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.'"
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.
Public debt ensures that all tax paying citizens are on the hook. Even someone who is responsible and is able to manage their personal money suddenly become beholden to whoever holds the debt. What better way to hijack an entire country?
Palm trees and 8
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 resulted in putting men on the moon and spurred the computer age and caused 20 years of growth.
Give credit where it is due, and don't forget the spoils of war -- the German rocket technology and science, which propelled the US space science into the late 70s. The rest of the world was paying their war time debts up until the 80s.
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
nickmh opined:
Meanwhile the USA's industrial productivity is dropping year by year. Those "organise anywhere" people are getting what they want. A dismantling of capitalism. I'm not sure they're gonna like like it.
Industrial productivity is the only way out. But that's not going to happen while you have the Fed funding and subsidising projects that will lift energy and industrial input costs.
Absolutely wrong.
Industrial productivity is not going to increase domestically as long as it is significantly cheaper to manufacture products overseas (i.e. - in China, India, Indonesia, etc.). Meanwhile, domestic income tax revenue will continue to decline as former line-level manufacturing employees permanently lose their middle-class incomes, while the self-styled "job creators" buy Congressional complicity in sheltering their own spiraling incomes from taxation (see: General Electric, etc.), and in generating 10-figure tax-funded handouts to themselves (see: the oil industry). Saying the problem is, "the Fed funding and subsidising projects that will lift energy and industrial input costs," is an attack on the flimsiest of straw men. The true problem is the combination of relentless globalization, predatory trade policy by the new industrial giants (China, again, and India, again), and MBA-dominated domestic corporate managment's obsessive focus on short-term profitability at the expense of the long-term viability of the companies whose interests they pretend to serve.
Welcome to the Roaring Twenties, redux.
Check out my novel.
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.
Where do you think the government gets the money to repay its debts? There are two possibilities: tax revenue
The federal government never ever pay debts from tax revenue. Taxing is nothing more than a mechanism to reduce the aggregate money supply in the private sector. Once money has been taxed it is gone into the void. (for the federal government or any other currency owner that is)
The federal government doesn't own money. It doesn't make any sense, as it is the issuer and recaller.
As such, the only way for the federal government to repay debt is by creating new money. And with that realization, you quickly come to the understanding that the government doesn't have to borrow money if it doesn't want to. However, borrowing is a simple and easy way to manage interest rates and tie up private/foreign sector savings over a longer term so that it is impossible to flood the market with currency in a short interval. Hence, sovereign currency owners borrow to make the currency more stable.
As for Greece. They aren't a currency owner, so it sucks to be them.
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