What percentage of the GDP would our national debt have to exceed...

[jdp349]

What percentage of the GDP would our national debt have to exceed to trigger a re-evaluation of US T-bonds/bills by the financial markets?

As of July 28, 2010, the "Total Public Debt Outstanding" was approximately 93% of annual GDP, ($13.258 Trillion) with the constituent parts of the debt being "Debt held by the Public" being approximately 60% of GDP ($8.63 Trillion) and "Intergovernmental Debt" standing at 32% of GDP ($4.55 Trillion)

How do we go about calculating our tipping point? Essentially how much debt can we accumulate before financial markets begin to truly doubt our ability to make good on our obligations and begin to demand higher rates of return and our cost of borrowing begins to increase? How much unused financing capacity do we have left?

[jtuck004]

1. As you might imagine, it is hard to calculate what other people "think".

Per Alan Greenspan, and several other economists, “(A) government cannot become insolvent with respect to obligations in its own currency.”

We are the sole creator of the dollar, created by law, and required to pay obligations to the United States government. It is also the reserve currency for most of the world. As long as our obligations are in dollars, there is no physical limit. Our only limit might be if the Congress does not allow any more to be credited to the appropriate bank acocunts by the Fed.

[jdp349]

2. Thanks for the link

that answered a lot of my questions

[jtuck004]

5. NP. Of course, a discussion of inflation seems to

always arise when talking about this, so this article is also a good read.

[drm604]

3. Very interesting article.

Everyone should read it.

[Yupster]

4. Party on dude

We can spend endlessly as much as we want.

Who knew KISS was right. We can rock and roll all night and party every day.

Kowabunga !!

[notesdev]

6. The answer is "you don't want to find out for certain"

the moment it does it'll be like that moment on the rollercoaster when the bottom drops out... but you're in one of the back seats so you can't see it coming until it happens

[jtuck004]

7. That's no doubt true, but I think it is much further away than most of the

fear-monger's :) think. China only has around 30% consumption, so they are very dependant on our dollars to buy their stuff, so they can in turn buy things from us. I honestly can't think of another nation even close that has a "democratic" financial system that could facilitate global trade the way we do. Some have made noise about that, which I think is probably a way to weaken their dependence on the dollar, and allow countries to trade globally even if we figure out how to get some real wealth building back into this country.

I think we are in much more danger of an implosion. We have let finance take over. Important seats in the Fed and Treasury as well as others in the government are or have been taken by ex-Goldman Sachs and other Wall Street folks, or people at the fed/treasury and in Congress simply have too close a relationship with the finance industry. Policies have been written and laws changed to make it possible for them to have an unbridled hand in world financial markets. We are paying part of the price for that today. There are still potentially trillions of dollars hidden behind the veil of the Fed, and Wall Street has been and is continuing to be re-financed at an amazing rate, and apparently building up the same complex derivative market that led us down this road. All the while the administration and others seem to be following a policy of kicking-the-can-down-the-road because they know that there is a huge debt to be paid, (I'm speaking of the $4 to $5 trillion that we owe on mortgages OVER the actual value of our real estate, the worthless paper the fed traded treasuries for, etc) before we ever get to the trade deficit. 30 million unemployed and under-employed people need for them to create a really LARGE plan to not just put people to work, but to find ways that all that money doesn't simply get shipped overseas. We are also likely to be living in an economy where service provides the biggest part of GDP - so where does wealth come from? But it would take acknowledging the debt load, and they don't want to do that for fear the world will lose faith.

Which is why I really like your analogy..."that moment on the roller coaster when the bottom drops out... but you're in one of the back seats so you can't see it coming until it happens". 'Cause I think that's where most of us are, and we have no idea of the seat we're in - so we argue about all the other stuff that isn't even close to affecting us as much. ;)