NationStates Jolt Archive

Yes the united states is in debt and we will always be in debt, until we have conquered the world or destoyed it. No matter how much money the United states owes any particular country, that country isn't going to do anything about it. What can they do? Go to war with the most powerful country? I think not, they will be happy because they think we will pay them back. We have many nukes, and I think we need more that what we have because being able to destroy the world 20 times over isn't enough, LOL.

No one's forrced to loan us money. Most that do benefit from it..

Yes the united states is in debt and we will always be in debt, until we have conquered the world or destoyed it. No matter how much money the United states owes any particular country, that country isn't going to do anything about it. What can they do? Go to war with the most powerful country? I think not, they will be happy because they think we will pay them back. We have many nukes, and I think we need more that what we have because being able to destroy the world 20 times over isn't enough, LOL.
14th Amendment. We have to honor all debts we take. It's in the Constitution.

the constitution also said all people were free. Imagine that, a group of well-to-do white slave owners saying all people are free. Are you serious by saying that because its in the constitution that it means we must obey it.

You dont always borrow from other countries, you borrow from banks and citizens throught government bonds

the constitution also said all people were free. Imagine that, a group of well-to-do white slave owners saying all people are free. Are you serious by saying that because its in the constitution that it means we must obey it.
Um...yes.


You know, that's the entire reason we have it...It's only the basis for all law in the land.

Debt is all in the eye of the beholder... The United States is indebted from time to time to many different countries, but it just depends what numbers you are looking at, for example: The trade defecit means nothing at all...Zip, Zilch, nada. Imagine, we have a trade deficit with the country of Jamaica, which produces 97% of the worlds Aluminum Ore. Does that mean they are superior to us economically, or that we are somehow endebted to them? No. It means Americans have enough money to buy imported goods, which is a sign of higher quality of life. Thus, the fact that Jamaicans don't have any money to buy American goods results in a trade deficit to them, which in turn means nothing. Therefore, it all depends on which type of debt you are speaking about..

the constitution also said all people were free. Imagine that, a group of well-to-do white slave owners saying all people are free. Are you serious by saying that because its in the constitution that it means we must obey it.

Blacks weren't classified as people, so we followed the Constitution back then too. The Declaration of Independence states the God created all men equal, not the Constitution.

Yes the united states is in debt and we will always be in debt, until we have conquered the world or destoyed it. No matter how much money the United states owes any particular country, that country isn't going to do anything about it. What can they do? Go to war with the most powerful country? I think not, they will be happy because they think we will pay them back. We have many nukes, and I think we need more that what we have because being able to destroy the world 20 times over isn't enough, LOL.

Any nation that used nukes as a reason to not pay its debts would have been destroyed a long time ago.

Capitalism > War machine

You do know how the system of international lending and borrowing of money by states works, right?
You are paying the money back, people! It's just that your Government keeps borrowing new money from others moreso than paying its old debts. But every individual or organisation always gets its money back. And in time, too.
If it doesn't, America's credit rating goes down, and nobody will want to lend money to the US anymore. And that's very bad indeed.
And those investors who give money to the Government don't give a shit about how many nukes America has. They are in the position of power (collectively and to some extent individually, as they have the choice). Bush wants some money, they have that money, and then they lend it to him. And over the next years, Bush pays it back with interest.

No reason to become all nationalistic here... :D

You do know how the system of international lending and borrowing of money by states works, right?
You are paying the money back, people! It's just that your Government keeps borrowing new money from others moreso than paying its old debts. But every individual or organisation always gets its money back. And in time, too.
If it doesn't, America's credit rating goes down, and nobody will want to lend money to the US anymore. And that's very bad indeed.
And those investors who give money to the Government don't give a shit about how many nukes America has. They are in the position of power (collectively and to some extent individually, as they have the choice). Bush wants some money, they have that money, and then they lend it to him. And over the next years, Bush pays it back with interest.

No reason to become all nationalistic here... :D

I'm confused about this whole national debt thing. I know that the U.S. has a national debt and I know that other countries have debts to the U.S. so my question is who owes who the most? And is there a single country in the world that isn't in debt to someone else?

I'm confused about this whole national debt thing. I know that the U.S. has a national debt and I know that other countries have debts to the U.S. so my question is who owes who the most? And is there a single country in the world that isn't in debt to someone else?

Well, everybody owes to everybody really.
Often, borrowing and lending works through buying Government Bonds (ie a piece of paper that says IOU until 2015 and an interest is paid as well)
So I could go and buy an American Government Bond, and the USA would have a national debt with me.
Often it's countries that buy Government Bonds rather than people, but in any case no one forces them to, so it depends on whether they believe they're gonna get the money back or not. So if the US chooses not to pay its debts, no one is gonna buy their bonds anymore, and the Government runs out of money mighty quick. And all kinds of things could happen in the Economy as well, with demand for bonds falling greatly, and interest rate going up.
I don't think there is a country that doesn't have some kind of debt. Even when there is a Government Budget Surplus, that money often goes into paying back previous debts. But maybe North Korea. They might only have inofficial debts with the Chinese.

BUT I'm no expert. I'm a second year economics student, and there may be details wrong with what I'm saying.

Well, everybody owes to everybody really.
Often, borrowing and lending works through buying Government Bonds (ie a piece of paper that says IOU until 2015 and an interest is paid as well)
So I could go and buy an American Government Bond, and the USA would have a national debt with me.
Often it's countries that buy Government Bonds rather than people, but in any case no one forces them to, so it depends on whether they believe they're gonna get the money back or not. So if the US chooses not to pay its debts, no one is gonna buy their bonds anymore, and the Government runs out of money mighty quick. And all kinds of things could happen in the Economy as well, with demand for bonds falling greatly, and interest rate going up.
I don't think there is a country that doesn't have some kind of debt. Even when there is a Government Budget Surplus, that money often goes into paying back previous debts. But maybe North Korea. They might only have inofficial debts with the Chinese.

BUT I'm no expert. I'm a second year economics student, and there may be details wrong with what I'm saying.

So my motivation for buying a government bond is that the government will pay me back that money plus interest and the government's motivation for selling the bond is that it needs immediate cash?

So my motivation for buying a government bond is that the government will pay me back that money plus interest and the government's motivation for selling the bond is that it needs immediate cash?

Exactly.

Well, everybody owes to everybody really.
Often, borrowing and lending works through buying Government Bonds (ie a piece of paper that says IOU until 2015 and an interest is paid as well)
So I could go and buy an American Government Bond, and the USA would have a national debt with me.
Often it's countries that buy Government Bonds rather than people, but in any case no one forces them to, so it depends on whether they believe they're gonna get the money back or not. So if the US chooses not to pay its debts, no one is gonna buy their bonds anymore, and the Government runs out of money mighty quick. And all kinds of things could happen in the Economy as well, with demand for bonds falling greatly, and interest rate going up.
I don't think there is a country that doesn't have some kind of debt. Even when there is a Government Budget Surplus, that money often goes into paying back previous debts. But maybe North Korea. They might only have inofficial debts with the Chinese.

BUT I'm no expert. I'm a second year economics student, and there may be details wrong with what I'm saying.


Lichenstein - offhand - has no debt. Some of the petro-dollar economies used be in the same position. I am not sure how they stand now.

Lichenstein - offhand - has no debt. Some of the petro-dollar economies used be in the same position. I am not sure how they stand now.

What is a petro-dollar?

What is a petro-dollar?

Countries that export pretty much only oil tend to accumulate huge reserves of US dollars, because oil is traded internationally on a dollar basis. These huge reserves of US currency are called petro-dollars. I don't know why. The term has fallen out of vogue in the last fifteen years or so, probably because oil was unreasonably cheap in the 1990s.

What is a petro-dollar?


petrodollar

A petrodollar is a dollar earned by a country through the sale of oil. The term was coined by Ibrahim Oweiss, a professor of economics at Georgetown University, in 1973. Oweiss felt there was a need for a word to describe the situation which was occurring in the OPEC countries, where it was entirely the sale of crude oil which allowed these nations to prosper economically and to invest in the economies of the nations which purchased their oil.

In the West, the word has been used to reference the large financial leverage the OPEC countries held until the turn of the century, and has been seen by some Arab politicians as offensive because it stereotyped OPEC producers. Considerable concern was being expressed at the time, particularly by the American media, that the American economy was in danger of being held hostage by OPEC interests.


so basically the OPEC coountries

petrodollar

A petrodollar is a dollar earned by a country through the sale of oil. The term was coined by Ibrahim Oweiss, a professor of economics at Georgetown University, in 1973. Oweiss felt there was a need for a word to describe the situation which was occurring in the OPEC countries, where it was entirely the sale of crude oil which allowed these nations to prosper economically and to invest in the economies of the nations which purchased their oil.

In the West, the word has been used to reference the large financial leverage the OPEC countries held until the turn of the century, and has been seen by some Arab politicians as offensive because it stereotyped OPEC producers. Considerable concern was being expressed at the time, particularly by the American media, that the American economy was in danger of being held hostage by OPEC interests.


so basically the OPEC coountries


Yah, that's an even better answer.

Countries that export pretty much only oil tend to accumulate huge reserves of US dollars, because oil is traded internationally on a dollar basis. These huge reserves of US currency are called petro-dollars. I don't know why. The term has fallen out of vogue in the last fifteen years or so, probably because oil was unreasonably cheap in the 1990s.

So the U.S. debt is owed to countries with huge reserves of U.S. currency?

So the U.S. debt is owed to countries with huge reserves of U.S. currency?

No, its held by whoever owns US treasury Bonds.

14th Amendment. We have to honor all debts we take. It's in the Constitution.
psst. they honor them buy selling more bonds.

No, its held by whoever owns US treasury Bonds.

So when they talk about the national debt are they talking about money owed to American citizens and companies as well other countries?

Debt is all in the eye of the beholder... The United States is indebted from time to time to many different countries, but it just depends what numbers you are looking at, for example: The trade defecit means nothing at all...Zip, Zilch, nada. Imagine, we have a trade deficit with the country of Jamaica, which produces 97% of the worlds Aluminum Ore. Does that mean they are superior to us economically, or that we are somehow endebted to them? No. It means Americans have enough money to buy imported goods, which is a sign of higher quality of life. Thus, the fact that Jamaicans don't have any money to buy American goods results in a trade deficit to them, which in turn means nothing. Therefore, it all depends on which type of debt you are speaking about..
debt doesn't mean trade deficit. trade deficit is when you import more than you export. debt (or just plain deficit is how much the debt grows every year) is when the government sells bonds. then in a certain number of years depending on the bond we pay them back with a certain interest based on the bond.

So when they talk about the national debt are they talking about money owed to American citizens and companies as well other countries?

Yah, anyone who has a bond. (Or a mutual fund with US bond holdings &c.)

Yah, anyone who has a bond. (Or a mutual fund with US bond holdings &c.)
And right now, I believe the largest non-country holder of US bonds is the Social Security system. That's why Bush's little statement that the Social Security trust fund didn't exist was so dreadfully inaccurate--those bonds are backed by the full faith and credit of the US government, as required by the Constitution.

I'm confused about this whole national debt thing. I know that the U.S. has a national debt and I know that other countries have debts to the U.S. so my question is who owes who the most? And is there a single country in the world that isn't in debt to someone else?
China supports a significant amount of our debt. they do this so that you and i have money to buy shitty little toys and all of our textiles. they will overtake us in about 50 years as the world super power and maybe in a hundred they will stop supporting our debt.
this is basically how it works:
people buy bonds (loans the government takes out) from the government in such and such years they pay those people back with such and such interest. why do they do this? because they know we'll pay them back. why can we pay them back? because people keep buying bonds. isnt that circular logic? yes, but it works. but can it work forever? no, within a century America will no longer have the economic strength it once did and people will stop buying bonds from us because they have better places to put their money (investsments, other countries bonds, etc.).

Well, everybody owes to everybody really.
Often, borrowing and lending works through buying Government Bonds (ie a piece of paper that says IOU until 2015 and an interest is paid as well)
So I could go and buy an American Government Bond, and the USA would have a national debt with me.
Often it's countries that buy Government Bonds rather than people, but in any case no one forces them to, so it depends on whether they believe they're gonna get the money back or not. So if the US chooses not to pay its debts, no one is gonna buy their bonds anymore, and the Government runs out of money mighty quick. And all kinds of things could happen in the Economy as well, with demand for bonds falling greatly, and interest rate going up.
I don't think there is a country that doesn't have some kind of debt. Even when there is a Government Budget Surplus, that money often goes into paying back previous debts. But maybe North Korea. They might only have inofficial debts with the Chinese.

BUT I'm no expert. I'm a second year economics student, and there may be details wrong with what I'm saying.
countries still have debts because its not economically viable to get rid of them in practice (ideological theory aside). why pay off your debt if your China and you have the strongest work force on the planet and everyone depends on you for their clothes and shitty toys?

