Is the US debt a problem?
The national debt has increased every year over the past ten years. Interest expenses during this period have remained fairly stable due to low interest rates and investors' judgement that the U.S. Government has a very low risk of default.
Rising debt means fewer economic opportunities for Americans. Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.
Decreased savings and income
The private sector will stop seeking investments that can generate growth due to the incentive to save. This includes the lower amount of capital available once individuals stop investing in securities offered by businesses due to treasury securities being more attractive.
88% of them show borrowing on an unsustainable path. The US Treasury building in Washington, DC. The Congressional Budget Office warned in its latest projections that US federal government debt is on a path from 97% of GDP last year to 116% by 2034 — higher even than in World War II. The actual outlook is likely worse.
Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).
At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.
1) Switzerland
Switzerland is a country that, in practically all economic and social metrics, is an example to follow. With a population of almost 9 million people, Switzerland has no natural resources of its own, no access to the sea, and virtually no public debt.
The least indebted state is Oklahoma, according to the report, followed by Iowa and a tie for third with New Hampshire and Nebraska. The fifth best state in the category is Ohio. The next five best states, from best to worst, are Wyoming, Indiana, and Wisconsin, with Vermont and South Dakota tied in their ranking.
China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt. 1 However, it does not own the most U.S. debt of any foreign country. Nations borrowing from each other may be as old as the concept of money.
He said debt is an important tool for a country, and its importance is why we should be so concerned. Cochrane points out that during the Great Recession and the COVID-19 shutdown, the United States was able to swoop in fast with billions for bailouts, stimulus checks and aid programs.
Is 3000 dollars in debt bad?
Recurring debt ($3,000) ÷ gross monthly income ($6,000) = 0.50 or 50%. That's not a good DTI. If your DTI is higher than 43% you'll have a hard time getting a mortgage or other types of loans. Most lenders say a DTI of 36% is acceptable, but they want to lend you money, so they're willing to cut some slack.
An Explainer. Just about every country has debt: governments take loans to pay for new roads and hospitals, to keep economies ticking over when recessions hit or tax revenues fall. Sometimes they borrow from countries, other times banks, or maybe asset managers—companies like those investing your pension dollars.
The $34 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself.
Then there are the countries that owe America money. Even though Japan holds the biggest amount of U.S. debt, the U.S. is also owed a lot of money by them too.
The United States is the undisputed heavyweight when it comes to the economies of the world. America's gross domestic product in 2022 was more than 40% greater than that of China, the world No. 2. Even more striking, U.S. GDP was over five times that of the next two largest economies, Japan and Germany.
Jerome Kerviel, The Most Indebted Person In The World, Owes $6.3 Billion To Former Employer, Societe Generale. In a hyper-competitive world where everyone strives to be the biggest, boldest and most famous, no one covets Jerome Kerviel record-breaking achievement. He is the most indebted person in the world.
As of 2021 (the latest available data), federal debt reached 115 percent of gross domestic product (GDP), ranking 16th highest out of 164 countries for which the IMF has data. Japan tops the ranking with central government debt of 221 percent of GDP, followed by Greece, Sudan, Eritrea, and Singapore.
Public debt in Russia averaged 15.4% of GDP in the decade to 2022, below the average of 32.5% of GDP for Eastern Europe. Public debt in Russia was 18.9% of GDP in 2022. For more public debt information, visit our dedicated page.
A sovereign debt default is the failure of a government to honor some or all of its debts. Common causes of sovereign defaults include economic stagnation, political instability, and financial mismanagement.
In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion.
Is Hawaii in debt?
“Hawaii is the most indebted state, with government debt at $13,681.67 per capita. The total state debt balance of $19.7 billion represents 19.49% of the state's gross domestic product. For comparison, Idaho has the lowest per capita government debt, per the report, at $3,108, or 5.43% of the state's GDP.
Average American Credit Card Debt
The Federal Reserve study does not provide numbers for the average credit card balance per consumer. However, according to Transunion, this figure rose from $5,795 in January 2023 to $6,295 in January 2024.
By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off. Congress distributed the surplus to the states (many of which were heavily in debt). The Jackson administration ended with the country almost completely out of debt!
