National Debt reaches $8,000,000,000,000 (8 trillion dollars) [Archive]

Arnfinn Madsen

10-25-2005, 12:24 PM

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So you owe me $27k. After your Rosa Park comments I feel pleasure in that fact.

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This statement makes no sense, unless Mr. Madsen is the owner of a lot of Treasury securities.

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Silly post by me, but based on his logic, my personal share of the norwegian state fortune exceeds $27k. However, I checked the facts for fun and most of the money is lent to other countries so my share of the US treasury is only appx. $10k, but I have 4 brothers, so if I include them he owns it to my family /images/graemlins/tongue.gif.

zipo

10-25-2005, 01:20 PM

Best of luck trying to collect.

Arnfinn Madsen

10-25-2005, 01:24 PM

You seriously think the US government will not manage to pay?

10-25-2005, 01:33 PM

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You seriously think the US government will not manage to pay?

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Hey, that's what we do best! Pay and pay and pay and pay and pay and pay.......

Arnfinn Madsen

10-25-2005, 01:36 PM

Yes, I asked because I got curious. What are the future projections for debt in terms of % of GDP? Such projections are of course very insecure, but is there any consensus regarding this?

FishHooks

10-25-2005, 02:06 PM

Are debt should/probably will keep growing as the economy grows. As our economy grows we will import more, and since exports and exogenous they wont rise as quickly and having a huge trade deficit will be normal now which will create a debt . I really hope we can find a way to somehow balance a budget, but actually paying off the debt in the future, there is probably slim to none chance.

clambunny

10-25-2005, 08:16 PM

the world bank last year said the single greatest threat to economic security in the world was US's national debt. anyone want to explain what it is to me? i gather it is our exports minus our imports, but when we import something like if i just bought a kimono from japan online wouldn't i immeadiately have to pay for that product, just like all things we import? so how could a debt accumulate?

[censored]

10-25-2005, 08:23 PM

clambunny

I believe it is financed by the importing companies then buying large amounts of the US's issued debt. It is in this way they are financing a trade deficit. Hopefully someone with more specifics will chime in with details.

BCPVP

10-25-2005, 08:24 PM

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i gather it is our exports minus our imports

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That's the trade deficit, not the national debt.

The national debt, I believe, is the total accumulated borrowing that Congress does to meet its shortfalls.

lehighguy

10-25-2005, 08:54 PM

Well with GDP growing at 3% and the budget deficiet well over 5% of GDP, and the joke of a retirement system we have....

We're pretty [censored].

BadBoyBenny

10-25-2005, 09:08 PM

Meh

It'll probably fix itself in the long run. No one is going to let the US economy collapse.

FishHooks

10-25-2005, 09:15 PM

Bingo, its a global economy now, unless our debt becomes extremly high nothing to worry about.

Il_Mostro

10-26-2005, 02:39 AM

At least that is what you people are desperately hoping for.

Darryl_P

10-26-2005, 04:05 AM

Some info about the national debt (http://www.brillig.com/debt_clock/faq.html)

Exports minus imports is just the trade surplus (or deficit if it's negative). This is a figure that applies to a given year only and is part of the calculation of GDP. It is important because of its volatility and impact on currency rates which, in turn, affect the economy.

The national debt, on the other hand, is an accumulated figure that's been accumulating for over 200 years. It is basically the accumulated budget deficit, ie. the amount that the government spent in excess of what it collected in revenues.

The largest chunk of that debt is owed to the Federal Reserve (the Fed), which is a privately owned corporation -- a fact very much downplayed by the government and media. One source of info. about the Fed is here (http://www.federal-reserve.net/whatisthefederalreservebank.htm) , which some will say is negatively biased but which I personally think is accurate.

SinCityGuy

10-26-2005, 05:48 AM

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Bingo, its a global economy now, unless our debt becomes extremly high nothing to worry about.

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That's not true, and that cavalier attitude has been persistent during the "tax cut and spend" years of Reagan, George H. W. Bush and George W. Bush.

Part of the annual budget is a mandatory payment of the interest on the national debt. Obviously, the higher the national debt, the higher the mandatory payment on the interest, which diverts money from infrastructure, national defense, education, and a host of other necessities.

frizzfreeling

10-26-2005, 06:15 AM

At least that is what you people are desperately hoping for.

My thought exactly. Its amazing what people think will just go away or solve itself. For some reason, most people get the idea that the U.S. system is invulnerable to catastrophic failure because...well, because it hasnt happened yet or because the doomsdayers have always been wrong before, etc.

Then you have those who will pull 1945 out like a shining sword and say "look, government debt was much higher then and everything went fine afterwards". In so many ways, this economy is much different and on much more fragile footing than in 1945. Not just the government, but the average citizen is up to their necks in debt now and saving virtually nothing. Its a snowball effect just waiting for the wrong conditions to happen.

