GDP and Debt

#1
T

therealUT

Rational Thought Allowed?
Joined
Mar 9, 2006
Messages
30,347
Likes
4,191
#1
For those who are outraged at the trillions of dollars that the U.S. owes, here are some interesting numbers concerning debt as a percentage of GDP:

Rank Country Debt % of GDP

1 Monaco 2068.97%
2 Ireland 637.30%
3 United Kingdom 388.36%
4 Switzerland 354.01%
5 Netherlands $ 329.13%
6 Belgium 301.57%
7 Sweden 192.57%
8 Austria 190.81%
9 Denmark 187.61%
10 France 155.62%
12 Germany 144.81%
13 Norway 144.77%
14 Portugal 140.80%
16 Finland 131.08%
18 Lebanon 109.75%
20 Iraq 98.12%
22 Spain 94.33%
28 United States 71.50%
36 Italy 54.33%
39 Australia 50.52%
42 Israel 48.90%
57 Canada 39.48%
58 Japan 38.45%
78 Korea, North 30.00%
128 Korea, South 15.94%
138 Russia 13.55%
143 Mexico 12.86%
149 Syria 11.84%
192 India 3.48%
193 Iran 3.39%
196 China 2.85%
 
#2
#2
The national debt may be one of the most misunderstood statistics there is.
 
#5
#5
I do not lie awake at night worrying about US debt, but I don't see that your numbers are good. I assume you are trying to rationalize that the US is in good shape concerning it's debt to GDP ratio?
 
#6
#6
I do not lie awake at night worrying about US debt, but I don't see that your numbers are good. I assume you are trying to rationalize that the US is in good shape concerning it's debt to GDP ratio?
 
#8
#8
allvol123 said:
I do not lie awake at night worrying about US debt, but I don't see that your numbers are good. I assume you are trying to rationalize that the US is in good shape concerning it's debt to GDP ratio?
Click to expand...
I believe that the US is in great shape concerning its debt to GDP ratio. If you make more than you owe, then you are in great shape. If you make slightly less than you owe, you are in good shape. It is leverage.

Imagine you are buying a $250,000 home and you make $120,000/year. No one is going to call you crazy for purchasing that home. You basically are in debt for around $290,000 (interest rate dependent.) Your debt to income ratio is up around 250%. I have no problem with a 75% debt to GDP ratio.
 
#9
#9
therealUT said:
I believe that the US is in great shape concerning its debt to GDP ratio. If you make more than you owe, then you are in great shape. If you make slightly less than you owe, you are in good shape. It is leverage.

Imagine you are buying a $250,000 home and you make $120,000/year. No one is going to call you crazy for purchasing that home. You basically are in debt for around $290,000 (interest rate dependent.) Your debt to income ratio is up around 250%. I have no problem with a 75% debt to GDP ratio.
Click to expand...

I disagree somewhat. The home is a unique example. It is one of the few things that appreciates after you buy it and you can easily get out of it anytime you want, in most cases without a loss. This person with $250,000 home also probbaly has $30k in cars, 20k in credit card bills and who knows what else in school and other misc debt. I don't find buying anything on debt a good plan. If I had it to do over, I would have waited and paid cash for my home. Not like I have any say so in running the country, but I think people have gotten way too careless with the idea that debt is ok and the federal government and big business seem ok with this idea as well.
 
#11
#11
allvol123 said:
I disagree somewhat. The home is a unique example. It is one of the few things that appreciates after you buy it and you can easily get out of it anytime you want, in most cases without a loss. This person with $250,000 home also probbaly has $30k in cars, 20k in credit card bills and who knows what else in school and other misc debt. I don't find buying anything on debt a good plan. If I had it to do over, I would have waited and paid cash for my home. Not like I have any say so in running the country, but I think people have gotten way too careless with the idea that debt is ok and the federal government and big business seem ok with this idea as well.
Click to expand...
People have not gotten careless. Debt has turned into a bad word over the past 20 years. In reality, there is good debt and bad debt, and how it is categorized is interest rate dependent. If you can take a loan out at 4% APR, and you can invest at 5% or more, then the smart thing is to take the loan, and free up your own cash for investment purposes. However, debt has been associated with credit cards in the past 20 years, and most people are paying 18-23% interest on their credit cards, therefore debt is a bad word through association.

