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Some Startling Facts About The Us Deficit

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It was interesting looking at the headlines in the US and UK snoozepapers these past few days. I had to pinch myself and then recall what I thought of the average abilities of journalists who are pressed to hack out one article after the next.

The UK news repeatedly raises alarm over the size of the US deficit which currently stands at around $8.4 trillion, this figure comprises 4.6 trillion dollars of consumer debt with the balance accounted for by various forms of Federal debt. With a population of 298 million that equates to $28,000 per head of population – while that’s a large amount by any standards, and larger than historical norms, let’s keep it in perspective, it’s half the average wage. Now compare these numbers with the UK statistics where the national debt is 1.3 trillion GBP: with a population of 60 million that’s 21,000GBP per head. Given the current exchange rate of 1.88 USD per pound each person in the UK, from toddler to grandparent, owes $40,700. That’s 40% more than Uncle Sam.

I would like to hear others thoughts on why journalists rant about the USA getting its debt under control while at the same time they ignore the debt burden held by UK citizens. Is the pot calling the kettle black?

I now believe there is a large degree of dishonesty in the UK press and governmental institutions who fail to note not only the higher absolute debt levels but also peoples’ inability to pay. What do I mean by that? Here in the USA some 30% of the population work in the public sector whereas in the UK its over 40%. Tax burdens are also much higher in the UK which means the average UK taxpayer has to service much higher debt levels than his USA counterpart with less in his bank account after deductions. Productive workers in the UK are therefore getting a very poor ‘new deal’ while public sector workers wallow in indignation when told they should expect to work until 67 and receive contributions based pensions.

So where lies the truth? If my figure are correct then the UK is in a far worse position than the USA and sterling should see a flight of investors now that the BoE have shown they don’t care about inflation and do care about the value of their own homes. Is the BoE stuck between a rock and a very hard place? If they increase interest rates then housing will collapse in value but sterling will remain strong; on the otherhand i they reduce rates then the UK populace will continue investing in the fools gold of property markets.

Edited by bpw

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It was interesting looking at the headlines in the US and UK snoozepapers these past few days. I had to pinch myself and then recall what I thought of the average abilities of journalists who are pressed to hack out one article after the next.

The UK news repeatedly raises alarm over the size of the US deficit which currently stands at around $8.4 trillion, this figure comprises 4.6 trillion dollars of consumer debt with the balance accounted for by various forms of Federal debt. With a population of 298 million that equates to $28,000 per head of population – while that’s a large amount by any standards, and larger than historical norms, let’s keep it in perspective, it’s half the average wage. Now compare these numbers with the UK statistics where the national debt is 1.3 trillion GBP: with a population of 60 million that’s 21,000GBP per head. Given the current exchange rate of 1.88 USD per pound each person in the UK, from toddler to grandparent, owes $40,700. That’s 40% more than Uncle Sam.

I would like to hear others thoughts on why journalists rant about the USA getting its debt under control while at the same time they ignore the debt burden held by UK citizens. Is the pot calling the kettle black?

I now believe there is a large degree of dishonesty in the UK press and governmental institutions who fail to note not only the higher absolute debt levels but also peoples’ inability to pay. What do I mean by that? Here in the USA some 30% of the population work in the public sector whereas in the UK its over 40%. Tax burdens are also much higher in the UK which means the average UK taxpayer has to service much higher debt levels than his USA counterpart with less in his bank account after deductions. Productive workers in the UK are therefore getting a very poor ‘new deal’ while public sector workers wallow in indignation when told they should expect to work until 67 and receive contributions based pensions.

So where lies the truth? If my figure are correct then the UK is in a far worse position than the USA and sterling should see a flight of investors now that the BoE have shown they don’t care about inflation and do care about the value of their own homes. Is the BoE stuck between a rock and a very hard place? If they increase interest rates then housing will collapse in value but sterling will remain strong; on the otherhand i they reduce rates then the UK populace will continue investing in the fools gold of property markets.

