U.S.’s $13 Trillion Debt Poised to Overtake GDP: Chart of the Day

[Quantum]

BANKRUPT!


http://www.bloomberg.com/apps/news?pid=20601109&sid=aa0cI64Gx.4E&pos=15

U.S.’s $13 Trillion Debt Poised to Overtake GDP: Chart of Day

By Garfield Reynolds and Wes Goodman

June 4 (Bloomberg) -- President Barack Obama is poised to increase the U.S. debt to a level that exceeds the value of the nation’s annual economic output, a step toward what Bill Gross called a “debt super cycle.”

The CHART OF THE DAY tracks U.S. gross domestic product and the government’s total debt, which rose past $13 trillion for the first time this month. The amount owed will surpass GDP in 2012, based on forecasts by the International Monetary Fund. The lower panel shows U.S. annual GDP growth as tracked by the IMF, which projects the world’s largest economy to expand at a slower pace than the 3.2 percent average during the past five decades.

“Over the long term, interest rates on government debt will likely have to rise to attract investors,” said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest publicly traded bank. “That will be a big burden on the government and the people.”

Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co. in Newport Beach, California, said in his June outlook report that “the debt super cycle trend” suggests U.S. economic growth won’t be enough to support the borrowings “if real interest rates were ever to go up instead of down.”

Dan Fuss, who manages the Loomis Sayles Bond Fund, which beat 94 percent of competitors the past year, said last week that he sold all of his Treasury bonds because of prospects interest rates will rise as the U.S. borrows unprecedented amounts. Obama is borrowing record amounts to fund spending programs to help the economy recover from its longest recession since the 1930s.

“The incremental borrower of funds in the U.S. capital markets is rapidly becoming the U.S. Treasury,” Boston-based Fuss said. “Do you really want to buy the debt of the biggest issuer?”

(To save a copy of the chart, click here.)

To contact the reporters on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net.

Last Updated: June 4, 2010 05:06 EDT

[Apparition]

If the government wasn't as crooked as Enron then the actual national debt would be $100 trillion+ (including unfunded liabilities and other expenses that are intentionally left off balance) and thus it would've already surpassed the GDP a long time ago.

So, in actuality, there's nothing new to report.

[cedarchopper]

Add Freddie and Fannie and $6 Billion more...and it isn't a government sponsored entity, it is a government entity.

[gunDriller]

actually, once again, the government is fudging their numbers.

the debt is about $13 Trillion. the US has hit the 93% debt - GDP ratio, so that means the GDP is about $14 Trillion.

BUT the debt is an accumulation of debt from past year's.

9% of this year's GDP is from government spending & debt accumulation - in other words, they're putting it on the credit card. or submitting their order with the money printing department.

so real GDP is $14 Trillion minus 9% - or 12.74.

The debt is $13 Trillion - the GDP is 12.74 Trillion - that puts the ratio over 100%.

traditionally, economists have considered a ratio above 90% to be fatal. They cite Argentina's collapse in the 90's as an example. An economist that knows a little history can usually cite a few more instances of classic national economic crises that all had that one thing in common - their debt GDP ratio went over 90% ... they couldn't service their debt.

and the US debt-GDP ratio is 93% or 102%.

Of course in 2010, the debt goes up by the approximate amount of the deficit, which i think is $1.7 Trillion officially but judging by recent months of $222 Billion & $333 Billion, i wouldn't surprised to see the 2010 deficit hit $2 Trillion.

anyway, that gets added to next year's debt.

so the debt in 2011 is $14.7 trillion, for sure.

i wouldn't count on the GDP being any bigger in 2011 than in 2010.

this is bullish for gold and silver.