Countries that export pretty much only oil tend to accumulate huge reserves of US dollars, because oil is traded internationally on a dollar basis. These huge reserves of US currency are called petro-dollars. I don't know why. The term has fallen out of vogue in the last fifteen years or so, probably because oil was unreasonably cheap in the 1990s.
i really dont understand why they still do that.

And right now, I believe the largest non-country holder of US bonds is the Social Security system. That's why Bush's little statement that the Social Security trust fund didn't exist was so dreadfully inaccurate--those bonds are backed by the full faith and credit of the US government, as required by the Constitution.

No, those aren't real bonds.

Yah, anyone who has a bond. (Or a mutual fund with US bond holdings &c.)

Earlier I think you mentioned that Lichenstein does not have a national debt. Do you know what their standard of living is like and how they manage to stay debt free?

i really dont understand why they still do that.

Do what?

So when they talk about the national debt are they talking about money owed to American citizens and companies as well other countries?
only bonds (also called treasuries)

Earlier I think you mentioned that Lichenstein does not have a national debt. Do you know what their standard of living is like and how they manage to stay debt free?

Very high.

They do it by being very tiny, so they don't have much to spend government money on.

Yah, anyone who has a bond. (Or a mutual fund with US bond holdings &c.)
no he MEANT the loans taken out by people from banks and companies. only the bonds count towards the national debt.
P.S. does anyone know where that national debt counter thing is. i remember seeing it once. you can actually watch it calculate all the interest and such in real time, its pretty cool and kinda scary.

no he MEANT the loans taken out by people from banks and companies. only the bonds count towards the national debt.
P.S. does anyone know where that national debt counter thing is. i remember seeing it once. you can actually watch it calculate all the interest and such in real time, its pretty cool and kinda scary.

Oh, I thought he was asking if bonds held by domestic entities counted towards the national debt.

No, those aren't real bonds.
meh. they are almost always counted when people talk about the deficit and the surplus.

Do what?
use a shitty currency like the dollar for selling oil.

No, those aren't real bonds.
Oh yeah they are, at least according to the Social Security Administration (http://www.ssa.gov/OACT/ProgData/fundFAQ.html#n7). As stated in the answer to "What happens to the taxes that go into the trust funds?", most of the money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the current increase in the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.

Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

Very high.

They do it by being very tiny, so they don't have much to spend government money on.

Is Lichenstein the correct spelling? I tried looking up Lichenstein and Lichtenstein on google and all I got were Castle Lichtenstein and Roy Lichtenstein.

And right now, I believe the largest non-country holder of US bonds is the Social Security system. That's why Bush's little statement that the Social Security trust fund didn't exist was so dreadfully inaccurate--those bonds are backed by the full faith and credit of the US government, as required by the Constitution.
pretty much true. A little over 40% of the US National Debt is owned by the US government, and maybe 23% is held outside the US by either foreign (to the US) governments or foreign companies or foreign individuals.

As for the trust fund actually exsting, well this is technically true, but if the US government wised to, it could repay the trust fund and assign the money paid to Social Security to the Treasury to pay bonds to the Social Security trust fund, thus wiping out a large chunk of the US national debt, and at the same time bankrupting social security. While the US government is obligated to pay the bonds, it is not obligated to spend the revenues from that repayment on social security.

Is Lichenstein the correct spelling? I tried looking up Lichenstein and Lichtenstein on google and all I got were Castle Lichtenstein and Roy Lichtenstein.Lichtenstein (with the "t") is the prefered spelling and will probably show up on the 2nd or 3rd page of a google search. try "nation lichtenstein" maybe

use a shitty currency like the dollar for selling oil.

Probably because it is the world's reserve currency, and gives you easy access to the largest capital markets. Also probably because the US is the worlds largest consumer of oil.

I suppose eventually - if china doesn't implode, go on renationalization kick, rediscover marxism &c. and oil is still a valuable commodity by then - they will swap over to Yuan.

I mean they could swap to Euros, but that would be shooting themselves in the foot considering their current holdings of US debt and equities.

Umm... for someone to borrow money, there has to be someone to lend them money, so it has to add up in the end. National debts are a little confusing, but there are plenty of creditor nations. That is nations that lend more than they borrow. Japan's government has a huge debt, but since the Japanese are great savers they fund their governments entire debt and part of the United States and other countries. (But the Japanese are saving a smaller portion of their GDP as their population ages and they continue to have economic difficulty.)

The U.S. federal debt is bad for the U.S. Every dollar than is invested in U.S. treasuries is a dollar that isn't invested in the economy. The less investment you have, the less productive your economy will be in the future.

pretty much true. A little over 40% of the US National Debt is owned by the US government, and maybe 23% is held outside the US by either foreign (to the US) governments or foreign companies or foreign individuals.

As for the trust fund actually exsting, well this is technically true, but if the US government wised to, it could repay the trust fund and assign the money paid to Social Security to the Treasury to pay bonds to the Social Security trust fund, thus wiping out a large chunk of the US national debt, and at the same time bankrupting social security. While the US government is obligated to pay the bonds, it is not obligated to spend the revenues from that repayment on social security.
libertarian?

Lichtenstein (with the "t") is the prefered spelling and will probably show up on the 2nd or 3rd page of a google search. try "nation lichtenstein" maybe

The Principality of Liechtenstein located between Switzerland and Austria. Blink while you're driving by and you might miss it.

in theory. unfortunately paying off the entire debt isnt exactly the easiest thing to do, nor is it economically viable. true, Clinton had planned it all out and Gore would've followed through and it would've taken no more than 10 years without any horrible luck, but with Bush in office or any Republican that i've seen, dont hold your breath.

pretty much true. A little over 40% of the US National Debt is owned by the US government, and maybe 23% is held outside the US by either foreign (to the US) governments or foreign companies or foreign individuals.

As for the trust fund actually exsting, well this is technically true, but if the US government wised to, it could repay the trust fund and assign the money paid to Social Security to the Treasury to pay bonds to the Social Security trust fund, thus wiping out a large chunk of the US national debt, and at the same time bankrupting social security. While the US government is obligated to pay the bonds, it is not obligated to spend the revenues from that repayment on social security.

I am not convinced about the Bonds issued to the trust fund. To begin with, no-one else can purchase them. Also, I don't see how an entity can issue a bond to itself. Really, they are just sort of iou's. (Edit: I O Myselfs actually).

The Principality of Liechtenstein located between Switzerland and Austria. Blink while you're driving by and you might miss it.
Liechtenstien too. Small country, and English has always had a tendency to garble spellings of words/names from other languages. Liechtenstein is the way the CIA world fact book has it, but Lichtenstein is the more common (prefered) spelling, at least in the US and the UK.

Where does the national debt come from. Well:

Budget:
revenues: $1.862 trillion
expenditures: $2.338 trillion, including capital expenditures of NA (2004 est.)

When you spend 500 million more than you have coming in you have to cover this somehow.
The US does this at the moment by issuing Bonds, which are bought by private investors or foreign governments. While there is confidence in the ability of the US to continue paying these bonds, and while the interest offered is sufficient to attract investment, there is no great problem.

However:-
Confidence in a countries economy depends upon many factors, but amongst these is the balance of trade, the currency strength, the strength of the accounting mechanisms, the worlds opinion in general. All of these factors have been badly hit in the last few years as far as the US is concerned. Another factor is the state of the manufacuring industry in the country, which in the USA is in a bad way at the moment.

What can be done?

Cut spending so no further borrowing is required:
or
Increase tax revenues so no further borrowing is required.

A healthy economy does not normally have its national debt above 60% of the GDP. For the USA at the moment it is at 65%. Unless the government acts soon to lower this ratio there is likely to be serious economic consequences. (The IMF and the World Bank have already issued warnings to the USA treasury.)

Time to bite the bullet in the USA, what do you want? More taxes or less spending?

I am not convinced about the Bonds issued to the trust fund. To begin with, no-one else can purchase them. Also, I don't see how an entity can issue a bond to itself. Really, they are just sort of iou's.Well they have an existance, even though for the most part it is only as electons in computers. More of an IOI than an IOU though, a little note the government writes to itself and puts in it's wallet to remind itself how much of the rent money it spent on drinks at the bar. But the government isn't commited to spending the money on rent when it repays the IOIs, it can instead say screw the rent and spend the money on a few more nights in the bar. It's not that something called "the trust fund" doesn't exist, it is that it isn't a trust fund.

Time to bite the bullet in the USA, what do you want? More taxes or less spending?Less spending.

And the US debt/gdp ratio is well within acceptable levels (under 40%) if government debt owned by the US government is excluded. Not to say that the US government owned component of the US national debt is not troublesome, but it is so large a chunk of the US national debt that it distorts comparisons.

Less spending.

And the US debt/gdp ratio is well within acceptable levels (under 40%) if government debt owned by the US government is excluded. Not to say that the US government owned component of the US national debt is not troublesome, but it is so large a chunk of the US national debt that it distorts comparisons.
So what do you cut? Social Security, Medicare or national defense? Everything else is just chump change, you know.

Less spending.

And the US debt/gdp ratio is well within acceptable levels (under 40%) if government debt owned by the US government is excluded. Not to say that the US government owned component of the US national debt is not troublesome, but it is so large a chunk of the US national debt that it distorts comparisons.

Lets see now. We measure the health of an economy by looking at its debt to GDP ratio, but we should exclude a portion of this debt because it happens to be owned by the debtor. I think not.

The point is that the debt owned by the government needs to be repaid, with interest by the government to itself. Now this is the "trust fund" situation. The US government does not have the funds to repay itself, so the debt is genuine. (It has just been pushed up the time line somewhat, by borrowing from SS.) Very technically, the debt is not owned by the government it is owned by the contributors to the SS scheme.

US Debt = 65% of GDP however you want to play it.

Here is an article from today about the impact of the US budget deficiet.

http://www.nzherald.co.nz/index.cfm?c_id=3&ObjectID=10128092

"The report says the US current account deficit is likely to stay near its recent high and warns there are limits to global demand for US assets. "

The real danger in the debt, in my eyes, isn't that the US will fail to pay back the debt, but that the US will fail to attract enough money to cover our budget shortfall (the amount the government pays over what it takes in taxes). I forget the exact number, but the United States currently needs about $2.7 billion each day to cover this difference.

Most of this money is supplied by East Asian central (government) banks, especially China and Japan. Japan's central bank holds over $800 billion in US bonds now, and China holds well over $600 billion. Taiwan and South Korea each hold hundreds of billions more. Those countries are willing to buy US bonds for now, because it helps keep their own currency cheaper relative to the US dollar, which helps their exports. However, holding $800 billion is a significant risk, and there is a danger that these countries could stop buying US bonds to limit their exposure to risk. This danger is heightened by current US dollar weakness. Since US bonds pay out in dollars, if the dollar is weakened over the term of the bond, you are payed at the end in weaker dollars than the ones you used to buy the bonds. This makes it harder for the East Asian central banks to hold massive amounts of US bonds.

If US bonds do become less appealing to foreign investors, the US would have no choice but to increase the ammount of interest that the bonds pay in an effort to attract investors back again. Increased interest rates on government bonds would lead to increase interest rates on all loans in the US, which ultimately would make loans more expensive and slow down the economy. It would also hurt the US government, because the interest on our debt would be that much more expensive. The US government's ability to control interest rates would be severly limited. It could bring the US back to the "stagflation" of the 1970's.

The worst-case scenario would be if the East Asian central bankers did not simply stop buying enough US bonds, but actually began selling the bonds they already had. If a central bank is willing to accept less yen/yuan/won etc. for a US bond that pays the same amount of USD as before, the USD becomes that much cheaper relative to the foreign currency. If one of the central banks starts selling their US government bond reserves, the others would have little choice but to sell their reserves as well, or end up holding bonds worth far less than they paid for them. This could lead to a "dollar crash", were the USD becomes worthless overnight. The US would end up in the same boat as Argentia a few years ago.

Sorry for the long post, but this is a topic that interests me. Considering the grave impact this could have on the US and world economies, it's suprising how little attention is payed to it.

Sounds like someone's been reading their Krugman. Good work.

Why do conservatives keep cutting welfare in their ineffectual attempts to balance the budget? Isn't it a miniscule amount of the governments expediture? Unless, of couse, you count coporate welfare.

Wait, are we talking about the U.S. national debt or the deficit?

Lets see now. We measure the health of an economy by looking at its debt to GDP ratio, but we should exclude a portion of this debt because it happens to be owned by the debtor. I think not.

The point is that the debt owned by the government needs to be repaid, with interest by the government to itself. Now this is the "trust fund" situation. The US government does not have the funds to repay itself, so the debt is genuine. (It has just been pushed up the time line somewhat, by borrowing from SS.) Very technically, the debt is not owned by the government it is owned by the contributors to the SS scheme.

US Debt = 65% of GDP however you want to play it.Actually we don't count it if it is owed to the same entitiy it is owed by. It is considered both an assest and a liability, a wash if you will. If we were to consider debt owed by a government to that same government then Germany (as an example) would have a debt/GDP ratio of about 70%, worse than the US instead of the commonly reported 40.2%. All the IMF figures that I have seen for the US debt/GDP ration put the percentage at under 40%, so for the most part the IMF does not count debt owed to the government by the government as a debt.

