US total debt officially breaks debt ceiling!

reply to post by Rockpuck


When our debts greater than our entire economy output our growth will slow down to a standstill or become a recession while our debt will continue to rise and we will never be able to pay it off. Interest will be insane and our world will end. The debt ceiling means nothing because we have and will change it.

reply to post by tooo many pills


So again, it has everything to do with revenue... not GDP ..the Government cannot collect GDP, it collects Taxes, which would average a small percentage of our GDP. let's assume 30% of our GDP. If our expenditures are -55% of our GDP, our expenditures are over 180% of revenue ... Since after tax breaks and credit, the average American pays 24%, and the average corporate tax is 20%, then we can assume that saying the Feds even take in 30% for revenue is laughable, meaning our Debt to Revenue if more like 200%+ Revenue would be what the Government uses to pay debts, when they cannot they issue debt to pay the debt.

GDP has nothing to do with Debt, and Debt to GDP is not a negative sign to an economy, only the governments ability to pay. Example: Ireland, Greece and Portugal .. unable to pay their debts because Revenue declined when the economy crashed.

reply to post by tooo many pills


I think your statistics are a little old, our GDP is about 15 trillion, and our debt is 14.3 and will be over 15 trillion by the end of the year, that's a lot more than 52%. We have added more than 5 trill of debt in just the last 3.5 years. That is why it is such a problem, there is no plan to slow it down, and as it grows so too grows the interest expense on it. But regardless, I agree with Rockpuck it's a stupid statistic.

The only way our GDP has grown for the last 30 years is by pulling demand forward by taking on excessive debt - our GDP would not have grown at all otherwise. All that fake GDP will be gone as soon as it is forced out when the debt defaults.

I think all countries with a ratio over 100% are going to collapse, we are all interconnected and when the ponzi scheme blows up, it's going to blow up for everyone involved.

Must be nice to spend money and not worry where it comes from. But that's what government does.

Can you say unfunded liabilities?

It's nice and comfortable to say GDP and debt is unrelated. However we can NEVER pay off the debt if it exceeds a percentage of total domestic product. Also related is interest on the debt.

At this point our public debt is 96.8% of GDP. Debt subject to limit is $14.2T and GDP is $14.66T.

List of countries and debt to gdp ratio (We're number eleven! We're number eleven!):
en.wikipedia.org...

Debt to GDP ratio
en.wikipedia.org...

US Public Debt
en.wikipedia.org...

A good 2010 article on why we can't already pay off our debt can be found here: theeconomiccollapseblog.com...

...The U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything....And the U.S. government would still be massively in debt....

...for more dollars to enter the system, the U.S. government has to go into more debt.

The U.S. government does not issue U.S. currency - the Federal Reserve does.
...
So, when the U.S. government needs to borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.

The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days).

So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.

So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.
...

Bank health is important, because of fractional reserve (banks have to reserve 3%-10% of deposits and not loan that out), they loan out 97% of the money you deposit. They turn your $30 into $1,000 in loans. The total imaginary dollars (not the $30, but the $1,000) is counted as M3 money supply. The Fed conveniently stopped tracking this, but it's around $14 Trillion.

M1 $1.9 Trillion: research.stlouisfed.org...
M2 $8.9 Trillion: research.stlouisfed.org...
M3 (2005) $10.3 Trillion: research.stlouisfed.org...
M3 Shadowstats: www.shadowstats.com...

If the US was a bank, M3 was the total money (~$14T), and debt was what was loaned out ($14.2T), the US may be violating it's fractional reserve requirement and is about to be bankrupt, and default on it's debt.

Long story short, if debt (interest) can't be paid off by economic activity, that's bad. If debt exceeds total money supply, that's also bad. How bad it is keeps getting obfuscated by the blue pills the economy is fed daily.

reply to post by tooo many pills


I did a little research for you since you seem to doubt my knowledge of economics.

tpmlivewire.talkingpointsmemo.com...

"Forget Debt To GDP, It's Debt To Revenue That Matters--And The U.S. Is The Worst"

Whatever the size of a government's liabilities, what matters ultimately is how they compare to the resources available to service them

The US takes in 18% of GDP as revenue and has a Debt to Revenue of 358.1% ......... in August of 2010.

