US Debt Explained in Simple English

Off Topic
21

Debt is great. I understand that it is paramount to an expanding economy. My post was to provide a little perspective on how bad it is.

It is by taking on debt that I can own a house. With shelter, I am warm, and safe and able do my best work to make money and contribute to society. Through debt, I have provided stability for my family so that my kids have the optimal environment to maximize their potential and become even better contributors to society than I am. The opportunities and comforts that I provide for my family are worth the debt that I incur.

But if I am stupid and hit my credit limit, I can’t just decide to raise my debt ceiling. I can’t go to my work and tell my employer (taxpayers) that I have decided to increase my wages and that it is their responsibility to pay my bills AFTER putting money in my pocket.

24

@ Orion

Don’t twist my words. I never said unchecked/irresponsible money growth is a good thing, in fact I conceded the opposite. And with regards to speculation over inflation, the US just spent the better part of a trillion dollars and 20 year US treasury notes are holding steady right around 4%.

If investors feared massive inflation in the future, it would show up in the 10 and 20 year notes in the form of jacked up interest rates. This has not been the case. So unless we are going to operate under the ludicrous notion that markets and investors are irrational, the danger has been grossly overstated. Beyond that I don’t even know what point you’re trying to make. Are you in favor of a balanced budget?

PS: Enjoy being a miserable cynic.

@ RRibber

My point was comparing household debt to government debt is apples to oranges. Your analogy does not apply and the picture you posted is propaganda aimed at people who aren’t versed in economics.

25

[quote]RRibber wrote:
Debt is great. I understand that it is paramount to an expanding economy. My post was to provide a little perspective on how bad it is.

It is by taking on debt that I can own a house. With shelter, I am warm, and safe and able do my best work to make money and contribute to society. Through debt, I have provided stability for my family so that my kids have the optimal environment to maximize their potential and become even better contributors to society than I am. The opportunities and comforts that I provide for my family are worth the debt that I incur.

But if I am stupid and hit my credit limit, I can’t just decide to raise my debt ceiling. I can’t go to my work and tell my employer (taxpayers) that I have decided to increase my wages and that it is their responsibility to pay my bills AFTER putting money in my pocket. [/quote]

Oh debt, or more broadly a diversified financial sector is one of the pillars of a robust economy.

Which is exactly why central planning of the means of exchange and price fixing of interest rates is a very, very, very bad idea.

26

Also,

<----- likes “teahadists”

Not only because is has infinitely more class than “teabaggers”, but also because it implies that they have indeed begun a spiritual struggle to save the soul of a nation.

27

[quote]four60 wrote:

[quote]overstand wrote:
People need to understand that balancing the budget for the sake of balancing the budget makes absolutely no economic sense. Despite what Obama and the rest of the harbingers of doom would have us believe, the government CAN NOT go broke. We are not Greece! Where Greece had no control over the Euro, we have total sovereign control over the $ and can (and should) continue to run a deficit indefinitely. This principle is the very foundation of a fiat money system. Money growth is not only NOT a bad thing, but is absolutely essential for stable economic growth. The concept of government debt is a holdover from the gold standard era and has no application in today’s economy. Instead of thinking of the deficit as “debt”, think of it as money growth. Every dollar the government spends beyond what it collects in taxes represents another dollar added to the economy. This infusion of cash lowers the interest rate and spurs private investment. In the bottom line, deficit spending = money growth = private sector savings, penny for penny.

Understand that I am not advocating limitless money expansion. There is a resource contraint whereby if we grow money faster than our consumption/investment/etc. can expand, we will face unnecessary inflation. However, this is why we have the Fed and monetary policy tools to make micro adjustments to keep the economy on track.

In case you have forgotten, the US has run a deficit for 99% of the country’s history. A period with one of the largest deficits in history, WWII, also saw some of the fastest economic growth ever. The few times we’ve run a surplus have resulted in recessions. Instead of focusing on the deficit (which is largely arbitrary and endogenous), we should be focusing on real issues like unemployment.
[/quote]

Our biggest problem is Fear and Fear Mongers. People get scared think the world is going to fall around them and stop spending. Companies Fear going under and go for the cheapest way out. And all this shit starts with the fighting in congress over BS and Power.[/quote]
Could you elaborate?

