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Now obviously, I realise it does but I want to understand “how” it matters, and the difference in the national debt versus government debt. I will put all figures in pounds with dollar conversions in brackets.

If you take the U.S. and the U.K. economies for example.

Here in the U.K. we have a government running around like headless chickens ripping money out of everything, trying to cover a £150 billion ($ 242 Billion) overspend and lower it to 0 within 8 years. They are pulling £4 billion out of voluntary and charity organisations, they have pulled ALL the extended funding (called EMA) for 16 to 18yr olds in college.

Thats on top of 15 to 25% reduction in local government budgets for cities up and down the country which we are expecting to result in half to three quarters of a million people losing their public sector jobs over the next 12 to 24 months with probably another 150 thousand + going from the private sector that relies on public sector to buy many of its products and services.

So, its a slash and burn tactic, everything is for sale, everything must go. No growth programs, just normalisation of the budgets and to hell with the consequences.Yet even if they accomplish this insanity and do actually manage to balance the books, we still have a national debt of £1.2 trillion ($ 1.93 Trillion) with a GDP output of £2.17 Trillion

Then you have the USA…

they are planning government debt reduction of £750Billion ($ 1.2Trillion) over ten years, they are not planning anything like the draconian measures here in the UK, and for all intents and purposes, though not a perfect solution, borrowing and slowly growing their way out of their recession whilst slowly reducing that borrowing has worked for them with growth rates at 2.8% annualised V our UK growth contraction of 0.6%.

But even so, when all is said and done, and say they do actually manage to balance the government budget for the first time since Clinton (who`s team managed to balance them so well, the US Government had a $ 75 billion surplus per year) There is still an 11.8 Trillion dollar national debt against a GDP of 14.3 Trillion dollars.

And don’t even get me started on UK and US trade deficits…

So, what’s the point of all this pain if for all intents and purposes, were only going to have to go through worse in ten or twenty years when the markets realise we’ve sold our gold, we’ve sold our companies to china, we’ve stripped all our natural resources and sold them and all we have left is the paper with our debt numbers on it.

1 Thought on Does national Debt really matter? If so, are we in the west(including the US) all bankrupt?
  1. Reply
    Quizzard
    October 25, 2011 at 3:27 am

    Western economies are not ‘bankrupt’, which is defined as having debts which exceed assets. You can owe $ 1 million on your home mortgage, but if your home is WORTH $ 2 million, you are still very well off. While the US owes $ trillions, the assets of the country are far higher.

    What matters is not the debt itself, but the carrying costs, the interest that must be paid every year. That number hurts the economy as billions are pulled from taxpayers to service the debt. The ratio of debt to GDP is one measure of the risk.

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