Why The National Debt Is Good For The Country

[Steelplate]

read my edit

 

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read my edit

Stay up night on that one?

 

[Steelplate]

read my edit

Stay up night on that one?

Hey... I'll increase my post count too...

Whatthefuckwasthatallabout?

 

[Meister]

OK... we have 10 pages of this thread that I am not willing to go through to decipher the ins and outs of the exchange...

Here's what I have to say on the matter... Debt is not all that good, or not all that bad.

It's not good in the fact that we can't keep adding to it in a willy nilly fashion. It's not bad if you look at the current debt in a long term fashion.

I will try to explain the best that I can....

First off.. Health Care is one our biggest pain in the ASS areas of our economy. Whether Conservatives like it or not... the bottom line is we are #1 in the WORLD in expense and #38 in quality of care.... no matter how you slice it... that's fucked up. Even the most ignorant of you Tea Partiers should be able to understand that.Second of all... We spend more than 8X our next LEADING competitor in the area of Military and defense spending. WTF??? Are we afraid that McDonnell Douglass or Boeing is going to sell to the Chinese? Is that what this is all about? That we have to keep them happy so they don't sell to the commies or the Muslim terrorists? I really don't get it... so someone who is in the know, explain it to me. Or is it just taxpayer welfare to keep otherwise unsustainable businesses afloat?

Help me to understand why we should keep on giving welfare to Insurance companies and Defense Contractors while our weakest citizens struggle to survive...

Drink some more of that Kool-Aid and get back to your echo chamber

Hey... you give a one line response... and I'll give you one back... FUCK YOU ASSHOLE!

Ok... look at my reason for going beyond the one line.....

Those numbers come from The World Health Organization... BTW..... I was wrong... I was pulling the 38th number from memory.... after researching.. you were right... I was drinking the kool aid.... it's 37th(sue me).... right behind Costa Rica and right behind Slovenia. Keep drinking YOUR kool aid motherfucker.

You actually trust WHO? The cards are stacked against the US. The criteria for live births differ between other countries and the US in how it's reported. Whether you want to believe that we have state of the art healthcare or not is your choice We have more MRI's in the US than the rest of the world does total. Quality of healthcare is not an issue in the US....take that to the bank.

 

[Sundial]

The dollar is a world currency and is used to buy things around the planet sundial. The amount of US debt held by the rest of the world has been going up quite a bit. Where is the corresponding increase in US jobs your theory says will occur? Fail.

Imagine you could write out an IOU and buy something. But instead of coming back to you for payment, the guy trades it to someone else, who trades it to someone else, etc. And it never comes back to you. That's a pretty good deal. You're getting something for nothing.

If foreigners trade dollars with each other, forever, without ever buying US goods and services, that's what they'd be doing.

At some point, however, foreigners, collectively, are more likely to decide they've got enough US dollars, and they'll want to turn them in for payment.

A dollar is an IOU for American goods and services. When a foreigner turns a dollar in for payment that's what he gets. American goods and services.

Ultimately the only use for dollars is to buy stuff from us. They don't have to buy stuff from us. They can keep the dollars instead. But if they want to get any use out of them - other than trading them with each other - that's all they can do.

And just like we create jobs in China (or wherever) when we use dollars to buy stuff from them, they will create jobs in the US when they use dollars to buy stuff from us.

Those IOUs. They cause inflation, as the dollars become worth less, foreigners rush to get rid of them. It costs us more to buy from them. That hurts us and is far from free.

Well, that's true. They buy dollars and create jobs and inflation in China. When they use those dollars to buy stuff from us the process will be reversed.

 

[Sundial]

I don't know I would say debt is good but there's a lot of truth in what you say. Running a business or the government of a cash basis means you bypass a lot a lot of good things, like the putting a man on moon and the interstate highway system. However, when you consistently grow debt faster than GDP growth, you will have problem. Interest will become such a large expense that it threatens your ability to continue borrowing and your credit standing with your lenders.

There is a point where debt becomes a problem. But we're not there. Japan has twice the debt that we do, as a ratio to GDP, and interest rates even lower than ours. Our interest rates are at historic lows, and the amount of interest we're paying is manageable.

