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American National Debt Crisis

edited July 2011 in Politics
So... we're 10 days from defaulting on everything and China coming over to repo our car and break our kneecaps (caution to those in the kneecap states). Democrats have chosen an unfortunate time to grow a spine, and Republicans are being less agreeable than usual. Republican leaders have given up on talking with the White House all together, which will only lead to the process taking even longer. Are there any alternative's left other than pooling for an apartment in Montreal?
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Comments

  • US Treasury bond interest rates are at an all time low (something like 2%). Congress will raise the debt limit at the last second in the name of bipartisanship while republicans take a hit and further split their party. The Gang of Six deal will more than likely be passed.
  • US Treasury bond interest rates are at an all time low (something like 2%).
    I find it interesting how the bond interest rates are almost similar to the interest rates that some regular savings accounts hold...
  • The practical side of me is all left-wing, "let's just get this shit done because it's the onpy possible way to keep things going" but at my core I just feel it's really sad that we put the USA forward as the world's greatest country, but we've done so on a mountain of debt.

    I understand the core philosophy of Keynesian economics is that you borrow a ton of money to make even more money down the road, spend it on improving the country, and then borrow increasing ammounts to repeat the charade. Yes, you have to spend money to make money, and this system keeps credit trickling down to let all the businesses both big and small run tight operations, but I still find it sad that it is the only way. Evetually it leads to exponential growth of your debt, but no other country can ever actually call in these debts or it would be mutually assured/global economic destruction. In the end I just hope we get a balanced plan that jacks up taxes but also cuts a lot of gov't services, while agreeing to some sort of balanced budget ammendment that puts us on the honest path.

    This is why I can't stand politics. Both sides want to put themselves forward as the savior, but one is just the lesser of two evils. You're still evil.

    /endrant.
  • I'm no longer convinced it'll be raised before a default happens; some in GOP still don't actually believe the dire predictions of what will happen if it's not raised.

    The rest don't want any deal with any increased revenues because it goes counter to the 'Starve the Beast' strategy that they've been using. (Let's face it, it's been working to a large extent.)
  • edited July 2011
    My own debt plan involves a strategic expatriation to the UK. No point in living in the Greatest Country On Earth if a loaf of bread is $10 and there's 20% unemployment.

    I believe the Dutch say that countries with problems like these are in "Amerikaanse toestanden," or American Conditions. Pleasant.
    Post edited by WindUpBird on
  • edited July 2011
    exponential growth of your debt
    Is that where the US is? I've seen charts, but it is difficult to plot debt (or any other function of currency) over a long time line with values that are normalized across that entire time line. Without normalization (and due largely to inflation), I could surely see debt being exponential (or worse). But I'm curious how the US debt actually looks, to which I assume there are many different answers based on the different techniques for normalization. Btw, I assumed this quote was hyperbole rather than presented fact, but it did make me wonder.
    no other country can ever actually call in these debts or it would be mutually assured/global economic destruction
    I'm also very curious about this entire process. Is it the IMF that handles this country defaulting stuff? I get the impression the US pretty much owns and runs the IMF in practice, so it can't be the IMF that would be doing this. How does each individual country get to come in and make their claims?

    I've seen some of what is happening with Turkey, but I get the impression their default was being handled by the European Union.
    Post edited by Byron on
  • My quote was hyperbole in the sense that I only know that the debt increases are non-linear and trending upward, but have no idea if it is following an exponential curve. I've seen the figures about how the recent bailouts caused debt growth at previously unheard-of rates. The best place for a lot of charts is to go to the federal reserve websites. The charts that show the money supply are particulariy frightening. This shows how little I know about economics though. In the past few years we have literally doubled the amout of available US dollars. This should have totally devalued the currency in my mind, and caused crippling inflation, but obviously that has not happened

    I've read a lot of interesting theories that point to gov't control of interest rates as the source of recent financial pains, and causing the need for big bailouts. Artificially low interest rates were used as a tool to stave off some of the risks in how we manage the coutry's budget, but artificially low interest means that it actually makes financial sense for people and corporations to take out huge loans and gamble with the money. Sometimes you lose when you gamble, though.

    Re: IMF, I have little uderstanding below a very high level as to how that all would actually work.
  • In the past few years we have literally doubled the amout of available US dollars. This should have totally devalued the currency in my mind, and caused crippling inflation, but obviously that has not happened
    Doubling the amount of available US dollars just means that a half dollar is now worth as much as a quarter was once worth. It also means a $2.50 burger now costs $5.00. It also means when you were being paid $30,000 a year, you should now be paid $60,000 a year. Ah! I found the problem!
  • edited July 2011
    In the past few years we have literally doubled the amout of available US dollars. This should have totally devalued the currency in my mind, and caused crippling inflation, but obviously that has not happened
    Doubling the amount of available US dollars just means that a half dollar is now worth as much as a quarter was once worth. It also means a $2.50 burger now costs $5.00. It also means when you were being paid $30,000 a year, you should now be paid $60,000 a year. Ah! I found the problem!
    At least, this is my understanding based on some real value of money.

