Thanks for the comprehensive response. The only answer that raised more questions for me is the one on repayment of debt. Surely there is a point where the interest rate required on debt reflects the risk of non-payment? The risk of non-payment increases as debt levels increase, and decreases as economic growth increases. With debt levels increasing, and economic growth stagnant to negative, shouldn't this increase the rate required on U.S. government paper?
At what level does default occur (I'm thinking something like (longterm) GDP less than debt servicing costs)? Is the U.S. anywhere close to this? (I'm again guessing that it is far from it, but the occasional and probably highly biased reports that I keep seeing are harking on about the U.S. being close to breaking point)
Est. US National Debt ($USD):7.524T (http://www.brillig.com/debt_clock/ , http://www.publicdebt.treas.gov/opd/opdpenny.htm)
Est. US GDP ($USD):11.803T (http://www.bea.doc.gov/bea/newsrel/gdpnewsrelease.htm)
Not sure what the composition of the U.S. debt looks like (therefore can't calculate duration), but looking at the various rates there was a max of about 4.5% (http://forecasts.org/interest-rate/7-yea...-yield.htm) so at that estimate only 2.9% of GDP is spent on interest. seems very little to be worried about, even if the interest rate doubled... have I messed something up, or am I missing something?
At what level does default occur (I'm thinking something like (longterm) GDP less than debt servicing costs)? Is the U.S. anywhere close to this? (I'm again guessing that it is far from it, but the occasional and probably highly biased reports that I keep seeing are harking on about the U.S. being close to breaking point)
Est. US National Debt ($USD):7.524T (http://www.brillig.com/debt_clock/ , http://www.publicdebt.treas.gov/opd/opdpenny.htm)
Est. US GDP ($USD):11.803T (http://www.bea.doc.gov/bea/newsrel/gdpnewsrelease.htm)
Not sure what the composition of the U.S. debt looks like (therefore can't calculate duration), but looking at the various rates there was a max of about 4.5% (http://forecasts.org/interest-rate/7-yea...-yield.htm) so at that estimate only 2.9% of GDP is spent on interest. seems very little to be worried about, even if the interest rate doubled... have I messed something up, or am I missing something?