Companies, unlike the US gov’t,do operate fairly simply. As the cost of goods rise due to inflation (rising oil costs most recently) profit margins shrink and companies adjust, either by increasing price, reducing quality or laying off workers.

Laid off workers don’t spend money because they can’t. Others do tighten up just in case, but the fear comes from a practical place. Business cycles run their course regardless of who is in office and should.

Giving big government cock suckers control will only lead to the private sector giving up more and more rope to govt, creating the scenario you are scared of.

Knee jerk reactions and late night pundit parroting only hurt this country’s outcome. Overstand did a great job explaining the Fiat system too. The fear is in the “left” painting the “right” as bogeymen by utilizing whimsical emotion rather than fact as you and others in this thread demonstrate.

28

[quote]Christine wrote:
Not Michele, but another crazy teahadist.[/quote]

They just need some good long sausage. If you had to eat vienna wieners all the time, you’d be stuck up too!!

29

Oh to stay on topic: Govt debt is good. Stimulates growth and checks recession however I personally feel we carry too much bad debt. Why are we spending billions on foriegn policy when we need to improve our own country’s infastructure?

30

[quote]HoustonGuy wrote:

[quote]four60 wrote:

[quote]overstand wrote:
People need to understand that balancing the budget for the sake of balancing the budget makes absolutely no economic sense. Despite what Obama and the rest of the harbingers of doom would have us believe, the government CAN NOT go broke. We are not Greece! Where Greece had no control over the Euro, we have total sovereign control over the $ and can (and should) continue to run a deficit indefinitely. This principle is the very foundation of a fiat money system. Money growth is not only NOT a bad thing, but is absolutely essential for stable economic growth. The concept of government debt is a holdover from the gold standard era and has no application in today’s economy. Instead of thinking of the deficit as “debt”, think of it as money growth. Every dollar the government spends beyond what it collects in taxes represents another dollar added to the economy. This infusion of cash lowers the interest rate and spurs private investment. In the bottom line, deficit spending = money growth = private sector savings, penny for penny.

Understand that I am not advocating limitless money expansion. There is a resource contraint whereby if we grow money faster than our consumption/investment/etc. can expand, we will face unnecessary inflation. However, this is why we have the Fed and monetary policy tools to make micro adjustments to keep the economy on track.

In case you have forgotten, the US has run a deficit for 99% of the country’s history. A period with one of the largest deficits in history, WWII, also saw some of the fastest economic growth ever. The few times we’ve run a surplus have resulted in recessions. Instead of focusing on the deficit (which is largely arbitrary and endogenous), we should be focusing on real issues like unemployment.
[/quote]

Our biggest problem is Fear and Fear Mongers. People get scared think the world is going to fall around them and stop spending. Companies Fear going under and go for the cheapest way out. And all this shit starts with the fighting in congress over BS and Power.[/quote]
Could you elaborate?

Companies, unlike the US gov’t,do operate fairly simply. As the cost of goods rise due to inflation (rising oil costs most recently) profit margins shrink and companies adjust, either by increasing price, reducing quality or laying off workers.

Laid off workers don’t spend money because they can’t. Others do tighten up just in case, but the fear comes from a practical place. Business cycles run their course regardless of who is in office and should.

Giving big government cock suckers control will only lead to the private sector giving up more and more rope to govt, creating the scenario you are scared of.

Knee jerk reactions and late night pundit parroting only hurt this country’s outcome. Overstand did a great job explaining the Fiat system too. The fear is in the “left” painting the “right” as bogeymen by utilizing whimsical emotion rather than fact as you and others in this thread demonstrate.

[/quote]

Many words and missed my point so hard you made most of it for me.
Also no clue what side of the fence this boogyman comes from since you also made a leap to say I was blaming One Side over the other.

It’s this type of MY side is always Right and Your side is always wrong that leads to a fucking Super Congress of scape goats.

Ease up and stop assuming my position.

