U.S. National Debt Actually Isn't That High, According to Bank of America Research Team

[Frodo]

It all depends on how you measure it:

The US national debt isn't actually very high, BofA says

The US national debt is measured at over $28 trillion, and for decades, it has been a source of concern - and inhibition - for lawmakers. The Republican Party tends to cite the runaway federal debt when it is not in possession of the White House, while Presidents Donald Trump and George W. Bush significantly addred to the debt when they held office.

But what if it's not actually that big, and the way of looking at it been wrong instead?

On Monday, a Bank of America Research team led by Jared Woodard questioned the accuracy of the traditional nation debt measurement, which compares federal debt to nominal gross domestic product. Instead, it suggested using a discounted cash flow, or DCF, analysis, which estimates the value of an investment based on expected future cash flows.

Using this method, which is how companies and financial assets are traditionally valued, the bank found the ratio of US federal debt to total GDP, defined as discounted future economic output of the entire US economy, comes in at 0.7%. That's the lowest since 2004. The traditional valuation method, on the other hand, shows that US federal debt as a percentage of GDP rose to 125% by the end of 2020.

And here is a visual illustration:

[jaichind]

The entire report is based on the fact that real borrowing costs will stay very low or even negative for a long time to come.  Not saying it is not true but it rests on the rest of the world financially funding the USA debt by holding the surge to cash produced the Fed which is in effect an interest free loan to the USA federal government. 

In many ways I can see how this will hold true for a while but when the future could be bimodal meaning when it becomes not true then the present value of the federal could very quickly balloon upward to crippling levels.   Of course Japan have shows that this could go on for a long time but it is easier to convince Japanese savers to give interest free loans to the Japanese government.  The USA has a more fickle audience to play to to keep this going.