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  1. #31
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    Quote Originally Posted by ari1013 View Post
    The problem is when the debt:GDP ratio is so high that it leads to massive inflation of the currency. Again though, we're not anywhere near that point. As long as we keep teetering in and out of deflation, it's important for us to NOT start paying off the national debt. If we do that we'll go further into deflation and that's a terrible thing for economic growth. Stop thinking about this as if it's a guy with a big credit card bill. That analogy doesn't work here. Take a look at what happened in the Great Depression when they started paying off debts while the economy was still banged up. We double-dipped. That's not the type of solution to the problem that anybody would want -- be it Bush, Obama, Superman, or a poster on here.
    ari,

    how long can the US continue to take debt on to fight deflation? at some point, isn't the interest cost going to drag the economy down?

    does the need to fight deflation mean that the US should keep the bush tax cuts forever? for an extra year? or something in between.

    at some point, it seems that the economy has to stand on its own, so to speak. the US has to start paying for what it spends. some combination of tax increases and/or spending cuts have to be made. the sooner the better seems to be the way start doing this. i get the need for stimulus. and the importance of avoiding the 'great depression' meltdown. keeping the economy from contracting too fast. but isn't that moment passing?

    shouldn't the US be starting to look to reducing debt/deficit. to keep the cost of servicing that debt from slowing down the economic growth.

    sorry for so many questions, but i have always been a 'pay as you go' kind of guy. i see the need for the spending to avoid the 'great depression scenario', but it seems that stimulus is becoming an excuse for spending just to be spending or not raising taxes to pay for stuff.

    Last edited by IndyFan; 09-14-2010 at 08:33 AM.

  2. #32
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    Quote Originally Posted by IndyFan View Post
    ari,

    how long can the US continue to take debt on to fight deflation? at some point, isn't the interest cost going to drag the economy down?

    does the need to fight deflation mean that the US should keep the bush tax cuts forever? for an extra year? or something in between.

    at some point, it seems that the economy has to stand on its own, so to speak. the US has to start paying for what it spends. some combination of tax increases and/or spending cuts have to be made. the sooner the better seems to be the way start doing this. i get the need for stimulus. and the importance of avoiding the 'great depression' meltdown. keeping the economy from contracting too fast. but isn't that moment passing?

    shouldn't the US be starting to look to reducing debt/deficit. to keep the cost of servicing that debt from slowing down the economic growth.

    sorry for so many questions, but i have always been a 'pay as you go' kind of guy. i see the need for the spending to avoid the 'great depression scenario', but it seems that stimulus is becoming an excuse for spending just to be spending or not raising taxes to pay for stuff.

    Interesting enough, didn't Obama pass Paygo earlier this year. I don't believe it's been followed much though.

    If i'm wrong on that, or distorted it, please let me know.

  3. #33
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    Quote Originally Posted by IndyFan View Post
    ari,

    how long can the US continue to take debt on to fight deflation? at some point, isn't the interest cost going to drag the economy down?

    does the need to fight deflation mean that the US should keep the bush tax cuts forever? for an extra year? or something in between.

    at some point, it seems that the economy has to stand on its own, so to speak. the US has to start paying for what it spends. some combination of tax increases and/or spending cuts have to be made. the sooner the better seems to be the way start doing this. i get the need for stimulus. and the importance of avoiding the 'great depression' meltdown. keeping the economy from contracting too fast. but isn't that moment passing?

    shouldn't the US be starting to look to reducing debt/deficit. to keep the cost of servicing that debt from slowing down the economic growth.

    sorry for so many questions, but i have always been a 'pay as you go' kind of guy. i see the need for the spending to avoid the 'great depression scenario', but it seems that stimulus is becoming an excuse for spending just to be spending or not raising taxes to pay for stuff.

    Sure. The compounding interest is a definite burden. Will it lead to hyperinflation? No.

    The key is to look at the debt:GDP ratio and not necessarily the debt itself. Most countries around the world have some amount of national debt. As long as it's manageable, it's ok. There are basically 3 sets of numbers to look out for: 60%, 80%, and 100%. Debt below 60% isn't a problem at all. Debt above 80% is worrisome (that's where we are now). Debt above 100% is a problem.

