posted
My brother's dragging me out to a party -- or rather, to find a party -- right now, so I don't have the time to post in-depth on this, but the question's been annoying me for some time now, and I need to get it floating out in the open.
It's painfully clear Bush has no intention of fiscal responsibility, let alone running a balanced budget, let alone considering paying off the seven trillion dollar debt, three fourteenths of which he's responsible for. If he's elected, I dare not dream about the depths of debt the US will reach -- but I'm willing to put money on double digits.
We can't possibly pay this off. What's more, we won't -- any system of paying off such a debt would take us half a century (if we're lucky), and there are far too many neo-conservatives in power to ever raise taxes on those with money. Will we ever pay it off?
I've long suspected the US will default on the payments when paying off just the interest of these loans becomes unmanageable. Paying off the debt in its entirety, even over the long run, would cripple the country's finances, drive business out of the country by taxation, boost foreign economies (and thus further double-damning American business with envigorated foreign business and leeching taxes)... In short, it'd wreck us. Maybe not at the moment, if we act immediately, but we all know that won't happen with a Republican in office.
I heard rumors that the IMF, that liberal cabal, spoke out against the US' monstrous debt, though I never looked further into the matter. Was it out of fear of default?
I'm beginning to doubt any course of action but interest payments and eventual default. Of course, along the line, conservatives will take advantage of the debt to insist that the beast must be starved, and cut off Medicare, welfare, all social programs that don't directly affect the rich. But in the end, I doubt the debt in its entirety will ever be paid off. Does anyone believe it will?
Posts: 3293 | Registered: Jul 2002
| IP: Logged |
posted
Blame Alexander Hamilton. I think he was the first person to argue that federal debt is actually good for the economy. It stabilizes values or something. I'm a conservative, but I'm not a fan of increasing the national debt all the time.
I'm not even a fan of spending :Carl Sagan voice: billions and billions of dollars :/end sagan: on rebuilding Iraq. I think the war was justified, but I don't think we need to make it a nicer place to live than West Virginia. (I realize it is far, far from that point now and I don't know how much it should cost.)
But I'm not worried about the debt. I used to worry about it when I was younger, but I also thought the introduction of the zinc penny was the mark of the beast when I was younger. I was worried about Brazil defaulting on their international loans. I'm not sure where I was hearing about that, but it worried me. Russia defaults on theirs. And yet somehow they were lending money to Iraq.
So I don't really understand the debt. I don't even understand my debts. Old folks keep telling me "Them as understands interest collects it. Them as don't understands interest pays it." Apparently having a grasp of English grammar precludes fiscal responsibility.
Posts: 11017 | Registered: Apr 2003
| IP: Logged |
Not likely. The amount of debt is a factor in our money supply. The Federal Reserve's reserves, which is issues loans off of, are treasury bonds. If we pay them off, our money supply contracts. Then you get 1929 all over agian. The Federal Reserve is a big player in this problem.
quote: Of course, along the line, conservatives will take advantage of the debt to insist that the beast must be starved, and cut off Medicare, welfare, all social programs that don't directly affect the rich.
I guess if you don't want to address the source of the problem, you could keep those programs.
You make this out to be a Republican problem, which absurd. It was a democrat, Woodrow Willson who helped ram through the Federal Reserve Act of 1913, creating the mechanism which the feds use to pile up this debt. Before then, the gov had to borrow that money from private lenders, meaning there wasn't an infinite supply. Now the fed just buys up all the treasury bonds that aren't sold to foreign contries trying to keep their currency low, like japan. It was a parade of democrats who set up all the spending which has caused this gi-normous debt. There is no doubt that republicans are going right along with them, but to make it seem to be a republican problem is dishonest.
quote: IMF, that liberal cabal
The IMF takes money from us, by way of the fed, and pays it to 3rd world dictators so they can maintain their nationalized industries, thus rendering any improvement in those countries, impossible.
Posts: 859 | Registered: Oct 2003
| IP: Logged |
They do, but the debt doesn't just go away. We end up paying it out of the federal reserve because their loans are all garanteed by the world bank and IMF, which we support.
Posts: 859 | Registered: Oct 2003
| IP: Logged |
posted
Great! now I can go back to laying awake at night worrying. Russia, Brazil, the US... Sometimes I think there are problems that simply come from a country being too large. Not that the US is really supposed to operate as one country. Wasn't there a time we were supposed to operate as really cooperative separate states?
