Have you ever been to USDEBTCLOCK.ORG?

[웃 910]

http://www.usdebtclock.org/

[Rhiannercakes 14]

That's kind of neat.

There's way too much money in the military section, in my opinion.

[Niels Bohr 72]

That clock is not even accurate. It's just a counting program. To actually know the total requires tremendous synchronous connections, and huge buffer. Every retail store transaction are sent to the main corporate servers every night at close. Banks transactions are held depending on type. Bonds are not taken to account. Getting the data just takes tremendous strains on the network.

Sorry Confucian. It's just propaganda. But, the US is in debt.

Edited October 6, 2009 by Niels Bohr

[웃 910]

That clock is not even accurate. It's just a counting program.

I'm not saying it is accurate to the $1 but it is accurate, relatively speaking.

Edited October 6, 2009 by Confucian

[Pinocchio Liberal 268]

Its Hope and Change man!

[one...two...tree 2,762]

That clock is not even accurate. It's just a counting program.

I'm not saying it is accurate to the $1 but it is accurate, relatively speaking.

Were you watching it in 2004?

[scandal 951]

That clock is not even accurate. It's just a counting program.

I'm not saying it is accurate to the $1 but it is accurate, relatively speaking.

Were you watching it in 2004?

More to the point, were you watching it circa ~1999 (during the final years of Clinton's term) when it was actually running in reverse?

We were running a surplus, and the debt was shrinking, not growing.

Also - without minimizing the scary size of the debt - note the following.

The debt is about $11.2 trillion on this clock. Ok, that's about right (counting the social security"lockbox").

The annual deficit is $1.4 trillion. That is a scary number.

However, the GDP, even after several quarters of contraction in the economy, is $10.5 trillion.

That means that total outstanding debt is about 11.2/10.5 = 107% of GDP.

The TOTAL national debt of the country (operating and fixed debt) is roughly equal to the gross revenues of the country.

To put that on an individual scale, it would be like comparing your total debt- mortgage, car loan, credit cards, student loans, and comparing that to your 1-year gross salary.

If you have a $100,000 mortgage, $10,000 car loan and other miscellaneous debt, but you are middle class with a family income of, say, $80K or $90K, are you freaking out? Or do you realize that a 30 year debt amortization can be managed with such a salary? That's approximately the situation the US is in right now. Not great, but not necessarily catastrophic.

[one...two...tree 2,762]

That clock is not even accurate. It's just a counting program.

I'm not saying it is accurate to the $1 but it is accurate, relatively speaking.

Were you watching it in 2004?

More to the point, were you watching it circa ~1999 (during the final years of Clinton's term) when it was actually running in reverse?

We were running a surplus, and the debt was shrinking, not growing.

Also - without minimizing the scary size of the debt - note the following.

The debt is about $11.2 trillion on this clock. Ok, that's about right (counting the social security"lockbox").

The annual deficit is $1.4 trillion. That is a scary number.

However, the GDP, even after several quarters of contraction in the economy, is $10.5 trillion.

That means that total outstanding debt is about 11.2/10.5 = 107% of GDP.

The TOTAL national debt of the country (operating and fixed debt) is roughly equal to the gross revenues of the country.

To put that on an individual scale, it would be like comparing your total debt- mortgage, car loan, credit cards, student loans, and comparing that to your 1-year gross salary.

If you have a $100,000 mortgage, $10,000 car loan and other miscellaneous debt, but you are middle class with a family income of, say, $80K or $90K, are you freaking out? Or do you realize that a 30 year debt amortization can be managed with such a salary? That's approximately the situation the US is in right now. Not great, but not necessarily catastrophic.

Great post, Ron.

[HYENA 4]

Its Hope and Change man!

Bush started it...wait...Bush continued it! We've been off the gold standard since Nixon (stoopid move)!

[Mr. Big Dog 10,747]

That clock is not even accurate. It's just a counting program.

I'm not saying it is accurate to the $1 but it is accurate, relatively speaking.

Were you watching it in 2004?

More to the point, were you watching it circa ~1999 (during the final years of Clinton's term) when it was actually running in reverse?

We were running a surplus, and the debt was shrinking, not growing.

Also - without minimizing the scary size of the debt - note the following.

The debt is about $11.2 trillion on this clock. Ok, that's about right (counting the social security"lockbox").

The annual deficit is $1.4 trillion. That is a scary number.