Buying a house with cash is indeed one of the more brainless financial decisions a person can make.
 
#12
#12
therealUT said:
People have not gotten careless. Debt has turned into a bad word over the past 20 years. In reality, there is good debt and bad debt, and how it is categorized is interest rate dependent. If you can take a loan out at 4% APR, and you can invest at 5% or more, then the smart thing is to take the loan, and free up your own cash for investment purposes. However, debt has been associated with credit cards in the past 20 years, and most people are paying 18-23% interest on their credit cards, therefore debt is a bad word through association.

Buying a house with cash is indeed one of the more brainless financial decisions a person can make.
Click to expand...

Absolutely brainless statement.
 
#13
#13
therealUT said:
People have not gotten careless. Debt has turned into a bad word over the past 20 years. In reality, there is good debt and bad debt, and how it is categorized is interest rate dependent. If you can take a loan out at 4% APR, and you can invest at 5% or more, then the smart thing is to take the loan, and free up your own cash for investment purposes. However, debt has been associated with credit cards in the past 20 years, and most people are paying 18-23% interest on their credit cards, therefore debt is a bad word through association.

Buying a house with cash is indeed one of the more brainless financial decisions a person can make.
Click to expand...

There is no good debt, to owe someone, I do not find any good in that.
 
#14
#14
allvol123 said:
Absolutely brainless statement.
Click to expand...
Right...You are telling me that if you had $200,000 in cash to buy a $200,000 house (which you could have financed at 4%) you would use that cash on the house instead of investing at 5%, 6%, 7%, or 8% (all safe returns you can get on mutual funds right now)?

So you would pass on the following cash returns, over a 30 year period:
5%: $664,388
6%: $948,698
7%: $1.3M
8%: $1.8M

Still pass?
 
#15
#15
therealUT said:
Right...You are telling me that if you had $200,000 in cash to buy a $200,000 house (which you could have financed at 4%) you would use that cash on the house instead of investing at 5%, 6%, 7%, or 8% (all safe returns you can get on mutual funds right now)?

So you would pass on the following cash returns, over a 30 year period:
5%: $664,388
6%: $948,698
7%: $1.3M
8%: $1.8M

Still pass?
Click to expand...

A 200,000 house payment would be around a $1600 mortgage a month. If you paid the house off up front becuase you could and then invested that $1600 a month for 30 years in mutual funds that average 12% growth, which is not hard to do. You would have 1.6 million in 20 YEARS or 16 million in 30 years. Yes I would.
 
#16
#16
Just because everyone else is doing it doesn't make it right. This county is in serious trouble if the entitlement program in this country isnt reviewed and addressed.
 
#17
#17
allvol123 said:
A 200,000 house payment would be around a $1600 mortgage a month. If you paid the house off up front becuase you could and then invested that $1600 a month for 30 years in mutual funds that average 12% growth, which is not hard to do. You would have 1.6 million in 20 YEARS or 16 million in 30 years. Yes I would.
Click to expand...
Negative! If you invested all $576,000 ($1,600/month for 30 years) in the first month, then you would end up with your $16.6 million. However, if you just invested $1,600/month for 30 years at 12%, you would only end up with $5,063,878 at the end of 30 years, subtract the $576,000 that you invested over time, and you net $5.06M. Which, is over $700,000 less than you would end up with if you invested $200,000 in the first month at a 12% rate of return, and did not invest a dime more into it over 30 years.
 
