National Debt

[strk]

check out this link - from the Treasury Dept

http://www.publicdebt.treas.gov/opd/opdpenny.htm

I had no idea the national debt was so high.  Shouldnt the US be paying down this debt?

[NUKE]

Debt not as high as it has been in past. Shouldnt you be worried about banning beards?

[Mickey1992]

Originally posted by NUKE
Debt not as high as it has been in past.

Really?  When has it been higher?

[kappa]

Clearly this is Nuke talking outta his other face...

[miko2d]

strk: I had no idea the national debt was so high.  Shouldnt the US be paying down this debt?

 That number is false.
 First, it does not include the Social Security Administraton fund - which is kept in the form of special government bonds and adds up to several billion more of the debt that will have to be paid.

 If you add them up, you will not even get close to the actual value that US government owes because it would not include the obligations - SSA and Healthcare entitlements which are not expressed in bonds but must be paid anyway.
 In total, it adds up to about $45-55 trillion.

 It is all explained here by David M. Walker, Comptroller General of the United States:
TRUTH AND TRANSPARENCY: THE FEDERAL GOVERNMENT’S FINANCIAL CONDITION AND FISCAL OUTLOOK

 And illuestrated here:
Economist: In the long run we are all broke



 The numbers in the Economist article and in that chart seem too low as US debt is indicates as about 2.5 of GDP rather than 4.5-5.5 times as seems to be general consensus - or have been before Bush signed that prescription drug benefit that adds trillions more - but you get the general idea.

 There are also tens of trillions worth of US currency held around the world which are nothing more - or less - than non-interest bearing obligations of US government.

 Anyway, do not worry about paying the debt. US could not do it even if it wanted. It will default through devaluing the currency just like it did in 1933 and 1973 and gradually all the time since 1913 and leave creditors holding the bag - which will serve them right.

 miko

[Eagler]

debt is good, just ask the credit card companies ...

which country is not in debt?
when was the US not in debt?
why is it so terrible?

[Saurdaukar]

This is getting old fast.

[Ping]

To heck with just forgiving the Iraqi people their debt, I say the world forgives everybody and we get our one and only DO-OVER.

[Frogm4n]

Debt is bad. Better to save money to buy the things you want then spend someone else's cash.

[NUKE]

Originally posted by Mickey1992
Really?  When has it been higher?

Debt in relation to GDP is not as high as it has been in the past.

[miko2d]

Eagler: when was the US not in debt?

 US paid off it's debt twice - during the presidencies of Jefferson and Jackson IIRC.

why is it so terrible?

 It diverts resources from productive use by private sector towards wastefull and harmfull government programs without having to gather a population consensus as it would be necessary in case of taxe increases.

 It creates a burden on people who have no chance to vote on the issues - children and grandchildren. Call it the ultimate taxation without representation.

 It puts US souvereignity at risk because foreign governments may threaten to seriously upset US economy by dumping US obligations. They may loose paper value of the assets they would never have repaid anyway but even if their losses were real, it would be still cheaper for them than to wreck an equivalent devastation to us by launching a nuke at us.
 Just imagine if China stops buying $120 billion a year and even selling their half trillion stash. Even if the other investors do not dump any of US obs in panic, how will US government be able to keep spending? It will either drastically increase interest rates, rase taxes - which will kill economy without increase in revenues, hyperinflate or do something equally stupid.

 The inflow of goods paid for by state debt - and those are mostly consumer goods, not capital investments - destroys US production that has foreign competition and subcidises the rest thus making is bloated and inefficient, thus leaving US with a seriously unbalanced and inafficient capital structure and greatly dependent on foreign goodwill.

 The state debt crowds out private investment and capital creation and thus reduces growth or even causes capital decumulation.

 The debt gets monetised by Federal Reserve which further dissuades saving and investing which reduces growth.

 The debt that cannot be paid represents a time bomb in the form of the future retired beneficiaries who were dissuaded from private saving for retirement by government guarantees but cannot possibly be paid off.

 Those just off the top of my head.


NUKE: Debt in relation to GDP is not as high as it has been in the past.

 By the end of a real devastating wars - and promptly reduced afterwards. Now we are at peacetime and supposedely at the peak of our economic efficiency and we cannot even stay even.
 Any growth of US economy is caused not by non-existant US savings and investment but by foreign savings and investments. If the trends persist, in a few years foreigners may not only be funding our growth but the current consumption.

 A country that relies on inflow of donated foreign wealth to keep up it's capital and standard of living is hardly in a good shape economically.
 One can cry all he wants about how well we live - forgetting that we get at least a quarter of our consumption from borrowing and that foreigners aquire more and more of our capital and it's future revenue stream.

 miko

[Eagler]

so we have been in debt since 1837?

what's the big deal now?

[miko2d]

Eagler: so we have been in debt since 1837?
what's the big deal now?

 Not a big deal now. Dollar only lost 30% this year and it did not even translate into corresponding increase in import prices yet.  It will be a big deal in 10-15 years when you and the baby-boomer generation will try to cash in their retirement checks.

 At this level of borrowing/deficit  - ~$500 billion the dollar is droping. Just imagine that a $1 triillion social security surplus turns in to $1 trillion deficit. Do you think we will be able to run $1.5 trillion deficit every year without dollar dropping?
 Of do you think we will be able to just raise $1 trillion extra taxes every year from a smaller number of workers per retiree? And not totally kill economy by doing that?

 The only solution would be to let dollar devalue and thus negate the obligations to the retirees - which will also wipe out the private pension savings that are mostly kept in dollar-denominated state and private bonds.

 miko