That analysis might track if the government bought gold or made a real investments. The cost to service the debt is nearing a half-trillion per year and that is money that could buy a lot of gold. However, I am getting off track the government should be reducing spending as it wastes more than it invests even in its nanny-state endeavors.
That analysis might track if the government bought gold or made a real investments. The cost to service the debt is nearing a half-trillion per year and that is money that could buy a lot of gold. However, I am getting off track the government should be reducing spending as it wastes more than it invests even in its nanny-state endeavors.
The analysis tracks regardless of how the government spends.
Suppose the US Naval Observatory has a plumbing problem. They hire a contract plumber to do the job, agreeing to pay 1759.15. The government borrows the money from China, agreeing to pay it back at 3.29% interest.
A year later, the Chinese Embassy, adjacent to the US Naval Observatory (according to Google Maps) has an identical plumbing problem. They call the same plumber who quotes them $1823.01, which is the same value, after inflation, that the Naval Observatory paid the previous year. China asks us to repay our loan. We collect taxes and retire our debt with $1817.03, the principal and interest on the Chinese loan, and the Chinese Ambassador wires Beijing, asking for another $5.98 to get an American plumber to snake their drain.
Now yes, the government should reduce wasteful spending. But paying down debts in this manner is NOT wasteful.
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We work together every damn day. --Jon Stewart
You are missing something important, the government never pays back it just services the debt.
I have not missed that point. Keeping that debt on the books and accruing interest at 3.29%, the real value of that debt (including interest) is constantly decreasing as long as the inflation rate exceeds 3.29%.
When we accrue that debt, we are able to purchase an ounce of gold. A year later, we pay it off with an amount of money that would not purchase an ounce of gold. Or, 2 years later. Or 5 years later. Or 10. Or retiring that debt by incurring another debt from someone else, repeatedly, forever. In fact, the longer we hold it in the books, the more we earn.
So long as the interest rate is less than the inflation rate, we are taking real value from our lenders. We must subtract the inflation rate from our interest rate when calculating the real cost of our borrowing.
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We work together every damn day. --Jon Stewart
We still owe a principal that is not being paid, and the cost to service the debt is almost a half-trillion dollars per year and growing. With interest below the inflation rate savings will drop, lenders cannot leverage money and states will begin to pass legislation to make silver and gold legal tender.
We still owe a principal that is not being paid, and the cost to service the debt is almost a half-trillion dollars per year and growing. With interest below the inflation rate savings will drop, lenders cannot leverage money and states will begin to pass legislation to make silver and gold legal tender.
I've spent enough time explaining this to you. That money is the second half of the transaction and it does not decrease our wealth in the slightest.
The only factor to consider in government borrowing is whether inflation will continue to match government interest rates in the long run. The primary component of that issue is our credit worthiness.
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We work together every damn day. --Jon Stewart
I've spent enough time explaining this to you. That money is the second half of the transaction and it does not decrease our wealth in the slightest.
The only factor to consider in government borrowing is whether inflation will continue to match government interest rates in the long run. The primary component of that issue is our credit worthiness.
Your explanations wax thin as the nation smothers in debt.
Your explanations wax thin as the nation smothers in debt.
The nation benefits from debt, not smothers. That's the advantage of having a credit rating that allows for interest rates equal to or less than inflation rates. Again, a basic understanding of economics, sufficient for the understanding of personal and household credit management, is completely inadequate for a proper understanding of federal-level fiscal policy.
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We work together every damn day. --Jon Stewart
The nation benefits from debt, not smothers. That's the advantage of having a credit rating that allows for interest rates equal to or less than inflation rates. Again, a basic understanding of economics, sufficient for the understanding of personal and household credit management, is completely inadequate for a proper understanding of federal-level fiscal policy.
Your analysis and basic understanding seem a bit inadequate. In the long haul where would investment money come from if interest rates are not higher than the inflation rate? People and nations are already turning to gold and silver for investment.
If you think I misunderstand the benefits of debt let's tap in on Obama's understanding :
Quote:
Obama in ?08: Bush?s debt ?unpatriotic?
