{"id":992,"date":"2023-06-05T21:30:30","date_gmt":"2023-06-05T19:30:30","guid":{"rendered":"https:\/\/hrvhealth.org\/blog\/?p=992"},"modified":"2024-06-10T15:57:13","modified_gmt":"2024-06-10T13:57:13","slug":"is-america-broke","status":"publish","type":"post","link":"https:\/\/hrvhealth.org\/blog\/?p=992","title":{"rendered":"Is America broke?"},"content":{"rendered":"\n<p>When evaluating a company, ratios provide profound insights into a company&#8217;s performance, it&#8217;s financial stability, and what its future holds. One of the key ratios is that between interest charges and cash flow.<\/p>\n<p>Anyone who has had a mortgage understands the problem. If your mortgage repayments represents a significant proportion of your disposable income, you\u2019re in deep trouble when interest rates rise. It\u2019s the same for companies.<\/p>\n<p>And it\u2019s the same for countries, with some important differences.<\/p>\n<p>Let\u2019s look at America\u2019s position. America\u2019s debt is 148% of GDP at $31.4tn<span class=\"footnote_referrer\"><a role=\"button\" tabindex=\"0\" onclick=\"footnote_moveToReference_992_1('footnote_plugin_reference_992_1_1');\" onkeypress=\"footnote_moveToReference_992_1('footnote_plugin_reference_992_1_1');\" ><sup id=\"footnote_plugin_tooltip_992_1_1\" class=\"footnote_plugin_tooltip_text\">[1]<\/sup><\/a><span id=\"footnote_plugin_tooltip_text_992_1_1\" class=\"footnote_tooltip\"><a href=\"https:\/\/www.bbc.com\/news\/business-65461927\">US debt ceiling &#8211; what it is and why there is one<\/a><\/span><\/span><script type=\"text\/javascript\"> jQuery('#footnote_plugin_tooltip_992_1_1').tooltip({ tip: '#footnote_plugin_tooltip_text_992_1_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top center', relative: true, offset: [-7, 0], });<\/script>. The government&#8217;s revenue is 32.9% of GDP. At present with rising interest rates, America\u2019s 20 year bond yield is 3.8%<span class=\"footnote_referrer\"><a role=\"button\" tabindex=\"0\" onclick=\"footnote_moveToReference_992_1('footnote_plugin_reference_992_1_2');\" onkeypress=\"footnote_moveToReference_992_1('footnote_plugin_reference_992_1_2');\" ><sup id=\"footnote_plugin_tooltip_992_1_2\" class=\"footnote_plugin_tooltip_text\">[2]<\/sup><\/a><span id=\"footnote_plugin_tooltip_text_992_1_2\" class=\"footnote_tooltip\"><a href=\"https:\/\/www.treasurydirect.gov\/marketable-securities\/treasury-bonds\/\">Treasury Bonds<\/a><\/span><\/span><script type=\"text\/javascript\"> jQuery('#footnote_plugin_tooltip_992_1_2').tooltip({ tip: '#footnote_plugin_tooltip_text_992_1_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top center', relative: true, offset: [-7, 0], });<\/script>.<\/p>\n<p>If all the debt were to be funded at that rate, the interest charges would make up 17% of all government expenditure. That\u2019s unsustainable, but it\u2019s a little more complicated than that.<\/p>\n<p>Much of the debt is at historical interest rates, which are lower than the current bond yield, so for the moment the total cost is lower than 3.8%, Moreover, with inflation, the amount paid back in the future is worth less than the amount that is being borrowed now. So while the government says it\u2019s concerned about inflation, that same inflation is digging it out of a hole. The Federal Reserve which is independent of the government has the responsibility for inflation, not the government. But they also understand the debt problem, and what raising interest rates will do to the economy. They are between a rock and a hard place, and it is the government &#8211; the President and the representatives in Congress who have created this mess.