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Thread: The National Debt Will NEVER Be "Paid Back".

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    Default The National Debt Will NEVER Be "Paid Back".

    This is NOT as "doomy and gloomy" as some might think at first glance.
    It is nothing more than an explanation of how the real world of U.S. government borrowing works.
    The national debt is NOT like a fixed term mortgage for a household. With a mortgage, it is paid off after 20 or 30 years. Yes it can be refinanced but I'm trying to keep this simple so that even I can understand it lol.

    The national debt consists of a mix of Treasury bills , notes and bonds with terms as short as 30 days all the way to 30 year bonds.
    The national debt is much more like a line of credit for a business in an overall sense. There is nothing wrong with a business having a line of credit so long as the size of the overall debt remains in sensible proportion to business income and asset values. With the national debt it is measured against annual GDP. Just as a business can renew or roll over a line of credit, so does the Federal government by redeeming old debt as it comes due and issuing new debt. So long as the business keeps paying interest on time and its bank doesn't get nervous, all is well and can stay well unless and until things change. As profits go up and asset values increase, the business can even increase its credit limit. Optimally, they can roll it over from time to time paying off a higher interest LOC with one at a lower rate. During W.W.II our national debt exceeded GDP and the country did not collapse.

    Why will it never be paid back ? Because it is too big. It is currently $16 trillion and counting. If we stopped borrowing further tomorrow and taxed ourselves enough so that revenues exceeded outlays for a couple of decades, then it could conceivably be brought down to zero. That is neither necessary nor desirable.It will also NEVER happen except under some sort of dictatorship i.e. so long as we have a Congress and a POTUS. What is necessary imho is to lower the trajectory so that the rate of future borrowing declines in relative terms. Spending restraint coupled with economic growth of at least 3.5% would enable us to pay the interest on existing debt and to maintain our credit rating so that we will be able to keep borrowing in the future at afforable rates. That is the best that anybody can expect or hope for.
    If we ran surpluses a la Clinton's second term we could reduce the gross sum owed. Reduce it, not eliminate it unless we have a major oil strike plus have another major gold rush. Who wants to count on THAT happening ?

    Why are some of us so worried ? Because for one thing the very nature of our national borrowing has changed. Starting under Bush The Dumber we borrowed NOT to "invest" in things like roads, airports, research or even things like aircraft carriers that last a long time; like 50 years. We borrowed and have kept borrowing to keep up a level of transfer payments that any actuary will tell you is unaffordable. Things like Social Security, Medicare, Medicaid , SNAP ( Food Stamps ) etc. etc. That kind of borrowing accelerated under Obama and, so far, there is no sign of anything other than an ever increasing rate of borrowing well into the future.

    We've been OK, so far, because there has only been one slight downgrade of our credit rating by just one major credit rating agency. That has kept interest rates relatively low, e.g. the 10 Year Note is still paying less than 2 %. BUT every tenth of a point on the yield on that and all other new debt issued adds billions and billions to the cost of borrowing. The more we borrow as a government, the less that businesses can borrow. Just as a lender can only lend so much to any one business and what they do lend reduces the money available to lend to other businesses.What you hope for is that you can issue new debt at the same or lower interest rates as the old debt paid. Who thinks that is going to happen ?

    We certainly have soft money "doves" at the Fed keeping rates artificially low but for how much longer ? There are rumblings, even from a couple of the "doves" that rates must go up albeit in the mid to long range future. Then what ?

    There is another kicker - the Fed has been buying Federal government debt. Not a new thing for them to do but not to the extent that THIS Fed has been doing it. What are they using to buy it with ? Money printed for the occasion by the Fed. For how much longer ? Who knows .

    If anybody out there seriously thinks ( like Krugie has written in a number of columns, God bless him for providing the comic relief ) that the national debt will ever be "paid back", please explain how.