Greece had 312.2% Debt to Revenue.

The only difference is the US can monetize debt, which we have been at historic levels. Greece has no control over monetary policy, and thus cannot print cash to stave off a bounced check..

reply to post by Rockpuck


I don't doubt your knowledge at all, I've agreed and stared you in many other threads. I'm not going to argue with the debt-to-revenue stat as it’s pretty eye popping. And I agree, that the GDP and our public debt basically have nothing to do with each other. It's a weird stat, but you said it yourself that it measures our country's ability to pay back our debt. Since, we have such a large debt that needs to be paid back at the lowest interest possible that's a pretty big deal. Our credit rating is extremely important.

I probably shouldn't have said "it's the real problem," but it certainly is more important than the debt ceiling, which Congress has the ability to change to whatever number they'd like, and has been changed eleven times since 1996. In all reality we don't even need a debt ceiling since they never stick to the previous one they set.

From what I've read if we go over 100% debt to GDP we will never recover because it would be near impossible for our economy to keep growing at the rate needed to cover the additional debt needed to keep us going and interest that would apply after our credit rating drops to the floor. But it's always possible that we create the next big invention in energy or transportation that creates an entire new industry with millions of jobs and a fresh cash flow.

You could look at debt as the total mortgage, and deficit as the mortgage payment vs. paycheck.

For perspective:

Mortgage amount: $700,000 (debt)
Mortgage payment: $3,800 (deficit at 5%)
Monthly take home paycheck: $10,000 (revenue if all is well)
Debt to Revenue ratio is 70%.

Debt to Revenue ratio of 358% would be a $3.58 Million mortgage, on that same $10,000 take home paycheck. It will never get paid off.

Here's a revenue to GDP chart from the CBO. Never before has the government spent so much in GDP percentage, totally irresponsible. Same as a $3.58Million dollar mortgage on a $10K paycheck. Like your neighbor stole your checkbook and every day is writing checks you can't cover.

[atsimg]http://files.abovetopsecret.com/images/member/3fd611c86211.png[/atsimg]

reply to post by proximo


I don't think the CIA Factbook is wrong. The Debt Held by the Public (our government debt) is around $9 trillion and the Intragovernmental Holdings is like $5 trillion. When added together, our Total National Debt is calculated. I'm thinking when they do the debt to GDP ratio they use the public debt only. Which is why for the end of 2010 the CIA says its 58%, and why dbriefed’s and your calculations are off. As I don’t think our debt to GDP% raised from 58% to 98% in less than a year, although it did rise 22% from 2008 to 2010. I wouldn’t put it pasted them, but I don’t remember them adding that much to it recently, do you?

so if America fails to pay and goes 'cap in hand' to China, would they bail America out ?

What other country can bail America out ?

Here in the UK, when Ireland went under we bailed them out to the tune of £7billion pound.
The UK did not actually have the money but borrowed the £7Billion at a nice low 1% interest repayment rate.

The UK then lent the £7Billion to Ireland with an interest rate of some thing like 5 - 7%.

Nice money maker for the UK.
Will the UK populous see that interest at all, err nope.

We have our own stupidly high debt to pay.

reply to post by tooo many pills


True, but if we were over 100% Debt to GDP ratio, we would be over 750% Debt to Revenue .. We would have to issue more debt in a single quarter than there is Dollars in circulation. Our breaking point for Debt to Revenue has, imo, already been surpassed.. because we don't know where or how to trim our budget we can only continue to expand the debt ceiling .. meaning ever larger percentages of our budget must go to paying interest on the debt. For us, because we can monetize our debt, it's not really a question of "what is the breaking point?" it's "how long can we maintain an equilibrium of stress on the economy?" That, imo, no one knows. The masters of our currency may have a slight inkling of when we will finally come crashing down .. I would say we can probably maintain another 25% increase in the National Debt over the next 10 years and still maintain our equilibrium. it will mean of course that our quality of life for the middle class down is going to get progressively worse.

It's interesting to note historically countries don't collapse because of economic woes.. they collapse because the populace reaches a breaking point long before the economy reaches a breaking point.. they can erode our quality of life, inflate our currency, tax us, fine us, fee us and even beat us but eventually we tire of it before the monetary policy ends the government.