Posts: 11017 | Registered: Apr 2003
| IP: Logged |
posted
Yes pooka, but the federal government couldn't be nearly as important as it is now, if the states actually operated as they were intended. The funny thing about all this is that the founding fathers had specific thoughts about debt. Jefferson likened it to placing the next generation in chains, which is exactly what it is. We are forced to work off the spending of our ancestors.
Posts: 859 | Registered: Oct 2003
| IP: Logged |
posted
One thing we should all be able to agree on is that a borrow and spend budget is completely unsustainable. Deficit spending can certainly help bring a nation out of recession, but what is happening now can only be described as insane.
While I am a Canadian, and as such enjoy a government with a fiscal situation that is quite enviable to the American one, the current situation in the US troubles me deeply. Being a young person, I can look forward to inheriting the costs of the current Congress and administration's reckless borrowing, as well as those of the previous thirty years. The Americans of my generation and the ones after will in all likelihood be faced with the burden of paying off this enormous debt.
It is entirely reasonable to foresee a worldwide depression touched off by the accumulating cost of such massive borrowing. I don't mean to be a doomsayer, but this is exactly the situation that the IMF is worried about, and is the impetus for their warning about US current account deficits.
In twenty years, if current trends in the US and the EU regarding current account deficits are not curtailed, the maintenance payments alone will be enough to significantly burden the budgets of both the US and the EU, not to mention Japan. This in itself is a huge problem, but compounding it will be a likely dramatic rise in energy prices.
During the energy crisis of the ?70s, there were a few swing producers of oil, that is producers with the excess capacity to adjust for drops in production or rises in demand. Saudi Arabia and Venezuela spring immediately to mind. Despite great increases in production capacity and a significant fall in oil and gas prices since the energy crisis, production is much closer to capacity than it once was. The only remaining swing producer is Saudi Arabia, and even they are running dangerously close to capacity. For several straight years, oil production has dropped. While we are in no danger of running out of oil and gas soon, it is not running out that is the problem; it is running out of cheap oil. Alberta's oil sands are an excellent example of this. Only recently, as cheaply accessible stocks of oil are becoming less productive, is it becoming economical to synthesize crude from tar sands bitumen, or tap the Hibernia fields with massively expensive rigs designed to withstand the full fury of the North Atlantic. I'm sure Twinky can elaborate on this further, since he works in this industry, but as one of the enemy, he is sure to disagree with my conclusions.
So what am I getting at? Well, quite simply, by the time I am 40, the price of oil could conceivably be several times what it is now. There is no replacement for this resource that could be rolled out in time to take up the slack, notwithstanding a major breakthrough in some other source of energy. This would compound disastrously with the cost of the previous generation's debts, and the cost of supporting them in retirement. The possibility for a depression worse than in the '30s is very real. The possibility of wars to secure resources is also real. I am expecting my generation to have a significantly lower living standard than my parents'. I'm not saying this as a lament or a complaint, but I'm worried that unless these problems are addressed now, they will be much worse when they arrive. These events are not a matter of if; they are a matter of when. The debts must be paid or defaulted on, oil production will not keep pace with demand forever, and Bush's generation is close to retirement. These factors could compound disastrously unless we prepare for their impact now. A prescription drug plan on borrowed money and an energy plan that the VP is going to court to keep secret aren't steps in the right direction.
Posts: 1769 | Registered: Feb 2000
| IP: Logged |
posted
To help wrap up a major tangent...let's agree that deficit spending would make a lot more sense were it directed at building more nuclear plants.
Posts: 1839 | Registered: May 1999
| IP: Logged |
posted
Bah, Nuclear power doesn't come close to being as cheap as oil, even after the initial startup costs.
Posts: 1769 | Registered: Feb 2000
| IP: Logged |
posted
Charon - that is absolutely not true. I should add, I'm speaking as a nuclear physicist here, but also a left wing liberal. Nuclear power is cheap. It is relatively sustainable and, compared to coal and oil is clean.
(Radioactive waste can be contained. Aside from that, the number of deaths from oil/coal pollution is far far less from the number of deaths now (even counting Chernobyl and Three Mile Island) or projected for nuclear power).
