Wrong. No crime was prosecuted because the prosecutor knew on the first day of the investigation that the "leaker" was Armitage - a man who was against the war and had no motive to intentionally discredit Wilson. But instead of closing the investigation once he discovered who the "leaker" was (which is what he was chartered to do), he continued for 2 years to "investigate" a crime that he knew wasn't committed just so he could prosecute an innocent man for not recalling the exact time and content of conversations he had several years ago, even though the testimony against Libby was just as inconsistant and full of error.
And yes, perjury (what clinton was charged with) is a crime.
No, it's a valid point because we change the clocks twice a year. The majority of the public has decided that we don't want it to stay dark too late in the morning during winter or get light too early in the morning during summer, so we want the clocks to shift. It's up to the minority who doesn't want this to adjust.
The only debate about global-warming should be scientific debate WITHIN the scientific community. I wish that scientists could ignore the money-grabbers, the politicians, and the Jesus-freaks, but unfortunately, most pure science has to be funded by the government, so they Do have to deal with such crap.
That is a GREAT idea! Why don't we lock all the global warming "scientists" in a room where they can scream and shout at each other about the "certain" doom we are facing because of climate change. That way the rest of us can live our lives in peace and quiet, without some long-haired elitist freak following us around claiming that we are "ruining" their world.
I wish that sane and rational individuals could ignore the "intellectual" snobs, the anti-capitalists, and the blind sheep alarmists, but unfortunately they are still around, so we still have to deal with such crap.
Unless your enemies use violence against you. If you don't respond in kind to defend yourself, you'll end up a "civilized, decent" and dead human being, and the world will be that much less civilized because you are gone. That seems like a very ineffective solution to your problems.
Unfortunately, violence has been very necessary since man has been roaming this earth.
So, if Diebold can rig the elections as you claim, why would you assume that they are going to transfer power to a party that would investigate them? Why, for that matter, did they already do that in the 2006 election?
I think that the answer lies in the fact that you are full of crap.
Football is the greatest sport ever invented, and burgers are dang near close to the best food invented. Don't have an SUV yet, but I'm saving my pennies for one. As for blowing up half the world, as long as it's the crappy half, I'm cool with it.
Wrong. In addition to the Al-Samoud missiles that you are referring to, they found missile technology transferred from North Korea for 1,300KM+ ballistic missiles, and UAV programs that were well beyond the 150KM range allowed. They also found violations in each of the other WMD catagories of Chemical, Biological, and Nuclear weapons. Here is what David Kay reported 6 months after Baghdad fell: "We have discovered dozens of WMD-related program activities and significant amounts of equipment that Iraq concealed from the United Nations during the inspections that began in late 2002." It is clear that Saddam wasn't funneling all of his fraudulent oil-for-food money into research into making a better lollipop for the kids.
If you want to learn more, I suggest you read the 1400+ ISG report that was released by Duelfer in 2004.
You don't want me to post the long list of Democrats who also said Iraq had WMD, do you? Funny how you aren't condemning them for their "lies".
The intelligence that Bush reviewed said the exact same thing that the international intelligence community had been saying for the 12+ years, and for the most part, this intelligence was right. Saddam was clearly in violation of the WMD requirements imposed by the UN. The only thing he didn't have was his stockpiles of 20 year old munitions that had not been accounted for.
The entire lower tertiary area of the Gulf is estimated to hold no more than 15 billion barrels of oil, which is very deep and expensive to get to.
You say that like it's insignificant. 15 Billion barrels of oil nearly doubles our current proven reserves. And thanks to something called innovation (which is always a byproduct of a profit-driven economy), this oil is now accessible despite how deep and hard to get to it is.
Even if it was easy to get to it will only serve the U.S. at current consumption for 2 years.
Well, that's a really stupid way to analyze it. But even if you do want to look at it that way, you have to look at all the facts. Our current proven reserves are at 21 Billion barrels, which is only about 2.8 years at current consumption. Adding 15 Billion barrels increases this to 4.8 years, or a 71% increase. Throw in the 11 Billion barrels in ANWR, and you've added another 1.5 years to 6.3 years, or a 125% increase over our current reserves.
But the reason this is a stupid way to look at it is because all of this oil in the ground takes time to extract. We currently consume 20.5 million barrels of oil per day, with 8.7 million barrels produced domestically and 11.8 million barrels imported. Over 30 years of production, a 15 Billion barrel discovery would produce around 1.3 Million barrels per day, reducing our dependency on foreign oil imports by over 11%. Add the 11 Billion barrels in ANWR to get another 1 Million barrels per day, and we have reduced our dependency on foreign sources of oil by 20% for 30 years.
