How would paying down the debt effect the economy?

[Oddball]

Ah, I didn't articulate what I meant well enough then. When I said in the black I meant the annual budget.

I have no idea what would happen if we told the Fed to shove it under either scenario but whatever it is I suspect it would be big.

No less big than the eventual economic collapse that will ensue, when the mathematics can no longer support paying American debts, a massive domestic welfare state and the interest on the FRN funny money Ponzi scheme.

I can agree with that but would it resemble that kind of a collapse?

Hard to say what it would look like, as I can't think of a modern analogue....Maybe the Confederacy?

Suffice to say that the people who relied upon money-out-of-thin-air to support their lifestyles, on both the borrower and lender ends of the equation, would be in for a serious reality check.

Of course, this would also open up immense opportunities in the worlds of private lending and marketing of debt instruments.

 

[Sallow]

Good thing and certainly a surprise to the bankster parasites at the Fed.

That would be an defacto admission that the Fed has been a big fat scam all along...But that's just a little more honesty than I expect from the average politician.

Such a change would surely ripple across the entire global economy. What do you think might happen both here in the US and globally as a result? What significant changes, if any, do you foresee?

I read an article yesterday about Iceland defaulting on their debt. What they experienced was 20% inflation. For one year.

Then their economy then stabilized and now they have 2-3% growth unencumbered by all that debt.

Let me look for that article.

EDIT: Here it is:
Iceland exits recession | Business | The Guardian

Decision to force bondholders to pay for banking system's collapse appears to pay off as economy grows 1.2% in third quarter.
Iceland famously agreed in a referendum to reject a scheme to repay most of its debts that were once worth 11 times its total national income.
In contrast to Ireland, Iceland's taxpayers refused to foot the bill for the debts accumulated by the banking sector. Bondholders were told to accept dramatic reductions in the value of repayments on bank debt after the sector borrowed beyond its means to fund ambitious investments abroad.
Iceland's currency has fallen by around a quarter (inflation?), helping its exports.

Iceland rejected the Banker debt and it didn't destroy them.

Hmm.

PROFILE

Geography
Area: 103,000 sq. km. (39,600 sq. mi.); about the size of Virginia or slightly larger than Ireland.
Cities: Capital--Reykjavík (pop. 118,326). Other towns--Kópavogur (30,357), Hafnarfjörður (25,913), Akureyri (17,573), Reykjanesbær (14,091), Garðabær (10,643).
Terrain: Rugged.
Climate: Maritime temperate.
Highest elevation: Hvannadalshnjúkur at Vatnajökull Glacier, at 2,110 meters (6,923 ft.).

People
Nationality: Noun--Icelander(s). Adjective--Icelandic.
Population (January 1, 2010): 317,630.
Annual population growth rate (2009): -0.54%.
Ethnic group: Relatively homogenous mixture of descendants of Norwegians and Celts.
Religion: Evangelical Lutheran, 84.4%.
Language: Icelandic.
Education: Compulsory up to age 16. Attendance--99%. Literacy--99.9%.
Health: Infant mortality rate (1999-2008 average)--2.4/1,000. Life expectancy (2008)--men 79.6 years, women 83.0 years.
Work force (2008, 184,100): Commerce--32.2%; manufacturing--8.2%; fishing/fish processing--3.4%; construction--10.05%; transport and communications--6.3%; agriculture--2.3%; government, education, and health--27.2%; other services--9.55%. Unemployment (March 2010): 9.3%.

Government
Type: Parliamentary republic.
Independence: 1918 (became "sovereign state" under Danish Crown); 1944 (establishment of republic);
Constitution: 1874.
Branches: Executive--president (head of state), prime minister (head of government), cabinet (12 ministers). Legislative--63-member unicameral parliament (Althingi). Judicial--Supreme Court, district courts, special courts.
Subdivisions: 26 administrative districts and 77 municipalities.
Major political parties: Social Democratic Alliance (SDA), Left-Green Party (LGP), Independence Party (IP), Progressive Party (PP), and The Movement.
Suffrage: Universal 18 years and above.
National holiday: June 17, anniversary of the establishment of the republic.

Economy
GDP (2009): $12.0 billion.
GDP growth rate: (2007) 3.8%; (2008) 1.3%; (2009) -6.5%.
Per capita GDP (2009): $37,622.
Inflation rate: (2008) 18.1%; (2009) 7.5%.
Central government budget: (2009) $4.5 billion; (2010 proposed) $4.5 billion.
Annual budget deficit: (2009 estimated) $1.2 billion; (2010 proposed) $790 million.
Net central government debt: (2007) 10.3% of GDP; (2008 estimated) 41.3% of GDP; (2009 estimated) 78% of GDP.
Natural resources: Marine products, hydroelectric and geothermal power.
Agriculture: Products--potatoes, tomatoes, cucumbers, carrots, roses, livestock.
Industry: Types--aluminum smelting, fishing and fish processing technology, ferro-silicon alloy production, hydro and geothermal power, tourism, information technology.
Trade: Exports of goods (2009)--$4.0 billion: marine products 41.7%; industrial products 48.6%; agricultural products 1.5%; and miscellaneous 8.2%. Partners (2009)--EEA 83.5% (Netherlands 30.7%, U.K. 12.8%, Germany 11.3%, Spain 4.8%, Norway 5.8%); U.S. 3.9% ($155.3 million). Imports (2009)--$3.3 billion: industrial supplies 30.4%; capital goods, parts, accessories 21.5%; consumer goods 15.6%; transport equipment 9.7%; food and beverages 10.2%; fuels and lubricants 12.4%. Partners (2009)--EEA 64.8% (Germany 8.3%, Sweden 8.1%, Netherlands 8.6%, Denmark 7.3%, U.K. 4.5%, Norway 13.0%); U.S. 6.9% ($248 million); China 5.0%; Japan 3.4%.
Iceland

