How Large is the US Federal Debt?

10 thoughts on “How Large is the US Federal Debt?”

1. The USA is approaching bankruptcy

   As hard is it is to believe, the US may have to default on it's debt. Public debt has grown by more than 100% with all the bailouts. We currently have a debt level 3 times what the European Union allows it's members. We are financially in far worse debt as a percent of GDP than Italy. Unfortunately, our Social Security Trust Fund is financed almost entirely by special bonds. Our government loaned themselves the money in the Trust Fund and spent it like drunken sailors at a strip club. We are left holding what may be worthless pieces of paper to guarantee our Social Security checks.

   ASIA - UNITED STATES
   U.S. debt approaches insolvency; Chinese currency reserves at risk
   by Maurizio d'Orlando
   In a few months, America's public debt has grown to more than 100% of GDP. Fear of a valuation crisis for the dollar, with tremendous consequences for Asian countries, major exporters to the United States.

   Milan (AsiaNews) - In the United States, the danger of debt insolvency is growing, putting at risk the currency reserves of foreign countries, China chief among them. According to new figures published by Bloomberg in recent days (Nov. 25, 2008 [1]), the American government has employed a total of 8.549 trillion dollars to stop the financial crisis. This means a total of about 24-25.4 trillion dollars of direct or indirect public debt weighing on American taxpayers. The complete tally must also include the debt - about 5-6 trillion dollars - of Fannie Mae and Freddie Mac, which are now quasi-public companies, because 79.9% of their capital is controlled by a public entity, the Federal Housing Finance Agency, which manages them as a public conservatorship.

   In 2007, public debt in the United States was 10.6 trillion dollars, compared to a GDP (gross domestic product) of 13.811 trillion dollars. Public debt in 2007 was therefore 76.75% of GDP. In just one year, direct and indirect public debt have grown to more than 100% of GDP, reaching 176.9% to 184.2%. These percentages exclude the debt guaranteed by policies underwritten by AIG, also nationalized, and liabilities for health spending (Medicaid and Medicare) and pensions (Social Security)[2]. By way of comparison, the Maastricht accords require member states of the European Union (EU) to reduce their public debt to no more than 60% of GDP. Again by way of comparison, in one of the EU countries with the largest public debt, Italy, public debt in 2007 was equal to 104% of GDP.

   In 2007, 61.82% [3] of America's public debt was held by foreign investors, most of them Asian. So the U.S. public debt held by nonresident foreigners is equal to about 109.39% (113.86%) of GDP. According to a study by the International Monetary Fund, countries with more than 60% of their public debt held by nonresident foreigners run a high risk of currency crisis and insolvency, or debt default. On the historical level, there are no recent examples of countries with currencies valued at reserve status that have lapsed into public debt insolvency. There are also few or no precedents of such a vast and rapid expansion of public debt. Link here.

   The United States of America is approaching bankruptcy

2. You commentors really don't know that you don't know much about the subject. The fed creates currency and gets it into circulation buying up, tradisionally, Federal bebt - approximately 380 billion per year. They must also buy up federal dept with new currency to shore up the liquidity of the dollar outside the US. (The US Dollar is used to buy many things, and all oil, outside the direct US economy.) This is probably in the range of 100B per year. Without this, the economy will enter recession. The net benefit to us taxpayers is that a great deal of the federal government can be paid via currency creation rather than direct taxes.

   The current deflationary situation requires an even greater infusion of currency to get the economy back on track, though the channels may need to be different. As a result, they are directly infusion money into the economy by buying bad mortgages, etc to the tune of, from what I've read, around 1 trillion dollars. (Conveniently, much of that money will be repaid to the US government, increasing revenues in future years.) It will take some time for this money to have the desired effect but it appears the Fed is already seeing the signs of turn around and reducing the rate of currency creation.

