national debt ~ whats the point

[oZma]

i have been trying to get learned on what the heck the point of it is... i see both sides

democrats seem to say the national debt is different from normal household debt.  different in the sense we don't ever have to pay it back... that we can print our way out if needed.   but i wonder, if there is no point in ever paying it back, why have it?  to sell treasuries to the public?  to sell them overseas?  but then if we can just print the money for the interest payments, why tax us?  why take our money when printing money doesn't seem to be an issue? i get confused with this one and am still researching how it makes sense.

republicans seem to say we have to balance the budget, that if we don't we could default because we can't pay the interest on the debt and we need to cut back on spending instead of taking out more debt. 

how do you feel?

[Medusa]

Look at Greece that is result of "we don't ever have to pay it back" little difference is they cannot print money because using € and cannot leave union because once you sign contract with devil ...
Zimbabwe is good example of what "we can print our way out if needed" do, noone want colorful papers printed by state, it is just garbage, money have it value because there is some amount of them and cannot be created from nothing, it is simple why is sand cheaper than diamonds? because it is everywhere if there were money laying everywhere, they become as priced as sand 

[Jamie D]

The problem the United States risks with it's out-of-control spending is that the Federal Reserve will need to print more money, and devalue the currency in circulation (to make it easier to service its debt), and thus create an inflationary trend.  If you have an increase in money unsupported by physical reserves, or an increase in output and/or services, it could lead to a devastating condition known as "hyperinflation."

Anyone on a fixed income would be seriously hurt.

[Joelene9]

Anyone on a fixed income would be seriously hurt.

Yes, me.  Politics, bad politics.  Ted Kennedy said before he passed away that the Nixon administration has a good health plan, but Ted Kennedy and the senate Democrats decided to vote against it.  Kennedy said that it was politics and apologized for that.  The same is going on now with the Republican House majority.  The last 4 years had the Republicans having this "Just say no" on any effort by Obama on the budget mess. 
  The idea of printing more money is a very bad idea.  Obama already nixed the platinum $1 billion coin minting.  I'll give him that. 

  Joelene

[Flan]

The US national (read: governmental) debt is like a credit card: while the 1% hordes money the government spends like it's going out of style with it's supposed fix to be make the people suffer or the 1% who is vilified for their success (gained or otherwise). When that naturally fails, we're supposed to view increasing the government's "credit card" limit like a good thing?

[oZma]

I agree with all of you... and it really seems to be the consensus... although I like to try and learn as much add possible about the people that disagree with me

check out this forum post.  this guy seems to know what he is talking about, I might probe him some questions cause it's hard to find democrats that seem to know what they are talking about when it comes to the economy

http://www.politicalforum.com/economics-trade/282185-national-debt-does-not-have-paid-off-will-never-paid-off.html

let me know what you think... read all the pages, see if we can come up with some questions for him/her

[suzifrommd]

democrats seem to say the national debt is different from normal household debt.  different in the sense we don't ever have to pay it back... that we can print our way out if needed.   but i wonder, if there is no point in ever paying it back, why have it?  to sell treasuries to the public?  to sell them overseas?  but then if we can just print the money for the interest payments, why tax us?  why take our money when printing money doesn't seem to be an issue? i get confused with this one and am still researching how it makes sense.

republicans seem to say we have to balance the budget, that if we don't we could default because we can't pay the interest on the debt and we need to cut back on spending instead of taking out more debt. 

how do you feel?

I think a more accurate  description of the differences would be that both sides see debt and deficits as a way to winning votes. Democrats tend to be doing it by committing to social programs that are not sustainable, Republicans by promising tax cuts to the point that the government cannot pay its bills.

Until people stop rewarding this behavior by voting for candidates that promise them stuff over candidates that tell the truth, this spiral will continue until the government either prints money, in which case the inflation that Jamie D talks about will be a certainty, or finally executes the needed cuts and tax hikes, in which case the economy will suffer.

[gennee]

Argentina had a severe economic crisis several years ago. They defaulted. All the debt had to be forgiven. Argentina is doing well. The stock market is a bubble that will burst. The real unemployment is 21%. Printing more money keeps the banks solvent and does nothing for the average American.    

[Shantel]

Then there's the business of the fact that the American dollar is fiat money, like monopoly money it isn't backed by any precious metals like gold or silver, so in all practicality it is totally worthless save for the fact that It has been the the International Monetary Fund's world standard as a reliable currency. However now that the US GDP is lagging behind there are ongoing discussions at the IMF about dropping the USD in favor of possibly the Chinese Yuan coupled with a package of other national currencies. If that happened we could heat our homes with $100 bills because they would indeed be worthless paper.

In order to offset the illusion that the US is flat broke and close to bankruptcy, the bills need to be paid to keep good faith with our creditors, just like each individual has to do on a personal basis or suffer sudden and severe deprivation.

