National Debt

[bethanygm]

Thoughts?

We are trying to clean up our finances and I am horrified at the thought of my country basically living off of credit. It is a never-ending cycle. I wasn't paying much attention to this because I was so enamored with the thought of public insurance (I had cancer, can't get individual insurance now for myself, want to be able to get it so I can work for myself).
But now I am paying attention.
This guy says we are headed for a depression greater than the last one.

http://www.trendsresearch.com/forecast.html

[jyng1]

I like it when an economist rattles his bones, mixes a potion and forecasts the future.

At least your national debt accumulated when Obama poured cash into the US economy is only $10,000 for each man, woman and child. In the UK it's $30,000

[HoneyCyclical]

I'm responding to all of your posts with late 80s Laurie Anderson videos.
National Debt

[Pip's Squeak]

It is not as if the government has much choice. You want a depression? Allow the money supply to contract and its velocity to lessen.

The Federal deficit is a symptom, not the problem. This, in my opinion, is overconsumption by the American population. They are going to have to decrease their debt. While this is proceeds -- for at least another five years -- the government had better spend money.

What is really going on is the economic and political decline of the US. This was inevitable anyway, but was nicely accelerated by Bush and Co by a generation. Congratulations, Republicans.

[vSv]

I would have liked to see a way worse depression, so people perhaps starts to understand that this system maybe not is as good as they think instead of just keeping the rotten system alive.

[Pip's Squeak]

I would have liked to see a way worse depression, so people perhaps starts to understand that this system maybe not is as good as they think instead of just keeping the rotten system alive.

Emotionally, I agree with you. But this is said from a position of relative security. Rationally, it is not right to wish for a situation that implies increased misery for millions.

[vSv]

Emotionally, I agree with you. But this is said from a position of relative security. Rationally, it is not right to wish for a situation that implies increased misery for millions.

Keeping it alive implies that many people to suffer all the time, even so that the world itself may not be able to handle us anymore because of all the toxic waste from our meaningless productions that exists only to keep the system alive by an endless routine of more and more consumption in an ever accelerating rate.
Of course I can't say what would happen if it did became a worser depression either, but as it is now, it's just ridiculous and the system itself really needs to be changed from scratch, and I can't say that I believe an stable economy for some more years would be able to fix that.

[floid]

National Debt is another way of saying some people haven't been paying their fair share of taxes.

And Warren Buffett (http://www.washingtonpost.com/wp-dyn/content/article/2007/06/27/AR2007062700097.html) knows who that is.

[mancroft]

The utter failure of the Fed:

http://www.tcsdaily.com/article.aspx?id=082709A

This explains the entire scam:

http://www.themoneymasters.com/

3 1/2 hours vid but worth watching.

More up-to-date info:

http://www.europac.net/
http://theinternationalforecaster.com/

EDIT:

This will further ruin your day:

http://www.youtube.com/watch?v=m1VbGcaVvFM&feature=email

More on debt

[Lee]

It is not as if the government has much choice. You want a depression? Allow the money supply to contract and its velocity to lessen.The money supply can expand without additional Federal Government debt -- the vast majority of which hasn't been spent yet.

In any case, politicians in Washington are not practicing Keynesian macroeconomic policy when they promote a fiscal deficit to "fight" a recession. The flip side of a Keynesian deficit is a surplus when the economy is strong, but even during the height of the recent boom the Federal Government was increasing its deficit. In fact, if you tried to predict when the U.S. economy was in recession by looking for fiscal deficits and surpluses, then you would think there has been a progressively worsening recession since the mid-70s. Politicians only follow Keynesian macroeconomic policy when it suits them, i.e. when it recommends more debt and spending.

Much of the "stimulus" reads like a Democratic wish-list, funneling money to preferred special interests as payoff for helping them get elected. Do you remember the rhetoric about what would happen if the "stimulus" didn't get passed immediately? Since then only a small fraction has been spent, and much of it isn't due to be spent for years. Even among Keynesians, there is a general agreement that a monetary stimulus, conducted by a central bank, is far superior to a fiscal stimulus, but you can bet which one is more popular in Washington. The brute fact is that both the Republicrats and Democons have screwed almost everyone over the last 2 years.

