Recent historic examples of countries that got their debt under control and saw a subsequent boom?

[b0mbrman]

The US is currently faced with record levels of nominal debt.

Can anyone think of an example where a developed nation acted opposite its Keynesian instincts and focused on closing deficits during a recession and it worked?

I'm looking to prove that this could work for the US, but am having trouble finding a real example. The Asian Financial Crisis of the late 90s seems to disprove my theory as those countries seem to have dug themselves deeper into the hole, partially with the help of the IMF urging a constrictive money supply on the countries...

Ireland of the last couple decades came to mind early on, but it's tough to say that it happened because of cleaning up their balance sheets. I'd say it had more to do with globalization allowing them to do high-skill, English-speaking jobs for the US and allowing them to export to Europe outside of the UK. But maybe there's something I'm not looking at....

Anyhow, can anyone think of examples?

 

[bamacre]

http://www.youtube.com/watch?v=czcUmnsprQI

 

[Craig234]

Edit: I'll just say, no I'm not aware of such examples off the top of my head.

This a real problem with the massive increase in the concentration of wealth, as only the richest have skyrocketed in wealth, while the deficits indirectly fund them.

We need a higher tax on the wealthy for the good of the nation and the economy.

We're racing to a disastrous concentration that is a threat to the middle class, which is just what those who want to undo the FDR new deal wealth of the middle class want.

Either the middle class owns a greater share of the wealth and the rich own less, or the rich own more and the middle class own less.

More distributed wealth leads to greater productivity that is the 'rising tide' to left 'all boats', not the current situation that only 'lifts all yachts'.

 

[JSt0rm]

Originally posted by: bamacre
http://www.youtube.com/watch?v=czcUmnsprQI

he looks unhealthy

 

[First]

Originally posted by: JSt0rm01

Originally posted by: bamacre
http://www.youtube.com/watch?v=czcUmnsprQI

he looks unhealthy

Sounds crazy too.

 

[rchiu]

Originally posted by: b0mbrman
The US is currently faced with record levels of nominal debt.

Can anyone think of an example where a developed nation acted opposite its Keynesian instincts and focused on closing deficits during a recession and it worked?

I'm looking to prove that this could work for the US, but am having trouble finding a real example. The Asian Financial Crisis of the late 90s seems to disprove my theory as those countries seem to have dug themselves deeper into the hole, partially with the help of the IMF urging a constrictive money supply on the countries...

Ireland of the last couple decades came to mind early on, but it's tough to say that it happened because of cleaning up their balance sheets. I'd say it had more to do with globalization allowing them to do high-skill, English-speaking jobs for the US and allowing them to export to Europe outside of the UK. But maybe there's something I'm not looking at....

Anyhow, can anyone think of examples?

Not really, but I know plenty countries that went bankrupted, gone into civil war, become communist country when they keep letting their debt build up and gone out of control.

 

[b0mbrman]

Originally posted by: rchiu

Originally posted by: b0mbrman
The US is currently faced with record levels of nominal debt.

Can anyone think of an example where a developed nation acted opposite its Keynesian instincts and focused on closing deficits during a recession and it worked?

I'm looking to prove that this could work for the US, but am having trouble finding a real example. The Asian Financial Crisis of the late 90s seems to disprove my theory as those countries seem to have dug themselves deeper into the hole, partially with the help of the IMF urging a constrictive money supply on the countries...

Ireland of the last couple decades came to mind early on, but it's tough to say that it happened because of cleaning up their balance sheets. I'd say it had more to do with globalization allowing them to do high-skill, English-speaking jobs for the US and allowing them to export to Europe outside of the UK. But maybe there's something I'm not looking at....

Anyhow, can anyone think of examples?

Not really, but I know plenty countries that went bankrupted, gone into civil war, become communist country when they keep letting their debt build up and gone out of control.

Hmmm...that's a bit of a second choice solution, but I may be able to make it work.

When did Keynesian deficit spending in response to recession lead to coups, civil wars, and such?

 

[CycloWizard]

Originally posted by: Craig234
Edit: I'll just say, no I'm not aware of such examples off the top of my head.

This a real problem with the massive increase in the concentration of wealth, as only the richest have skyrocketed in wealth, while the deficits indirectly fund them.