[oZma]

i say we do this
http://www.lewrockwell.com/rothbard/rothbard190.html

or privatize our currency... make it compete for us to use it!

everything that lacks competition fails (i. e. gov) but gov has the (legal use of) guns, err violence, so their failures continue to destroy our lives :-(

[Shantel]

i say we do this
http://www.lewrockwell.com/rothbard/rothbard190.html

or privatize our currency... make it compete for us to use it!

everything that lacks competition fails (i. e. gov) but gov has the (legal use of) guns, err violence, so their failures continue to destroy our lives :-(

Yes, that's a problem, but if the self aggrandizing morons on both sides of the aisle and the white house run us into a ditch, then they will put themselves out of business and no doubt we will survive and start over.

[oZma]

Yes, that's a problem, but if the self aggrandizing morons on both sides of the aisle and the white house run us into a ditch, then they will put themselves out of business and no doubt we will survive and start over.

thats why you should take your wealth out of their system... stop collecting fed reserve notes and trade the monopoly money for something worth a damn... silver? gold? maybe bit coins?

[Kayla]

thats why you should take your wealth out of their system... stop collecting fed reserve notes and trade the monopoly money for something worth a damn... silver? gold? maybe bit coins?

There is a problem why pegging currency to valuable metals and gems failed and it's called the triffin dilemma. The dilemma occurs when you have a national currency that is also sought after as an international one. Therefore, the printer of this currency (America) has to run up budget deficits to meet foreign currency demands while also running a budget surplus to avoid the currency becoming over-valued. Hence the rise of fiat currency. Private businesses selling valuable coins, metals, and minerals would face the same problem. How can they sell in such a way as to make a profit without printing more than they take in, thus undervaluing their own currency?

On currency competition, the problem of different individuals & groups not accepting certain currencies arises. When private individuals reject transactions based on the type of currency, then economic transactions slow and the larger economy slows as well. Thus it is in everyone's interest to have a universally accepted currency. Likewise, the dollar is one of, if not, the strongest currencies in the world. If not the strongest, it is easily the most widely accepted as the only two things of value that are internationally accepted are gold and dollars. Countries wanted to expand their international portfolio have but so much gold they can buy (it's limited) while the dollar is more readily available.

Likewise, as to the OP and why we have public sector debt, I feel this article explains why both parties are wrong. What happens is when the government spends money then someone in the private sector gains money. The 2nd chart does a good example of showing the mirror relation between public debt and private surplus. This allows our economy to expand, recover from economic downturns, and proves that Keynes theory about "spending our way out of a recession" correct.

[oZma]

There is a problem why pegging currency to valuable metals and gems failed and it's called the triffin dilemma. The dilemma occurs when you have a national currency that is also sought after as an international one. Therefore, the printer of this currency (America) has to run up budget deficits to meet foreign currency demands while also running a budget surplus to avoid the currency becoming over-valued. Hence the rise of fiat currency. Private businesses selling valuable coins, metals, and minerals would face the same problem. How can they sell in such a way as to make a profit without printing more than they take in, thus undervaluing their own currency?

On currency competition, the problem of different individuals & groups not accepting certain currencies arises. When private individuals reject transactions based on the type of currency, then economic transactions slow and the larger economy slows as well. Thus it is in everyone's interest to have a universally accepted currency. Likewise, the dollar is one of, if not, the strongest currencies in the world. If not the strongest, it is easily the most widely accepted as the only two things of value that are internationally accepted are gold and dollars. Countries wanted to expand their international portfolio have but so much gold they can buy (it's limited) while the dollar is more readily available.

Likewise, as to the OP and why we have public sector debt, I feel this article explains why both parties are wrong. What happens is when the government spends money then someone in the private sector gains money. The 2nd chart does a good example of showing the mirror relation between public debt and private surplus. This allows our economy to expand, recover from economic downturns, and proves that Keynes theory about "spending our way out of a recession" correct.

ill take a read Kayla... i wasn't saying the USA should go to gold/silver standards... but more specifically to protect your wealth from the out of control spending gov, that putting some of your wealth into PMs is a good idea. 

as for the competition of currency?  hmmm, i should do more research def. 

what do you think the best/stable currency model is? austrian economics with a gov monopoly on money?  competition?

[Kayla]

what do you think the best/stable currency model is? austrian economics with a gov monopoly on money?  competition?

I'm no economist by any means, but I do feel that Keynes' model explains economics best.

[oZma]

I'm no economist by any means, but I do feel that Keynes' model explains economics best.

check out my thread Econ Battle Raps!!

[oZma]

Likewise, as to the OP and why we have public sector debt, I feel this article explains why both parties are wrong. What happens is when the government spends money then someone in the private sector gains money. The 2nd chart does a good example of showing the mirror relation between public debt and private surplus. This allows our economy to expand, recover from economic downturns, and proves that Keynes theory about "spending our way out of a recession" correct.

but thats making the assumption that gov spends the money correctly.  if the Gov keeps throwing money at something like HD-DVDs while Blu-ray is clearly the better format... how does this enrich the private sector? Eventually HD-DVD fails and all the investment by the Gov gets cleared out with bankruptcy... oh is this where the Gov is supposed to step in and bail out HD-DVD?  Like they bailed out GM, which is now partly owned by China cause they still failed? 

i read the article and understand that one of the biggest problems we have is private debt... and the way to solve that is higher wages... but jut throwing money or Gov spending doesn't guarantee higher wages.  But we can force higher wages with laws?  That prevents hiring of low skilled individuals and makes wages more arbitrary than based on skill sets.  This creates more unemployment by making it "illegal" to hire somebody for what they are "worth".

