\n\t\t\t\t\t\t\t\t\t1\t\t\t\t\t\t\t\t<\/p>\n
Creditworthiness \u2014 or the capacity to repay debt productively \u2014 is at the heart of credit analysis and credit ratings. <\/p>\n
\n\t\t\t\t\t\t\t\t\t2\t\t\t\t\t\t\t\t<\/p>\n
After the Moody\u2019s downgrade, the United States has lost its AAA rating \u2014 and very likely its status as a trusted, creditworthy partner. <\/p>\n
\n\t\t\t\t\t\t\t\t\t3\t\t\t\t\t\t\t\t<\/p>\n
To avert that scenario, U.S. Treasury Secretary Scott Bessent has announced that he wants to \u201cgrow the economy at a rate faster than the growth in U.S. debt.” <\/p>\n
\n\t\t\t\t\t\t\t\t\t4\t\t\t\t\t\t\t\t<\/p>\n
As a numeric example, consider that, if the U.S. economy grows 5% per year and debt grows 2%, then the remaining 3% could be used to pay down the existing debt. <\/p>\n
\n\t\t\t\t\t\t\t\t\t5\t\t\t\t\t\t\t\t<\/p>\n
What is the actual U.S. performance in that regard? The U.S. economy is currently growing at 2.9% a year \u2014 while debt is growing at 7.5%. <\/p>\n
\n\t\t\t\t\t\t\t\t\t6\t\t\t\t\t\t\t\t<\/p>\n
Since 2000, U.S. debt has grown by over $30 trillion. In 2000, public debt was around $6 trillion. Now, it is over $36 trillion. <\/p>\n
\n\t\t\t\t\t\t\t\t\t7\t\t\t\t\t\t\t\t<\/p>\n
That is a 500% increase in U.S. debt in 25 years \u2014 or a 7.5% compound annual growth rate (CAGR). <\/p>\n
\n\t\t\t\t\t\t\t\t\t8\t\t\t\t\t\t\t\t<\/p>\n
In the same period, the U.S. economy grew from $10 trillion to $28 trillion \u2014 an $18 trillion increase. That is 180% total growth \u2014 or about 4.3% per year. <\/p>\n
\n\t\t\t\t\t\t\t\t\t9\t\t\t\t\t\t\t\t<\/p>\n
So, to grow the U.S. economy by less than two times, U.S. debt had to grow by nearly 5 times. In other words, 500% in new debt just to get under 200% in GDP growth. <\/p>\n
\n\t\t\t\t\t\t\t\t\t10\t\t\t\t\t\t\t\t<\/p>\n
Very significantly and revealingly, while U.S. debt has increased by 7.5% annually since 2000, the U.S. stock market has delivered the same rate of return over that time. <\/p>\n
Sources: Moody\u2019s, Reuters, PBS, Fitch Ratings, BBC, Marjanul Islam, Washington Post <\/p>\n
\t\t\t\t\t\tTakeaways<\/p>\n
Can the U.S. really grow its economy at a rate faster than the growth in U.S. debt? <\/p>\n
The U.S. economy is currently growing at 2.9% a year, while debt is growing at 7.5%. <\/p>\n
Since 2000, U.S. debt has grown by over $30 trillion. In 2000, public debt was around $6 trillion. Now, it is over $36 trillion. <\/p>\n","protected":false},"excerpt":{"rendered":"1 Creditworthiness \u2014 or the capacity to repay debt productively \u2014 is at the heart of credit analysis…\n","protected":false},"author":2,"featured_media":132481,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5311],"tags":[2825,1700,3448,1195,977,49,978,659],"class_list":{"0":"post-132480","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-united-states","8":"tag-debt","9":"tag-economy","10":"tag-gdp","11":"tag-growth","12":"tag-stock-market","13":"tag-united-states","14":"tag-us","15":"tag-usa"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114572549738669001","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/132480","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=132480"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/132480\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/132481"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=132480"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=132480"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=132480"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}