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(National Journal)   US economic output won't reach its potential level until 2017, a lost decade after the recession started in December 2007 (With lots of graphs for Farkers to use to make their own unique points)   (nationaljournal.com ) divider line 43
    More: Sad, Congressional Budget Office, economic output, growth spurt, recession started, Real GDP, Carmen Reinhart, Kenneth Rogoff, calendar years  
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987 clicks; posted to Business » on 06 Feb 2013 at 9:48 AM (3 years ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-02-06 10:01:07 AM  
What is a "bad" level of debt?

assets.nationaljournal.com
 
2013-02-06 10:23:44 AM  

hinten: What is a "bad" level of debt?


When it's of a type and amount of currency you don't have sufficient access to.
 
2013-02-06 10:24:39 AM  
i53.tinypic.comi51.tinypic.comi52.tinypic.comi54.tinypic.comi51.tinypic.com
Newer graphs are even more depressing
 
2013-02-06 10:35:40 AM  

dragonchild: hinten: What is a "bad" level of debt?

When it's of a type and amount of currency you don't have sufficient access to.


A bad debt is one that you don't have access to? The US government has unlimited access to debt, so, I guess, we are fine.
 
2013-02-06 10:58:09 AM  

hinten: What is a "bad" level of debt?


The debt itself is not the issue.  It is what the debt cost you that IS the issue.  Specifically, the interest burden that this debt carries.  While the debt principal is part of this equation, there are many other factors to consider that ultimatly determien what this obligation is.

/Currently, our total debt obligation is about 19% of the entire federal tax revenue.
 
2013-02-06 11:02:39 AM  
In addition, can anyone please explain to me why the CBO baseline projection has revenues surpassing 20% of GDP starting about 2014 and then continuing to climb all the way up to about 24% by 2040?

In the history of this country we have only touched the 20% threshold twice, and this was for very brief periods.  Methinks that thier revenue projects are a might bit optimistic.  Because of this, I tend to judge thier Alternative Baseline projection as a little more realistic.
 
2013-02-06 11:02:44 AM  

HeadLever: hinten: What is a "bad" level of debt?

The debt itself is not the issue.  It is what the debt cost you that IS the issue.  Specifically, the interest burden that this debt carries.  While the debt principal is part of this equation, there are many other factors to consider that ultimatly determien what this obligation is.

/Currently, our total debt obligation is about 19% of the entire federal tax revenue.


FTFA:

Economists differ on what qualifies as an acceptable debt-to-GDP ratio. The European Union and the International Monetary Fund have settled on 60 percent, though that is arbitrary, Kogan writes. Harvard professors Kenneth Rogoff and Carmen Reinhart, who studied eight centuries of financial crises,  say debt becomes a problem when it constitutes more than 90 percent of GDP.
 
2013-02-06 11:08:58 AM  

hinten: HeadLever: hinten: What is a "bad" level of debt?

The debt itself is not the issue.  It is what the debt cost you that IS the issue.  Specifically, the interest burden that this debt carries.  While the debt principal is part of this equation, there are many other factors to consider that ultimatly determien what this obligation is.

/Currently, our total debt obligation is about 19% of the entire federal tax revenue.

FTFA:

Economists differ on what qualifies as an acceptable debt-to-GDP ratio. The European Union and the International Monetary Fund have settled on 60 percent, though that is arbitrary, Kogan writes. Harvard professors Kenneth Rogoff and Carmen Reinhart, who studied eight centuries of financial crises,  say debt becomes a problem when it constitutes more than 90 percent of GDP.


Again, the issue is not the debt itself.  The government can simply roll the debt over until the end of time.  It is the cost of maintaining this debt that is the issue.  Namely interest.  How much interest can we bear is the real question and which is difficult to answer since it depends upon so many things.
 
2013-02-06 11:11:53 AM  
That is just a projection based on a model that may or may not be accurate.  Methinks these projections are based on a very optimistic model.
 
2013-02-06 11:18:53 AM  

hinten: What is a "bad" level of debt?

[assets.nationaljournal.com image 625x255]


Depends on who you ask and how they want to define it. Republicans want to define debt in terms of GDP, as you can see we are running a high percentage of debt against our GDP.

You could also define "bad" debt in terms of tax revenue vs the amount borrowed to cover the US budget. In those terms we are running between 45-50% of tax revenue vs. the amount we must borrow. In real terms in 2012 the US took in roughly 2.4 trillion dollars in tax revenue, had an outlay of roughly 3.8 trillion dollars and borrowed roughly 1.4 trillion dollars in 2012. The total US debt is roughly 16 trillion and growing.

