30 Important Facts About The European and U.S. Debt Crisis

By Karin Lehnardt, Senior Writer

Published July 1, 2017

The biggest single-day loss ever in the history of the Dow occurred on September 29, 2008, when it dropped 777.68 points, or approximately $1.2 trillion in market value._[8]
If a person spent $1 every second, that would equal to $1 million dollars in 12 days. At this rate, it would take 32 years to spend $1 billion dollars. It would take 31,000 years to spend $1 trillion dollars._[14]
In 2008, U.S. households lost an estimated 18% of their net worth, equaling approximately an $11.2 trillion loss. This collapse was the largest since the Federal Reserve began tracking household wealth after WWII._[8]
Five years prior to 2008, 11 banks failed. In 2008, 25 banks failed and were taken over by the FDIC. In 2009, 140 failed._[6]

In 2017, the U.S. national debt is about $20 trillion

In 1971, the national debt was $75 million. In 2010, the debt rate rose that much once an hour._[12]
A trillion $10 bills end to end would wrap around the globe 380 times. This would still not be enough pay off the national debt._[14]
When the U.S. debt reached 100% of its GDP in 2011, it joined Japan (229%), Greece (152%), Jamaica (137%), Lebanon (134%), Italy (120%), Ireland (114%), and Iceland (103%) as other countries whose public debt exceeds their GDP._[13]
China, the largest foreign holder of U.S. debt, chastised the U.S. on August 6, 2011, admonishing the United States to cure its “addiction to debts” and “live within its means.” A Chinese newspaper said that the issue of the U.S. dollar needed international supervision and questioned whether the U.S. dollar should continue to be the global reserve currency._[3]
The U.S. government pays more than $1 billion each day just on interest on its debt. It spends $10 billion a day for all the services it provides._[12]
The U.S. debt ceiling was created in 1917 at a limit of $11.5 billion during WWI to allow greater simplicity and flexibility during the war by allowing the Treasury to borrow any amount it needed as long as the amount was below this limit. Prior to this, Congress had to approve each issuance of debt. To change the debt ceiling, Congress needs to enact specific legislation and the President must approve the legislation._[9]
The U.S. government borrows approximately $5 billion every business day._[2]

The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

- Thomas Jefferson

The U.S. was in debt even in its first yearly report on January 1, 1791, in the amount of $75,463,476.52. Every president since Truman has added to the national debt. The debt ceiling has been raised 72 times since 1962, including 18 times under Reagan, eight times under Clinton, seven times under Bush and, as of August 2011, three times under Obama._[9]
The only democratic country besides the U.S. with a debt ceiling is Denmark. However, it’s ceiling is so high it is it unlikely to ever be reached. The Danish set the ceiling so high to avoid slowing the process of borrowing money and to avoid political conflicts similar to those current in the U.S._[4]
Many economists consider the global financial crisis (GFC), or the late-2000s financial crisis, to be the worst financial crisis since the Great Depression._[7]
In 2004, Greece admitted that it gave misleading financial information to gain admission into the Eurozone._[15]

In 2004, Greece admitted that it gave misleading financial information to gain admission into the Eurozone

Time Magazine identified 25 people who are at most to blame for the U.S financial crisis, including Alan Greenspan, George W. Bush, Bill Clinton, the CEO of Merrill Lynch, and the American consumer._[1]
It is estimated that Bill Gates and Warren Buffett lost a collective $43 billion in 2008. However, they were not the only billionaires to have a rough year. The number of billionaires dropped from 1,125 in 2008 to 793 in 2009._[8]
Simply put, the European debt crisis happened because some countries in Europe have too much debt and are at risk of not being able to pay it back. If one or more of the Eurozone countries defaults on its debt or pulls out of the Eurozone, it may cause investors to panic, triggering a massive banking shock in Europe and possibly the U.S._[15]
Some economists note that Germany and France, which have the strongest economy in the Eurozone, encouraged the PIIGs (Portugal, Italy, Ireland, Greece, and Spain) to go into debt. German and French banks lent money to the PIIGS so that the PIIGS could buy German and French goods and services, just like a junkie setting up an addict._[11]

Germany and France have been accused of encouraging debt

From August 2007 to October 2008, an estimated 20%, or $2 trillion, disappeared from Americans’ retirement plans._[8]
Ireland is in massive debt because it experienced a large real estate bubble in which the government had to bail out Ireland’s banks. Its debt is now 121% of its economy._[15]
Even though countries such as Germany and France have high output and manageable debt, the size of other countries’ debt is putting the whole Eurozone in trouble. Consequently, investors don’t want to buy bonds from any European country because even those who have manageable debt might have to assume responsibility for those weaker countries._[11]
Some critics blame the Euro currency for the European debt crisis, arguing that a single currency to meet the needs of 17 different economies is inherently flawed. Nations yoked under one currency cannot adjust a particular nation’s money supply to encourage or inhibit growth in response to economic turmoil._[15]
In context to the Eurozone crisis, the “contagion effect” refers to the fear that one country’s financial problems will cause financial crisis in another country._[11]

The EU is a powerful international organization with its own flag and diplomatic representation

In 2011, investors in global stock markets lost $6.3 trillion in wealth mainly due to fears of a Eurozone breakup._[5]
When Reagan took office, U.S. debt was under $1 trillion. After he left eight years later, debt was $2.6 trillion and the U.S. had moved from being the world’s largest international creditor to the world’s largest debtor nation._[7]
The European debt crisis exploded after Greece admitted that its 2009 budget deficit would be 12.7% of its GDP, which was far higher than the Eurozone limit of 3%. After Greece revealed its number, investors panicked, the country could not fund itself, it was forced to take a €110 billion bailout from the IMF, and it is due to receive a second bailout package in 2012._[16]

Spain has the highest youth unemployment rate in the EU, at close to 50%

The youth unemployment rate in the EU is extremely high at 20%. In Spain, it is 48%. The European Commission said that not only do young people remain the hardest hit by the crisis and its aftermath, but also that “income shocks may prove permanent.”_[5]
The majority of EU member states have agreed on a new treaty that could stave off a Eurozone collapse. The intergovernmental treaty would deepen the integration of national budgets, turn over Europe’s bailout funds to a central European bank, and add €200 billion to the IMF. Only Britain refused to sign the deal._[10]
The euro is used by over 332 million people daily and is the official currency of the Eurozone as well as six other countries that are not part of the Eurozone or the EU. After the U.S dollar, the euro is the second largest reserve currency as well as the second most traded currency in the world._[11]