Just How Bad Is the National Debt?

We always hear these huge numbers being thrown around, and they're often so absurdly large that we ignore them. We're simply unable to comprehend trillions of dollars. This is a great video that puts the issue in visual perspective, though you'll probably wish you didn't watch it after seeing it. My question is this: Where's the way out? What has to happen for our country to get on top of this debt? Realistically, is there any hope? Somebody give me some good news.

 

No good news coming, Ed. In order for our inbred oligarchy to remain on top, the rest must eat ramen. In a weird way that makes my stomach turn, I empathize with those that bite into the big government cookie. After all, when the top 1% constantly acts in the disinterest of the rest it's only a matter of time before the Lenins and the Maos arise. The biggest problem with America in this regard is that we think it can't happen here.

The debt load precipitates the growth of the military industrial complex. Anyone who's fooling themselves into thinking the dollar still stands off anything other than American military might and dominance is either drinking the Kool-Aid or hasn't seen enough of the world.

The only way out is to rip the band aid off .

There are only two scenarios as to when this will happen...never or too late.

Until then... remain calm citizen.

 
Midas Mulligan Magoo:
our inbred oligarchy
Almost fell backward out of my chair reading this.

Personally, I'm hopeful for the future, but I understand that right now it looks bad. Really, REALLY bad. The plus side of the USA going down is that I won't have to repay my student loans. The downside, is that it would be the end of civilization as we know it. Major bummer. I'm hoping this debt thing works out. Until then, I'm stocking up on guns and MREs

Get busy living
 

At the end, I expected to him say, "Yea, shit just got real."

- Bulls make money. Bears make money. Pigs get slaughtered. - The harder you work, the luckier you become. - I believe in the "Golden Rule": the man with the gold rules.
 

The majority of the debt is to China, and China has no interest in calling in the debt because the US is their bread and butter, literally. If the US economy falls, the whole world's economy falls. It is in the whole world's interest that the US economy keeps standing. It is a love-hate symbiotic relationship.

 
Best Response
Military_MBA_Banker:
The majority of the debt is to China, and China has no interest in calling in the debt because the US is their bread and butter, literally. If the US economy falls, the whole world's economy falls. It is in the whole world's interest that the US economy keeps standing. It is a love-hate symbiotic relationship.

Agreed, but we're seeing a lot of countries aggressively trying to de-couple themselves from the US economy. China has pulled a pretty clever fast one by piling into short term US debt and forgoing the long term stuff. That way, it looks like they're still buyers, but their long term exposure is greatly reduced.

I predict we'll see a "basket of currencies"-type scheme take over the US dollar on the world stage at some point in the next 48 months.

No one wants to look like they're running for the door, because the US gives pretty much every trading partner ridiculous concessions, but pretty much every country is diversifying away from the dollar, which would have been unthinkable a generation (or even a decade) ago.

 
Edmundo Braverman:
Agreed, but we're seeing a lot of countries aggressively trying to de-couple themselves from the US economy. China has pulled a pretty clever fast one by piling into short term US debt and forgoing the long term stuff. That way, it looks like they're still buyers, but their long term exposure is greatly reduced.

Where can I read about that?

 
Edmundo Braverman:
Military_MBA_Banker:
The majority of the debt is to China, and China has no interest in calling in the debt because the US is their bread and butter, literally. If the US economy falls, the whole world's economy falls. It is in the whole world's interest that the US economy keeps standing. It is a love-hate symbiotic relationship.

Agreed, but we're seeing a lot of countries aggressively trying to de-couple themselves from the US economy. China has pulled a pretty clever fast one by piling into short term US debt and forgoing the long term stuff. That way, it looks like they're still buyers, but their long term exposure is greatly reduced.

I predict we'll see a "basket of currencies"-type scheme take over the US dollar on the world stage at some point in the next 48 months.

No one wants to look like they're running for the door, because the US gives pretty much every trading partner ridiculous concessions, but pretty much every country is diversifying away from the dollar, which would have been unthinkable a generation (or even a decade) ago.