    "What is the point of this latest ' ideological ' rant Eric ? What is the practical value to the average Dollar Den reader ? " Very simple - plan to borrow to buy a house or car any time in your forseeable future ? Thinking of taking a student loan ? Care about the overall health of the economy and things like inflation ? Plan on having children ? Want them to have the same or better opportunities than you did ? Then this stuff matters. And there is nothing "ideological" about it. It's just the plain truth. Anyone with some serious cause or basis for a more optimistic explanation and/or forecast is free to contribute same.

    "Come on Eric, the U.S. is not Greece ." Not yet. Unlike Greece we can print our own money and our debt to GDP ratio and overall credit rating are much , much better than theirs. For now.
    Last edited by Eric Stoner; 01-04-2013 at 12:43 PM.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Eric, if US grows at a nominal rate of 6% (3.5 real and 2.5 inflation); in 100 years, it's economy will be near 275 trillion dollars. 17 trillion is piddly and if you fire the luddite, ideology-driven republican congress who think small and in really short terms, you can have an easy long term fix.

    Oh and in 20 years we will be mining asteroids and deep sea and flood the world with all the raw materials ever needed plus the useless ones like Gold. So, don't worry about dollar-crash hyper-inflation.

    The only thing for people to worry is why they wasted their last 5 years jerking off to doom porn while hoarding worthless pieces of shiny metals.
    Last edited by xanfiles1; 01-05-2013 at 01:21 AM.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    ^^^ 'Irrational Exuberance' about the distant future aside, the medium term concern about growing levels of national debt is that tax revenues must be diverted to pay interest on already issued US Treasury bonds and bills, thus those tax revenues cannot be spent for any 'productive' purpose. In 2012, with a ~2% average interest rate, those interest payments amounted to $360 billion ... or some 14.4% of the estimated 2.5 trillion dollars worth of total federal income tax revenues collected ( per the Tax Policy Center anyhow ). And as Eric has pointed out, existing US Treasury bonds and bills are constantly maturing, and must be replaced by newly issued US Treasury bonds and bills which pay off the principle owed on the old US Treasury bills that are reaching maturity ( since the USA cannot afford to repay the principle out of current year tax revenues ).

    But the interest rate which must be paid on newly issued US Treasury bonds and bills is subject to 'market conditions' / investor expectations. So if the US gov't was to endure another downgrade of its credit rating, it's not impossible that future interest rates on newly issued US Treasury bonds and bills could increase significantly. If and when that happens, the $360 billion in annual T bond interest payments could easily turn into 1/2 trillion, or 3/4 trillion, or 1 trilliion ... causing an increase from the current 14.4% of current year tax revenues, to 20-30-40%+ of future year tax revenues for 'non-productive' US gov't debt service payments. If and when this happens, it will leave very little tax revenue money to be spent on other gov't budget items. This was precisely the situation already faced by Greece.

    The likely solution for the US gov't to avoid having an ever greater share of current year tax revenues being diverted to 'non-productive' Treasury bond and bill interest payments is, of course, to devalue the US dollar by an equal annual percentage ... which is painless in the very short term because the USA ( Fed ) is able to print US dollars ( versus Greece being unable to print Euros ). This causes current year federal tax revenues to rise, and effectively makes existing T bond debt less 'expensive' to service. However, this devaluation also will cause US dollar denominated price levels for all global commodities ( food, energy, precious metals ) to similarly rise soon afterward, which hurts private sector workers' weekly budgets as well as US small business profit margins. And said policy also depreciates the 'purchasing power' of US dollars already saved and invested in 'fixed income' instruments by many Americans.