However, the GDP, even after several quarters of contraction in the economy, is $10.5 trillion.

That means that total outstanding debt is about 11.2/10.5 = 107% of GDP.

The TOTAL national debt of the country (operating and fixed debt) is roughly equal to the gross revenues of the country.

To put that on an individual scale, it would be like comparing your total debt- mortgage, car loan, credit cards, student loans, and comparing that to your 1-year gross salary.

If you have a $100,000 mortgage, $10,000 car loan and other miscellaneous debt, but you are middle class with a family income of, say, $80K or $90K, are you freaking out? Or do you realize that a 30 year debt amortization can be managed with such a salary? That's approximately the situation the US is in right now. Not great, but not necessarily catastrophic.

Great post, Ron.

Interesting is also that not only was the debt clock actually turned off towards the end of the Clinton presidency (in Sept 2000) but just 8 years later - after Bush had completed his devastating two terms - it actually ran out of digits in Sept 2008 when the debt exceeeded 10 trillion dollars.

[SMR 368]

That clock is not even accurate. It's just a counting program.

I'm not saying it is accurate to the $1 but it is accurate, relatively speaking.

Were you watching it in 2004?

More to the point, were you watching it circa ~1999 (during the final years of Clinton's term) when it was actually running in reverse?

We were running a surplus, and the debt was shrinking, not growing.

Also - without minimizing the scary size of the debt - note the following.

The debt is about $11.2 trillion on this clock. Ok, that's about right (counting the social security"lockbox").

The annual deficit is $1.4 trillion. That is a scary number.

However, the GDP, even after several quarters of contraction in the economy, is $10.5 trillion.

That means that total outstanding debt is about 11.2/10.5 = 107% of GDP.

The TOTAL national debt of the country (operating and fixed debt) is roughly equal to the gross revenues of the country.

To put that on an individual scale, it would be like comparing your total debt- mortgage, car loan, credit cards, student loans, and comparing that to your 1-year gross salary.

If you have a $100,000 mortgage, $10,000 car loan and other miscellaneous debt, but you are middle class with a family income of, say, $80K or $90K, are you freaking out? Or do you realize that a 30 year debt amortization can be managed with such a salary? That's approximately the situation the US is in right now. Not great, but not necessarily catastrophic.

This is misleading and really a bad analogy for several reasons. If you have $100,000 mortgage and $10,000 car loan, you are okay because you have assets to cover the debt. That is, your house and car are probably worth more than the debt. If they aren't, you are under water and really considered to be in a bad place. Also, your debt should be decreasing annually or you are in trouble.

The national debt is not leveraged against assets. It is insured against the good name of the US government and nothing else. That's like credit card debt (assume a credit card with a low interest rate). If you make $90k a year and have $100k in credit card debt, that is a lot different than insured debt, even if your credit card has a low interest rate. The US government is by definition under water.

Also, consider that on a 30 year loan, at average interest rates, you will buy your house several times because of interest. Maybe a private citizen has to do that because he needs somewhere to live and doesn't have other options. But why does this make sense for a government? The government deficit is not caused by a necessary one-time long term purchase which we are paying off over time. It is caused by the government consistently spending more money than it brings in, year after year.

So the government is in debt a car and a house but has neither the car nor the house and is consistently spending more than it brings in with the debt growing every year. Explain to me why this is a good situation.

Edited October 6, 2009 by SMR

[웃 910]

That clock is not even accurate. It's just a counting program.

I'm not saying it is accurate to the $1 but it is accurate, relatively speaking.

Were you watching it in 2004?

More to the point, were you watching it circa ~1999 (during the final years of Clinton's term) when it was actually running in reverse?

We were running a surplus, and the debt was shrinking, not growing.

Also - without minimizing the scary size of the debt - note the following.

The debt is about $11.2 trillion on this clock. Ok, that's about right (counting the social security"lockbox").

The annual deficit is $1.4 trillion. That is a scary number.

However, the GDP, even after several quarters of contraction in the economy, is $10.5 trillion.

That means that total outstanding debt is about 11.2/10.5 = 107% of GDP.

The TOTAL national debt of the country (operating and fixed debt) is roughly equal to the gross revenues of the country.

To put that on an individual scale, it would be like comparing your total debt- mortgage, car loan, credit cards, student loans, and comparing that to your 1-year gross salary.