During the Lost Decades, Japanese public debt has continued to rise in response to a number of challenges, such as the Great Recession in 2008, and as well as two national crises, including the triple disaster (earthquake, tsunami, and nuclear disaster, etc.)
China has little overseas debt, and a high national savings rate. In addition, most of the debt is state owned – state-controlled banks loaned funds to state-controlled firms – giving the government the ability to manage the situation.
References
- https://www.barrons.com/articles/net-wealth-is-over-135-trillion-where-that-money-resides-d722c9c6
- https://www.thebalancemoney.com/who-owns-the-u-s-national-debt-3306124
- https://www.bu.edu/articles/2023/what-is-the-sovereign-debt-crisis-and-can-we-solve-it/
- https://www.quora.com/How-much-does-America-owe-to-other-countries-and-how-much-do-those-countries-owe-America
- https://www.foxbusiness.com/economy/us-national-debt-tops-34t-how-much-debt-is-too-much-debt
- https://www.investopedia.com/articles/investing/080615/china-owns-us-debt-how-much.asp
- https://www.incharge.org/debt-relief/how-much-debt-is-too-much/
- https://www.nerdwallet.com/article/investing/bond-market-crash
- https://www.marketplace.org/2023/11/07/why-is-china-selling-off-its-us-debt-treasurys/
- https://www.huffpost.com/entry/jerome-kerviel-most-debt-in-the-world_n_2077219
- https://www.titlemax.com/discovery-center/money-finance/debts-owed-by-the-us-and-owed-to-the-us/
- https://www.clearfinances.net/countries-without-public-debt/
- https://www.quora.com/If-China-sells-all-US-treasury-bonds-what-will-happen-to-the-US-economy
- https://www.pgpf.org/infographic/the-national-debt-is-now-more-than-34-trillion-what-does-that-mean
- https://www.quora.com/What-happens-if-all-countries-stop-buying-US-treasuries
- https://taxfoundation.org/blog/us-debt-compares-to-other-countries/
- https://www.investopedia.com/articles/investing/040115/reasons-why-china-buys-us-treasury-bonds.asp
- https://worldpopulationreview.com/country-rankings/countries-by-national-debt
- https://www.investopedia.com/articles/economics/10/national-debt.asp
- https://www.forbes.com/advisor/credit-cards/average-credit-card-debt/
- https://en.wikipedia.org/wiki/Financial_position_of_the_United_States
- https://finance.yahoo.com/news/top-20-countries-owe-us-175515001.html
- https://www.investopedia.com/articles/markets-economy/090616/5-countries-own-most-us-debt.asp
- https://www.visualcapitalist.com/which-countries-hold-the-most-us-debt/
- https://thehill.com/opinion/international/4075341-china-is-in-default-on-a-trillion-dollars-in-debt-to-us-bondholders-will-the-us-force-repayment/
- https://www.cnn.com/2023/05/25/economy/japan-china-us-debt-default-intl-hk/index.html
- https://en.wikipedia.org/wiki/Debt-trap_diplomacy
- https://www.quora.com/How-long-would-it-take-to-pay-off-the-national-debt-of-the-United-States-if-the-government-stopped-spending-money-and-only-used-money-from-tax-revenue-to-pay-it-off
- https://www.carlylefinancial.com/blog/if-the-dollar-collapses-what-happens-to-your-house/
- https://www.bloomberg.com/news/newsletters/2024-01-06/bloomberg-new-economy-china-s-debt-mountain-is-even-bigger-than-feared
- https://www.visualcapitalist.com/government-debt-by-country-advanced-economies/
- https://budgetmodel.wharton.upenn.edu/issues/2023/10/6/when-does-federal-debt-reach-unsustainable-levels
- https://www.economicshelp.org/blog/634/economics/the-problem-with-printing-money/
- https://www.statista.com/statistics/246420/major-foreign-holders-of-us-treasury-debt/
- https://finance.yahoo.com/news/china-sells-most-us-assets-223331094.html