Eddie, I see your point, but the fact is that China is going to continue to purchase US debt, even if it is short term, for the long term, because they have to put their money somewhere--and the dollar, though getting inflated, is still their best option, and will continue to be.

But WTF do I know...

 

The thing about the debt is that it is a sort of mystical thing, lock ness monster if you will. While yes it is very real and very important it has gotten to the point that its almost become like a fanasty, in a sense it really doesnt matter what we do about it. We can let it grow and grow and just say fuck it, with the US military behind it we can other countries, out side of maybe China. wont attempt to call their debts. As for the majority of the cash oustanding debt it is held by people of this country, and honestly I think a good chunk of that prob around 750 billion to 1 trillion are debt obligations that have long since passed maturity but people just forgot to turn them in. I know I have prob a few thousand dollars of those savings bond things lying around from when I was a little kid that I never turned in yet.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 
jsmort11:
These charts might be misleading because GDP is a per year figure that is being compared to TOTAL future figures (unfunded pensions/SS)?

Not saying our deficit isn't high but this might be misleading.

Yeah, you make a valid point, but one way you would determine the level of leverage for a business might be to see how much money it made this year (the US annual GDP) assume it grows no further and that the debt grows no further and see how many 'turns' it takes to service the debt (the total unfunded pensions/SS). The assumption here is that the total unfunded debt obligations for the US takes into account just the current population, thus no future citizens and the debt obligation that will accompany them...otherwise the obligations number would just be the infinity symbol, lol.

I'm no expert but that is the way I thought about it. Maybe someone knows different.

Regards

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so." - Ronald Reagan
 
cphbravo96:
jsmort11:
These charts might be misleading because GDP is a per year figure that is being compared to TOTAL future figures (unfunded pensions/SS)?

Not saying our deficit isn't high but this might be misleading.

Yeah, you make a valid point, but one way you would determine the level of leverage for a business might be to see how much money it made this year (the US annual GDP) assume it grows no further and that the debt grows no further and see how many 'turns' it takes to service the debt (the total unfunded pensions/SS). The assumption here is that the total unfunded debt obligations for the US takes into account just the current population, thus no future citizens and the debt obligation that will accompany them...otherwise the obligations number would just be the infinity symbol, lol.

I'm no expert but that is the way I thought about it. Maybe someone knows different.

Regards

True, these policies obviously have to change at some point in a way that will reduce the standard of living in our country.

We also should note that the current deficit in real terms is going to be reduced pretty significantly when Bernanke induces massive inflation and devalues the currency significantly. Visually for the chart shown in the video, if everything else remained constant, inflation causes future debt bars to remain constant while the GDP bar per year grow. Would be cool to see this simulation run for different levels of currency devaluation.

I posted a link to one of Bernankes speeches in another thread and it's pretty clear from reading it that he isn't going to stop until inflation is achieved and the only political barriers to inflationary policy seem to have been already overcome.

 

Eddie, I agree...a trillion dollars is so large it is hard to comprehend. I realize this is a bit gimmicky and it may not even be accurate but I think it reflects the severity of our debt problem, plus people understand how much hundreds and thousands are and you can see those numbers spinning by so fast your brain can't keep up.

Epilepsy warning!!!

http://www.usdebtclock.org/

Regards

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so." - Ronald Reagan
 
cphbravo96:
Eddie, I agree...a trillion dollars is so large it is hard to comprehend. I realize this is a bit gimmicky and it may not even be accurate but I think it reflects the severity of our debt problem, plus people understand how much hundreds and thousands are and you can see those numbers spinning by so fast your brain can't keep up.

Epilepsy warning!!!

http://www.usdebtclock.org/

Regards

I just looked at this for the longest time. Thank you :)

It's what you put into it
 

I may not know what the f*ck I'm talking (often times I don't lol) but I think we should keep straight the differences between the public and private sector. Don't get me wrong, I'm not saying there's no interplay between them. My point is just that foreign countries investing less in US debt, is not the same thing as companies and individuals having a hard time raising capital. Governments raising money for public projects/spending, and individuals or companies raising money for ventures, is not the same thing and should not be treated as such.

