Contrary to popular belief, the United States is not broke.
At least, that’s what Capital Economics is suggesting, which noted that the total domestic net worth was as much as 550% of gross domestic product in 2011.
“The upshot is that there is very little risk of either a collapse in the dollar or a spike in long-term interest rates,” said Paul Ashworth of Capital Economics.
Even if America appears to be in a relatively ‘healthy financial state’ many experts claim that if all future government liabilities were included, the country is actually broke.
For instance, the net present value of those liabilities is almost $90 trillion, but most of those liabilities will be incurred between 2040 and 2090. But that could change if laws are revamped regarding social security, Medicare and other programs, the report suggests.
“Even ignoring the inherent uncertainty in forecasting what will happen that far ahead, the projections are based on the continuation of current law, which can be amended at any time. Common sense suggests that if current law is completely unsustainable then, even if it is politically difficult to do so, it will eventually be changed,” Ashworth concluded.