Yup--and a report today said that the EU deficit is currently 50% of the US deficit and growing more rapidly. Its a case of the pot calling the kettle black. US GDP growth is twice that of the Eurozone and they are adding jobs. Makes you think. :blink:

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It was interesting looking at the headlines in the US and UK snoozepapers these past few days. I had to pinch myself and then recall what I thought of the average abilities of journalists who are pressed to hack out one article after the next.

The UK news repeatedly raises alarm over the size of the US deficit which currently stands at around $8.4 trillion, this figure comprises 4.6 trillion dollars of consumer debt with the balance accounted for by various forms of Federal debt. With a population of 298 million that equates to $28,000 per head of population – while that’s a large amount by any standards, and larger than historical norms, let’s keep it in perspective, it’s half the average wage. Now compare these numbers with the UK statistics where the national debt is 1.3 trillion GBP: with a population of 60 million that’s 21,000GBP per head. Given the current exchange rate of 1.88 USD per pound each person in the UK, from toddler to grandparent, owes $40,700. That’s 40% more than Uncle Sam.

I would like to hear others thoughts on why journalists rant about the USA getting its debt under control while at the same time they ignore the debt burden held by UK citizens. Is the pot calling the kettle black?

I now believe there is a large degree of dishonesty in the UK press and governmental institutions who fail to note not only the higher absolute debt levels but also peoples’ inability to pay. What do I mean by that? Here in the USA some 30% of the population work in the public sector whereas in the UK its over 40%. Tax burdens are also much higher in the UK which means the average UK taxpayer has to service much higher debt levels than his USA counterpart with less in his bank account after deductions. Productive workers in the UK are therefore getting a very poor ‘new deal’ while public sector workers wallow in indignation when told they should expect to work until 67 and receive contributions based pensions.

So where lies the truth? If my figure are correct then the UK is in a far worse position than the USA and sterling should see a flight of investors now that the BoE have shown they don’t care about inflation and do care about the value of their own homes. Is the BoE stuck between a rock and a very hard place? If they increase interest rates then housing will collapse in value but sterling will remain strong; on the otherhand i they reduce rates then the UK populace will continue investing in the fools gold of property markets.

I saw a TV advert earlier today, a sort of 'Smith & Jones' head to head skit where some deep in debt geeezer was being assured by a suit that despite him being loads in debt the new government guidelines will aid him to clear off ALL his debt in 5 years.

Not too much deterrent there to stay out of debt.

Hasn't Mervyn King already announced his intent to up the ante, let the strong survive & the weak flounder.

Journalists are just puppets, media is controlled by higher forces.

It's not really their fault, they must hold back until their paymasters have gleaned maximum benefit from the present situation before they may present the true facts.

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I saw a TV advert earlier today, a sort of 'Smith & Jones' head to head skit where some deep in debt geeezer was being assured by a suit that despite him being loads in debt the new government guidelines will aid him to clear off ALL his debt in 5 years.

Not too much deterrent there to stay out of debt.

Hasn't Mervyn King already announced his intent to up the ante, let the strong survive & the weak flounder.

Journalists are just puppets, media is controlled by higher forces.

It's not really their fault, they must hold back until their paymasters have gleaned maximum benefit from the present situation before they may present the true facts.

What Merv said mirrors the Japanese statement earlier today: higher IR will weed out the weak and allow the strong to prosper. Its a worldwide move to kill inflation and sort out the chaff. The bubbles will all pop, including HPI, and the world will return to normal again--for awhile.

Know when to sell and go to cash and let the storm pass.

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What Merv said mirrors the Japanese statement earlier today: higher IR will weed out the weak and allow the strong to prosper. Its a worldwide move to kill inflation and sort out the chaff. The bubbles will all pop, including HPI, and the world will return to normal again--for awhile.

Know when to sell and go to cash and let the storm pass.

GAAAAAAAAAAAAAAAAAAAAAMMMMMMEEEEE ON!

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The UK news repeatedly raises alarm over the size of the US deficit which currently stands at around $8.4 trillion, this figure comprises 4.6 trillion dollars of consumer debt with the balance accounted for by various forms of Federal debt.

Where do you get that idea? As of the 16th, US government debt was $8,338,162,385,897.57.

