Friday, June 18, 2010

U.S. facing debt 'super cycle': $13trillion black hole to overtake country's GDP 'within two years'

Official presidential portrait of Barack Obama...

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America's $13trillion debt is set to overtake the country's GDP within the next two years as economists warn of a 'debt super cycle.'

Forecasters predict the U.S. debt will grow to surpass gross domestic product in 2012, based on data from the International Monetary Fund.

According to Bloomberg, the world's largest economy will expand at a slower pace than the 3.2 per cent average of the past five decades.

It comes as Barack Obama borrows record amounts to fund spending programs to help the economy recover from its longest recession since the 1930s.

'Over the long term, interest rates on government debt will likely have to rise to attract investors,' said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Securities Inc.

'That will be a big burden on the government and the people.'

The forecast prompted warnings the country will be plunged into a debt 'super cycle' - which occurs when a debt exceeds the value of a nation's annual economic output.

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