$9 trillion in debt

[child of wonder]

Originally posted by: BoberFett

Originally posted by: child of wonder
I'm not a Democrat or Republican but I have to raise this point --

were you equally as upset when the Republican controlled Congress voted to increase the national debt to $9 trillion in May of 2003?

Link

Yep. Any other questions?

Good, I'm happy to hear that.

 

[StageLeft]

The debt ceiling is funny. It's like a business meeting where a badly-running project is given a new schedule and even as everyone is agreeing on it, they know there's no way in the world it will happen as they have just written it out.

Anyway, if we can only see the US attack Iran, this ceiling can get bumped another trillion to cover that.

 

[FoBoT]

both dems and repubs will spend us into oblivion, neither party will change until it is too late

my only hope is for a grassroots 3rd party movement to save us from the crooks, like happened in 1892 with the Populist Party

 

[charrison]

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison
To quote you

The US exports very little compared to what it imports.

A 30% delta does not mean we export very little.
We are dealing with 2 very large numbers, so it is easy to make a graph that makes things look bad.

Well, yeah. Compared to imports from an historical perspective it's a small number. Not a small number in absolute terms.

The graph looks bad because historically surpluses and deficit in the trade balance were very small (as you see in the almost flat curve during the '60s to mid '70s).

And 40 years ago exports were 5% of gdp, today they are 12% of gdp. The graph does not even come close to telling the entire store.

No but we were talking about debt, not the general state of the economy. Trade deficits concur to Current Account deficits, which generate debt.

Trade deficits do not generate debt. This is like saying you are indebted to your local grocery story, because they never buy anything from you.

No. It is like saying that if you have a hardware store and your brother has a grocery store, and you agree to trade goods, but you buy much more groceries than he buys nails and hammers, then you'll incur in debt, which is true.

Being trade balance part of the current account obviously it's one of the relevant parameters when discussing a country's debt.

Fortunately we developed cash and we dont have to worry about how many tomatoes a hammer is worth. You missed the point, a trade deficit is not real debt.

 

[charrison]

Originally posted by: Engineer

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison
To quote you

The US exports very little compared to what it imports.

A 30% delta does not mean we export very little.
We are dealing with 2 very large numbers, so it is easy to make a graph that makes things look bad.

Well, yeah. Compared to imports from an historical perspective it's a small number. Not a small number in absolute terms.

The graph looks bad because historically surpluses and deficit in the trade balance were very small (as you see in the almost flat curve during the '60s to mid '70s).

And 40 years ago exports were 5% of gdp, today they are 12% of gdp. The graph does not even come close to telling the entire store.

No but we were talking about debt, not the general state of the economy. Trade deficits concur to Current Account deficits, which generate debt.

Trade deficits do not generate debt. This is like saying you are indebted to your local grocery story, because they never buy anything from you.

That's true but an imbalance must be satisfied one way or another. Either the money flows back in the form of "lending" from other nations or they invest (buy our assets) in our country. Of course, we could simply print more money but the inflation that would occur would cause more issues than it solved. If one of the above did not play out, you would simply run out of money.

You are correct, everything must balance. The US does receive a significant amount of foreign investment and there are lots of countries that dont mind holding US bonds.

 

[imported_Tango]

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison
To quote you

The US exports very little compared to what it imports.

A 30% delta does not mean we export very little.
We are dealing with 2 very large numbers, so it is easy to make a graph that makes things look bad.

Well, yeah. Compared to imports from an historical perspective it's a small number. Not a small number in absolute terms.

The graph looks bad because historically surpluses and deficit in the trade balance were very small (as you see in the almost flat curve during the '60s to mid '70s).

And 40 years ago exports were 5% of gdp, today they are 12% of gdp. The graph does not even come close to telling the entire store.

No but we were talking about debt, not the general state of the economy. Trade deficits concur to Current Account deficits, which generate debt.

Trade deficits do not generate debt. This is like saying you are indebted to your local grocery story, because they never buy anything from you.

No. It is like saying that if you have a hardware store and your brother has a grocery store, and you agree to trade goods, but you buy much more groceries than he buys nails and hammers, then you'll incur in debt, which is true.

Being trade balance part of the current account obviously it's one of the relevant parameters when discussing a country's debt.

Fortunately we developed cash and we dont have to worry about how many tomatoes a hammer is worth. You missed the point, a trade deficit is not real debt.

In a two actors model, where exactly does your cash come from?

 

[charrison]

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison
To quote you

The US exports very little compared to what it imports.

A 30% delta does not mean we export very little.
We are dealing with 2 very large numbers, so it is easy to make a graph that makes things look bad.

Well, yeah. Compared to imports from an historical perspective it's a small number. Not a small number in absolute terms.

The graph looks bad because historically surpluses and deficit in the trade balance were very small (as you see in the almost flat curve during the '60s to mid '70s).

