NickF1011 Posted October 26, 2009 Share Posted October 26, 2009 If up to me.....and since we don't seem to be able to meaningfully cut government spending....much of it mandated by law....I would raise US taxes until we ran a surplus....and then continue with that until we have no meaningful public debt. Figuring eventually just the low debt status of our country and the stimulative effect of higher regard by our allies would be good for our economy....whch would inrease tax revenue by itself. Man....that would sure raise a howl from the same folks protesting the borrowing. You increase taxes, you inevitably increase spending, wiping out any ability to address the debt. Plus it has been shown time and time again that increasing taxes usually leads to lower tax revenue, which would only increase the debt. It's not that we are not able to meaningfully cut government spending, it's just that nobody wants to. You want a real way to cut government spending and the debt? Place term limits on Congress. Then they'd stop being so damn concerned with getting the most money for their own constituents and getting re-elected and start being concerned with actually fixing something. Quote Link to comment Share on other sites More sharing options...
xr7g428 Posted October 26, 2009 Share Posted October 26, 2009 Paying off the debt is a complex task with many consequences. First off, what would be different in your life if the debt were paid off? Would you have more money? Doubtful. The difference between an undeveloped country and a developed country is the investments made in infrastructure. Infrastructure should be accomplished with debt. The new asset will pay for itself over time. It is like buying a cow; the milk will make the payments. Almost by definition, investments made by governments are the ones with very large pay offs, that take a long time to develop. The time horizon for a government should be in decades, the rest of us mortals think in shorter terms. For example, the Interstate Highway system could never be built by private means. First off, paying off the debt has to be clarified. If we were to set out to pay off the debt, what it would mean would be collecting money from the tax payers, and then giving the money to the current bond holders. Those bond holders would then be faced with finding a new place to invest the money. In and of itself this is not a problem. The unintended consequences might be a huge problem. What most people do not know is that the thing that made the banking crisis possible was that there was an incredible amount of money out there looking for a "safe" investment. There are two sides to every equation. In order to loan the money, the money had to be there to loan. The global pool of investment money took about 3000 years to grow to $35 trillion in 2000, in just 6 years, it had doubled to $70 trillion. What happened was that Russia, China, India, more than half of the worlds population, decided to try out the free market system, and it worked. All of that money was looking for a home and the US housing market looked to be the safe place. If the US government were to start buying back debt, the same thing would happen in a different place. The first indication that the debt is too big will be when US treasuries start to be sold at big discounts (effectively a rise in the rate of interest). Currently, deflation is holding those rates very very low. Quote Link to comment Share on other sites More sharing options...
Ralph Greene Posted October 26, 2009 Share Posted October 26, 2009 I would be more comfortable with the debt level VS GDP we had a few years ago. Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted October 26, 2009 Share Posted October 26, 2009 The difference between an undeveloped country and a developed country is the investments made in infrastructure. Infrastructure should be accomplished with debt. So if I need to fix my kitchen sink, I should put it on a high-interest credit card instead of using the cash I have in my wallet? Would it not be better in the long run to use the billions saved in not paying debt interest for those infrastructure improvements instead? We don't need to stop building infrastructure to pay down the national debt. We need to stop wasteful spending, which exists in the hundreds of billions of dollars. Quote Link to comment Share on other sites More sharing options...
Edstock Posted October 26, 2009 Share Posted October 26, 2009 The more severe the impact is on the US, the higher the probability of a Global Conflict. That's your opinion. Who would be fighting whom? Please supply details on this hypothetical world war. Quote Link to comment Share on other sites More sharing options...
