U.S. Government Debt Nears Overwhelming Threshold

In the book, This Time is Different, writers Ken Rogoff and Carmen Reinhart documented that governments debt begins to erase long-term growth once it goes beyond 90% of Gross Domestic Product (GDP).

Their research shows that the average growth performance of developed economies drops by around -1.75% per year when debt breaches that threshold.

As you can see in the chart below, overall U.S. government debt now stands at 93% of projected 2010 GDP.

And that doesn’t even take into account the massive guarantees by government-owned Fannie Mae and Freddie Mac.

The International Monetary Fund (IMF) projects the ratio of debt to GDP to surpass 100% by 2014.

This does not bode well for prosperity in America.