US GDP in 2007 was US$13.843 trillion (or US$13,843 billion). Malaysia's GDP was US$186.482 billion. There are plenty of long term bears over the US economy. The US economy has been running on empty, running on it being the reserve currency, for far too long. The events and developments over the last 5 years have shown that the world economy is realigning and the rest of the world is making the US more accountable for their excesses. The sub prime mess and Fannie & Freddie bailouts are just a portion of the financial and economic problems within the US. To get a grasp of each problem, lets use it as a percentage of US GDP. Its quite frightening. I certainly would not like to be going into retirement age and living in the US over the next 20 years.
Just consider the sub prime mess so far and we are just talking of US$1 trillion here. The social security and Medicare unfunded liability is supposed to borne by a growing base of tax payers. We know that is not going to happen as America has an aging population, unless the country admit a whole lot more people under 35 into their workforce now and for the next 10 years.
How to pay for all these, well, issue more bonds. We all know where that's going to lead to. Or the country can raise taxes a lot, which will be very bad for consumption and their livelihood. Or the country will have to keep its military leadership and fight some more wars for the democratic world - that will keep the USD as the reserve currency and ensure the current countries buying US bonds will continue to do so.
a) The IMF estimated asset write-downs resulting from the 2007-2008 credit crisis to be US$1.1 trillion. By most estimates, only half has been written down so far. In all likelihood, corresponding to defaults on 20% to 30% of home mortgages, we should be looking at another US$500 billion in writedowns. (8% of 2007 GDP)
b) U.S. national debt of US$4.4 Trillion. This figure is obtained from the “Long-term Financial Outlook”, U.S. Government Accountability Office, Jan. 2008. The risk is high that the national debt will continue to grow through deficit spending for many years to come. This gigure is likely to continue to grow in the coming years. (31% of 2007 GNP)
c) The unfunded liability of the Social Security System is estimated to be US$6.7 Trillion (Government Accountability Office, Jan. 2008). Thats the problem with having a lot of social safety nets that is not properly funded. (48% of 2007 GNP)
d) The unfunded liability of Medicare is estimated by the Government Accountability Office to be US$34.1 Trillion. This is the motherlode. One can argue that the liability will be funded over a very long time, but the amount will also grow as well. (347% of 2007 GNP)
e) The cost of imported oil. Despite all the hoo-hah, oil is one of US smallest problem. Yearly import cost is between US$825 billion to US$1 trillion. The danger is if the cost of oil were to go to US$180 in 3 years and the American consumption patterns does not change, then we are looking at maybe US$1.8 trillion. (6% of 2007 GNP)