xr7g428 Posted October 26, 2009 Share Posted October 26, 2009 So if I need to fix my kitchen sink, I should put it on a high-interest credit card instead of using the cash I have in my wallet? Not your kitchen sink, is not an investment. Now if it were a sink in a new restaurant, that was likely to make a return on the investment that was larger than the cost of the interest, then yes, it would be a good idea. (In practice, innumerable new business are started on credit card debt. I think the risk is too high, but that is my opinion.) Would it not be better in the long run to use the billions saved in not paying debt interest for those infrastructure improvements instead? If the benefits exceed the cost, then waiting until you don't have debt is just a different form of spending; you are spending the value of the benefits that you did not receive while you were saving. We don't need to stop building infrastructure to pay down the national debt. We need to stop wasteful spending, which exists in the hundreds of billions of dollars. Actually, we would be better off to stop the wasteful spending, and to spend the money on things that produced a return on investment. The second best option is to just stop the wasteful spending. Keep in mind that inflation works for debtors, not investors. It is most beneficial to the party that spends first (buys at the lowest cost), and pays the latest (with the most depleted dollars). The government is in the exact right position to do exactly that. It is easy to look at personal finance and to project the same values on business and government. Where I do not like debt at all in personal finance, the use of debt as a tool in business is an entirely different thing. Even in business, the minute I see that an asset is not producing a return, it needs to be debt free first, and then sold if it can not be utilized in some different way to create a return. For example, rental property that is empty will bleed you to death, unless it is paid for. Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted October 27, 2009 Share Posted October 27, 2009 Not your kitchen sink, is not an investment. Now if it were a sink in a new restaurant, that was likely to make a return on the investment that was larger than the cost of the interest, then yes, it would be a good idea. (In practice, innumerable new business are started on credit card debt. I think the risk is too high, but that is my opinion.) Those businesses use credit for such things because most of them don't have a choice. If the benefits exceed the cost, then waiting until you don't have debt is just a different form of spending; you are spending the value of the benefits that you did not receive while you were saving. The benefits do not exceed the cost though. Besides, there is no cost to simply eliminating wasteful spending. Once it's gone, it's gone. Actually, we would be better off to stop the wasteful spending, and to spend the money on things that produced a return on investment. The second best option is to just stop the wasteful spending. If the return on your investment is at best break-even (come on, this is the federal government we're talking about here) then there's no point spending the money on it unless it is absolutely necessary. The size and spending of the federal government needs to contract, or it is going to collapse under its own weight. Quote Link to comment Share on other sites More sharing options...
xr7g428 Posted October 27, 2009 Share Posted October 27, 2009 I think you missed this: Actually, we would be better off to stop the wasteful spending, and to spend the money on things that produced a return on investment. The second best option is to just stop the wasteful spending. The qualifier is return on investment. I think that you would be hard pressed to prove that the interstate highway system has not had a huge return on investment. There are many government programs that do work. The sad fact is that the reason they can spend so much money on stuff that doesn't work is because the programs that do work are so successful. I am not advocating wasteful unproductive spending, just trying to point out the difference between the US and Mexico is that we had effective government, where they did not. Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted October 27, 2009 Share Posted October 27, 2009 I think you missed this: The qualifier is return on investment. I think that you would be hard pressed to prove that the interstate highway system has not had a huge return on investment. There are many government programs that do work. The sad fact is that the reason they can spend so much money on stuff that doesn't work is because the programs that do work are so successful. I am not advocating wasteful unproductive spending, just trying to point out the difference between the US and Mexico is that we had effective government, where they did not. I didn't miss it at all. You make it sound like the wasteful spending should be replaced by spending that brings a return on investment. I don't think that should be the case. The wasteful spending should simply be eliminated thereby shrinking the size of the government. Those plans that are already returning good investments can remain in place or should in many cases be looked at to be sent back to the private sector where they would probably be even more effective at returning a profit. Quote Link to comment Share on other sites More sharing options...
xr7g428 Posted October 27, 2009 Share Posted October 27, 2009 Spending does not mean the same as investing. I think that there has to be a distinction between the two. Spending is when the government hires half the people to dig holes, and half the people to fill the holes up, they can say they created a bunch of jobs through government spending. Investing is where the government builds a dam and provides low cost power to and entire region. Not all investments are equal. There are things that government can do, that can't be effectively done by individuals. For example, when the government builds a bridge, it can save people countless hours, large amounts of fuel, even save lives. Then it pays off in more tax revenue from the improvements in business efficiency and productivity. Right now, the air traffic control system has lots of room for improvement. It is a perfect case for effective government investment. Private investments are better at creating jobs, and goods and services. It seems to work best when the government does the things that it can do best, and stays clear of the things it can't do well. For example, imagine what Disney World would be like if it were run by the DMV. Or if software was designed by the people who create tax forms. What is needed is a balance of both types of investment. Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted October 27, 2009 Share Posted October 27, 2009 Spending does not mean the same as investing. I think that there has to be a distinction between the two. Spending is when the government hires half the people to dig holes, and half the people to fill the holes up, they can say they created a bunch of jobs through government spending. Investing is where the government builds a dam and provides low cost power to and entire region. Not all investments are equal. There are things that government can do, that can't be effectively done by individuals. For example, when the government builds a bridge, it can save people countless hours, large amounts of fuel, even save lives. Then it pays off in more tax revenue from the improvements in business efficiency and productivity. Right now, the air traffic control system has lots of room for improvement. It is a perfect case for effective government investment. Private investments are better at creating jobs, and goods and services. It seems to work best when the government does the things that it can do best, and stays clear of the things it can't do well. For example, imagine what Disney World would be like if it were run by the DMV. Or if software was designed by the people who create tax forms. What is needed is a balance of both types of investment. Well I think we're finally in agreement then. :yup: Quote Link to comment Share on other sites More sharing options...
