debt will keep growing rapidly, Posner wrote earlier this week on a blog he shares with Gary Becker, an economics and sociology professor at the University of Chicago.

    Declining tax revenue, rising Medicare costs, congressional reluctance to cut spending or raise levies, and the likely cost of efforts to overhaul health care and promote climate control will push the debt higher, in Posner’s view.

    “At some point the wheels may start coming off the chassis,” he wrote. “The United States may find itself in the kind of downward economic spiral in which ‘developing’ countries often find themselves.” He drew the comparison with the British Empire, whose economic position in the early 20th century was similar to the U.S. role today.

    The threat may emerge as the Treasury borrows more and more money, fear of inflation worsens as the Federal Reserve avoids raising interest rates, and government social programs cause unfunded spending to increase, the posting said.

    Posner’s most recent book is “A Failure of Capitalism,” published in May. He is a U.S. Court of Appeals judge for the Seventh Circuit as well as a senior lecturer at the University of Chicago Law School.

    (To save a copy of the chart, click here.)

    To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net
    Last Updated: September 17, 2009 10:22 EDT
  2. lrm21


  3. "May"?

    Really just a matter of time... unless the revolution comes soon enough.
  4. the1


    I think this may be a bit outdated. I recently heard the interest on the debt has now exceeded the national defense budget. No source.

  5. the1


  6. Our interest payment on our debt is about 3% of current GDP.
  7. I'm trying to figure our where he is getting the $52trillion debt number from. ????

    {edit} Oh, he is adding in all consumer debt, corporate debt, and private debt. Also all financial sector debt. I see.
  8. kxvid


    The guys right, to some extent. If you have a business that has higher return of assets than after tax borrowing costs you should borrow more. That is assuming you believe you will be able to maintain that return on assets.

    Households do not operate like businesses. An increase in household debt will not result in an increase in income generated. Household debt is non self liquidating, business debt is self liquidating. To say we need more household debt is ridiculous.

    It is also debatable if there should be more business debt EVEN if business return on assets are higher than after tax borrowing costs. This is because nobody knows if those returns are sustainable. ROA's were artificially high due to the doubling in private credit market debt over the past 10 years.
  9. <cite>Rising Debt May Cause Sun to Set on U.S. Economy: Chart of Day <cite/>


    I am just some DUMBASS trader and I can tell you as the sun set from 9/15/2008 to 9/15/2009, that was a VERY GOOD YEAR.

    I am NO FAN of President Barry, Nasty Nancy Pelosi, or Dingy Harry Reid, but these Three Stooges be making me money, day in and day out.
    #10     Sep 17, 2009