Crumbling Under Debt

[BitWhys]

Re: RE: Crumbling Under Debt

...How long have we been doing "free trade"...?

You want to control the economy, why?

With the US and Europe each kicking in over thirty cents on the dollar for agricultural products and squeezing emerging economies out of the world market, and the likes of the Byrd Amendment still in full swing, I suggest "the appearance of free trade" would be a more apt description for a lot of important sectors within the world economy.

 

[BitWhys]

Point of interest for some, raising taxes to cover the current deficit amounts to a loss of $1,600 take home-annually from that $44,000 US average (median? lost my notes) HOUSEHOLD income.

 

[Jay]

Re: RE: Crumbling Under Debt

...How long have we been doing "free trade"...?

You want to control the economy, why?

With the US and Europe each kicking in over thirty cents on the dollar for agricultural products and squeezing emerging economies out of the world market, and the likes of the Byrd Amendment still in full swing, I suggest "the appearance of free trade" would be a more apt description for a lot of important sectors within the world economy.

I agree that it isn't full blown "free trade" and in some respects I support that. Can Ontario compete with Asia for beef products and still sell an ethical product? Probably not. So I support subsidized agriculture industries within Ontario's borders for now. I'm sure Toro will point something out though that makes me change my mind.

If the third world is depending on us to buy their agriculture products I think they might be screwed.

 

[#juan]

The household net worth of the United States is $52 trillion.

Link

That's assets after debt.

So, you're telling me that the American people have been paying hundreds of billions of dollars in debt service when they could just pay off the debt. Twenty three cents of every tax dollar goes to debt service and they could just pay it all off tomorrow?

Sounds like a lot of horsefeathers to me Toro. I think your great, great, grandchildren will still be paying off this debt.

 

[BitWhys]

Re: RE: Crumbling Under Debt

...If the third world is depending on us to buy their agriculture products I think they might be screwed.

Actually, the net result is emerging markets can't SELL their agricultural products but I'm glad to see we do have some common ground after all. Like I said, I don't oppose free trade. I think to say it should be an end more than a means sums up my position as I understand it so far.

 

[Toro]

So, you're telling me that the American people have been paying hundreds of billions of dollars in debt service when they could just pay off the debt. Twenty three cents of every tax dollar goes to debt service and they could just pay it all off tomorrow?

No, that's not what I'm saying. What I'm saying is that if you're going to compare per capita debt, you must put it into context. And do to do that, you must look at assets.

Its like saying "Oh no, General Electric has $200 billion in debt! Its going to collapse! They'll be paying it off forever!" Except that GE has $600 billion in assets and has a AAA credit rating.

Less debt is better than more, IMO. But I think the doomsayers who think America is going to collapse don't understand basic finance.

 

[jimmoyer]

Good point.

Despite our shared misgivings over the American national
debt, the newspapers NEVER put the federal debt
in context with the size of the whole economy.

That utter lack of context makes any number
meaningless.

 

[BitWhys]

curious, Toro:

you don't think the US is lined up for a recession?

 

[darkbeaver]

The average salary in the U.S. is about $40,000.00 a year. Right now, the debt is about $27,000.00 for every man, woman, and child in that country. That seems to indicate that their debt will be around for a very long time.

link

That's like having a $180,000 house with a $27,000 mortgage.

The household net worth of the United States is $52 trillion.

http://www.federalreserve.gov/releases/z1/Current/z1r-5.pdf

That's assets after debt.

Assets of the all governments estimated to be $2 trillion, but probably higher. So that's $54 trillion. Subtract government debt in the United States and you get around $45 trillion. With 300 million people in the US, that's a net worth - that's net, as in after all liabilities - of $150,000 per person.

Who is going to give you money for the houses? and won't property values plummet, like to the bottom.

 

[#juan]

Canada's debt is 38% of GDP

Mexico------------39% of GDP

U.S-----------------64.7% of GDP

debt to GDP is not the final word but it is an indicator.

 

[I think not]

Canada's debt is 38% of GDP

Mexico------------39% of GDP

U.S-----------------64.7% of GDP

debt to GDP is not the final word but it is an indicator.

According to 2005 estimates:

Canada's Debt to GDP ------ 68.20%
U.S. Debt to GDP ------ 64.70%
Mexico Debt to GDP -------- 21.20%

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

 

[Toro]

Re: RE: Crumbling Under Debt

curious, Toro:

you don't think the US is lined up for a recession?

Gee, you know BitWhys, I've been thinking for about the last 12-18 months we might get one. But the economy is strong. I would think that some time in the next few years, we may have a sharp one. But I don't know. I've been wrong so far.

The global economy is strong. Japan and Europe are going to grow faster this year than maybe the last 10-15 years, so that's good. China's growth declerated last quarter from 9.5% to 8.5%, and could slow even further, so its good other parts of the world are picking up slack.

 

[Toro]

The household net worth of the United States is $52 trillion.

http://www.federalreserve.gov/releases/z1/Current/z1r-5.pdf

That's assets after debt.

Who is going to give you money for the houses? and won't property values plummet, like to the bottom.

I wouldn't touch real estate with a ten-foot pole attached to another ten-foot pole. Real estate is probably the most over-valued asset there is right now. Real estate is already beginning to fall in the hottest areas as inventories have skyrocketed and transactions have slowed dramatically. In fact, I've been thinking about selling the value of my house in the futures market on the CME when the exchange starts trading housing futures.

