Irrelevant. Currency basically only represents your purchasing power of all available assets for sale in the market. While my wealth might increase, even disproportionally to the wealthiest, my purchasing power compared to their wealth has decreased. So even while the total amount of currency available might increase, it's really more important to measure the relative amount of the pie you own. Considering that capital does better than labor in our market, they tend to get higher returns and thus have a higher percentage of the pie even if my nominal wealth increases alongside. This is why you commonly see wages compared over time while adjusting for inflation. When measured against inflation, wages for labor have been stagnating, as we would expect.
Irrelevant. Currency basically only represents your purchasing power of all available assets for sale in the market. While my wealth might increase, even disproportionally to the wealthiest, my purchasing power compared to their wealth has decreased. So even while the total amount of currency available might increase, it's really more important to measure the relative amount of the pie you own. Considering that capital does better than labor in our market, they tend to get higher returns and thus have a higher percentage of the pie even if my nominal wealth increases alongside. This is why you commonly see wages compared over time while adjusting for inflation. When measured against inflation, wages for labor have been stagnating, as we would expect.
For 25 years stagnating, which is apparently unprecedented, while the top 0.01% have gone up hunfreds of percent, and their total share of the wealth has skyrocketed.
Recall that the top 0.01% share of nationa income, IIRC, has gone from the norm of 1% for decades after the Great Depression to 6% today. The rising tide lifting the yachts.
we can pay it off, americans just need to stop being wimps (which probably won't happen)
paying off the debt only becomes deflationary when the federal reserve starts sell its bonds back to the government, otherwise its just currency being moved around
paying it off mean that when you need to (say now) you can.
its never a smart idea to run fully leveraged even if you are getting a good roi, which in our case was pretty doubtful.
Actually Japan's public debt is around $6 trillion, they have one of the worst debt to GDP ratios in the world.
:laugh:
I don't know what you are smoking but Japan's gov't debt is nearly 200% of their annual GDP --- in the United States today debt is around 82% of annual GDP and that includes internal debt we owe ourselves.
Discounting those internal IOUs our Federal debt is around 52% of annual GDP.
'Technically' I think economists figure each dollar spent bounces around the economy 7 times.
There is a point of diminishing return, of course. But the DARPA example is a good one for the most part. It's one reason the BEA lists the level of defense (and total gov't) spending in the country when they analyze GDP ...
Elias824
Golden Member
- Mar 13, 2007
- 1,100
- 0
- 76
In general you dont really want to pay off your debt espically during times of recession. I think the best policy is during the good times dont run a defecit so that your GDP/debt ratio improves without deflating your currency. The problem is that during the good times and even the not so bad ones we have been running massive deficits so it gets harder to justify spending when we actually need to.
As far as the household income not changing since 1980 http://en.wikipedia.org/wiki/F...ld_income_65_to_05.png
looks like it was around 39k in 1980, compared to 46k in 2005, not sure how much the correct amount should be with inflation.
here is the full article http://en.wikipedia.org/wiki/H...e_in_the_United_States
As far as the household income not changing since 1980 http://en.wikipedia.org/wiki/F...ld_income_65_to_05.png
looks like it was around 39k in 1980, compared to 46k in 2005, not sure how much the correct amount should be with inflation.
here is the full article http://en.wikipedia.org/wiki/H...e_in_the_United_States
Well, that would certainly take away wealth from the rich, but how would it translate into increasing the wealth of the middle & lower classes?
Argentina during the 70's: Quote from Wiki
Partly owing to the 1973 oil crisis, however, the pact began to unravel (particularly following Perón's July 1974 death). Although Argentina was nearly self-sufficient in petroleum, the oil price shock adversely impacted the nation's delicate financial balance; it, in part, caused the nation's foreign oil bill to jump from US$60 million to US$600 million in 1974 and indirectly helped erase the rest of the nation's record billion-dollar 1973 trade surplus.[23] This adverse turn might have been better managed had it not been that the Peronists were under enormous pressure from their political base (the unions, in particular) to avoid a recession at almost any cost (a consideration painfully denied them by Economy Minister Alvaro Alsogaray in 1959 and in 1962).[18] Refusing to resort to borrowing and unable, by 1975, to control soaring budget and trade deficits, as well as a wave of violence between Trotskyite and fascist extremists, the Peronist government resorted to a chaos of sharp currency devaluations and erratically timed wage hikes and freezes.[23] In a seemingly never-ending tide of near-hyperinflation, strikes, business lockouts and violence, the military took power in a violent March 1976 coup.
------------------
While Keynesian deficit spending is not the only cause to the coup and violence (they're rarely caused by a single factor), the deficit reduce the flexibility of a country to manage things like economic crisis and oil crisis. Imaging a company with high leverage (large debt). While it may function fine during normal economy, but when a sudden crisis hit and all of a sudden it doesn't generate enough profit to cover the debt payment, it is going to go under. You can see plenty of example in this past crisis.
Country management is the same. You may function fine when everything is fine and dandy, but when there is a crisis, and you no longer have the ability to manage your debt/deficit, you are going to face with things like sharp currency devaluation, that lead to hyper-inflation that lead to strike, violence......
...in other words, people don't (necessarily) think that working to cut the federal deficit during a recession is the right thing to do economically. Rather, they fear that at the other extreme, the US could become bankrupt and go into civil war.
Yes?
Yes?
halik
Lifer
- Oct 10, 2000
- 25,696
- 1
- 0
Monetary contraction to defend the dollar was what pushed US into the depression in the 1930s. Generally speaking, buying back debt will have unintended consequences in the FX markets and on interest rates in general.
Here's what I see happening:
Lower supply for Tnotes = higher price/ lower yield. The process of buying back debt increases dollar supply, thus depreciating the dollar. Also expected lower yield will depreciate the dollar per the interest rate parities, ceteris paribus (i.e. expected inflation won't change).
StageLeft
No Lifer
- Sep 29, 2000
- 70,150
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- 0
I am actually more inclined to this view over time. I am not struggling at all at the moment, but what I see happening to others in the US just doesn't seem like the country is as a whole getting better. I read that last year the average exec, at least in my region, got something like a 5% pay raise. The proportion of wealth has been charging quickly toward those in the upper tiers. It makes for a less healthy nation and a less healthy majority of the population. Sink or swim is part of every country to varying degrees, more so in the US and part of its strength, but there has to be a balance of it and the balance isn't trending in the best direction.
BTW to answer OP the US used to have a higher debt to GDP after WWII, so it did recover. That was after a war, though, not just a crazy spending spree. This country has been a greedy fat pig (like most of the West) and now the food has run out and the hunger pangs are going to be uncomfortable.
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