But that's insignificant, because it ignores the unfunded liabilities, just like UK government debt ignores the cost of government pensions. Those unfunded liabilities in America are estimated by reasonable measures to be somewhere between $40 trillion and $80 trillion, and new liabilities are being added all the time.

With a population of 298 million that equates to $28,000 per head of population

Big fat deal: all the money comes from productive workers, of which I believe there are only about 110,000,000 in America. That takes your debts up to over $70k per worker, and if you add in the unfunded liabilities it could be over $750,000 per productive worker.

Needless to say, once you do the sums it's obvious that the liabilities will either be defaulted on or inflated away.

Edited by MarkG

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Indeed, but then given the working population of the uk is only 20million then that again leapfrogs us into the lead.

UK for teh win!

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Where do you get that idea? As of the 16th, US government debt was $8,338,162,385,897.57.

But that's insignificant, because it ignores the unfunded liabilities, just like UK government debt ignores the cost of government pensions. Those unfunded liabilities in America are estimated by reasonable measures to be somewhere between $40 trillion and $80 trillion, and new liabilities are being added all the time.

Big fat deal: all the money comes from productive workers, of which I believe there are only about 110,000,000 in America. That takes your debts up to over $70k per worker, and if you add in the unfunded liabilities it could be over $750,000 per productive worker.

Needless to say, once you do the sums it's obvious that the liabilities will either be defaulted on or inflated away.

This still does not detract from the relative differences between the levels of indebitness between the US and the UK. The UK would still have a larger debt per head of the population than the US, and with has less ability to deal with the debt. The US is still the largest and most powerful economy in the world, and as such can get away with some very sharp monetary practice as the rest of the world economy is reliant upon it. The UK on the other hand has a relatively minor role to play and will not be indulged to nearly the same extent.

I think that this is the main difference in the perceived levels of worry and alarm about debt in the US and the UK, a meltdown in the US economy would be bad news for everyone, whilst one in the UK would mostly only affect the poor suckers that happen to live on that island off the EU coast.

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Indeed, but then given the working population of the uk is only 20million then that again leapfrogs us into the lead.

UK for teh win!

Less, if you only count those whose efforts create the wealth.

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The UK would still have a larger debt per head of the population than the US, and with has less ability to deal with the debt.

So you're claiming that UK government debts and unfunded liabilities are more than 4-8x GDP?

It's possible, but I'd like to see some figures to back it up.

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So you're claiming that UK government debts and unfunded liabilities are more than 4-8x GDP?

It's possible, but I'd like to see some figures to back it up.

Sounds like the average FTB position now: 8x salary mortgages?

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Where do you get that idea? As of the 16th, US government debt was $8,338,162,385,897.57.

But that's insignificant, because it ignores the unfunded liabilities, just like UK government debt ignores the cost of government pensions. Those unfunded liabilities in America are estimated by reasonable measures to be somewhere between $40 trillion and $80 trillion, and new liabilities are being added all the time.

Big fat deal: all the money comes from productive workers, of which I believe there are only about 110,000,000 in America. That takes your debts up to over $70k per worker, and if you add in the unfunded liabilities it could be over $750,000 per productive worker.

Needless to say, once you do the sums it's obvious that the liabilities will either be defaulted on or inflated away.

You are now comparing apples and oranges. Show us the figures for the unfunded liabilities in the UK and then make the comparisons, will be interesting to see which country is most mored in debt.

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You are now comparing apples and oranges. Show us the figures for the unfunded liabilities in the UK and then make the comparisons, will be interesting to see which country is most mored in debt.

The issue that a lot of commentators have with the US level of debt (both public and private) isn't so much its amount relative to GDP, which as you point out is not excessive compared to many western countries.

The problem is rather that the USA is the world's biggest economy, and a high debt to GDP ratio for the US means a high absolute level of debt. Most importantly, since the USA is now running a current account deficit, a very large proportion of this debt has to be financed from abroad. Central banks in China and the Middle East are accumulating particularly rapidly. The worry is that foreigners might at some point not want to accumulate any more American debt, and the whole system would come crashing down.

