The future looks bleak

[mfs378]

GAO video presentation

Unfunded commitments are at $46.4 trillion, up $25 trillion in the last five years. That works out to $156,000 for every man, woman, and child in America.

Drastic measures are called for.

Government programs from defense to social security need to be severly cut. We don't need new fighter planes, the ones we have are good enough. We can save $100 million just by stopping the abstinence sex-ed programs. The tax code needs to be completely rewrittend. Its time that common sense finds a place in Washington.

 

[2Xtreme21]

It's OK, spend spend spend and tax cuts for the rich!

 

[theeedude]

I didn't know we were running out of the Chinese to lend us money

 

[Darthvoy]

Originally posted by: senseamp
I didn't know we were running out of the Chinese to lend us money

what if the chinese all of suden requested all of its money back? Good times I say!

 

[theeedude]

Originally posted by: Darthvoy

Originally posted by: senseamp
I didn't know we were running out of the Chinese to lend us money

what if the chinese all of suden requested all of its money back? Good times I say!

We'd just have to print a lot of money to give to them.

 

[Stunt]

A few things to understand before you guys continue with this discussion.

My opinion can be found on my blog but to highlight a few statistics for the lazy.

Looking closer, Canada as a whole has a debt to gdp ratio of 67%, compared to the US?s 65%, EU?s 76%, and Japan?s 164%. This means that the US is generating wealth at a far greater rate than its debt accumulation; interestingly, with all the deficits the US has posted over the years, the debt to gdp ratio has been declining as the nation invests more money in people, education, and infrastructure.

For those obsessed by the US deficit, and want to know how much too much is, there really is no answer to that. What I can do is show different country?s deficits (-) and surplus (+) relative to their productivity; Canada +0.7%, US -2.7%, UK -3.5%, France -4.3%, Germany -4.2%, Italy -3.1%, Japan -9.3%. As you can see, even though the US has a ?massive? deficit, it is in no more fiscal trouble than many other first world countries.

You also mention commitments of America and the balance owing for each individual in the country. This is extremely short sighted, even though the US government has a debt of $8.5trillion, that money has been invested in infrastructure and assets with a value on the global market. One must look at the net debt to fully understand the financials of any country. In the United States during fiscal year 2005, Americans held overseas stocks, bonds, factories and other assets totaling $10.01 trillion, while foreigners held $12.70 trillion in American assets.

As a percentage GDP, net debt is as follows:
Canada: 40%
France: 56%
Germany: 65%
Italy: 102%
Japan: 94%
UK: 38%
US: 48%

Is debt something to criticize? yes. Is the US completely out of line? no.

 

[charrison]

Originally posted by: Stunt
A few things to understand before you guys continue with this discussion.

My opinion can be found on my blog but to highlight a few statistics for the lazy.

Looking closer, Canada as a whole has a debt to gdp ratio of 67%, compared to the US?s 65%, EU?s 76%, and Japan?s 164%. This means that the US is generating wealth at a far greater rate than its debt accumulation; interestingly, with all the deficits the US has posted over the years, the debt to gdp ratio has been declining as the nation invests more money in people, education, and infrastructure.

For those obsessed by the US deficit, and want to know how much too much is, there really is no answer to that. What I can do is show different country?s deficits (-) and surplus (+) relative to their productivity; Canada +0.7%, US -2.7%, UK -3.5%, France -4.3%, Germany -4.2%, Italy -3.1%, Japan -9.3%. As you can see, even though the US has a ?massive? deficit, it is in no more fiscal trouble than many other first world countries.

You also mention commitments of America and the balance owing for each individual in the country. This is extremely short sighted, even though the US government has a debt of $8.5trillion, that money has been invested in infrastructure and assets with a value on the global market. One must look at the net debt to fully understand the financials of any country. In the United States during fiscal year 2005, Americans held overseas stocks, bonds, factories and other assets totaling $10.01 trillion, while foreigners held $12.70 trillion in American assets.

As a percentage GDP, net debt is as follows:
Canada: 40%
France: 56%
Germany: 65%
Italy: 102%
Japan: 94%
UK: 38%
US: 48%

Is debt something to criticize? yes. Is the US completely out of line? no.

Well said.

