Ned Davis’s different take on the US debt problem
|In association with:|
Veneta Dimitrova is a US economist at Ned Davis Research
Government debt – It is widely quoted that US sovereign debt is a relatively low 65% of GDP, compared with an estimated 102% OECD estimated world reading and, say, 120% for Italy or 135% for Greece. Yet the US government debt could be much higher than the average, depending upon what is included in the calculation. Corporate debt – Much bullish excitement has accompanied news that non-financial corporations have a record $2 trillion just sitting on their balance sheets. Although that is true, non-financial corporations also have $7.3 trillion of debt on their balance sheets. That represents 48.8% of GDP versus a mean since 1952 of 35.5%. The cash helps corporations during a potential short-term liquidity squeeze like the one in 2008, but still much of the cash is more than matched by liabilities, and thus must be paid back.
Household debt – It is largely believed that the big problem with US debt is the debt held by households.