US Debt

[Triple Vacuum Seal]

I don't like to start topics much but...

 

 

Why doesn't anyone in America give a sh*t about the debt ceiling? It's kind of a really big deal. Public and private debt in general are about to f*ck us.

 

It's now sickening how disengaged and short-sighted we American voters are

[Deffpony]

America is probably the most programmed country in the world.

 

We care do much about Kim kardashians baby but not about Monsanto. I love the US but we are f*cked. People don't care because there's nothing you can do about it. People who are in power will do whatever to stay in power. Money controls everything.

 

Ugh I don't wanna even get started.

[Triple Vacuum Seal]

 

America is probably the most programmed country in the world.

 

We care do much about Kim kardashians baby but not about Monsanto. I love the US but we are f*cked. People don't care because there's nothing you can do about it. People who are in power will do whatever to stay in power. Money controls everything.

 

Ugh I don't wanna even get started.

True.

 

When sh*t finally hits the fan, the public blames politicians (because that's our modern exit strategy for having to address important issues at a conversational level). Then those politicians blame the rival party. Then the public goes back to letting things slide in Washington so they don't have to think about the mind boggling issues themselves. Vicious cycle.

[sivispacem]

I blame it solely on all the idiots who compare fiscal budgets for entire nations to household budgets. As a householder, you don't have the world's most powerful military and more strategic weight than most of the rest of the world combined to back up political and economic policy. There's little, if any, evidence to suggest nations running large deficits actually end up any worse of than those that don't. Case in point- Japan.

[Triple Vacuum Seal]

 

There's little, if any, evidence to suggest nations running large deficits actually end up any worse of than those that don't. Case in point- Japan.

I beg to differ...

 

Greece, France (centuries back), Spain, Italy, and the several other examples of corporations just as large as countries failing from doing the same thing. Japan has tall shiny buildings and advanced technology, but don't let that fool you. Growth has significantly slowed there. Their consumer finance industry has totally broken down to the point where many people have to turn to loan sharks for loans. Debt and financial failure is actually one of the main contributors to Japan having such an astounding suicide rate.

 

No matter how you spin it. It's a basic principle that an economic agent can't continue to spend on credit (somebody else's money) while their creditworthiness has a declining outlook.

[nightwalker83]

Can the US debt ever be repaid if so why is it so high?

[El Dildo]

Why doesn't anyone in America give a sh*t about the debt ceiling?

lots of people in America give a sh*t about our debt.

 

the problem is that those people don't serve in Congress

[gtamann123]

I think welfare spending as well as military spending must be cut. Welfare was never meant to be a lifestyle and meant to only be a short term thing to get back on your feet but too many people are mooching off of the system. And I really don't think I need to explain why military spending is too high.

[Chunkyman]

I think welfare spending as well as military spending must be cut. Welfare was never meant to be a lifestyle and meant to only be a short term thing to get back on your feet but too many people are mooching off of the system. And I really don't think I need to explain why military spending is too high.

According to Keynesians, this would collapse the economy now.

[Triple Vacuum Seal]

 

Can the US debt ever be repaid if so why is it so high?

Yes and no.

 

No because debt simply means obligations and debt at manageable levels is healthy. A personal finance example of healthy debt would be a manageable car payment, mortgage, and utilities expense. When there is too much debt present, more money has to be made or less money has to be spent. In the long term, you cannot slowly chisel from a debt as large as ours with a small surplus because the effects on the overall debt would be minimal. You certainly can't just balance the budget year after year because you've made no progress on paying your debt as you just managed to break even. However, the worst thing you can possibly do is run a deficit which is an increase in debt. Running deficits in a time of deep debt are like giving a mass murderer more ammunition to keep him from killing more people.

 

Yes because it can be repaid to healthy levels with actual action on the matter such as lower spending and higher taxes (AKA contractionary policy). The problem is that too much contractionary policy is bad for economic growth since businesses won't invest (AKA hiring people and spending) as much because of the tax burden and less purchasing of their product due to the reduced spending.

 

 

Our debt is high because everyday people don't naturally question where the money came from to provide a given service (military, social security, medicaid, and medicare). They just know they want that service. This is especially the case when people have been receiving the service long enough. It becomes "entitlement spending" (AKA political suicide for anyone willing to cut the services). That's why it's easier for our gov. to sell the public on inflation than austerity despite the heavier burden of inflation.

Edited January 8, 2013 by canttakemyid

[El Dildo]

According to Keynesians, this would collapse the economy now.

not exactly.

 

most Keynes economists have been calling for deep slashing of the military budget for decades.

[Iminicus]

According to Keynesians, this would collapse the economy now.

not exactly.