Mind you, it is not to say that the social security debt is not troublesome, or even that the under 40% debt/GDP ratio sn't, but that it is such a large chunk of the US national debt that it distorts comparisons. Likewise Japan has a reported debt/gdp ratio of 70%, but if government debt were included it would jump to 140%, such a large percentage of the total debt is government debt that it distorts comparisons.

So what do you cut? Social Security, Medicare or national defense? Everything else is just chump change, you know.
all of the above and lotsa the chump change. BTW you forgot the other one of the big 4, employment security (welfare). as for the chump change, you know the old line, a billion here, a billion there, and pretty soon you're talking real money. Does the federal government really need to spend all that money to expand the national Packard museum, I mean honestly how long has the Packard company been out of business?

A healthy economy does not normally have its national debt above 60% of the GDP. For the USA at the moment it is at 65%. Unless the government acts soon to lower this ratio there is likely to be serious economic consequences. (The IMF and the World Bank have already issued warnings to the USA treasury.)

Yep...

The problem being that most of your budget expense will be used to pay your debt interest. Im not sure of the number, but i think here in Canada about 25% of our budget goes into interest payment. Since most of the debt have been contracted in the 80's, it is a pain in the ass for the younger generation who have to pay without many benefit from it.

all of the above and lotsa the chump change. BTW you forgot the other one of the big 4, employment security (welfare). as for the chump change, you know the old line, a billion here, a billion there, and pretty soon you're talking real money. Does the federal government really need to spend all that money to expand the national Packard museum, I mean honestly how long has the Packard company been out of business?
Okay, now for the real question--politically, what could you realistically cut? I mean, it's easy to say that you'd cut all of the above and then some, but what could you get passed?

Okay, now for the real question--politically, what could you realistically cut? I mean, it's easy to say that you'd cut all of the above and then some, but what could you get passed?Well since I would doubtless be able to sell myself as a conservative, I'd nationalize healthcare with a low salery level and rationed care, cutting medicare expenses. I'd index SS benefits to assets, if you can afford to suport yourself you're not getting a check from Uncle Sam regardless of how much you paid into SS over the years. I'd cut a good 1/4th of the transportation budget if I could, that would be the toughest sell actually as congresspeople worked hard to get those millions for the Packard Museum expansion. Military would be tough, but it would have to be the navy and air forces which took the biggest cuts, long term a bad idea for the ability of the US to project military power but it would force the EU to spend money on that ( cease developement funding immediately and make curent production commitments final ones for new planes and subs and ships, no immediate savings but with attrition losses long term savings extreme as well as personel attrition). Completely defund HUD and force existing HUD projects to support themselves through sales and revenue from rents, HUD's sitting on some expensive real estate and is so inefficent at its function that it is just better to let it whither adnd die.

If you make cler that you are not going to accept anyone's pork you could probably get a good 2 budgets without pork, a goodly number of congresspeople are stuck taking pork because they would feel they were wronging thier consituants by letting other states have pork. Of course pork would creep in after a while, but you could cut a good chunk out.

Well since I would doubtless be able to sell myself as a conservative, I'd nationalize healthcare with a low salery level and rationed care, cutting medicare expenses. I'd index SS benefits to assets, if you can afford to suport yourself you're not getting a check from Uncle Sam regardless of how much you paid into SS over the years. I'd cut a good 1/4th of the transportation budget if I could, that would be the toughest sell actually as congresspeople worked hard to get those millions for the Packard Museum expansion. Military would be tough, but it would have to be the navy and air forces which took the biggest cuts, long term a bad idea for the ability of the US to project military power but it would force the EU to spend money on that ( cease developement funding immediately and make curent production commitments final ones for new planes and subs and ships, no immediate savings but with attrition losses long term savings extreme as well as personel attrition). Completely defund HUD and force existing HUD projects to support themselves through sales and revenue from rents, HUD's sitting on some expensive real estate and is so inefficent at its function that it is just better to let it whither adnd die.

If you make cler that you are not going to accept anyone's pork you could probably get a good 2 budgets without pork, a goodly number of congresspeople are stuck taking pork because they would feel they were wronging thier consituants by letting other states have pork. Of course pork would creep in after a while, but you could cut a good chunk out.

I don't know much about economics, but I have heard that the U.S. is spending billions of dollars in military aid to other countries. Would cutting back on this help the national debt?

Yes the united states is in debt and we will always be in debt, until we have conquered the world or destoyed it. No matter how much money the United states owes any particular country, that country isn't going to do anything about it. What can they do? Go to war with the most powerful country? I think not, they will be happy because they think we will pay them back. We have many nukes, and I think we need more that what we have because being able to destroy the world 20 times over isn't enough, LOL.

The debt is mostly what the government owes the bond-holders... Not what we owe to other states.

What people who moan about the US debt don't understand is that the dollar is GOLD. As long as the dollar is accepted by the entire world as a universal currency the US govt can just keep printing them and shoving it in people's hands, mouths and arses and the debt will be backed.

What people who moan about the US debt don't understand is that the dollar is GOLD. As long as the dollar is accepted by the entire world as a universal currency the US gov. can just keep printing them and shoving it in people's hands, mouths and arses and the debt will be backed.

Hello stagflation.

Dollars can only be printed and issued if there are the reserves to support their value. The dollar is only accepted currently due to oil being sold in dollars (the other aspect of the petrodollar, one that was not mentioned earlier). Even with this, the dollar is currently losing value rather rapidly.


Squi-
The CIA World Factbook, a US source, cites the USA National debt as 65% of the GDP. Where are you getting your figure of 40% from?

I don't know much about this, and have learned a fair bit from reading this thread, so thanks very much.

Is national debt necessary? If governments spend only within their means, then they don't have to pay back interest to the holders of bonds. In the long run, doesn't the lack of short-term overspending mean that the government will have more money to spend?

We don't owe a debt to nations. Contrary to popular belief the US National Debt isn't from taking loans out from other nations. It is from borrowing money from ourselves. It seems wierd, but that's what it is.

Dollars can only be printed and issued if there are the reserves to support their value.This is true for other currencies, but not the dollar.

Where does the national debt come from. Well:


When you spend 500 million more than you have coming in you have to cover this somehow.
The US does this at the moment by issuing Bonds, which are bought by private investors or foreign governments. While there is confidence in the ability of the US to continue paying these bonds, and while the interest offered is sufficient to attract investment, there is no great problem.
Don't forget the government itself buys treasury bonds as well ala Social Security surplus. -Effectively moving the social security surplus into the general budget.


However:-
Confidence in a countries economy depends upon many factors, but amongst these is the balance of trade, the currency strength, the strength of the accounting mechanisms, the worlds opinion in general. All of these factors have been badly hit in the last few years as far as the US is concerned. Another factor is the state of the manufacuring industry in the country, which in the USA is in a bad way at the moment.

Actually, the value of the dollar has been increasing quite considerably lately - in direct contradiction to your hypothesis. The USA moved from a manufacturing economy to a service economy decades ago - the manufacturing component is over-exaggerated in your post. Also, you ignore the consideration that an overly strong currency can also be harmful to an economy.

http://finance.yahoo.com/q?s=USDEUR=X


What can be done?

Cut spending so no further borrowing is required:
or
Increase tax revenues so no further borrowing is required.
Again you present an either/or argument where there is more than one option. Reducing spending increases to a rate below that of economic growth would also reduce the dept ratio. Pursuing a policy of economic expanison would therefore also be a valid option. Reducing taxes can be a component of that - It is comparable to a store increasing revenues by having a sale.


A healthy economy does not normally have its national debt above 60% of the GDP. For the USA at the moment it is at 65%. Unless the government acts soon to lower this ratio there is likely to be serious economic consequences. (The IMF and the World Bank have already issued warnings to the USA treasury.)

This is quite incorrect. You should provide a link if you feel it is not. The correct numbers can be found here;

http://www.heritage.org/Research/Budget/bg1820.cfm
"In 2004, America’s $4.3 trillion debt represents 38 percent of its $11.6 trillion GDP. Despite all the hand-wringing over increased budget deficits, the 38 percent debt ratio is actually below the post–World War II average of 43 percent."


Time to bite the bullet in the USA, what do you want? More taxes or less spending? That's easy - less spending=less government interference in our lives. Fiscal conservatives have ben asking for that for decades. Now that liberals are no longer in control of the beurocratic behemoth they too are just beginning to see the virtues of smaller federal government. It may be some time from now - but it is possible that the party platforms on the size of the federal government could swap. We could only hope.

We don't owe a debt to nations. Contrary to popular belief the US National Debt isn't from taking loans out from other nations. It is from borrowing money from ourselves. It seems wierd, but that's what it is.

Not all that weird.

Debt = What the government owes the taxpayers and bond holders.

Odly enought, taxpayers are also allowed to "give" to the debt relief. Which makes a good way to actuall piss off the IRS.

It works like this. You are allowed to pay (in any form) to the relief of the US national debt (like a charity). Including by cash. However, when cash is given (regardless of ammount), the agent handling the cash must have the cash loged. So here is what you do.

You take 100 $1.00 bills. Place them each in a single envelope. And mail them off to the IRS.

The agent who handled the envelope upon receipt, must take each envelope to a special counter. Where a receipt must be generated. And a special form filled out bearing the name, SSN/TaxID, and DOB along with address of the sender... It costs, but you can get some perverse pleasure out of the hassle you're causing the IRS in the process...

This is quite incorrect. You should provide a link if you feel it is not. The correct numbers can be found here;

Public debt:
65% of GDP (2004 est.)
source linky (http://www.cia.gov/cia/publications/factbook/geos/us.html#Econ)


Believe who you will then.

This is true for other currencies, but not the dollar.

Sorry to disappoint you, but it is true for ALL currencies. The dollar has no special status with regard to this.

I don't know much about this, and have learned a fair bit from reading this thread, so thanks very much.

Is national debt necessary? If governments spend only within their means, then they don't have to pay back interest to the holders of bonds. In the long run, doesn't the lack of short-term overspending mean that the government will have more money to spend?

Not exactly - it is not so black and white as that. One benefit of debt is the ability to invest the borrowed capital for growth. For example, borrowing money to buy a car, which you then use as a taxi. You now can have a revenue stream that you otherwise would not have without a taxi. The revenues can be used to both pay back the debt as well as subsidise other projects (like rent).
Also a consideration is the effects of inflation. If you borrow money for thirty years and pay interest only you are eventually paying back the same amount you borrowed, but the dollars you pay it back with are worth LESS because of the effects of inflation.
Does that mean the US should borrow more? No, of course not. It means that when the US borrows the money should be invested prudently. Sadly, that is not always the case.

Sorry to disappoint you, but it is true for ALL currencies. The dollar has no special status with regard to this.

No, he is correct and you are mistaken. The dollar was, at one time, asset backed. At the time it was called a 'silver note'. This ended in 1963.


http://en.wikipedia.org/wiki/United_States_Notes
After the abandonment of the gold standard in 1933, all types of issued currency (silver certificates, federal reserve notes, and United States notes) were redeemable only for silver. This ceased to be the case in 1963, when all U.S. currency became fiat currency


http://en.wikipedia.org/wiki/Federal_Reserve_note
Federal Reserve notes are not redeemable in gold, silver or any other commodity. This has been the case since 1933. The notes have no value for themselves, but for what they will buy. They have no backing other than the "full faith and credit of the U.S. government" (i.e., the government's ability to levy taxes to pay its debts). In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy. (I.e., a currency is worth only what it can buy, but keep in mind that the US economy is worth nearly $12 trillion.)

This is true for other currencies, but not the dollar.

I'm sorry, but you can't just print more dollar to cover your debt. If you double your money supply, inflation will come up and you will have to pay twice as much for any goods, the value of your national currency will sunk and so on.

Believe who you will then.

I believe that source is not exclusive of federal liabilities but also includes state and municipal authorities. For the context of this discussion that would be inaccurate.

Don't forget the government itself buys treasury bonds as well ala Social Security surplus. -Effectively moving the social security surplus into the general budget.
Do you actually believe there is a social security surplus? What it is doing is borrowing, without asking, the contributions of the members of the SS scheme to finance its debt. This works for a while, but it will catch up with the governement soon.

Actually, the value of the dollar has been increasing quite considerably lately - in direct contradiction to your hypothesis. The USA moved from a manufacturing economy to a service economy decades ago - the manufacturing component is over-exaggerated in your post. Also, you ignore the consideration that an overly strong currency can also be harmful to an economy.
If you look at a longer term trend then the dollar is in steady decline. Look at the USD vs Euro since 2001.

euros per US dollar -
1.1175 (2001)
1.0626 (2002)
0.8860 (2003)
0.8089 (2004)
Source - CIA World Factbook again. I will stick with that as it is a pro US source not linked to any spewcific political viewpoint (unlike Heritage etc.)
That is not increasing in value, is it?