Are you still going to argue that this is insignificant?
I understand the difference between real and nominal. I'm pretty sure you don't, because in the case where interest rates are higher than real GDP growth, but less than nominal GDP growth, your model violates assumption 3. Cuts in spending in real terms are spending cuts.
You are wrong. Like I have been saying all along, treasury yields only relate the future ability to service debt, not to the current size of the debt. You obviously just let google teach you the difference between real and nominal GDP growth, so why don't you give it a try again to learn the difference between real and nominal interest rates. The value of the interest payments to service debt decrease year to year because the value of the principle debt decreases year to year. Economic growth is the only thing that is needed -- no spending cuts are required as long as the economy grows at least as fast as the debt.
Keep trying though, maybe if you bash your head against a brick wall long enough, you'll figure out that unless GDP growth - yes nominal GDP growth - is higher than Treasury yields, you can not grow your way out of debt.
First, this contradicts what you just said in your previous paragraph where you claimed that spending cuts are needed even if nominal GDP growth is higher than interest rates. And second, nominal GDP grwoth is higher than interest rates. Annualized nominal GDP growth over the past century is 6.25%, current treasury yields are less than 5%. Annualized real GDP growth over the past century is 3.23%, current real treasury yields are 2.2%. Average Debt-to-GDP ratio over the past century is around 60%, current debt to GDP ratio is around 60%. It looks like we have been doing a damn fine job of growing our way out of our debt burden for quite some time now.
Now you have got to be kidding. Are you seriously admitting in public that you don't know the difference between real and nominal?
I am quite finished with spoonfeeding you on this, so I will leave it up to you to wipe the drool off your face and do some research. But I will say that a comparison between the 3.2% annualized growth rate in real GDP with the future debt service of a nominal treasury yield of 5% is a very, very meaningless comparison. (Hint: apples to apples=good, apples to oranges=bad)
Man, this whole time I thought you were just trying to be a pain. It turns out that you really are clueless.
Your model does not fit the criteria you gave, then.
No, you just don't understand the model.
We were paying so much debt off during the Clinton years that they stopped issuing 30 year Treasuries. We were assuredly not continually rolling current debts into new treasuries - we were being "stupid", as you call it, and paying off debt. We also raised taxes during the Clinton years, which you again claim was "stupid".
Yes, it was stupid. All it did was transfer money from the pockets of tax payers to the pockets of debt holders, which resulted in less money in the tax payers hands, the elimination of a interest earning asset in the debt holders hands, and money government had available to spend on things that would help contribute to future economic growth vanishing in the incinerator. Are you going to argue that that was a smart move?
So, I'll ask again. Show me the math.
1) Country A starts out with $10 in debt. Its GDP is $1000.
2) It ALWAYS rolls over debt into new debt.
3) It NEVER uses increased taxes or spending cuts to pay down that debt.
4) The growth rate of GDP always remains below the interest rate on the debt.
5) The debt/GDP ratio does not rise over time.
Ok, I'll show you the math, but I'll have to admit, I'm a little embarrassed for you that this needs to be explained like this.
Assumptions: GDP growth is 3% (which is ridiculously low, considering the nominal annualized GDP growth over the past 100 years is 6.5%, and that includes the Great Depression). All debt matures 5 years (also not true, but makes examples like this much easier).
Starting off, GDP is $1000, debt is $10, debt-to-GDP is 10%.
Year 1. GDP grows 3% to $1030. Debt grows 3% to $10.30. New debt is $.30. Debt-to-GDP is still 10%
Year 2. GDP grows 3% to $1060.9. Debt grows 3% to $10.61. New debt is $.31. Debt-to-GDP is still 10%
Year 3. GDP grows 3% to $1092.73. Debt grows 3% to $10.93. New debt is $.32. Debt-to-GDP is still 10%
Year 4. GDP grows 3% to $1125.51. Debt grows 3% to $11.26. New debt is $.33. Debt-to-GDP is still 10%
Year 5. GDP grows 3% to $1159.27. Debt grows 3% to $11.59. New debt is $.33. Debt-to-GDP is still 10%
Year 6. GDP grows 3% to $1194.05. Debt grows 3% to $11.94. New debt is $.35, of which $.30 is expired debt from year 1 being rolled into new debt. Debt-to-GDP is still 10%.
Year 7. GDP grows 3% to $1229.87. Debt grows 3% to $12.30. New debt is $.36, of which $.31 is expired debt from year 1 being rolled into new debt. Debt-to-GDP is still 10%.
There you have it. A free lesson on the mathematical principle of ratios, which you were apparently robbed of in the 2nd grade. Of course, new debt in years 1-5 also has a portion of expired debt being rolled into new debt from previous years, but that wasn't calculated here.