Reducing unemployment, on the other hand, would improve the governments situation, because it would bring in more income in the long run.

You want to use Japan as a reference point in your debate?

Twenty years of economic stagnation and you want to use Japan? Please read this and get back to us, okay?
http://pzacad.pitzer.edu/~lyamane/hoshi1.pdf

I'm not arguing the Japanese have no problems. I'm arguing that their debt is not one of them, despite being larger than ours.

 

[gslack]

The OP is a complete whitewash...

Its is a very obvious attempt to dumb down people with half logic, and unsound reasoning.

DEBT by its very nature is NOT a good thing and to pretend it is with some kind thinly veiled double talk is asinine.

Debt in this instance is what you accrue on money you borrow. Willfully owing debt with no intention of paying it off whether its a person, entity, or government is never a good thing. And to try and make the argument it is somehow a good thing, no matter what kind of twisted logic used, is either ignorance of reality and finance, or a deliberate act to try and trick people into a false belief.

If you believe the OP's contentions, than I suggest you read up on finance and the Federal Reserve banking system or the fractional reserve system in general ASAP...

 

[Meister]

There is a point where debt becomes a problem. But we're not there. Japan has twice the debt that we do, as a ratio to GDP, and interest rates even lower than ours. Our interest rates are at historic lows, and the amount of interest we're paying is manageable.

Reducing unemployment, on the other hand, would improve the governments situation, because it would bring in more income in the long run.

You want to use Japan as a reference point in your debate?

Twenty years of economic stagnation and you want to use Japan? Please read this and get back to us, okay?
http://pzacad.pitzer.edu/~lyamane/hoshi1.pdf

I'm not arguing the Japanese have no problems. I'm arguing that their debt is not one of them, despite being larger than ours.

Their debt created the "The Lost Decade" in Japan. Good grief!!!!!

 

[Sundial]

This is an inherent flaw in the thinking or the left. You can use temporary spending increases tp deal with temporary unemployment problems during time of economic recession. The THEORY is quite sound. The failure is in the execution. Politicians do not give money back

Clinton did.
Bush didn't.
The evidence points to electing Democrats.

Sun points to unemployment as our problem and not spending. I would like to know where that employment is after spending trillions of dollars?

The emergency spending kept the economy from going off a cliff. As bad as things are, they could be worse.

It is not here simply because the idea that the government is creating employment through this spending is a complete myth.

If the government fired everybody, would the unemployment rate stay the same?

More so, none of this is temporary. The budget arguments highlight it well. After all the bickering there are virtually no cuts anywhere and we have gone through this TWICE!

Did you really just utter this!! That is absolutely insane. Essentially, our money is backed by… our money!

Actually it's even weirder than that. Our money is backed up... by our debt.

And you feel that is a more secure and sure backing then gold which is backed by its inherent rarity and value?

Yes. People need dollars to pay off bank loans and to pay their taxes. Gold, on the other hand, you don't need for anything.

Sure, should the entire system collapse then gold and silver will be worthless but so would dollars. Food would be the only commodity worth anything at that point. Gold will always hold value far better than a fiat currency. Your currency is only valuable as long as the government is able to make it that way.

I have trust in the government's ability to make it that way.

At some point, if we continue on this asinine road, the government will no longer be able to float that. I can’t say that I would prefer an actual gold backed system like we had before only because that is a far more complicated matter but to say our currency has is backed by bonds but gold is backed by nothing is plain dumb.

That is absolutely ridiculous. Where do you get the idea that a dollar has any connection to American goods and services?

From the fact that you need dollars to buy American goods and services. If Americans stopped accepting dollars, how much value would they have?

 

[Sundial]

You want to use Japan as a reference point in your debate?

Twenty years of economic stagnation and you want to use Japan? Please read this and get back to us, okay?
http://pzacad.pitzer.edu/~lyamane/hoshi1.pdf

I'm not arguing the Japanese have no problems. I'm arguing that their debt is not one of them, despite being larger than ours.

Their debt created the "The Lost Decade" in Japan. Good grief!!!!!

Their debt was response to slow growth, not the cause of it.