The strength of the currency was just one of the factors I mentioned in determining investor confidence. I was not addressing the pros and cons of a strong or weak currency overal, I was looking at it solely from the investors point of view, and there strong is good, weak is bad.



Again you present an either/or argument where there is more than one option. Reducing spending increases to a rate below that of economic growth would also reduce the dept ratio. Pursuing a policy of economic expanison would therefore also be a valid option. Reducing taxes can be a component of that - It is comparable to a store increasing revenues by having a sale.
The options I gave were to reduce spending or increase tax revenue. This latter includes your proposal here, does it not. (I did not suggest increasing tax rates specifically, read rather than assume please.) The either or is there because the government deficit can only be controlled by one of these two or a combination of them. There are no other options.



This is quite incorrect. You should provide a link if you feel it is not. The correct numbers can be found here;

http://www.heritage.org/Research/Budget/bg1820.cfm
"In 2004, America’s $4.3 trillion debt represents 38 percent of its $11.6 trillion GDP. Despite all the hand-wringing over increased budget deficits, the 38 percent debt ratio is actually below the post–World War II average of 43 percent."
Dealt with in a previous post. Choose your sources gentlemen, turn, walk ten paces, turn and fire. May the best man win.

That's easy - less spending=less government interference in our lives. Fiscal conservatives have ben asking for that for decades. Now that liberals are no longer in control of the beurocratic behemoth they too are just beginning to see the virtues of smaller federal government. It may be some time from now - but it is possible that the party platforms on the size of the federal government could swap. We could only hope.
I agree 100%, but being a classic liberal at heart, that is not surprising. Also I am European so I prefer the CL label to libertarian.

I believe that source is not exclusive of federal liabilities but also includes state and municipal authorities. For the context of this discussion that would be inaccurate.

Government debt is government debt. Trying to exclude this or that because it is not federal, or it is owed to itself etc, is the type of economic slight of hand that gives US accounting a bad name. If it is money owed that has to be covered by government borrowing, at whatever level, at whatever future time, it is still government debt.

A healthy economy does not normally have its national debt above 60% of the GDP. For the USA at the moment it is at 65%. Unless the government acts soon to lower this ratio there is likely to be serious economic consequences. (The IMF and the World Bank have already issued warnings to the USA treasury.)

Plenty of healthy economies have high national debts. India, which has tremendous economic growth and potential, has a higher debt ratio than the US, and so do many European nations.

Okay, now for the real question--politically, what could you realistically cut? I mean, it's easy to say that you'd cut all of the above and then some, but what could you get passed?

Cuts would be easy to sell for someone sophisticated enough. The trouble is that the big-spenders in washington also define a cut as no increase. Go figure.

TO balance the budget simply cap the amount that spending can be increased. Voila. Not only would it work, it has toe potential to make certain departments much more efficient. If they can't afford the beurocracy they will eliminate the beurocracy. In business this is called a 'turn around'.

Government debt is government debt. Trying to exclude this or that because it is not federal, or it is owed to itself etc, is the type of economic slight of hand that gives US accounting a bad name. If it is money owed that has to be covered by government borrowing, at whatever level, at whatever future time, it is still government debt.

Nope, apples to orange. If Miami is over their head in debt it has little effect on the economy of San Francisco. If California is over it's head in debt it has little effect on the people of Delaware. Why? Because they are all different taxing authorities with different tax rates and needs. It is one of the benefits of being a union rather than a single state.

No, he is correct and you are mistaken. The dollar was, at one time, asset backed. At the time it was called a 'silver note'. This ended in 1963.


http://en.wikipedia.org/wiki/United_States_Notes
After the abandonment of the gold standard in 1933, all types of issued currency (silver certificates, federal reserve notes, and United States notes) were redeemable only for silver. This ceased to be the case in 1963, when all U.S. currency became fiat currency


http://en.wikipedia.org/wiki/Federal_Reserve_note
Federal Reserve notes are not redeemable in gold, silver or any other commodity. This has been the case since 1933. The notes have no value for themselves, but for what they will buy. They have no backing other than the "full faith and credit of the U.S. government" (i.e., the government's ability to levy taxes to pay its debts). In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy. (I.e., a currency is worth only what it can buy, but keep in mind that the US economy is worth nearly $12 trillion.)


I was not claiming that the Dollar was still a gold standard issue. (As far as I am aware no currency is any more, with the possible exception of the South African Krugerand). However the government still has to hold reserves to back its currency issue or you simply create inflation by increasing the money supply. This is not disputed by anyone in economics.

The full faith and credit of the US government does not necessarily refer to the ability of the government to levy taxes, but also to the ability of the government to redeem its scrip in some real way if the dollar were to be discarded. (Wiki is not the most reliable of sources where multiple interpretations are possible).

All currency depends on confidence in the issuing authority, and a large part of that confidence derives from the existence of the reserves. Go and investigate the causes of hyperinflation to see what happens when such confidence fails.

Nope, apples to orange. If Miami is over their head in debt it has little effect on the economy of San Francisco. If California is over it's head in debt it has little effect on the people of Delaware. Why? Because they are all different taxing authorities with different tax rates and needs. It is one of the benefits of being a union rather than a single state.

Not apples to oranges at all. If Miami is over its head in debt, who guarantees the services to the residents of the state if the state goes bankrupt? This is the price of a federal structure. The federal government has an obligation to its citizens, but does not control the local finances. There is good and bad that comes from this. The government, is not just the federal government it is all levels of government. Government debt, is the debt from all levels. This has to be paid, as I said, and this means that this amount of money will be taken out of the economy, be it locally or nationally. It matters not which part of the enormous government machinery owes the debt, it is owed.

Stop trying to hide debts, they have to be repaid. That is the bottom line, and that is the reason why the level is problematic. It removes that level of resources from active investment.

Arguing that the state or city debt is not part of the overall debt is like arguing that one persons debt is not part of a household debt. Of course it is: the money has to come from somewhere to pay it.

I'd love to hand and chat for a while, but life call. C-ya

Wait, are we talking about the U.S. national debt or the deficit?
the title of the thread is the debt of the united states. so i assume we're talking about the debt. but i guess deficit would be relevant if you want to talk about it.

14th Amendment. We have to honor all debts we take. It's in the Constitution.

Those debts are in dollars. Eventually, we may have to take out debt in gold.

Plenty of healthy economies have high national debts. India, which has tremendous economic growth and potential, has a higher debt ratio than the US, and so do many European nations.

Their European economies have under-perforemd the OCED average. And there are many other countries with larger debts as a % of GDP that are practically bankrupt. Defending your own idiot country that way isn't going to work :p

I say the best way to eliminate our debt is to eliminate it completely from the domestic infrastructure, leaving it only in place for businesses and the government for international funds. It's kinda like eliminating the middle men, so to speak, but on an overly effective scale. After all, our country would be better suited weighing it's worth in it's society instead of the dollar which hinders it. Everything from education to health to our own economy has an unsurmountable benifit from a plan such as this, and I'd be so inclined to suggest it to any nation more than capable of surplusing it's economy as directly and easily as the US.

Yes, it's something that your business 101 books would never comprehend, but the benifits would only increase over time, and our debt would turn into a surplus in less than 2 years. I'd bet my life on it! ;)

Unisic Representative Of Grr Cheese, Ronixus

I don't know much about economics, but I have heard that the U.S. is spending billions of dollars in military aid to other countries. Would cutting back on this help the national debt?Not significantly, all foreign aid (military and non-military) by the US government comes to under $100BillionUS/year. You could cut some of it, but already it is so lean that most cuts would be in meat instead of fat.

Squi-
The CIA World Factbook, a US source, cites the USA National debt as 65% of the GDP. Where are you getting your figure of 40% from?The IMF and Eurstat. Nor does the CIA World Factbook list the national debt of the US, it lists the public debt of the US, a different number and one that is far less important for determining the health of an economy.

OK, let me try to make this simple for you, government debt oowed by the government (GD) to government versus government debt owed to non-government entities (NGD). Interest paid on debt, GD goes to government and is availible to be spent on government functions, NGD lost to government and unavailable to spent on governmetnt functions - GD not a drain on the economy, NGD a drain on the economy. Loss of confidence in the ability of the government to repay debt, NGD - less available credit, higher interest rates required to secure credit, a drain on the economy; GD - subject to the fiats of the borrower (lender) and interest set at whatever level the government decides, as much available as the government wishes to make, no drain on the economy.

The IMF and Eurstat. Nor does the CIA World Factbook list the national debt of the US, it lists the public debt of the US, a different number and one that is far less important for determining the health of an economy.

OK, let me try to make this simple for you, government debt owed by the government (GD) to government versus government debt owed to non-government entities (NGD). Interest paid on debt, GD goes to government and is available to be spent on government functions, NGD lost to government and unavailable to spent on government functions - GD not a drain on the economy, NGD a drain on the economy. Loss of confidence in the ability of the government to repay debt, NGD - less available credit, higher interest rates required to secure credit, a drain on the economy; GD - subject to the fiats of the borrower (lender) and interest set at whatever level the government decides, as much available as the government wishes to make, no drain on the economy.

Two points.
Firstly Public debt vs Government debt.
What is the "public" institution or structure that can have a debt or contract a debt in anyway, that is not in some real sense, the government. The difference between the two is, as I commented to B0zzy, simply sleight of hand accounting. The public debt is the true government debt, with government being those institutions and entities that are empowered to act on behalf of the people of the country or any portion there of by residential qualification (i.e State, municipality etc.)

GD vs NGD

This would all be fine if you can explain why and how the government borrows the money from itself to start with. If it has the money, then it would simply use this rather than borrow it from itself, creating a debt, and then use it. If it does not have the money then it can not lend it can it.

Of course if there were a fund which it controls but does not have the title to the contents thereof, rather like, for example a company pension fund in relation to a company, it could borrow from this fund, at an interest cost (if not the fund is losing out as it could have invested the money elsewhere to earn interest) and shift the debt problem into the future. A father borrowing money using a ten year-old's college fund as collateral would be about the same. Now the Government does not have control over the interest repayments, and these are not available for general use as you claim. Well they are, but only by cheating the contributors to the SS scheme. (or whatever other fund is involved.) If a corporation were to try this it would be slapped hard and fined by the SEC, why is it acceptable for the government? It is not, and it is building a huge problem for the very near future.

(By the way, you don't have to make it simple for me OK. I do understand it very well indeed thank you.)

I don't know much about economics, but I have heard that the U.S. is spending billions of dollars in military aid to other countries. Would cutting back on this help the national debt?
In theory, yes. but lets assume we stop giving all that aid to Israel. Israel coincidentally has a huge economic collapse at the same time (helped spurred on by recent cut of aid) as well as losing all that military aid. the military becomes extremely weak and the surrounding countries see this and go to invade (kinda like when we never gave them aid in the first place). Israel isnt strong enough to hold of 5 different armies and feels that their survival is significantly threatened. as a result they authorize the use of nuclear weapons against the surrounding countries. millions die and the U.S. loses much of its oil source. it also loses its credibility because it reneged on certain deals with Israel. how would that be economically viable?

What people who moan about the US debt don't understand is that the dollar is GOLD. As long as the dollar is accepted by the entire world as a universal currency the US govt can just keep printing them and shoving it in people's hands, mouths and arses and the debt will be backed.
not forever. we may be dead by that time but it wont last forever.

We don't owe a debt to nations. Contrary to popular belief the US National Debt isn't from taking loans out from other nations. It is from borrowing money from ourselves. It seems wierd, but that's what it is.
true, americans do buy bonds. so do foreign people, companies, and governments. take China for instance.

Plenty of healthy economies have high national debts. India, which has tremendous economic growth and potential, has a higher debt ratio than the US, and so do many European nations.
India isn't normal. it can't really be compared to the US. our productivity is MUCH lower and people aren't outsourcing to us as fast as they can.

Cuts would be easy to sell for someone sophisticated enough. The trouble is that the big-spenders in washington also define a cut as no increase. Go figure.

TO balance the budget simply cap the amount that spending can be increased. Voila. Not only would it work, it has toe potential to make certain departments much more efficient. If they can't afford the beurocracy they will eliminate the beurocracy. In business this is called a 'turn around'.
god knows all the federal government employees are just as smart as the average business.

I say the best way to eliminate our debt is to eliminate it completely from the domestic infrastructure, leaving it only in place for businesses and the government for international funds. It's kinda like eliminating the middle men, so to speak, but on an overly effective scale. After all, our country would be better suited weighing it's worth in it's society instead of the dollar which hinders it. Everything from education to health to our own economy has an unsurmountable benifit from a plan such as this, and I'd be so inclined to suggest it to any nation more than capable of surplusing it's economy as directly and easily as the US.

Yes, it's something that your business 101 books would never comprehend, but the benifits would only increase over time, and our debt would turn into a surplus in less than 2 years. I'd bet my life on it! ;)

Unisic Representative Of Grr Cheese, Ronixus
so really your just arguing whether or not libertarians are right. isnt that a seperate thread?

