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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (3148)	1/11/2001 10:54:21 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

Without that the debt owned by the public is under 50% of GDP Actually, I believe it is more like 33% of GDP (based upon $10 Trillion GDP) publicdebt.treas.gov publicdebt.treas.gov There is debt owned by the public and debt held by the government -owed to itself- to cover unfunded liabilities somewhere in the future. Both categories of debt combined total some 57% of GDP, or $5.7 Trillion. Social Security Trust Fund surpluses accrued to pay for future SS liabilities (baby boomers) must be parked in government debt. Thus, the govt debt owed to itself increases with every year there exists a surplus in tax revenues, UNLESS the government directly applies these surpluses to buy back publicly held debt. And furthermore, when the SSTF purchases govt debt (10-20 year bonds) with those surplus funds, it effectively increases the total government budget since the government is issuing debt to itself and receiving those surplus funds in return. Now comparing the debt situation with that of Japan, where economists are projecting that their national debt will total 130% of national GDP. And due to an aging workforce, and a xenophobic culture that is hostile to immigration of foreign labor (taxpayers), this debt burden will be born by fewer taxpayers. Thus, taxes will either have to be increased to pay their debt in coming years, or the government will have to monetize the debt. Now for Europe's total deficit picture, I don't have any combined data that incorporates all EMU/EEC members, and I haven't felt the compulsion to add up the individual datum myself. But given Europe's STILL abnormally large entitlement sector, I can't see how their national debt picture is any better than that of the US. One essential fact that bears mentioning, imo, is that a on-going govt surplus equates to decreasing financial liquidity in the economy since those surpluses are derived by taking money out of the pockets of individual taxpayers. If those surpluses were spent/invested in hard assets, or in infrastructure projects, the costs of which cannot be born by the private market, then I would have little problem with the concept. But when the surplus is spent on increasing govt obligations/entitlements, or on pork barrel projects with no economic justification, then it absolutely becomes a burden on the economy. Regards, Ron