 

[Jaskalas]

Originally posted by: Stunt
Is debt something to criticize? yes. Is the US completely out of line? no.

QFT

 

[zephyrprime]

The US will always be in debt so long as fractional reserve banking and the debt based monetary system exists.

 

[Trevelyan]

Originally posted by: Stunt
A few things to understand before you guys continue with this discussion.

My opinion can be found on my blog but to highlight a few statistics for the lazy.

Looking closer, Canada as a whole has a debt to gdp ratio of 67%, compared to the US?s 65%, EU?s 76%, and Japan?s 164%. This means that the US is generating wealth at a far greater rate than its debt accumulation; interestingly, with all the deficits the US has posted over the years, the debt to gdp ratio has been declining as the nation invests more money in people, education, and infrastructure.

For those obsessed by the US deficit, and want to know how much too much is, there really is no answer to that. What I can do is show different country?s deficits (-) and surplus (+) relative to their productivity; Canada +0.7%, US -2.7%, UK -3.5%, France -4.3%, Germany -4.2%, Italy -3.1%, Japan -9.3%. As you can see, even though the US has a ?massive? deficit, it is in no more fiscal trouble than many other first world countries.

You also mention commitments of America and the balance owing for each individual in the country. This is extremely short sighted, even though the US government has a debt of $8.5trillion, that money has been invested in infrastructure and assets with a value on the global market. One must look at the net debt to fully understand the financials of any country. In the United States during fiscal year 2005, Americans held overseas stocks, bonds, factories and other assets totaling $10.01 trillion, while foreigners held $12.70 trillion in American assets.

As a percentage GDP, net debt is as follows:
Canada: 40%
France: 56%
Germany: 65%
Italy: 102%
Japan: 94%
UK: 38%
US: 48%

Is debt something to criticize? yes. Is the US completely out of line? no.

Color me impressed...

 

[mfs378]

Originally posted by: Stunt
A few things to understand before you guys continue with this discussion.

My opinion can be found on my blog but to highlight a few statistics for the lazy.

Looking closer, Canada as a whole has a debt to gdp ratio of 67%, compared to the US?s 65%, EU?s 76%, and Japan?s 164%. This means that the US is generating wealth at a far greater rate than its debt accumulation; interestingly, with all the deficits the US has posted over the years, the debt to gdp ratio has been declining as the nation invests more money in people, education, and infrastructure.

For those obsessed by the US deficit, and want to know how much too much is, there really is no answer to that. What I can do is show different country?s deficits (-) and surplus (+) relative to their productivity; Canada +0.7%, US -2.7%, UK -3.5%, France -4.3%, Germany -4.2%, Italy -3.1%, Japan -9.3%. As you can see, even though the US has a ?massive? deficit, it is in no more fiscal trouble than many other first world countries.

You also mention commitments of America and the balance owing for each individual in the country. This is extremely short sighted, even though the US government has a debt of $8.5trillion, that money has been invested in infrastructure and assets with a value on the global market. One must look at the net debt to fully understand the financials of any country. In the United States during fiscal year 2005, Americans held overseas stocks, bonds, factories and other assets totaling $10.01 trillion, while foreigners held $12.70 trillion in American assets.

As a percentage GDP, net debt is as follows:
Canada: 40%
France: 56%
Germany: 65%
Italy: 102%
Japan: 94%
UK: 38%
US: 48%

Is debt something to criticize? yes. Is the US completely out of line? no.

I read your blog but I don't think it directly addresses the issues raised in the GAO video.

Certainly debt is ok if it is kept managable. An easy way to phrase the strategy is: "borrow when times are tough, then pay it back when things are going well again." The second half of that statement isn't as explicit in what you wrote, but I assume that is what you mean.

The problem is that the economy is doing relatively well right now, and the deficits are still enormous. Whats worse, we've committed ourselves to an additional $25 trillion in spending that will go directly into the debt column because there is no way to pay for it with the current tax revenue we have.

The problem is that the government is behaving less like a family taking out a mortage to buy a home and more like a teenage girl who just got hold of mom's credit card.

 

[ntdz]

Originally posted by: Darthvoy

Originally posted by: senseamp
I didn't know we were running out of the Chinese to lend us money

what if the chinese all of suden requested all of its money back? Good times I say!