This is the model for a world power by Conservatives? Or should we stop being a world power and become more like Iceland.

Or is this post just nonsensical cherry picking.

 

[Article 15]

Good thing and certainly a surprise to the bankster parasites at the Fed.

That would be an defacto admission that the Fed has been a big fat scam all along...But that's just a little more honesty than I expect from the average politician.

Such a change would surely ripple across the entire global economy. What do you think might happen both here in the US and globally as a result? What significant changes, if any, do you foresee?

I read an article yesterday about Iceland defaulting on their debt. What they experienced was 20% inflation. For one year.

Then their economy then stabilized and now they have 2-3% growth unencumbered by all that debt.

Let me look for that article.

EDIT: Here it is:
Iceland exits recession | Business | The Guardian

Decision to force bondholders to pay for banking system's collapse appears to pay off as economy grows 1.2% in third quarter.
Iceland famously agreed in a referendum to reject a scheme to repay most of its debts that were once worth 11 times its total national income.
In contrast to Ireland, Iceland's taxpayers refused to foot the bill for the debts accumulated by the banking sector. Bondholders were told to accept dramatic reductions in the value of repayments on bank debt after the sector borrowed beyond its means to fund ambitious investments abroad.
Iceland's currency has fallen by around a quarter (inflation?), helping its exports.

Iceland rejected the Banker debt and it didn't destroy them.

Interesting.

I wonder what happens differently when it is $10 trillion defaulting.

 

[Sallow]

Interesting.

I wonder what happens differently when it is $10 trillion defaulting.

Here are some more interesting facts..

DEFENSE
The U.S. and Iceland signed a bilateral agreement in 1951 stipulating that the U.S. would make arrangements for Iceland's defense on behalf of NATO and provide for basing rights for U.S. forces in Iceland. In March 2006 the U.S. announced it would continue to provide for Iceland's defense but without permanently basing forces in the country; Naval Air Station Keflavik closed in September 2006 after half a century
<snip>
In 2008, the Government of Iceland passed its first defense budget ($20 million) and on June 1, 2008 established the Icelandic Defense Agency (IDA), under the direction of the Ministry for Foreign Affairs. The IDA oversees support of cooperative defense activities, military exercises in Iceland, and maintenance of defense-related facilities, including the operation of the Iceland Air Defense System radar sites, which the United States handed over to Iceland on August 15, 2007. Defense spending in the 2009 budget was reduced to roughly $13 million, due to government-wide budget cuts as well as considerable devaluation of the krona. The Government of Iceland announced in 2009 that the short-lived IDA would be closing in 2010. It offered assurances, however, that all of the IDA's functions and responsibilities would continue.
Iceland

 

[Article 15]

Interesting.

I wonder what happens differently when it is $10 trillion defaulting.

Here are some more interesting facts..

DEFENSE
The U.S. and Iceland signed a bilateral agreement in 1951 stipulating that the U.S. would make arrangements for Iceland's defense on behalf of NATO and provide for basing rights for U.S. forces in Iceland. In March 2006 the U.S. announced it would continue to provide for Iceland's defense but without permanently basing forces in the country; Naval Air Station Keflavik closed in September 2006 after half a century
<snip>
In 2008, the Government of Iceland passed its first defense budget ($20 million) and on June 1, 2008 established the Icelandic Defense Agency (IDA), under the direction of the Ministry for Foreign Affairs. The IDA oversees support of cooperative defense activities, military exercises in Iceland, and maintenance of defense-related facilities, including the operation of the Iceland Air Defense System radar sites, which the United States handed over to Iceland on August 15, 2007. Defense spending in the 2009 budget was reduced to roughly $13 million, due to government-wide budget cuts as well as considerable devaluation of the krona. The Government of Iceland announced in 2009 that the short-lived IDA would be closing in 2010. It offered assurances, however, that all of the IDA's functions and responsibilities would continue.
Iceland

Pussies.

We lose enough defense money in the desert to fund their military for centuries.

 

[Paulie]

Defaulting on debt when you're otherwise still pretty powerful in a lot of other ways isn't necessarily a bad thing.

How many big corporations have defaulted on debt, organized a bankruptcy, and then emerged stronger than they were previously?

