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12 comments to Total US Debt As A Percentage Of GDP |
  
            
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This is graph of the fallacy of pumping up the economy by cutting taxes. You can hand the bill to your children, but the bill will still come due. By putting off paying the bill by cutting taxes, we have added the interest to the bill, now really out of control. The only way out is to print money. Cutting taxes is a clever way of intensifying the concentration of wealth.
Nice article.
I hope you don’t mind if I reference this article and include the GDP graph in an essay I’m working on.
Weaver:
Yes, please feel free. I actually encourage people to use the articles as long as they reference the original source.
Michael
How a Stimulus Package Works
It is a slow day in a small town of somewhere in USA, the streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.
A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.
As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.
The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.
The hooker rushes to the hotel and pays off her room bill with the hotel owner.
The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.
At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.
No one produced anything. No one earned anything… However, the whole town is now out of debt and now looks to the future with a lot more optimism.
And that, as far as I can tell, is how a Stimulus package works.
I downloaded a chart that compares US Federal Debt As Percent Of GDP for Fiscal Years 1792 to 2010. The source was http://www.usgovernmentspending.com. The percentages are vastly different. For example, the peak was 1946 where gross federal debt was 121.25% x GDP of 222.2 Bn. A chart on Wiki has the same result. It also shows 2010 gross federal debt at approx. 80% of GDP. Can you please explain the discrepancy?
The chart that I posted includes all forms of debt (government, business and consumer), so that it why those two charts will look vastly different.
Michael
So the traveler lucked out by getting his money back. Actually this could work for a secluded community on Gilligan’s Island. All the participants are trading their services, EVERYONE is producing VALUE and trading it!
Now what happens when Gilligan borrows money from a naive individual over in east bum forest, on the other side of the word? Instead of offering his service he now sits around all day eating hotdogs that he bought from the butcher and does not trade any products or services of value in return.
What happens when the Chines figure out that they have been working long hard hours and financing Americans high standard of living and will never be paid back?
The scary part is the GDP rate at which government officials have assumed. What people don’t talk about is WHEN GDP declines at an alarming rate this graph will be so off the charts no one can comprehend the Economic Tsunami…
Chart looks a little fishy to me. How did we pay down so much debt during WWII and Korea?
The FALLACY in this chart, without CONTEXT, is that the GDP CAN GO DOWN, or collapse, which of course sends the RATIO soaring!!
Just read Paul Krugman if you really want to understand!
Paul Krugmsn gave us the mentality that the government can never spend enough and you can always have your cake and eat it too.
This chart is meaningless without a corresponding chart of *assets* as a a percent of GDP. Even then, you would have to be very careful to put both charts on an “apples to apples” basis. For example, if I take out a mortgage to buy a house, the house is an asset to me and the mortgage is a liability. However, to the bank, the mortgage is an *asset*, which they can borrow against from (say) another bank. Then this second bank could do the same against the asset that the loan to the first bank represents to them. Simply adding up the “debts” in the system tells you nothing.
Hey Michael,
I know there are some sources listed under the graph, but I wasn’t able to find any information on the actual data included nor what explicitly encompasses ALL U.S. debt. Do you know where I could find that information?