Usa Debt

The US has a huge debt; the country is on the verge of default.

Sergei Glazyev, Adviser to the President of Russia: "If you look at the graphs - the US public debt goes up exponentially. In mathematics, this is called the peaking regime. When the system enters such a regime, it inevitably collapses. The American hegemony will come to an end anyway - this is an objective law."

Not really. In absolute terms, the US has a large public debt - more than $ 18 trillion (excluding debt on the balance of state structures - five billion less), every second it increases by several thousand dollars. However, it is more correct to assess the debt of states not in absolute figures, but in relation to GDP - the more the country's economy, the easier it is to pay its debts. According to the World Bank, the US debt is 96.1% of GDP. This is also a significant figure, although many countries live for decades and with great debt - for example, in France, Italy and Japan, this figure exceeds 100%. And in addition Russia's external debt per capita is $ 5,000. GDP per capita is about 6000 dollars. However, according to recent events, we see the fact, that this is default in Russia, and not in the US. Russians pay 60 rubles for 1 dollar, and not Americans pay 60 dollars for 1 ruble. Patriots, looking at the US national debt, screaming about the "Our Crimea", go and buy goods at high prices, content with low salaries and a weak standard of living.

Why is there no default in the US due to external debt?

Yes, because the economy of this country is one of the strongest in the world. The amount of debt is huge, which means that Americans pay very small percentages for it. The US economy makes it possible to provide a very clear service for this debt. The economy of the country does not differ much from the family economy. In fact, debt funds work incessantly, making a profit. As well as money should work. Therefore, in developed countries, for example, in Switzerland, the UK or Germany, there is always a large public debt. Because they do not steal, and money works for the benefit of the inhabitants. In addition, in the near future, the national debt of the world's largest economy, although it will increase in absolute terms, may stabilize relative to GDP. This is not out of the question because of the growth rate of the US economy: according to preliminary data, for the first time since 1999, it outperformed the world in terms of annual growth rates and showed the best result in 11 years. The graph of the US debt in relation to GDP for more than two centuries shows that after periods of high indebtedness it should be reduced.

Russia will ruin the US economy by selling US government bonds.

Andrew Schenk, an analyst “InvestCafe”: "The drop of US bonds could lead to the fact that the yield on US securities will grow. Of course, this will lead to some negative effect on the US economy, since the US, having a deficit budget of $ 680 billion in 2013, must constantly issue bonds to cover this deficit, and the withdrawal of Russia and, more importantly, China from this market will lead to a rise in the cost of debt and a decrease in the liquidity of these instruments."

        Not really. Russia does hold a significant part of the gold and foreign exchange reserves in the US government bonds - about one-quarter of all the Central Bank's reserves are located there (according to the data at the end of November, the Central Bank owns US $ 108 billion in government bonds). Nevertheless, this amount is not very significant in the world market: Russia occupies the 13th place in terms of stocks in US government bonds, and leaders - China and Japan - bought securities worth more than $ 1.2 trillion.

In fact, Russia is already selling US government bonds - because of the need to support the ruble, Russia's international reserves have declined by more than $ 120 billion since the beginning of the year, and US bonds in reserves have fallen by 30 billion (as of November by MINFIN). In other words, Russia for the year sold 22% of its US government bonds, but the market did not notice it.

Can China and Japan, which has much more securities, arrange a collapse of the US economy? Theoretically - yes, but it is very difficult to imagine that this will really happen. First of all, it is unprofitable for China and Japan, because the remaining part of their reserves will depreciate, and the global financial system is in for a shock. In addition, both China and Japan are export-oriented countries, and, therefore, they are profitable with a strong dollar, which will inevitably start to fall from mass sales. Or, it's even simpler: China and Japan receive dollars for their goods, which then are exchanged in the country for Yen and Yuan. The more expensive a dollar is, the more Yen and Yuan they get.

Russia has a small debt, it is very far from default

Dmitry Medvedev, Prime Minister: Russia's public debt is 10% of GDP. [...] Therefore, the Russian financial system is reliable and allows for profitable borrowing.

Not really. Russia's direct public debt is lower than that of other major economies, both in absolute terms and in relation to GDP. However, the peculiarity of Russia is that it has a large number of state-owned companies whose debts are very high not only in comparison with their revenues, but also in relation to the entire GDP. According to the Central Bank, Russia's external debt in an expanded definition (the so-called debt of the state together with the debt of state companies) is more than $ 377 billion. It was more difficult to give this money to the state and state-owned companies because of the devaluation of the ruble, and to refinance due to sanctions. Thus, the risks of default of the state or state-owned companies have recently increased. An additional threat in itself is the decline in GDP in dollar terms, which is why the level of public debt in relation to the size of the economy is increasing.