Edstock Posted October 28, 2009 Share Posted October 28, 2009 Quote Link to comment Share on other sites More sharing options...
Trimdingman Posted October 28, 2009 Share Posted October 28, 2009 That's your opinion. Who would be fighting whom? Please supply details on this hypothetical world war. I have been following Gerald Celente and Peter Schiff, two respected forecasters, among others. The US owes more money than all the money in the world. Look what happened to the Soviet Union. The US is in the same boat now. If the dollar collapses, all hell will break loose. What if the power grid goes down, the internet? People will start looting for food. There will be no gasoline for cars. It will be dog eat dog in the cities. Before any of this is allowed to happen, we will be at war. Lebanon lobbed a missile into Northern Israel to-day. Pakistan is on the brink. World War II solved the last Great Depression. This Depression is predicted to make the Great Depression look like a Sunday school picnic. I don't think that it will be allowed to happen. Quote Link to comment Share on other sites More sharing options...
retro-man Posted October 28, 2009 Share Posted October 28, 2009 Well I think we're finally in agreement then. :yup: Me three. That's all I want sometimes on here: a return to what (to me) was a balanced world view, where you had "the public sector" and "the private sector" each doing what they do best - rather than the extremism that I see so often. Quote Link to comment Share on other sites More sharing options...
Edstock Posted October 28, 2009 Share Posted October 28, 2009 I have been following Gerald Celente and Peter Schiff, two respected forecasters, among others. That's nice. At least you are reading. The US owes more money than all the money in the world. And your point is? Look what happened to the Soviet Union. The US is in the same boat now. No. The US is not in the same boat now. The historical backgrounds are different, and the current economic structures are different, and demographics are different. If the dollar collapses, all hell will break loose. Collapses? That would mean that its value would decline precipitously against other currencies. So imports get really really expensive. Tough if you own a VW dealership, and Japanese electronics will get really expensive, but the price of Kraft Dinner probably won't be affected very much. What if the power grid goes down, the internet? People will start looting for food. There will be no gasoline for cars. It will be dog eat dog in the cities. Tighten your tin-foil hat. Why would the power grid go down? What about the internet? Before any of this is allowed to happen, we will be at war. Why? With whom? Liechtenstein? Switzerland? Namibia? France? Iran? Lebanon lobbed a missile into Northern Israel to-day. No, Arab terrorists, not the Lebanese government lobbed a missile from Lebanon into Northern Israel. Ho-hum, same-old, same-old. Pakistan is on the brink. Of what? This Depression is predicted to make the Great Depression look like a Sunday school picnic. By whom? Some idiot who predicted a 30,000 DOW? Please supply tin-foil specifics. Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted October 28, 2009 Share Posted October 28, 2009 This Depression is predicted to make the Great Depression look like a Sunday school picnic. You mean the "depression" that is likely to be over within the next 6 months? Yes, that's right. GDP is expected to grow again in another quarter or two. :shrug: Quote Link to comment Share on other sites More sharing options...
Edstock Posted October 28, 2009 Share Posted October 28, 2009 This Depression is predicted to make the Great Depression look like a Sunday school picnic. Check out this account of what the "real" Depression looked like: http://www.thebigmoney.com/articles/histor...-panic-stricken "The Town Is Panic-Stricken" A chilling excerpt from The Great Depression: A Diary. By TBM Staff Posted Monday, October 26, 2009 - 2:42pm 80 years ago this week, the United States experienced the worst meltdown of the stock market in the nation's history. As the effects of the crash rippled through the broader economy, banks began shutting their doors in record numbers. Benjamin Roth, a lawyer in Youngstown, Ohio, recorded the effects as the banks closed in his town. His diary, previously excerpted on The Big Money, is now available as a book—The Great Depression: A Diary. A great read. Quote Link to comment Share on other sites More sharing options...
