Saturday, December 19, 2009

Debt Load Freakout

I read a blog named The Market Ticker, which needs to be read with an open mind. He believes, for instance, that the climate change issue is a hoax and is predicting the imminent financial collapse not only of the US but of the entire world. Nonetheless, he presents many interesting facts and arguments, and is good reading.

In a post yesterday he sounds alarm bells about this nation’s debt load and presents some conclusions which I think have quite a lot of merit. He has a really lovely chart which shows the progression of debt from 1980 to the present and, well, “Yikes.”

Over the past 29 years we have added to our debt at a rate 2.75 times faster than we have added to our GDP; in that 29 years we increased our GDP by 488% and increased our debt by a stunning 1341%. When you are adding debt in a multiplicative manner, it doesn’t just get worse every period, it gets tremendously worse.

The last nine years are breathtaking. We increased our GDP by 40.8% but increased our debt load by 110%, more than doubling it; a $26 trillion increase in debt, for a stunning total of $50.6 trillion in debt carried. There is a reasonable case to be made that consumer debt should be omitted for the comparison, since consumer income is not included in the GDP, but that makes it worse; without consumer debt the increase was 111%.

What makes the chart a real shocker is over on the right, those tiny columns labeled “Rest Of World.” Pardon my language, but, “Holy Shit!” Assuming that column is correct; The United States is carrying 25 times as much debt as the rest of the entire world combined?! Have we lost our freaking minds?

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