- https://finance.yahoo.com/news/30-wealthiest-countries-per-capita-111348314.html
- https://knowledge.wharton.upenn.edu/article/how-the-u-s-could-stabilize-debt-and-fuel-economic-growth/
- https://chinapower.csis.org/us-debt/
- https://www.itsuptous.org/blog/consequences-of-national-debt
- https://www.quora.com/Why-does-Japan-hold-so-much-U-S-government-debt-What-might-motivate-them-to-stop-doing-this-in-the-future
- https://www.itsuptous.org/blog/who-does-us-owe-money-to
- https://www.barrons.com/articles/-bank-of-japan-early-warning-u-s-5c9dd0e2
- https://www.treasurydirect.gov/government/historical-debt-outstanding/
- https://www.bloomberg.com/news/articles/2024-04-01/us-government-debt-risk-a-million-simulations-show-danger-ahead
- https://www.pgpf.org/top-10-reasons-why-the-national-debt-matters
- https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/
- https://usafacts.org/articles/which-countries-own-the-most-us-debt/
- https://www.bizjournals.com/pacific/news/2024/01/05/hawaii-gets-a-perfect-score-in-debt.html
- https://www.marketplace.org/2024/01/30/us-national-debt-34-trillion/
- https://www.usnews.com/news/best-countries/articles/the-top-10-economies-in-the-world
- https://www.cfr.org/backgrounder/us-national-debt-dilemma
- https://www.imf.org/en/Blogs/Articles/2023/09/13/global-debt-is-returning-to-its-rising-trend
- http://fingfx.thomsonreuters.com/gfx/rngs/CHINA-DEBT-GRAPHIC/0100315H2LG/
- https://en.wikipedia.org/wiki/National_debt_of_Japan
- https://www.investopedia.com/articles/investing/102413/why-and-when-do-countries-default.asp
- https://collins.house.gov/media/press-releases/collins-china-buying-us-farmland
- https://www.ceicdata.com/en/indicator/russia/government-debt--of-nominal-gdp
- https://www.cbsnews.com/minnesota/news/good-question-how-did-the-u-s-debt-get-so-high/
- https://www.gao.gov/americas-fiscal-future/federal-debt
- https://homework.study.com/explanation/what-would-happen-if-the-u-s-actually-paid-off-the-national-debt-where-would-the-banks-big-financial-institutions-and-government-foreign-and-domestic-put-their-cash.html
- https://time.com/personal-finance/article/savings-bonds-guide/
- https://www.history.com/this-day-in-history/andrew-jackson-national-debt-reaches-zero-dollars
- https://uk.finance.yahoo.com/news/countries-owe-china-billions-struggling-130000651.html
- https://www.quora.com/If-China-owns-most-of-our-debt-what-would-happen-if-they-stopped-buying-our-bonds
- https://www.taxpolicycenter.org/briefing-book/how-does-federal-government-spend-its-money
- https://www.marketplace.org/2023/05/26/who-does-the-u-s-owe-31-4-trillion/
- https://www.quora.com/Why-does-the-U-S-borrow-money-from-China-despite-having-a-strong-economy
- https://www.titlemax.com/discovery-center/money-finance__trashed/debts-owed-by-the-us-and-owed-to-the-us/
- https://www.quora.com/What-would-happen-if-the-USA-and-other-countries-stopped-trading-with-China
- https://en.wikipedia.org/wiki/National_debt_of_the_United_States
- https://www.pgpf.org/blog/2023/05/the-federal-government-has-borrowed-trillions-but-who-owns-all-that-debt
- https://www.focus-economics.com/country-indicator/russia/public-debt/
- https://www.quora.com/How-much-does-Mexico-owe-the-United-States
- https://watcher.guru/news/brics-china-central-bank-dumping-us-dollar-currency
- https://www.laconiadailysun.com/news/state/these-states-are-where-americans-have-the-most-least-debt/article_0d3c56d9-4b20-5488-a827-38788dd57b2f.html
- https://finance.yahoo.com/news/china-really-dumping-treasury-bonds-002534002.html
- https://www.quora.com/The-UK-owns-about-755-000-000-000-of-the-USA-debt-how-much-more-of-the-USA-debt-could-the-UK-own-and-what-impact-does-that-have-on-both-countries