If you have a $100,000 mortgage, $10,000 car loan and other miscellaneous debt, but you are middle class with a family income of, say, $80K or $90K, are you freaking out? Or do you realize that a 30 year debt amortization can be managed with such a salary? That's approximately the situation the US is in right now. Not great, but not necessarily catastrophic.

Very good points! Here is another way of looking at it, from George Friedman, founder of Stratfor.

"Friedman argues America's power on the world stage will actually increase in the 21st Century for three major reason:

• The immense size of the U.S. economy: The current crisis is painful and America's deficits are shocking on an absolute basis but are "trivial" relative to the country's net worth, which Friedman estimates is about $340 trillion.
• The unrivaled dominance of the U.S. Navy: Even in the digital age, control of the high seas is paramount in geopolitics.
• The ability of the U.S. to absorb immigrants, both culturally and in terms of the nation's relatively low population density"

^^Short video seen here: http://finance.yahoo.com/tech-ticker/artic...George-Friedman

Longer video:

[HYENA 4]

The USD is supported only by demand since being off the gold standard, the second way to guage a money is to calculate imports vs exports and the US imports more than it exports so really the USD should be more like the Peso (worse, actually) so we force countries to trade oil on the USD but Iraq changed to the Euro so we invaded them. Iran changed to the Euro so we're screaming nukes nukes and we must invade them. China is currently making deals with ALL of its trading partners to stop using the USD for trade and start using the Yuan which Thailand and its neighbors have agreed to so far.

If you know enough about supply and demand, this is significant. The US government sets oil purchase prices so the only way to counter the drop in demand for the USD is to raise oil prices, which it did starting when Iraq and again Iran got off the USD and S. American countries have been following suit to stop using the USD unless there is direct trade with the US.

Basically the USD is falling out of favor as the world currency and that's why our dollar is dropping and won't be coming back.

I've never been an alarmist but these days really do mark the last decades of US dominance and dominance of the USD. Other countries have far more resources and stability than we have now (China has eminent domain over US loans....EMINENT DOMAIN)!

Tell me we're not out of gold and desperate!

Edited October 6, 2009 by HYENA

[scandal 951]

This is misleading and really a bad analogy for several reasons. If you have $100,000 mortgage and $10,000 car loan, you are okay because you have assets to cover the debt. That is, your house and car are probably worth more than the debt. If they aren't, you are under water and really considered to be in a bad place. Also, your debt should be decreasing annually or you are in trouble.

Well, we need to distinguish between capital and operating expenditures. That's how businesses look at their debt.

Le's start with a capital expenditure. It's considered perfectly sound business practice to borrow money (e.g. bank loan, issue a bond, etc.) and use the proceeds to purchase capital equipment, land, structures, etc. which have a usage period over the amortization of the loan. A business (or government) typically doesn't want to tie up all the capital needed for a major investment in Year 1 of construction or purchase - they want to spread out the purchase over the lifetime of usage. That's directly comparable to a personal mortgage on a home or a car loan, as you point out. And, indeed, that's what governments do as well. A municipal bond which is used to invest in sidewalks and roads, or a state bond to build schools and hospitals, or a federal bond used to buy an aircraft carrier for the Navy are all examples. Surely you have no problem with that, since there is a tangible asset purchased with the loan, and the loan is paid back while the equity in the capital investment is still greater than the loan balance (i.e. not "underwater").

Now let's consider operating expenditures. That means paying for ongoing expenses such as salaries, rent, utility bills, etc. Typically you'd think that a responsible entity (an individual household, a business, or a government) would want to cover its operating budget completely in-year, and not be borrowing money to cover it. That's certainly a good thing to strive for. However, it's not always practical or desirable. For one thing, during tough times (e.g. a sharp recession) the income flowing in may drop sharply (either business revenue, or tax receipts) but the expenditures are somewhat fixed. Yes, you can lay off staff and trim costs, but probably not enough to make up the gap. If you trim too sharply you severely affect the overall operation. So, it can be better to borrow money to keep things flowing temporarily until the revenue picture improves. Granted, you don't want to float a 30 year bond for operating debt, this should be financed with short term instruments.

The national debt is not leveraged against assets. It is insured against the good name of the US government and nothing else. That's like credit card debt (assume a credit card with a low interest rate). If you make $90k a year and have $100k in credit card debt, that is a lot different than insured debt, even if your credit card has a low interest rate. The US government is by definition under water.