Peter Wehner 08.24.2011 - 4:20 PM
We recently learned that during the Obama presidency ? which hasn?t even reached its third year ? America has increased its debt by $4 trillion. That is to say, Obama has achieved in two-and-a-half years what it took George W. Bush two full terms in office to achieve. All of which makes this clip particularly delicious.
On July 3, 2008, presidential candidate Barack Obama said this:
The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents ? #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back ? $30,000 for every man, woman and child. That?s irresponsible. It?s unpatriotic.
How typical of Obama. He couldn?t simply express his policy disagreements with President Bush; he had to add his characteristic slander (Bush?s actions were ?unpatriotic.?) Back in those days, before Obama carried the burdens of governing, it all seemed so simple. And now, two-and-a-half years into his presidency, Obama has made virtually everything he has touched worse. He turns out to be a man of uncommon incompetence.
I would add among the many differences between Bush and Obama is the former made a very serious run at entitlement reform (Social Security) while the latter put us on an unprecedented spending spree, including a hugely expensive (and injurious) entitlement program, the Affordable Care Act.
As Ed Morrissey puts it, ?if Obama can use the increase in the national debt to question Bush?s patriotism, doesn?t it follow that increasing deficit spending by 152 percent per month makes Obama 152 percent more ?unpatriotic? than Bush??
I guess it does.
Let's get it with Obama's full oratory inflection:
In looking at the foreign ownership of the U.S. national debt, we realized that we could determine whether a nation is growing or fading in relative economic power by whether or not its share of the U.S. national debt is growing or falling with respect to other nations over time.
As you might imagine, a nation whose relative economic power is on the rise will see its share of the U.S. national debt it might own rise over time, which will most often be a result of it being able to run a trade surplus with the United States for a sustained period of time. Here, the nation running a sustained trade surplus would buy U.S. government-issued debt as a way to help balance the books for its international trade with the United States. The longer that goes on, the larger the share it gains of the U.S. national debt.
We found that that China and Brazil were the two nations whose relative economic power were on the rise during most of the first decade of the twenty-first century.
But in that analysis, we left out the nation whose relative economic power declined the most substantially by that measure - the United States!
Major Holders of U.S. National Debt, March 2000 through December 2010
You can begin seeing what we mean in our first chart, which adds the contributions from U.S. individuals and institutions, individuals such as people who own savings bonds, to institutions, which includes banks, private pension and retirement funds and the Federal Reserve, to the contributions of the U.S. Treasury "borrowing" money from other federal government entities, such as military and civilian government retirement funds and Social Security.
Here, we see that the relative amounts of the U.S. national debt owned by U.S. entities has not grown anywhere near as fast over much of the past decade as the portions owned by foreign powers.
That's especially true for U.S. government pension plans and Social Security, whose ownership of the U.S. national debt has grown at a steady pace over the past decade. By contrast, we see an explosion in the amount of U.S. debt held by all other entities, especially beginning after August 2008 as the financial crisis of that year began.
Our next chart maps the percentage share of the U.S. national debt for each of the indicated debt holders for each month from March 2000 through December 2010 (we're limited to only going back to March 2000 by the U.S. Treasury's available foreign-owned debt data. The percentages shown on the chart indicate each debt holders relative percentage share of the entire U.S. national debt in March 2000 and in December 2010.
Major Holders of U.S. National Debt by Percentage of Debt Held, March 2000 through December 2010
What we see here is that the portion of the U.S. national debt owned by U.S. persons and entities has fallen from the levels of March 2000, while the percentage share held by foreign entities has risen through December 2010. This outcome indicates that the relative economic power of the U.S. has slipped during the period from March 2000 through December 2010, and most dramatically following August 2008.
What's particularly disturbing is that the U.S. trade deficit with China has fallen since August 2008, which means that China's growing share of the U.S. national debt in the time since is not being driven by that nation's trade surplus with the United States and the need to balance the books of that international trade. Instead, it would appear that China's increasing ownership share of the U.S. national debt is aimed at effectively propping up the U.S. government and its spending.
Why China would desire to acquire U.S. debt in excess of what it would seem to need to balance its books to support its international trade is an exercise we'll leave to others. We'll simply observe that they likely believe the policy to be to their advantage in enhancing their relative status with respect to the United States, and so far, there are several indications that suggest that China's enhanced status is being recognized at the highest level.
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