Jonock's Blog : The Future are You Prepared?

At the end of 2009 the United States National debt was $12.3 trillion and our gross domestic product was $15.56. This means that our national debt is approximately 80% of our total GNP. The majority of economist estimate that the Debt/GDP ratio could rise to approximately 90% this year, and the 95-100% range in 2011.
Analyst are also in agreement that reaching 100% "would be a serious concern from the perspective of the U.S. AAA rating." In effect the United States bond rating would be relegated to “junk bond” status and the ability of the US to borrow money would be seriously affected
Traditionally in the U.S., when the Debt/GNP levels reached over 90% it has lead to "significantly elevated inflation," usually to levels between 5% and 7%.
A recent academic research study (Carmen Reinhart of the University of Maryland, and Kenneth S. Rogoff of Harvard University ) analyzed the economic data from 44 countries over the past 200 years, and found a correlation between reaching the 90% Debt/GNP benchmark and the country's economic growth.. In this study when the country went above the 90% Debt/GNP ratio the country's median economic growth rate drops. This drop accelerates the rate of increase in the Debt/GNP ratio dramatically and creates a “cause and effect “ spiral that feeds on its self and leads to a“systemic financial disaster”.
This study also found that there are currently five countries with Debt/GNP ratios in the “systemic financial cries” range – Iceland, Ireland, Spain, the United Kingdom and the United States.
These facts are a matter of public record. It would be prudent to take them in to consideration in our future planning.