 

[FA_Q2]

This is an inherent flaw in the thinking or the left. You can use temporary spending increases tp deal with temporary unemployment problems during time of economic recession. The THEORY is quite sound. The failure is in the execution. Politicians do not give money back

Clinton did.
Bush didn't.
The evidence points to electing Democrats.

Actually, the evidence points to electing democrat president and republican congressmen but don’t let that stand in the way of your partisan hackery.

Besides that, no, Clinton did no such thing. The Clinton surplus and bubble have been explained a million times here on various threads. It has no connection with the ever increasing expenditures the government seems to continually need.

Sun points to unemployment as our problem and not spending. I would like to know where that employment is after spending trillions of dollars?

The emergency spending kept the economy from going off a cliff. As bad as things are, they could be worse.

SO you say and so no one seems to be able to show. All they are able to show is a bunch of mumbo jumbo and POOF, the economy seems to be saved. Some spending may have been necessary. The levels and actual spending that we did were not only nuts but mostly moot.

If the government fired everybody, would the unemployment rate stay the same?

Straw man. If the government fired half of the people they employ, returned that cash to the people and, more importantly, removed the MASSIVE amount of job killing regulations coupled with actually creating regulations that helped consumers over big business then yes, our employment would be FAR higher. The problem is not inherent in simply hiring people. There is more to obscene government spending than that.

A better question, if the government hired all unemployed, would our economic situation be better?

Actually it's even weirder than that. Our money is backed up... by our debt.



Yes. People need dollars to pay off bank loans and to pay their taxes. Gold, on the other hand, you don't need for anything.

Wow, utterly false. Our money is not backed by debt but rather by the government. If the US had a completely balanced budget we would still have money and it would still have value. You can get dollars with gold and will always be able to do so as long as the dollar has value. Even further than that, you will easily be able to pay for things with gold long after the dollar ceases to exist. Even MORE importantly, an ounce of gold will get you roughly the same amount of food today as it will in ten years. Try that with a dollar and you are screwed. Gold has value because it is valuable. The dollar has value only because our government says so and only as much as our government allows it to have.

Sure, should the entire system collapse then gold and silver will be worthless but so would dollars. Food would be the only commodity worth anything at that point. Gold will always hold value far better than a fiat currency. Your currency is only valuable as long as the government is able to make it that way.

I have trust in the government's ability to make it that way.

An inherent problem in your thought process. The government is not there to be trusted. That is what the vote is all about. Government should NEVER be trusted. You, me and every single American citizen are charged with carefully watching over it and regulating its actions through our votes. Unfortunately, as voter turnout and general American knowledge in politics shows, most Americans agree with you and simply trust there government. Hence where we are at today.

At some point, if we continue on this asinine road, the government will no longer be able to float that. I can’t say that I would prefer an actual gold backed system like we had before only because that is a far more complicated matter but to say our currency has is backed by bonds but gold is backed by nothing is plain dumb.

That is absolutely ridiculous. Where do you get the idea that a dollar has any connection to American goods and services?

From the fact that you need dollars to buy American goods and services. If Americans stopped accepting dollars, how much value would they have?

Your point? There is still ZERO connection between American goods and American dollars. MANY buisnesses in Europe accept dollars as well. Does that mean that every time a dollar is sent to china that the sopkeepers in Germany are guaranteed to see that productivity because that dollar is going to magically end up there? You are supposing that a dollar MUST be spent in America. That is insane. I cand spend that dallr the world around and should I choose, I can convert that dollar to any currency whatsoever.

You are treating debt from a country as if it is not debt. That, somehow, it is actual vale for the one that owes and not for the entity that is owed. Debt is debt no matter who carries it. Sure, nations do not work on the same principles that people or companies do but that does not change the meaning or nature of the debt itself. All that means is that it can be quite healthy for a country to, at times, carry certain amounts of debt and that sometimes a country needs to barrow. The end result, though, is that debt is cash that is owed and not valuable to the one that owes. No matter who it is owed to, debt can crush a country and we are seeing the first fissures through the world that is based on a system of never ending and ever increasing debt. We need to address this issue NOW.

 

[Meister]

I'm not arguing the Japanese have no problems. I'm arguing that their debt is not one of them, despite being larger than ours.

Their debt created the "The Lost Decade" in Japan. Good grief!!!!!

