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Wednesday, September 5, 2012

US Debt piles up to $ 16 trillion



US national debt ultimately touched the dreading $ 16 trillion level turning its every citizen into a debtor to the tune of $50,000. Every taxpayer of the United States is burdened with a debt of $ 1,40,000. Interestingly US GDP is around $ 15.3 trillion-this means US owes more than its GDP (total value of goods and services produced by the economy in entire year). 
US dollar being the reserve currency of the world, US did not find any difficulty in amassing this huge liability. Years of deficit spending has resulted into such a gargantuan debt.
China in order to keep its domestic currency competitive parked money into US treasury products and presently China is the largest foreign owner of the US debt.  China presently holds around 7.25 % of the US debt. However, China had reduced its exposure in US treasury products over the past year. By June 2012, China owned US debt worth $ 1.16 Trillion against the previous figure of $1.31 trillion a year ago. Japan follows the china with the ownership of the US debt worth $1.12 Trillion.
Other major countries whom USA owe are UK, Ireland, Brazil, Russia, Switzerland, Canada and Germany.
To get rid of this huge debt US government  needs to cut spending or increase taxes. But both options being unviable especially politically, US government goes for an innocuously looking but more dangerous option- money printing or quantitative easing. This results in higher overall inflation as more money now chases available goods and services.

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