    Any time an economy has a downturn, even if it doesn't borrow a single cent, it will still see its debt:GDP ratio increase. And typically to get the economy rolling again, it will need to borrow and thus the debt:GDP ratio will increase even more.

    If the economy was growing at 3-4% AND we were still incurring massive amounts of debt I would be a little worried about it. But while it's down, spending $180B on stabilization efforts is a good thing. Spending $787B on stimulus and tax cuts is a good thing. We need to get out of the rut. Then we can worry about paying it down.
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  4. #34
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    Quote Originally Posted by behindmydesk View Post
    Interesting enough, didn't Obama pass Paygo earlier this year. I don't believe it's been followed much though.

    If i'm wrong on that, or distorted it, please let me know.
    Kind of. From what I've seen most of the new programs have been paid for via reallocations of predetermined spending (like how some UI extensions came out of the stimulus funds for reconstruction of highways). That said, I'm fairly sure both sides have been going around the paygo by using earmarks to attach riders to non-spending bills which are not subject to paygo.

    And since the GOP loves their projects but hates spending bills (whereas the Dems love giant spending bills), expect even more of that next year if the GOP takes over the House (as expected).
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  5. #35
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    Quote Originally Posted by corralski View Post
    Maybe I'm being too simplistic here but isn't it all just money we don't have?
    Like I said to DF, you can't think of it like a person with a credit card. It doesn't quite work that way.
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  6. #36
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    Quote Originally Posted by ari1013
    The compounding interest is a definite burden. Will it lead to hyperinflation? No.
    Great. No one ever claimed that it would. All I ever said was that monetizing the debt would lead to hyperinflation, and it will, albeit not instantaneously.

    Quote Originally Posted by ari1013 View Post
    Like I said to DF, you can't think of it like a person with a credit card. It doesn't quite work that way.
    Enlighten us then. Why can't we look at an endless increase in debt and say that it's not sustainable? Seems like it's one of those obvious things, like the sun rising & setting, the sky being blue, but you say it's not. Ok, explain to us why we can't do that.

    Quote Originally Posted by ari1013
    But while it's down, spending $180B on stabilization efforts is a good thing. Spending $787B on stimulus and tax cuts is a good thing. We need to get out of the rut. Then we can worry about paying it down.
    Unfortunately we're not getting out of the rut with all the spending. Any backup ideas in mind when spending doesn't lead to getting out of the rut, besides more spending?
    Last edited by DodgersFan28; 09-14-2010 at 09:52 AM.
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  7. #37
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    Quote Originally Posted by ari1013 View Post
    Kind of. From what I've seen most of the new programs have been paid for via reallocations of predetermined spending (like how some UI extensions came out of the stimulus funds for reconstruction of highways). That said, I'm fairly sure both sides have been going around the paygo by using earmarks to attach riders to non-spending bills which are not subject to paygo.

    And since the GOP loves their projects but hates spending bills (whereas the Dems love giant spending bills), expect even more of that next year if the GOP takes over the House (as expected).
    Again though, just because one side does it, doesn't make it ok for the other.

    Also Obama did the paygo press conference. But from what I remember (again remember so i might be wrong) not all the UI came from that. In fact, the GOP wanted it all to come from stimulus, and was murdered in the press for not voting for extensions when they weren't paid for.

  8. #38
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    Quote Originally Posted by DodgersFan28 View Post

    Enlighten us then. Why can't we look at an endless increase in debt and say that it's not sustainable? Seems like it's one of those obvious things, like the sun rising & setting, the sky being blue, but you say it's not. Ok, explain to us why we can't do that.



    Unfortunately we're not getting out of the rut with all the spending. Any backup ideas in mind when spending doesn't lead to getting out of the rut, besides more spending?
    This is one that does not require a professor in economics to explain, even a lowly financial advisor can do this one.

    If you wish to posit "an endless increase in debt" then juxtapose it with an endless increase in GDP. The debt in and of itself is not a problem, it is a problem as a percentage of GDP.
    Here is the question of the day, does anyone think that wealthy people should pay a lower percentage of their income to taxes than middle class people? Don't argue tax brackets, just a simple question. Do you think someone earning 46 million dollars should pay a lower percentage of their income than say someone earning sixty thousand?

  9. #39
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    ^ Did you read my last question? When the endless increase spending that leads to the increase in debt does not also lead to increase in GDP, what's your plan, besides spend more?