Their debt was response to slow growth, not the cause of it.

Which perpetuated it. Don't you think we have slow growth? We are going down the same rabbit trail as they did. WAKE UP! Dude, your thought process is down right scarey. I can't believe that people actually think like this.

 

[Freedomlover]

What do you think would happen if you paid only the interest on your mortgage or your credit cards? If you did not pay the mortgage down you would lose your house. If you only paid the interest on your credit cards and kept using them, evenually you would go bankrupt. (Economics 101)

 

[gslack]

That guy is trolling for effect. He has no intention of actually defending his claims here logically.

 

[saveliberty]

That guy is trolling for effect. He has no intention of actually defending his claims here logically.

He's either a troll or stupid. Ignore time for him.

 

[Sundial]

A better question, if the government hired all unemployed, would our economic situation be better?

Yes. If the government hired everyone who was willing and able to work, the economic situation would be better.

Wow, utterly false. Our money is not backed by debt but rather by the government.

Money is backed by debt.

You can see the balance sheet for the Federal Reserve here.
The first set of tables are the Fed's assets. The Fed has 1.6 trillion in US Treasury securities, and another 900 billion in mortgage-backed securities. (The mortgages are new; before the most recent crisis the Fed bought government debt exclusively.) The Fed has a handful of other assets, but those two categories are the lion's share.

The second set of tables are the Fed's liabilities. The Fed has issued about $1 trillion in currency ("Federal Reserve Notes"), and has another 1.6 trillion which are reserve deposits. Again, it has some other miscellaneous liabilities, but those two are the lion's share.

Liabilities are what the Fed owes to others. Assets are what others owe to the Fed. As with any bank, assets must equal liabilities (+capital). If a bank has more liabilities than assets, it's insolvent.

US currency is a liability of the Fed because it is an IOU. (The "Note" in "Federal Reserve Note" is for "promissory note," which is a kind of IOU.)

When the Fed writes promissory notes, it creates a liability on itself. It must, therefore, create an asset of at least equal value in order to stay solvent. The asset the Fed buys when it issues money is debt. Traditionally government debt, but recently mortgage debt as well.

The asset that backs the Fed's liabilities, therefore, is debt.

Commercial banks operate the same way, except that they're required to keep a certain amount of Fed liabilities as reserves. That's why it's called the Federal Reserve System.

Anyway, the point is that just as commercial banks' liabilities (also known as customer deposits) are backed by loans they make to the public, the Fed's liabilities (currency and Federal Reserve accounts) are backed by the loans it makes to the US.

Money is, therefore, not just backed by debt, it is debt itself. It is bank debt - it is the money the banks owe to us. And it's backed by the money we owe to them.

If the US had a completely balanced budget we would still have money and it would still have value.

It's paying off the debt that would cause the problem, not balancing the budget.

But I do need to retract something I said before. While the Fed has traditionally relied on US government securities, recently (since the financial crisis) it's bought mortgages as well. Treasury debt may be preferable, but it's not required. So paying off the debt would not necessarily put the Fed out of business.

You can get dollars with gold and will always be able to do so as long as the dollar has value. Even further than that, you will easily be able to pay for things with gold long after the dollar ceases to exist. Even MORE importantly, an ounce of gold will get you roughly the same amount of food today as it will in ten years.

Between about 1973 or so and 1980 gold went from $60 - $850. Over the next ten years it fell to about $400, and then fell another $100+ in the ten years after that. Since then, as I'm sure you know, it's skyrocketed. Gold's record is not one of price stability.

Try that with a dollar and you are screwed. Gold has value because it is valuable.

Gold has value for the same reason anything has value. Because people think it does. It has no inherent value.

The dollar has value only because our government says so and only as much as our government allows it to have.

An inherent problem in your thought process. The government is not there to be trusted. That is what the vote is all about. Government should NEVER be trusted. You, me and every single American citizen are charged with carefully watching over it and regulating its actions through our votes. Unfortunately, as voter turnout and general American knowledge in politics shows, most Americans agree with you and simply trust there government. Hence where we are at today.

At some point, if we continue on this asinine road, the government will no longer be able to float that. I can’t say that I would prefer an actual gold backed system like we had before only because that is a far more complicated matter but to say our currency has is backed by bonds but gold is backed by nothing is plain dumb.