Trimdingman Posted October 28, 2009 Share Posted October 28, 2009 You mean the "depression" that is likely to be over within the next 6 months? Yes, that's right. GDP is expected to grow again in another quarter or two. :shrug: Who are you listening to, the same ones who said that everything was okay just before last year's crash? Check out to-day's markets. New home sales down 3.6% when it was "predicted" that they would go up. If the dollar collapses, and there is anarchy on the street, people will not go to work, for one because their wages will be worthless, and number two, they will fear for their families' safety. The electrical grid is fragile. Look at how easily it went down a few years ago. There was a blackout that lasted for days. Imagine if it lasted for a month. Cities are made up of millions of people. Getting food and water and other necessities to them is no small undertaking. Imagine trying to run an assembly line with over half of the workforce absent. We depend on this chain. No individual person can survive in the city without it. Armed gangs would rule. We are not that different from the USSR when it comes to financials. We are running on debt. Over half of the population is non-productive and depends on the other half. The productive half is quickly also becoming non-productive, as they have less and less to sell. At some point, there will be a monumental collapse. It will come suddenly, not gradually. This is because we are deluding ourselves and creating bubbles. Bubbles pop. The top minds running the country are not ignorant of all this. They just want the people to be. Our only chance is war. Young people will be drafted to fight. I would rather be one of them than die of hunger or see my family murdered by gangs. Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted October 28, 2009 Share Posted October 28, 2009 Who are you listening to, the same ones who said that everything was okay just before last year's crash? Check out to-day's markets. New home sales down 3.6% when it was "predicted" that they would go up. Oh no! A day of down market performance! Run away! Run away! Long term future indicators (not past performance indicators like home sales) are indicating a recovery already. Things like home sales, employment, etc will all lag behind a recovery in GDP, just as they all lagged the GDP in going down. Quote Link to comment Share on other sites More sharing options...
Edstock Posted October 28, 2009 Share Posted October 28, 2009 If the dollar collapses, and there is anarchy on the street, people will not go to work, for one because their wages will be worthless, You just don't give up. The dollar can only "collapse" relative to the value of other currencies. CAPICE? So, if you are not importing anything, the "collapse" is meaningless. Food does not have to be imported. The electrical grid is fragile. Look at how easily it went down a few years ago. There was a blackout that lasted for days. Imagine if it lasted for a month. And why would it be down for a month? "Look how easily it went down a few years ago" — look how easily it got back on-line. We are not that different from the USSR when it comes to financials. No, we are that different from Russia (the USSR, you may recall, no longer exists) when it comes to financials. As I posted above, the economies are different, the demographics are different, and the futures are different. Hint: compare life-spans. Our only chance is war. Again, I ask: Why? With whom? Liechtenstein? Switzerland? Namibia? France? Iran? Please refrain from tin-foil hat extremism and give us a concise, reasoned statement on just who the US will be going to war with. Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted October 28, 2009 Share Posted October 28, 2009 Again, I ask: Why? With whom? Liechtenstein? Switzerland? Namibia? France? Iran? Please refrain from tin-foil hat extremism and give us a concise, reasoned statement on just who the US will be going to war with. I've got my eye on Trinidad & Tobago. :glare: Quote Link to comment Share on other sites More sharing options...
sprinter Posted October 28, 2009 Author Share Posted October 28, 2009 You mean the "depression" that is likely to be over within the next 6 months? Yes, that's right. GDP is expected to grow again in another quarter or two. :shrug: That is a pretty big word for someone that runs around in their underwear Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted October 28, 2009 Share Posted October 28, 2009 That is a pretty big word for someone that runs around in their underwear Well, sorry, I left my Carnac the Magnificent turban at home, so I couldn't say that I guarantee it will improve. Quote Link to comment Share on other sites More sharing options...
fmccap Posted October 28, 2009 Share Posted October 28, 2009 You mean the "depression" that is likely to be over within the next 6 months? Yes, that's right. GDP is expected to grow again in another quarter or two. :shrug: Then what's with all the bad economic data today? Quote Link to comment Share on other sites More sharing options...
fmccap Posted October 28, 2009 Share Posted October 28, 2009 Long term future indicators (not past performance indicators like home sales) are indicating a recovery already. Would you care to share what these are? Quote Link to comment Share on other sites More sharing options...
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