vrijdag 5 april 2013

150% Debt to GDP

On the Peter Schiff Show with Neeraj Chaudhary I learned about the 150% debt to GDP limit. If a government's debt goes above this limit, then there is no way the debt will be repaid. It's historic evidence.

In Europe, the country that has gone over the limit is Greece, Italy is at 130% as we speak. So we need to watch Italy closely.
Chart 1: Eurozone Debt to GDP
The U.S. doesn't have much time left as debt is skyrocketing.
Chart 2: U.S. Debt to GDP

3 opmerkingen:

  1. This analysis is slightly misleading, because it ignores the fact that US holds a huge store of wealth equivalent to 550 percent of GDP, so it is a mistake to say that the US does not have much time left to correct its deficit, because higher borrowing is sustainable.

    Check out the analysis by Paul Ashworth of Capital Economics Ltd cited in this Bloomberg article: "U.S. Isn’t Broke, Dollar Won’t Fail".

    1. Wouldn't that 550% also be the coinciding amount of unfunded liabilities of medicare, social security?


  2. Unfunded liabilities of medicare, social security & pensions are usually funded out of tax revenues when they fall due for payment.

    The huge store of wealth tied underpins the ability of the US to meet its obligations of this type out of its tax revenues in future years.