 

Joke's on the people who bought our debt really. It's like buying preferred stock that will be bought back with a reissue of the same at a defined point in the future. However, the company selling this preferred stock allocates next to no voting rights to it and can dilute it's value at any time. Thus it's really not that big of a financial burden as it is made out to be. When it comes down to it, the debt is still in US dollars and the inflation from QE 3, 4 and 5 should really reduce the value of the outstanding debt, especially when you factor in the move toward longer term bonds. Maybe we have to cut some programs and raise taxes and it may suck, but it will suck more for the people who have large holdings of US debt, currency reserves or rely heavily on exports to the US.

 

As long as we give 1-way trade deals to top importers, we will be fine. Every decade people think it is the end of the world, whether it is WWII, Cold War & Nukes, Terrorism, Debt...Rome fell, there were Dark ages, and the human race continued. The fact is that maybe the next generation as a whole might be worse off than their parents, but I know I am going to do better than my parents and don't care what the rest of the world does.

 
Military_MBA_Banker:
The fact is that maybe the next generation as a whole might be worse off than their parents, but I know I am going to do better than my parents and don't care what the rest of the world does.

"Fuck all y'all, I got mine!"

Ladies and gentlemen, bear witness to the philosophical underpinnings to the collapse of Western Civilization!

 

Off that ,monkeysama, the entitlements picture for much of the rest of the developed world is far worse than ours because we still have our Catholic Hispanics streaming across the border, pumping up the economy and juicing our population growth rates while everyone else has to deal with populations aging far faster.

 
rafiki:
Off that ,monkeysama, the entitlements picture for much of the rest of the developed world is far worse than ours because we still have our Catholic Hispanics streaming across the border, pumping up the economy and juicing our population growth rates while everyone else has to deal with populations aging far faster.

The only place that has a declining population is the EU (and possibly Japan at this point). So we're not as well off as you imagine. I hope you're right though, but I think one of the grandest ironies is that the Tea Party right wants to make getting into this country harder when the only thing that can prop up their decaying asses is the hard work of the brown people.

 

$650 billion versus a trillion, no big deal, right? Thanks for the post Eddie. It really helped me keep a visual for when I next hear about huge numbers, now that I got some perpective.

On another note, I couldn't help but chuckle when the debt was greater than the world's GDP.

 
Military_MBA_Banker:
Plus think long term--we are using everyone else's oil while we sit on a mountain of shale, natural gas, and our own oil reserves. Guess what happens we all that is left is what we have. We win.
Yes, this is the grandest joke of all - the US could close off completely and be fine. This reminds me of a fun point on the GWOT: while the US could seal off its borders and all communication from the ME if it had to, Eurasia is ultimately part of the same geography, and given their history: far more screwed than us.

I'm still stockpiling for the zombie apocolypse though. Just in case.

Get busy living
 
UFOinsider:
Yes, this is the grandest joke of all - the US could close off completely and be fine.

All countries rely on one another a great deal, assuming we're talking about international trade. This video will show you how much we rely on one another (both inside and outside of country borders):

 
UFOinsider:
Military_MBA_Banker:
Plus think long term--we are using everyone else's oil while we sit on a mountain of shale, natural gas, and our own oil reserves. Guess what happens we all that is left is what we have. We win.
Yes, this is the grandest joke of all - the US could close off completely and be fine. This reminds me of a fun point on the GWOT: while the US could seal off its borders and all communication from the ME if it had to, Eurasia is ultimately part of the same geography, and given their history: far more screwed than us.

I'm still stockpiling for the zombie apocolypse though. Just in case.

same here.

pretty much just stacking up on pipe bombs and motolovs to fend off those pesky tanks.