<\/p>\n<p>In the table below, the USA is in the company of a group of countries that are in dire financial straits. How did it get there?<\/p>\n<p>A government has two primary ways of obtaining funding to pay for its expenditures, taxes and borrowing.<\/p>\n<p>America was founded as a rebellion against King George III&#8217;s taxes. The French Revolution was also a reaction to Louis XVI\u2019s taxes. History is littered with rebellion\u2019s and changes of government against taxes that were imposed when social equality was already stretched, as now.<\/p>\n<p>The inflation is making everyone poorer. In effect, it\u2019s working the same as a tax, because it\u2019s making you poorer while creatively managing the government&#8217;s debt.\u00a0<\/p>\n<p>Because they don\u2019t want to get thrown out for raising taxes, governments are borrowing, especially in the USA and the United Kingdom.<\/p>\n<p>Long term borrowing is fine when funding infrastructure or investments that creates economic growth or saves money. These loans are funding the incompetent handling of the pandemic, the interest on existing loans, and the excesses of Afghanistan and Iraq.<\/p>\n<p>It\u2019s not a surprise that Putin felt confident that he could attack Ukraine. While America has the world\u2019s most powerful military, it does not have the financial strength to support another sustained conflict.<\/p>\n<p>America is broke. Without some fiscal responsibility sometime soon, the house of cards will come tumbling down.<\/p>\n<h2 id=\"tablepress-13-name\" class=\"tablepress-table-name tablepress-table-name-id-13\">Government Debt and Revenue to GDP<\/h2>\n\n<table id=\"tablepress-13\" class=\"tablepress tablepress-id-13\" aria-labelledby=\"tablepress-13-name\">\n<thead>\n<tr class=\"row-1 odd\">\n\t<th class=\"column-1\">Country<\/th><th class=\"column-2\">Year<\/th><th class=\"column-3\">Debt<\/th><th class=\"column-4\">Revenue<\/th><th class=\"column-5\">Debt\/Revenue<\/th>\n<\/tr>\n<\/thead>\n<tbody class=\"row-hover\">\n<tr class=\"row-2 even\">\n\t<td class=\"column-1\">Japan<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">256.0<\/td><td class=\"column-4\">38.1<\/td><td class=\"column-5\">6.7<\/td>\n<\/tr>\n<tr class=\"row-3 odd\">\n\t<td class=\"column-1\">United States<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">148.0<\/td><td class=\"column-4\">32.9<\/td><td class=\"column-5\">4.5<\/td>\n<\/tr>\n<tr class=\"row-4 even\">\n\t<td class=\"column-1\">Greece<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">191.5<\/td><td class=\"column-4\">50.2<\/td><td class=\"column-5\">3.8<\/td>\n<\/tr>\n<tr class=\"row-5 odd\">\n\t<td class=\"column-1\">Italy<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">172.5<\/td><td class=\"column-4\">48.3<\/td><td class=\"column-5\">3.6<\/td>\n<\/tr>\n<tr class=\"row-6 even\">\n\t<td class=\"column-1\">Spain<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">142.7<\/td><td class=\"column-4\">43.7<\/td><td class=\"column-5\">3.3<\/td>\n<\/tr>\n<tr class=\"row-7 odd\">\n\t<td class=\"column-1\">Ireland<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">65.3<\/td><td class=\"column-4\">23.2<\/td><td class=\"column-5\">2.8<\/td>\n<\/tr>\n<tr class=\"row-8 even\">\n\t<td class=\"column-1\">Canada<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">112.8<\/td><td class=\"column-4\">41.4<\/td><td class=\"column-5\">2.7<\/td>\n<\/tr>\n<tr class=\"row-9 odd\">\n\t<td class=\"column-1\">Portugal<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">116.6<\/td><td class=\"column-4\">44.4<\/td><td class=\"column-5\">2.6<\/td>\n<\/tr>\n<tr class=\"row-10 