You are absolutely right that US treasuries are backed by nothing more than the full faith and credit of the US government. And yet - they are considered 'risk free' benchmark assets in the market place!!! What a great deal we as taxpayers get.

Geez, I just WISH that I could borrow for my car loan and mortgage without needing to put up my car and house as collateral, and still get the same great interest rate terms! That's the sweetest deal imaginable.

Oh, and just because treasuries are "unsecured" does not mean that "The US government is by definition under water". If the bond proceeds are used to invest in infrastructure and improve the overall capital value of the country - it's health, welfare, education of its citizens, and economic vitality - then we've gained something for the debt we've issued. Our country is more valuable. Think of it as you would a home improvement loan. You borrow $20K and fix up your kitchen. You're $20K in debt but presumably your intrinsic home equity has increased by a comparable amount.

Also, consider that on a 30 year loan, at average interest rates, you will buy your house several times because of interest. Maybe a private citizen has to do that because he needs somewhere to live and doesn't have other options. But why does this make sense for a government? The government deficit is not caused by a necessary one-time long term purchase which we are paying off over time. It is caused by the government consistently spending more money than it brings in, year after year.

Yes, paying interest on a loan is an expense. Sometimes it's wise to borrow, sometimes it's not. That's true for individuals, small businesses, large ones, and governments.

It depends on several factors. (a) What purpose will the loan proceeds be used for? (B) What interest rate will be paid? © What are the repayment terms (fixed, floating, can you pay-off early, etc.)? (d) To what other purpose can working capital be put more effectively? (i.e. - let's say you can pay cash for something, or instead borrow cheaply for that thing while investing your cash in a more lucrative investment. Borrowing can make sense in such a case).

You write : "The government deficit is not caused by a necessary one-time long term purchase which we are paying off over time." That's simply not true. What' you've described is called a capital expenditure (see above) and happens very often. Every interstate freeway, bridge, airport, hospital, and aircraft carrier we've ever built in this country has been financed in this way.

So the government is in debt a car and a house but has neither the car nor the house and is consistently spending more than it brings in with the debt growing every year. Explain to me why this is a good situation.

I'm not saying it's a good situation. I think, as just about everyone does, that our current debt levels are uncomfortably high. The current deficit projections are quite staggering. What I'm saying is that it's not an absolute thing - not all debt, in any amount, is automatically bad.

A responsibly managed debt burden, where loan proceeds are used to pay economic dividends down the road, is a very good thing.

Alexander Hamilton suggested this principle way back in the 1780s to finance the Revolutionary War and the emerging needs of the new federal government. This country has ALWAYS had a national debt, and has used that debt (in the form of US Treasuries) to provide liquidity and capital in our financial markets, and to stimulate economic growth in a partnership with private business throughout the nation's history. We live in a much richer and more prosperous society than we possibly could have otherwise if there were no US national debt all through these years.

In fact, in the late 1990s when we were running large budget surpluses and paying down the debt, there were serious academic concerns that we would soon have it paid off entirely. This was perceived as a major problem, since it would mean the end of the bond market (at least for treasuries), leaving no benchmarks for corporates and munis, and a liquidity crisis all of its own! Anyway, thanks to Bush 43 we no longer have to worry about THAT particular problem anytime soon!

[one...two...tree 2,762]

This is misleading and really a bad analogy for several reasons. If you have $100,000 mortgage and $10,000 car loan, you are okay because you have assets to cover the debt. That is, your house and car are probably worth more than the debt. If they aren't, you are under water and really considered to be in a bad place. Also, your debt should be decreasing annually or you are in trouble.

Well, we need to distinguish between capital and operating expenditures. That's how businesses look at their debt.

Le's start with a capital expenditure. It's considered perfectly sound business practice to borrow money (e.g. bank loan, issue a bond, etc.) and use the proceeds to purchase capital equipment, land, structures, etc. which have a usage period over the amortization of the loan. A business (or government) typically doesn't want to tie up all the capital needed for a major investment in Year 1 of construction or purchase - they want to spread out the purchase over the lifetime of usage. That's directly comparable to a personal mortgage on a home or a car loan, as you point out. And, indeed, that's what governments do as well. A municipal bond which is used to invest in sidewalks and roads, or a state bond to build schools and hospitals, or a federal bond used to buy an aircraft carrier for the Navy are all examples. Surely you have no problem with that, since there is a tangible asset purchased with the loan, and the loan is paid back while the equity in the capital investment is still greater than the loan balance (i.e. not "underwater").