Oh and my resume. Always have my resume ready in case I meet a Goldman MD and rescue him. It might lead to an offer

 

Not that I rely too heavily on sell-side banks for my info, but Richard Berner (formerly of MS), wrote a research piece which claimed that up to 50% of US outflows were inflation indexed (to US core CPI). Inflating our way out of this will not work, since it will require more than 1$ devaluation (maybe up to $1.5) for every 1$ of debt.

looking for that pick-me-up to power through an all-nighter?
 
<span class=keyword_link><a href=/finance-dictionary/what-is-london-interbank-offer-rate-libor>LIBOR</a></span>:
Not that I rely too heavily on sell-side banks for my info, but Richard Berner (formerly of MS), wrote a research piece which claimed that up to 50% of US outflows were inflation indexed (to US core CPI). Inflating our way out of this will not work, since it will require more than 1$ devaluation (maybe up to $1.5) for every 1$ of debt.

This is really surprising to me. Nominal treasuries seem so much more popular than TIPS. Do you have this article I'd like to take a look.

 
jsmort11:
<span class=keyword_link><a href=/finance-dictionary/what-is-london-interbank-offer-rate-libor>LIBOR</a></span>:
Not that I rely too heavily on sell-side banks for my info, but Richard Berner (formerly of MS), wrote a research piece which claimed that up to 50% of US outflows were inflation indexed (to US core CPI). Inflating our way out of this will not work, since it will require more than 1$ devaluation (maybe up to $1.5) for every 1$ of debt.

This is really surprising to me. Nominal treasuries seem so much more popular than TIPS. Do you have this article I'd like to take a look.

Same.

 

The Federal Reserve actually owns more treasuries than China. China doesn't own as many as people think (about equal to Japan) and they have been quietly paring down their holdings over the past year. The reason they are so important is because they are the biggest marginal buyer (other than the Fed of course) with an outsized influence on the price.

Some people bring up an interesting point on our nation's self-sufficiency. In a true doomsday scenario, while everyone suffers, the US will be comparatively better off. Not only do we have a nice stock of natural gas (with some oil as well) but we are the holders of incredibly fertile agricultural land that is relatively well supplied with water. 10-20 years from now it will become apparent what an advantage that is. Not to mention other factors such as geographical isolation, low population density, clean environment (relatively) and easily accessible waterways. The kicker to all of this is our continued population growth (thanks to immigration) while the rest of the developed world and China will be dealing with severe demographic problems. I am bearish on the US in the medium term but actually bullish in the very long term (this is all on a relative basis). There will clearly be some dark times while this debt situation is brought under control, possibly with extensive debt monetization, but the US is like a company with a competitive advantage that can (almost) never be eroded. I would bet on our moat protecting us when times are tough.

 

I also think it is relative to say things might get bad for the US--bad how? High unemployment? High gas prices? A decrease in quality of life proportional to the increase in quality of life in developing nations with cheaper labor? Take a look at post-war Iraq or Chad or Liberia. We don't know how good we have it.

 

As for a basket of currencies (i.e. IMF special drawing rights) taking over the dollar in 48 months.. come on man. There is diversification into the Euro (hence the continual bid despite their debt crisis) and gold but this is all at the margin. I do expect a rush into the RMB, but nothing near a replacement of the dollar, when it becomes fully convertible but that is a while away.

 

Military_MBA_Banker, I agree with you and truly feel that Americans today are spoiled and apt to whine and complain about everything. Yes, on a relative basis we are not dominating the world economically like we did in the 1960s-1990s but we really do have it good. I believe everything is cyclical and when the upcoming generation that will be hardened by tough times (and possibly large-scale armed conflict) steps up to the plate it will provide the force for our next surge.

 
macro:
Military_MBA_Banker, I agree with you and truly feel that Americans today are spoiled and apt to whine and complain about everything. Yes, on a relative basis we are not dominating the world economically like we did in the 1960s-1990s but we really do have it good.
I would argue we really dominated the world economically during the 1800s and from ~1920 until 1973. The world was first an agricultural economy- an area where the US was really strong. Then the world shifted towards a manufacturing economy towards the end of the late 1800s- and we were right behind the UK; ahead of France and Germany. Then there was WWI and WWII, and we kept our infrastructure intact while Europe and Asia self-destructed. It took them 25 years after WWII to rebuild and eventually the world became constrained by resources again rather than labor or infrastructure. That finally played out with the Arab oil embargo.