They can't just request their money back, it's in in the form of long term bonds.

 

[theeedude]

Originally posted by: ntdz

Originally posted by: Darthvoy

Originally posted by: senseamp
I didn't know we were running out of the Chinese to lend us money

what if the chinese all of suden requested all of its money back? Good times I say!

They can't just request their money back, it's in in the form of long term bonds.

Nor would they. The second they do it, the US dollar would collapse relative to the yuan, and then who is going to buy their overpriced junk? They are just as addicted to lending us money as we are to their loans.

 

[techs]

TAX CUT AND SPEND!!!!
TAX CUT AND SPEND!!!!
TAX CUT AND SPEND!!!!

The neo-con plan for America.
I will laugh my *ss off collecting my social security while the neo-con morons who gave us Bush and Iraq and sold America to the corporations are paying 40 percent in taxes.

 

[hehatedme]

Originally posted by: senseamp

Originally posted by: ntdz

Originally posted by: Darthvoy

Originally posted by: senseamp
I didn't know we were running out of the Chinese to lend us money

what if the chinese all of suden requested all of its money back? Good times I say!

They can't just request their money back, it's in in the form of long term bonds.

Nor would they. The second they do it, the US dollar would collapse relative to the yuan, and then who is going to buy their overpriced junk? They are just as addicted to lending us money as we are to their loans.

The Chinese could request their money back at a market rate because the debt is securitized as treasury bonds. They could just sell them in the open market. Also the renmibi is generally fixed to the dollar. However the Chinese are preparing to float their currency and it currently moves relative to a basket of currencies in a fixed range determined by the Chinese government. Even still, the Chinese, the Japanese, and South Koreans would never sell the US debt they own without the permission of the Federal Reserve because their economies are very intertwined with ours.

All that aside, I agree that spending, deficits, and debts are too high. Also the government is wasteful with money. A lot of change needs to occur to correct these problems, but its complex and the consequences are global so who knows if there even is a way to prevent disaster if that is the situation.

 

[soccerballtux]

Originally posted by: senseamp

Originally posted by: ntdz

Originally posted by: Darthvoy

Originally posted by: senseamp
I didn't know we were running out of the Chinese to lend us money

what if the chinese all of suden requested all of its money back? Good times I say!

They can't just request their money back, it's in in the form of long term bonds.

Nor would they. The second they do it, the US dollar would collapse relative to the yuan, and then who is going to buy their overpriced junk? They are just as addicted to lending us money as we are to their loans.

What happens when they do get them back later? Doesn't this kill our economy? I've been hearing a lot about our debt situation and I'm wondering

a). When we're going to have to start paying back whatever we've borrowed to who
b). What it's going to do to the economy
c). What it's going to do to my student loan interest rates
d). What should be done to prepare for it/react to it?

Perhaps now is the time to begin oversees banking, as in owning your money in Euro and letting it earn interest, as opposed to USD and getting interest. This way when (if?) the USD collapses, my Euro$$$ are worth much more USD now, so I can exchange them for 2-3x what I'd have if I left them in an American bank as USD; and then pay off my student loans.

You time this right and you take out a giant loan for a nice fat house while you've been saving for years in your Euro acct, and then when we hit the inflation it's much easier to pay back your loan. After all the contract says $500,000, it doesn't say "$500,000 2006USD."

 

[theeedude]

Originally posted by: hehatedme

Originally posted by: senseamp

Originally posted by: ntdz

Originally posted by: Darthvoy

Originally posted by: senseamp
I didn't know we were running out of the Chinese to lend us money

what if the chinese all of suden requested all of its money back? Good times I say!

They can't just request their money back, it's in in the form of long term bonds.

Nor would they. The second they do it, the US dollar would collapse relative to the yuan, and then who is going to buy their overpriced junk? They are just as addicted to lending us money as we are to their loans.

The Chinese could request their money back at a market rate because the debt is securitized as treasury bonds. They could just sell them in the open market.

If China were to sell their US debt in the open market, they would flood it with dollar denominated securities, causing a sharp fall in the dollar.

Also the renmibi is generally fixed to the dollar.