See, that really wasn't too hard, now was it? Why don't you repeat this one more time just to help you remember:
As long as the economy grows at least as fast as the accumulation of new debt, the debt-to-GDP ratio will remain the same, and your ability to service that debt in the future remains unchanged.
First of all, I know you aren't the sharpest of tacks, but I assumed you would at least realize that I am the OP who wrote the post that you responded to. Not only did I read the post that you responded to, I wrote it, and I understand it far better than you. You haven't come close to invalidating anything in that post. You have done a marvellous job of making an ass of yourself, however.
Notice how if current debts are rolled into new treasury securities, Treasury yields are relevant to this discussion?
Wrong, wrong, wrong,,wrong, wrong. Treasury yields are only relevant to a discussion about the future ability to service debt, not to a discussion about the size of the current debt. As I wrote before, and I don't mind repeating again, as long as the economy grows at least as fast as the accumulation of new debt, the debt-to-GDP ratio will remain the same, and your ability to service that debt in the future remains unchanged. This is a very simple concept, so put on your thinking cap and try to think it through so you can understand it better.
Notice how the costs of servicing that interest will contribute to future debt?
It contributes to debt accumulation just as much as every other outlay compared to inlay does on the budget. This brings us back to the central idea that you are still trying to understand. As long as the economy grows at least as fast as the accumulation of new debt, the debt-to-GDP ratio will remain the same, and your ability to service that debt in the future remains unchanged.
Notice how you haven't been able to come up with a model where current debts are rolled into new treasury securities, taxes aren't raised and debt isn't paid off early, where GDP grows more slowly than the yield on Treasuries, and debt/GDP doesn't grow?
Once again, my model is the last 150+ years where we have used deficit financing, as well as the deficit financing used by just about every other industrialized nation on the planet. We are continually rolling current debt into future securities as the debt expires and have been for over a hundred years. Our current debt-to-GDP ratio right now is right where the historical average is over the last century. Why has this worked? Because our economy has grown at least as fast as the accumulation of new debt, so our debt-to-GDP ratio has remained the same, and our ability to service the debt has remained unchanged. This economic growth has even helped average out the rare times when debt skyrocketed or economic growth has slowed enough to temporarily skew the ratio.
So, once again, repeat after me. Don't worry if there are people around you, they probably already think you are weird:
As long as the economy grows at least as fast as the accumulation of new debt, the debt-to-GDP ratio will remain the same, and your ability to service that debt in the future remains unchanged.
Have you seen the light yet, or are you still confused?
Your inability to comprehend this concept is quite comical. I am talking about debt accumulation, not the servicing of interest payments on debt. Treasury yields are irrelevant to this discussion. Interest payments are, by law, paid when they are due, just as debt is, by law, paid off when it is due. Interest payments may or may not contribute to new debt accumulation. In fact, the cost of these interest payments is about half of what it was a decade ago compared to the size of the economy. But as long as the economy grows at least as fast as debt accumulation, the ratio of debt-to-GDP will remain the same, and our ability to service this debt will remain the same. Thus, with a growing economy, retiring debt can most definitely be rolled into new debt without increasing the debt-to-GDP ratio, regardless of what the current treasury yields are.
This is such a simple concept that your complete misunderstanding of it is, among other things, quite spectacular.
23% is Directly owned by foreign countries/corporations. They are the direct loaners. A good percentage of other 1st tier debt is resold, and among the buyers of those are foreign countries/corporations/citizens as well. That's 23++ percent of interest we are throwing away. If we pay off the debt we could then invest that money instead of throwing it away, and earn interest on it ourselves.
First, you will note that I am right - 23% is a minority. And second, the interest paid to this minority isn't thrown away. Like I said before, in a global economy growth abroad equates to growth at home, plus we have the added bonus of having other people finance our growth promoting infrastructure.
It's not a phobia. I'm not scared of other countries. I just think it's quite stupid to pay them interest forever instead of earning the interest ourselves.
Again, there is nothing stopping us from earning interest ourselves. You can go right to the Treasury Website and buy all the interest earning savings bonds that you want. The fact that there are lots of people in other countries that are willing to invest in our growth is a good thing.
Yes. But spending doesn'g guarantee you have an asset.
I'm not sure if I agree with that. First of all, the opposite is true - not spending guarantees that you won't have an asset. But if the government generates a deficit, it does generate an asset in the private sector. Not only that, interest paid on this debt goes directly into the private sector, which fuels more investment and growth. I would argue that the simple act of the government borrowing money contributes to economic growth, regardless of where that borrowed money is spent. If the government spends that borrowed money on the right things that further promote growth, you will see the kind of economic growth that allows you to keep your debt burden constant in relation to the size of the economy.
