Slashdot Mirror
When Having the US Debt Paid Off Was a Problem
Hugh Pickens writes "NPR reports that not so long ago, the prospect of a debt-free U.S. was seen as a real possibility with the potential to upset the global financial system. As recently as 2000, the U.S. was running a budget surplus, taking in more than it was spending every year — and economists were projecting that the entire national debt could be paid off by 2012. So the government commissioned a secret report outlining the possible harmful consequences of retiring the debt completely. For one thing, paying off the national debt would mean the end of Treasury bonds, a pillar of the global economy. Treasury securities are crucially important to the world financial system in a number of ways: banks buy them as low-risk assets, the Fed uses them for executing monetary policy, and mortgage interest rates vary based on Treasury rates. '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. In the end, Jason Seligman, the economist who wrote most of the report titled 'Life After Debt (PDF),' concluded it was a good idea to pay down the debt — but not to pay it off entirely. 'There's such a thing as too much debt,' says Seligman. 'But also such a thing, perhaps, as too little.'"
because debt is yet another way to subsidize big money?
Yes, I'm left. You have a problem with that?
Dear /.
debt is a good thing, you can't have enough of it.
Yours sincerely
the IMF
-- no sig today
If there is no US debt, implying no need for Treasury bonds, that means there's nothing for people to invest in?
Man, I've heard some absurd statements before, but this one takes the cake!
I do not fail; I succeed at finding out what does not work.
I never liked Clinton either but I'm starting to revise my opinion based on the last two clowns that replaced him. He looks better everyday.
Using the US government as your debt-collection agency so you can park your capital somewhere while you golf with Obama or whatever it is you do, is EXACTLY the kind of thing that results in the deindustrialization of the economy.
When TFA says: "banks buy them as low-risk assets" it is betraying the truth of the "economics" profession reflected in Modern Portfolio Theory's so-called "risk free asset". The reality is that this "risk free asset" is the foundation of the centralization of wealth via what classical economists referred to as "economic rent": The portion of return on the economy which is, for all practical purposes, simply the result of there being an economy.
A rational political economy would distribute all economic rent evenly in a citizen's dividend thereby replacing all government transfer programs (with their attendant public sector rent seeking) with market demand for what the people (as opposed to the wealthy or the politically influential with their lobbyists) need..
Since it is clear that the US Federal government is now captured by the rentiers (rent seekers) of both the private and public sectors, it cannot admit rational political economic thought. So the responsibility devolves to the States. There is a proposal for State legislation to remediate some of the pathology created by a positive feedback loop of centralized power, but realistically, even the State governments are so depleted of resources by this vicious cycle that there is little hope for them to salvage the Republic.
Seastead this.
If you pay off debt the money is gone. Cash, paper foldable money, makes up about 5% of the money supply. The rest is just numbers in a balance sheet. Banks create new money when they create loans, but they don't create the paper -- just a ledger entry. The problem is, the money the banks create must be paid back at interest but they don't also create the interest. As a result, the amount of money owed is always greater than the amount of money in existence, thus ensuring that someone somewhere won't be able to find the money to pay off debts.
It's so odd that the banks can make a profit on something they don't even have -- the money they loan is loaned into existence and then they get real money back as profit.
"Money as Debt" is a little hokey, but still interesting: http://video.google.com/videoplay?docid=-2550156453790090544
What changed under Obama? Nothing Good
This is a silly post. Remember spending bills originate in the House. Here is your list with Congressional Control
Regan +9.3%
House Democrats
Senate Democrats until 1981
Senate Republican 1981-1987
George H. W. Bush +13.0%
House Democrats
Senate Democrats
Clinton -0.07%
House Democrats 1993-1994
House Republicans 1995-1997
Senate Democrats 1993-1994
Senate Republicans 1995-1997
Clinton -9.0%
House Republicans 1997-2000
Senate Republicans 1997-2000
George H. Bush +7.1%
House Republicans 2001-2004
Senate Democrats 2001-2002
Senate Republicans 2003-2004
George H. Bush +20.7%
House Republican 2005-2006
House Democrat 2007-2008
Senate Republican 2005-2006
Senate Democrat 2007-2008
So it seems that the only time there was a real decrease was the Republican Revolution of 1994 when they were fighting Clinton. Once Bush was elected and they had full majorities they started spending again. More complicated and interesting than you claim.
I love Jesus, except for his foreign policy.
There is a problem with using public debt as a way to provide wealthy investors with a safe place to put their money. Debt is an investment because it is repaid at interest; public debt is repaid using tax dollars. Using tax revenue as a way to create returns on investments for the wealthy amounts to the enslavement of the population.
Public debt is a tool for weathering hard economic times and paying one-time costs. When it becomes a shelter for the world's richest investors, there is a problem.
Palm trees and 8
Your thinking is completely backwards.
The purpose of money is to facilitate transactions.
That's it. Nothing more. Nothing less. You can barter instead, if you prefer. But the purpose of currency is to facilitate transactions. It is not there to "save your wealth". It is only there as a universal, interchangeable IOU note. This is why gold, oil, and the rest are NOT money - these are assets.