Now then compared to other first world countries a US citizen pays about half the personal income tax rate and studies have shown that federal income tax on the top two brackets could double with impacting economic activity. This would generate enough tax revenue to almost close the deficit. From there cutting the federal budget by 5-10% would close the remaining deficit.

Finally, there is this to consider the US is the worlds reserve currency. Right now the interest rate to borrow money for the US government is below inflation. This effect is called negative amortization and what it means is that money borrowed now will not cost the US anything, because the rate of inflation is greater then the interest rate. US and international firms and citizens, not to mention foreign governments are paying the US to store their money in US bonds.

Personally I don't think the US will have reached a "bad" level of debt until the cost to borrow more debt has reached exorbitant interest rates of say over 15-20%. Current US interest rates on bonds range from .2, yes .2, to 1.76 percent. At those rates the US is still able to borrow as much money as it wants.

Finally the question is what do We the People of the United States of America want? Austerity, with it's slow economic growth or even economic shrinkage? This will reduce our debt, but will cost jobs and reduce wages.  Stimulus, on the other hand will require the US to borrow about 2-3 trillion dollars to buy goods and services in order to stimulate demand. This will increase economic activity and should create growth in the economy, but add trillions more in debt.

Personally I feel that we need stimulus right now. We have an entire generation of US citizens graduating college and unable to find jobs. They can not start careers, and unless something is done right now will this will have a knock on effect of slowing expected economic growth, because these people will not be buying homes at the expected times, will delay having children, and generally be behind on all economic milestones.
 
2013-02-06 11:50:01 AM  

Slaves2Darkness: Now then compared to other first world countries a US citizen pays about half the personal income tax rate


Do you have a citation for that?
 
2013-02-06 11:52:02 AM  

Slaves2Darkness: Now then compared to other first world countries a US citizen pays about half the personal income tax rate and studies have shown that federal income tax on the top two brackets could double with impacting economic activity. This would generate enough tax revenue to almost close the deficit. From there cutting the federal budget by 5-10% would close the remaining deficit.



You are making some huge assumptions about high income individuals that I don't think are realistic.  We live in a global society now and the very wealthy can easily move to a more tax friendly environment.  This is exactly what is happening in England and France right now. 

Personally I don't think the US will have reached a "bad" level of debt until the cost to borrow more debt has reached exorbitant interest rates of say over 15-20%. Current US interest rates on bonds range from .2, yes .2, to 1.76 percent. At those rates the US is still able to borrow as much money as it wants.

Are you serious?  It isn't a problem until we get to loan shark rates?  The conventionally regarded tipping point is at about 7%.

Finally, there is this to consider the US is the worlds reserve currency. Right now the interest rate to borrow money for the US government is below inflation. This effect is called negative amortization and what it means is that money borrowed now will not cost the US anything, because the rate of inflation is greater then the interest rate. US and international firms and citizens, not to mention foreign governments are paying the US to store their money in US bonds.

True, but unreasonable to believe that will last forever and when it does end, it will likely be disastrous.  Kind of like getting a credit card with a 2% interest rate, running up a big balance, miss one payment, and they ratchet it up to 24.99%.

Not to say I think austerity is a better alternative.  America will eventually fall into the same debt pit most European countries now find themselves in, regardless of which path it takes.  It will lose it's status as a superpower.  I think the world without the U.S. as the police will be an interesting place....More wars and less feigned civility.
 
2013-02-06 12:02:43 PM  

Slaves2Darkness: This would generate enough tax revenue to almost close the deficit.


I am pretty sure this is a lie. That shortfall you are talking about i about $1.06Trillion, which is about 6.8% of the GDP.  The top 2% total income is about $1.5 to $2T.  If you can manage to tax these folks at about a 50% to 75% effective rate (mind you, just for the federal taxes), you may close the gap.  In all reality, though - good luck with that.
 
2013-02-06 12:10:51 PM  

Slaves2Darkness: Right now the interest rate to borrow money for the US government is below inflation.


Actaully, no it is not.  I don't know where you guys keep pulling these lies out from.

Total interest last year - ignoring the one time credit was about $425 Billion.  With 16.5 trillion in debt principal, that comes to an effective annual rate of 2.6%.  In 2011, inflation was about 2.1%.

And don't forget what will happen when interest rates normalize.  Racking money up on that "0% introductory rate" credit card with no plans to ever pay it off typically never pans out very well.
 