Again, the problem with your reasoning is not so much that it is wrong, but that it misses the point. A growing economy needs a growing money supply. But growing the money supply by itself is not a sustainable way to grow the economy.
I never said that growing the money supply is the only ingredient needed for economic growth -- I said that you cannot have economic growth without an increasing money supply (note the difference). Economic growth comes from productivity and investment in the private sector, both of which are aided when the government borrows money.
Notice that in my example, the economy keeps growing.
Right. And the economy will keep growing as long as we don't do something stupid, like raise taxes or pay off the debt.
Notice that in my example, current debts can not be rolled into new treasury securities without the debt to GDP ratio increasing.
Wrong. Both the debt and GDP can increase, and as long as the GDP increases at least as much as the debt burden, the ratio of debt-to-GDP will always remain the same or decrease. If you don't believe me, I strongly suggest you pick up a 3rd grade math book and study the concept of ratios.
Notice that one of us doesn't understand what is going on here.
Notice that I understand what is going here.
Unfortunately, you are in a little worse shape than that. You seem to think that you know what is going on but really don't, and that is far worse than just pleading ignorance and educating yourself about the subject.
My god are you screwed up. You want us to continue to pay interest on a national debt forever - to foreign countries.
No, I want us to continue to pay interest on national debt forever to all debt holders, of which foreign countries are minority.
The money won't vanish, our debts will vanish and then we can start *earning* interest each year on investments, rather than *paying* interest each year to foreign nationals, NOT to Americans as you would have everyone believe.
How will our debts vanish? That $5 Trillion has to come from somewhere, and that somewhere is obviously the pockets of the US tax payer. $5 Trillion in private-sector interest earning assets would be paid for by the taxpayers and the only thing they would get in return is the satisfaction of knowing that there is $5 Trillion less in interest earning assets in the private sector. The government would be stuck with $5 Trillion worth of worthless T-Bills and bonds that they can't do anything with unless they want to sell them again and go back into debt. And investors would lose their $5 Trillion worth of interest producing assets in exchange for cash that was taken out of the US taxpayers pocket. And you are trying to argue that this would be a good thing?
Your foreign national phobia doesn't hold any water, either. Both the largest holder and fastest accumulator of our debt is the US Government and US citizens, and the minority of debt that is serviced outside the country isn't wasted either. In a global economy, prosperity abroad will always result in prosperity at home. If you don't like it, you could always pick up some T-Bills and earn some interest yourself while at the same time helping to contribute to the overall growth of our economy.
Cute, but wrong. I don't know where you somehow got the idea that the GDP needs to grow faster than the treasury yield, but it only shows that you don't really understand what is going on. The GDP needs to grow at least as fast as our total debt burden grows, which, with few exceptions, it has been for the last 100+ years. Otherwise we would have a total debt burden that is well in line with our historical average, and well under the historical extremes seen in the past century.
By the way, there are plenty of countries that hold an amount of debt that is greater than their GDP. Japan, Italy, Lebanon, and Singapore all maintain debt-to-GDP ratios of over 100%. In case you have to look it up, there are not very many "retards" voting for Republicans in those countries.
Still doesn't matter. Unless the money was invested in something that creates returns on GDP (e.g. infrastructure, education), the fact that GDP growth might outpace deficit spending is irrelevant. That future tax money is going to be taken out of our (admittedly richer) pockets. Money deficit spent on education, infrastructure and research is a different story. Yes, it comes out of our pockets, but the amount of money in our pockets because of the investment may be greater than the amount being taken out to pay for the loan.
It is not irrelevant. Our ability to service our increasing debt does not change as long as the economy grows at least as fast as the debt. Borrowed government money ends up in the private sector as an income producing asset, which also creates returns on GDP. Other than that, I don't disagree with your points. I believe the government should only invest in something that promotes economic growth, and that definitely includes infrastructure, education, and defense.
This is a bit of elementary finance that somehow has never made it into political consciousness: the difference between operating and captial expenses. Anybody who has ever financed a house knows the difference between mortgage payments and rent.
Right, and anybody who has read an investment book knows the benefits of leveraging a growing, income-producing asset.
There is of course a multiplier effect of course for every dollar spent. But your argument doesn't hold water; unless the money being spent is taken out of the economy some other place, you are in effect raising the money supply, which leads to inflation. It's taken out of the private capital market, either by competing with private investment on the bond market, or by incrasing interest rates, or both. In short, the government can't spend without taking it out of the economy one way or another. So when it does spend, it needs to spend on worthwhile things.