Yes, because China agrees to buy dollars for a fixed number of renmibi. But imagine that they sell their US debt, and dollar falls sharply. They will have to buy tonnes of devalued dollars back if they want to maintain the currency fix. So basically, they cannot maintain the renmibi fix to the dollar while selling dollar denominated securities. It is fixed to the dollar precisely because China agrees to buy US dollars.
And if they do it, their currency will float so high relative to the dollar, noone is going to buy their junk to sell at Walmart, and their economy will go into the dumpster.

However the Chinese are preparing to float their currency and it currently moves relative to a basket of currencies in a fixed range determined by the Chinese government. Even still, the Chinese, the Japanese, and South Koreans would never sell the US debt they own without the permission of the Federal Reserve because their economies are very intertwined with ours.

They won't sell because they like exporting goods to the US, not as a favor to the Federal reserve. If they sell and dollar collapses, their economies will be screwed.

All that aside, I agree that spending, deficits, and debts are too high. Also the government is wasteful with money. A lot of change needs to occur to correct these problems, but its complex and the consequences are global so who knows if there even is a way to prevent disaster if that is the situation.

Yeah, but it's going to be hard to be disciplined about debt when you have all these countries that want to lend you cheap money in exchange for buying their stuff.

 

[wirelessenabled]

Originally posted by: Stunt
A few things to understand before you guys continue with this discussion.

My opinion can be found on my blog but to highlight a few statistics for the lazy.

Looking closer, Canada as a whole has a debt to gdp ratio of 67%, compared to the US?s 65%, EU?s 76%, and Japan?s 164%. This means that the US is generating wealth at a far greater rate than its debt accumulation; interestingly, with all the deficits the US has posted over the years, the debt to gdp ratio has been declining as the nation invests more money in people, education, and infrastructure.

For those obsessed by the US deficit, and want to know how much too much is, there really is no answer to that. What I can do is show different country?s deficits (-) and surplus (+) relative to their productivity; Canada +0.7%, US -2.7%, UK -3.5%, France -4.3%, Germany -4.2%, Italy -3.1%, Japan -9.3%. As you can see, even though the US has a ?massive? deficit, it is in no more fiscal trouble than many other first world countries.

You also mention commitments of America and the balance owing for each individual in the country. This is extremely short sighted, even though the US government has a debt of $8.5trillion, that money has been invested in infrastructure and assets with a value on the global market. One must look at the net debt to fully understand the financials of any country. In the United States during fiscal year 2005, Americans held overseas stocks, bonds, factories and other assets totaling $10.01 trillion, while foreigners held $12.70 trillion in American assets.

As a percentage GDP, net debt is as follows:
Canada: 40%
France: 56%
Germany: 65%
Italy: 102%
Japan: 94%
UK: 38%
US: 48%

Is debt something to criticize? yes. Is the US completely out of line? no.

Something I must not understand here. We hold $10.01 trillion of overseas assets and foreigners hold $12.7 trillion of US assets. I get a net debt of c. $2.7 trillion using your numbers. Since the the US GDP is on the order of $12.3 trillion, how does that equate to 48% of GDP?

Are your numbers bogus? Or faulty reasoning? Or is my reasoning faulty?

 

[ntdz]

Originally posted by: wirelessenabled

Originally posted by: Stunt
A few things to understand before you guys continue with this discussion.

My opinion can be found on my blog but to highlight a few statistics for the lazy.

Looking closer, Canada as a whole has a debt to gdp ratio of 67%, compared to the US?s 65%, EU?s 76%, and Japan?s 164%. This means that the US is generating wealth at a far greater rate than its debt accumulation; interestingly, with all the deficits the US has posted over the years, the debt to gdp ratio has been declining as the nation invests more money in people, education, and infrastructure.

For those obsessed by the US deficit, and want to know how much too much is, there really is no answer to that. What I can do is show different country?s deficits (-) and surplus (+) relative to their productivity; Canada +0.7%, US -2.7%, UK -3.5%, France -4.3%, Germany -4.2%, Italy -3.1%, Japan -9.3%. As you can see, even though the US has a ?massive? deficit, it is in no more fiscal trouble than many other first world countries.

You also mention commitments of America and the balance owing for each individual in the country. This is extremely short sighted, even though the US government has a debt of $8.5trillion, that money has been invested in infrastructure and assets with a value on the global market. One must look at the net debt to fully understand the financials of any country. In the United States during fiscal year 2005, Americans held overseas stocks, bonds, factories and other assets totaling $10.01 trillion, while foreigners held $12.70 trillion in American assets.