    On the flip side, such a US currency devaluation / price inflation policy benefits those Americans who have little or no savings and investments, since it also makes their existing personal debt less 'expensive' to service. And this is particularly the case when the incomes of those Americans is 'indexed' for US dollar inflation i.e. union workers, gov't employees, social welfare benefit recipients, minimum wage workers etc. who will be relatively unaffected by rising US dollar denominated price levels since their checks will automatically get larger as well. Said policy also benefits the big Wall St. banks, since the 'inflated' future prices of US housing, for example, will turn current mark to market REO losses on foreclosed properties into gains, thus turning underwater mortgages into mortgages with equity etc. And said policy also benefits stock market investors, since stock share prices of many US companies will be 'inflated' right along with the US dollar. Additionally, said policy would also benefit huge US corporations by making export products comparatively less expensive when paid for in foreign currencies. But the arguable #1 beneficiary of said policy would be the US treasury, since US income tax brackets are set at fixed dollar amounts thus inflated paychecks will result in far higher effective income tax rates being paid !
    Last edited by Melonie; 01-05-2013 at 06:36 AM.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Ah the inflation fairy and the dollar collapse coming to you in 2009, no 2010, 2011?, 100% sure 2012, 2013, 2014.

    The problem with ideology driven framework is, you don't update your model when you are pathetically and horribly wrong; but double down on stupid thesis.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    ^^^ are you seriously implying that US dollar denominated prices haven't increased significantly since 2009 ?





    The 'Everyday Price Index' strips out big ticket items like housing, automobiles, and appliances, and expresses price trends in 'everyday' items like taxes, food, gasoline, utilities, and 'necessary' consumer items. The chart shows that, compared to the official US gov't CPI which shows a cumulative increase of ~7% since 2009, the 'Everyday Price Index' has increased by ~20%.



    Granted that you'll probably challenge the methodology / validity of the 'Everyday Price Index'. But any American who does their own grocery shopping and pays their own utility bills will recognize it's a fairly 'real' indicator.


    Of course, at the same time that 'Everyday' prices have increased significantly since 2009, the size of paychecks essentially hasn't changed at all. THIS is the expected result of US dollar devaluation / money printing policy !


    And in response to the ubiquitous claim of economic 'ideology', I would point out that those who support a different economic 'ideology' have been methodically 'gaming' the official statistics in an attempt to convince 'low information' Americans that their claims are actually true in the 'real world' ! Admittedly, they have been relatively successful ! However, I have confidence that most Dollar Den readers have the intelligence and the common sense to rise above the 'low information' level.
    Last edited by Melonie; 01-06-2013 at 06:21 AM.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Quote Originally Posted by Melonie View Post
    Of course, at the same time that 'Everyday' prices have increased significantly since 2009, the size of paychecks essentially hasn't changed at all. THIS is the expected result of US dollar devaluation / money printing policy !


    And in response to the ubiquitous claim of economic 'ideology', I would point out that those who support a different economic 'ideology' have been methodically 'gaming' the official statistics in an attempt to convince 'low information' Americans that their claims are actually true in the 'real world' ! Admittedly, they have been relatively successful ! However, I have confidence that most Dollar Den readers have the intelligence and the common sense to rise above the 'low information' level.
    Quote Originally Posted by Melonie View Post
    $5 per gallon US gasoline is a virtual certainty before the end of THIS year.
    (September 2012)

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    US gasoline prices are but one component of the EPI. Despite the fact that US gasoline prices have declined recently ( for reasons discussed in other threads ), the fact remains that US price increases for food, for other energy, for utilities, for 'necessary' consumer items etc. rose enough to offset the decline in US gasoline prices for an overall EPI increase of ~8% for 2012 ... while the official gov't CPI rose less than half of that amount.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    and there are 'other ways' being used to attempt to disguise increasing US dollar denominated prices of global commodities ...

    from


    (snip)This article hit close to home for me. Literally. It was just over the holiday season that I mentioned to my mom that her coffee doesn’t taste as good as it used to. She insisted that she was buying the same blend as always and I insisted it didn’t taste as good. The conversation ended there.

    Then I came across the following article and everything started to make sense. From the Daily Finance:

    Reuters is reporting that many of America’s major brands have been quietly tweaking their coffee blends. While most coffee companies consider their blends trade secrets, and are loath to disclose exactly what goes into them, both circumstantial and direct evidence suggests they’re now substituting lower-grade Robusta beans for some of their pricier Arabica, and degrading the quality of our coffee.