   BTW - collateral does not guarantee value or repayment. Collateralized holdings lost their value on a massive scale during the multiple fanancial panics in the 19th century and, like the s&l crisis of the 80s, banks holding mortgages today are failing because the property backing their loans have fallen in value. Even though the loan may be paid off in the long term, banks have to keep a researve based on the value of collateral to loan. When the collateral's (housing) value falls, they need more cash on hand to cover potential losses or go under. Where do they get cash? 1) additional depositors (not likely), 2) investors (not likely) 3) Other banks, ie investors, taking them over (happening) 4) Fed making very low interest loans (happening), or 4) Fed using new currency to buy up deflated mortgages (happenig but difficult since valuing the properties without killing the bank is a problem.)

3. This really puts the big numbers in terms that demonstrate their sheer size. And I must disagree, debts and deficits do matter, particularly when considered in terms of percentage of GDP, and their accumulating interest. The latter is what's really scary to me, as the cycle spirals out of control. The U.S. went off the gold standard in 1971, when France asked for its dollars to be redeemed for gold and Pres. Nixon realized that we would be losing what he considered to be too big a piece of the national assets. I don't know enough to know about the wisdom of that decision, but do know that if we keep printing dollars without creating actual value, the only reason we won't be carting dollars in wheelbarrows as the Germans are said to have done with marks before WWII is that technology has changed and money is transferred by plastic or computer entry and not physically!
   i hope the government does the right thing in balancing all the competing interests and restoring sound fiscal policy, but don't have real confidence. In any case, the mess we are in has been a long time coming, and will take a long time to resolve.

4. The true debt is not known, the Feds are unwilling to disclose their loans or who they're loaning too. Week ending last week the Feds were loans financial banks $93 billion DAILY and investments banks, $100 billion for the week and comerecial paper purchases were at $282 billion for the week. That's all up from the previous week, and that America,is close to a $1 trillion that the Feds are spending a week. How will they repay these loans, simply by printing US dollars. America is abusing it's position as world currency.

5. it's all fairly serious stuff. You in the US are not Robinson Crusoe you know. I've bought gold but I can't help feel the gold market is being manipulated. what do you think.

6. You know, I knew the U.S. was in huge debt, but the picture wasn't this clear until i read the post. Haha! I know it's not suppose to be funny but when things are "looking" this bad, there's nothing you can do but have a laugh out of the situation. Haha!

7. Not surprising to me really, considering how few of us are ever taught anything about money and finance in our 12 years of public education.

   I have no doubt now, however, many of us will have at least an inkling before the next 2 years have passed.

   Please think kindly of/to each other. It's possible to get through it, and become "a survivor", and like me, a survivor of the 30's, who's enjoying every day. Doug.

8. Maybe we don't understand debt. It is not what you owe that is important, it is what is backing it up. Ever heard of collateral? (& I don't mean the movie) Unless you want to trade the debt for Virginia, or Texas, then it may be a problem because the people that we owe the money to may just want to be paid back. So we "sevice the debt" by printing money or giving them gold. I suggest we give them Washington, D.C. and the caretakers therein.

   Now if we are not gonna give 'em Texas, we have to give something, and that simply means the more dollars we print with the same backing, (or reserve) each dollar becomes worth less, (not worthless [yet])

   When the dollar buys less, (that means, children, it takes more dollars to buy the same thing than it used to take) Ever heard of inflation. Well, if you haven't, you will get a real education soon. (as soon as we are finished with disinflation [or deflation] call it what you will. So it does not matter how big the debt is, it is how we service it. Or how we CAN service it, IF we can. (printing works for while) OK, feel better?

9. deficits and debt don't matter as long as deficits do not cause high/hyperinflation and debt as long as the majority is owned by US citizens

10. Hooweee....it is indeed astronomical ..It is indeed splendid to have this post shared and of course takes so much erudition to get this down ...You have said it all...What will shall see happen to the US economy in a Few Years to come will be more trhan the 87 market crash That is inevitable...Traders with the Eagle eye sees this and we all know the it is a crack in the rib for the Equity markets ....Lets see How hard Your newly elected President can at least try to save the economy in may be 20 years to come ..However good luck to us all ..The world at large ... Really dont know why we have to eat the pain of another.. but hey ...what has gone wrong has gone wrong ..I personally wish the US speedy recovery from its ailment and indeed the World at large ....All My love from AFRICA ..RAZAQ DAVIES

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