The US public debt is indeed around 14-15 trillion - they are paying out a huge amount of their budget just on servicing the debt (can't remember the figure - if you assume an interest rate of around 5% I think you are looking at something like $750 billion annually - it's somewhere around that mark)Pretty sure the entire US budget is something like $3 trillion? That's a gigantic whack out of their budget annually just to pay the interest on their debt.
Of course, there is also hidden debt that the US government owes - they owe, for example, future pensions to retirees in a population where the demographics are tilting older and older each year. I'm pretty sure I saw a figure on this of about $75 trillion.
The $14-15 trillion figure is around 50% of gdp, which isn't exactly all that great for a country that has the biggest economy in the world *and* is has the world's reserve currency.
The issue, however, is that they have a massive and ballooning budget deficit with apparently no political will to tackle that deficit. In other word's it's not as if the $15 trillion or whatever they owe in public debt is a static figure - it's a rapidly expanding one.
Anwyay, here's the bind - they have a moribund economy, but the government has to cut its spending/raise taxes. Both of these measures are going to seriously impair GDP growth in the US economy at a time when the US government should actually be in a position to do the opposite. If they raise taxes it will have a more deleterious effect on their GDP than if they cut spending, at least according to an IMF study. In other words, if they want to address the budget deficit with measures that will have less of an effect on GDP growth, they really should look at cutting spending ahead of cutting taxes. Which means taking the razor to social security - so the poor will get it in the neck once again. Whatever they do its going to have a serious effect on GDP and I suspect will send the world into a deflationary tailspin for some time.
Then, of course, there is the "hidden" debt I mentioned above - the $75 trillion or so that is actually some hundreds of % of their GDP - the US government will look at some way to address that issue by basically cutting the commitments the made to US citizens. They will do it by stealth, but it will happen. The other obvious thing they are doing now is deliberately devaluing their own $ - which of course helps a lot of US companies and their bottom line, but increases the pain for the US consumer via inflation. Stealthily, it is also actually cutting the money the US government owes overseas by cuttin the value of that debt in real terms. In other words, the $15 trillion owed is now actually worth a lot less in real terms now that the US $ has devalued 30% or so since the GFC - 30% less actually. A lot of that money is owed to China and Japan - China would love some of that money to pay for the expansion in its own economy - and Japan would love it to help pay for the recovery from the tsunami plus pay back their own public debt.
You can see why China and Japan are looking around for other currencies to hold rather than US $ - and you can now understand why the Aussie $ is the world's 5th most traded one while we have the 16th or so largest economy in the world. Some of that disparity between our currency being traded and the size of our economy is because we stand as a proxy for the Chinese renmimbi - but part of it is because the US $ is heading down a path where it will no longer be *the* reserve currency - hence also the rise in the price of gold.
Anyway - I reckon there will be a QE 3 and QE 4 soon - at the moment the deflationary signs are everywhere - from our own housing market to a looming commodities bust. In a deflationary event the only thing I'd like to be holding is cold hard cash, and at the moment that is basically the place to be.