Two points.
Firstly Public debt vs Government debt.
What is the "public" institution or structure that can have a debt or contract a debt in anyway, that is not in some real sense, the government. The difference between the two is, as I commented to B0zzy, simply sleight of hand accounting. The public debt is the true government debt, with government being those institutions and entities that are empowered to act on behalf of the people of the country or any portion there of by residential qualification (i.e State, municipality etc.)

GD vs NGD

This would all be fine if you can explain why and how the government borrows the money from itself to start with. If it has the money, then it would simply use this rather than borrow it from itself, creating a debt, and then use it. If it does not have the money then it can not lend it can it.

Of course if there were a fund which it controls but does not have the title to the contents thereof, rather like, for example a company pension fund in relation to a company, it could borrow from this fund, at an interest cost (if not the fund is losing out as it could have invested the money elsewhere to earn interest) and shift the debt problem into the future. A father borrowing money using a ten year-old's college fund as collateral would be about the same. Now the Government does not have control over the interest repayments, and these are not available for general use as you claim. Well they are, but only by cheating the contributors to the SS scheme. (or whatever other fund is involved.) If a corporation were to try this it would be slapped hard and fined by the SEC, why is it acceptable for the government? It is not, and it is building a huge problem for the very near future.

(By the way, you don't have to make it simple for me OK. I do understand it very well indeed thank you.)The thing is the government is the only entitiy that has title to the "Social Security Trust Fund". You have no right to the money in there, regardless of how much you put into it nor does anyone else. You are under the mistaken belief that because it is called a trust fund it is in fact a trust fund, it isn't. The US government has several different forms of intragovernment bonds it uses (not just the trust fund although that is the largest one), it is a standard practice for US government financing. Why do they do it that way? Well, it has to do with the US budget construction which is a messy process and has all kinds of problems, if I recall correctly it is a practice whic developed in the 1930s as way of giving congress more control over how monies were spent by executive agencies.

You say you understand it, but you seem not to. Intragovernment lending is both an assest and a liability for the government in equal ammount, it has no net effect on the net worth of the government, it is a wash. Some countries use this type of financial ledgemain and some don't for accurate comparison of governments which use it with governments which don't, intragoverment debt is discounted. That's just the way it is, intragovernment debt isn't a drain on the resources of the government. If the US decided to wipe out the SS Trust Fund tommorow, by paying off the bonds and using the money recieved from the bonds to pay off the bonds, the US government would be no less nor no more solvent than it is today, it would lose a $3TrillionishUS asset and pay off a $3Trillionish liability. If the US government were to decide to suspend interest payments on the bonds in the SS Trust Fund it would not save any money either (all other things being equal) since it would have to make up the shortfall in income to Social Security through a different form of funding. This government owned government debt is simply a bookeeping device.

Contributors to Social Security have no legal right to the funds in Social Security, period. You are not an assest holder in the SS Trust Fund and the government can spend the money in the Fund for whatever it wants to. All that the US government is legally obligated to do with the SS Trust Fund bonds is pay the money to the Social Security Administration, which it can then direct the Social Security Administration to send right back to the treasury.

The thing is the government is the only entity that has title to the "Social Security Trust Fund". You have no right to the money in there, regardless of how much you put into it nor does anyone else. You are under the mistaken belief that because it is called a trust fund it is in fact a trust fund, it isn't. The US government has several different forms of intragovernment bonds it uses (not just the trust fund although that is the largest one), it is a standard practice for US government financing. Why do they do it that way? Well, it has to do with the US budget construction which is a messy process and has all kinds of problems, if I recall correctly it is a practice which developed in the 1930s as way of giving congress more control over how monies were spent by executive agencies.

All of these intragovernment bonds do the same thing. They take revenues that are already committed to some specific use and release them from that commitment. What they do not do is remove the commitment. The guff about giving congress more control is just that, guff. What these enable the government to do is to enter a budget that meets their campaign pledges to the population and then rescue the money from its pledged destination to use elsewhere. Political sleight of hand. (I am using that phrase too much.)


You say you understand it, but you seem not to. Intragovernment lending is both an asset and a liability for the government in equal amount, it has no net effect on the net worth of the government, it is a wash. Some countries use this type of financial ledgemain and some don't for accurate comparison of governments which use it with governments which don't, intragoverment debt is discounted. That's just the way it is, intragovernment debt isn't a drain on the resources of the government. If the US decided to wipe out the SS Trust Fund tomorrow, by paying off the bonds and using the money received from the bonds to pay off the bonds, the US government would be no less nor no more solvent than it is today, it would lose a $3Trillionish US asset and pay off a $3Trillionish liability. If the US government were to decide to suspend interest payments on the bonds in the SS Trust Fund it would not save any money either (all other things being equal) since it would have to make up the shortfall in income to Social Security through a different form of funding. This government owned government debt is simply a bookkeeping device.
I understand it from a bookkeeping point of view, and I also understand it from the reality of it. Yes, in a double entry bookkeeping system, borrowing from one account to deposit in another account of an individual is a nett null transaction, as you put it, a wash. However from a real point of view, what matters is has the money has been spent or not, not which account it is in. Assume I have two bank accounts, one that I use for paying my regular bills and one which I use for entertainment spending. If I transfer a thousand US$ from one account to the other I still have the same assets, just in a different place. If however I spend that money on a new computer, the accounting still shows a wash on the internal accounts, but I can no longer pay my bills when they fall. This is what the US Government is doing with intragovernment bonds (and any other government that uses them for that matter). What it means is that the external borrowing has just been pushed down stream. The obligations that the money was redirected away from have to be met, and this will require future borrowing as the assets are no longer available. Thus I hold that Public Debt includes and should include intragovernment debt.

Contributors to Social Security have no legal right to the funds in Social Security, period. You are not an asset holder in the SS Trust Fund and the government can spend the money in the Fund for whatever it wants to. All that the US government is legally obligated to do with the SS Trust Fund bonds is pay the money to the Social Security Administration, which it can then direct the Social Security Administration to send right back to the treasury.
You do not have the right to the funds now, agreed. You do have a legal right to receive the contracted pension. Legally the government has to pay the money back. It has no choice in the end. Unless it wishes to default on its own people that is, which would do wonders for confidence levels in the US economy.

While you look at the situation as an accountant or as an economist, then it is possible to deceive yourself concerning the state of the debt. If, however, you build accurate analogies between the government and a family situation, you can clearly see the road to ruin laid out in front of you.

What people who moan about the US debt don't understand is that the dollar is GOLD. As long as the dollar is accepted by the entire world as a universal currency the US govt can just keep printing them and shoving it in people's hands, mouths and arses and the debt will be backed.

Until the EURO becomes the number one world currency of course. :)

Which the way central reserves are dropping the Dollar is only a matter of time...not only that but with Chaves trying to find any market other than the USA to export oil to i would imagine that some soon the 5th largest producers of oil is going to stat trading in EURO's.

Once that happens i spy with my little eye and f**ked US economy. :eek: :eek:

bonds come with interest. if you paid off 3 trillion dollars in bonds wouldnt you lose 10's of billions of dollars.

Until the EURO becomes the number one world currency of course. :)

Which the way central reserves are dropping the Dollar is only a matter of time...not only that but with Chaves trying to find any market other than the USA to export oil to i would imagine that some soon the 5th largest producers of oil is going to stat trading in EURO's.

Once that happens i spy with my little eye and f**ked US economy. :eek: :eek:

Ya'll don't remember the 70s very much, do you. You can look it up and read about it. That is what things look like when the dollar is weak and not a global standard. The US not only survived, but continued to expand it's lead in the global economy.

You seem hung up on the value of the dollar compared to it's all time high rather than it's average - a very dangerous fallacy for anyone who values accuracy.

Welcome back B0zzy.

god knows all the federal government employees are just as smart as the average business.

I'd love to join you in taking this cheap-shot at federal employees, but that would be inaccurate. Often times a budget cut is waht it takes to get menagement to aquiesce to needed cuts.
(Think internet bubble and frivilous dot-com budgets)

Ya'll don't remember the 70s very much, do you. You can look it up and read about it. That is what things look like when the dollar is weak and not a global standard. The US not only survived, but continued to expand it's lead in the global economy.

Correct me if I'm wrong, but wasn't the recession of the 1970's more the result of an inflationary shock caused by the oil embargo? I was under the impression that the dollar has, for some time (including the 70's) been a global standard.

Also, a weak currency isn't necessarily a bad thing. Case in point, the Chinese RMB, artificially kept down at Y8.5 to $1 since 1995.

I'd love to join you in taking this cheap-shot at federal employees, but that would be inaccurate. Often times a budget cut is waht it takes to get menagement to aquiesce to needed cuts.
(Think internet bubble and frivilous dot-com budgets)
true, it is cheap. it is true though. my dad worked in the federal government and my mom has worked in the federal government since she was 16 except for maternity leave. both of them have repeatedly said this based on life long experience so i generally accept it as true. (note: not saying ALL federal government employees are stupid just a disproportionately higher amount)

All of these intragovernment bonds do the same thing. They take revenues that are already committed to some specific use and release them from that commitment. What they do not do is remove the commitment. The guff about giving congress more control is just that, guff. What these enable the government to do is to enter a budget that meets their campaign pledges to the population and then rescue the money from its pledged destination to use elsewhere. Political sleight of hand. (I am using that phrase too much.) I guess this is a way to look at it. The commitments however are considered part of the necessary function of government. regardless of the existane of the bonds or not, government is going to produce the money needed to pay for these. Having the bonds or not having the bonds has no impact on the government's solvency. If a country which doesn't use this sort of accounting finagling has a smaller public debt but has the same commitments to provide services, it is in better shape economically than one which uses this type of finacial slight of hand? No, the commitment exists in all governments and whether it is booked as bonds is irrelevant, and because one government uses bonds to notionalize these financial commitments does not mean it is less solvent than one which doesn't notionalize it's financial commitments.



I understand it from a bookkeeping point of view, and I also understand it from the reality of it. Yes, in a double entry bookkeeping system, borrowing from one account to deposit in another account of an individual is a nett null transaction, as you put it, a wash. However from a real point of view, what matters is has the money has been spent or not, not which account it is in. Assume I have two bank accounts, one that I use for paying my regular bills and one which I use for entertainment spending. If I transfer a thousand US$ from one account to the other I still have the same assets, just in a different place. If however I spend that money on a new computer, the accounting still shows a wash on the internal accounts, but I can no longer pay my bills when they fall. This is what the US Government is doing with intragovernment bonds (and any other government that uses them for that matter). What it means is that the external borrowing has just been pushed down stream. The obligations that the money was redirected away from have to be met, and this will require future borrowing as the assets are no longer available. Thus I hold that Public Debt includes and should include intragovernment debt.Yes the obligation will exist even though the money is spent. But the ibligation exists anyway, you still have to pay the bills regardless of whether or not you have IOUs to yourself or not. Thus when you spend money o the computer from you bills account and write an IOU from your entertainment account, you gain no new obligation, you still have the same commitment to pay the same ammount of bills. It does not matter whether the money you spent on your new computer came out of your entertainment account or your bills account, you obligation is the same, you have created no new obligations (to double pay your bills?). This makes no sense, the money was going to be spent anyway, regardless of what account it came out of, taking it out of the SS account just made it easier to justify. Your bills do not increase because you spend money from your bill account instead of your entertainment account, you incur no new obligations.

You do not have the right to the funds now, agreed. You do have a legal right to receive the contracted pension. Legally the government has to pay the money back. It has no choice in the end. Unless it wishes to default on its own people that is, which would do wonders for confidence levels in the US economy.

While you look at the situation as an accountant or as an economist, then it is possible to deceive yourself concerning the state of the debt. If, however, you build accurate analogies between the government and a family situation, you can clearly see the road to ruin laid out in front of you.OADI pensions? you have no contract with the government to recieve anything from them. I agree that it is unlikely that the US government is going to stop paying SS benefits to anyone, but this is irrelevant to the bonds that the US government has issued to the SS Trust Fund, without the bonds the government would have the same obligations. The bonds at best serve as a way to notionalize those obligations (which they do poorly), but the fact that the US government issues them as a way to notionalize thier obligations in no way makes it less solvent than the majority of governments which do not issue bonds to themselves to keep track of their obligations. The UK does not have a trust fund of government bonds backing thier old age pensions, so they do not have the obligation to provide old age pensions? Again, the bonds are meaninless in terms of the national debt and economic health since the obligation is the same regardless of whether or not the bonds exist. Nor, btw, does anyone seriously expect the US to stop making SS payements in 2020 or 2040 (depending on who you listen to) when the SS trust fund bonds are exhausted, the obligation remains even though the financial debt doesn't.