2013-02-06 12:19:21 PM  

Slaves2Darkness: Personally I don't think the US will have reached a "bad" level of debt until the cost to borrow more debt has reached exorbitant interest rates of say over 15-20%. Current US interest rates on bonds range from .2, yes .2, to 1.76 percent. At those rates the US is still able to borrow as much money as it wants.


I'll agrue that the response should be 'how much of our tax revenue do we want ate up by interest expense'.  Right now about $20 cents of every tax dollar you give to the government is eaten up by this cost.  That is money that cannot go to legitimate government functions and basically deterorates the effective worth of our taxes.
 
2013-02-06 12:21:56 PM  

HeadLever: Slaves2Darkness: Right now the interest rate to borrow money for the US government is below inflation.

Actaully, no it is not.  I don't know where you guys keep pulling these lies out from.

Total interest last year - ignoring the one time credit was about $425 Billion.  With 16.5 trillion in debt principal, that comes to an effective annual rate of 2.6%.  In 2011, inflation was about 2.1%.

And don't forget what will happen when interest rates normalize.  Racking money up on that "0% introductory rate" credit card with no plans to ever pay it off typically never pans out very well.


If you compute inflation as it was done in 1980, it's much much higher than 2.2%

www.shadowstats.com
 
2013-02-06 12:23:45 PM  

Pumpernickel bread: Are you serious? It isn't a problem until we get to loan shark rates? The conventionally regarded tipping point is at about 7%.


That sounds about right

i2.cdn.turner.com
 
2013-02-06 12:30:33 PM  

mcreadyblue: If you compute inflation as it was done in 1980, it's much much higher than 2.2%


That is a fair point.  What worries me is that if we do ever end up heading into another big boom cycle with the amount of Fed pumping, inflation could explode sending interest rates skyrocketing.  That could be very bad news for the taxpayer and our deficits.  You can bet the Fed is watching this like a hawk.

In any case, I think that this slow growth period is about as good of a path forward as any.  If we can keep interest rates and inflation under control while continuing to allow households to continue the deleveraging process while continuing to slowly cut spending and increase revenues, we may just get out of this mess we made for ourselves.  It will be a long slog, but probably worth it.
 
2013-02-06 12:37:45 PM  

Slaves2Darkness: Finally the question is what do We the People of the United States of America want? Austerity, with it's slow economic growth or even economic shrinkage? This will reduce our debt, but will cost jobs and reduce wages.


Before we talk about hypothetical effects of austerity, can we (for once) actually talk about what austerity is, in the sense of how people are using the word?  It involves less spending by the government and higher taxes to make. . . a number on a balance sheet look better.  More bluntly put, it is the government accumulating wealth at the private sector's expense.  I thought people hated that idea.  Went to war for it.  You know, "no taxation without representation" and stuff?  And every single time the government talks about raising taxes it's all torches & pitchforks.  Well, spending less is pretty much the same thing, from the private sector perspective.  Either way, the money stops flowing from public to private and goes the other direction.  I'm not saying the government should operate near the verge of bakruptcy, but with the 10-year bond around 2% is there any evidence that it is?  And as long as investors are basically paying Uncle Sam to hold onto their cash, why should we be suddenly so concerned that the government is "poor"?

And sudden it was.  Thing is, I didn't even first hear of this austerity shiat until that black dude took over the White House in the midst of a global financial meltdown.  As far as I'm concerned it was political sabotage; the GOP trying to sell the public a horrible idea to get Obama to burn political capital doing the obvious thing.  It didn't matter that austerity was never going to happen; the goal was to get the people to hate the Democrats for doing the smart thing.  The GOP not only would've done the same thing; they DID do the same thing -- Obama only picked right up where Bush left off.  Their sole motivation was to get the people to hate whatever the hell the Democrats were doing.

With unemployment where it's at, if Uncle Sam has any funds to spare they should be using it.  Save it for what, a rainy day?  2008-2012 WAS the rainy effin' day!
 
2013-02-06 12:57:14 PM  

HeadLever: mcreadyblue: If you compute inflation as it was done in 1980, it's much much higher than 2.2%

That is a fair point.  What worries me is that if we do ever end up heading into another big boom cycle with the amount of Fed pumping, inflation could explode sending interest rates skyrocketing.  That could be very bad news for the taxpayer and our deficits.  You can bet the Fed is watching this like a hawk.

