US National Debt hit $19 trillions/Your thoughts on how it is going to affect USD

[Gone4Good]

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Originally Posted by Mulligan That is true but also $5 trillion plus of that $19 trillion is owned by intergovernmental holdings such as the SS trust fund, etc...

Yeah, you're right. Only ~$14T held by the public. The rest we owe to ourselves.

[Gone4Good]

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Originally Posted by sengsational It was kind of paid back, I think.

The denominator went up. The numerator didn't go down.

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Originally Posted by sengsational ...that's how it's done. You've inflated the fiat currency and so taxed people that saved their money in a way that didn't defend against inflation.

Over the last 12 months, the all items CPI index increased 0.7 percent before seasonal adjustment.

The interest paid to bondholders includes compensation for expected inflation. For at least the last decade the amount paid to bondholder for inflation has exceeded the actual amount of inflation we've experienced. This is no longer the 1970's.

[bclover]

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Originally Posted by REWahoo How is the national debt going to impact the US$? Way beyond me. Heck, I'm still trying to figure out where your lap goes when you stand up...

Right now I'm not losing sleep over the exact number. what is more worrisome to me is that our wonderful elective officials seem to play "kick the can", which actually should not surprise me since they have done that a time or two.

So while 19 trillion is worrisome I'd feel much better if someone was at least attempt to rein in the spending.

which always leads to another hot topic question of "who's willing to take a pay cut"?

[bclover]

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Originally Posted by DrRoy The debt is a concern. Look what happened to Greece. We are not that bad off yet but could get there. What we need is to control the growth of overall entitlement spending, and then the debt would be manageable as a % of GDP. The politicians so not have the stomach for that since people will not vote for someone who rains on their parade, even if it is to prevent a hurricane.

the problem is who determines which "parade" is more important. The pentagon just asked for 7 billion dollars more to supposedly fight isis. ok who takes the cut? As a senior I certainly don't want my "entitlements" cut to fund more military spending.

who makes the call??

[travelover]

And of course, any "crisis" is an opportunity to wound your political opponents while pretending to solve the crisis .

I won't provide an specific examples to avoid being kicked off the forum.

[Hamlet]

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Originally Posted by Gone4Good Good thing we won't have to do that. One thing that I think is poorly understood about government finances is that the U.S. never needs to pay down the money it has borrowed. We never repaid the money we borrowed to finance WWII and we'll never repay the $19 trillion we owe today. We'll roll it over until the end of time. And that's OK. The giant WWII debt balances are positively trivial in size compared to today's economy. So too will $19 trillion be in the not too distant future. That's not to say we don't have a long-run fiscal imbalance, we do; mostly due to rising health care costs. And we'll have to raise some taxes and cut some spending to address that. But we don't really have a debt problem. And I don't expect we ever will.

Yes, the situation is concerning, but not dire. We actually don't even need to ever balance the budget, as long as we get the deficit down to less than our growth rate. We are currently running a deficit of less than 3% GDP, so we aren't terribly far from sustainable right now. We just need to trim the deficit down about 1% of GDP to be staying even.

And we need to address the potential growth of the deficit down the road that the CBO estimates we will see. People need to keep in mind that their projections depend on a lot of assumptions that may not come to pass. They see a rising deficit in large part because they expect interest rates to rise. That might be correct, but I think they are also expecting pretty mediocre growth over that time. I suspect that if we really get the interest rate rise that they are forecasting, it will be because the economy has run a little hotter than they expected.

In any case, we don't need dramatic changes, just a general bending of the curve in the right direction.

[VFK57]

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Originally Posted by bclover Right now I'm not losing sleep over the exact number. what is more worrisome to me is that our wonderful elective officials seem to play "kick the can", which actually should not surprise me since they have done that a time or two. So while 19 trillion is worrisome I'd feel much better if someone was at least attempt to rein in the spending. which always leads to another hot topic question of "who's willing to take a pay cut"?

Agree. May be it is not that bad as of now but living on borrowed and printed money soon or late will lead to disaster.

[sengsational]

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Originally Posted by Gone4Good The denominator went up. The numerator didn't go down.

I'm going to need some help with this one. Real GDP went up? I did a little graph and can't get the right answer (image). I used this [http://www.usinflationcalculator.com...1913-to-2008/] and this []BEA : Page Not Found to come up with that graph.

[NYEXPAT]

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Originally Posted by Gone4Good Good thing we won't have to do that. One thing that I think is poorly understood about government finances is that the U.S. never needs to pay down the money it has borrowed. We never repaid the money we borrowed to finance WWII and we'll never repay the $19 trillion we owe today. We'll roll it over until the end of time. And that's OK. The giant WWII debt balances are positively trivial in size compared to today's economy. So too will $19 trillion be in the not too distant future. That's not to say we don't have a long-run fiscal imbalance, we do; mostly due to rising health care costs. And we'll have to raise some taxes and cut some spending to address that. But we don't really have a debt problem. And I don't expect we ever will.

Hell, we still owe that Philly banker his 800k to finance the American Revolution. I think with interest the debt is now 32 Billion?

