Saturday, March 10, 2012

US Debt to GDP: Think 160% (Higher than Greece, Spain, Italy & Portugal)

10 March 2012

Bruce Krasting, a retired hedge fund manager, has recently taken a look at the off-balance sheet debt of the US government.

When you add the off-balance sheet debt (much of it high-risk loans to the public) to the $10.4 trillion in official government debt held by the public, you get a $24 trillion figure, in contrast to an annual GDP figure of $15 trillion. (That is, the above chart overlooks this $13-14 trillion off-balance sheet amount.)

This gross debt to GDP figure is actually the highest in the developed world.

Think Enron.

So exactly why are US government bonds considered a safe haven? You've got me.

My take, not that far down the road, the safe haven status of the US will be challenged by the international community. Whoever happens to be president at that juncture may have an unfortunate time with the history books.... (Not a job I would want, nor recommend!)


  1. Why Not freeze spending at current levels for three years. Thats one way of dealing with the budget problem. I think the major problem with the federal budget is lifespan. Today anyone retiring at sixtyfive can expect to live almost twenty years. Payments from social security and medicare will soon consume the majority of the budget in less than twenty years. The problem that nobody wants to face is lifespans. There's no getting around this issue it has to be addressed sooner or later. When social security began lifespans were maybe five or ten years after someone retired at sixtyfive. The retirement age must be raised by a large amount if these programs are to remain solvent. Also the escalating cost of healthcare must be checked this one thing stands to in time bankrupt all governments at all levels' and the whole economy.

  2. I think this is a "deep issue." What you are saying is true, but moneyprinting has made crazy spending possible. If the trust fund had been invested, it would be much more able to handle longer lifespans. Ron Paul figures govt is manageable at about the 2004 level, and govt was BIG in 2004, just smaller than now! I think a strategy is needed to solve the problem. My basic rule is infrastructure yes, bureaucracy no.