In any case, I think that this slow growth period is about as good of a path forward as any.  If we can keep interest rates and inflation under control while continuing to allow households to continue the deleveraging process while continuing to slowly cut spending and increase revenues, we may just get out of this mess we made for ourselves.  It will be a long slog, but probably worth it.


Devaluing of the Yen and Euro will cause a big kink in the recovery.
 
2013-02-06 01:22:33 PM  

dragonchild: With unemployment where it's at, if Uncle Sam has any funds to spare they should be using it.


Uncle sam has no 'spare funds' outside of what he borrows and adds to the debt.  If you think that he should borrow more and rack up more debt, that is your prerogative.  However, many have issues with that path forward.
 
2013-02-06 01:26:25 PM  

mcreadyblue: HeadLever: mcreadyblue: If you compute inflation as it was done in 1980, it's much much higher than 2.2%

That is a fair point.  What worries me is that if we do ever end up heading into another big boom cycle with the amount of Fed pumping, inflation could explode sending interest rates skyrocketing.  That could be very bad news for the taxpayer and our deficits.  You can bet the Fed is watching this like a hawk.

In any case, I think that this slow growth period is about as good of a path forward as any.  If we can keep interest rates and inflation under control while continuing to allow households to continue the deleveraging process while continuing to slowly cut spending and increase revenues, we may just get out of this mess we made for ourselves.  It will be a long slog, but probably worth it.

Devaluing of the Yen and Euro will cause a big kink in the recovery.


Among a multitide of other pitfalls that could happen if we get to shortsighted.  A slow and steady progression toward lower spending, increased revenue and ultimately fiscal stability will be better for nearly everyone.
 
2013-02-06 01:44:30 PM  

HeadLever: Uncle sam has no 'spare funds' outside of what he borrows and adds to the debt. If you think that he should borrow more and rack up more debt, that is your prerogative. However, many have issues with that path forward.


It's kind of weird how you took a rhetorical phrase and turned it into a point for the sole purpose of disagreeing with it.

I am NOT saying Uncle Sam has "funds to spare", per se.  My point is that anyone who thinks the government should be in any other situation is probably living in the wrong country.  The government doesn't have funds to spare because presumably it's spent on the nation.  Maybe not well, maybe even terribad, but it spends, and that's the point.  Its job isn't to "save"; it's not a household or a business; it exists for the benefit of households and businesses.  If you wanna look at an austere country with very stable government finances, there's Best Korea.
 
2013-02-06 01:58:52 PM  
No, The United States will not go into a debt crisis, not now, not ever.

Can we focus on infrastructure and R&D for clean energy programs, now?
 
2013-02-06 02:07:40 PM  

dragonchild: I am NOT saying Uncle Sam has "funds to spare", per se.


And that was my point.  When you are engaged in perpetual deficits, this agrument is not even rhetorical, it is a complete mischaracterization.

I agree that the goal of government is not to accumulate wealth, but it should not run the country as to destroy its wealth either.  It is within the government's (that is, 'all of us') best interest to spend within its means and provide an adequte saftey net while not burdening the taxpayer any more than they need be.

Right now, we need the taxpayer to step up where possible to provide adequate revenue for controlling deficits.  The government also needs to do its part and cut out spending where it can.  The implication is that if we allow these deficits to continue, there will be little ability to control said deficits in the future.

Higher taxes and lower government spending  (non-interest) is coming one way or the other.  Whether we do it ourselves or it is forced upon us is our decision.  Choose wisely.
 
2013-02-06 02:16:21 PM  

Nadie_AZ: No, The United States will not go into a debt crisis, not now, not ever.

That arguemnt is laughable.  You don't have to be insolvent to have a debt crisis.  A debt crisis could be just the spiraling cost of servicing the debt leading to the rapid accumulation of additional debt.  Remember that printing money can lead to inflation, which can lead to increased interest rates.

Having a fiat currency does not guard against that.


Can we focus on infrastructure and R&D for clean energy programs, now?

While those are part of legitimate government spending, yes, let's keep or elevate these as a priority.  However, we still have to be judicious about how we spend this money.
 
2013-02-06 02:27:20 PM  
and in case you wanted to know, this is what a debt crisis may look like.
theeconomiccollapseblog.com
 
2013-02-06 04:36:33 PM  

Nadie_AZ: No, The United States will not go into a debt crisis, not now, not ever.

Can we focus on infrastructure and R&D for clean energy programs, now?


Wow. What's scary is so many people believe that nonsense.