The US regained some economic dominance in the '80s and '90s with deficit spending and later the collapse of communism and the tech boom, but we no longer had the monopoly on labor and infrastructure that we had 40 years ago. And as China and India stepped up to the plate ~10 years ago, the US worker looked expensive and unproductive relative to the competition.

But what people don't realize is that the world is about to hit another constraint like it did in the early '70s. Instead of running out of oil this time, we're going to run out of food- the world's population and demand for animal products has outstripped our ability to produce grain just like the world's population of cars and airliners outstripped our ability to produce oil in the '70s.

This is terrible news for much of the world, but it's going to be good news for the US- particularly farmers- just like bad news for the West when it came to oil prices in the '70s was great news for the oil emirates.

Long run, the PETA folks handing out Unhappy Meals outside McDonald's are the real winners. They're going to force the world off the Atkins diet and into eating their weird mix of bread, tofu, rice, and vegetables. :D

 

Sorry, I think that rant came from the fact my father in law is an asshole who believes the world is coming to an end (he is a rich, ignorant jerk). I think I was yelling at him in my head as I wrote it.

 
Military_MBA_Banker:
Sorry, I think that rant came from the fact my father in law is an asshole who believes the world is coming to an end (he is a rich, ignorant jerk). I think I was yelling at him in my head as I wrote it.
No worries. I grew up around doomsday types, so I feel the same about the US: so we're not totally dominant in every way. The rest of the world is developing, so fucking what.

This is a great place to live.

Get busy living
 

Esse corporis dolorum molestiae consequatur. Cum et quo eos rem. Incidunt aut in rem perspiciatis temporibus temporibus. Et vitae sunt accusamus in. Quidem molestiae accusantium reprehenderit maxime et. Aut quis ex sunt.

Sit deleniti possimus impedit at. Non quo perferendis quos sapiente deserunt. Doloremque odio quae excepturi ratione. Quidem quod in doloribus molestiae debitis nisi. Quo nisi vel assumenda. Eum vitae delectus explicabo atque.

Quae eos ab dolores vitae iusto aperiam veniam eaque. Praesentium dolor voluptatum inventore voluptatem et et sit.

Ab debitis est modi sequi. Et possimus tenetur accusantium corporis. Voluptatem consequatur asperiores distinctio placeat tenetur. Et quas error porro quod.

 

Numquam velit eius minima enim aut inventore harum. Officia numquam est cum est ut commodi et. Qui atque odit laborum ipsum nulla eum rem.

Et a quaerat fuga rerum provident sint. Sapiente id laudantium sed delectus asperiores quis distinctio iure.

Fugiat repellat id reprehenderit minima sint eos quasi. Cum est odio voluptatem et dolorem eaque. Exercitationem voluptatem laboriosam ut odit neque tempore.

Consequuntur molestias quidem dolore quam voluptatem. Libero dolore nesciunt consectetur est. Quo sit accusamus sit magni tenetur recusandae nemo et. Iure voluptatem eius architecto commodi aut voluptas.

 

Ipsam et velit id voluptatem. Quis distinctio maxime asperiores molestias. Occaecati harum natus quae cupiditate soluta alias et. Omnis vel assumenda exercitationem accusamus. Ad neque explicabo voluptate voluptate consequatur consequuntur. Voluptates quisquam molestias ut minima quia consequatur.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
Secyh62's picture
Secyh62
99.0
5
kanon's picture
kanon
98.9
6
DrApeman's picture
DrApeman
98.9
7
dosk17's picture
dosk17
98.9
8
GameTheory's picture
GameTheory
98.9
9
CompBanker's picture
CompBanker
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”