The UK similarly has a high level of debt and a large current account deficit, but the volume of sterling debt in the world is insignificant beside dollar debts, and even if we did end up with some sort of crisis as punishment for our high-spending ways, it would be less likely to cause a global recession.

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There is no such thing as a miracle economy, if the US tanks then the whole world will go down with the ship. Only a fool would think they could create a micro insulated economy, seperated from the wider world whilst opening up their business to the perils of a global economy.

To repeatedly pat yourself on the back for your good work in keeping a "Stable Economy built on prudent finance" whilst borrowing at breakneck unnafordable speed is a complete and utter disgrace.

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The UK similarly has a high level of debt and a large current account deficit, but the volume of sterling debt in the world is insignificant beside dollar debts, and even if we did end up with some sort of crisis as punishment for our high-spending ways, it would be less likely to cause a global recession.

If i was an American - and I am not - I would suggest that other countries with high debt levels also reduce their debt levels accordingly. Why should it be acceptable for a UK citizen to have $40k of debt when an American has $28k. If the problem is the rest of the worlds ability to keep buying others debt then the pain should be shared equally. It would be interesting to see how much national debt is owed per capita to overseas lenders. Anyone have the figures?

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Look at Spain - no oil, water shortage problems - and the second most indebted nation in the world behind the USA.

EU money is about to come to a grinding halt too.

Inflation perobably highest in EU.

Housing bubble second to none in EU.

Wherever you look, you see countries in real trouble. If one goes . . .

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The UK news repeatedly raises alarm over the size of the US deficit which currently stands at around $8.4 trillion, this figure comprises 4.6 trillion dollars of consumer debt with the balance accounted for by various forms of Federal debt. With a population of 298 million that equates to $28,000 per head of population – while that’s a large amount by any standards, and larger than historical norms, let’s keep it in perspective, it’s half the average wage. Now compare these numbers with the UK statistics where the national debt is 1.3 trillion GBP: with a population of 60 million that’s 21,000GBP per head. Given the current exchange rate of 1.88 USD per pound each person in the UK, from toddler to grandparent, owes $40,700. That’s 40% more than Uncle Sam.

bpw,

I think you need to gather the correct figures together, then come back with your conclusions. The ones you have quoted are incorrect.

$8.4 trillion is the US public debt (actually $8.3t at the mo'), and it doesn't comprise "4.6 trillion dollars of consumer debt". Consumer debt is a separate issue, and at end Mar '06 was $11.9 trillion.

The UK national (public) debt isn't 1.3 trillion GBP as you claim. It was 525.9 billion at end 2005. Consumer debt is 1.18 trillion GBP (is this what you meant by 'national debt'?).

On top of that you've got the unfunded liabilities argument as MarkG mentioned (which is debatable because the figs quoted above are actual balances whereas unfunded liabilities are the PDV of future 'promises').

Above all though, debt in itself doesn't tell you much as it needs to be equated to assets. If I have a $1 million loan and $2 million in bank deposits, am I in poorer shape than someone who's debt free and has no savings?

[You can find all the info you need at the ONS and from the latest Fed Flow of Funds report]

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bpw,

I think you need to gather the correct figures together, then come back with your conclusions. The ones you have quoted are incorrect.

$8.4 trillion is the US public debt (actually $8.3t at the mo'), and it doesn't comprise "4.6 trillion dollars of consumer debt". Consumer debt is a separate issue, and at end Mar '06 was $11.9 trillion.

The UK national (public) debt isn't 1.3 trillion GBP as you claim. It was 525.9 billion at end 2005. Consumer debt is 1.18 trillion GBP (is this what you meant by 'national debt'?).

On top of that you've got the unfunded liabilities argument as MarkG mentioned (which is debatable because the figs quoted above are actual balances whereas unfunded liabilities are the PDV of future 'promises').

Above all though, debt in itself doesn't tell you much as it needs to be equated to assets. If I have a $1 million loan and $2 million in bank deposits, am I in poorer shape than someone who's debt free and has no savings?

[You can find all the info you need at the ONS and from the latest Fed Flow of Funds report]

My figures came from various websites including including an article on the conservatives official website.

