Debt... and Assets -- problem, or no?

So everyone knows the public debt's going bonkers. But looking at the Fed's balance of payments reports, it's also clear that private debt is collapsing, as appetite for risk in the credit markets has evaporated, so other kinds of debt have been rapidly evaporating.

On balance, the overall 'debt' in the country isn't really changing all that much in the latest quarters. In fact, debt overall, when you count in everything (including federal) is growing more slowly than it was in the good times. So is the federal deficit really a problem? It also explains why there's still plenty of demand for treasuries at 4% yields. The personal savings rate is soaring so people are looking for assets to invest in, and the 'exotic' options are out the window.

Which is the other part of the question - each and every debt is someone else's asset. Your debt is someone else's investment. In a globalized economy, the net debt of the whole system is exactly zero. It has to be. Sooo... in the big picture, does any of it matter? I suppose it does for your country if you get too indebted to external (foreign) lenders so the interest is too big a drag on your nation's cash flow.

I really don't know where I'm going with this. Just casual noodling on a Sunday afternoon, and itching to see where conversation goes. 8)

I think that the proportion of public debt does matter. When I was getting my Public Administration degree, instructors worried that debt service was taking up a large percentage of federal spending and would squeeze out other public priorities.

We will probably see big tax increases that'll hurt business and investors, ill-considered defense cuts that will make our allies vulnerable, and eventually curbs on entitlement programs that provide social stability.