 

most Keynes economists have been calling for deep slashing of the military budget for decades.

Yeah and only of the Military budget, ignoring the fact that it isn't even the biggest sink hole the US Government pours money into.

[El Dildo]

that's not true either.

 

Keynes economists are not only concerned with the military budget.

you're right that military is not the largest "sinkhole," but it's awfully close and A LOT of it is blatant waste.

 

the same cannot be said of competing programs budgets.

 

http://www.cbpp.org/cms/index.cfm?fa=view&id=1258

http://www.factcheck.org/2011/07/fiscal-factcheck

 

 

[FAH-Q]

Hahah oh man, a lot of people care but none of us have trillions of dollars in our back pockets. Whatever, the world ends the 21st anyway...

[Triple Vacuum Seal]

Hahah oh man, a lot of people care but none of us have trillions of dollars in our back pockets. Whatever, the world ends the 21st anyway...

The funny thing is that our pockets is exactly where the money will have to come from eventually. We're (tax payers) going to have to bail the government out on this one.

[Dingdongs]

Our debt is not a problem at all - it's perfectly manageable at current levels. The debt ceiling itself is unconstitutional and frankly stupid to begin with.

[crispypistonx8]

Lol We should Tell our debt holder's to go f#ck themselves and dare them to say somthin. I wonder what would happen?...

 

Welfare programs and all aid set forth to support people having children without the means of raising said child should be abolished/significantly cut back.

 

Military spending is something that has its ups and downs,I have personally seen on quite few occasions soldiers/law enforcement literally bury thousands of rounds of top grade ammunition I'm talking everything from 9mm to howitzer shells just because they didn't feel like training. And on the other hand continuous advancement our military through means of experimentation will always require vast sums of money an man hours there's just no way around it.

[GrandMaster Smith]

Financial crisis' are inevitable..

 

 

The 'Federal' Reserve (Not even federal but privately owned, it's just their name) makes the money, the banks are then loaned the money with interest on top to pay back.

 

We will ALWAYS owe more money than even exists in circulation causing endless debt that can never be fully paid back. It will never end, it's a completely flawed system that the Fed is cashing out on.

[Triple Vacuum Seal]

 

Lol We should Tell our debt holder's to go f#ck themselves and dare them to say somthin. I wonder what would happen?...

 

It doesn't work that way.

 

Our government has something called a deficit. That means that we spend more money than we bring in. The only reason why we can still pay for services around us such as the military, federal salaries, etc. is that we have something called bond markets. Bonds are simply loans to investors who make money from the interest and principle. US treasury bonds and notes are sold on these markets to investors who think that government will in fact pay them back. Saying "f*ck yourself" to those who loaned you money is called defaulting. When a nation defaults, it's credit rating is reduced and it's bonds become "junk status" (AKA high risk). Junk status debt = no one buys US debt (loans the US money) and we have to print our way out of debt = US dollars literally becomes toilet paper.

 

Sad.

 

@Irviding I don't see what's stupid about limiting how out of control our spending can get. I just think that the placement and flexibility of the ceiling should be handled better. It's simply a credit limit; which is a standard that every other agent in the global economy seems to be held to. Why not our government?

Edited January 9, 2013 by canttakemyid

[King Of Monra]

*Meanwhile in Norway*

 

Debt, wtf is that?

Edited January 9, 2013 by King Of Monra

[Ari Gold]

*Meanwhile in Norway*

 

Dept, wtf is that?

You'll find out once demand for Norwegian oil drops.

[nightwalker83]

*Meanwhile in Norway*

 

Dept, wtf is that?

You'll find out once demand for Norwegian oil drops.

He wrote dept not debt.

[sivispacem]

 

Greece, France (centuries back), Spain, Italy, and the several other examples of corporations just as large as countries failing from doing the same thing.

Actually, the recent issues with Greece, Italy and Spain aren't due to their deficits, they're due to lack of economic productivity. Very different things. It's possible to run a huge deficit and remain economically productive. The fact they have low economic productivity and high deficits makes borrowing expensive. Nations with high economic productivity and high deficits tend to keep borrowing costs low regardless of how many percent above GDP the deficit is.

 

 

Japan has tall shiny buildings and advanced technology, but don't let that fool you.  Growth has significantly slowed there.

Again, this relates directly to economic productivity. Through the 1970s and 1980s Japan was running a deficit of more than 200% whilst being an absolute economic powerhouse. It's competition in the high-value, high-skill technology sector in other areas of Asia which have reduced their economic productivity.