FreeTrader

You fail to report what you think the figures are so please feel free to correct me explicitly by stating what you think the per capita personal and national debts are for the UK and USA. This is may support your case and then again ....

lets see pls

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My figures came from various websites including including an article on the conservatives official website.

FreeTrader

You fail to report what you think the figures are so please feel free to correct me explicitly by stating what you think the per capita personal and national debts are for the UK and USA. This is may support your case and then again ....

lets see pls

I'm not making a case. You are.

You started a thread making a point about US vs UK per capita debt, and you based it on incorrect data. You may as well have said 1 + 1 = 3. Your figures are wrong. Period.

I'm not interested in working out the figures, but I've pointed you to sources where you can get the correct data to rework and repost your conclusions (which may well be the same). I think you'll find the ONS and the US Federal Reserve more reliable sources than "an article on the conservatives official website". I should have added the BoE as well for the latest consumer debt data.

Not looking for a fight, bpw. I have no axe to grind either way. My previous comment was meant to help.

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Guest Charlie The Tramp

I should have added the BoE as well for the latest consumer debt data.

Another URL I added to my favourites. ;)

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Either way, it's a lot of debt!

Spain has had a lot of growth in terms of manufacturing, a million new jobs in that sector I believe. If all that debt is for property then they are screwed. Though perhaps not as bad as Ireland...

Edited by RichM

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on inflation what normally causes inflation to rise? we have low IR now will high IR make inflation rise or drop?

What is real inflation? (oil/housing costs/taxes/utility bills included)

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Not looking for a fight, bpw. I have no axe to grind either way. My previous comment was meant to help.

Nothing wrong with a good punch up according to John Prescott ;-)

I looked at the ONS website when I started lunchtime web research for my posting. Frankly, the ONS website makes it difficult to work out what is what and, as you highlight, the american and UK data sources make it hard to know exactly what the figures correspond to. In my simple mind the figure we should be concerned with is the sum of personal debts (house loans, credit cards, etc) and Government debts. Regardless of what you call them they represent the amounts that consumers and productive workers need to pay off at some point in their life. The alternative is to burden someone else with the cost - something all FTBs know about!

Now, you mention that debt risk is related to our ability to pay it off, i.e. our income and assets, the snag is that most peoples assets in the USA and UK are in the form of inflated house prices. And who is ultimately left with the bill for houses, pensions, health care etc...... of course, it's the younger citizens of the UK - given the context in which I am talking I'll stick with Lord Turner's report which draws the line at those under 45. I feel the younger generation are slowly being strangled by the older generation using the boiled frog principle, Turner said as much in more polically correct language.

The point I have made would seem to be of critical importance and having the facts will make us all better informed. I have therefore just spent two hours looking at the ONS website, the treas.gov website amongst others and found the following:

UNITED KINGDOM

Office for National Statistics

"At the end of 2005 general government debt was £525.9 billion, equivalent to 42.8 per cent of GDP."

Credit Action Org

'At the end of March 2006 the total UK personal debt was £1,182bn. The growth rate remains strong at 10.2% for the previous 12 months which equates to an increase of £100bn. "

http://www.creditaction.org.uk/debtstats.htm

USA

Public debt - $4.79tril, Intragovernmental holding $3.55tril = $8.34tril

http://www.publicdebt.treas.gov/opd/opdpdodt.htm

Personal debt: $11.5tril

http://mwhodges.home.att.net/

The last link presents some sobering facts about the US economy which in many ways apply to the UK as well. If we sum the two debts and then calculate the per capita figures you get

USA $66.7k per person

UK $51.3k per person

now the ratio of GDP usa/uk = 1.34 which tells me the debt level per head adjusted for GDP is slightly higher in the UK than the USA. Sorry for the misleading figures earlier - but the conclusions are the same even when you allow for ability to pay.

One explanation for the increase in household debt is given by a very readable Australian report

Australian report on household debt

Low interest rates are obviously the main culprit but the international comparisons are interesting since again they show some countries are no better than the USA.

For the record, as I've stated here before I read here and post as a means of being better informed so being corrected by you will just make me better informed.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


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