Monday, September 13, 2010

Is ten times revenue the debt limit?

I just had a thought, which is that GDP is irrelevant when measuring the debt. The appropriate measurement is instead cash flow or tax revenue. And I think that 10 times that amount of revenue is some kind of limit or would signal an imminent debt crisis. If that point is reached and interest rates rise to only 5%, then half of all revenue will go towards paying interest. I also like measuring it on a scale of 1 to 10.

The last hard numbers I have are for 9/30/09 when revenue was at 2105 and total debt was 11,910 for a Debt Crisis Number or "Crip" of 5.7. The number at 9/30/10 should be about 6.4, with revenue of 2,100 and debt of 13,500.

So the question is, when will this reach the max of 10? Well there are lots of assumptions, but my best guesstimate is in 2025, when tax revenues will be $5,346B and debt will be $58,332B.

Update 6/19/2012:
This is model C-1.

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