Now let's consider operating expenditures. That means paying for ongoing expenses such as salaries, rent, utility bills, etc. Typically you'd think that a responsible entity (an individual household, a business, or a government) would want to cover its operating budget completely in-year, and not be borrowing money to cover it. That's certainly a good thing to strive for. However, it's not always practical or desirable. For one thing, during tough times (e.g. a sharp recession) the income flowing in may drop sharply (either business revenue, or tax receipts) but the expenditures are somewhat fixed. Yes, you can lay off staff and trim costs, but probably not enough to make up the gap. If you trim too sharply you severely affect the overall operation. So, it can be better to borrow money to keep things flowing temporarily until the revenue picture improves. Granted, you don't want to float a 30 year bond for operating debt, this should be financed with short term instruments.

The national debt is not leveraged against assets. It is insured against the good name of the US government and nothing else. That's like credit card debt (assume a credit card with a low interest rate). If you make $90k a year and have $100k in credit card debt, that is a lot different than insured debt, even if your credit card has a low interest rate. The US government is by definition under water.

You are absolutely right that US treasuries are backed by nothing more than the full faith and credit of the US government. And yet - they are considered 'risk free' benchmark assets in the market place!!! What a great deal we as taxpayers get.

Geez, I just WISH that I could borrow for my car loan and mortgage without needing to put up my car and house as collateral, and still get the same great interest rate terms! That's the sweetest deal imaginable.

Oh, and just because treasuries are "unsecured" does not mean that "The US government is by definition under water". If the bond proceeds are used to invest in infrastructure and improve the overall capital value of the country - it's health, welfare, education of its citizens, and economic vitality - then we've gained something for the debt we've issued. Our country is more valuable. Think of it as you would a home improvement loan. You borrow $20K and fix up your kitchen. You're $20K in debt but presumably your intrinsic home equity has increased by a comparable amount.

Also, consider that on a 30 year loan, at average interest rates, you will buy your house several times because of interest. Maybe a private citizen has to do that because he needs somewhere to live and doesn't have other options. But why does this make sense for a government? The government deficit is not caused by a necessary one-time long term purchase which we are paying off over time. It is caused by the government consistently spending more money than it brings in, year after year.

Yes, paying interest on a loan is an expense. Sometimes it's wise to borrow, sometimes it's not. That's true for individuals, small businesses, large ones, and governments.

It depends on several factors. (a) What purpose will the loan proceeds be used for? ( B) What interest rate will be paid? © What are the repayment terms (fixed, floating, can you pay-off early, etc.)? (d) To what other purpose can working capital be put more effectively? (i.e. - let's say you can pay cash for something, or instead borrow cheaply for that thing while investing your cash in a more lucrative investment. Borrowing can make sense in such a case).

You write : "The government deficit is not caused by a necessary one-time long term purchase which we are paying off over time." That's simply not true. What' you've described is called a capital expenditure (see above) and happens very often. Every interstate freeway, bridge, airport, hospital, and aircraft carrier we've ever built in this country has been financed in this way.

So the government is in debt a car and a house but has neither the car nor the house and is consistently spending more than it brings in with the debt growing every year. Explain to me why this is a good situation.

I'm not saying it's a good situation. I think, as just about everyone does, that our current debt levels are uncomfortably high. The current deficit projections are quite staggering. What I'm saying is that it's not an absolute thing - not all debt, in any amount, is automatically bad.

A responsibly managed debt burden, where loan proceeds are used to pay economic dividends down the road, is a very good thing.

Alexander Hamilton suggested this principle way back in the 1780s to finance the Revolutionary War and the emerging needs of the new federal government. This country has ALWAYS had a national debt, and has used that debt (in the form of US Treasuries) to provide liquidity and capital in our financial markets, and to stimulate economic growth in a partnership with private business throughout the nation's history. We live in a much richer and more prosperous society than we possibly could have otherwise if there were no US national debt all through these years.

In fact, in the late 1990s when we were running large budget surpluses and paying down the debt, there were serious academic concerns that we would soon have it paid off entirely. This was perceived as a major problem, since it would mean the end of the bond market (at least for treasuries), leaving no benchmarks for corporates and munis, and a liquidity crisis all of its own! Anyway, thanks to Bush 43 we no longer have to worry about THAT particular problem anytime soon!

Another excellent and informative post, brother Ron.