When Will The U.S. Debt Become A Negative?

Discussion in 'Economics' started by TraderTactics, Mar 30, 2010.

  1. Since October 2008, the U.S. government has been spending a lot of money, most of which it currently does not have. Simply put, to keep the economy going the government has borrowed from other nations and from the Federal Reserve Bank. The major foreign debt holders are China, Japan, and Brazil. The capital borrowed from the Federal Reserve Bank is simply printed. The national debt for the United States is now estimated to be over $12 trillion dollars. I repeat $12 trillion dollars!

    What is the amount of interest that must be paid back on this borrowed money? What will happen if the 10 Year T-note yields go to 5.00 – 6.00 %? How can the U.S possibly service the interest on this debt? Forget about paying off the principle on this debt, that simply cannot happen in the next 50 years.

    Spending by the past administration was completely out of control in the United States throughout 2001-2008. However, this current administration is not any different than the last one. The last time I checked a household could not spend their way into saving money. Countless stimulus and entitlement programs from the government continue to unfold on a daily basis. Therefore, the U.S. debt only seems to increase.

    At this time the stock market loves what is going on. The market seems to float higher everyday, and every dip is a buying opportunity. Leading stocks such as Apple Inc (NASDAQ:AAPL), Cliffs Natural Resources Inc (NYSE:CLF), and Potash Corp (NYSE:pOT) are certainly trading higher and signaling all is well, for now. However, at some point the party will end just as it did in 2007. When the party does end and the music stops, this time around has the potential to be worse than the last crisis.

    Source: usdebtclock.org
  2. No, it's a lot worse. This is change you can believe in:

    <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2788100>
  3. Wow that's a lot :eek:
  4. At this point, the US national debt is almost $12.7 trillion. At the current rate of growth, I have read estimates that the national debt will continue to rise to $17.8 trillion by the end of Obama's first term in 2013. If you add off-balance sheet obligations including almost $2 trillion for Fannie and Freddie, $500 billion to fund the FDIC for all the bank insolvencies and about $500 billion for FHA losses, our total national debt could be around $20 trillion dollars in 3 years, give or take a few trillion dollars. Currently our 30 year bonds pay a little under 5% interest. Assuming interest rates on all maturities rise, the interest rate on all treasuries could average around 5% in the next few years. 5% interest on $20 trillion of national debt is $1 trillion yearly, which is the amount collected for all individual and corporate federal US income tax in 2009. In other words, within a few years, all federal income tax may go to simply paying for interest on the national debt without reducing the principal.
  5. blox87

    blox87 Guest

    The whole system is flawed since money is created from debt. Fiat currency that's not backed by anything lasts an average 40 years. Our time is up. Back to barter economy or new currency ( backed by something of limited/fixed supply)
  6. sumfuka


    The new currency shall be backed by human organs. :D
  7. toc


    get ready for hyperinflation which will eventually lead to debt being paid off in newspaper value currency which results in a new currency adoption by the us.

    this was the plan all along since reagan took office but the question is how much suffering the common american will have to face.

    forget about great depression, governments will never let that happen, but great recession seems to be here to stay for next 3-5 years more.
  8. No, debt levels like this are not sustainable. It's only a matter of when the serious financial repercussions arise. We issued 333B of debt just last month, which is insanely high. I've said the same thing since my early posts on ET, so I won't say anymore.