Did you know that Obama's projected deficit is equal to the entire Federal budget when Bush, Jr took office?

[avolkiteshvara]

Maybe with enough debt, China will be forced to float the yuan and the current account deficit can be reversed.

[UniversalMagnetism]

The utter failure of the Fed:

http://www.tcsdaily.com/article.aspx?id=082709A

This explains the entire scam:

http://www.themoneymasters.com/

3 1/2 hours vid but worth watching.

More up-to-date info:

http://www.europac.net/
http://theinternationalforecaster.com/

EDIT:

This will further ruin your day:

http://www.youtube.com/watch?v=m1VbGcaVvFM&feature=email

More on debt

That is depressing...

[Pip's Squeak]

The money supply can expand without additional Federal Government debt -- the vast majority of which hasn't been spent yet.

In any case, politicians in Washington are not practicing Keynesian macroeconomic policy when they promote a fiscal deficit to "fight" a recession. The flip side of a Keynesian deficit is a surplus when the economy is strong, but even during the height of the recent boom the Federal Government was increasing its deficit. In fact, if you tried to predict when the U.S. economy was in recession by looking for fiscal deficits and surpluses, then you would think there has been a progressively worsening recession since the mid-70s. Politicians only follow Keynesian macroeconomic policy when it suits them, i.e. when it recommends more debt and spending.

Much of the "stimulus" reads like a Democratic wish-list, funneling money to preferred special interests as payoff for helping them get elected. Do you remember the rhetoric about what would happen if the "stimulus" didn't get passed immediately? Since then only a small fraction has been spent, and much of it isn't due to be spent for years. Even among Keynesians, there is a general agreement that a monetary stimulus, conducted by a central bank, is far superior to a fiscal stimulus, but you can bet which one is more popular in Washington. The brute fact is that both the Republicrats and Democons have screwed almost everyone over the last 2 years.

Did you know that Obama's projected deficit is equal to the entire Federal budget when Bush, Jr took office?

Some further notes on government debt:

Although taxpayers will pay for deficits with higher taxes in the future, resources are bid away from alternative uses in the present. A government's "economic footprint" is not only its tax and regulatory burdens, but its total command of resources including deficit spending.

Government debt is unlike ordinary debt, because it doesn't need to deliver economic growth to be sustained. The value of the resources used by a government program can be greater than its output, because without prices there are no losses and no way to gauge relative value. Thus wasteful uses of resources -- malinvestment -- can persist almost indefinitely, whereas in the private sector it would eventually be driven out of business. Since the government can fulfil all its proper and useful functions without a deficit, it follows that deficits are almost wholly malinvestment. Future growth is impaired because genuine investment must first compensate for government deficits.

The argument presented seems to imply that monetary stimulus has been lacking. This is not so (c.f. statistical release of the Fed: http://www.federalreserve.gov/releases/h6/Current/). The result has been many ‘extra’ billions sloshing about, driving up stock prices. If fiscal stimulus is seen to pander to Democratic party policies and demographics, should not this monetary stimulus be seen as again stuffing the pockets of Republican constituencies? This political perspective naturally has no necessary economic theoretical basis.

Taxpayers will certainly have to pay more later. One might think. Not a bad idea in my opinion. On the other hand, more likely to occur first is an additional, and severe, collapse of the dollar. It is this which will at last force the US consumer to cut back in a structural fashion.

It is a commonplace, but I do believe true, that the only salvation possible is a rapid development of domestic markets in China, India and Brazil which, by mopping up excess production capacity, could help stem the decline in consumer expenditure elsewhere. Not being a soothsayer, I don’t know whether this coming to pass is just improbable or plainly absurd.

[Hustler]

National Debt is another way of saying some people haven't been paying their fair share of taxes.

