Douglas Elmendorf of the Congressional Budget Office,
…. accumulating deficits will push federal debt held by the public to significantly higher levels. At the end of 2009, debt held by the public was $7.5 trillion, or 53 percent of GDP; by the end of 2020, debt is projected to climb to $15 trillion, or 67 percent of GDP.
USA: 53%
UK: ~100%
Japan: approaching 180%
Tuesday, February 9, 2010
Saturday, February 6, 2010
Confidence in America
Still, by next year things could be worse: Japan’s public debt is expected to hit $9.4 trillion, or 181 percent of its gross domestic product. By that measure, Washington still looks good, if only by comparison.
One thing about public debt, it requires public confidence. Japan's AA rating on public debt was downgraded to "negative" from "stable" by Standard & Poor's last week. The 10-year JGB climbed to 1.380% on Thursday, its highest level since Nov. 12. This concerns the government because if the confidence isn't there, speculation may turn into reality. Japan currently has the highest debt of any industrialized nation and, unlike the confidence that keeps US interest rates fairly grounded, would raise the cost of servicing the debt to the Japanese government. In these situations the government needs to step in. Quantitative easing perhaps but this tactic has provided very little support in combating deflation.
This picture provides a warning to the US. Without growth in two key areas, consumer confidence and exports, the deflation will remain a burden to Japan's economy. Exports provide a keystone for fabricating the turnaround and much of this will ultimately depend on the US, the biggest consumers in the world. If this were a level playing ground, the US would be in the same boat. The US faced mild deflation the past year and a half and yet everyone I've talked to has been forecasting inflation in the near future. Why? Because the economy is in a recession and the wave of job growth, innovation, technological leadership, and consumer confidence will allow for interest rates to rise. This may be seen as speculative but it is the only the reason the dollar hasn't officially collapsed yet. Why would anyone be holding onto US dollars if they knew a recovery was unlikely? Perhaps the psychological acceptance of the US dollar still holds stronger than the speculative dismay of the US economy.
One thing about public debt, it requires public confidence. Japan's AA rating on public debt was downgraded to "negative" from "stable" by Standard & Poor's last week. The 10-year JGB climbed to 1.380% on Thursday, its highest level since Nov. 12. This concerns the government because if the confidence isn't there, speculation may turn into reality. Japan currently has the highest debt of any industrialized nation and, unlike the confidence that keeps US interest rates fairly grounded, would raise the cost of servicing the debt to the Japanese government. In these situations the government needs to step in. Quantitative easing perhaps but this tactic has provided very little support in combating deflation.
This picture provides a warning to the US. Without growth in two key areas, consumer confidence and exports, the deflation will remain a burden to Japan's economy. Exports provide a keystone for fabricating the turnaround and much of this will ultimately depend on the US, the biggest consumers in the world. If this were a level playing ground, the US would be in the same boat. The US faced mild deflation the past year and a half and yet everyone I've talked to has been forecasting inflation in the near future. Why? Because the economy is in a recession and the wave of job growth, innovation, technological leadership, and consumer confidence will allow for interest rates to rise. This may be seen as speculative but it is the only the reason the dollar hasn't officially collapsed yet. Why would anyone be holding onto US dollars if they knew a recovery was unlikely? Perhaps the psychological acceptance of the US dollar still holds stronger than the speculative dismay of the US economy.
Tuesday, February 2, 2010
For the record
The central bank last year purchased $300 billion in U.S. government debt and is on track to buy $1.25 trillion in mortgage-backed securities plus $175 billion in debt from government-backed mortgage companies by the end of March.
American International Group (AIG) has received $43.2 billion from the Treasury's TARP program. The Obama administration's budget proposal, released Monday, announced that AIG will receive an additional $69.8 billion from TARP through 2010.
$27 billion was allocated to foreclosure prevention and an additional $48.8 billion may be on its way.
One of Obama's proposals is to cut companies' abilities to place their earning in overseas bank accounts, which enjoy tax-free havens.
Large business taxes would raise $468 billion over the next ten years, according to the fiscal 2011 budget plan. One pattern is that taxes concentrate around demand. Rental property, on a whole, has experienced increased demand naturally as unemployment has forced many families to migrate out of their newly foreclosed homes and into more affordable, temporary solutions.
Others who would face tax increases if the budget plan is passed by Congress:
US oil, gas, and coal producers
Producers of cellulosic ethanol made from paper byproducts
Employers who pay unemployment taxes
Owners of rental property
Companies that rely on independent contractors
Overview of Business Tax Highlights
The Bush tax cuts for lower and middle income American expire this year. It is still unclear whether the Obama administration will extend or terminate them.
American International Group (AIG) has received $43.2 billion from the Treasury's TARP program. The Obama administration's budget proposal, released Monday, announced that AIG will receive an additional $69.8 billion from TARP through 2010.
$27 billion was allocated to foreclosure prevention and an additional $48.8 billion may be on its way.
One of Obama's proposals is to cut companies' abilities to place their earning in overseas bank accounts, which enjoy tax-free havens.
Large business taxes would raise $468 billion over the next ten years, according to the fiscal 2011 budget plan. One pattern is that taxes concentrate around demand. Rental property, on a whole, has experienced increased demand naturally as unemployment has forced many families to migrate out of their newly foreclosed homes and into more affordable, temporary solutions.
Others who would face tax increases if the budget plan is passed by Congress:
US oil, gas, and coal producers
Producers of cellulosic ethanol made from paper byproducts
Employers who pay unemployment taxes
Owners of rental property
Companies that rely on independent contractors
Overview of Business Tax Highlights
The Bush tax cuts for lower and middle income American expire this year. It is still unclear whether the Obama administration will extend or terminate them.
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