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Us Debt "red Herring"

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I was discussing house prices and the wider gobal economy with a work colleague last night.

He mentioned an article in Time magazine which he brought in for me today.

Time magazine Red Herring

I've not looked in huge detail at the US economy - but am well aware of their problems.

His opinion was that the cuts here and in the US are not required, then confirmed that he is a 'deficit denier'!

So is US debt a red herring, or is the article way off the mark?

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The article is way off the mark.

I have never been able to understand the fixation with GDP figures as a goal in themselves. The central point of the article about tax revenues rising as GDP rises is true in normal times, but when GDP is rising as a result of extreme government spending, the two do not necessarily go together. At the moment, there doesn't seem to be a correlation.

At the moment, the U.S. deficit is over 10% of GDP. Even if GDP rises at a very optimistic 4%, the accumulation of further debt at 10% per year is clearly going to outpace the effects of increased GDP in making the existing sotck of debt more manageable.

Also, was just wondering why you had a summary of Facebook's business model as your avatar. I hope people wait until Facebook have worked out stage 2 before buying into their IPO.

Edited by WageslaveX14
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