National Debt vs GDP - why does it matter?
 

The Outstanding Public Debt as of 28 Nov 2011 at 05:27:22 PM GMT is 15,054,997,576,083.

USA GDP is ~15,227,000,000,000.

Supposedly the debt is increasing at a rate of 3,970,000,000 per day.


So, let's discuss. What is going to happen and/or what does it mean to us when the debt is greater than the GDP? Anyone have a clue? :eek:

It doesn't much matter anymore. Its only a matter of time until the US defaults. The political system pretty much ensures that will be the case.

Am I totally off base or is "debt" a total amount and "GDP" a yearly amount?

I think the proper comparison should be "deficit" vs. GDP?

Unless there is some weird accounting math that I'm just ignorant of?

I think it was Dick Cheney that said deficits do not matter. You don't hear much of that talk anymore from anyone.

Asher

Guys debt is not the same as deficit.

The National Debt is the total amount of money owed by the government; the federal budget deficit is the yearly amount by which spending exceeds revenue. Add up all the deficits (and subtract those few budget surpluses we've had) for the past 200+ years and you'll get the current National Debt.

Right, so why are you comparing debt to gdp, isn't gdp a yearly amount as well? What does that have to do with anything?

It's like comparing an individuals income (say, 80k) to their total debt (mortgage, car notes, etc., say 800k).. Yes, 800k is MORE than 80k, but that relationship isn't descriptive of the system.

It's my understanding that when our national debt is greater than our GDP, then we are screwed some how. I am simply wondering what it means in plain person talk vs. all these economists that are discussing it. Make sense?

For example, per the "Wall Street Journal"...

"In stark but simple terms, unless Americans are made aware of this financial crisis and demand accountability, the very fabric of our society will be destroyed. Interest rates and interest costs will soar and government revenues will be devoured by interest on the national debt. Eventually, most of what we spend on Social Security, Medicare, education, national defense and much more may have to come from new borrowing, if such funding can be obtained. Left unchecked, this destructive deficit-debt cycle will leave the White House and Congress with either having to default on the national debt or instruct the Treasury to run the printing presses into a policy of hyperinflation."

Does this mean I only have to worry about high interest rates? I don't really use a credit card, and typically pay cash and/or own what I need, so does this effect me or not?

HOW?