DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post - America and the west are in deep economic trouble

**GlictStiply** · 09-04-2012, 03:22 AM

Could you spend some more space on two points. Why do they have a national debt limit and the possibility of US Bonds melting.

The national debt is different from the national deficit.
The deficit is annual shortfall, and the debt is the total amount that the government owes to its creditors, such as bond holders like China.

Right now the debt is almost $12 trillion, of which $7.6 trillion is publicly held. A mainstream way to measure debt is not in total dollars but as a comparison to the economy’s total size, known as the debt-to-GDP ratio.
The higher the debt-to-GDP ratio, the less likely the country will pay its debt back, and the higher its risk of default.

By Debt-to-GDP ratio, publicly held debt- $7.6 trill- is about 54 percent of GDP: $15.094 trill.

As a share of the economy, publicly held debt in 2009 is larger than at any time since 1955, though more recent years have seen debt-to-GDP ratios almost at current levels. In 1993, 1994, and 1995, for example, the debt was between 49 percent and 50 percent of GDP.

However, according to 2011 data, Debt to GDP ratio, or DTG was 69.4 %, ranked 29th worst in the world. Zimbabwe was worst witha DTG of 230.8%. Japan was second worst with 208 %.

With all that in mind, the likelihood of bonds melting on their own, like an ice cube on the street, so to speak, is largely unlikely because the global financial industry would collapse along with America. This because the value of the dollar would fall and global currencies are based on the dollar.

As well, appearance plays a big part of keeping things afloat. America is pressing lawsuits against various banks as a result of the Libor scandal to give an impression of due diligence and ethical conduct. In turn, most of these banks consider 100 million or even 500 million dollar fines by the feds merely the cost of doing business, as the type of wealth they are pushing around- or manipulating- ranges in the 100s of billions, even trillions.

All that being said, there are a growing number of analysts predicting the fall of the US bond market (and recall that the value of the dollar will drop with it).
Forbes ran a prediction here.

09-04-2012, 03:22 AM	#28
GlictStiply Join Date Oct 2005 Posts 447 Senior Member	Could you spend some more space on two points. Why do they have a national debt limit and the possibility of US Bonds melting. The national debt is different from the national deficit. The deficit is annual shortfall, and the debt is the total amount that the government owes to its creditors, such as bond holders like China. Right now the debt is almost $12 trillion, of which $7.6 trillion is publicly held. A mainstream way to measure debt is not in total dollars but as a comparison to the economy’s total size, known as the debt-to-GDP ratio. The higher the debt-to-GDP ratio, the less likely the country will pay its debt back, and the higher its risk of default. By Debt-to-GDP ratio, publicly held debt- $7.6 trill- is about 54 percent of GDP: $15.094 trill. As a share of the economy, publicly held debt in 2009 is larger than at any time since 1955, though more recent years have seen debt-to-GDP ratios almost at current levels. In 1993, 1994, and 1995, for example, the debt was between 49 percent and 50 percent of GDP. However, according to 2011 data, Debt to GDP ratio, or DTG was 69.4 %, ranked 29th worst in the world. Zimbabwe was worst witha DTG of 230.8%. Japan was second worst with 208 %. With all that in mind, the likelihood of bonds melting on their own, like an ice cube on the street, so to speak, is largely unlikely because the global financial industry would collapse along with America. This because the value of the dollar would fall and global currencies are based on the dollar. As well, appearance plays a big part of keeping things afloat. America is pressing lawsuits against various banks as a result of the Libor scandal to give an impression of due diligence and ethical conduct. In turn, most of these banks consider 100 million or even 500 million dollar fines by the feds merely the cost of doing business, as the type of wealth they are pushing around- or manipulating- ranges in the 100s of billions, even trillions. All that being said, there are a growing number of analysts predicting the fall of the US bond market (and recall that the value of the dollar will drop with it). Forbes ran a prediction here.
	Quote