even\">\n\t<td class=\"column-1\">United Kingdom<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">103.6<\/td><td class=\"column-4\">41.3<\/td><td class=\"column-5\">2.5<\/td>\n<\/tr>\n<tr class=\"row-11 odd\">\n\t<td class=\"column-1\">Iceland<\/td><td class=\"column-2\">2013<\/td><td class=\"column-3\">106.9<\/td><td class=\"column-4\">44.7<\/td><td class=\"column-5\">2.4<\/td>\n<\/tr>\n<tr class=\"row-12 even\">\n\t<td class=\"column-1\">Australia<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">84.4<\/td><td class=\"column-4\">35.5<\/td><td class=\"column-5\">2.4<\/td>\n<\/tr>\n<tr class=\"row-13 odd\">\n\t<td class=\"column-1\">Mexico<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">54.5<\/td><td class=\"column-4\">23.0<\/td><td class=\"column-5\">2.4<\/td>\n<\/tr>\n<tr class=\"row-14 even\">\n\t<td class=\"column-1\">Israel<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">83.2<\/td><td class=\"column-4\">37.2<\/td><td class=\"column-5\">2.2<\/td>\n<\/tr>\n<tr class=\"row-15 odd\">\n\t<td class=\"column-1\">France<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">116.9<\/td><td class=\"column-4\">53.4<\/td><td class=\"column-5\">2.2<\/td>\n<\/tr>\n<tr class=\"row-16 even\">\n\t<td class=\"column-1\">Hungary<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">88.6<\/td><td class=\"column-4\">41.2<\/td><td class=\"column-5\">2.2<\/td>\n<\/tr>\n<tr class=\"row-17 odd\">\n\t<td class=\"column-1\">Belgium<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">103.8<\/td><td class=\"column-4\">49.7<\/td><td class=\"column-5\">2.1<\/td>\n<\/tr>\n<tr class=\"row-18 even\">\n\t<td class=\"column-1\">Colombia<\/td><td class=\"column-2\">2019<\/td><td class=\"column-3\">82.9<\/td><td class=\"column-4\">40.7<\/td><td class=\"column-5\">2.0<\/td>\n<\/tr>\n<tr class=\"row-19 odd\">\n\t<td class=\"column-1\">Austria<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">101.1<\/td><td class=\"column-4\">50.3<\/td><td class=\"column-5\">2.0<\/td>\n<\/tr>\n<tr class=\"row-20 even\">\n\t<td class=\"column-1\">Slovenia<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">89.9<\/td><td class=\"column-4\">44.9<\/td><td class=\"column-5\">2.0<\/td>\n<\/tr>\n<tr class=\"row-21 odd\">\n\t<td class=\"column-1\">Brazil<\/td><td class=\"column-2\">2019<\/td><td class=\"column-3\">110.0<\/td><td class=\"column-4\">61.0<\/td><td class=\"column-5\">1.8<\/td>\n<\/tr>\n<tr class=\"row-22 even\">\n\t<td class=\"column-1\">Germany<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">77.4<\/td><td class=\"column-4\">47.5<\/td><td class=\"column-5\">1.6<\/td>\n<\/tr>\n<tr class=\"row-23 odd\">\n\t<td class=\"column-1\">South Korea<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">59.6<\/td><td class=\"column-4\">37.2<\/td><td class=\"column-5\">1.6<\/td>\n<\/tr>\n<tr class=\"row-24 even\">\n\t<td class=\"column-1\">Slovakia<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">64.2<\/td><td class=\"column-4\">40.2<\/td><td class=\"column-5\">1.6<\/td>\n<\/tr>\n<tr class=\"row-25 odd\">\n\t<td class=\"column-1\">Chile<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">42.1<\/td><td class=\"column-4\">26.8<\/td><td class=\"column-5\">1.6<\/td>\n<\/tr>\n<tr class=\"row-26 even\">\n\t<td class=\"column-1\">Finland<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">82.3<\/td><td class=\"column-4\">53.0<\/td><td class=\"column-5\">1.6<\/td>\n<\/tr>\n<tr class=\"row-27 odd\">\n\t<td class=\"column-1\">Latvia<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">57.2<\/td><td class=\"column-4\">37.1<\/td><td class=\"column-5\">1.5<\/td>\n<\/tr>\n<tr class=\"row-28 even\">\n\t<td