#18
#18
oklavol said:
Just because everyone else is doing it doesn't make it right. This county is in serious trouble if the entitlement program in this country isnt reviewed and addressed.
Click to expand...
What does educated money management have to do with feelings of entitlement?
 
#19
#19
therealUT said:
Negative! If you invested all $576,000 ($1,600/month for 30 years) in the first month, then you would end up with your $16.6 million. However, if you just invested $1,600/month for 30 years at 12%, you would only end up with $5.5M at the end of 30 years. Which, is $200,000 less than you would end up with if you invested $200,000 in the first month at a 12% rate of return, and did not invest a dime more into it over 30 years.
Click to expand...

Wow, I screwed that total up.
But I still prefer my method. From day 1 of my way, you have a paid for house. You say I would end up with 200,000 less, but not really once you consider the 376,000 in interest you pay in lagging the house out over 30 years.

Philisophically, I prefer to not owe. The more you owe, the less freedom you have.
 
#20
#20
allvol123 said:
A 200,000 house payment would be around a $1600 mortgage a month. If you paid the house off up front becuase you could and then invested that $1600 a month for 30 years in mutual funds that average 12% growth, which is not hard to do. You would have 1.6 million in 20 YEARS or 16 million in 30 years. Yes I would.
Click to expand...
By the way, it would be a $1,600 mortgage payment at 9%. If you cannot get a 30 year home loan for under 7%, preferably under 5%, then you are seriously hurting.
 
#21
#21
allvol123 said:
Wow, I screwed that total up.
But I still prefer my method. From day 1 of my way, you have a paid for house. You say I would end up with 200,000 less, but not really once you consider the 376,000 in interest you pay in lagging the house out over 30 years.

Philisophically, I prefer to not owe. The more you owe, the less freedom you have.
Click to expand...
Check where I have corrected my post, by investing the $200,000 you actually end up with over $700,000 more cash returned on the investment. So, take my $376,000 away...
 
#22
#22
allvol123 said:
Philisophically, I prefer to not owe. The more you owe, the less freedom you have.
Click to expand...
I would have to categorically disagree with this statement. If I owe you $200,000 tomorrow and I do not have it, then yes, my freedom is severly restricted. However, if I have entered into a legal and binding contract to pay you $200,000 plus interest over 30 years, and I have the means to make the payments every month, then I am as free, if not more free due to the excess money I am making through investment, than you are (especially if I have $200,000 in liquid assets invested in a mutual fund.)
 
#23
#23
therealUT said:
By the way, it would be a $1,600 mortgage payment at 9%. If you cannot get a 30 year home loan for under 7%, preferably under 5%, then you are seriously hurting.
Click to expand...

Calm down hammer, was just throwing a number out there, the number itself would be irrelevant concerning the strategy.
 
#24
#24
allvol123 said:
Calm down hammer, was just throwing a number out there, the number itself would be irrelevant concerning the strategy.
Click to expand...
Not irrelevant in the least. My $200,000 would stay invested from the beginning, however, your monthly investments would drop to around $900, dropping your net return to a ballpark of $2.8M. Since that is less than half of the investment return on $200,000 invested from the beginning, I would say that is pretty relevant.
 
#25
#25
therealUT said:
I would have to categorically disagree with this statement. If I owe you $200,000 tomorrow and I do not have it, then yes, my freedom is severly restricted. However, if I have entered into a legal and binding contract to pay you $200,000 plus interest over 30 years, and I have the means to make the payments every month, then I am as free, if not more free due to the excess money I am making through investment, than you are (especially if I have $200,000 in liquid assets invested in a mutual fund.)
Click to expand...

Home ownership is not my main point. Moreover, it is everything else. A home is the only thing I would finance.

You are also assuming people owing on the 200,000 home have made room to allow for investing in their discretionary budget. More people than not seem to overspend on their house purchase.

Also, if you owe anyone anything, and I owe absoutley no one anything. I do not consider you less obligated than me.
 
New posts
You must log in or register to reply here.

VN Store



Back
Top