Thursday, May 28, 2009

Debt servicing, America's GDP, and inflation

From the Financial Times:

Exploding debt threatens America
[...] Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years. [...]

Inflation could lower the debt to GDP ratio, but would cause prices to rise. It could quickly become unmanageable.

The article says there is still time to reverse this. But does anyone in government have the will to do it?

1 comment:

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