IF the SS trust fund were an accurate representation of the SS obligations the US has AND IF all other countries used identical means to quantify their obligations for similar services, then yes public debt (including the SS bonds)/GDP would be a good measure of the health of an economy, HOWEVER since most industrialized nations have similar obligations and do not notionalize those obligations by issuing bonds, using the Public Debt (including the SS bonds) distorts the picture of US economic health. Thus instead of attempting to quantify the pension liabilites of all other countries and to quantify the ratio of the value of the intragovernmental bonds to liabilites and using these to figure out how many bonds other countries would issue if they followed a similar accounting regime to the US, we simplify the way the US ( and countries which use similar accounting mechanisms) accounts for its debt and remove the intragovernmental bonds, so that we can compare like and like.

bonds come with interest. if you paid off 3 trillion dollars in bonds wouldnt you lose 10's of billions of dollars.But since you pay the money to yourself, you save the 10s of Billions you would have had to pay to yourself in interest. The interest doesn't come fom nowhere you know, you have to raise money to pay the interest on the bonds you issued so you can rake in the interest from the bonds you own.

The "national debt" is just an imbalance in goods, in relation to exports and imports, but we don't OWE anybody ANYTHING. You see, when the "national debt" is set equal to our capital account, we find that trade is balanced. Let's use an example:

I buy more from my grocer than he buys from me, and I bet it's the same with you and your grocer. That means we have a trade deficit with our grocers. Does our perpetual grocer trade deficit portend doom? If we heeded some pundits and politicians who are talking about our national trade deficit, we might think so. But do we have a trade deficit in the first place? Let's look at it.

Insofar as the grocer example, there are two accounts that I hold. One is my "goods" account, which consists of groceries. The other is my "capital" account, which consists of money. Let's look at what happens when I purchase groceries. Say I purchase $100 worth of groceries. The value of my goods account rises by $100. That rise is matched by an equal $100 decline in my capital account. Adding a plus $100 to a minus $100 yields a perfect trade balance. That transaction, from my grocer's point of view, results in his goods account falling by $100, but when he accepts my cash, his capital account rises by $100, again a trade balance.

The principle here differs not one iota if my grocer was located in another country as opposed to down the street. There'd still be a trade balance when both the goods account and the capital account are considered. Imbalances in goods accounts are all over the place. For example, my grocer buys more from his wholesaler than his wholesaler buys from him. The wholesaler buys more from the manufacturer than the manufacturer buys from him, but when we put capital accounts into the mix, in each case, trade is balanced.

We've moved from vodoo economics to canabis economics

"Neither a borrow nor a lender be."

Correct me if I'm wrong, but wasn't the recession of the 1970's more the result of an inflationary shock caused by the oil embargo? I was under the impression that the dollar has, for some time (including the 70's) been a global standard.

Also, a weak currency isn't necessarily a bad thing. Case in point, the Chinese RMB, artificially kept down at Y8.5 to $1 since 1995.

No, there were many factors, of which oil was only one. There was a multitude of others including runaway interest rates, a weak foreign exchange, double digit inflation, weak job market, the failure of Detroit to respond to market demands, incredibly high tax rates, the conflict in Vietnam, Watergate, etc. etc. etc.

If you really want to get a feel for what things were like from a financial perspective, without reading a really dull textbook, then I suggest reading "The Money Changers" which is a real fun fictional book written about characters in that time period. I promise you won't be bored and you will come away with a deeper understanding of the economy during that period. Think 'Vanity of the Bonfires' for bankers instead of reporters.

"Neither a borrow nor a lender be."

Actually some middle-eastern religions follow that doctrine, well, religiously. They cannot invest in debt instruments - bonds, CDs or anything else which pays interest. As you can see, that does not leave much - equities are about it.

the constitution also said all people were free. Imagine that, a group of well-to-do white slave owners saying all people are free. Are you serious by saying that because its in the constitution that it means we must obey it.

There is a difference between how the general population interperates things and when something is spelled out.

When it says all men are created equal, they were intending on an equal opportunity such as no kings and tyrants. I doubt they intended on saying blacks, whites and everyone in between is equal. However when something says "Debt must be repaid." One could not interperet that differently.

I guess this is a way to look at it. The commitments however are considered part of the necessary function of government. regardless of the existence of the bonds or not, government is going to produce the money needed to pay for these. Having the bonds or not having the bonds has no impact on the government's solvency. If a country which doesn't use this sort of accounting finagling has a smaller public debt but has the same commitments to provide services, it is in better shape economically than one which uses this type of financial slight of hand? No, the commitment exists in all governments and whether it is booked as bonds is irrelevant, and because one government uses bonds to notionalize these financial commitments does not mean it is less solvent than one which doesn't notionalize it's financial commitments.
Any country that does not use this type of "finagling" will be in the situation that it has not spent the money it has publicly committed to some purpose
on something else. They have not used the rent money to buy game tickets. So when the rent falls due, they do not have to borrow to pay it. It is clearly more solvent. This is the point that you insist on ignoring. The money, when transferred by an intragovernment bond is double booked, and it can not pay both. i.e. the debt burden has been increased.

Yes the obligation will exist even though the money is spent. But the obligation exists anyway, you still have to pay the bills regardless of whether or not you have IOUs to yourself or not. Thus when you spend money on the computer from you bills account and write an IOU from your entertainment account, you gain no new obligation, you still have the same commitment to pay the same amount of bills.
But I no longer have the money, I have a computer instead. (This could be a new set of tanks, or a tax break on some industry, or a subsidy or something in the government case.) When the bill arrives, I can't send the computer as payment.

It does not matter whether the money you spent on your new computer came out of your entertainment account or your bills account, you obligation is the same, you have created no new obligations (to double pay your bills?). This makes no sense, the money was going to be spent anyway, regardless of what account it came out of, taking it out of the SS account just made it easier to justify.
The money was not going to be spent, or if it was then I had a borrowing requirement that included this money to start with to balance the commitments to the revenue source. Thus it has to be included in the National (Public) debt.

Your bills do not increase because you spend money from your bill account instead of your entertainment account, you incur no new obligations.OADI pensions? you have no contract with the government to receive anything from them. I agree that it is unlikely that the US government is going to stop paying SS benefits to anyone, but this is irrelevant to the bonds that the US government has issued to the SS Trust Fund, without the bonds the government would have the same obligations. The bonds at best serve as a way to notionalize those obligations (which they do poorly), but the fact that the US government issues them as a way to notionalize their obligations in no way makes it less solvent than the majority of governments which do not issue bonds to themselves to keep track of their obligations.
I am no lawyer, so this may be the case. If the US does default on its pension obligations to its citizens though, its financial reputation in the world is down the drain, completely and totally, with no possibility of reprieve. That would be complete financial disaster for the USA.

The UK does not have a trust fund of government bonds backing their old age pensions, so they do not have the obligation to provide old age pensions? Again, the bonds are meaningless in terms of the national debt and economic health since the obligation is the same regardless of whether or not the bonds exist. Nor, btw, does anyone seriously expect the US to stop making SS payments in 2020 or 2040 (depending on who you listen to) when the SS trust fund bonds are exhausted, the obligation remains even though the financial debt doesn't.
I don't have a clue how the UK does this, as I am opted out and have a private pension scheme (and no longer live in the UK). As shown above, the bonds are financing a revenue shortfall, this is debt. I keep repeating it is just a method of pushing the debt load upstream until the bonds are due. It will be interesting to see what happens then if the government stops this practice. Of course what will happen is that they will roll the debt over by issuing more bonds. Thus pushing the proportion of debt to GDP ever upwards, until it reaches a catastrophic failure point as happened in Argentina for example.

IF the SS trust fund were an accurate representation of the SS obligations the US has AND IF all other countries used identical means to quantify their obligations for similar services, then yes public debt (including the SS bonds)/GDP would be a good measure of the health of an economy, HOWEVER since most industrialized nations have similar obligations and do not notionalize those obligations by issuing bonds, using the Public Debt (including the SS bonds) distorts the picture of US economic health.
They do not notionalize them because they are not robbing the coffers to pay for current spending. It is not in the debt figure, because it is not a debt, it is just a future obligation. Only when you use intragovernment bonds to release this money now does it become a debt. This is why Public Debt has to be used, and not the misleading jerry rigged figures of National debt.

Thus instead of attempting to quantify the pension liabilities of all other countries and to quantify the ratio of the value of the intragovernmental bonds to liabilities and using these to figure out how many bonds other countries would issue if they followed a similar accounting regime to the US, we simplify the way the US ( and countries which use similar accounting mechanisms) accounts for its debt and remove the intragovernmental bonds, so that we can compare like and like.

Compare like with like is what I am trying to do here. The Debt is the cumulative difference between the spending and the receipts. Nothing more complicated than that. SS scheme receipts are not part of the government receipts for these purposes as they are to be used to meet future obligations. Annual receipts - Annual expenditure gives annual surplus or deficit. Accumulate this to find the total Debt or Credit balance on the governments account. Don't create complications of this borrowing is not debt, or that expenditure was not government etc. It is simple, get rid of all the pyrotechnics and fancy gestures, I want to see how, and I can see how, they can't put the lady back together after cutting here in half.

Not all that weird.

Debt = What the government owes the taxpayers and bond holders.

Odly enought, taxpayers are also allowed to "give" to the debt relief. Which makes a good way to actuall piss off the IRS.

It works like this. You are allowed to pay (in any form) to the relief of the US national debt (like a charity). Including by cash. However, when cash is given (regardless of ammount), the agent handling the cash must have the cash loged. So here is what you do.

You take 100 $1.00 bills. Place them each in a single envelope. And mail them off to the IRS.

The agent who handled the envelope upon receipt, must take each envelope to a special counter. Where a receipt must be generated. And a special form filled out bearing the name, SSN/TaxID, and DOB along with address of the sender... It costs, but you can get some perverse pleasure out of the hassle you're causing the IRS in the process...

If I worked for the IRS and got paid by the hour, that wouldn't bother me in the slightest... Unless I was bothered by the waste of paper.

In theory, yes. but lets assume we stop giving all that aid to Israel. Israel coincidentally has a huge economic collapse at the same time (helped spurred on by recent cut of aid) as well as losing all that military aid. the military becomes extremely weak and the surrounding countries see this and go to invade (kinda like when we never gave them aid in the first place). Israel isnt strong enough to hold of 5 different armies and feels that their survival is significantly threatened. as a result they authorize the use of nuclear weapons against the surrounding countries. millions die and the U.S. loses much of its oil source. it also loses its credibility because it reneged on certain deals with Israel. how would that be economically viable?

I never mentioned Israel, although I find your scenario very unlikely. The truth was I was thinking more about Egypt. I recently had a conversation with someone from Egypt and when he said that Egypt is an economical powerhouse I asked him why the U.S. is providing them with military aid. He said the money (2.5 Billion anually) was not entirely used for the military. When I asked him what it was used for he replied it was essentially a bribe to keep them from kicking Isreal out of the Gaza strip.

I don't know if I believe him or not, but I'm curious to know your opinion on the matter.

He is, in a bigoted simplistic way, correct. The US pays a fair amount of money to Egypt in exchange for their cooperation with middle east peace. It is why Egypt has such a stronger economy than, say, Syria.

I'm not very convinced it is 'to keep them from "kicking Isreal out of the Gaza strip" considering it took Israel less than a week to erradicate Egypt's forces the last time they tried to attaack Israel.

The "national debt" is just an imbalance in goods, in relation to exports and imports, but we don't OWE anybody ANYTHING. You see, when the "national debt" is set equal to our capital account, we find that trade is balanced. Let's use an example:

I buy more from my grocer than he buys from me, and I bet it's the same with you and your grocer. That means we have a trade deficit with our grocers. Does our perpetual grocer trade deficit portend doom? If we heeded some pundits and politicians who are talking about our national trade deficit, we might think so. But do we have a trade deficit in the first place? Let's look at it.

Insofar as the grocer example, there are two accounts that I hold. One is my "goods" account, which consists of groceries. The other is my "capital" account, which consists of money. Let's look at what happens when I purchase groceries. Say I purchase $100 worth of groceries. The value of my goods account rises by $100. That rise is matched by an equal $100 decline in my capital account. Adding a plus $100 to a minus $100 yields a perfect trade balance. That transaction, from my grocer's point of view, results in his goods account falling by $100, but when he accepts my cash, his capital account rises by $100, again a trade balance.

The principle here differs not one iota if my grocer was located in another country as opposed to down the street. There'd still be a trade balance when both the goods account and the capital account are considered. Imbalances in goods accounts are all over the place. For example, my grocer buys more from his wholesaler than his wholesaler buys from him. The wholesaler buys more from the manufacturer than the manufacturer buys from him, but when we put capital accounts into the mix, in each case, trade is balanced.


Give credit where credit is due.

This is an op/ed by Walter Williams and should be duely accredited.

http://www.townhall.com/columnists/walterwilliams/ww20050525.shtml


Edit: Moreover, this thread is about National debt, not trade deficits.

