With precisely one year left for the world and all of its inhabitants, at least according to the Mayans, not to mention on the day of the Winter Solstice, it is only fitting that US debt, net of all settlements for all already completed bond auctions, is now at precisely $15,182,756,264,288.80. Why is this relevant? Because the latest annualized US GDP, according to the BEA, was $15,180,900,000.00. Which means that, as of today, total US debt to GDP is 100.012%. Congratulations America: you are now in the triple digit "debt to GDP" club!
(naturally, this is using purely "on the books" data. If one adds the NPV of all US liabilities, and adjusts GDP for such things as today's housing contraction, then the magical triple digit threshold was breached long, long ago).
And here is the breakdown for the forensically inclined ones:
I. Total debt as of December 20: $15,131,979,264,288,80 (source):
http://www.zerohedge.com/news/its-official-us-debtgdp-passes-100
... it's gonna be a bumpy ride!!!
You know, it's gonna suck for lots of people, but I live on a self-sufficient farm. I'm just gonna keep sitting out here in the middle of nowhere, writing books and minding my own business while the world goes to the hell it so desperately deserves.
Deserves? Absolutely. To quote Mencken: "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."
They had best be grabbing their ankles.
but as you said "for a lot of people" I am not really too worried for myself. If the anti business climate continues I may quit doing any new projects to speak of, but I can trim down to a skeleton crew and either sell out or operate my existing production and do just fine.
I do feel bad for people with jobs who are worried about keep them, I also worry about people whose plans for retirement were based on either their pension plan or their 401K's. Those people are going to be in for a very rude awakening. People like Willy who think their modest paying but secure jobs are guaranteed for life are also going to be in for a surprise when the reality of just how much debt we have run up finally sinks in.
Our debt to GDP ratio was beyond 120% when we were fighting WWII. When we raised taxes on the wealthy, corporations, and investment, this number declined down to below 40%. Ever since Reagan gave the wealthy a 50% tax cut on their incomes, this number has been getting worse and worse and worse.
We could fix this problem tomorrow, if we were still a functioning democratic republic.
The difference is that 70% of our economy back then wasn't consumption like it is today.
Back then, we were the world's leading exporter of just about everything. Now we're the world's leading importer of just about everything.
Wealth begins with the application of ingenuity and labor to raw materials that turn them into something more useful than they were to start with. That's where value comes from, and it is the only place it comes from. Even intellectual property (such as my various patents and books) has value because of the way it helps transform less useful into more useful things.
Today, our economy is essentially 30% wealth production and 70% wealth consumption. Most people's jobs are economically parasitic. That is, they either work for government, insurance, banks, accounting firms and the like or they are lawyers, accountants, accounts payable, accounts receivable etc. As useful as these occupations are, they do NOT add value or create wealth. Under the best of circumstances they merely reduce its loss.
This is a bit conceptually strange so let me explain it this way. Why do I hire an accountant? Do I hire him because I can't fucking COUNT? Of course not. I hire him because the wages I pay him are less than the money he saves me in taxes. Why do I hire a lawyer? Because the money I pay him is less than the cost of losing a lawsuit. Neither of them produces a fucking thing, and though they may be indispensable in this litigious and over-regulated age, they are parasitic expenses.
Every dollar these people earns has to come from a starting spot of someone PRODUCING something of VALUE. A value-add.
If you look back in the 1940s -- coming out of WWII where we kicked both the Nazi's and the Japanese' asses -- we had rebuilt an impressive industrial base and our economy was focused on production rather consumption. Because we were the PRODUCERS the wealth migrated to us. We therefore paid down that debt with minuscule taxes, relatively generous child deductions, etc.
Why do you think we have to borrow money from China? Because China is a PRODUCER nation, therefore the wealth migrates there.
While there are indeed plenty of places where America still produces, in aggregate, most of our economy is consumption. You can't pay down debt if your economy is consumption. Even at the individual level, that's why people's savings rates are so abominable. Heck, our government most often doesn't even call us citizens anymore -- it calls us consumers.
Nobody is paying attention, but we have turned into a nation of consumers whose consumption is paid for with debt and paychecks earned by reducing losses rather than producing gains.
Under the current circumstances, that debt is FAR more threatening than it was in 1945.
That's what we have been doing for the last few decades, and that's all a "service economy" is.
We all know what happens when a stockbroker "churns" the account of someone who has entrusted him with his money. That's exactly what's happening here.
I completely agree with John, unless and until we started producing more than we consume, we will never reverse our downward spiral and it's only a matter of WHEN, not if, we go down the very same path as the Greeks.
"producers" of products are nothing more than exploiters of workers and consumers, creating worthless products that feed our need to consume. So the present form of our economy is much more ethical! lol!