If you want the economy to grow, you have to increase the money supply. Otherwise, people are just redistributing the same finite amount of currency without any net growth. Fortunately, deficit spending is one of the few ways to increase the money supply without inflationary pressures because every dollar borrowed by the government equates to a dollar asset in the private sector that increases in value over time. And the government's ability to pay for this increasing value gets better and better as the economy grows.
Contrast this to the other ways to increase money supply. Printing a bunch of extra bills certainly increases money supply, but there is no private sector asset to leverage this new currency against, so it also devalues the currency. As inflation rises, the costs of future obligations also rise (such as baby boomer retirement, etc), so you are forced to either print more money, or return to deficit spending to cover the costs.
I think your post does quite a good job of highlighting exactly how intelligent and rational you are on this subject, so I will only respond with one point. Our debt levels are nowhere near WWII debt levels. The 100-year average Debt-to-GDP ratio is right around 60%, and our current Debt-to-GDP ratio is... (you guessed it)... right around 60%. So despite periods of massive debt accumulation (much higher than we have today), and periods of economic contraction (such as the Great Depression), our total debt burden is no higher now than it historically has been, thanks to economic growth.
Those folks won't accept 'funny money' that the government prints up if they think the dollar is unstable/worthless. They'll want it in real currency.
You are failing to make the distinction that needs to be made between bankruptcy and hyperinflation. The government can always print money to pay off debts owed to both domestic and foreign entities, but this creates hyperinflation, not bankruptcy. Our debts would be paid for, but our currency will be worthless. The obvious solution, which I didn't see you address in your response, is to promote growth so that when we do have to pay off matured debts, we don't have to print money and risk hyperinflation. Once again, as long as the economy grows at least as fast as our debt grows, paying the debt off will never be a problem.
You mean it would transfer the money that is currently being pumped outside the country (interest to foreign debt holders) back into the pockets of Americans who could then earn the interest themselves.
WRONG! The money would not go back in the pockets of Americans - it would come out of the pockets of Americans whose tax payments would be used to pay off the debt. Not only that, this money that is transferred out of the private sector essentially vanishes into $5 Trillion worth of Bonds, T-Bills, and Notes that are worthless unless the government wants to sell them and go back in debt. We would essentially erase $5 Trillion worth of income producing assets from the private sector at the expense of the American taxpayers and get nothing in return. We would even lose out on the $400+ Billion in growth producing interest payments that are deposited back into the private sector every year. Paying the debt off would be an economic catastrophe of epic proportions.
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Wrong. No crime was prosecuted because the prosecutor knew on the first day of the investigation that the "leaker" was Armitage - a man who was against the war and had no motive to intentionally discredit Wilson. But instead of closing the investigation once he discovered who the "leaker" was (which is what he was chartered to do), he continued for 2 years to "investigate" a crime that he knew wasn't committed just so he could prosecute an innocent man for not recalling the exact time and content of conversations he had several years ago, even though the testimony against Libby was just as inconsistant and full of error.
And yes, perjury (what clinton was charged with) is a crime.
No, it's a valid point because we change the clocks twice a year. The majority of the public has decided that we don't want it to stay dark too late in the morning during winter or get light too early in the morning during summer, so we want the clocks to shift. It's up to the minority who doesn't want this to adjust.
I wish that sane and rational individuals could ignore the "intellectual" snobs, the anti-capitalists, and the blind sheep alarmists, but unfortunately they are still around, so we still have to deal with such crap.
Why don't you sleep later and leave everyone else out of this?
Unfortunately, violence has been very necessary since man has been roaming this earth.
So, if Diebold can rig the elections as you claim, why would you assume that they are going to transfer power to a party that would investigate them? Why, for that matter, did they already do that in the 2006 election?
I think that the answer lies in the fact that you are full of crap.
Football is the greatest sport ever invented, and burgers are dang near close to the best food invented. Don't have an SUV yet, but I'm saving my pennies for one. As for blowing up half the world, as long as it's the crappy half, I'm cool with it.
Life is good.....
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Wrong. In addition to the Al-Samoud missiles that you are referring to, they found missile technology transferred from North Korea for 1,300KM+ ballistic missiles, and UAV programs that were well beyond the 150KM range allowed. They also found violations in each of the other WMD catagories of Chemical, Biological, and Nuclear weapons. Here is what David Kay reported 6 months after Baghdad fell: "We have discovered dozens of WMD-related program activities and significant amounts of equipment that Iraq concealed from the United Nations during the inspections that began in late 2002." It is clear that Saddam wasn't funneling all of his fraudulent oil-for-food money into research into making a better lollipop for the kids.
