Is the economy really sick?

January 14th, 2011

One measure that if understood that would be sure to create arguments is the not to well understood Debt-to-GDP ratio.

According to Wikipedia in economics, the debt-to-GDP ratio is one of the indicators of the health of an economy. It is the amount of federal debt of a country as a percentage of its Gross Domestic Product (GDP). A low debt-to-GDP ratio indicates an economy that produces a large number of goods and services and probably profits that are high enough to pay back debts.

So what does that say about the economy when our debt to GDP. The forecast GDP for June of 2011 is $15.1T and our dept is about $13.9T which means our forecast ratio is
about 91.4% which is an improvement from the same time period in 2010 when the ratio was about 98.4%. Although this represents an improvement, a healthy economy with limited risk should have a ratio in the mid 60’s at the most. IT was not to long ago that we were there.

A cool site where you can play around with the numbers if you can handle it is the government spending site.

We look forward to and appreciate you comments.

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