How Bad is the US Debt Problem?

Do you have any idea how bad the US debt problem is?  Does it matter at all?  I had those exact same questions so I set out to do a little research to try to figure this out and satisfy my curious little brain. This paper is the result of that search.

Many of you may know that a countries debt is measured in a ratio that compares current national debt to the Gross Domestic Product (GDP). We know from Wiki that GDP, ”refers to the market value of all officially recognized final goods and services produced within a country in a given period.”

So what is a normal Debt-to-GDP ratio?  How about if we ask the question a slightly different way? What are the ratios of the countries that have terrible debt problems?  These may be a bit easier to find and easier to understand.

So the first thing I did was look for a list of the countries with the worst debt. This is a list of the 15 worst Debt-to-GDP countries .

1. Japan – They had terrible debt since the burst of their real estate bubble. The
   tsunami just made it worse.
2. Saint Kitts and Nevis
3. Lebanon
4. Zimbabwe
5. Greece – They are in the mist of their crisis.
6. Iceland – Thye have already had a huge crisis.
7. Jamaica
8. Italy
9. Singapore
10. Belgium
11. Ireland – They already had a huge debt crisis.
12. Sudan
13. Sri Lanka
14. France
15. Portugal

Japan was a surprise for me initially.  I know their economy has been terrible for almost a generation now but this bad? Not only had their huge real estate bubble devastated them but also add the recent devastating tsunami and you have a complete economic disaster on
your hands.  One may wonder if they will ever recover.

Many of the countries in the top 15 list are no surprise at all. They are either a banana republic or they are countries that have been experiencing civil war for a generation or more.

There are some that have been in the news for either going completely bankrupt and defaulting on bond payments like Iceland and Ireland and Greece is currently going through their civil unrest due to some of the austerity measures being put in place to attempt to stave off defaulting on their debt.

So let’s take a look at some of the more interesting countries that might be a better comparison to the United States.

Greece Debt/GDP Chart

http://www.economicsinpictures.com/2011/09/greek-debtgdp-only-22-in-1980.html

It is somewhere over 143% now.

Italy Debt/GDP Chart

http://www.tradingeconomics.com/italy/general-government-net-debt-in-percent-of-gdp-imf-data.html

Italy is sitting above 120%

Belgium Debt/GDP Chart

http://www.tradingeconomics.com/belgium/central-government-debt-total-percent-of-gdp-wb-data.html

Belgium at 92%

France Debt/GDP Chart

http://www.tradingeconomics.com/france/general-government-net-debt-in-percent-of-gdp-imf-data.html

France is above 82%

Portugal Debt/GDP Chart

http://www.indexmundi.com/portugal/public_debt.html

http://www.telegraph.co.uk/finance/financialcrisis/8404350/Portugals-economy-in-graphs.html?image=1

Portugal seems to be above 77%

Spain Debt/GDP Chart

http://research.stlouisfed.org/fred2/graph/?g=3t8

Latest numbers for Spain that I could find have the debt above 47%.

US Debt/GDP Chart

So what is the damage for the US?  We have heard of all the dire predictions
from the PIGS (Portugal, Italy, Greece and Spain) of Europe so surely the US
has to be so much better off, right?

Take a look at this chart. http://dailybail.com/home/chart-us-debt-to-gdp-1940-2015.html

This is incredible!!!
Why are people not yelling this in the streets?  I have heard the arguments from TV talking
heads and “Smart Analysts” that America is so much stronger than all those
other countries and that this huge dept is not a problem for us.  Excuse my French, but I believe that is complete crap.

Do you remember during the .com bubble, when all the “smart” analysts were saying that “the rules of investing have changed permanently”?  They went on to day that “We do not have to value stocks the way we used to do it.” Well 2008 has proven them wrong and when the markets stop taking our IOUs and interest rates go through the roof these same “Smart Analysts” will be wrong again.

Conclusion

So the take away for this article is, what are you doing to
protect yourself and your family for when that day or reckoning comes?   I am not going to tell you how to do it, but
I would encourage you to start preparing for that day.  Prepare for the days of hyper inflation.

Footnote:

This chart shows total of several different countries.  This is mind blowing.

http://www.gfmag.com/tools/global-database/economic-data/10403-total-debt-to-gdp.html#axzz1qAHbC9LN