The topic for this module is debt. The US national debt (debt clock Links to an

Question

The topic for this module is debt. The US national debt (debt clock Links to an external site.) currently stands at $64,641 per citizen. This certainly seems huge...and that is for every citizen...for every taxpayer it is about triple that figure. When you look at personal debt - you have student debt, credit card debt - adds up to another $57,995 per citizen. When you look at numbers like that - they seem overwhelming.

So, the questions to ponder for this discussion:

1. Is the US debt too high and are we leading towards ruin/default? Which countries own all the debt? Does this give them power over our economy?

2. On a more personal level - is consumer debt a bad thing? Should people be allowed to go into debt? What are the benefits of consumer debt? What are the countries with the lowest consumer debt?

Explanation / Answer

1)

US debt is close to the $ 20 trillion which is likely to increase further due to current government policies. Such level of debt is still sustainable. US economy is growing over 2 % per annum and further likely to continue same pace over long run.

Japan national debt is close to 220 % of GDP which is larger than US debt.

China owns close to $ 1.02 trillion of debt which is not significant if it is viewed in relative term. Further most of debt US government owes to its own subject. Debt becomes problem when government is not able to gather sufficient level of revenue to payoff debt. But present rate of growth does not bode any likely crisis for US government. Hence, it is sustainable.

2)

Debt is not problem as long as it is used for productive purposes or borrowers have sufficient resources to payback in future. debt becomes problem when income tends to less than debt. It might lead to crisis like situation. Debt is important driver of aggregate demand in economy. Consumer debt is needed to be regulated by the government.

India, Mexico, Argentina are some of countries with lowest consumer debt.

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