    I expect to be quickly corrected about how money actually works, because I apparently don't know how this works either.
    Post edited by Byron on
  • edited July 2011
    AFAIK the common explanation is that inflation is only the result of money that changes hands. If the money sits somewhere, unused, as a buffer on some balance sheet it wont drive prices upwards.
    Post edited by Agnara on
  • AFAIK the common explanation is that inflation is only the result of money that changes hands. If the money sits somewhere, unused, as a buffer on some balance sheet it wont drive prices upwards.
    This explains a good portion of what I wad pondering in my second rant.
  • In the past few years we have literally doubled the amout of available US dollars. This should have totally devalued the currency in my mind, and caused crippling inflation, but obviously that has not happened
    Doubling the amount of available US dollars just means that a half dollar is now worth as much as a quarter was once worth. It also means a $2.50 burger now costs $5.00. It also means when you were being paid $30,000 a year, you should now be paid $60,000 a year. Ah! I found the problem!
    At least, this is my understanding based on some real value of money.

    I expect to be quickly corrected about how money actually works, because I apparently don't know how this works either.
    It's how money would work if it were based on a metal standard.
  • edited July 2011
    From what I can understand, money is essentially worth how much we think it's worth, collectively. The health of the economy is essentially the interaction between how well we are lying to ourselves about the worth of some numbers and how fast those numbers are changing hands.

    In other words, the economy is similar to Tinkerbell in that it is sustained by us clapping our hands and believing.
    Post edited by open_sketchbook on
  • I understand the core philosophy of Keynesian economics is that you borrow a ton of money to make even more money down the road, spend it on improving the country, and then borrow increasing ammounts to repeat the charade. Yes, you have to spend money to make money, and this system keeps credit trickling down to let all the businesses both big and small run tight operations, but I still find it sad that it is the only way. Evetually it leads to exponential growth of your debt, but no other country can ever actually call in these debts or it would be mutually assured/global economic destruction. In the end I just hope we get a balanced plan that jacks up taxes but also cuts a lot of gov't services, while agreeing to some sort of balanced budget ammendment that puts us on the honest path.
    Sorta, You are supposed to spend money in a recession to try and keep the economy running, but when you move into a boom time you don't cut taxes and such, you place that money to the side and save it so when you have another lean time you can use that money to boost your economy again, this of course never happens :-(
  • AFAIK the common explanation is that inflation is only the result of money that changes hands. If the money sits somewhere, unused, as a buffer on some balance sheet it wont drive prices upwards.
    This makes a lot of sense to me, now that you mention it.
    I expect to be quickly corrected about how money actually works, because I apparently don't know how this works either.
    It's how money would work if it were based on a metal standard.
    ... or if everybody were to have the amount of money they owned double. It turns out I was making an implicit assumption of a uniform distribution of the newly minted wealth, as I was thinking of it as a stock split. Agnara's comment made me realize this. The distribution would not be uniform, and until any of that currency entered actual circulation, there would be no change. As the currency enters true circulation (not people, banks, and companies sitting on it), then each dollar out there devalues.

    Thank you for the correction Agnara.
  • edited July 2011
    You are supposed to spend money in a recession to try and keep the economy running
    In a recession, money is short in supply and high in demand (to the greater number of people). Doesn't that mean, given supply and demand being the primary rule of what currency represents, that a recession makes money more valuable? Why does this not appear to be happening? Or is it?

    EDIT: my response seems tangential to the quote, but there was some relationship that got my head on those questions.

