Does this figure—10,329,969,366,304—make any sense to you? In school physics, we learnt that such large numbers are usually associated with the distance between one planet and another. But put a dollar sign before the above figure, and it constitutes a major part of the answer as to why the global financial system is currently in turmoil, why stock markets in India and around the world have crashed, why many businesses have either been wiped out or are in doldrums, why the dreaded word ‘R’ word (retrenchment) has entered into many sectors of the economy in India and elsewhere, and why another dreaded word ‘R’ word (recession) is spreading gloom ahead of Diwali, the festival of lights.

The number $10.3 trillion denotes the outstanding Public Debt of the United States of America as of 17 October 2008. Just three years ago, at the end of 2005, it was $7.9 trillion, which itself was about nine times its 1980 level. Indeed, the number was lengthening so rapidly that the National Debt Clock at New York’s Times Square recently ran out of spaces. A new and longer clock is now under construction. America’s gross debt has become so huge that it amounts to 70 per cent of the country’s GDP this year.

What this means is that America has simply borrowed its way to prosperity. Paradoxically, nearly four-fifths of the borrowings that have sustained its prosperity are from foreign institutions and governments, including the Government of India, who have been investing in dollar-denominated debt instruments issued by the US Treasury. (This also means, shockingly, that the US has been fighting wars in foreign lands using other people’s money.) Borrowing has become a way of life, both for the government and the people. In an economy where interest rates were kept artificially low for a prolonged period of time, citizens were first addicted to consumerism and then to the culture of ‘living a good life’ by borrowing, as can be seen from the fact that Americans spent $800 billion a year more than they earned. An average American family owns 13 credit cards, and 40 per cent of them have a balance. Household debt grew from $7 trillion in 2001 to $14 trillion in 2008. An entire new industry of financial jugglery came into being to translate greed into profits. And this non-productive industry of ‘financial products’, and not the real industry of making physical products, became America’s primary business. Manufacturing today accounts for only 12 per cent of USA’s GDP.

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