IF Gov would increase spending and WOULD invest/spend more money in industries that are GUARANTEED to prosper, this theory makes sense... but to make the main portion that is missing is the "GUARANTEE" ~ which requires telling the future....

The Gov will never be able to know where to spend, subsidize, etc... to fix the economy... well for starters because they usually help their "friends" first or  use "intuition" which may as well be fortune telling...

The article also insinuated that a economic recovery would happen...

If you take the average person, ask them what will cause them to spend more money: A policy announcement from Bernanke, or the promise of a well-paying job for years to come. The answer is obvious.

But a promise of a good job?  Really?  What does a promise mean?  That you can't be fired?  When you can't fire people, you end up with people not working hard... laziness... but that might not be what they meant?  I'm not sure, it was quite vague.

I'll keep with my Austrian perspective the economy is organic, you can't "jumpstart" it with spending

[Kayla]

but thats making the assumption that gov spends the money correctly.  if the Gov keeps throwing money at something like HD-DVDs while Blu-ray is clearly the better format... how does this enrich the private sector? Eventually HD-DVD fails and all the investment by the Gov gets cleared out with bankruptcy... oh is this where the Gov is supposed to step in and bail out HD-DVD?  Like they bailed out GM, which is now partly owned by China cause they still failed? 

i read the article and understand that one of the biggest problems we have is private debt... and the way to solve that is higher wages... but jut throwing money or Gov spending doesn't guarantee higher wages.  But we can force higher wages with laws?  That prevents hiring of low skilled individuals and makes wages more arbitrary than based on skill sets.  This creates more unemployment by making it "illegal" to hire somebody for what they are "worth".

IF Gov would increase spending and WOULD invest/spend more money in industries that are GUARANTEED to prosper, this theory makes sense... but to make the main portion that is missing is the "GUARANTEE" ~ which requires telling the future....

The Gov will never be able to know where to spend, subsidize, etc... to fix the economy... well for starters because they usually help their "friends" first or  use "intuition" which may as well be fortune telling...

I would agree that misuse of stimulus spending is problematic, but I think you're confusing a tool for a desired ends with misuse of said tool. Keynes advocated for giving money to the people via having the unemployed dig ditches, build roads, bridges, or other common good public interest projects. From there, their increased wealth created demand for which market could recover. Likewise, once the economy is moving again, that creates demand on private businesses to hire better individuals and produce better wages. Of course this is all hypothetical and every theory has it's shortcomings.

Conversely, the idea of the government throwing money at the blu-ray disc industry runs counter to Keynes central idea about demand driving the economy. That is more in line with supply side economics. Granted, both (spending on blu-ray & hiring ditch diggers) have the same effect on the public debt/private surplus ratio. I don't think Keynes would advocate picking private sector "winners & losers" as much as he would try to find a way to channel cash into the economy from the bottom up to get it moving again.

I'll keep with my Austrian perspective

And I'll stick with mine. To be honest, this is why I avoid politics debates. Karl Rove said it best "No body changes their mind on politics after turning 19." It's just one of those things in which both of us could argue until we're blue in the face and get no where.

Politics aside, I love the pup in your avatar. It's adorable!!

[oZma]

I would agree that misuse of stimulus spending is problematic, but I think you're confusing a tool for a desired ends with misuse of said tool. Keynes advocated for giving money to the people via having the unemployed dig ditches, build roads, bridges, or other common good public interest projects. From there, their increased wealth created demand for which market could recover. Likewise, once the economy is moving again, that creates demand on private businesses to hire better individuals and produce better wages. Of course this is all hypothetical and every theory has it's shortcomings.

Conversely, the idea of the government throwing money at the blu-ray disc industry runs counter to Keynes central idea about demand driving the economy. That is more in line with supply side economics. Granted, both (spending on blu-ray & hiring ditch diggers) have the same effect on the public debt/private surplus ratio. I don't think Keynes would advocate picking private sector "winners & losers" as much as he would try to find a way to channel cash into the economy from the bottom up to get it moving again.

And I'll stick with mine. To be honest, this is why I avoid politics debates. Karl Rove said it best "No body changes their mind on politics after turning 19." It's just one of those things in which both of us could argue until we're blue in the face and get no where.

Politics aside, I love the pup in your avatar. It's adorable!!

thanks! she's my baby...

I'm not getting mad or anything,  but I do think the opposite of political debate.  I think we need to talk about them more so people can be educated instead of scared to talk about these things.  we need to teach people HOW to debate... not NOT to debate, but thats just my opinion I guess?

there is much I don't know about Keynes... and your post shows a little more light, I think? the public works idea makes sense for spending and giving people things to do.  my argument may be off, but thats why I need debates!

and to add... I changed my political view after 19 you shouldn't limit people

but then again, going from a conservative to a libertarian is easier than a democrat to a republican LOL