If debt will never be a problem, in addition to pie in the sky clean energy spending, can we just do away with income taxes, now? I mean, we can just borrow more, right? No need to pay for anything of weeeEEEEeee E E will never, ever, ever, have a debt crisis. Like ever.
 
2013-02-06 05:08:55 PM  
December 2007, MY ASS
It was definitely before that when 50% of my tenants got laid off in one month

/not a landlord anymore
 
2013-02-06 06:45:50 PM  
Subby, you missed the quotation marks around points, just thoguht I'd throw that out there.
 
2013-02-06 06:46:43 PM  
thought, derp...
 
2013-02-06 07:21:58 PM  

Debeo Summa Credo: If debt will never be a problem, in addition to pie in the sky clean energy spending, can we just do away with income taxes, now?


We probably should.  The dollar gets its value from productivity, so a direct disincentive to work probably isn't the best way to go about propping up Uncle Sam's credit rating.  Property taxes are more progressive, and a disincentive for the wealthy sitting on assets just so that no one else can use them -- something that causes deflation and stagnation.
 
2013-02-06 09:02:38 PM  

RowdyRough: Subby, you missed the quotation marks around points, just thoguht I'd throw that out there.


What's your "point"?
 
2013-02-06 09:35:55 PM  

HeadLever: hinten: HeadLever: hinten: What is a "bad" level of debt?

The debt itself is not the issue.  It is what the debt cost you that IS the issue.  Specifically, the interest burden that this debt carries.  While the debt principal is part of this equation, there are many other factors to consider that ultimatly determien what this obligation is.

/Currently, our total debt obligation is about 19% of the entire federal tax revenue.

FTFA:

Economists differ on what qualifies as an acceptable debt-to-GDP ratio. The European Union and the International Monetary Fund have settled on 60 percent, though that is arbitrary, Kogan writes. Harvard professors Kenneth Rogoff and Carmen Reinhart, who studied eight centuries of financial crises,  say debt becomes a problem when it constitutes more than 90 percent of GDP.

Again, the issue is not the debt itself.  The government can simply roll the debt over until the end of time.  It is the cost of maintaining this debt that is the issue.  Namely interest.  How much interest can we bear is the real question and which is difficult to answer since it depends upon so many things.


This is what many cannot understand. The debt is relevant only in terms of its carrying charges. It is not at all like a personal debt. It will never be paid off, because it is not actually debt in the sense that people think of debt. It is a commitment to meet certain obligations. It has little to do with money per se. The problem is if you promise too much, keeping those promises begins to cause more damage than you can reasonably expect to grow out of.
 
2013-02-07 12:25:19 AM  

HeadLever: Slaves2Darkness: Right now the interest rate to borrow money for the US government is below inflation.

Actaully, no it is not.  I don't know where you guys keep pulling these lies out from.

Total interest last year - ignoring the one time credit was about $425 Billion.  With 16.5 trillion in debt principal, that comes to an effective annual rate of 2.6%.  In 2011, inflation was about 2.1%.

And don't forget what will happen when interest rates normalize.  Racking money up on that "0% introductory rate" credit card with no plans to ever pay it off typically never pans out very well.


Sure, but total interest isn't a useful way to look at it because that doesn't apply to any new borrowing.  That's based on the historical rates when that debt was issued (REGAN!!).

Yields on 10 year notes are currently hovering right around 2%, a couple months ago they were down around 1.6%.  Assuming our currency doesn't start deflating in the next couple years, we should really be borrowing as much as possible.
 
2013-02-07 12:42:55 AM  

seanpg71: .  Assuming our currency doesn't start deflating in the next couple years, we should really be borrowing as much as possible.



Again, what happens when that debt is rolled over in a few years?  It resets to the current interest rate which is not at all likely going to be this low.  This country does not pay off the debt principal, it just rolls it over into new debt.  Your short term thinking is going to get us into trouble in the extended future.

Again, I argue that a slow, extended growth out of this mess is likely the best path forward.  The Krugman's of the world I feel will just produce another bubble to crash yet again.  Continuing the boom and crash cycle of the past few decades is the last thing we need.  Keep it slow and keep it steady and we will right this ship.  However, the hard decisions are yet to be addressed.  That will a test of our mettle.
 
2013-02-07 01:25:32 AM  

HeadLever: Again, what happens when that debt is rolled over in a few years? It resets to the current interest rate which is not at all likely going to be this low. This country does not pay off the debt principal, it just rolls it over into new debt. Your short term thinking is going to get us into trouble in the extended future.