However, look at the above link. The total value of housing in the US is $19.8 trillion. Since 1933, the number of years housing has fallen nationally is exactly zero. Housing prices have never gone down for a year in the United States as a whole since then. Have regions gone down? Yup, big time. Can the entire country fall even though there has not been a drop in 70 years? Of course. In fact, I would be very surprised if it didn't happen.

However, the worst housing crisis over the past century was during the Depression when housing nationally fell by 25% over 4 years. And that was during the worst economic depression the country saw in the 20th century. So its unlikely that housing would fall by much more than 10%. The way housing markets usually work is that, rather than falling, they move sideways for many years.

But lets say housing falls 20%. How much wealth does that destroy? $20 trillion x 20% = $4 trillion. That's a lot, no doubt, but that would not presage an economic collapse. A recession, sure, but not collapse.

 

[Toro]

Canada's debt is 38% of GDP

Mexico------------39% of GDP

U.S-----------------64.7% of GDP

debt to GDP is not the final word but it is an indicator.

I clicked on that link and it didn't say what the ratio was. However, I've seen that number on the government of Canada's Ministry of Finance page, and that number referenced, I believe, net debt.

The reason why I always reference the OECD numbers, though they are not perfect, is because they include debt of all governments - national, state, cities, municipalities, etc. Provincial indebtedness is relatively higher in Canada than state indebtedness is in the US.

 

[#juan]

Canada’s National Debt History, courtesy of the Globe and Mail.

2001
Quote: "Mr. Speaker, we meet today at a time of global turbulence. A time when character is tested, perseverance is tried and values reaffirmed. Just three months ago tomorrow, terror touched our continent and changed our world. Today, we deal with its economic consequences, but that day was first and foremost a human tragedy, measured in lives taken, families destroyed and fears awakened." — Paul Martin

Net debt: 547.4
Debt/GDP ratio: 51.8
Deficit/Surplus after debt charge (no contingency): $17.1 billion

2003:
Quote: "Mr. Speaker, there can surely be no greater responsibility for any government than to provide for the security and safety of its people. And this budget does so. It also delivers on our responsibility to provide global leadership in finding solutions to the problems which give rise to instability the problems of hunger and disease, of exploitation and poverty." — John Manley

Net debt: 507.7
Debt/GDP ratio: 44.5
Deficit/surplus after debt charge, contingency: 0

ITN I think your numbers are probably from 2000. Canada's GDP has gone up steadily since 2000 and we've paid down some of the debt.

 

[I think not]

ITN I think your numbers are probably from 2000. Canada's GDP has gone up steadily since 2000 and we've paid down some of the debt.

I only got it from Wikipedia, could be wrong, they've been wrong before. There is a link I had found on another forum from the OECD, if I find it again, I'll post it.

 

[BitWhys]

Re: RE: Crumbling Under Debt

curious, Toro:

you don't think the US is lined up for a recession?

Gee, you know BitWhys, I've been thinking for about the last 12-18 months we might get one. But the economy is strong. I would think that some time in the next few years, we may have a sharp one. But I don't know. I've been wrong so far.

The global economy is strong. Japan and Europe are going to grow faster this year than maybe the last 10-15 years, so that's good. China's growth declerated last quarter from 9.5% to 8.5%, and could slow even further, so its good other parts of the world are picking up slack.

Its so anathema its annoying. All the indicators are there in spades. I heard the US was giving China the gears about the Yuan and it sounded to me like they were saying "shoot me and get it over with" but then I realized China would rather see the greenback fall against everyone than have the Yuan rise against, them being exporters and all.

A lot of the beancounters still laugh when you mention Europe, let alone Japan. Europe's been holding its own for years, they just read things a lot different across the pond. Japan is the one to watch. Sounds like they're waking up and if they do they've got TONS of room to manouver. Politically Taiwan's the one to watch. Asian Development is trying to design a virtual basket their block can use as a reference for strategic planning, specifically around the greenback which, surprise surprise, they're kinda nervous about. China doesn't want to play so far because it would mean including Taiwan in the formula. That could change.

Interesting times. Read a 2 or 3 year old working paper out of the Fed today that analyses a collection of 25 capital account adjustments (Canada was in it twice). The signs are there. INCLUDING above trend income growth. The adjustment was usually 3-4 years. With US as the defacto reserve currency this could get very protracted and sluggish. Japan's taken 10+ years and they're no dummies. I hope the Conservatives have a plan B. This might happen on their watch.

 

[BitWhys]

re: provincial debt

it can be decieving. Manitoba's looks wicked until you realize they're carrying bonds on Hydro projects which are about as close to dead-bang investments as you can get.

I don't trust the OECD numbers on the US debt as far as I can throw them. They're an unusual hash of things and it seems to me its only counting external debt. The Treasury's own "debt to the penny" site has it clocked at $8.4T and change today. (about a quarter of that is external) With a GDP just over 12T, maybe 12.5, you got yourself a chunk-a ratio and that's just central.

 

[BitWhys]

Galbraith points out the biggest contribution to the great depression was a mistake. The banks seized up and put investment capital out of reach. That's not going to happen again.

They just didn't know. Keynes figured it out but that wasn't until 1936. He wasn't perfect, but he was brilliant.

 

[Toro]

Bit Whys

I don't think provincial debt secured with operating assets are included, i.e. HydoQuebec bonds are not included in Quebec debt since HydroQuebec is a separate operating entity.