We need a higher tax on the wealthy for the good of the nation and the economy.

We're racing to a disastrous concentration that is a threat to the middle class, which is just what those who want to undo the FDR new deal wealth of the middle class want.

Either the middle class owns a greater share of the wealth and the rich own less, or the rich own more and the middle class own less.

More distributed wealth leads to greater productivity that is the 'rising tide' to left 'all boats', not the current situation that only 'lifts all yachts'.

This would be true if the sum of all wealth were fixed. Fortunately, wealth can be created such that rising wealth of the wealthiest does not preclude rising wealth for the rest of us.

 

[heyheybooboo]

Topic Title: Recent historic examples of countries that got their debt under control and saw a subsequent boom?

Example A: The United States of America

 

[b0mbrman]

Originally posted by: heyheybooboo
Topic Title: Recent historic examples of countries that got their debt under control and saw a subsequent boom?

Example A: The United States of America

...?

 

[brandonbull]

Originally posted by: heyheybooboo
Topic Title: Recent historic examples of countries that got their debt under control and saw a subsequent boom?

Example A: The United States of America

I hadn't been aware of the US getting the debt under control anytime in my lifetime.

 

[b0mbrman]

Originally posted by: brandonbull

Originally posted by: heyheybooboo
Topic Title: Recent historic examples of countries that got their debt under control and saw a subsequent boom?

Example A: The United States of America

I hadn't been aware of the US getting the debt under control anytime in my lifetime.

Depends how you define "under control." Text

 

[jdjbuffalo]

Originally posted by: b0mbrman
The US is currently faced with record levels of nominal debt.

Can anyone think of an example where a developed nation acted opposite its Keynesian instincts and focused on closing deficits during a recession and it worked?

Anyhow, can anyone think of examples?

Sweden went through something similar in the 1990s.

http://en.wikipedia.org/wiki/Economy_of_Sweden

 

[blackangst1]

Originally posted by: brandonbull

Originally posted by: heyheybooboo
Topic Title: Recent historic examples of countries that got their debt under control and saw a subsequent boom?

Example A: The United States of America

I hadn't been aware of the US getting the debt under control anytime in my lifetime.

Me neither. And also keep in mind a balanced budget != having debt under control.

 

[zephyrprime]

Well, you're not going to find any examples because there aren't any. The problem with our system and why paying down debt doesn't work is because paying down debt in our fractional reserve banking system actually reduces the supply of money in circulation. The deflation then crushes the economy. If we didn't have a debt based monetary system, paying down the debt wouldn't create deflation but we don't have such a system and neither do any other economies.

However, there's one other way to get debt under control and that's for there to be massive amounts of defaulting. The financial system would collapse of course but the debt would be wiped out.

Ultimately, the US will have hyperinflation to devalue its debt or move to a new currency while devaluing the old one. There's no way the US can actually pay off its debt.

 

[b0mbrman]

Originally posted by: blackangst1

Originally posted by: brandonbull

Originally posted by: heyheybooboo
Topic Title: Recent historic examples of countries that got their debt under control and saw a subsequent boom?

Example A: The United States of America

I hadn't been aware of the US getting the debt under control anytime in my lifetime.

Me neither. And also keep in mind a balanced budget != having debt under control.

What % would you consider under control?

 

[b0mbrman]

Originally posted by: jdjbuffalo

Originally posted by: b0mbrman
The US is currently faced with record levels of nominal debt.

Can anyone think of an example where a developed nation acted opposite its Keynesian instincts and focused on closing deficits during a recession and it worked?

Anyhow, can anyone think of examples?

Sweden went through something similar in the 1990s.

http://en.wikipedia.org/wiki/Economy_of_Sweden

Coo. I will explore. THanks

 

[Genx87]

During a recession? That is going to be a tough cookie to find. Because typically recessions last long enough where any kind of govt change wont be noticed.

During times of good the saving part of keynesian economics proved to work during the late 90s.

 

[heyheybooboo]

Originally posted by: b0mbrman

Originally posted by: heyheybooboo
Topic Title: Recent historic examples of countries that got their debt under control and saw a subsequent boom?

Example A: The United States of America

...?

That's an interesting link yah got up there but I'll try to take us from this point forward. I won't go into an exhaustive review of statutory Paygo and the required sequestration of mandatory budget outlays but the foundation has been laid as of July of this year to require automatic, across-the-board spending cuts.