Money are just IOU notes. Money (in the abstract!) is debt of someone else that you are holding - that's the definition of money. There is a very good reason to have inflation. The reason is so someone that is descendant from Ancient Rome doesn't swing by and buy stuff based on how much their ancestors in Rome managed to collect. Deflation or non-devaluating currency creates the ultimate trust funders. This scenario is the ultimate economy killer.
On the other hand, high inflation is bad too. You want to allow people sufficient time for them to decide what they want to buy. You can't have 50+% inflation per year - that creates problems with debt. Actually, if you have lots of fixed debt and there is lots of inflation, your debt melts away rather quickly.
Ideal scenario is low, positive inflation. So $100 today will only buy $95 worth next year and $89.50 year after that, etc.. This scenario facilitates the real use of the money. Use it or lose it.
So how can you use your money? You can buy assets (house, land, companies) or you can lend it to others that need cash (bonds)..
So why do we have money that devalues? So people keep working. So our society doesn't disintegrate.
This is massive price deflation and it benefits the consumer.
You are missing the point completely. Reduction in computer prices has been brought by increased efficiencies in production of this technology, *and* due to actual sales. If no one bought anything for $1500 earlier, well, you can rest assure that the $20 option today would not be available.
Your cheaper prices in very few sectors are brought to you by miniaturization and automation - by reduced input costs. This is fine in specific areas, as long as overall, you have inflationary monetary policy.
This keeps going until there is $10,000. So the banks create $9,000 of money from that first $1000.
This depends on the requirements for your reserves. Your scenario works only if the reserves are 10%. This varies. Chinese have reserves of about 40% (less leverage). A bank must ALWAYS stay above reserve requirements. So 10% min reserves means they would generally have double or even triple the minimum, depending on the size of the bank.
Anyway, the purpose of fractional reserve banking is to facilitate liquidity. The purpose of interest is not to make money, it is to prevent loss. If you pay 7% floating interest and the bank can sell that debt as 3% interest, then they are not making 4% profit off of it. 4% assumes only that less than 1/25th of their loans are going to default. If more default, the bank is screwed and loses lots of money.
The purpose of banks is to gauge RISK of the loans. Their money making is from arbitrage in rates and (mostly) from service fees (eg. brokerage fees, daily banking fees, lending fees, etc.). Fractional reserve banking simply allows them leverage. Without fractional reserve baking, a bank would not allow you to take out a loan unless they secured a bond offering for it first. Think of this as you can only get a mortgage 4x a year when bank issues more bonds. That would certainly screw up the economy.
Anyway, I could go on and on. But the bottom line is, money is debt and fractional reserve banking is simple leverage.
It's not a libel. There is fundamentally no basis to believe that reducing tax rates when the marginal tax rate is below 50% will result in an increase in revenues. It's voodoo economics.
In addition there is no evidence that such tax reductions have in fact increased revenues. All revenue increases post such tax reductions are explainable by secular economic growth.
You can stop reading, but it doesn't change the fact that we HAVE an economy because people are forced to invest instead of passively sit on money in a vault. Take away inflation, and you're left with de-facto feudalism where wealth is more or less eternal and static.
> If someone works hard and saves up to buy something large, like a house, your policy effectively steals a portion of that savings from them.
You'll have to pick a better example, at least with specific regard to "house you buy as your personal residence". Within comparable markets (obviously, someone selling a house in Detroit with the expectation of buying a comparable replacement in Los Angeles is in for a bit of a disappointment), you can sell your house and buy a comparable one with elsewhere. Now, you might not come out as well if you bought a house purely as investment property, but realistically, for about 98% of Americans (slightly distorted by flipping 5 years ago), "buying a house" is synonymous with "buying a house to live in as your one and only residence."
The fact is, if you're even remotely close to a typical middle-class American, your savings are a complete fiction anyway. They're a temporary insurance policy against a cash-flow disruption so you can keep making minimum payments and avoid losing *everything* in the meantime. Remember, in the context of inflation, 'savings' is almost entirely a synonym for "cash under the mattress", and NOT "investments", because investments (including invested retirement funds) generally inflate along with everything else.
So, if we're going to get personal, yes, fuck anybody who thinks it's worth destroying the economy so they can store cash in a mattress and expect it to magically retain (or gain) value. They're such a wacky, obscure, extremely rare edge case in the grand scheme of things, they aren't even a blip within the margin of error.
Considering how Bush intentionally left out of the budget the cost of the both wars, as well as some other "home defense" spending, you have to check on the actual amount added to the national debt to see how much Bush really spent, which is MUCH higher than his "projected" budget deficit. I know, it's a great conservative talking point that Obama spent so much more than Bush, but anyone that tells you that is either outright lying to you, or is too ignorant/stupid to fact check the bullshit coming out of their mouth.
Fascism: An authoritarian and nationalistic right-wing system of government and social organization. See also: NAZI's