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National U.S. Debt
For highly advanced and developed nations, insurmountable public debt becomes a significant issue that affects
Government policy, expenditures, and economic growth. In 2015, the U.S. national debt is expected to be $18.6 trillion, and is considered to be the largest debt burden in the world.
This is an important issue that will continue to plague the US and can highlight the interdependent dynamics between each component as well as to the general health and future growth of the US economy as a whole and may have negative repercussions if it continues to grow larger in the years to come.
1) How the growing national debt affects monetary policies and inflation
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NATIONAL DEBT OF UNITED STATES
In early twentieth century debt started picking momentum with US citizens with introduction of credit terms. Dollar became much more affordable and standard of living rose as a result. It was excessive debt which in part was responsible for the economic boom of 1980s, 90s and 2000. However a dollar borrowed today is less than dollar plus interest which has to be repaid in the future. When accumulated over time, debt negatively impacts the future economic growth.
The public debt in 2004 was $7.3 trillion. This rose to $10 trillion when the housing bubble burst four years later. Today it exceeds $18 trillion and is projected to approach $21 trillion by 2019 (Patton, 2015). For a normal taxpayer the increase in debt means increased liability. Also, in advanced economies like United States, if debt to GDP ratio crosses 90 percent, they are at risk of prolonged decreased economic growth. Growing federal debt can lead to financially instability which can lead to loss of investor confidence. If there is no confidence on government's ability to manage the budget, it would lose its ability to obtain funds at affordable rates.
Affect on Inflation
With increasing debt, there is a debate among policymakers on ...
Impact of increasing national debt of United States on inflation and monetary policy are examined.