 

 

No matter how you spin it.  It's a basic principle that an economic agent can't continue to spend on credit (somebody else's money) while their creditworthiness has a declining outlook.

Logically speaking, sure. But the borrowing time-frames are so long for nation states, particularly those who can borrow at low comparative rates, that this is barely if at all applicable. Some examples, if you will. More than 15 US states have defaulted on debts in the last 100 or so years. Angola defaulted in 2002, but has one of the fastest growing economies in the world ten years later and no signs of it having actually caused any economic damage. Gabon is pretty much the most economically active, and certainly one of the richest (in terms of GDP per capita) nations in sub-Saharan Africa, but defaulted in 2005. Brazil has defaulted on sovereign debts no less than 12 times in the last 100 years, but still maintains a strong and rapidly growing economy. The US itself has defaulted twice in the last hundred years, but both of these defaults have been accompanies by periods of rapid post-default economic expansion. West Germany defaulted in 1948, but by 1951 was the fastest growing, most productive and effectively strongest economy in Europe.

 

There's absolutely no evidence of a parallel between economically strong nations with decent productivity levels defaulting on sovereign debts and any loss in economic performance, living standards or quality of life amongst the population.

 

 

 

Look at it this way- are the debt repayments the US currently makes on it's obligations manageable? Yes. Then the issue does not exist.

[Triple Vacuum Seal]

 

Greece, France (centuries back), Spain, Italy, and the several other examples of corporations just as large as countries failing from doing the same thing.

Actually, the recent issues with Greece, Italy and Spain aren't due to their deficits, they're due to lack of economic productivity. Very different things. It's possible to run a huge deficit and remain economically productive. The fact they have low economic productivity and high deficits makes borrowing expensive. Nations with high economic productivity and high deficits tend to keep borrowing costs low regardless of how many percent above GDP the deficit is.

 

 

Japan has tall shiny buildings and advanced technology, but don't let that fool you.  Growth has significantly slowed there.

Again, this relates directly to economic productivity. Through the 1970s and 1980s Japan was running a deficit of more than 200% whilst being an absolute economic powerhouse. It's competition in the high-value, high-skill technology sector in other areas of Asia which have reduced their economic productivity.

 

 

No matter how you spin it.  It's a basic principle that an economic agent can't continue to spend on credit (somebody else's money) while their creditworthiness has a declining outlook.

Logically speaking, sure. But the borrowing time-frames are so long for nation states, particularly those who can borrow at low comparative rates, that this is barely if at all applicable. Some examples, if you will. More than 15 US states have defaulted on debts in the last 100 or so years. Angola defaulted in 2002, but has one of the fastest growing economies in the world ten years later and no signs of it having actually caused any economic damage. Gabon is pretty much the most economically active, and certainly one of the richest (in terms of GDP per capita) nations in sub-Saharan Africa, but defaulted in 2005. Brazil has defaulted on sovereign debts no less than 12 times in the last 100 years, but still maintains a strong and rapidly growing economy. The US itself has defaulted twice in the last hundred years, but both of these defaults have been accompanies by periods of rapid post-default economic expansion. West Germany defaulted in 1948, but by 1951 was the fastest growing, most productive and effectively strongest economy in Europe.

 

There's absolutely no evidence of a parallel between economically strong nations with decent productivity levels defaulting on sovereign debts and any loss in economic performance, living standards or quality of life amongst the population.

 

 

 

Look at it this way- are the debt repayments the US currently makes on it's obligations manageable? Yes. Then the issue does not exist.

- Debt is the most obvious and significant reason for Greece's economic crisis. Their productivity has slowed because of their debt and the contractionary forces of dealing with it that I pointed out in my previous posts. Productivity and solvency are entirely different concepts. Our productivity here in the states won't carry us past this issue.

 

 

- Exactly. They were running massive deficits in the 70s and 80s to fuel the overconfidence in their market and it led to economic collapse and the "Lost Decade". The negative effects of poor economic policy are insidious and gradual. That doesn't make them any less of a threat either. You also can't blame the dismal state of Japan's economy (characterized by slowed economic growth and a bubble economy) all on Asian competition. It just doesn't make sense. Investors no longer hold the same confidence in their national economy plain and simple.

 

- US defaulting in the past 100 years. These instances were no where near on the scale of debt we are talking about in this topic. We are talking about trillions of dollars here. In 1979, the US treasury accidentally defaulted on $120 million in obligations and in 1934 $7 billion was defaulted (worsening the depression of course).

