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Total Public Debt Forecast

total-public-debt

The US Treasury released its forecast of US Public Debt and the graph above. I am stunned to say the least by the amount of debt we are taking on due to spending money we don’t have.

The US GDP for 2009 was $14.2 trillion (the chart and this fact are from Tyler Durden’s blog but taken from a US Treasury report) yet our debt is going to grow to $20 trillion in five years and a doubling from 2008.

The current weakness in the Euro Vs. the Dollar will subside and the Dollar will be in the trash heap. An economy cannot spend at this pace while revenues are down. Europe understands this and across the board they have begun to cut spending. We have to do the same or we will be in dire straights.

As the current weakness in the stock market plays out, smart money will flow to where economic fundamentals reflect: sound economic policy and economic growth — Canada, Australia, Switzerland, Singapore, South Korea, Vietnam, Taiwan, India, Brazil, and China. The US, Europe and Japan will be burdened with debt for an extended period of time and have slow economic growth.

If we apply a VERY GENEROUS 2.5% growth rate to US GDP, we come up with 2015 GDP of $17.28 trillion, or nearly $3 trillion in national debt greater than GDP. If we use a MORE REALISTIC 1.5% growth rate for GDP, 2015 GDP is only $16.45 trillion. This ratio is worse than Greece’s today – and we’ve seen what happened in Greece.

If you are managing your own portfolio, look to commit money to the strong economies either through ETF’s, ADR’s of companies in those economies, or domestic multinationals that derive a significant share of their revenues in those economies. That is our plan – we are developing our Buy List right now and will commit funds we currently have in cash/short-term bonds when the time is right.

Maybe Congress needs to take the following advice…

Mark