And 40 years ago exports were 5% of gdp, today they are 12% of gdp. The graph does not even come close to telling the entire store.

No but we were talking about debt, not the general state of the economy. Trade deficits concur to Current Account deficits, which generate debt.

Trade deficits do not generate debt. This is like saying you are indebted to your local grocery story, because they never buy anything from you.

No. It is like saying that if you have a hardware store and your brother has a grocery store, and you agree to trade goods, but you buy much more groceries than he buys nails and hammers, then you'll incur in debt, which is true.

Being trade balance part of the current account obviously it's one of the relevant parameters when discussing a country's debt.

Fortunately we developed cash and we dont have to worry about how many tomatoes a hammer is worth. You missed the point, a trade deficit is not real debt.

In a two actors model, where exactly does your cash come from?

In my example, I assumed the reader smart enough to realize that both actors were working with modern concept of cash and not the antiquated barter system.

I guess i assumed too much.

 

[imported_Tango]

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison

Originally posted by: Tango

Originally posted by: charrison
To quote you

The US exports very little compared to what it imports.

A 30% delta does not mean we export very little.
We are dealing with 2 very large numbers, so it is easy to make a graph that makes things look bad.

Well, yeah. Compared to imports from an historical perspective it's a small number. Not a small number in absolute terms.

The graph looks bad because historically surpluses and deficit in the trade balance were very small (as you see in the almost flat curve during the '60s to mid '70s).

And 40 years ago exports were 5% of gdp, today they are 12% of gdp. The graph does not even come close to telling the entire store.

No but we were talking about debt, not the general state of the economy. Trade deficits concur to Current Account deficits, which generate debt.

Trade deficits do not generate debt. This is like saying you are indebted to your local grocery story, because they never buy anything from you.

No. It is like saying that if you have a hardware store and your brother has a grocery store, and you agree to trade goods, but you buy much more groceries than he buys nails and hammers, then you'll incur in debt, which is true.

Being trade balance part of the current account obviously it's one of the relevant parameters when discussing a country's debt.

Fortunately we developed cash and we dont have to worry about how many tomatoes a hammer is worth. You missed the point, a trade deficit is not real debt.

In a two actors model, where exactly does your cash come from?

In my example, I assumed the reader smart enough to realize that both actors were working with modern concept of cash and not the antiquated barter system.

I guess i assumed too much.

The problem is countries don't have a job. They only receive cash through trade or cash inflow/outflows. So if you have a current account deficit you need debt issues to finance it.

That why in equilibrium:

Exports - Imports = Capital Outflows - Capital Inflows (assuming a few minor things constant, for example changes in official reserves)

So if exports are smaller than imports you need to finance the deficit with a capital account surplus. You can achieve this selling assets abroad. When these assets are treasury bonds you increase your national debt.

 

[imported_Shivetya]

sorry, rules are... you cannot call out stupid Democrats because they have only one reply : Bush


Aren't they luck his name was so easy to spell?

 

[charrison]

Originally posted by: Tango
The problem is countries don't have a job. They only receive cash through trade or cash inflow/outflows. So if you have a current account deficit you need debt issues to finance it.

That why in equilibrium:

Exports - Imports = Capital Outflows - Capital Inflows (assuming a few minor things constant, for example changes in official reserves)

So if exports are smaller than imports you need to finance the deficit with a capital account surplus. You can achieve this selling assets abroad. When these assets are treasury bonds you increase your national debt.

The problem is our debt is generated from government selling bonds to finance government spending, not to cover the trade defect.

 

[imported_Tango]

Originally posted by: charrison

Originally posted by: Tango
The problem is countries don't have a job. They only receive cash through trade or cash inflow/outflows. So if you have a current account deficit you need debt issues to finance it.

That why in equilibrium:

Exports - Imports = Capital Outflows - Capital Inflows (assuming a few minor things constant, for example changes in official reserves)

So if exports are smaller than imports you need to finance the deficit with a capital account surplus. You can achieve this selling assets abroad. When these assets are treasury bonds you increase your national debt.

The problem is our debt is generated from government selling bonds to finance government spending, not to cover the trade defect.

You use bonds to cover both. They are both negative sides of the equation. Another way to think about it is, with a trade surplus you could cover some of the government spending without issuing debt.

The reason why I focus on this is because trade deficit doesn't get any attention compared to fiscal deficit, but it might prove very relevant in the future, as emerging countries enter new markets. In my opinion US companies could quite easily compete in a much more efficient way if their management were a little bit more illuminated, especially in a few critical markets like cars, mechanical devices, precision instruments etc (basically those in which Germany is particularly strong).

As emerging countries increase their world share of production of the cheapest goods, they also increase their demand for luxury/quality goods. European economies are exploiting this much more than the US. I don't see any particular reason for this to be determined by structural problems, so I believe it could be addressed by specific policies to promote international competitiveness.