31

[quote]pushharder wrote:
[Laughing my head off at the naivete of those who think the Tea Party of all things is causing the problem or not trying to deal with it]

Lord have mercy, the ignorance here is unfettered. Wow.[/quote]

32

[quote]four60 wrote:

It’s this type of MY side is always Right and Your side is always wrong that leads to a fucking Super Congress of scape goats.

[/quote]

Ah, thats so very middle of the road of you.

It is just that debt and money printing either a) “Govt debt is good. Stimulates growth and checks recession” or b) removes resources from the productive, i.e. private sector and strangles the economy even more.

Tertium non datur, choose.

And of you choose wrong, you might tank the system.

33

[quote]four60 wrote:

[quote]HoustonGuy wrote:

[quote]four60 wrote:

[quote]overstand wrote:
People need to understand that balancing the budget for the sake of balancing the budget makes absolutely no economic sense. Despite what Obama and the rest of the harbingers of doom would have us believe, the government CAN NOT go broke. We are not Greece! Where Greece had no control over the Euro, we have total sovereign control over the $ and can (and should) continue to run a deficit indefinitely. This principle is the very foundation of a fiat money system. Money growth is not only NOT a bad thing, but is absolutely essential for stable economic growth. The concept of government debt is a holdover from the gold standard era and has no application in today’s economy. Instead of thinking of the deficit as “debt”, think of it as money growth. Every dollar the government spends beyond what it collects in taxes represents another dollar added to the economy. This infusion of cash lowers the interest rate and spurs private investment. In the bottom line, deficit spending = money growth = private sector savings, penny for penny.

Understand that I am not advocating limitless money expansion. There is a resource contraint whereby if we grow money faster than our consumption/investment/etc. can expand, we will face unnecessary inflation. However, this is why we have the Fed and monetary policy tools to make micro adjustments to keep the economy on track.

In case you have forgotten, the US has run a deficit for 99% of the country’s history. A period with one of the largest deficits in history, WWII, also saw some of the fastest economic growth ever. The few times we’ve run a surplus have resulted in recessions. Instead of focusing on the deficit (which is largely arbitrary and endogenous), we should be focusing on real issues like unemployment.
[/quote]

Our biggest problem is Fear and Fear Mongers. People get scared think the world is going to fall around them and stop spending. Companies Fear going under and go for the cheapest way out. And all this shit starts with the fighting in congress over BS and Power.[/quote]
Could you elaborate?

Companies, unlike the US gov’t,do operate fairly simply. As the cost of goods rise due to inflation (rising oil costs most recently) profit margins shrink and companies adjust, either by increasing price, reducing quality or laying off workers.

Laid off workers don’t spend money because they can’t. Others do tighten up just in case, but the fear comes from a practical place. Business cycles run their course regardless of who is in office and should.

Giving big government cock suckers control will only lead to the private sector giving up more and more rope to govt, creating the scenario you are scared of.

Knee jerk reactions and late night pundit parroting only hurt this country’s outcome. Overstand did a great job explaining the Fiat system too. The fear is in the “left” painting the “right” as bogeymen by utilizing whimsical emotion rather than fact as you and others in this thread demonstrate.

[/quote]

Many words and missed my point so hard you made most of it for me.
Also no clue what side of the fence this boogyman comes from since you also made a leap to say I was blaming One Side over the other.

It’s this type of MY side is always Right and Your side is always wrong that leads to a fucking Super Congress of scape goats.

Ease up and stop assuming my position.
[/quote]You made your position clear but more importantly I’m directly on point objectively discussing the true fear mongering/big govt control issue you introduced to the thread, personal opinions notwithstanding.

My post is the objective post. If you could elaborate on your corporate fear mongering point of view as requested, we could continue further. Otherwise you are just crawfishing out, which is fine. Do it quick though, I set sail shortly.

34

[quote]orion wrote:

[quote]four60 wrote:

It’s this type of MY side is always Right and Your side is always wrong that leads to a fucking Super Congress of scape goats.

[/quote]

Ah, thats so very middle of the road of you.

It is just that debt and money printing either a) “Govt debt is good. Stimulates growth and checks recession” or b) removes resources from the productive, i.e. private sector and strangles the economy even more.

