Thought I would inject a few facts into the debate over US debt levels. As you can see in the chart, the US is not actually one of the higher-debt countries. Germany, France, Italy, Canada, and Japan have larger government debt relative to GDP.
The best measure of indebtedness is relative to net worth, not GDP. By that measure the US is in even better shape. We have the deepest capital markets in the world. The most recent data from the Federal Reserve Board show that on September 30, 2004, households owned $21.7 trillion in tangible assets (houses, cars and the like) and $35.3 trillion in financial assets such as stocks and bonds. Against this $57 trillion in total assets, US households had $10.3 trillion in liabilities, mostly in the form of mortgages. Their net worth was $46.7 trillion, about 4 years worth of GDP.
When you include the other sectors, financial assets grow to $105 trillion and tangible assets grow to more than $40 trillion–not including the market value of the 750 million acres of land owned by the federal government.
Folks, we are OK here.
JR