[dallas27]

Of which 2-3 trillion is on owned by the fed, so a wash.


Sent from my iPhone using Early Retirement Forum

[Gone4Good]

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Originally Posted by sengsational I'm going to need some help with this one. Real GDP went up?

Yes, but when talking about things like debt / gdp as we are in this tread all the values are nominal.

So here's what nominal GDP did from 1940-1980 according to the Saint Louis Fed. That's the period when debt to GDP declined.



And the attached file shows what U.S. debt outstanding looks like over the same period according to the White House historic tables ( https://www.whitehouse.gov/omb/budget/Historicals )

Both went up. GDP went up more so the debt / GDP ratio declined.

[audreyh1]

I'm not quite sure what you all are trying to figure out, but GDP is real.

[Jerry1]

I've always found the site below interesting:

U.S. National Debt Clock : Real Time

A few things come to mind:

I remember Ross Perot and his graphs and I don't think we've done anything to address the debt since then. I think it was about $8T then.

I don't recall when the SS fund was combined with the General fund, but I think that was a mistake.

The $19T is nothing compared to the unfunded liabilities that the Federal government has for SS and Medicare and that doesn't even include the unfunded pensions of local and state governments that are underfunded.

Signed,

Looking for a safe harbor but thinking there's none to be had.

[sengsational]

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Originally Posted by Gone4Good Yes, but when talking about things like debt / gdp as we are in this tread all the values are nominal.

I'm kind of a simpleton in that I can't get my head around two (or more) things at once, especially when it's exponential and especially something exponential plotted linearly. That's why I try to look at stuff in real, rather than inflated, currencies.

[Gone4Good]

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Originally Posted by sengsational I'm kind of a simpleton in that I can't get my head around two (or more) things at once, especially when it's exponential and especially something exponential plotted linearly. That's why I try to look at stuff in real, rather than inflated, currencies.

That's fine. You just want to make sure you're comparing apples to apples. If you want to use real gdp to calculate a debt to gdp ratio you need to make sure you're adjusting the debt balance for inflation as well.

[Winemaker]

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Originally Posted by Gone4Good The denominator went up. The numerator didn't go down. Over the last 12 months, the all items CPI index increased 0.7 percent before seasonal adjustment. The interest paid to bondholders includes compensation for expected inflation. For at least the last decade the amount paid to bondholder for inflation has exceeded the actual amount of inflation we've experienced. This is no longer the 1970's.

Recall that in August 1971, the US formally removed all ties to the US dollar and gold. At the rate the US was sending dollars overseas at the time, I believe I read, the US had previously "owned" 55% of the world's gold, and had been reduced to 22%.

[Dwhit]

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Originally Posted by Clone My largest concern is rampant inflation. If we get to a stretch where the markets do not keep on with inflation, then the net worth takes a real hit. A pension with no COLA is seriously devalued.

If that happens with large debt, the Feds have a problem, since interest rate hikes to fight inflation really ramps up the debt problem. it takes away flexibility.

[Gone4Good]

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Originally Posted by Dwhit If that happens with large debt, the Feds have a problem, since interest rate hikes to fight inflation really ramps up the debt problem. it takes away flexibility.

Except inflation depreciates the real value of the outstanding debt burden. And it should also increase nominal tax revenue, meaning higher interest costs aren't such a burden for the treasury.

Deflation is more of a problem for debtors.

[VFK57]

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Originally Posted by Winemaker Recall that in August 1971, the US formally removed all ties to the US dollar and gold. At the rate the US was sending dollars overseas at the time, I believe I read, the US had previously "owned" 55% of the world's gold, and had been reduced to 22%.

Good point. The problem is that we are not sure if our Gold vaults still have 22% of world Gold. Germany wants a large portion of their Gold returned back from New York and could organize entire transportation of 300 Tons (agreed with the Feds) within a week but since Jan 2013 when Bundesbank announced the plan only around 100 Tons were returned. German Bundesbank foresee the Financial instability and that is why they are eager to repatriate their Gold while we point out on "technical difficulties" to return it right away. Total current German Gold what has to be in US vaults=1,450Tons.

[GTFan]

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Originally Posted by Whisper66 Looks like I'm contrary to most folks here. National debt concerns me more than any other national topic; including terrorism, our wars overseas, pollution and certainly climate change. I see no logical basis to support that unfettered spending, grossly rising debt and copious printing of money to support it all can remotely be considered acceptable, sustainable fiscal policy. My guess is that the economy will eventually take a far-worse-than-2008 nose dive, most likely when one of the other large economies (Eurozone, China...who knows) takes off and the world decides it is a better place to invest than the U.S.

The problem is that folks equate national debt with personal debt and spending habits and thereby say the sky is falling because we spend too much so everyone else owns us. As others have mentioned, there is no issue with the debt that can't be solved by printing more money as long as we're the world's gold standard currency. Buying off debt with play money isn't really an issue, the Feds just concluded QE a couple of years ago with no impact to inflation.

And global economic issues really have little to do with how much debt we're carrying, IMO. Most economists agree that government spending plays a vital role in GDP and the austerity measures implemented in other countries have hurt more than they've helped. But we're not Greece either.