It doesn't help that the federal government has had budget deficits in 36 of the last 40 years. If they're not going to tax the Warren Buffets of the world their fair share, they should probably try to spend a little less on the likes of stimulus packages and foreign invasions.

[floid]

It doesn't help that the federal government has had budget deficits in 36 of the last 40 years. If they're not going to tax the Warren Buffets of the world their fair share, they should probably try to spend a little less on the likes of stimulus packages and foreign invasions.

I think that's how trickle down economics is supposed to work.

Spend public money, reap the profits, if any, from the expenditure and share them among your associates(ala Bush/Cheney in Iraq), and then leave a public deficit for the public to pay.

You have to keep the tax rate on the wealthy very low indeed if you want to keep the "trickle" in "trickle down economics".

I think it's all working pretty much as our economic overlords intended it to.

[Lee]

The argument presented seems to imply that monetary stimulus has been lacking.Where did it "imply" that?

In any case, the Federal Reserve has embarked upon an unprecedented monetary stimulus, and I never meant to "imply" otherwise. In my opinion, a small expansion of the money supply would have been appropriate while leaving insolvent institutions to fail. Thus new money would be injected into the economy through prudent and successful banks, and not used to temporarily prop up an unsustainable system. But while you consider the monetary stimulus -- and, presumably, the TARP -- to be "stuffing the pockets of Republican constituencies," I don't see the financial sector as any more a Republican than Democrat. Both parties have demonstrated a preference for helping out their buddies on Wallstreet, the primary difference is merely what rhetoric such actions are wrapped in.

[Lee]

Democratic governments have a tendency to borrow and spend rather than tax and spend, because spending is good politics and taxing is bad politics. When borrowing, tax increases can be deferred to some future date, by which time the responsible politician has moved on or retired. He is remembered as a great man in the popular media for his spending, while a successor is lumbered with the job of financing it. The most common way for a politician to finance a predecessor's borrow-and-spend habit is to borrow even more to pay it off, since spending cuts would be unpopular. Thus there is little incentive to reduce the ever accumulating debt pile, because any politician who tried would ruin their career. It is like a game of pass the parcel with a time bomb inside -- each incumbant is hoping that he is not holding the parcel when it explodes.

Historically, when the fiscal crisis does explode, politicians remain averse to increasing nominal taxes. Instead, they prefer monetary debasement, i.e. inflation. That is one of the looming threats to the U.S. economy, because it is nigh on politically impossible to reverse the trend of increasing spending. It happened after World War II, but today's spending increases are primarily subsidies and entitlements, which, because of dependent and self-interested recipients, are much more difficult to cut. Government debt and monetary debasement have a long and sordid history together, and I do not expect a change anytime soon.

[UniversalMagnetism]

Democratic governments have a tendency to borrow and spend rather than tax and spend, because spending is good politics and taxing is bad politics. When borrowing, tax increases can be deferred to some future date, by which time the responsible politician has moved on or retired. He is remembered as a great man in the popular media for his spending, while a successor is lumbered with the job of financing it. Of course, the most common way for a politician to finance a predecessor's borrow-and-spend habit is to borrow even more to pay it off. Thus there is little incentive to reduce the ever accumulating debt pile, because any politician who tried would not be very successful in politics. It is like a game of pass the parcel with a time bomb inside -- each incumbant is hoping that he is not holding the parcel when it explodes.

Historically, when the fiscal crisis does explode, politicians remain averse to increasing nominal taxes. Instead, they prefer monetary debasement, i.e. inflation. That is one of the looming threats to the U.S. economy, because it is nigh on politically impossible to reverse the trend of increasing spending. It happened after World War II, but today's spending increases are primarily subsidies and entitlements, which, because of dependent and self-interested recipients, are much more difficult to cut. Government debt and monetary debasement have a long and sordid history together, and I do not expect anything different to change now.