I think "they" know this, and have a contingency plan to deal with us before they deal with their inability to maintain their own monetary policies.

reply to post by dbriefed


Well said, I should use graphs more often.. people like graphs.. pretty pictures..

Riddle me this, if the debt added $34 Billion and change on Friday alone, what happened? Was that so-called situation normal outlay per day, in which case we're looking at running $13 trillion annual deficits, or was there some sort of point debt that came due on Friday that the treasury had to pay out to?

The more I look at this, the more I'm starting to agree with that Stansbury guy. I think the poison pill was absorbing all of the bad debt from the banks, Fannie/Freddie, and various "should have been allowed to fail" side bailouts. That is the only explanation I can come to for why the nation went from a couple hundred Billion dollar a year deficits to 5-10 times that almost overnight and suddenly can't trim more than a few billion bucks without it supposedly crippling the nation.

reply to post by burdman30ott6


Usually the debt it's self only increases with Treasury auctions.. if the debt increased by 34 billion in one day, that means the Treasury sold 34 billion in new Tbills to fund current obligations. February 2011 was the single most expensive month in US history. A lot of this has to do with the previous "stimulus" plans, as well as past obligations made in previous spending bills that certain debts have to be sold by certain times to cover the cost of either the obligations or the interest on the obligations. There's no "average" of pe-day debt, it follows the Treasury's Auction calendar. Then you'll also have the Debt that was purchased to cover the cost of the bailouts and stimulus that need to roll over, so our deficits will look higher than they really are.

I think the only real way of measuring actual debt is compiling total outstanding Treasury bills in circulation and their planned auctions. You'd then have to compare it to the level of income vs level of expense.. then determine whether it was due to an increase in spending, or a decrease in revenue. 2011 has been a particularly bad year for revenue, and we are also paying interest on $14 trillion in debt.

Also Frannie and Freddie are not listed on our books .. it's a black hole of God Knows What. We fund their ability to buy more assets, but if we counted up their liabilities we'd be adding well over 2 trillion in further losses. Same with the "Bad Bank" deal the Federal Reserve has hidden somewhere in DC.. that bank alone could tank our economy.

Easiest way to explain it: Ponzi Scheme. It can't crash till everyone wants out.

reply to post by Rockpuck

It's interesting to note historically countries don't collapse because of economic woes.. they collapse because the populace reaches a breaking point long before the economy reaches a breaking point.. they can erode our quality of life, inflate our currency, tax us, fine us, fee us and even beat us but eventually we tire of it before the monetary policy ends the government.

I think "they" know this, and have a contingency plan to deal with us before they deal with their inability to maintain their own monetary policies.

That's true, entire countries don't collapse because of their economic woes, but empires sure do. The countries themselves always find a way to continue on as they should have in the first place.

But Rome had basically the same problem we are having now;

Many historians argue that the rapid growth of the empire over a relatively short time and the economic inflation that followed contributed substantially to the empire's decay. Due to the vast size of the empire, it required an enormous budget to maintain the infrastructure necessary for its survival, including roads (essential for communication, transportation, and the moving of armies) and aqueducts (many cities relied on the water thus provided). Moreover, the empire faced enemies on all sides due to its expansion into their territories, and huge sums of silver and gold were required to keep up its armies. To cope with both problems, the empire was forced to raise taxes frequently, and also to adulterate its coins, causing inflation to skyrocket into hyperinflation. This in turn caused major economic stresses that some historians regard as central in Rome's decline.

As did the Ottoman Empire which collapsed because it owed a majority of its debt to Rothschild owned-European Banks.

Then it was the British Empire's turn to conquer as much of the world as they could until they became so financially constrained by policing their empire they took on enormous amounts of debt to the up and coming banking hub, the U.S.

So, now it's the U.S.' turn to attempt world domination and assume mass amounts of debt, and then it will be China's turn.

It's quite interesting that the Banks are always are the center of it all. First, they build up empires and allow them to indebt themselves to the next blossoming country, then they jump ship when the time's right, let the former empire crumble and start all over again.