I never mentioned Israel, although I find your scenario very unlikely. The truth was I was thinking more about Egypt. I recently had a conversation with someone from Egypt and when he said that Egypt is an economical powerhouse I asked him why the U.S. is providing them with military aid. He said the money (2.5 Billion anually) was not entirely used for the military. When I asked him what it was used for he replied it was essentially a bribe to keep them from kicking Isreal out of the Gaza strip.

I don't know if I believe him or not, but I'm curious to know your opinion on the matter.
it was intended to be very hypothetical. i was just trying to point out that aid isnt entirely a waste of money.
as for Egypt. they couldn't even dream of coming close to touching Israel. they do that to keep the peace and stop terrorism. even if Egypt tried (which it did) it would fail. in fact when they did they had 3 or four other armies on their side. they all failed and Israel kicked them out and took a good bit of their land. had foreign powers not stepped in Israel would have been capable of marching on Cairo. (i shit you not, they were more than ready to do it when England Russia and the US said no).
ps. 2.5 billion dollars and really all of foreign aid by the US is nothing compared to the rest of the budget

Real quick I have to say this before the Dems come. Bush inheirited most of the national debt from clinton. We've always had national debt. Anyome who saids that Clinton got rid of the national debt and bush gave it back is stupid. We had a surplus under clinton, and now we have a deficite under bush.

Real quick I have to say this before the Dems come. Bush inheirited most of the national debt from clinton. We've always had national debt. Anyome who saids that Clinton got rid of the national debt and bush gave it back is stupid. We had a surplus under clinton, and now we have a deficite under bush.
whoever said this was either misinformed or misspoke. no intelligent person is even claiming this. and by the way you cant really say "inherited from Clinton" because Clinton inherited from the last president and that one from the one before him and so on.
Clinton did have a surplus and as i recall had a plan that would take 10 more years to eliminate the whole debt. fat chance that'll happen now.
ps. the dems are already here.

whoever said this was either misinformed or misspoke. no intelligent person is even claiming this. and by the way you cant really say "inherited from Clinton" because Clinton inherited from the last president and that one from the one before him and so on.
Clinton did have a surplus and as i recall had a plan that would take 10 more years to eliminate the whole debt. fat chance that'll happen now.
ps. the dems are already here.

Well, lets be honest, Clinton never had a plan to eliminate the debt. He just happened to be president during an economic upturn, that saw massive capital gains reciepts.

His "plan" depended upon totally unrealistic growth in the equities markets.

The only way to realistically control deficits is to control spending. Something that neither party seems to be capable of doing.

it was intended to be very hypothetical. i was just trying to point out that aid isnt entirely a waste of money.
as for Egypt. they couldn't even dream of coming close to touching Israel. they do that to keep the peace and stop terrorism. even if Egypt tried (which it did) it would fail. in fact when they did they had 3 or four other armies on their side. they all failed and Israel kicked them out and took a good bit of their land. had foreign powers not stepped in Israel would have been capable of marching on Cairo. (i shit you not, they were more than ready to do it when England Russia and the US said no).
ps. 2.5 billion dollars and really all of foreign aid by the US is nothing compared to the rest of the budget

2.5. Billion seems like a lot of money to me. And if you include the money going to Israel and other countries, wouldn't it be better spent on Public Education and Medical Research? I don't know much about Middle Eastern politics, but if Egypt invaded Israel and Israel was capable of defending itself, does the U.S. really need to be giving money to either of these countries?

2.5. Billion seems like a lot of money to me. And if you include the money going to Israel and other countries, wouldn't it be better spent on Public Education and Medical Research?

No, it is better if it is not spent at all, or even collected for that matter.

I don't know much about Middle Eastern politics, but if Egypt invaded Israel and Israel was capable of defending itself, does the U.S. really need to be giving money to either of these countries?
I pretty much agree there.

The main point of all this thoough is that the US owes everyone money, everyone owes the US money and everyone owes everyone else money.
If one nation pays back all its debts to the penny, then the recivng nations would be able to pay back their debts and so on till the world is debt free. The problem then is the poor countries would still ahve ridiculour amounts of debt and they only owe us in GB and US because we keep throwing money randomly at the third world! Also the world would find itself quickly back in debt to itself! :confused:

The "national debt" is just an imbalance in goods, in relation to exports and imports, but we don't OWE anybody ANYTHING. You see, when the "national debt" is set equal to our capital account, we find that trade is balanced. Let's use an example:

I buy more from my grocer than he buys from me, and I bet it's the same with you and your grocer. That means we have a trade deficit with our grocers. Does our perpetual grocer trade deficit portend doom? If we heeded some pundits and politicians who are talking about our national trade deficit, we might think so. But do we have a trade deficit in the first place? Let's look at it.

Insofar as the grocer example, there are two accounts that I hold. One is my "goods" account, which consists of groceries. The other is my "capital" account, which consists of money. Let's look at what happens when I purchase groceries. Say I purchase $100 worth of groceries. The value of my goods account rises by $100. That rise is matched by an equal $100 decline in my capital account. Adding a plus $100 to a minus $100 yields a perfect trade balance. That transaction, from my grocer's point of view, results in his goods account falling by $100, but when he accepts my cash, his capital account rises by $100, again a trade balance.

The principle here differs not one iota if my grocer was located in another country as opposed to down the street. There'd still be a trade balance when both the goods account and the capital account are considered. Imbalances in goods accounts are all over the place. For example, my grocer buys more from his wholesaler than his wholesaler buys from him. The wholesaler buys more from the manufacturer than the manufacturer buys from him, but when we put capital accounts into the mix, in each case, trade is balanced.

LMFAO at this nonsense. It seems a little bit of knowledge and a lot of stupidity is a dangerous thing.

Look at it this way: When you buy $100 dollars of groceries, you then eat them. In order to buy more groceries you need more money, and you can't sell the old groceries because you've eaten them. Over the course of your life, if you want to balance out, you will have to acquire as much money somehow as you spend on your groceries, because groceries are used up.

Take the US a single entity (that's the point of this exercise). When it buys stuff, it has to acquire the money somehow to buy that stuff, and it can do that by selling either goods or services to the rest of the world. Because goods and services are consumed and used up, it does not matter that at the instant when the exchange occurs the balances are technically equal, because in effect consumption counterbalances production, and reduces assets. So it's just like a person, unsurprisingly. Like a person, if it spends more than it earns, it goes into debt. Real debt.



Honestly, does the person that wrote that (be glad it wasn't actually you) really believe that 100% of the world's economists had somehow missed this rather obvious revelation that he claimed to have found? Did it not occur to him that if all the authoritative opinions on the matter disagreed with his he might just have got the wrong end of the stick? Did something not twig in his mind to say 'hmmm, perhaps I should just check my logic here?' Evidently not.

[QUOTE=Southern Balkans]The main point of all this thoough is that the US owes everyone money, everyone owes the US money and everyone owes everyone else money.
QUOTE]

True, but on balance, the US owes more money than most (anyone?).

The main point of all this thoough is that the US owes everyone money, everyone owes the US money and everyone owes everyone else money.
If one nation pays back all its debts to the penny, then the recivng nations would be able to pay back their debts and so on till the world is debt free. The problem then is the poor countries would still ahve ridiculour amounts of debt and they only owe us in GB and US because we keep throwing money randomly at the third world! Also the world would find itself quickly back in debt to itself! :confused:

The debts are not from one nation to another in the majority. They are from the governments of nations to private investors. The investors do not owe much money, if any, to the governments so it is not a nett zero debt.

This is not about the repayment of aid, which is not a loan to start with. It is about the payment of treasury bonds.

No, it is better if it is not spent at all, or even collected for that matter.

I pretty much agree there.

Why? (to both statements.)

LMFAO at this nonsense. It seems a little bit of knowledge and a lot of stupidity is a dangerous thing.

Look at it this way: When you buy $100 dollars of groceries, you then eat them. In order to buy more groceries you need more money, and you can't sell the old groceries because you've eaten them. Over the course of your life, if you want to balance out, you will have to acquire as much money somehow as you spend on your groceries, because groceries are used up.

Take the US a single entity (that's the point of this exercise). When it buys stuff, it has to acquire the money somehow to buy that stuff, and it can do that by selling either goods or services to the rest of the world. Because goods and services are consumed and used up, it does not matter that at the instant when the exchange occurs the balances are technically equal, because in effect consumption counterbalances production, and reduces assets. So it's just like a person, unsurprisingly. Like a person, if it spends more than it earns, it goes into debt. Real debt.



Honestly, does the person that wrote that (be glad it wasn't actually you) really believe that 100% of the world's economists had somehow missed this rather obvious revelation that he claimed to have found? Did it not occur to him that if all the authoritative opinions on the matter disagreed with his he might just have got the wrong end of the stick? Did something not twig in his mind to say 'hmmm, perhaps I should just check my logic here?' Evidently not.

So you are saying it is impossible to make money in the real estate market?

So you are saying it is impossible to make money in the real estate market?

No he wasn't he was saying that grocery speculation is not a growth industry.
i.e. the nature of the goods purchased matters, and governments tend not to purchase goods with any resale value.

No he wasn't he was saying that grocery speculation is not a growth industry.
i.e. the nature of the goods purchased matters, and governments tend not to purchase goods with any resale value.

Uh-uh, I gather that. However, the relative wealth of a nation is linked to more than just its productive capacity. Asset appreciation can more than cover shortfall in trade balance, and over an extended period.

I am not saying it is desirable, but national economies can continue to grow and prosper, despite chronice trade gaps. Look at the UK.

(And too great a trade surplus can be bad also).

How much (approxomatly) does the US owe because the UK government owes about £38 billion. COmbined with all other debts of companys and people like credit cards and mortgages the UK owes £1 trillion :(

Uh-uh, I gather that. However, the relative wealth of a nation is linked to more than just its productive capacity. Asset appreciation can more than cover shortfall in trade balance, and over an extended period.

I am not saying it is desirable, but national economies can continue to grow and prosper, despite chronice trade gaps. Look at the UK.

(And too great a trade surplus can be bad also).

I have no problem with that, but I do have a problem with the Public debt. A completely different thing. The two together, a trade deficit, and a government deficit are problematic as the first implies that money is being syphoned out of the economy rather than helping to expand it, and the second requires expansion of the economy as one of the cures.

The UK public debt is a lot lower, as is and was the trade deficit. As is often the case, a little can be good but excess is a problem.

How much (approxomatly) does the US owe because the UK government owes about £38 billion. COmbined with all other debts of companys and people like credit cards and mortgages the UK owes £1 trillion :(

Don't you mean 380 billion pounds? (Sorry I don't have the pound sign...stupid US keyboards).

I have no problem with that, but I do have a problem with the Public debt. A completely different thing. The two together, a trade deficit, and a government deficit are problematic as the first implies that money is being syphoned out of the economy rather than helping to expand it, and the second requires expansion of the economy as one of the cures.

The UK public debt is a lot lower, as is and was the trade deficit. As is often the case, a little can be good but excess is a problem.

Yeah, but he was talking about trade balances.

I also dislike large public debts, though sometimes a small deficit can be beneficial to add liquidity to the economy.

The UK public debt is about the same size as the US relative to GDP. (Unless you count those silly SS "bonds", which shouldn't be counted, because they will never be paid. Ever.)

The trade gap for the US is silly at the moment, but the US has been running one for a lot shorter time than the UK. Also, it is now actually starting to close.

In 2004 the Public debt was $706 billion in the UK (PPP)

I dont know if my statistics are quite right but the Newspapers have been trumpeting that we have £1 trillion in debt, that is ALL debts combined government, private, public etc

I dont know if my statistics are quite right but the Newspapers have been trumpeting that we have £1 trillion in debt, that is ALL debts combined government, private, public etc

Nah, I imagine that it is a lot more than that.

The UK public debt is about the same size as the US relative to GDP. (Unless you count those silly SS "bonds", which shouldn't be counted, because they will never be paid. Ever.)



Would you care to go back and read the discussion I had with Squi on exactly this point. The SS bonds do count, they have to count, and pretending they don't is just burying your head in the sand.

Technically they are future debt, not current debt, but they are debt all the same.

The US has a Public debt of 65% of GDP, the UK has 39.6%. These are not about the same.

Y
The trade gap for the US is silly at the moment, but the US has been running one for a lot shorter time than the UK. Also, it is now actually starting to close.

Next point. What on earth makes you think that the trade deficit for the US is starting to close? If the US obeys its obligations to the WTO then the gap is likely to increase, dramatically. However I feel that this is about as likely as Microsoft obeying the European Court ruling in Europe.

You may have a larger debt now but we are catching up Gordon Brown is determined to spend more and more

Would you care to go back and read the discussion I had with Squi on exactly this point. The SS bonds do count, they have to count, and pretending they don't is just burying your head in the sand.

Technically they are future debt, not current debt, but they are debt all the same.

The US has a Public debt of 65% of GDP, the UK has 39.6%. These are not about the same.

As long as the fund is in surplus, they are meaningless. The fund is now, and always will be in surplus. (The idiots in washington will see to that).