Damn it. This makes a lot of sense. Why can't the government fail after I'm dead.
*still hoping, but planning for the worst*
I was thinking about learning another language. Maybe Chinese since they own us. Now all I gotta do is find a Chinese kid who wants to learn English or make a friend with someone who wants to learn Chinese. Or maybe I could kidnap a Chinese person from China and feed it Ramen noodles in return for Chinese lessons. Yes, my plan is perfect. There's no way it could fail. :banana:

[Architectonic]

David Walker has interesting things to say with regard to how far under the USA is and how Obama has the opportunity to improve things, but will likely make things worse.
Eg the Health Care plan. http://edition.cnn.com/2009/POLITICS/04/15/walker.tax.debt/



They should probably try to spend a little less on the likes of stimulus packages and foreign invasions.

Electing politicians that will do that is almost as elusive as 'common sense'.

[hoodrich84]

I think that's how trickle down economics is supposed to work.

Spend public money, reap the profits, if any, from the expenditure and share them among your associates(ala Bush/Cheney in Iraq), and then leave a public deficit for the public to pay.

You have to keep the tax rate on the wealthy very low indeed if you want to keep the "trickle" in "trickle down economics".

I think it's all working pretty much as our economic overlords intended it to.

good job.

[Lee]

John B. Taylor, economics professor at Stanford University and name behind the famous Taylor Rule of modern macroeconomics, recently started a blog called Economics One (http://johnbtaylorsblog.blogspot.com/). Yesterday he posted the below chart of the Federal debt as a percentage of GDP from the late 18th Century to the late 21st Century (with future debt extrapolated from current trends).

http://forums.intpcentral.com/picture.php?albumid=66&pictureid=411

Source: Congressional Budget Office

Arnold Kling, professor of economics at George Mason University, responds on his blog, Econlog (http://econlog.econlib.org/):


Our debt situation today is much scarier than it was after World War II. When the war ended, we stopped accruing war debt. As GDP grew, the ratio of debt to GDP shrank. I would describe our current debt not as war debt but as entitlement debt. Entitlement debt is not frozen. It is growing. It is growing faster than GDP. Very different.
The problem is that entitlement debt it is very difficult to cut; there are self-interested parties that have a big incentive to keep the money flowing. For example, programs such as Social Security, Medicare, and Medicaid, although unsustainable and potentially ruinous, have actually been expanded time and again because, in the short run, it is good politics.

[mancroft]

The light at the other end of the tunnel is an oncoming train.

[avolkiteshvara]

There is much pork everywhere.

[dubbeltop]

National Debt

I always get this funny feeling when I explain this to an audience of layed off steel workers.

[borzik]

Where one can find a piece of document that shows who owes whom.

[Harion]

is not a problem so long as the US is in control of credit flow
all the money flowing into your system right now is virtually imaginary
the Fed is feeding the flow and keeping the country afloat
if it were elsewhere (argentina?) the dollar would have long ago lost its value
but because the US has the guns, they can enforce economic might thru force
the IMF, world bank, virtually any agency where credit goes is controlled by the US
saying the US has national debt is just like saying you owe yourself money you borrowed from yourself
this latest recession is just an indication that your CREDIT ECONOMY has overextended its imaginary wealth vs REAL WEALTH tied down by goods and products
now, the sensible thing to do would have been to allow the economy to contract so wealth could equalize to REALITY, but with so many (and most of them running the country) having tasted the good life in easy street wall street, no one is willing to let go of this false wealth. so to keep the dream alive, you feed the debt with more debt taken from imaginary money you never had in the fist place. the dollar is just a currency printed on a piece of paper. that paper is as worthless as toilet paper unless everyone agrees it has a financial value. the credit economy on the other hand made everything worse. it's all well and good when credit is paid with REAL wealth, but when credit is paid with more IOUs, everything collapses. it's what happened remember? ppl with debts defaulted on their payments, and then suddenly, your credit isn't just good anymore unless you can back it up with liquidity. but your whole economy revolved around credit and so when the usurer knocked on the door to collect, no one had the goods to pay in cash. everything was writ in credit.

and it's all just set to repeat in a couple of years unless you learn that the solution is in biting the bullet now and enduring the hard times to fix the problem. it's inevitable. the US needs to let its economy contract.