I still think we should use more solar and wind power. And all you people in the US where smart cars are readily available, and you can afford them, buy them! (My next car will be a smart car).
But until solar and wind power become commerciably available, nuclear power is a heck of a lot better than oil or coal power.
posted
*chuckle* Hamilton's view was considerably more complex than that. He saw federal debt as healthy in small amounts, and particularly when used to relieve the states of debt. That was his big innovation -- he had the federal government buy out the states' debt, which considering the huge debts they were laboring under gave a huge jumpstart to the state economies that had previously been largely devoted to debt services. Because of the amalgamation of the debt Hamilton was able to combine and renegotiate terms such that the debts amortized over a much longer term in the case of foreign debt (which a lot of it was), and in the case of private debt try to pay it off quicker, creating a local stimulus.
Hamilton would probably be repulsed by the amount of debt today. He did not see debt as a good thing in and of itself, but he did see it as a tool the federal government could use. Considering his nationalizing of the debt probably saved the United States economy, I'm inclined to agree with him .
As for the money supply arguments, they're not particularly applicable. We're already holding the money supply down with interest rates. Having a lower debt is one thing that leads to increased interest rates being worthwhile. Furthermore, the way our debt is structured we wouldn't be disturbing the markets by paying off debt at a higher rate, we'd be paying off debt at the normal rate and just issuing fewer savings bonds and such.
Not to mention, Robespierre, you have an odd idea of what caused 1929. What caused 1929 wasn't a contraction in the general money supply, it was a contraction in the stock market, which was brought on by panic, which was brought on by buying stocks on the margin. Banks were heavily overinvested in the stock market (not federal debt), and when the stock market went under they went under, in droves. If anything, its a showing of how the free market can royally screw up -- stock purchasing's lack of regulation was what allowed for such an economically idiotic buying on the margin method; banks lack of regulation allowed them to overinvest in unsafe investments, putting their customers' accounts at high risk; and the lack of insurance on at least some of customers' money meant that when the banks went under, peoples' lives went under.
Posts: 15770 | Registered: Dec 2001
| IP: Logged |
posted
I think you mean the number of deaths from oil/coal are far fare more . . .
Also, a lot of the problems with waste are due to concerns about weapons-grade materials. Most of what we throw away as "waste" could continue to be used to produce power, and when it came out it would be much less harmful radioactively (albeit much more harmful in the sense it could be used as part of a very destructive bomb).
Posts: 15770 | Registered: Dec 2001
| IP: Logged |
quote: Banks were heavily overinvested in the stock market (not federal debt), and when the stock market went under they went under, in droves.
And what allowed them to pump so much money on loan into the market? The availability of easy loans at the overnight window from the fed. They took loans from the fed using their current assets as collateral. They then used that money to issue loans to business and individuals. They then went back to the fed and got more loans using those previous loans as collateral. Thus you can see the stair-stepping of debt upon debt. So when the market boom which they caused started to fizzle due to trimming of the money supply(which started in 28), the banks all started to call in their loans to stock buyers(margins), thus pushing the collapse even further.
quote: when the banks went under, peoples' lives went under.
Certainly that is true for those invested in the stock market and those with accounts in the banks which were loaning on margins. However, this represented only a small portion of the banks in the country. The most bank failures occured in the years to come when the depression set in due to over-zealous Hoover policies including Smoot-Hawly, and FDR policies like the banking act, etc.
Posts: 859 | Registered: Oct 2003
| IP: Logged |
posted
Those arguments are much more valid, with regards to issues with the stock market crash. And have essentially nothing to do with the money supply causing the crash, which is what your assertion was. The Federal government didn't suddenly buy back all its debts from those banks, causing a crash (and it wouldn't have, either, a loan from the federal government is the exact opposite of federal debt -- its a federal investment).
Where's your evidence that the stock market crash was caused by a contraction in the money supply? Seems to me it was caused by an overexpansion in the money supply, which resulted in panic and the stock market crash, which then caused a contraction in the money supply, not the other way around.
Posts: 15770 | Registered: Dec 2001
| IP: Logged |
Printer-friendly view of this topic
![[Dont Know]](graemlins/dontknow.gif)
![[Confused]](confused.gif)
![[Smile]](smile.gif)
.