    Research out of agricultural bank Rabobank confirms that demand for Arabica beans among coffee buyers “has fallen 27% year-to-date, while Robusta [demand] is 25% higher.” This seems to confirm a widespread alteration of the bean mix.


    Why the switcheroo? Prepare to not be shocked. The answer is: price.

    Now here’s the kicker of the article.


    When you get right down to it, if there’s more Robusta in our coffee but people still find it drinkable, and the coffee’s getting a bit cheaper in consequence, where’s the harm?

    What’s the harm? I didn’t think whether coffee was “drinkable” or not was the point of drinking coffee. The harm is this is just another example of standards of living being eroded by inflation. Inflation that we are told doesn’t exist"(snip)

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Steering back on topic, and speaking of more gov't sleight of hand, it appears that CBO failed to consider the impact of compounded interest on the national debt ... which is HIGHLY subject to small changes in future interest rates !

    from


    (snip)"They say "be careful what you wish for", and they are right. Because, in the neverending story of the American "recovery" which, sadly, never comes (although in its place we keep getting now semiannual iterations of Quantitative Easing), the one recurring theme we hear over and over and over is to wait for the great rotation out of bonds and into stocks. Well, fine. Let it come. The question is what then and what happens to the US economy when rates do, finally and so overdue (for all those sellside analysts and media who have been a broken record on the topic for the past 3 years), go up. To answer just that question, which in a country that is currently at 103% debt/GDP and which will be at 109% by the end of 2013, we have decided to ignore the CBO's farcical models and come up with our own. Our model is painfully simple, and just to give our readers a hands on feel, we have opened up the excel file for everyone to tinker with (however, unlike the CBO, we do realize that when calculating average interest, one needs to have circular references enabled so please do that before you open the model).

    Our assumptions are also painfully simple:

    i) grow 2012 year end GDP of ~$16 trillion at what is now widely accepted as the 'New Normal' 1.5% growth rate (this can be easily adjusted in the model);

    ii) assume the primary deficit is a conservative and generous 6% of GDP because America will never, repeat never, address the true cause of soaring deficits: i.e., spending, which will only grow in direct proportion with demographics but as we said, we are being generous (also adjustable), and

    iii) sensitize for 3 interest rate scenarios: 2% blended cash interest; 3% blended cash interest and 5% blended cash interest.

    And it is here that we get a reminder of a very key lesson, one that even the CBO admitted on Friday they had forgotten about, in what compounding truly looks like in a country that is far beyond the Reinhart-Rogoff critical threshold of 80% sovereign debt/GDP.

    The bottom line: going from just 2% to 3% interest, will result in total 2022 debt rising from $31.4 trillion to $34.1 trillion; while "jumping" from 2% to just the long term historical average of 5%, would push total 2022 debt to increase by a whopping $9 trillion over the 2% interest rate base case to over $40 trillion in total debt!

    Sadly, this is no "magic" - this is the reality that awaits the US.

    And for those more curious about that other critical economic indicator, debt/GDP, the three scenarios result in the following 2022 debt/GDP ratios:

    •2% interest - 169%;
    •3% interest - 183.5%; and
    •5% interest - 217%, or just shy of where Japan is now. (snip)


    The author's 'unspoken' point, of course, is that in the absence of major US dollar devaluation, by 2022 it's a distinct possibility that, just like Greece, 100% of current year US tax revenues would have to be diverted to paying interest on the national debt. At that point, there would be no tax revenue money left for spending on ANYTHING else ... leaving the gov't with the options of 'printing money' at 'warp speed' and devaluing the US dollar by HUGE percentages, or outright defaulting on US Treasuries / state muni bonds etc.