I believe as soon as the British relinquished control of Hong Kong back into the hands of the Chinese in 1997, it signaled China as the next empire destination. Hong Kong is even one of those special city-states like D.C., London, and Vatican City that doesn’t have to follow the same political rules as the rest of the country they reside in.

Sorry to go off topic.

reply to post by tooo many pills


It's all on topic and interconnected. I think that the US will follow the British in the way of our decline.. If you look at our budget it's not caring for our own people (medicare, ss etc) it's "Defense" .. which is completely out of control for a country of 300 million isolated from the rest of the World by two oceans. We should be able to exist with a minimal armed forces.. we spend more money policing our interest than our interest bring in revenue.

reply to post by Rockpuck

we spend more money policing our interest than our interest bring in revenue.

I think that's it right there. Our corporations force our government to assume mass amounts of debt for their bottom line. They found a way to use our military to their advantage without paying for it. They infiltrated every part of our government to make the government accept the yearly debt while they accept the quarterly profits. Yes, our imperialism helps our economy keep growing, but eventually it's going to destroy our empire and all of our lives as the amassed debt cannot be paid off.

Ok we now have a end game date... May 2.

Shall be interesting.

As we reported previously, the total US debt is now well above the debt ceiling. Since then the total debt number has only grown and as of yesterday was $14,320,468,555,091.68. Luckily, the legal loophole, the debt subject to the ceiling is still marginally below the $14.294 trillion cap: it was $14.268 trillion, or just $26 billion less.

So here is the math that is just a little troubling:

According to Treasury direct over the next week there will be a rather substantial net cash pay down:

* April 21: $92 billion in Bill Issuance offset by $122 billion in maturities for $30 billion in net debt reduction
* April 29: $14 billion in $14 billion TIPS issuance settles (auction today): $14 billion in net debt increase
* May 2: $99 billion of the abovementioned bonds settle (auctions next week), offset by $52.6 billion in maturities: $46.4 billion in net debt increase.

This means that over the next week there will be a total of $30.4 billion in net debt increase.

Backing up, as noted above there is $26 billion in capacity under the cap.

So..... just how does the Treasury plan to offset the $4 billion breach of the legal debt ceiling that is projected to appear on the Treasury statement as of May 2?

Got silver?

You know if they stopped Social Security, cut the president's, congress, senators, and other government officials' salaries we could probably cut back on some of our debt. What do you think?

reply to post by rockerchick135


Why would you stop Social Security? Many of those recieving it are just getting back what they were forced into investing into it as promised when SSI taxes were taken from their paychecks. To stop paying Social Security checks to these people would equate directly to theft. It isn't the retired Americans' fault that Social Security was raped repeatedly by corrupt politicians to fund wars, earmarks, and million dollar Pentagon toilet seats.

Guess what, the treasury sold 7.7 billion in bonds today... and POMO, the QE program, the FED... bought 78.5% of that since nobody wanted to buy it...

So they are FORCED to do QE3... otherwise nobody will buy the bonds... meaning the interest rates on the bonds (the debt) will skyrocket...

Now ``for real``...

Treasury Hopes To Issue $72 Billion In New 3,10, 30 Year Bonds Next Week, Even As Capacity Now Just $30 Billion

Next week will be interesting. Even as the Treasury is scrambling to find debt ceiling expansion options (for a complete analysis see this post from January) it has just released its most recent refunding statement, according to which it hopes to issue $72 billion in 3 Year, 10 Year and 30 Year bonds. What is interesting is that completely contrary to expectations, and to recent Treasury announcements, while the UST was expected to issue $69 billion this time around, it actually increased each issue by $1 billion. So much for that promise that the Treasury will need to borrow less. But what is worse is that there are no maturities or refunds next week, meaning the net debt increase next week will be $72 billion. This simply means that Geithner will now have to really start cutting back on all other interagency issues, and to actually start taking away from the funding of the SSTF. And the kicker: Congress is nowhere even close to start thinking about hiking the debt ceiling. While we had been expecting this to be a non-issue, it may suddenly become quite an issue, as unexpected downstream effects from the debt ceiling mitigation exercise start affecting local governments. Bottom line: the US economy now has just $30 billion in incremental debt capacity.