Press "Enter" to skip to content

US government debt now equals GDP

america split up

“I still don’t see a sense of urgency from the president about the massive federal debt,” said Sen. Lamar Alexander, Tennessee Republican. “His budget calls for too much government borrowing – even though the debt is already at a level that makes it harder to create private-sector jobs.” — Washington Times

President Obama projects that the gross federal debt will top $15 trillion this year, officially equalling the size of the entire U.S. economy, and will jump to nearly $21 trillion in five years’ time.

Amid the other staggering numbers in the budget Mr. Obama sent to Congress on Monday, the debt stands out — both because Congress will need to vote to raise the debt limit later this year, and because the numbers are so large.

Mr. Obama‘s budget said 2011 will see the biggest one-year jump in debt in history, or nearly $2 trillion in a single year. And the administration says it will reach $15.476 trillion by Sept. 30, the end of the fiscal year, to reach 102.6 percent of gross domestic product (GDP) — the first time since World War II that dubious figure has been reached.

us debt per gdp

In one often-cited study, two economists have argued that when gross debt passes 90 percent it hinders overall economic growth.

The president’s budget said debt as a percentage of GDP will top out at 106 percent in 2013, but only if the economy booms. Source: Washington Times (1)

We wish that the media could lead a reasoned conversation about government debt and intervention in the economy. There’s a nugget of a worthwhile discussion out there, buried in hyperbolic sky-is-falling hooey.

For example, how about a look at what’s driving the increasing debt? Increased spending? Sure, but that’s only a small part. Unemployment is up, massively, all over the world, and the unemployed can’t pay taxes. This loss of government revenue is by FAR the biggest driver of increasing debt today. If we can lower unemployment then we’ll create more taxpayers and lower deficits without having to raise anyone’s tax rates. But the media never talks about this because it’s much more sensationalistic to describe the situation as some kind of moral sickness.

Fractional reserve banking is the real culprit as it creates ONLY the principal amount of loans, while the INTEREST which is not created, and is therefore payable ONLY through an escalating level of new and bigger loans too keep the money supply liquid enough to sustain an economy, naturally accumulates as DEBT until the debt pyramid grows so large there is no more viable collateral for banks to loan against.

It should be obvious that we have now reached that tipping point given the publicly available facts, underlined by the general unwillingness to borrow more money even at current low rates, so who steps in, GOVERNMENTS as the borrower of last resort, which is just fine with the banksters because they can get no better security for their loans than the taxing power of the government.

We had at least one honest Central Banker in Graham Towers who testified before a Commons Finance Committee in 1939 that; “every bank loan is a new creation of money, and when it is paid back it ceases to exist” and what this proves in the first instance is that banker propaganda that they loan out only a PORTION of their depositors money is a complete fiction.

The real truth is that the “Bank Act” turns a liability (bank deposits still belong to the actual depositor, not the banks) into an asset (Reserves) against which the bankers can create out of thin air 20X or more times NEW (counterfeit in my books) currency (under legal tender laws) that ACTS as substitute money in the form of newly created loans as Graham Towers correctly testified.

What 99.9% of the brainwashed public does not get is that if you do the math, interest is only possible under a Ponzi scheme setup like our fractional reserve banking system. Because the interest is NEVER CREATED, only the principle amount of a loan, payment of interest is only possible as long as new loans exceed the interest being syphoned off! Using a standard 25 year mortgage (French for death gamble) at an average 5-6% interest means that over that 25 year period, approximately TWICE as much circulating medium is REMOVED as what was originally created and must be REPLACED for an economy to function, hence my label of a Ponzi scheme. The result, PERPETUAL DEBT for the masses exactly according to design.

Without deflecting blame from the banksters and the greedy corporations that are largely responsible for bringing about the current crisis, the average American needs to look inwards at their own values and attitudes.

People have to stop demanding that government take care of their every need without imposing taxes. We have to decide as a society if we want to buy the latest junk from China, dress in the latest style, take our kids to Disney or if we want roads, schools and health care. Not only have we been living above our means, we have been living by the wrong values. Unemployment could be largely mitigated if we all agreed to work shorter hours. This would take some adjustment – like not buying such a big home – but it would greatly reduce stress levels and permit quality time with family. We need to stop valuing things over essentials such as health care and infrastructure and pensions. These things are not free. Our whole society needs an attitude and value adjustment and it seems that it is about to be forced upon us by a world economic crash. Bring it on. Our lifestyle is unsustainable both environmentally and economically and the sooner we are forced to deal with it the better off we will be.


(1) Washington Times

One Comment

  1. Viable Opposition Viable Opposition February 16, 2011

    The greatest issue facing the United States is mounting interest payments on the debt which is now set to rise at a record rate with the release of the new budget deficit projection of $1.5 trillion. The Congressional Budget Office calculates that, under their best case scenario, interest payments could rise to 4 percent of GDP (or one-sixth of federal revenues) by 2035. Interest payments, which absorb federal resources that could otherwise be used to pay for government services, currently amount to more than 1 percent of GDP. Under their worse case scenario, interest payments on the debt will amount to 9 percent of GDP or one-third of federal revenues.

    Here’s an article outlining the interest rate spiral that is facing the Obama administration and the American people:

Leave a Reply

Your email address will not be published. Required fields are marked *