Minyan Mailbag: US Debt
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
Some talking head was on Squawk Box this morning saying it is better for China AND the United States if they DON'T de-peg the Yuan. They then said that the interim budget deficits should not be sledge-hammered as that will kill the goose, not cure it. Further, they said that interim deficits are not the question, it's the overall total government debt as against gdp that is the real issue, and we are below 40% debt / gdp (which is lower than the previous highs of 50% or more).
They also said that Elmer has it right this time - it's not 1994 and it's not 1999. He is raising the rates in measured form. Then they said that the long bond yield should be higher.
All the above is bullish, not bearish...so why all the worry and frowns and hand wringing?
I don't know where those figures come from, but we differ.
The government just raised the debt ceiling (10/04) from $7.2 trillion because they had to; we put total government debt at $7.4 trillion. GDP is a shade under $11 trillion - so total government debt is 67%, by far higher than ever before.
A better measure of risk is total credit in the economy. This is currently around 305% of gdp - sharply higher than 2000 where it was around 260%. This compares to 260% in 1930-31 when it rose from 150% in 1925. This number reached a low in 1954 of 130%.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter