National Debt/Deficit Spending question

[Iscariott]

So, I've been wondering pretty much since the bailout of fannie/freddie, exactly when does a state spend its self into oblivion? And how does that fall occur?

9 trillion isnt enough, so what is?

[Erik]

Easy: whenever the money lenders think the state can no longer pay them back.

In that regard the government is no different from private companies.

[Iscariott]

Easy: whenever the money lenders think the state can no longer pay them back.

Thats actually the answer i was hoping for

[Erik]

Thats actually the answer i was hoping for

I though you might be disappointed, because I don't know at which levels of debt exactly this happens, probably nobody knows that.

[Mithie]

This "debt" problem is usually blown way out of proportion.

It doesn't matter how many checks you write out, as long as people don't actually cash them.

[Panzerbear]

This "debt" problem is usually blown way out of proportion.

It doesn't matter how many checks you write out, as long as people don't actually cash them.

actually they do cash these checks.

since it is a debt argument, we are talking about loans here. and these are regular installment loans, for which you both pay premiums and interests. US just got yourself into a position where it cant even afford to pay for the interest. US govt borrows money in order to pay even for interest portion.

the only way US govt can fix this situation is to agressively curb military spending and balance its budget for starters. and then begin paying off their principal portion of debts. this technically is very hard to do without additional taxing of US taxpayers. a dead-end issue for any politician who is running for US govt office .

so, in the long term, US is already screwed and will sooner or later call default on its debt obligations (and suffer INSANE economic collapse, which will effectively end its position as a superpower). however, US govt is very far from being stupid, so they will prolong this as long as possible .

[Erik]

This "debt" problem is usually blown way out of proportion.

It doesn't matter how many checks you write out, as long as people don't actually cash them.

The US doesn't write checks, it issues treasuries.

Those treasuries always come with date attached, by which they must be payed back.
This can be anything up to 30 years from the moment they are issued.

Because of this, the national debt has to get refinanced constantly by issuing new treasuries.
If, for some reason, not enough people wants to buy new treasuries then the system will collapse.

[Ramashan]

so, in the long term, US is already screwed and will sooner or later call default on its debt obligations

Yeah, but you know, we don't have to worry about that today right? That's someone else problem.

And we wonder why the US has most of its citizens in some sort of debt and the mortgage crisis occurred. As I heard one reporter say, 'Just look at the role model the American citizen has for fiscal management.'

[Panzerbear]

Yeah, but you know, we don't have to worry about that today right? That's someone else problem.

well, you are assuming that this day "X" will come not within your lifetime .

the big question is whether or not this is necesserily true. I have a theory that US empire will be collapsing very methodically and without a big bang. one day they might decide that it is no longer feasible to keep troops in Europe. then in Asia. then everywhere else for that matter. then US military spending will become a fraction of what it is today. then all the sudden one day we will wake up to realize that US is just another Canada .

[Iscariott]

well, you are assuming that this day "X" will come not within your lifetime .

You might say i'm praying for it. If i were religious anyway.

[Ramashan]

then everywhere else for that matter. then US military spending will become a fraction of what it is today. then all the sudden one day we will wake up to realize that US is just another Canada

Fo most of its History, the US was a very isolationist nation, and some feel that's what we should return to. However, although I think we don't need to have our soldiers all over the world, the real Empire the US has is economic. And is the US fails economically, there will be some reprocussions felt globally.

The key thing is, so long as we are indebted to other nations those nations have an income regardless of their economy. Once those debts are cleared, the money much come from industry. On the other hand. When people blame the US military for sucking up all the tax dollars, this is partly true. But the reality is, most of the tax dollars goes to interest and prime on the loans to pay for the military spending.

It like we're sacrificing the internal workings of the nation for security and projected power. That is necessary I suppose, but there needs to be a balance.

[Sphere]

The best measure of national debt to show it as % of GDP. By this measure, national debt isn't all that different from when GHWB left office.

[Panzerbear]

The best measure of national debt to show it as % of GDP. By this measure, national debt isn't all that different from when GHWB left office.

great. so it looks like we are approaching WW2 time level of debt fast?
is it just me, or does everybody else see it being so wrong on so many levels?

PS: do they have the same chart for foreign debt?

[Sphere]

PS: do they have the same chart for foreign debt?

Not sure, and it depends on what you mean by "foreign" debt. This graph probably doesn't include trade deficits.

[Iscariott]

It like we're sacrificing the internal workings of the nation for security and projected power. That is necessary I suppose, but there needs to be a balance.

How is it a necessity? We own a huge and fertile chunk of a frickin continent. We are not bordered by any major military power. Note the derision of venezuala's "we gots 2 bombers from russia sittin here. whatcha gonna do?" from last week.

We do not need a standing army the size of what we have. Well, right now we need more troops thanks to the whole 2 war thing. But that never would have happened if our CiC didn't have access to such a huge army during peace time.

Hell thats part of why you dont keep massive high tech armies around at all times, they tend to get used more freely than necessary. The need to enact a draft, with the effects it has on the citizenry, serve as a counterpoint to hawkishness. And there's no saying "we couldnt have stuck back at the taliban after 9/11", returning to a peacetime military during peace doesnt mean no military.

[JP226]

So, I've been wondering pretty much since the bailout of fannie/freddie, exactly when does a state spend its self into oblivion? And how does that fall occur?

9 trillion isnt enough, so what is?

The rough numbers are somewhere around 200% of GDP. Then you hit this debt threshold. But even then that's a rough guess because take a country like Lebanon that borrows a couple billion and blows it every monday because it's monday, it's hard to say. Hell the UK owes over 10 trillion externally and they still ahven't spent themselves into oblivion. That's I think 500% of their GDP? The realy answer is when others get tired of giving you money and that "tiredness" isn't any rational number that can be logically found.

[Viking Prince]

So the solution is to grow the economy. Then the percentage drops. Or resolve the reasons for needing a larger defense budget. Just changing spending does not change the need for the spending. Timing is everything, ask Robert McNamara.

btw -- highlighting the presidents is meaningless. A bit more to the variables and lags to get correlation. You make it look like a sophmore exercise in high school.

[Ramashan]

How is it a necessity?...And there's no saying "we couldnt have stuck back at the taliban after 9/11", returning to a peacetime military during peace doesnt mean no military.

Sorry if I was misleading, I just meant that some form of military is necessary in my view. And from what I've read, the military that was designed during the Clinton years and used in Afghanistan was going in the right direction. Small, mobile, high tech, and job oriented. We don't need a large army and the Iraq thing, in my opinion was a mistake and took our military and threw it onto the shoals.

As for the chart.

So the solution is to grow the economy. Then the percentage drops

Its a bit misleading. As our economy grew by unprecedented numbers between 200 and 2003


as did better the military spending kept pace with it. Which means, it got more money. It has only a little to do with inflation. Looks like GW just brought the debt back up to his fathers levels.

[Viking Prince]

Sorry if I was misleading, I just meant that some form of military is necessary in my view. And from what I've read, the military that was designed during the Clinton years and used in Afghanistan was going in the right direction. Small, mobile, high tech, and job oriented. We don't need a large army and the Iraq thing, in my opinion was a mistake and took our military and threw it onto the shoals.

As for the chart.


Its a bit misleading. As our economy grew by unprecedented numbers between 200 and 2003


as did better the military spending kept pace with it. Which means, it got more money. It has only a little to do with inflation. Looks like GW just brought the debt back up to his fathers levels.

I did not say inflation, I said grow the economy. I meant real growth. Private sector growth. Percentage then declines. Not complicated, though your observation on Bush and by extension 9/11 is valid. Government tends to spend each and every increase in revenue with no consideration for closing the gap between spending and income.

[Ramashan]

I did not say inflation, I said grow the economy. I meant real growth.

I got that, and that's what I'm talking about as well, I just mentioned inflation because some of the GPD growth over 50 years has to come from inflation. But the US debt far out does the rate of inflation. So yes, as we make more money the government spends more. So, in a way, economic growth seems to egg the US gov on to spend more instead on maintaining spending.