Tertium non datur, choose.
And of you choose wrong, you might tank the system.

Thank You

[/quote]

35

[quote]overstand wrote:
People need to understand that balancing the budget for the sake of balancing the budget makes absolutely no economic sense. Despite what Obama and the rest of the harbingers of doom would have us believe, the government CAN NOT go broke. We are not Greece! Where Greece had no control over the Euro, we have total sovereign control over the $ and can (and should) continue to run a deficit indefinitely. This principle is the very foundation of a fiat money system. Money growth is not only NOT a bad thing, but is absolutely essential for stable economic growth. The concept of government debt is a holdover from the gold standard era and has no application in today’s economy. Instead of thinking of the deficit as “debt”, think of it as money growth. Every dollar the government spends beyond what it collects in taxes represents another dollar added to the economy. This infusion of cash lowers the interest rate and spurs private investment. In the bottom line, deficit spending = money growth = private sector savings, penny for penny.

Understand that I am not advocating limitless money expansion. There is a resource contraint whereby if we grow money faster than our consumption/investment/etc. can expand, we will face unnecessary inflation. However, this is why we have the Fed and monetary policy tools to make micro adjustments to keep the economy on track.

In case you have forgotten, the US has run a deficit for 99% of the country’s history. A period with one of the largest deficits in history, WWII, also saw some of the fastest economic growth ever. The few times we’ve run a surplus have resulted in recessions. Instead of focusing on the deficit (which is largely arbitrary and endogenous), we should be focusing on real issues like unemployment.
[/quote]

Obviously without slight deficit spending there would not be the government bonds the Fed OMC uses however the current deficit levels vs GDP are unsustainable. Remember not even Keynes believed that the government should operate in a state of deficit spending continuously. But rather could use deficit spending as a tool to nudge the economy out of down turns but that when economic growth returned government outlays should be reduced.

Its that kind of nuance that we aren’t getting from either ideological side.

36

[quote]Loudog75 wrote:

[quote]Christine wrote:
Not Michele, but another crazy teahadist.[/quote]

They just need some good long sausage. If you had to eat vienna wieners all the time, you’d be stuck up too!![/quote]

she likes corndogs too, apparently…

37

[quote]Edgy wrote:

[quote]Loudog75 wrote:

[quote]Christine wrote:
Not Michele, but another crazy teahadist.[/quote]

They just need some good long sausage. If you had to eat vienna wieners all the time, you’d be stuck up too!![/quote]

she likes corndogs too, apparently…[/quote]

Nah, its just a substitue for the black footlong she really craves.

Now stay on topic lol

38

[quote]orion wrote:

[quote]four60 wrote:

It’s this type of MY side is always Right and Your side is always wrong that leads to a fucking Super Congress of scape goats.

[/quote]

Ah, thats so very middle of the road of you.

It is just that debt and money printing either a) “Govt debt is good. Stimulates growth and checks recession” or b) removes resources from the productive, i.e. private sector and strangles the economy even more.

Tertium non datur, choose.

And of you choose wrong, you might tank the system.

[/quote]

But doesn’t Govt spending boost the private sector and SET UP the economy for failure with policy changes? The problem with the Gubment is that they don’t follow a free mkt philosophy. They follow ideology which sure as hell will get you broke.

39

[quote]HoustonGuy wrote:
Giving big government cock suckers control will only lead to the private sector giving up more and more rope to govt, creating the scenario you are scared of.

The fear is in the “left” painting the “right” as bogeymen by utilizing whimsical emotion rather than fact as you and others in this thread demonstrate.
[/quote]

Government control leads to corrupted results. The thing that need to be privatised the most in the economy is the private sector!

Both parties use the ‘divide and conquer’ approach. There is little value in terms like right or left any longer. Each party just continues/expands the policies of the previous party whether they are economic, foreign, or social. The push has been away from individual liberty and toward centralized power…both parties equally guilty. This transformation is taking place at every level of government from city councils and school boards to DC.
The distinction is between those that believe in using the power of the state to control and force people to think and behave in a manner they approve of under the threat of violence vs. those that believe in the sanctity of the individual.