    DBL EDIT: I think I am conflating inflation with recession.
    Post edited by Byron on
  • edited July 2011
    I understand the core philosophy of Keynesian economics is that you borrow a ton of money to make even more money down the road, spend it on improving the country, and then borrow increasing ammounts to repeat the charade. Yes, you have to spend money to make money, and this system keeps credit trickling down to let all the businesses both big and small run tight operations, but I still find it sad that it is the only way. Evetually it leads to exponential growth of your debt, but no other country can ever actually call in these debts or it would be mutually assured/global economic destruction. In the end I just hope we get a balanced plan that jacks up taxes but also cuts a lot of gov't services, while agreeing to some sort of balanced budget ammendment that puts us on the honest path.
    Sorta, You are supposed to spend money in a recession to try and keep the economy running, but when you move into a boom time you don't cut taxes and such, you place that money to the side and save it so when you have another lean time you can use that money to boost your economy again, this of course never happens :-(
    Instead, we get George W Bush. I would have hated to be his economic adviser. The man slashed taxes but then started 2 wars, and created a hugely expensive prescription drug program under medicare.
    In the past few years we have literally doubled the amout of available US dollars. This should have totally devalued the currency in my mind, and caused crippling inflation, but obviously that has not happened
    Doubling the amount of available US dollars just means that a half dollar is now worth as much as a quarter was once worth. It also means a $2.50 burger now costs $5.00. It also means when you were being paid $30,000 a year, you should now be paid $60,000 a year. Ah! I found the problem!
    At least, this is my understanding based on some real value of money.

    I expect to be quickly corrected about how money actually works, because I apparently don't know how this works either.
    It's how money would work if it were based on a metal standard.
    Then this little back-and-forth is the best and most concise explanation I've read for why we should not be on a gold standard. (edit: I know we haven't been on one since the 70's, but there are groups that speak longingly of those days)
    Post edited by Matt on
  • Better money through technology (research). Susan Hockfield (President of MIT) suggests ways to create jobs and bring revenue into the country.
  • edited July 2011
    Gallup poll answers in their own words
    We're dooooooommmmed.
    See, this is why we need economists and people who understand macro- and micro-economics and scale and things, because normal people are fucking retarded when it comes to thinking about things other than themselves.
    Post edited by GreatTeacherMacRoss on
  • So far I've thought of at least one thing that could be 100% cut from the budget. Corn subsidies. Anyone got any others?
  • edited July 2011
    The marines. Stealth bombers. Minor drug enforcement. Faith-based initiatives. Development funds for non-drone based air force craft. About half the military funding in general.

    The fact of the matter is though, there is nothing you can cut that will fix this. The government needs more income.
    Post edited by open_sketchbook on
  • The fact of the matter is though, there is nothing you can cut that will fix this. The government needs more income.
  • The fact of the matter is though, there is nothing you can cut that will fix this. The government needs more income.
    BUT YOU CAN'T RAISE TAXES ON JORB CREATORS! BECAUSE SOCIALISM!
  • About half the military funding in general.
    Well, I was actually reading about how many nuclear submarnies we are building, it's a lot. We already have a bunch do we really need more? Rym pointed out that its not really about building the submarines themselves. It's about maintaining the expertise and experience so that when we need to build them we'll be able to. If we just cancel all of them, and we actually need more 50 years from now, will we have the ability to do it?

    There's some crazy logic like that behind all spending. Therefore it becomes almost impossible to justify making cuts. But what happens when you have enough logic to justify unsustainable spending levels? You either have to suffer without something or go broke. Yes, right now we are at a point where raising taxes can pay for it. But interest rates are a percentage that gets bigger and bigger. Even if we raise taxes as high as we can, and never raise spending, and completely remove the debt cieling, at what point will we default? Is it even mathematically possible for us to pay the debt down?
  • Gallup poll answers in their own words
    We're dooooooommmmed.
    Putting those survey responses in all caps makes them sound 100x dumber. To be honest, they were pretty dumb to begin with. Even the "we should raise it" responses have some idiots in their camp such as "that's what Obama says we should do so we should just trust him and hope he's right" (whole lot of independent thought there) and "if we don't raise it we will look stupider." Gems, the lot of them.
  • So far I've thought of at least one thing that could be 100% cut from the budget. Corn subsidies. Anyone got any others?
    You're all going to hate me when I say this: NASA.
  • edited July 2011
    The war on drugs. Legalize it, regulate it, tax it. Then, you actually gain a crapload more money: you wind up turning a money losing prospect into a money gaining prospect.

    But we've been over this 1000 times before. In principle, a budget is simple: you either raise taxes or cut spending to meet a gap. In this case, we're trying to meet a big gap, so we need to do both.

    I'll be out at Pennsic, pretending to be a Viking, if/when the default happens. So if everything goes to shit overnight, at least I'll have a city of 13,000 people for support.

    EDIT: NASA's budget is so small that it just won't make much of a difference.

    EDIT 2: OK, it's actually like 1% of the federal budget, so cutting it could make a difference.
    Post edited by TheWhaleShark on
  • Cut defense by at least a third and raise the minimum retirement age.
  • The department of education. Let the states manage their own school systems. All the federal gov't does is send teachers money with huge strings attached to bogus plans like No Child Left Behind. Yes, the states would have to make up the gap for no more federal aid, but then maybe the schools would be run better as well. I'd gladly pay more if it actually meant people would get a better education.
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