Friday, December 17, 2010

US Public Debt Set To Pass US Annual GDP.

People may not even realize that during the Great Depression, US Federal debt as a percent of GDP did not even reach 40 percent.  Part of this was because the size of government was much smaller in military, public services, and entitlements.  The only time in history that the US as a whole spent more than it produced was during World War II. That is the only time but we are now quickly approaching the 100 percent range of federal debt to GDP as a percentage.  The US Treasury and Federal Reserve are aiming to pull the economy out of the Great Recession by going into further debt.  Think about this for a few minutes.  What led the US into a major financial crisis were banks allowing people to go into too much debt buying homes, cars, and other things they clearly were not able to afford.  While the banks were bailed out courtesy of taxpayers, the central banks are aiming to go deeper into debt just to create additional bubbles.  Bankers are loving this and their profits reflect this change.  Yet as many chastise economies around the world for going too deep into debt it is likely we will hit the 100 percent threshold next year.
Take a look at the amount of debt relative to our nation’s production:
us public debt vs gdp
Does the above even look healthy to you?  Starting in the 1970s the US government thought it would be smart to simply “deficit spend” and put all expenses on the US credit card.  So for a few decades this worked but now what?  If debt was the solution to everything then why not give every American an open ended credit card with $1 million dollars pre-loaded?  It would be simple given most Americans already have a credit card.  Yet wealth is reflected by what can actually be produced and the Federal Reserve simply printing money dilutes the currency of the US.  Common sense would tell you this.


  1. these bankers are ruthless. No need for wars because they control the money and who gets it.

  2. A foreign observer says;
    An Inter-generational national debt owed to the banksters!
    Capitalism based on wage labor ,is an economic system for creating profits in industrial production .
    Capitalisms economists ,the paid professors and the like have been paid to say and teach that the profits are created as a just return to hard working capital ,while Marxists say the profits are created by exploiting wage workers .
    No matter , whatever economic view on the source of new value and profits is true, the point is now moot.
    American industry, indeed American capitalism as a whole is no longer a profitable enterprise.In recent years its imported credit supply ,foreign investments ,was more or less equal or greater than the reported after tax profits of its corporations paid out as dividends to shareholders.

    The elite finance capitalists of America and their partners in the Anglo imperialist ‘free trade” bloc ,for their short term big profits , had betrayed and bankrupted the American people by selling out their industry ,de-industrializing America and created a Ponzi finance foreign credit driven economy , and has created a nation of enslaved Dept Peons .

    After this private capitalist finance sector had made huge profits for years , immediately they began to make huge losses they carried out a political coup in the Treasury Dept ,with bi-partizan political support and demanded that their losses be socialized by bailout from future government tax revenues.
    Not only that , indeed , they demanded that the US treasury and Fed bank print trillions of US dollars to handover immediately as an emergency bailout to the finance sector and its bankers even extracted huge bonuses in the millions of dollars for managing the bailouts!

    The dollar value is now threatened by a surge in government printing of money to pay for the bailouts.
    So the great advantages of the dollar hegemony in world trade and finance will be lost.
    As most industry has now been exported ,mostly to the cheap labor Third world
    it will be very difficult to resurrect an old style competitive real industrial capitalism with high wages.
    The children of the Debt Peons, now hereditary and increasingly underemployed debt peons themselves even if they are able to find productive work ,will be living in Austerity for paying off the past losses to this Elite traitor class ,now bailed by their government , by handing over all government future tax revenues for at least one generation.

    America is now a services based economy , a Ponzi dependent on foreign supplied credit to pay for its foreign trade and government deficit spending .
    Its job creating military industrial section is theoretically paid for out of government tax revenues and foreign armaments sales ,but in practice in recent years paid for by government deficit spending and subsidies..
    The US finance sector in recent years made most of its profits from wholesale fraud ,particularly by selling and exporting Trillions of $ worth of dud bonds and derivative futures in the property markets.
    The Ponzi scams finance sector had created a huge property bubble with its speculative consumers saddled by increasingly higher levels of debt were unable to keep up with the payments required , unable to pay off the increasingly high prices of the housing and credit card debts now required to live the expensive consumers of wealth lifestyles they are accustomed too.
    When this Ponzi finance sector imploded the bond markets collapsed .But As 40% of the dud bonds ,like sub prime housing bonds were sold overseas the economic crisis that started in America was exported to the rest of the financial world too.
    They understandably are no longer keen on supplying credit to the US
    To a dead insolvent Ponzi economy with a bad name for fraud and AAA scams !

  3. If American government debt becomes equal to a years GDP that doesn’t mean it can all be easily paid off in a couple of years of belt tightening austerity.
    Besides National debt there is private and company debts to pay.
    Not all GDP is profit .
    Or accumulatable extra wealth .
    Most of the GDP is simply consumed in simply everyday living costs and wealth consumption.

    Some of the GDP value flows to government for its expenses.
    Some GDP flows to shareholders as profit.
    Some of the GDP is used to pay off private and company debts.
    Without cutting down on the share flowing to profits and possibly bankrupting business,an EXTRA amount of value must be found in order to pay off the debts owned by the government bondholders in say a decade.

    So that would require not just an extra 10% more on top of normal tax contributions as that would not pay off much of the principle but finding an extra 10% in GDP to hand over.

    Paying interest for servicing the debt is one thing, but paying off the principle in say ten years would require an extra contribution of at least 10% of any future GDP.

    Where is this growth in new productivity of wealth going to come from for a bigger GDP in a now bankrupt American economy already deopendent on money printing for its profits?


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