    That scenario of course will never be allowed to happen, i.e. maintaining the US dollar's current value for the next 10 years then running into a 'brick wall'. Instead, it is highly probable that the US dollar will be devalued a few percent every year, with resulting US dollar denominated price increases / loss of US consumer purchasing power / losses on US dollar denominated savings and fixed investments in 'real' terms, etc.
    Last edited by Melonie; 01-07-2013 at 04:32 AM.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Melonie is right. At present, we pay over $300 billion per year in interest. That money is gone ! Poof ! It can't be spent on anything else.
    About half of it goes to foreign governments and half of that to one ( 1 ) country , China. That interest payment number is projected to do nothing but go up , Up , UP to MORE than 50 % of the Federal budget in the out years.

    Greece has 11 million people and their national debt is about $500 billion. We have over 300 million people and owe $16 trillion. NOT counting unfunded liabilities for Social Security, Medicare, Medicaid and Federal pensions. In the out years we are looking at another $ 75 to $ 80 trillion with a "T". Thus even with "Xanfiles1" optimistic projections , the spending and debt projections don't get any prettier in the next 20 years or so. Quite the contrary. I've been trying to low-key this a bit to try and keep anyone else from running away screaming from Dollar Den lol.

    On a per capita basis we owe about what Greece does. Yes, we have a much larger per capita GDP and a much better credit rating. For now.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Prediction for 2013:

    1) Zerohedge will produce blatantly stupid articles.
    2) Clueless idiots will lap it up without even doing grade I level critical thinking.

    I wasted 2 minutes of my time on that excel to find that GDP is at Real Rate. Big Difference!. Especially if you are assuming 10y rate to rise. But that's the kind of sheeple behavior I expect from Zerohedge crowd.

    Eric,
    If you are bringing Greece, Zimbabwe, Weimer Germany into the argument (which can easily by debunked by Grade II logic), then its really unproductive debate and I have to assume you don't even know the basic difference between US and these countries.




    USA can take on far greater debt than what it has now.

    Treasury can easily mint Trillion Dollar Coins and even retire 2-3 Trillion of existing debt with no inflation effects. (If No new debt is created other than the 3% annual deficit).

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Quote Originally Posted by Eric Stoner View Post
    Melonie is right. At present, we pay over $300 billion per year in interest. That money is gone ! Poof ! It can't be spent on anything else.
    About half of it goes to foreign governments and half of that to one ( 1 ) country , China. That interest payment number is projected to do nothing but go up , Up , UP to MORE than 50 % of the Federal budget in the out years.
    We're paying approximately 2 percent interest on our national debt. Those people who used the additional money they didn't pay in taxes as a result of our government borrowing money, to invest in stocks got a rate of return of approximately 15%. The perma-bears may have missed out on this, but not the millions of Americans invested in the stock market.

    Our national debt increased approximately $1 trillion in 2012. US household worth rose $2.83 trillion in the first quarter of 2012 alone.

    http://www.fa-mag.com/news/us-househ...-04-10940.html

    Our national debt - gdp ratio in 1945 was as high or higher than it is today, yet in the following decades we had unprecedented economic growth and prosperity.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Quote Originally Posted by eagle2 View Post
    We're paying approximately 2 percent interest on our national debt. Those people who used the additional money they didn't pay in taxes as a result of our government borrowing money, to invest in stocks got a rate of return of approximately 15%. The perma-bears may have missed out on this, but not the millions of Americans invested in the stock market.

    Our national debt increased approximately $1 trillion in 2012. US household worth rose $2.83 trillion in the first quarter of 2012 alone.

    http://www.fa-mag.com/news/us-househ...-04-10940.html

    Our national debt - gdp ratio in 1945 was as high or higher than it is today, yet in the following decades we had unprecedented economic growth and prosperity.
    Did either of you READ what I posted ? Did you ?

    I made it clear we are NOT Greece. Yet ! :
    1. We can print our own money. They can't.
    2. Our Fed can buy our debt.
    3. Our GDP and credit rating are much better than theirs.

    I noted that during World War II our deficit and debt exceeded GDP. That was a very special case that lasted for about three ( 3 ) years !
    We have posted repeatedly about THAT debt and deficit situation and how it was paid back. There is no need to rehash it here and now.
    The differences between then and now are pathetically obvious and not worth discussing further.