Again, I argue that a slow, extended growth out of this mess is likely the best path forward. The Krugman's of the world I feel will just produce another bubble to crash yet again. Continuing the boom and crash cycle of the past few decades is the last thing we need. Keep it slow and keep it steady and we will right this ship. However, the hard decisions are yet to be addressed. That will a test of our mettle.


Well, the idea isn't that you borrow money and then burn it.  You borrow money and then do something with it that stimulates the economy and increases the GDP allowing us to more easily pay off the debt in the future when the economy is better, the rates are higher, we're bringing in more in taxes, and we no longer need to be spending quite as much.
 
2013-02-07 03:37:56 AM  
Whenever I play Europa Universalis 3, I keep my inflation low - because it increases all my costs across the board. I freak out if it's at 10%. Minting money - that is, taking money from your monthly income stream that normally goes into your basic economy (Shown as the research levels), or dependance on gold production for an income, will cause your inflation to increase. Having a centralized policy set, one of your three advisors a master of the mint (So he is trusted), and a central bank all combat inflation.

Further, there are loans. I avoid loans like the plague - because paying the interest on them sucks, and I have to service the loan and pay back the entire ammount at the end of a 5 year period.

However, there are times I mint for extra money, or I take out a loan. I primarily mint during times of war to help pay for the costs of war, but I also mint (and occasionally take out loans) to pay for infrastructure upgrades that improve my country's provinces. Because I have to balance the cost of the loan with the benefit of the infrastructure.

/Although often enough, if my rate of deflation is high enough and my inflation is low enough, I'd just mint a small ammount of money to increase what I get.
 
2013-02-07 08:56:54 AM  

seanpg71: Well, the idea isn't that you borrow money and then burn it.  You borrow money and then do something with it that stimulates the economy and increases the GDP allowing us to more easily pay off the debt in the future when the economy is better, the rates are higher, we're bringing in more in taxes, and we no longer need to be spending quite as much.


Spending the money results in a one time benifit to the goverment.  The debt last forever and will beget interest forever.  Also, raising GDP does not necessarily translate into additional tax revenue in order to pay off the debt.  If you think that spending more helps us to pay off the debt, you really need to examine your ability to understand what a deficit really is.

Ultimately you are saying that we need to spend more now so we don't have to spend more later.  You really seem unable to grasp the concept of interest.  Since whatever we spend now ultimately becomes part of the deficit and will beget an interest obligation forever, you statement really just enforces exactly the short-term thinking we need to guard against if you want to see this counrty fiscally strong in the future.
 
2013-02-07 06:42:49 PM  
It will be the first of several lost decades.
 
2013-02-07 06:55:38 PM  

seanpg71: Well, the idea isn't that you borrow money and then burn it.  You borrow money and then do something with it that stimulates the economy and increases the GDP allowing us to more easily pay off the debt in the future when the economy is better, the rates are higher, we're bringing in more in taxes, and we no longer need to be spending quite as much.


Except that it doesn't work. Once the economy "gets better," what do you do? Balance the budget? If you do that, the whole house of cards collapses. Imagine if the last several years worth of "stimulus" had worked, and the government then cut $1,300,000,000,000 in spending. You really think that wouldn't put us right back where we are now? This isn't rocket science and you don't need a PhD in economics to know that it's a pipe dream. Our only options are to crash hard now, or crash harder later.
 
2013-02-08 12:43:01 AM  

HeadLever: Slaves2Darkness: Right now the interest rate to borrow money for the US government is below inflation.

Actaully, no it is not.  I don't know where you guys keep pulling these lies out from.

Total interest last year - ignoring the one time credit was about $425 Billion.  With 16.5 trillion in debt principal, that comes to an effective annual rate of 2.6%.  In 2011, inflation was about 2.1%.

And don't forget what will happen when interest rates normalize.  Racking money up on that "0% introductory rate" credit card with no plans to ever pay it off typically never pans out very well.


I think he's refering to the borrowing of additional money right now, not the interest we pay on money we have borrowed historically at higher rates.
 
2013-02-08 07:13:22 PM  

DrPainMD: Our only options are to crash hard now, or crash harder later.


You don't need a PhD in economics to know there's more than two options.
If you go into debt for something with an RoI of greater than one, it's perfectly feasible to come out ahead, no crash necessary.
The problem with the stimulus was that it was full of useless tax cuts and not nearly big enough, but it did prevent us from crashing further.
 
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