 

As long as humans exist, productivity will follow. That's not the issue. The issue isn't really about deficits in general either. The issue is that deficits are the worst possible scenario in the United State's current fiscal condition. You've seem to imply that standards of living are minimally effected. I think otherwise. In 2008, some banks, some auto makers, and a few other companies almost collapsed (some banks actually did) from poor financial standing and it led to a lot of people losing their homes, pensions, savings, general equity, and peace of mind. I think it's safe to say that the standard of living/quality of life would be greatly diminished for everyday Americans if our government ran out of investors to buy our bonds.

Edited January 9, 2013 by canttakemyid

[sivispacem]

1) Disagree. The root cause of Greece's deficit is historically low productivity and lack of economic competitiveness caused by an economy biased heavily in favour of non-productive, non-revenue or revenue neutral economic activity- a bloated and inefficient public sector and relatively small private sector, put simply. Greece has the lowest productivity per capita of any European nation by quite some margin, but its public debt to GDP ratio isn't that different to most other European nations so the reason for less of investor confidence cannot be linked to that alone. If that were the case, then why do the UK and Canada, both of which have debt to GDP ratios of over 100% still have the highest credibility on the borrowing markets? Size of government debt and ability to service it are quite different things.

 

2) Investor confidence is seldom if ever solely related to deficit. If that were the case, then why do nations with huge deficits continue to command excellent borrowing rates whereas numerous nations with comparatively low debt-to-GDP ratios can't? At the end of the day, investors are looking for a return and will put their money where it can be most readily delivered. The additional issue in Japan was (and is) a lack of cross-pollenation, with 96% of Japanese government debt internally held.

 

3) What about my various other examples? Some of these have been potentially catastrophic in theory but have only had very limited real-world impact. I'm not entirely dismissing the role that deficits play in economic crises but to portal them as the primary cause of investor exiles and economic contraction appears to be completely contradictory to all available evidence. If this were the case, why does the UK command an AAA rating despite sluggish growth and a debt of more than 100% GDP?

[crispypistonx8]

It doesn't work that way.

Really? I HAD NO IDEA!

[sivispacem]

It doesn't work that way.

Really? I HAD NO IDEA!

If you don't want people to patronise you, don't say silly things.

[Stephan90]

 

1) Disagree. The root cause of Greece's deficit is historically low productivity and lack of economic competitiveness caused by an economy biased heavily in favour of non-productive, non-revenue or revenue neutral economic activity- a bloated and inefficient public sector and relatively small private sector, put simply. Greece has the lowest productivity per capita of any European nation by quite some margin, but its public debt to GDP ratio isn't that different to most other European nations so the reason for less of investor confidence cannot be linked to that alone. If that were the case, then why do the UK and Canada, both of which have debt to GDP ratios of over 100% still have the highest credibility on the borrowing markets? Size of government debt and ability to service it are quite different things.

 

2) Investor confidence is seldom if ever solely related to deficit. If that were the case, then why do nations with huge deficits continue to command excellent borrowing rates whereas numerous nations with comparatively low debt-to-GDP ratios can't? At the end of the day, investors are looking for a return and will put their money where it can be most readily delivered. The additional issue in Japan was (and is) a lack of cross-pollenation, with 96% of Japanese government debt internally held.

 

3) What about my various other examples? Some of these have been potentially catastrophic in theory but have only had very limited real-world impact. I'm not entirely dismissing the role that deficits play in economic crises but to portal them as the primary cause of investor exiles and economic contraction appears to be completely contradictory to all available evidence. If this were the case, why does the UK command an AAA rating despite sluggish growth and a debt of more than 100% GDP?

And you really think the big rating agencies are omniscient? When the banking sector of Iceland collapsed in 2008, Iceland had an AAA rating fom Moody’s although there were already rumours of problems in 2006.

 

The working methods of the rating agencies are secret. And no one outside knows what they are doing.

[sivispacem]

And you really think the big rating agencies are omniscient?

Please explain where I said or implied that. My point was precisely that- that the fiscal stability of a nation and it's ability to borrow is not based solely, or even largely, on the size of their deficit.

 

Also, Iceland as a nation didn't default.

[Stephan90]

 

And you really think the big rating agencies are omniscient?

Please explain where I said or implied that. My point was precisely that- that the fiscal stability of a nation and it's ability to borrow is not based solely, or even largely, on the size of their deficit.

 

Also, Iceland as a nation didn't default.

"My point was precisely that- that the fiscal stability of a nation and it's ability to borrow is not based solely, or even largely, on the size of their deficit."

 

That's absolutely right. But the point is, I believe that some of the so called "high productive" countries don't deseve AAA and Aaa ratings, because they have enormous foreign trade deficits.

 

This only works as long as there is a constant foreign capital inflow in the same amount.

Edited January 9, 2013 by Stephan123