    Also, what good is a corresponding increase in GDP when the debt is never paid off?
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  10. #40
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    we borrow money from a private central bank when we should create our own money.

    governments should issue money not private banks.

    The 8 or 9 families who run these banks have been laughing at the world for over a century.

    But if a president steps out of line and challenges them they take a ride thru Dallas in a convertible.

  11. #41
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    Quote Originally Posted by DodgersFan28 View Post
    Great. No one ever claimed that it would. All I ever said was that monetizing the debt would lead to hyperinflation, and it will, albeit not instantaneously.



    Enlighten us then. Why can't we look at an endless increase in debt and say that it's not sustainable? Seems like it's one of those obvious things, like the sun rising & setting, the sky being blue, but you say it's not. Ok, explain to us why we can't do that.



    Unfortunately we're not getting out of the rut with all the spending. Any backup ideas in mind when spending doesn't lead to getting out of the rut, besides more spending?
    Sorry but that's how it works. GDP is based on spending. Spending from consumers, investors, and government. When one starts to lag the other(s) have to pick up the pace. You might not want to hear it since it goes against your ideology but that's how the economy works.

    And please stop taking what I'm saying to the extreme. I pointed out that there is a level of debt which is completely unsustainable. Obviously we can't borrow infinitely. But when an economy is down, incurring debt is to be expected. When the economy is up, the debt:gdp ratio should recede like it did under Clinton. And that doesn't just imply balancing the budget. It also stems from economic growth.
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  12. #42
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    Quote Originally Posted by behindmydesk View Post
    Again though, just because one side does it, doesn't make it ok for the other.

    Also Obama did the paygo press conference. But from what I remember (again remember so i might be wrong) not all the UI came from that. In fact, the GOP wanted it all to come from stimulus, and was murdered in the press for not voting for extensions when they weren't paid for.
    Right that was the second set of UI extensions. By that point in time the stimulus funds were starting to dip down to a point where we'd see serious cuts in ARRA projects and the CEA told the White House that it would be a bad idea to continue spending out of stimulus funds. Sticky situation to say the least.
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  13. #43
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    Quote Originally Posted by DodgersFan28 View Post
    ^ Did you read my last question? When the endless increase spending that leads to the increase in debt does not also lead to increase in GDP, what's your plan, besides spend more?

    Also, what good is a corresponding increase in GDP when the debt is never paid off?
    Implicit in your question is that debt is bad. Again from my position in business and finance, I know this not be true. Most successful businesses run with debt service. desertrat218 pointed out (and for the record, I did not believe it until I researched it) that the United States has never been without debt. Your question is based on assumptions, and to address it requires those assumptions first.
    Here is the question of the day, does anyone think that wealthy people should pay a lower percentage of their income to taxes than middle class people? Don't argue tax brackets, just a simple question. Do you think someone earning 46 million dollars should pay a lower percentage of their income than say someone earning sixty thousand?

  14. #44
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    Quote Originally Posted by DodgersFan28 View Post
    ^ Did you read my last question? When the endless increase spending that leads to the increase in debt does not also lead to increase in GDP, what's your plan, besides spend more?

    Also, what good is a corresponding increase in GDP when the debt is never paid off?
    Welcome to the age of global economies

    Everyone has debt. Even China who owns a solid chunk of our debt has debt of their own. But as long as GDP grows faster than the debt, there aren't any problems.

    The problems occur when something else happens -- like with Greece fudging their books. Or when central African countries actually do try to use seinorage to pay for things.

    Will we ever legitimately pay off our debt? No. I don't care who is in power, it'll never go away completely. The point is that it doesn't really need to. The important thing is to be in a situation where we are able to pay it off if we so choose (i.e. by keeping debt:gdp close to 60%). With solid growth it should take us about 3-4 years to get back to the 60s. With continued tepid growth it will be much longer.
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  15. #45
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    So since cab made up a straw man to respond to instead of the actual question I asked, and ari thinks of everyone else's debt in order to feel better about ours, I guess the answer to my question is that there is no backup plan for when the spending doesn't cause an increase in growth.

    Interesting seeing as the current spending only led to tepid growth for a small bit, and isn't leading to any sort of growth any longer. Hmm. Bringing me back to my original question to all of you - when the spending fails, what is the alternative besides more spending?
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