Fuck a bank.

 

[Oddball]

Especially the Fed.

 

[Paulie]

Especially the Fed.

But we must increase the debt ceiling, because a default would almost certainly open up a black hole in the galaxy and swallow up the planet. And then we'd all be dead and that would be HORRIBLE!!!

 

[boedicca]

Defaulting on debt when you're otherwise still pretty powerful in a lot of other ways isn't necessarily a bad thing.

How many big corporations have defaulted on debt, organized a bankruptcy, and then emerged stronger than they were previously?

Fuck a bank.

The U.S. isn't a corporation. When corporations go BK, their currency (stock) is significantly devalued or destroyed, but the impact is limited to the company's shareholders. A U.S. federal government default would signficantly damage the broad economy by ruining the "full faith and credit" of the dollar.

The Feds take in plenty of money to service the interest on the debt now. That should be the first priority for disbursements with spending cut to the level which matches the balance of receipts.

 

[Paulie]

Defaulting on debt when you're otherwise still pretty powerful in a lot of other ways isn't necessarily a bad thing.

How many big corporations have defaulted on debt, organized a bankruptcy, and then emerged stronger than they were previously?

Fuck a bank.

The U.S. isn't a corporation.

Could've fooled me.

 

[freeandfun1]

Those using Iceland as a model are overlooking the FACT that Iceland's currency isn't the world's reserve currency.

If we default we'll recover; eventually. However, in the meantime, the world's economies will follow and also collapse and that would almost assuredly lead to a global war with most having their target hairs on the US since we will have been the ones that created the problem. Hell, they're already mad at us as it stands.... just think how bad it would get if we default and render the USD useless.

 

[Norman]

Technically paying down the borrowed debt would be foolish, as all money borrowed from the FED is free and we never have to pay it back. A lot of really stupid people do not understand that, but it is the current reality. The FED takes our interest payments and sends them to the Treasury.

No Interest = Free borrowing.

That's right. The Fed is a privately owned company. If they lost money on their "investments" well, too fuckin' bad for them.

Then maybe Congress would get back to it's Constitutionally mandated job of managing the money supply.

If fed loses money, the treasury covers it up. They have to have something behind the dollar for name sakes...

And the debt to fed is not the issue, but debt and trade deficits to all other nations.

 

[NYcarbineer]

Technically paying down the borrowed debt would be foolish, as all money borrowed from the FED is free and we never have to pay it back. A lot of really stupid people do not understand that, but it is the current reality. The FED takes our interest payments and sends them to the Treasury.

No Interest = Free borrowing.

Nonsense.

 

[Neubarth]

Technically paying down the borrowed debt would be foolish, as all money borrowed from the FED is free and we never have to pay it back. A lot of really stupid people do not understand that, but it is the current reality. The FED takes our interest payments and sends them to the Treasury.

No Interest = Free borrowing.

What about the foreign debt?

Very simple, have the FED buy it back if we want to.

 

[Toro]

In the last 60 years only three times has our national debt been less than it was the year before. Every time this happened it was in the 1950's and in each instance the debt decreased by less than 1%. To find the last time the debt was being paid down at any kind of significant manner you have to go back to the 1920's. It's been a while and things have changed a lot since then.

Government - Historical Debt Outstanding – Annual

So ...

What do y'all believe would happen to the economy if by some miracle we got into the black and were able to start chipping away at the debt?

Less resources would be dedicated towards the unproductive activity of paying interest. This would free up resources for investment. It would also lower interest rates since it would mean less competition for savings from the government.

 

[Neubarth]

In the last 60 years only three times has our national debt been less than it was the year before. Every time this happened it was in the 1950's and in each instance the debt decreased by less than 1%. To find the last time the debt was being paid down at any kind of significant manner you have to go back to the 1920's. It's been a while and things have changed a lot since then.

Government - Historical Debt Outstanding – Annual

So ...

What do y'all believe would happen to the economy if by some miracle we got into the black and were able to start chipping away at the debt?

Less resources would be dedicated towards the unproductive activity of paying interest. This would free up resources for investment. It would also lower interest rates since it would mean less competition for savings from the government.

We don't need to pay interest to the FED, so why go through the sham of pretending that we do? The reality is that we should be able to borrow for free from the FED because the FED can create money out of thin air.

There are a bunch of nincompoops who follow Ron Paul in his outrageous claims that the FED is printing money to pay for government spending. He is so fucking stupid that he does not have a clue about who prints the money. It is not the FED.

Now, according to the Neubarthian School of Economics, printing of excess money is not a good thing as it floods the world with excess dollars and that can be deflationary. Thus, we need to keep a lid on it.

Ont he other hand, the spending of Electronic Money from the FED (and thus creating jobs and growing businesses is a good thing, and we should encourage it.) Electronic money is not paper money.

We need to put people back to work. Thus we should encourage the spending of government electronic money on massive projects to facilitate transportation and use of natural resources. Failure to do so will keep us mired in the present situation where we are not creating enough jobs to put the new kids who are entering the workforce to work.