If you want to learn more, I suggest you read the 1400+ ISG report that was released by Duelfer in 2004.
You don't want me to post the long list of Democrats who also said Iraq had WMD, do you? Funny how you aren't condemning them for their "lies".
The intelligence that Bush reviewed said the exact same thing that the international intelligence community had been saying for the 12+ years, and for the most part, this intelligence was right. Saddam was clearly in violation of the WMD requirements imposed by the UN. The only thing he didn't have was his stockpiles of 20 year old munitions that had not been accounted for.
You say that like it's insignificant. 15 Billion barrels of oil nearly doubles our current proven reserves. And thanks to something called innovation (which is always a byproduct of a profit-driven economy), this oil is now accessible despite how deep and hard to get to it is.
Well, that's a really stupid way to analyze it. But even if you do want to look at it that way, you have to look at all the facts. Our current proven reserves are at 21 Billion barrels, which is only about 2.8 years at current consumption. Adding 15 Billion barrels increases this to 4.8 years, or a 71% increase. Throw in the 11 Billion barrels in ANWR, and you've added another 1.5 years to 6.3 years, or a 125% increase over our current reserves.
But the reason this is a stupid way to look at it is because all of this oil in the ground takes time to extract. We currently consume 20.5 million barrels of oil per day, with 8.7 million barrels produced domestically and 11.8 million barrels imported. Over 30 years of production, a 15 Billion barrel discovery would produce around 1.3 Million barrels per day, reducing our dependency on foreign oil imports by over 11%. Add the 11 Billion barrels in ANWR to get another 1 Million barrels per day, and we have reduced our dependency on foreign sources of oil by 20% for 30 years.
Are you still going to argue that this is insignificant?
You sure about that?
You are wrong. Like I have been saying all along, treasury yields only relate the future ability to service debt, not to the current size of the debt. You obviously just let google teach you the difference between real and nominal GDP growth, so why don't you give it a try again to learn the difference between real and nominal interest rates. The value of the interest payments to service debt decrease year to year because the value of the principle debt decreases year to year. Economic growth is the only thing that is needed -- no spending cuts are required as long as the economy grows at least as fast as the debt.
First, this contradicts what you just said in your previous paragraph where you claimed that spending cuts are needed even if nominal GDP growth is higher than interest rates. And second, nominal GDP grwoth is higher than interest rates. Annualized nominal GDP growth over the past century is 6.25%, current treasury yields are less than 5%. Annualized real GDP growth over the past century is 3.23%, current real treasury yields are 2.2%. Average Debt-to-GDP ratio over the past century is around 60%, current debt to GDP ratio is around 60%. It looks like we have been doing a damn fine job of growing our way out of our debt burden for quite some time now.
Now you have got to be kidding. Are you seriously admitting in public that you don't know the difference between real and nominal?
I am quite finished with spoonfeeding you on this, so I will leave it up to you to wipe the drool off your face and do some research. But I will say that a comparison between the 3.2% annualized growth rate in real GDP with the future debt service of a nominal treasury yield of 5% is a very, very meaningless comparison. (Hint: apples to apples=good, apples to oranges=bad)
Man, this whole time I thought you were just trying to be a pain. It turns out that you really are clueless.
No, you just don't understand the model.
Yes, it was stupid. All it did was transfer money from the pockets of tax payers to the pockets of debt holders, which resulted in less money in the tax payers hands, the elimination of a interest earning asset in the debt holders hands, and money government had available to spend on things that would help contribute to future economic growth vanishing in the incinerator. Are you going to argue that that was a smart move?
Ok, I'll show you the math, but I'll have to admit, I'm a little embarrassed for you that this needs to be explained like this.
Assumptions: GDP growth is 3% (which is ridiculously low, considering the nominal annualized GDP growth over the past 100 years is 6.5%, and that includes the Great Depression). All debt matures 5 years (also not true, but makes examples like this much easier).
Starting off, GDP is $1000, debt is $10, debt-to-GDP is 10%.
Year 1. GDP grows 3% to $1030. Debt grows 3% to $10.30. New debt is $.30. Debt-to-GDP is still 10%
Year 2. GDP grows 3% to $1060.9. Debt grows 3% to $10.61. New debt is $.31. Debt-to-GDP is still 10%
Year 3. GDP grows 3% to $1092.73. Debt grows 3% to $10.93. New debt is $.32. Debt-to-GDP is still 10%
Year 4. GDP grows 3% to $1125.51. Debt grows 3% to $11.26. New debt is $.33. Debt-to-GDP is still 10%
Year 5. GDP grows 3% to $1159.27. Debt grows 3% to $11.59. New debt is $.33. Debt-to-GDP is still 10%
Year 6. GDP grows 3% to $1194.05. Debt grows 3% to $11.94. New debt is $.35, of which $.30 is expired debt from year 1 being rolled into new debt. Debt-to-GDP is still 10%.