    I also made it clear that right now ; in the year 2013 ; we are NOT in dire straits. Yet ! Interest rates are low ( remember the part where I posted the current rate on the 10 Year Note which is less than 2 % ? ).? That is NOW. We are paying $300 billion in interest NOW . About $75 billion of that going to China , NOW. What are the numbers going to be if interest on the 10 Year goes to 3 % ? or 3.5 % ( where it should really be btw IF we had a Fed that knew what it was doing. ) ?

    I made it clear that my concern is based on the current trend which is continued trillion dollar deficits growing the debt exponentially AND the $75 to 80 trillion in unfunded liabilities. With sluggish economic growth, we will never grow our economy enough to even create breathing room, let alone seriously impact deficits and the overall debt. The recently passed tax increases are a pathetically tiny fraction of what is needed. All I called for was restraint in FUTURE spending including Entitlements.

    Aside from a pathological refusal to do basic arithmetic, the Krugman School ( "borrow MORE !" ; "don't cut a dime except maybe from Defense " ; "Tax the rich , tax the rich " ) ignores all the retiring Baby Boomers who will shift from paying into to taking out from Social Security and Medicare.

    How many times do I have to point to the out years and the current trend ? Do you guys seriously want a Federal Budget where 50 cents of every dollar goes to pay interest on the National Debt ? Your solution is what ? Xanfiles1 assumes a stable debt of $17 trillion. Based on what ? His number means that we stop borrowing by the end of the year and don't add to the existing debt of around $16.5 trillion. Not to mention his reliance on deep sea mining and ASTEROIDS ???? We don't even have a space shuttle anymore so how exactly are going to get up there and bring anything back ? Rotfl ! Come on guys. You can't be serious.
    Last edited by Eric Stoner; 01-08-2013 at 11:01 AM.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Quote Originally Posted by Eric Stoner View Post

    I noted that during World War II our deficit and debt exceeded GDP. That was a very special case that lasted for about three ( 3 ) years !
    We have posted repeatedly about THAT debt and deficit situation and how it was paid back. There is no need to rehash it here and now.
    The differences between then and now are pathetically obvious and not worth discussing further.
    During and after World War II, we were able to raise taxes to necessary levels. Also, our government was willing to spend money on things that helped grow the economy like our national highway system and new airports. China's government is doing the same thing today that we were doing in the 1950s and 60s, and China has the fastest growing economy of all the major countries.

    Quote Originally Posted by Eric Stoner View Post
    I also made it clear that right now ; in the year 2013 ; we are NOT in dire straits. Yet ! Interest rates are low ( remember the part where I posted the current rate on the 10 Year Note which is less than 2 % ? ).? That is NOW. We are paying $300 billion in interest NOW . About $75 billion of that going to China , NOW. What are the numbers going to be if interest on the 10 Year goes to 3 % ? or 3.5 % ( where it should really be btw IF we had a Fed that knew what it was doing. ) ?
    The Fed doesn't control interest rates on Treasury bills. That is determined by the market. Lenders are willing to lend the US government money at 2% interest, so that is what the rate is.

    Why do you assume the Fed doesn't know what it is doing? How do know you're not the one who is wrong? If the Fed were to raise interest rates, the most likely result would be another recession. You are not considering the basic laws of supply and demand. In another thread you stated:

    "Oil has already hit $100 a barrel thanks to Ben and company at the Fed. When you create more dollars, those dollars are worth less. Thus it takes more of them to pay for things denominated in dollars like oil."

    The Fed has created more dollars since then, and the price of oil decreased. It now takes fewer dollars to buy a gallon of gasoline. When demand is down sellers are not going raise prices, unless the supply falls more than demand.

    $75 billion of our interest is not going to China. China holds less than 10% of our debt.