class=\"column-1\">Netherlands<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">66.4<\/td><td class=\"column-4\">44.3<\/td><td class=\"column-5\">1.5<\/td>\n<\/tr>\n<tr class=\"row-29 odd\">\n\t<td class=\"column-1\">Poland<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">58.7<\/td><td class=\"column-4\">39.8<\/td><td class=\"column-5\">1.5<\/td>\n<\/tr>\n<tr class=\"row-30 even\">\n\t<td class=\"column-1\">Lithuania<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">50.9<\/td><td class=\"column-4\">36.4<\/td><td class=\"column-5\">1.4<\/td>\n<\/tr>\n<tr class=\"row-31 odd\">\n\t<td class=\"column-1\">Turkey (Turkiye)<\/td><td class=\"column-2\">2020<\/td><td class=\"column-3\">42.9<\/td><td class=\"column-4\">31.2<\/td><td class=\"column-5\">1.4<\/td>\n<\/tr>\n<tr class=\"row-32 even\">\n\t<td class=\"column-1\">New Zealand<\/td><td class=\"column-2\">2020<\/td><td class=\"column-3\">52.8<\/td><td class=\"column-4\">38.6<\/td><td class=\"column-5\">1.4<\/td>\n<\/tr>\n<tr class=\"row-33 odd\">\n\t<td class=\"column-1\">Sweden<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">58.7<\/td><td class=\"column-4\">49.4<\/td><td class=\"column-5\">1.2<\/td>\n<\/tr>\n<tr class=\"row-34 even\">\n\t<td class=\"column-1\">Czech Republic<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">48.4<\/td><td class=\"column-4\">41.4<\/td><td class=\"column-5\">1.2<\/td>\n<\/tr>\n<tr class=\"row-35 odd\">\n\t<td class=\"column-1\">Switzerland<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">41.8<\/td><td class=\"column-4\">35.9<\/td><td class=\"column-5\">1.2<\/td>\n<\/tr>\n<tr class=\"row-36 even\">\n\t<td class=\"column-1\">Denmark<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">37.4<\/td><td class=\"column-4\">48.6<\/td><td class=\"column-5\">0.8<\/td>\n<\/tr>\n<tr class=\"row-37 odd\">\n\t<td class=\"column-1\">Luxembourg<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">31.0<\/td><td class=\"column-4\">43.6<\/td><td class=\"column-5\">0.7<\/td>\n<\/tr>\n<tr class=\"row-38 even\">\n\t<td class=\"column-1\">Norway<\/td><td class=\"column-2\">2022<\/td><td class=\"column-3\">42.2<\/td><td class=\"column-4\">65.1<\/td><td class=\"column-5\">0.6<\/td>\n<\/tr>\n<tr class=\"row-39 odd\">\n\t<td class=\"column-1\">Estonia<\/td><td class=\"column-2\">2021<\/td><td class=\"column-3\">24.3<\/td><td class=\"column-4\">39.0<\/td><td class=\"column-5\">0.6<\/td>\n<\/tr>\n<tr class=\"row-40 even\">\n\t<td class=\"column-1\">Russia<\/td><td class=\"column-2\">2019<\/td><td class=\"column-3\">21.8<\/td><td class=\"column-4\">42.5<\/td><td class=\"column-5\">0.5<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<!-- #tablepress-13 from cache -->\n<p>Source: <a href=\"https:\/\/data.oecd.org\/gga\/general-government-revenue.htm#indicator-chart\">OECD<\/a><\/p>\n<p>The above table shows the latest figures for the members of the OECD. China, the most notable omission is not a member of the OECD. The ranking is according to the ratio of government debt to government revenue &#8211; the closer a country is to the top, the worse its financial position.