As a percentage GDP, net debt is as follows:
Canada: 40%
France: 56%
Germany: 65%
Italy: 102%
Japan: 94%
UK: 38%
US: 48%

Is debt something to criticize? yes. Is the US completely out of line? no.

Something I must not understand here. We hold $10.01 trillion of overseas assets and foreigners hold $12.7 trillion of US assets. I get a net debt of c. $2.7 trillion using your numbers. Since the https://www.cia.gov/cia/publications/factbook/rankorder/2001rank.html">the US GDP is on the order of </a> $12.3 trillion, how does that equate to 48% of GDP?

Are your numbers bogus? Or faulty reasoning? Or is my reasoning faulty?

It's the Debt to GDP ratio, oversees assets have nothing to do with it. Our debt is, what 7 trillion, and our GDP is 12.5 trillion? 7/12.5 = the percentage we're looking at.

 

[libs0n]

About a month ago I read this book, but it was read during a tumultuous period in my life and nothing much sunk in, so I can't offer an analysis. I don't particularily see myself picking it up again, but its relevant to this discussion and its right up the threadstarter's alley if you're so inclined:

The Coming Generational Storm

 

[hehatedme]

Originally posted by: senseamp

Originally posted by: hehatedme

Originally posted by: senseamp

Originally posted by: ntdz

Originally posted by: Darthvoy

Originally posted by: senseamp
I didn't know we were running out of the Chinese to lend us money

what if the chinese all of suden requested all of its money back? Good times I say!

They can't just request their money back, it's in in the form of long term bonds.

Nor would they. The second they do it, the US dollar would collapse relative to the yuan, and then who is going to buy their overpriced junk? They are just as addicted to lending us money as we are to their loans.

The Chinese could request their money back at a market rate because the debt is securitized as treasury bonds. They could just sell them in the open market.

If China were to sell their US debt in the open market, they would flood it with dollar denominated securities, causing a sharp fall in the dollar.

Also the renmibi is generally fixed to the dollar.

Yes, because China agrees to buy dollars for a fixed number of renmibi. But imagine that they sell their US debt, and dollar falls sharply. They will have to buy tonnes of devalued dollars back if they want to maintain the currency fix. So basically, they cannot maintain the renmibi fix to the dollar while selling dollar denominated securities. It is fixed to the dollar precisely because China agrees to buy US dollars.
And if they do it, their currency will float so high relative to the dollar, noone is going to buy their junk to sell at Walmart, and their economy will go into the dumpster.

However the Chinese are preparing to float their currency and it currently moves relative to a basket of currencies in a fixed range determined by the Chinese government. Even still, the Chinese, the Japanese, and South Koreans would never sell the US debt they own without the permission of the Federal Reserve because their economies are very intertwined with ours.

They won't sell because they like exporting goods to the US, not as a favor to the Federal reserve. If they sell and dollar collapses, their economies will be screwed.

All that aside, I agree that spending, deficits, and debts are too high. Also the government is wasteful with money. A lot of change needs to occur to correct these problems, but its complex and the consequences are global so who knows if there even is a way to prevent disaster if that is the situation.

Yeah, but it's going to be hard to be disciplined about debt when you have all these countries that want to lend you cheap money in exchange for buying their stuff.

You somehow managed to disagree with me by agreeing with everything I said, which confused me for a minute. But that's ok.

As to what soccerballtux asked:

We are continuously paying back most of the debt in the form of interest and principal payments that the government makes everyday. They essentially print money to do this. What it does to the economy is not easy to answer, at least I can't do it very well. Your student loan interest rates reflect the markets interpretation of what interest rates should be, and again I wish I could predict the future on rates with confidence because I could easily be a billionaire then. To prepare or react to a dollar melt down, one could as you suggested invest in foreign currency, but it is impractical to do this with accounts you need to access daily. You could bank overseas but every time you make a transaction you would pay a comission on top of the bid ask spread of where the currency was trading, and overall you are assuming lots of short term risk even if the long term predictions are correct. If you have money to invest that you don't need daily access to, you could more easily choose this path. You could also choose to invest in gold and other hard assets which react positively to rising inflation.