    Quote Originally Posted by Eric Stoner View Post
    I made it clear that my concern is based on the current trend which is continued trillion dollar deficits growing the debt exponentially AND the $75 to 80 trillion in unfunded liabilities. With sluggish economic growth, we will never grow our economy enough to even create breathing room, let alone seriously impact deficits and the overall debt. The recently passed tax increases are a pathetically tiny fraction of what is needed. All I called for was restraint in FUTURE spending including Entitlements.
    and if we were to do anything now to significantly reduce the budget deficit, economic growth would be even slower, or even shrink like it is in Great Britain.

    Quote Originally Posted by Eric Stoner View Post
    Aside from a pathological refusal to do basic arithmetic, the Krugman School ( "borrow MORE !" ; "don't cut a dime except maybe from Defense " ; "Tax the rich , tax the rich " ) ignores all the retiring Baby Boomers who will shift from paying into to taking out from Social Security and Medicare.
    If we had spent more money to stimulate the economy 3 - 4 years ago, we would be having stronger economic growth now, and lower budget deficits.


    Quote Originally Posted by Eric Stoner View Post
    How many times do I have to point to the out years and the current trend ? Do you guys seriously want a Federal Budget where 50 cents of every dollar goes to pay interest on the National Debt ? Your solution is what ? Xanfiles1 assumes a stable debt of $17 trillion. Based on what ? His number means that we stop borrowing by the end of the year and don't add to the existing debt of around $16.5 trillion. Not to mention his reliance on deep sea mining and ASTEROIDS ???? We don't even have a space shuttle anymore so how exactly are going to get up there and bring anything back ? Rotfl ! Come on guys. You can't be serious.
    We had the same trend in the 80's and early 90's, but after we raised taxes to a reasonable rate, the deficits went away. Then when we passed big tax cuts in the early 2000's, the deficits returned.

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    Default Re: The National Debt Will NEVER Be "Paid Back".

    Quote Originally Posted by eagle2 View Post
    During and after World War II, we were able to raise taxes to necessary levels. Also, our government was willing to spend money on things that helped grow the economy like our national highway system and new airports. China's government is doing the same thing today that we were doing in the 1950s and 60s, and China has the fastest growing economy of all the major countries.



    The Fed doesn't control interest rates on Treasury bills. That is determined by the market. Lenders are willing to lend the US government money at 2% interest, so that is what the rate is.



    Why do you assume the Fed doesn't know what it is doing? How do know you're not the one who is wrong? If the Fed were to raise interest rates, the most likely result would be another recession. You are not considering the basic laws of supply and demand. In another thread you stated:

    "Oil has already hit $100 a barrel thanks to Ben and company at the Fed. When you create more dollars, those dollars are worth less. Thus it takes more of them to pay for things denominated in dollars like oil."

    The Fed has created more dollars since then, and the price of oil decreased. It now takes fewer dollars to buy a gallon of gasoline. When demand is down sellers are not going raise prices, unless the supply falls more than demand.

    $75 billion of our interest is not going to China. China holds less than 10% of our debt.



    and if we were to do anything now to significantly reduce the budget deficit, economic growth would be even slower, or even shrink like it is in Great Britain.


    If we had spent more money to stimulate the economy 3 - 4 years ago, we would be having stronger economic growth now, and lower budget deficits.




    We had the same trend in the 80's and early 90's, but after we raised taxes to a reasonable rate, the deficits went away. Then when we passed big tax cuts in the early 2000's, the deficits returned.
    Again, you insist on repetition and rehashing. We have gone over ALL of this before.
    To recap as briefly as possible : During and after W.W. II we had a top marginal tax rate of 91 % ! We also had four ( 4 ) recessions !

    You are correct about rates and how they are set for Treasury issued debt. That has zero effect on how much of that debt the Fed buys. How much buying for how long is the issue.

    Oil prices have been creeping up despite stable demand and increased supply.

    I can argue with you over and over about tax rates but the fact remains that when Clinton raised taxes he also CUT SPENDING ! Remember Welfare Reform and the Peace Dividend ? And Clinton also CUT TAXES !
    Last edited by Eric Stoner; 03-08-2013 at 08:56 AM.

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