U.S. Treasury Secretary Geithner said yesterday that the U.S. won't hit the debt limit (ceiling) unitl late in the year. Zerohedge has projected that the debt limit of $16'394 billion will be hit on September 14th, 2012. Presently the National Debt is at $15'596 billion according to the debt clock.

The present GDP is at $15'088 billion. September 14th is about 5.5 months away so if we add 1.125% (roughly 2.5% annualised) to GDP we would get GDP at around $15'258 billion. The National Debt is expected to hit $16'394 billion on September 14th so the debt to GDP ratio would be 107.4% versus a present level of 103.4%. The other worrying factor is the political one as the Republicans will most probably make it very difficult for the Obama administration to raise the debt limit prior to the November elections.

The National Debt hit 100% of GDP on December 21st, 2011. At the current rate it will be at 109% of GDP by the 21st of December, 2012! We all know the power of compounding interest! We should hit 118.81% of GDP by the December 21st, 2013, 129.5% by 2014, 141.15% by 2015 and 153.86% by December 21st, 2016. Scary stuff I would say. I also expect Fed chairman Bernanke to keep a close eye on these numbers and be ready to start the printing press again just in case economic growth slows down. After all slower economic growth means less income with which to service the national debt!

By Mario Innecco
ForSoundMoney.com

At ForSoundMoney we stand for a hard currency. We believe in a monetary system based on commodity money and a free-market banking system where central banks are non-existant.

Mario Innecco Archive

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.