That is absolutely ridiculous. Where do you get the idea that a dollar has any connection to American goods and services?

From the fact that you need dollars to buy American goods and services. If Americans stopped accepting dollars, how much value would they have?

Your point? There is still ZERO connection between American goods and American dollars. MANY buisnesses in Europe accept dollars as well. Does that mean that every time a dollar is sent to china that the sopkeepers in Germany are guaranteed to see that productivity because that dollar is going to magically end up there? You are supposing that a dollar MUST be spent in America.

No. I'm not supposing a dollar must be spent in America. I'm supposing that America is the only place where a dollar must be accepted.

That is insane. I cand spend that dallr the world around and should I choose, I can convert that dollar to any currency whatsoever.

You are treating debt from a country as if it is not debt. That, somehow, it is actual vale for the one that owes and not for the entity that is owed. Debt is debt no matter who carries it.

Debt is an asset to the person to whom it is owed, and a liability to the person who owes it. That is the nature of debt. I've never said otherwise.

Sure, nations do not work on the same principles that people or companies do but that does not change the meaning or nature of the debt itself. All that means is that it can be quite healthy for a country to, at times, carry certain amounts of debt and that sometimes a country needs to barrow. The end result, though, is that debt is cash that is owed and not valuable to the one that owes. No matter who it is owed to, debt can crush a country and we are seeing the first fissures through the world that is based on a system of never ending and ever increasing debt. We need to address this issue NOW.

It's true that too much debt can crush a country. It's also true that borrowing too little can unnecessarily choke off the economy's growth. If you wanted to compare it to a company it would be to a business that could borrow money in order to expand its operations. If you forced businesses to "live within their means," by forcing them to expand using only their cash flow, they'd still grow, but they'd grow more slowly than they could if they could borrow.

 

[gslack]

Thomas Jefferson once said

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations which grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered."

I think I trust in Thomas Jefferson more so than financial double talk and nonsensical ramblings of one of their pundits with less than half real knowledge on the subject...

I have responded to you directly on here a few times and you ignore them and keep right on rambling... I think you fear backing up your claims, and do so out of a lack of any real knowledge on the subject..

 

[gslack]

The entire concept of the Fractional reserve system relies on a false pretense. One that is simple yet easily overlooked. The pretense being that you can get something from nothing in the physical world.

They rely on the ignorance of the people and their elected representation in the ways of debt and finance. Sure most of us understand how debt works, or how a loan operates, but very few of us (even the highly educated) truly grasp the fundamental pretense of it all. Those who do grasp it are often IN the system themselves, or find themselves using this knowledge to manipulate the system themselves.

They like to gloss it over with double speak and rambling nonsense similar to the legalese used by the legal profession, and back it up with numbers and equations that although show complexity, serve no higher purpose than to over-complicate the system to the laymen. The essence of it all, its simplest truth, is no more complex than the age old concept of the con..

The Federal Reserve or Central banks run on the fractional reserve system. This system allows the central banks to loan out nearly infinite amounts on assets numbering a mere fraction of that which they loan out. Say a bank starts out with 10,000 dollars from investors, they can loan out 100,000 on a 10% reserve system. And a 10% reserve is actually not a given but the central bank itself decides how much it can keep in reserve. That reserve can be higher or lower. Now say this bank takes 10000 of its "new money" it can claim in funds to loan out, and opens a another bank the next town over. Then the process starts all over and that bank can loan 100,000 again and they can repeat this process indefinitely. Thats a simplification but an accurate one just the same.

Now remember if they loan out more than the 100,000 they are allowed, they can borrow from their branches, or place a fraction of their "new money" back into the reserve to generate even more "new money". They claim they have assets totaling 100,000 per bank when in reality they had 10,000 per bank. Say they have 10 banks, 10 x 100,000 = 1,000,000 but in reality its 10 x 10,000 = 100,000.. Keeping mind they can do this exponentially you can start to see where the problem is.