 

[HombrePequeno]

Originally posted by: senseamp

They won't sell because they like exporting goods to the US, not as a favor to the Federal reserve. If they sell and dollar collapses, their economies will be screwed.

Actually if our dollar did tank because of them selling, their currency would depreciate along with ours. This would cause the yuan to become horribly undervalued which would actually increase their exports. It definitely wouldn't help their economy though because they would be flooded with dollars that they can't really do much with. Also you would have the problem of the price of imports shooting through the roof and a lot higher inflation.

Either way it would be bad for their economy so it makes very little sense for them to do so.

Of course there would always be the strong possibility of them repegging their exchange rate to more accurately reflect the real exchange rate. Doing that would cause what you described and also cause deflation which can kill an economy.

 

[bobdelt]

thats not how it works... when we buy all our chinese imported goods... what do they do with the money? Invest it back into us...

The current account, deficit, interest rates, and exchange rates are all tied together... I think it's fair that can have a strong educated opinion on whether or not we have borrowed too much.

 

[Wreckem]

Originally posted by: wirelessenabled

Originally posted by: Stunt
A few things to understand before you guys continue with this discussion.

My opinion can be found on my blog but to highlight a few statistics for the lazy.

Looking closer, Canada as a whole has a debt to gdp ratio of 67%, compared to the US?s 65%, EU?s 76%, and Japan?s 164%. This means that the US is generating wealth at a far greater rate than its debt accumulation; interestingly, with all the deficits the US has posted over the years, the debt to gdp ratio has been declining as the nation invests more money in people, education, and infrastructure.

For those obsessed by the US deficit, and want to know how much too much is, there really is no answer to that. What I can do is show different country?s deficits (-) and surplus (+) relative to their productivity; Canada +0.7%, US -2.7%, UK -3.5%, France -4.3%, Germany -4.2%, Italy -3.1%, Japan -9.3%. As you can see, even though the US has a ?massive? deficit, it is in no more fiscal trouble than many other first world countries.

You also mention commitments of America and the balance owing for each individual in the country. This is extremely short sighted, even though the US government has a debt of $8.5trillion, that money has been invested in infrastructure and assets with a value on the global market. One must look at the net debt to fully understand the financials of any country. In the United States during fiscal year 2005, Americans held overseas stocks, bonds, factories and other assets totaling $10.01 trillion, while foreigners held $12.70 trillion in American assets.

As a percentage GDP, net debt is as follows:
Canada: 40%
France: 56%
Germany: 65%
Italy: 102%
Japan: 94%
UK: 38%
US: 48%

Is debt something to criticize? yes. Is the US completely out of line? no.

Something I must not understand here. We hold $10.01 trillion of overseas assets and foreigners hold $12.7 trillion of US assets. I get a net debt of c. $2.7 trillion using your numbers. Since the https://www.cia.gov/cia/publications/factbook/rankorder/2001rank.html">the US GDP is on the order of </a> $12.3 trillion, how does that equate to 48% of GDP?

Are your numbers bogus? Or faulty reasoning? Or is my reasoning faulty?

His numbers are legit, they come from the CBO.

The future is bleak because of future expenditure on social security and medicad.

All we really need to do is cut spending and fix social security/medicad. Social security needs to be fully funded like Germany or France. I hate to say it but Gore was right, he just shouldnt have used the "lock box" analogy.

 

[Wreckem]

Originally posted by: HombrePequeno

Originally posted by: senseamp

They won't sell because they like exporting goods to the US, not as a favor to the Federal reserve. If they sell and dollar collapses, their economies will be screwed.

Actually if our dollar did tank because of them selling, their currency would depreciate along with ours. This would cause the yuan to become horribly undervalued which would actually increase their exports. It definitely wouldn't help their economy though because they would be flooded with dollars that they can't really do much with. Also you would have the problem of the price of imports shooting through the roof and a lot higher inflation.

Either way it would be bad for their economy so it makes very little sense for them to do so.

Of course there would always be the strong possibility of them repegging their exchange rate to more accurately reflect the real exchange rate. Doing that would cause what you described and also cause deflation which can kill an economy.

China isnt going to revalue the yaun anytime soon unless they are forced to by the WTO.