What If We Paid Off The Debt? The Secret Government Report

Discussion in 'Economy' started by Synthaholic, Oct 22, 2011.

  1. Synthaholic
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    Synthaholic Platinum Member

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    What If We Paid Off The Debt? The Secret Government Report


    *snip*



    This was seen in many ways as good thing. But it also posed risks. If the U.S. paid off its debt here would be no more U.S. Treasury bonds in the world.


    "It was a huge issue.. for not just the U.S. economy, but the global economy," says Diane Lim Rogers, an economist in the Clinton administration.
    The U.S. borrows money by selling bonds. So the end of debt would mean the end of Treasury bonds.


    But the U.S. has been issuing bonds for so long, and the bonds are seen as so safe, that much of the world has come to depend on them. The U.S. Treasury bond is a pillar of the global economy.


    Banks buy hundreds of billions of dollars' worth, because they're a safe place to park money.


    Mortgage rates are tied to the interest rate on U.S. treasury bonds.
    The Federal Reserve — our central bank — buys and sells Treasury bonds all the time, in an effort to keep the economy on track.


    If Treasury bonds disappeared, would the world unravel? Would it adjust somehow?



    *snip*
     
  2. CrusaderFrank
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    CrusaderFrank Diamond Member

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    I'm confused. Are we talking about not issuing new debt or prepaying the $14T we owe? I don't believe that the bonds are callable but i could be wrong.

    If we get a surplus, all that happens is that we don't issue new debt as the old matures.

    Yields on treasuries wil increase, the economy will boom
     
  3. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    First of all, it ain't happening. Not in my lifetime or yours, the US Gov't is going to be in debt by 16 trillion by the end of 2012 and most likely will be double that by 2022, or near to it. For God's sake, we're running 1.4 trillion in yearly deficits, we can't even balance our budget let alone pay down any of the debt.

    But say we did, somehow someway pay off the debt. Interest rates around the country and around would have to key off something else, the prime bank rate or something.
     
  4. Synthaholic
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    Synthaholic Platinum Member

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    This was a secret report from the end of the Clinton administration, when he left us with a surplus - remember? - never released at the time because...well, it's all there in the link. You just have to bother clicking and reading.
     
  5. waltky
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    waltky Wise ol' monkey Supporting Member

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    China playin' it cool...
    :confused:
    Amid Europe debt crisis, EU goes hat in hand to China
    October 28, 2011 - Although China, the world's largest creditor, has bought European bonds in the past, experts doubts that it will invest in a new investment vehicle meant to alleviate the Europe debt crisis.

     
  6. waltky
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    waltky Wise ol' monkey Supporting Member

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    Greeks gonna muck it all up?...

    Will the Greek referendum snatch economic defeat from the jaws of victory?
    November 1, 2011 - After months of having their pride savaged by the rest of the continent, the Greeks have astounded Europe by announcing a referendum on the debt crisis plan.
     
    Last edited: Nov 1, 2011
  7. Baruch Menachem
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    Baruch Menachem '

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    No rational person is calling for the pay down of the US debt. It is the money supply. We even have a balanced budget it causes a recession, like what happened in 2001.

    There is also the fact it is part of the international money supply. Business and governments the world over use the dollar to settle transactions, and more are needed every year. The deficit has to grow a bunch just to maintain enough cash every year. That is part of the reason the Bush people were so lazzis fair about the thing. It was growing the money supply both here and abroad, but it was manageable in its increase from year to year. It grew like the economy grew.

    It is also worth remembering that a large part of the debt was recycled. The largest holder of US government debt is various entities of the US government, like the Fed or Social Security.


    The Obama budget is not quite the same. It is 1.5x the total receipts of the treasury. It is not manageable, sustainable or healthy.

    GM, for most of its existence, built ever larger debt as it became an ever larger company. It did this for years. Whenever they wanted to build a new factory or whatever, they issued new bonds.

    What killed them off was the debt that was the pension plan. Much the same problem that will face the US soon or late, as the Social Security birth/death rate problem is not going away. We are trying to fix the problem with mexicans, but it is not sustainable.

    And guess what, the asset that the Social Security Trust fund holds as its only investment for our old age...? US Treasury bonds. That means that as more folks collect, more of the bonds are redeemed by social security, and the government has to sell those bonds to someone else in order to make the payments.


    Anyway, a US government debt is like the nationaldrink after dinner. A little wine after dinner is essential for health. those who live to 100 have been drinking half a bottle a day for 90 years. However, instead of a couple glasses of wine after dinner, you instead go for a full bottle of MD 20-20 instead of dinner, that is not healthy. That will kill you before you are 30. The way Bush and Reagan ran the deficits, we had money supply for an expanding world wide economy. The way Obama is running the deficits, we are on a really horrible binge that will have us feeling very sorry the morning after . Which is where we are now after three years of Obama. Facing the morning after. And Obama's only cure is a hair of the dog that bit you.
     
  8. Oddball
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    If Synthia got his mitts on it, it can't be that big a secret. :lol:
     
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  9. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    You might be understating the debt problem a little bit, I think it's a little more serious. And the problem extends to the unfunded debt liabilities in the future, which some have estimated to be well over 100 trillion. I think we're in big trouble if we can't find a way to address the spending and revenue issues in a responsible manner.
     
  10. Baruch Menachem
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    True, we need to make sure the books are honest and all the obligations are clear. Unfortunately, the Obama folks are addicted to Enron accounting.

    The essential reality is we can't do a balanced budget, as that would be recessionary. But that does not mean would should go off like sailors home from 13 months at sea either.
     

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