Year 7. GDP grows 3% to $1229.87. Debt grows 3% to $12.30. New debt is $.36, of which $.31 is expired debt from year 1 being rolled into new debt. Debt-to-GDP is still 10%.
There you have it. A free lesson on the mathematical principle of ratios, which you were apparently robbed of in the 2nd grade. Of course, new debt in years 1-5 also has a portion of expired debt being rolled into new debt from previous years, but that wasn't calculated here.
See, that really wasn't too hard, now was it? Why don't you repeat this one more time just to help you remember:
As long as the economy grows at least as fast as the accumulation of new debt, the debt-to-GDP ratio will remain the same, and your ability to service that debt in the future remains unchanged.
First of all, I know you aren't the sharpest of tacks, but I assumed you would at least realize that I am the OP who wrote the post that you responded to. Not only did I read the post that you responded to, I wrote it, and I understand it far better than you. You haven't come close to invalidating anything in that post. You have done a marvellous job of making an ass of yourself, however.
Wrong, wrong, wrong,
It contributes to debt accumulation just as much as every other outlay compared to inlay does on the budget. This brings us back to the central idea that you are still trying to understand. As long as the economy grows at least as fast as the accumulation of new debt, the debt-to-GDP ratio will remain the same, and your ability to service that debt in the future remains unchanged.
Once again, my model is the last 150+ years where we have used deficit financing, as well as the deficit financing used by just about every other industrialized nation on the planet. We are continually rolling current debt into future securities as the debt expires and have been for over a hundred years. Our current debt-to-GDP ratio right now is right where the historical average is over the last century. Why has this worked? Because our economy has grown at least as fast as the accumulation of new debt, so our debt-to-GDP ratio has remained the same, and our ability to service the debt has remained unchanged. This economic growth has even helped average out the rare times when debt skyrocketed or economic growth has slowed enough to temporarily skew the ratio.
So, once again, repeat after me. Don't worry if there are people around you, they probably already think you are weird:
As long as the economy grows at least as fast as the accumulation of new debt, the debt-to-GDP ratio will remain the same, and your ability to service that debt in the future remains unchanged.
Have you seen the light yet, or are you still confused?
Your inability to comprehend this concept is quite comical. I am talking about debt accumulation, not the servicing of interest payments on debt. Treasury yields are irrelevant to this discussion. Interest payments are, by law, paid when they are due, just as debt is, by law, paid off when it is due. Interest payments may or may not contribute to new debt accumulation. In fact, the cost of these interest payments is about half of what it was a decade ago compared to the size of the economy. But as long as the economy grows at least as fast as debt accumulation, the ratio of debt-to-GDP will remain the same, and our ability to service this debt will remain the same. Thus, with a growing economy, retiring debt can most definitely be rolled into new debt without increasing the debt-to-GDP ratio, regardless of what the current treasury yields are.
This is such a simple concept that your complete misunderstanding of it is, among other things, quite spectacular.
First, you will note that I am right - 23% is a minority. And second, the interest paid to this minority isn't thrown away. Like I said before, in a global economy growth abroad equates to growth at home, plus we have the added bonus of having other people finance our growth promoting infrastructure.
Again, there is nothing stopping us from earning interest ourselves. You can go right to the Treasury Website and buy all the interest earning savings bonds that you want. The fact that there are lots of people in other countries that are willing to invest in our growth is a good thing.
I'm not sure if I agree with that. First of all, the opposite is true - not spending guarantees that you won't have an asset. But if the government generates a deficit, it does generate an asset in the private sector. Not only that, interest paid on this debt goes directly into the private sector, which fuels more investment and growth. I would argue that the simple act of the government borrowing money contributes to economic growth, regardless of where that borrowed money is spent. If the government spends that borrowed money on the right things that further promote growth, you will see the kind of economic growth that allows you to keep your debt burden constant in relation to the size of the economy.
I never said that growing the money supply is the only ingredient needed for economic growth -- I said that you cannot have economic growth without an increasing money supply (note the difference). Economic growth comes from productivity and investment in the private sector, both of which are aided when the government borrows money.
Right. And the economy will keep growing as long as we don't do something stupid, like raise taxes or pay off the debt.
Wrong. Both the debt and GDP can increase, and as long as the GDP increases at least as much as the debt burden, the ratio of debt-to-GDP will always remain the same or decrease. If you don't believe me, I strongly suggest you pick up a 3rd grade math book and study the concept of ratios.