It's a good first step toward fiscal sanity.

Over the next 10 years the on-budget deficit is around 4.7% of GDP. From 1983 to 1993 the on-budget deficit was 4.85% of GDP (actually peaked at 6% of GDP in 1983 before dipping and again rising to 5.5% of GDP in the early 1990s).

Reducing the number of troops in Iraq/Afghanistan to 30k by 2013 will reduce the on-budget deficit to 4.15% of GDP.

Then there is the matter of the 2001 & 2003 tax cuts. There were no spending off-sets made to balance the budgetary impact of the tax cuts. Regretfully, the greatest budgetary impact of the 2001/2003 tax cuts will occur in FY 2010.

The total impact of the 2001/2003 tax cuts over the next 10 years is projected at $4.4 trillion. By cutting the budgetary impact of the 2001/2003 tax cuts in half the projected on-budget deficit is reduced to 3.5% of GDP (in conjunction with the troop reductions noted above).

A complete repeal of the 2001/2003 tax cuts after 2010 will reduce the on-budget deficit to around 1.8% of GDP.

There are budgetary 'tricks' that can further reduce the anticipated on-budget deficits but so far it appears the Obama budget writers have been honest in their assessments. They've included around $550 billion in costs to index the AMT and $230 billion for 'future anticipated disaster costs'.

Regretfully, they have continued the practice of 'borrowing' SS funds --- IIRC it's around $1.8 trillion. I'd like to see these funds loaned to state and local gov'ts for infrastructure improvements to improve future Fed cash flow but they don't listen to me - LOL.

I also think around $3 trillion of the projected overall debt in the next 10 years is interest we pay to ourselves on money that we have borrowed from ourselves. I understand the underlying premise but still think it's convoluted in a perverse kind of way.

Sometime in the next few years we will zoom past $10 trillion in interest paid on the Federal debt since 'Reaganomics'.

Now, that's some serious Voodoo .....

 

[halik]

Originally posted by: bamacre
http://www.youtube.com/watch?v=czcUmnsprQI

Youtube education for the win.... :roll:

 

[zephyrprime]

Originally posted by: b0mbrman

Originally posted by: jdjbuffalo

Sweden went through something similar in the 1990s.

http://en.wikipedia.org/wiki/Economy_of_Sweden

Coo. I will explore. THanks

I'm not entirely sure about how sweden financed it recapitalization of the banks but I'm pretty sure it was primarily through issuing MORE government debt and that debt was then used as securities that acted as reserves for the insolvent banks. However, nationwide debt levels probably declined because the amount of defaults probably exceeded the amount of new debt issued by the government. Some of the recapitalization also came from private sources too no doubt.

 

[halik]

Originally posted by: b0mbrman
The US is currently faced with record levels of nominal debt.

Can anyone think of an example where a developed nation acted opposite its Keynesian instincts and focused on closing deficits during a recession and it worked?

I'm looking to prove that this could work for the US, but am having trouble finding a real example. The Asian Financial Crisis of the late 90s seems to disprove my theory as those countries seem to have dug themselves deeper into the hole, partially with the help of the IMF urging a constrictive money supply on the countries...

Ireland of the last couple decades came to mind early on, but it's tough to say that it happened because of cleaning up their balance sheets. I'd say it had more to do with globalization allowing them to do high-skill, English-speaking jobs for the US and allowing them to export to Europe outside of the UK. But maybe there's something I'm not looking at....

Anyhow, can anyone think of examples?

I would be surprised if you find one. Fundamentally leverage (ie debt) improves ROI - you need to use less of your money to make money. If you look at the G8, all countries maintain sizable debt load to gdp.

The capital decision to retire debt signals you cannot get a higher return investing the borrowed money than the rate you pay for the debt. Generally speaking, industrialized nations with halfway decent credit rating can get a higher return on investing than the borrowing rate - that's why all rich nations carry debt.

Russia did reduce their debt/gdp over the last decade, but that was a byproduct of the commodity run up more than anything else. They realized they cannot invest the cash better than what they pay on their debt... not surprising after the '98 debacle.

 

[JS80]

Originally posted by: halik

Originally posted by: b0mbrman
The US is currently faced with record levels of nominal debt.

