America’s debt burden starts to shrink*

December 14, 2009

Last week, when I published data showing that U.S. households were beginning to reduce their debt burden, I commented that the government is more than offsetting this with increased federal and state borrowing. I was wrong.

The Flow of Funds report often revises historical data. The latest revisions show a slightly improving picture.*

Here’s the chart:

US_DEBT1209

Economist Steve Keen, who helped me process the data, characterizes it as…

…a dramatic increase in government debt–just as in the Great Depression–but even so the deleveraging by the finance sector in particular, and the private sector in general, more than outweighs the increase in public debt to compensate.

*But this data comes with a BIG asterisk. Government debt as counted in the flow of funds report only counts “publicly-held” Treasury debt, which currently stands at $7.7 trillion.

The figure does NOT include money the government owes itself (i.e. the social security “trust fund”), nor does it include unfunded obligations for Medicare. Our total unfunded obligations equal a whopping $63 trillion as of 2009, up another $5 trillion since just last year.

The bottom line is that we still have a massive — and growing — debt problem. But at least consumers are starting to make a dent in it.

Comments

Is the Fannie and Freddie debt not currently counted in the private debt statistics?

Posted by pwm76 | Report as abusive
 

pwm76….I bet you’re right. My mistake. I’ve removed the offending paragraph.

Posted by Rolfe Winkler | Report as abusive
 

This is a 30 year problem that is going to result in a 30 year fix. Short term stimulus programs are just delaying the recognition of the reality.

Posted by Steve Roberts | Report as abusive
 

SHRINKS ?
Did you know that the average maturity period of the 80% of the total public debt is less than 5 years ?
and more importantly DID YOU KNOW THAT 46% OF THIS IS LESS THAN 1 YEARS ?
This will bring us a Hyperinflation or a Sudden devaluation.
My guess is less than 5 years.
May be one day when we wake up our government will say we are very sorry for our mistakes, we will never do it again, we will put this into a new law such that nobody in future will do this mistake again,
and we are issuing a new Dollar as of Today, which will be equivalent to 2 old Dollars PERIOD.

 

There is no logic to portraying the aggregate debt without including such debts as the Social Security Trust fund. These are debts as real as any others and can only be serviced via the same mechanisms as any other public debt: tax revenue or further borrowings. To argue that a public credit exists that nets out the associated debt is nonsensical as the credit is further fully commited to foreseen obligations. It was proper to point out this disconnect as a BIG asterisk, but better would have been to withhold the article until a proper aggregation could be presented.

Posted by Eric | Report as abusive
 

I wonder what percentage of the decline in consumer debt is from consumers actually paying it down versus what is being written off as bad debt via foreclosures and short sales on housing and writeoffs of credit card balances. I suspect it is the latter more than the former.

Posted by DP | Report as abusive
 

Steve
Could you provide a link for the maturity period of US public debt that you mentioned?

TIA

My guess is the same as yours, we go busto in 5 years or less.

Posted by Zap | Report as abusive
 

“I was wrong.”

pretty much why I read you (hmmmm…do I read you because I am almost always wrong, or because I too will admit I am wrong…this is gonna take some big thoughts)

Posted by fresno dan | Report as abusive
 

With all due respect articles like this simply add to the confusion and mis- or partial information that readers are having to grapple with. To say that the total debt of the US is decreasing is patently absurd. It is absolutely increasing across the board except for some individual families and businesses that never overextended themselves. Quantitative easing is debt creation and so are all of the stimulus programs, and neither have ended. Total debt has been increasing for the last 6 years, at least, and that was when things were pretty good. Now Congress needs to pass a budget increase before the end of this year, raising it from $1.2 T to $1.5 T. Tax revenues were less than $1.3 T last year and are going down this year. About $2 T must be refinanced within the next 12 months at higher interest rates. How can the total debt be decreasing based on those numbers?

Posted by Bruce Calder | Report as abusive
 

Hi Zap ;

Please send me an e-mail, i will send you the information you want: cansip@yahoo.com

Thanks
John S

 

Questions I never seem to get answered on this subject:

1. how are debt defaults included / excluded in the numbers? For example if I walk away from a $500k mortgage, is it considered no longer a current debt (equal to having been paid off?) or is it considered never included in past figures? This would be very important to know.

2. are state and local debts included? I know it’s difficult to determine these totals but many communities are having trouble paying their current obligations.

3. what are comparable debt / GDP ratios of other countries? Numbers can be very different between sites. It’s near impossible to get and understand debt figures for the UK and I’m guessing they aren’t using the same data parameters.

Posted by Steve Roberts | Report as abusive
 

And what we see here is debt deflation. And this is confirmation the US has entered DEFLATION, not inflation as folks like Peter Schiff thinks.

Posted by Willy2 | Report as abusive
 

Is anyone still believing we’re in a inflationary environment ?

Posted by Willy2 | Report as abusive
 

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