U.S. federal debt, household debt, financial business debt

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Numbers that Count!

In 2007 the federal deficit was 1.2 percent of G.D.P.
In 2009 the federal deficit has reached 13 percent.
U.S. trade deficit in April 2009: $29.2 billion. (read more)
While these are the sums for a specific time period, the overall debt keeps accumulating: As of June 30, 2009 the different sectors of the U.S. economy had accumulated the following debt (in trillions):
- Households: $13.7
- Non-financial business: $11.2
- Pirvate financial business: $8.4
- Govt. sponsored enterprises: $8.1
- Federal government: $7.2
- State and local government: $2.3
For comparison, the entire U.S. economy totalled around $14 trillion in 2008.

Total Credit Market Debt (Consumers, business, banks)

The ratio of debt to G.D.P.has risen from 143 percent in 1951 to 350 percent in 2008.
This number reached 133 percent in 2007.

Wealth and Consumption

As a standard rule of thumb, one additional dollar of wealth induces the average consumer to increase annual spending by four to six cents.
This means that the $13 trillion in wealth that evaporated during the 2007 recession reduced annual consumer spending by $650 billion.

The Facts About American Debt and the Bitter End

The past fifty years has seen a redistribution of income from lower- and middle-income households to corporate profits and upper-income households. In 1947, the bottom 40% of U.S. households had a 16.9% share of total U.S. income, while the highest 5% had a 17.5% income share. By 2006, these number had changed to 13.5% and 21.5% respectively. Since household spending is an essential part of the U.S. economy, the loss in household income was compensated by a decrease in personal savings. People started spending above their income at an increasing rate as could be measured by the increasing credit card debt and ballooning mortgage borrowing. A contractor friend of mine, whose business has all but come to a standstill during the 2007 recession, was well aware that "many of his remodelling jobs had been paid by home equity loans."

My personal bank since 1984, the Santa Cruz Community Credit Union has put on line a nifty tool on how to get a handle on your personal debt. Check it out!

In the News

14 November, 2009: Trade deficit widens to $36 billion in September.

21 October, 2009: Japan's government debt reached twice it's GDP ($5 trillion), while the accumulated U.S. government debt is nearly 98% of GDP. However, Japan owes less than 10% of its debt to foreign lenders, while 46% of U.S. debt is held by overseas countries such as China and Japan. Read the story or check out this graph.

26 August, 2009: $9 trillion deficit in the next 10 years. (read more)

August 2009: As we are all aware, borrowing cannot continue indefinitely, and debts in the end need to be repaid. This moment in the U.S. economy arrived in 2008. Homeowners were defaulting on their over extended mortgages and American consumer began to tighten their belts and live within their means. This is the main event that gives us all reason to assume that the current jobless recovery will last for many years to come.

Read more details in this article by economist Thomas Palley.

12 June, 2009: The great dilemma: The members of the political class face a set of monumental tasks. First, they have to persuade a country to postpone gratification for the sake of rebuilding the country. This country hasn't accepted sacrifice in 50 years.(read more)

23 May, 2009: The Federal Reserve is printing money from thin air, and the government is issuing trillions of dollars in new debt as it tries to spend its way out of the recession with a huge stimulus package, new lending programs, health care overhauls and automotive rescues (read more). As a direct result, the value of the dollar in respect to other foreign currencies is increasingly slipping (see chart).