There is always a lot of talk about the nation debt and a lot of the talk can be hard to understand. The nation debt currently stands at 13 trillion. That is over 43k for every U.S. citizen. How is your savings account coming along for this? Click on this link for a break down of current running amounts. Depending on when you read this the numbers maybe a lot higher (hopefully years from now it is actually lower).

Ok so what does this really mean and how can I understand it. I recently found this video which greatly helps explain how the national debt has grown through out the years and how quickly it grew under different presidents.

http://www.youtube.com/watch?v=P5yxFtTwDcc&feature=player_embedded

Now that we know how fast the national debt has been growing why do we care? How does a large debt effect us? If there is any lesson this country and its citizens should have learned from the economic collapse of 2009, we should have learned why it is bad to be leveraged to high. Financial leverage is the degree to which one is utilizing borrowed money. The U.S. debt compared to the national GDP tells us how leveraged the U.S. is. The chart to the right shows the history of Debt .vs GDP since the 1800. The spike right after the 1940s was to fund World War II. You can see that in  2010 we are gaining quickly on that all time high spike in the 1940s.

The government sells its debt by selling U.S. treasury bonds. Almost anyone can buy U.S. treasuries. They basically give the government money for a promise the money will be paid back with interest over a certain number of years. The U.S. government itself owns about 52% of these treasuries. This is where most of Social Security and Medicare savings account money is. After that China ($846 billion), Japan ($821 billion) and the U.K. ($374 billion) hold most the rest of the debt.

Some how the world’s richest nation has got in a position where it has to borrow form some of the world’s poorest. Just like in 2009 when banks ran out of money, or decided it was to risky to lend money anymore, the bubble popped. When countries like China and Japan stop lending us money it will drive up interest rates, cause home prices to drop more then they already have any could cause a run on the dollar. “If foreign central banks become net sellers of Treasurys, the demand for dollars needed to buy them would plummet.” If there is one rule most people remember from economy class, it is supply and demand.

Foreign countries have already started raising the risk level associated with lending to the U.S. It is time to get our spending under control.