In any case, there is no vested right to social security. The government could reduce benefits, cancel the program, increase the SS tax, increase the age to recieve benefits, means test it, or a whole host of other things tommorow. And there is nothing anyone can do about it. Nor would it effect the US's bond ratings. This is substantially different to defaulting on actual treasury issues that are held by the public at large.

Further, you can't buy an SS bond, there is no after market at them, and the interest rates are purely hypothetical.

Finally as a matter of law, a single entity cannot be both the holder and issuer of the same debt.

(Interestingly enough, back in the 80s, the social security fund was joined to the general fund, making this whole argument irrelevant. Unfortunately, people got all worked up about it, and it was described as "stealing from the trust fund" &c. So it was put back. But I ask you, what do people think would happen if SS was really run the way they think it should be, i.e. the trust fund and "lockbox" method. These same people complain about trade deficits and government overspending, can you imagine the damage that would be done to the economy it the US government started sequestering hundreds of billions of dollars from the economy every year? Frankly there is no other option that to spend the surplus, and this is how they have to do it.)

Next point. What on earth makes you think that the trade deficit for the US is starting to close? If the US obeys its obligations to the WTO then the gap is likely to increase, dramatically. However I feel that this is about as likely as Microsoft obeying the European Court ruling in Europe.

It was down in march.

clicky (http://www.newratings.com/analyst_news/article_828358.html)

As long as the fund is in surplus, they are meaningless. The fund is now, and always will be in surplus. (The idiots in washington will see to that).
Only if money is directed to that fund at some future time from some source other than SS fund contributions. Hence the future debt aspect.

In any case, there is no vested right to social security. The government could reduce benefits, cancel the program, increase the SS tax, increase the age to recieve benefits, means test it, or a whole host of other things tommorow. And there is nothing anyone can do about it. Nor would it effect the US's bond ratings. This is substantially different to defaulting on actual treasury issues that are held by the public at large.
What would the investment industry's image of the US government be if it defaulted on SS payments? There may be no legal requirement to pay the benefits, but there are very very strong pragmatic reasons to pay the benefits. The US government needs to attract investment, to cover its deficit. If it does not pay out its obligations investors will abandon ship in droves.

Further, you can't buy an SS bond, there is no after market at them, and the interest rates are purely hypothetical.

Finally as a matter of law, a single entity cannot be both the holder and issuer of the same debt.
Both are technical points and make no difference to the fact that money destined to pay benefits has been spent on other things and has to be recovered to pay those benefits for the reasons indicated above.

(Interestingly enough, back in the 80s, the social security fund was joined to the general fund, making this whole argument irrelevant. Unfortunately, people got all worked up about it, and it was described as "stealing from the trust fund" &c. So it was put back. But I ask you, what do people think would happen if SS was really run the way they think it should be, i.e. the trust fund and "lockbox" method. These same people complain about trade deficits and government overspending, can you imagine the damage that would be done to the economy it the US government started sequestering hundreds of billions of dollars from the economy every year? Frankly there is no other option that to spend the surplus, and this is how they have to do it.)

There is no problem with borrowing on the fund, it is just that this borrowing is real. Don't try to argue that because the government is the executor of the fund, the money does not have to be repaid. It does. There is a debt there. All I am arguing is that these intragovernment bonds are real, and not paper, debts. (I get the idea that the feel good line of thinking, that if we dress this up in this way it looks better, has become endemic in US economics. Confidence is king, so confidence tricks work.)

Only if money is directed to that fund at some future time from some source other than SS fund contributions. Hence the future debt aspect.


What would the investment industry's image of the US government be if it defaulted on SS payments? There may be no legal requirement to pay the benefits, but there are very very strong pragmatic reasons to pay the benefits. The US government needs to attract investment, to cover its deficit. If it does not pay out its obligations investors will abandon ship in droves.


Both are technical points and make no difference to the fact that money destined to pay benefits has been spent on other things and has to be recovered to pay those benefits for the reasons indicated above.



There is no problem with borrowing on the fund, it is just that this borrowing is real. Don't try to argue that because the government is the executor of the fund, the money does not have to be repaid. It does. There is a debt there. All I am arguing is that these intragovernment bonds are real, and not paper, debts. (I get the idea that the feel good line of thinking, that if we dress this up in this way it looks better, has become endemic in US economics. Confidence is king, so confidence tricks work.)

Alright, say that tommorow, the US government joined Social Security to the general fund, and retired the SS bonds. Are you saying that world confidence in US treasury issues would collapse?

It was down in march.

clicky (http://www.newratings.com/analyst_news/article_828358.html)

Fair enough. I sit corrected.

Looking in detail however, the deficit decreased due to reductions in consumer spending, much more than increases in exports. Not the best way of reducing the deficit, but better than none. (This will likely impact on the GDP figures for March.)

In March, the goods deficit decreased $5.2 billion from February to $59.4 billion, and the services surplus increased $0.4 billion to $4.4 billion. Exports of goods increased $1.0 billion to $72.1 billion, and imports of goods decreased $4.2 billion to $131.5 billion. Exports of services increased $0.5 billion to $30.1 billion, and imports of services increased $0.1 billion to $25.7 billion.
Linky (http://www.bea.gov/bea/newsrel/tradnewsrelease.htm)

Alright, say that tommorow, the US government joined Social Security to the general fund, and retired the SS bonds. Are you saying that world confidence in US treasury issues would collapse?

No. I am saying that this double talk of "These bonds are not real debt" would stop. They are not current debt, but they do represent future commitment to spending money the US government does not have. i.e. future debt.

Oh, and the interest payments on the bonds is there to compensate for the lost revenue that the fund should have had by investing this capital elsewhere. It is not imaginary, it is critical to the SS benefits being paid.

Fair enough. I sit corrected.

Looking in detail however, the deficit decreased due to reductions in consumer spending, much more than increases in exports. Not the best way of reducing the deficit, but better than none. (This will likely impact on the GDP figures for March.)

The US is probably due for a slow down in GDP growth. Something has to been done about the housing market too, before that turns into another dot bomb fiasco.

use a shitty currency like the dollar for selling oil.

Because when people try to change to using other currencies they get threatened with military action by the US. Iraq was selling oil for euros. Iran is planning to set up a euro-based oil Bourse next year.

The dollar has been artificially inflated for the last 20 odd years by the fact that oil is traded in dollars. If you want oil, you need dollars, so people always need to buy dollars, so the dollar value is inflated. If Iran successfully starts trading oil in euros, expect the dollar to tumble even further in the markets.

No. I am saying that this double talk of "These bonds are not real debt" would stop. They are not current debt, but they do represent future commitment to spending money the US government does not have. i.e. future debt.

Oh, and the interest payments on the bonds is there to compensate for the lost revenue that the fund should have had by investing this capital elsewhere. It is not imaginary, it is critical to the SS benefits being paid.

The fund never has invested money elsewhere in all it's seventy year history. In fact, that is a major no-no. (Also is brings into play the questionable practice of a national govenrment speculating in financial markets). However, even if the US had not actually spent a penny over total revenues in that time, there would still be a US "national" debt because the surplus would have to have been returned to the economy throught government spending.

Frankly, I think the funds should be merged, as the current set up is silly. (And it would change the entry in the CIA world factbook overnight).

I see where you are coming from, in that the US has voluntarily chosen to "block off" $3 trillion dollars on its own balance sheet as a pledge to future SS payments. But I don't think that it is a really meaningful commitment, because like I say, the funds could be merged tommorow wiping out $3 trillion, and it wouldn't make any difference.

Uh-uh, I gather that. However, the relative wealth of a nation is linked to more than just its productive capacity. Asset appreciation can more than cover shortfall in trade balance, and over an extended period.

I am not saying it is desirable, but national economies can continue to grow and prosper, despite chronice trade gaps. Look at the UK.

(And too great a trade surplus can be bad also).

I perfectly understand that. I was addressing the risible notion that when one person buys something else there is no debt created, because what you have bought is the same value as the money you spent on it. I was not trying to argue that money can't be accrued in any way other than by selling groceries or whatever - I was just phrasing my reply in terms of the example originally given.

As for a trade surplus being bad - if your debt payments are the same then it is better to run a deficit than a surplus, because it's effectively extra money with which to buy things. But you increase the costs of maintaining your debt, and that is why it is a short-term tactic. That isn't to say that it's wrong, but if you don't balance your account then there are consequences in terms of currency markets in particular, and possibly your credit terms. Reducing debt is almost always worthwhile if you can. You can save deficits for when you need them.

And I agree with Alien Born - all debt is real debt if you've got to pay it back at some point. I don't know the details of the SS bonds, I admit. What are their terms?

I'm confused about this whole national debt thing. I know that the U.S. has a national debt and I know that other countries have debts to the U.S. so my question is who owes who the most? And is there a single country in the world that isn't in debt to someone else?


I've joined very late into this discussion but have noticed that with the exception of one person, no one seems to realise that countries do not actually owe each other money. If they do it is done by proxy. The true entity that loans money is the Bank, namely the international banks - World Bank.... The US has the Federal Reserve Bank. Is it a national bank, meaning belonging to the US? No! It is a central bank but also an international bank, owned by private hands, not foreign countries. These private hands are the true government behind most of our governments. The Federal Reserve prints the money (not validated or backed by Gold anymore) and lends moneys out to other Banks and financial institutions for a certain percentage of interest. The banks then lend to the people 10 times the amount they had borrowed with interest. This is called fractional reserve banking, which is quite absurd when seen from the perspective of the people but extremely profitable for banks. This is a lot more complex than what is explained here but it would do all of you a lot of good to study it on your own, even those of you who are economics students. Your curriculums do not teach you about the illegality of this system and how it swindles the people and its government. It is purely one-sided in the long run leaving the people and governments unable to pay off their debts. And if you add corrupt politicians and presidents who actually represent the corporate and the banking community instead of the people (although they may claim to), then you are bound to go on a down hill trip with your deficits increasing infinitely.

The solution is 'No debt' and self sustaining communities who rely on their own resources for survival. Only such communities may survive it; for all other consumer oriented societies I'm afraid it's quite hopeless. You are going to be left dependent on a system that treats you as a cog of this huge industrial machine and worse you will be left with almost no skill fit for basic survival. Your education system does not prepare you for independence because it is dictated by the the same industry that drives you to dependence and debt in return for some modern comforts that cost you your freedom.


Galilean

The fund never has invested money elsewhere in all it's seventy year history. In fact, that is a major no-no. (Also is brings into play the questionable practice of a national govenrment speculating in financial markets). However, even if the US had not actually spent a penny over total revenues in that time, there would still be a US "national" debt because the surplus would have to have been returned to the economy throught government spending.

Frankly, I think the funds should be merged, as the current set up is silly. (And it would change the entry in the CIA world factbook overnight).

I see where you are coming from, in that the US has voluntarily chosen to "block off" $3 trillion dollars on its own balance sheet as a pledge to future SS payments. But I don't think that it is a really meaningful commitment, because like I say, the funds could be merged tommorow wiping out $3 trillion, and it wouldn't make any difference.


The first part is why government pension schemes don't work. The fund has to be able to invest, to obtain the results necessary to keep at least parity with inflation.

The funds should be merged, if and only if the SS contributions are taxation in the same way as other taxes are. If there is a legal difference (and I don't know about this) then they have to be kept separate, and any capital transfer has to be in the form of a loan. I guess this is the case, as otherwise it really makes very little sense.

The US$ 3 trillion (or whatever the figure is) would be eliminated from the current debt, true, but it is a future debt regardless. I do believe, however, that this is not legaly possible, as if it were,it would have been done.

The first part is why government pension schemes don't work. The fund has to be able to invest, to obtain the results necessary to keep at least parity with inflation.

The funds should be merged, if and only if the SS contributions are taxation in the same way as other taxes are. If there is a legal difference (and I don't know about this) then they have to be kept separate, and any capital transfer has to be in the form of a loan. I guess this is the case, as otherwise it really makes very little sense.

The US$ 3 trillion (or whatever the figure is) would be eliminated from the current debt, true, but it is a future debt regardless. I do believe, however, that this is not legaly possible, as if it were,it would have been done.

There is no legal reason why the funds cannot be merged. Only political ones. I believe the same thing happened in the UK with the NHS in the past. And in the early 1980s Reagan tried to merge the funds completely. (It ended up being a half assed deal, but it actually stopped more SS bonds being issued for a while, though it never retired them).

SS contributions are taxes. Though they are paid on a different schedule and are not deductible from income. But then that it because SS payments are not taxed as income.

I doubt that the US public will ever accept investing social security surplusses. In fact, the very reason why there are these silly "bonds" in the first place, is that politicians make a career out of misinformation in respect of social security. It's also to do with attitudes. The large voting senior population likes to feel that social security is something "they paid for" out of "thier own pockets" and that they are now living off the money they contributed to the system when they were working. This is of course utter fantasy, not least because they conrtibuted at a significantly lower rate than current contributors. (Which indeed is another reason why social security can be viewed as just another tax).