\u00a0<\/p>\n<p><strong>Read more:<\/strong><br \/><a href=\"https:\/\/www.bbc.com\/news\/business-66379366.amp\">Fitch downgrades US credit rating from AAA to AA+<\/a><\/p>\n<div class=\"speaker-mute footnotes_reference_container\"> <div class=\"footnote_container_prepare\"><p><span role=\"button\" tabindex=\"0\" class=\"footnote_reference_container_label pointer\" onclick=\"footnote_expand_collapse_reference_container_992_1();\">References<\/span><span role=\"button\" tabindex=\"0\" class=\"footnote_reference_container_collapse_button\" style=\"display: none;\" onclick=\"footnote_expand_collapse_reference_container_992_1();\">[<a id=\"footnote_reference_container_collapse_button_992_1\">+<\/a>]<\/span><\/p><\/div> <div id=\"footnote_references_container_992_1\" style=\"\"><table class=\"footnotes_table footnote-reference-container\"><caption class=\"accessibility\">References<\/caption> <tbody> \r\n\r\n<tr class=\"footnotes_plugin_reference_row\"> <th scope=\"row\" class=\"footnote_plugin_index_combi pointer\"  onclick=\"footnote_moveToAnchor_992_1('footnote_plugin_tooltip_992_1_1');\"><a id=\"footnote_plugin_reference_992_1_1\" class=\"footnote_backlink\"><span class=\"footnote_index_arrow\">&#8593;<\/span>1<\/a><\/th> <td class=\"footnote_plugin_text\"><a href=\"https:\/\/www.bbc.com\/news\/business-65461927\">US debt ceiling &#8211; what it is and why there is one<\/a><\/td><\/tr>\r\n\r\n<tr class=\"footnotes_plugin_reference_row\"> <th scope=\"row\" class=\"footnote_plugin_index_combi pointer\"  onclick=\"footnote_moveToAnchor_992_1('footnote_plugin_tooltip_992_1_2');\"><a id=\"footnote_plugin_reference_992_1_2\" class=\"footnote_backlink\"><span class=\"footnote_index_arrow\">&#8593;<\/span>2<\/a><\/th> <td class=\"footnote_plugin_text\"><a href=\"https:\/\/www.treasurydirect.gov\/marketable-securities\/treasury-bonds\/\">Treasury Bonds<\/a><\/td><\/tr>\r\n\r\n <\/tbody> <\/table> <\/div><\/div><script type=\"text\/javascript\"> function footnote_expand_reference_container_992_1() { jQuery('#footnote_references_container_992_1').show(); jQuery('#footnote_reference_container_collapse_button_992_1').text('\u2212'); } function footnote_collapse_reference_container_992_1() { jQuery('#footnote_references_container_992_1').hide(); jQuery('#footnote_reference_container_collapse_button_992_1').text('+'); } function footnote_expand_collapse_reference_container_992_1() { if (jQuery('#footnote_references_container_992_1').is(':hidden')) { footnote_expand_reference_container_992_1(); } else { footnote_collapse_reference_container_992_1(); } } function footnote_moveToReference_992_1(p_str_TargetID) { footnote_expand_reference_container_992_1(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_992_1(p_str_TargetID) { footnote_expand_reference_container_992_1(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }<\/script>","protected":false},"excerpt":{"rendered":"<p>When evaluating a company, ratios provide profound insights into a company&#8217;s performance, it&#8217;s financial stability, and what its future holds. One of the key ratios is that between interest charges and cash flow. Anyone who has had a mortgage understands the problem. If your mortgage repayments represents a significant proportion of your disposable income, you\u2019re&hellip; <a class=\"more-link\" href=\"https:\/\/hrvhealth.org\/blog\/?p=992\">Continue reading <span class=\"screen-reader-text\">Is America broke?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[74],"tags":[110,58],"_links":{"self":[{"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/992"}],"collection":[{"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=992"}],"version-history":[{"count":10,"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/992\/revisions"}],"predecessor-version":[{"id":1342,"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/992\/revisions\/1342"}],"wp:attachment":[{"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=992"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=992"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hrvhealth.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=992"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}