Then you take into consideration they charge interest on loans, fees for services, charges for checks, and you can easily see why there are so many banks. Of all the charges and fees, interest is the most interesting. A lot of people see an interest rate as say 10% to seem not too bad. Some may see it as being something like this.. They borrow 10,000 and are asked to pay it back in 5 years at 10% interest. So they may assume the 10% is on the borrowed sum meaning the pay back 11,000 dollars when its all said and done. Well anyone who has ever borrowed money should know by now this is not the case at all. A better way to view it would be The interest is on the service of using that sum over the alotted time period of the loan. So 10,000 borrowed at 10% over 5 years is around 15,000... that means you pay them half again what you borrowed in just 5 years.

Now some will tell you that you can pay a larger sum each month and apply that to the principle and pay it off sooner saving a great deal of interest. And why yes you certainly can and you had better if you can. However how many people can and will be able to do this, and how many even know they can? We are talking very simple short term loan here, imagine a house. A house where the bank payment can be nearly half a persons total income or more.

Say a 100,000 loan at 10% over 20 years... Then after 20 years you will have paid 200,000 on top of the principle you borrowed.

Sure you can get better than 10% and with a down payment you knock off quite a bit but the point still remains, you paid them back at an actual rate of nearly 100% or more of the principal borrowed amount. And knowing the fact this money was created using 10% in actual assets, you can soon realize how much money a bank can make off of the people in a very short time.

Now you think of this in terms of governmental debt numbering in the trillions, where the interest rate can vary based on the governments ability to pay (which is decided by the bank), and you see the real problem..

The OP poster can use all the mindless banter and meaningless claims and double talk he chooses, but the reality will still be there for anyone who chooses to open their eyes and realize just how simple it really is. Its not rocket science, its a simple math and numbers game designed to confound people.

The poster will have you go on buying into the concept there was actually 100,000 in each banks assets, when in reality they had 10,000. Sure you can play this game for a long time in a wealthy economy. But sooner or later they will no longer be able to keep the money supply up to meet the demand, and the money will lose so much of its value it will become worthless. And their plan for this ultimate end? A new currency of course. One with a clean slate based on unions of countries rather than one nation.

I say again you cannot make something from nothing in this physical world, especially if you expect to make it valuable...

 

[Sundial]

The poster will have you go on buying into the concept there was actually 100,000 in each banks assets, when in reality they had 10,000. ...

You're confusing capital, reserves, and assets.

Capital is what's left over after subtracting liabilities from assets.

Reserves, in our system, refers to cash on hand plus the amount in the bank's Federal Reserve account.

Assets are what a bank owns, and what it is owed.

A bank that had 10k in assets and 100k in liabilities would be bankrupt. One that had 10k in capital, on the other hand, would have somethin like twice as much capital as it needed.

 

[gslack]

The poster will have you go on buying into the concept there was actually 100,000 in each banks assets, when in reality they had 10,000. ...

You're confusing capital, reserves, and assets.

Capital is what's left over after subtracting liabilities from assets.

Reserves, in our system, refers to cash on hand plus the amount in the bank's Federal Reserve account.

Assets are what a bank owns, and what it is owed.

A bank that had 10k in assets and 100k in liabilities would be bankrupt. One that had 10k in capital, on the other hand, would have somethin like twice as much capital as it needed.

NO!.. Now stop the nonsense. I was very clear and took great care make it as easy for people to understand.

Capital when referring to a bank would be its money minus the reserve (hence its base), property and other valuables which collectively represent its wealth.

A liability is what they are responsible to pay either long term or short term, things like; accounts payable, taxes, wages, accrued expenses, and others such as deferred revenues. Long term would be something you pay for exponentially or continually, while short term is often in terms of months, or a year.

Now reserves in banking refers to exactly what the name implies. Money reserved in the vault or on deposit or any combination of the two..

A fractional reserve banking system is again exactly as the name implies. Only a fraction of the total deposits managed by the bank must be kept in reserve.

I really think you don't have a clue on this... Your argument was senseless. And did not address any points I made. All you did was claim I did something I clearly did not do, and attempt to argue for it.. I didn't confuse anything or get anything mixed up here, obviously you just cannot argue what you posted. I seriously think you should read up on this BEFORE posting absolutes about it. Your responses appear like you have have a bare minimum of knowledge on this subject but trying to give the impression of more.