Unfortunately, you are in a little worse shape than that. You seem to think that you know what is going on but really don't, and that is far worse than just pleading ignorance and educating yourself about the subject.
Don't worry. You can change.
No, I want us to continue to pay interest on national debt forever to all debt holders, of which foreign countries are minority.
How will our debts vanish? That $5 Trillion has to come from somewhere, and that somewhere is obviously the pockets of the US tax payer. $5 Trillion in private-sector interest earning assets would be paid for by the taxpayers and the only thing they would get in return is the satisfaction of knowing that there is $5 Trillion less in interest earning assets in the private sector. The government would be stuck with $5 Trillion worth of worthless T-Bills and bonds that they can't do anything with unless they want to sell them again and go back into debt. And investors would lose their $5 Trillion worth of interest producing assets in exchange for cash that was taken out of the US taxpayers pocket. And you are trying to argue that this would be a good thing?
Your foreign national phobia doesn't hold any water, either. Both the largest holder and fastest accumulator of our debt is the US Government and US citizens, and the minority of debt that is serviced outside the country isn't wasted either. In a global economy, prosperity abroad will always result in prosperity at home. If you don't like it, you could always pick up some T-Bills and earn some interest yourself while at the same time helping to contribute to the overall growth of our economy.
Cute, but wrong. I don't know where you somehow got the idea that the GDP needs to grow faster than the treasury yield, but it only shows that you don't really understand what is going on. The GDP needs to grow at least as fast as our total debt burden grows, which, with few exceptions, it has been for the last 100+ years. Otherwise we would have a total debt burden that is well in line with our historical average, and well under the historical extremes seen in the past century.
By the way, there are plenty of countries that hold an amount of debt that is greater than their GDP. Japan, Italy, Lebanon, and Singapore all maintain debt-to-GDP ratios of over 100%. In case you have to look it up, there are not very many "retards" voting for Republicans in those countries.
It is not irrelevant. Our ability to service our increasing debt does not change as long as the economy grows at least as fast as the debt. Borrowed government money ends up in the private sector as an income producing asset, which also creates returns on GDP. Other than that, I don't disagree with your points. I believe the government should only invest in something that promotes economic growth, and that definitely includes infrastructure, education, and defense.
Right, and anybody who has read an investment book knows the benefits of leveraging a growing, income-producing asset.
If you want the economy to grow, you have to increase the money supply. Otherwise, people are just redistributing the same finite amount of currency without any net growth. Fortunately, deficit spending is one of the few ways to increase the money supply without inflationary pressures because every dollar borrowed by the government equates to a dollar asset in the private sector that increases in value over time. And the government's ability to pay for this increasing value gets better and better as the economy grows.
Contrast this to the other ways to increase money supply. Printing a bunch of extra bills certainly increases money supply, but there is no private sector asset to leverage this new currency against, so it also devalues the currency. As inflation rises, the costs of future obligations also rise (such as baby boomer retirement, etc), so you are forced to either print more money, or return to deficit spending to cover the costs.
I think your post does quite a good job of highlighting exactly how intelligent and rational you are on this subject, so I will only respond with one point. Our debt levels are nowhere near WWII debt levels. The 100-year average Debt-to-GDP ratio is right around 60%, and our current Debt-to-GDP ratio is ... (you guessed it) ... right around 60%. So despite periods of massive debt accumulation (much higher than we have today), and periods of economic contraction (such as the Great Depression), our total debt burden is no higher now than it historically has been, thanks to economic growth.
You are failing to make the distinction that needs to be made between bankruptcy and hyperinflation. The government can always print money to pay off debts owed to both domestic and foreign entities, but this creates hyperinflation, not bankruptcy. Our debts would be paid for, but our currency will be worthless. The obvious solution, which I didn't see you address in your response, is to promote growth so that when we do have to pay off matured debts, we don't have to print money and risk hyperinflation. Once again, as long as the economy grows at least as fast as our debt grows, paying the debt off will never be a problem.
WRONG! The money would not go back in the pockets of Americans - it would come out of the pockets of Americans whose tax payments would be used to pay off the debt. Not only that, this money that is transferred out of the private sector essentially vanishes into $5 Trillion worth of Bonds, T-Bills, and Notes that are worthless unless the government wants to sell them and go back in debt. We would essentially erase $5 Trillion worth of income producing assets from the private sector at the expense of the American taxpayers and get nothing in return. We would even lose out on the $400+ Billion in growth producing interest payments that are deposited back into the private sector every year. Paying the debt off would be an economic catastrophe of epic proportions.