Can anyone think of an example where a developed nation acted opposite its Keynesian instincts and focused on closing deficits during a recession and it worked?

I'm looking to prove that this could work for the US, but am having trouble finding a real example. The Asian Financial Crisis of the late 90s seems to disprove my theory as those countries seem to have dug themselves deeper into the hole, partially with the help of the IMF urging a constrictive money supply on the countries...

Ireland of the last couple decades came to mind early on, but it's tough to say that it happened because of cleaning up their balance sheets. I'd say it had more to do with globalization allowing them to do high-skill, English-speaking jobs for the US and allowing them to export to Europe outside of the UK. But maybe there's something I'm not looking at....

Anyhow, can anyone think of examples?

I would be surprised if you find one. Fundamentally leverage (ie debt) improves ROI - you need to use less of your money to make money. If you look at the G8, all countries maintain sizable debt load to gdp.

The capital decision to retire debt signals you cannot get a higher return investing the borrowed money than the rate you pay for the debt. Generally speaking, industrialized nations with halfway decent credit rating can get a higher return on investing than the borrowing rate - that's why all rich nations carry debt.

Russia did reduce their debt/gdp over the last decade, but that was a byproduct of the commodity run up more than anything else. They realized they cannot invest the cash better than what they pay on their debt... not surprising after the '98 debacle.

Except government doesn't generate wealth nor create net value.

 

[halik]

Originally posted by: JS80

Originally posted by: halik

Originally posted by: b0mbrman
The US is currently faced with record levels of nominal debt.

Can anyone think of an example where a developed nation acted opposite its Keynesian instincts and focused on closing deficits during a recession and it worked?

I'm looking to prove that this could work for the US, but am having trouble finding a real example. The Asian Financial Crisis of the late 90s seems to disprove my theory as those countries seem to have dug themselves deeper into the hole, partially with the help of the IMF urging a constrictive money supply on the countries...

Ireland of the last couple decades came to mind early on, but it's tough to say that it happened because of cleaning up their balance sheets. I'd say it had more to do with globalization allowing them to do high-skill, English-speaking jobs for the US and allowing them to export to Europe outside of the UK. But maybe there's something I'm not looking at....

Anyhow, can anyone think of examples?

I would be surprised if you find one. Fundamentally leverage (ie debt) improves ROI - you need to use less of your money to make money. If you look at the G8, all countries maintain sizable debt load to gdp.

The capital decision to retire debt signals you cannot get a higher return investing the borrowed money than the rate you pay for the debt. Generally speaking, industrialized nations with halfway decent credit rating can get a higher return on investing than the borrowing rate - that's why all rich nations carry debt.

Russia did reduce their debt/gdp over the last decade, but that was a byproduct of the commodity run up more than anything else. They realized they cannot invest the cash better than what they pay on their debt... not surprising after the '98 debacle.

Except government doesn't generate wealth nor create net value.

You don't think that for example DoE loans to Tesla motors will create value?
Gov't money via DARPA didn't do anything? Research Grants?

I would argue that gov't investment in telecom via DARPA is what sparked the global growth in the past 20 years...


It's a rational decision on the part of gov't if the total cost of the debt can be offset by higher tax revenue via GDP growth.

 

[Craig234]

Originally posted by: CycloWizard

Originally posted by: Craig234
Edit: I'll just say, no I'm not aware of such examples off the top of my head.

This a real problem with the massive increase in the concentration of wealth, as only the richest have skyrocketed in wealth, while the deficits indirectly fund them.

We need a higher tax on the wealthy for the good of the nation and the economy.

We're racing to a disastrous concentration that is a threat to the middle class, which is just what those who want to undo the FDR new deal wealth of the middle class want.

Either the middle class owns a greater share of the wealth and the rich own less, or the rich own more and the middle class own less.

More distributed wealth leads to greater productivity that is the 'rising tide' to lift 'all boats', not the current situation that only 'lifts all yachts'.

This would be true if the sum of all wealth were fixed. Fortunately, wealth can be created such that rising wealth of the wealthiest does not preclude rising wealth for the rest of us.

Funny enough, I already addressed that point, and you missed it. I bolded the text for you.

What we have going IS the rise of wealth for the wealthiest at the expense of the rest.