There are others who think that the debt is just fine, because interest rates paid on it are low. Some even think that the Fed sets these rates, which is wrong. The interest rate on our federal debt is governed by ALL THE MAJOR PURCHASERS of that debt (including those who do it through government institutions ie grandma and grandpa's savings). If there arent enough people to buy all the bonds, the rate must go up to entice them (this is done through discounting the face value of the bond at sale time). Its an auction. Currently, we are lucky enough that many folks think that our bonds are a good buy. If they change their minds in any drastic fashion, we're screwed. We completely depend on the perception of value investors have in our bonds for them to be sellable at all.

Very shaky ground, at the least.

DVaut1

10-26-2005, 06:25 AM

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At least that is what you people are desperately hoping for.

My thought exactly. Its amazing what people think will just go away or solve itself. For some reason, most people get the idea that the U.S. system is invulnerable to catastrophic failure because...well, because it hasnt happened yet or because the doomsdayers have always been wrong before, etc.

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Good post. I think this is an excellent explanation why some here, as well as some in government, need to become better acquainted with Gambler's Ruin/RoR.

I'm more than willing to accept that the national debt and budget shortfalls might not be disasterous; but I won't accept "ain't never happened before" as a cogent argument to turn a blind eye to such problems.

FishHooks

10-26-2005, 11:29 AM

The reason why trade deficit is important is that our trade deficit will grow as our GDP grows, so as we get bigger it will help us create a national debt.

FishHooks

10-26-2005, 11:35 AM

The interest on the national debt is very small, its basically just slightly over inflation. Most of the people in this forum dont know much about economics, just like I can't spell, but I dont claim to be a spelling champion. No one has given any reason why the U.S. economy would collaspe. It wont collaspe because eveyone depends on us because we import and export so much to the entire world. Also we owe everyone money, why would anyone want to screw over a country that owes them money. Would you kill some guy who ows you 1 million dollars because your mad he wont pay, or would you wait it out and hope that he ends up paying you. I would say the budget deficit would have to become 10%+ of our GDP before something might happen. If it becomes that big the value of the dollar could fall and we would probably experience a multiplier effect.

Arnfinn Madsen

10-26-2005, 11:49 AM

Well, you aren't a economics champion either.

I am not claiming a US collapse, but assuming that nobody wants to screw you over since you owe they money shows no understanding of how it works. It is explained earlier in thread, the US debt is refinanced continiously by issuing new bonds and using the money to pay interest and pay bonds that expire. If fear of lack of US payment would arise, it would lead to a risk premium on new issued bonds (already issued ones are set) meaning that interest rates would increase sharply, meaning that GDP would decline, meaning that investors would demand a even higher risk premium etc. etc. A vicious cycle. This also shows that your interest as part of GDP-argument is irrelevant as bonds with current interest rates would expire and be replaced by higher interest ones.

vulturesrow

10-26-2005, 11:52 AM

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The reason why trade deficit is important is that our trade deficit will grow as our GDP grows, so as we get bigger it will help us create a national debt.

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The trade deficit matters little, except to people that look on international trade as some sort of macho man competition or those that hanker back to the days of mercantilism.

10-26-2005, 12:14 PM

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why would anyone want to screw over a country that owes them money.

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Yeah, that never happens. Just ask the Mexicans. Or the Argentinians.

FishHooks

10-26-2005, 01:22 PM

our trade deficit is about 600 billion dollars,I dont think it is a big deal , but if our economy keeps growing it will probably become a bigger percentage of our GDP.

FishHooks

10-26-2005, 01:26 PM

Investors know that bonds backed by the U.S. government are basically 100% risk free which is why they offer such low interest, so your argument about people not going to buy bonds is pretty irrelevent.

The example of iterest rates you described basically happend in the late 1970's, where they hit 14%, it only took us a couple years to recover. It can also be argued that the market is even more efficient today with new technology and wouldn't even take that long to respond

FishHooks

10-26-2005, 01:28 PM

their economies are nothing comapred to the U.S. bad example. China the next biggest economy is only about 1/12 of our economy.

Arnfinn Madsen

10-26-2005, 01:34 PM

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Investors know that bonds backed by the U.S. government are basically 100% risk free which is why they offer such low interest, so your argument about people not going to buy bonds is pretty irrelevent.

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Typically, the investors which choose government bonds are those who are the most risk-averse, does not take much of risk to remove their demand. It is only a change in perception of risk which is needed, not an actual change in risk. Such a change in the perception of risk may happen, the US is in no way immune to that (it has happened in other countries with large populations as well(you will probably counter that those were poor countries but then again you forget that their is no certainty that US will not be viewed as a poor country in future)).

theBruiser500

10-26-2005, 01:40 PM

Interesting thread guys. I've heard China is buying up a lot of US debt. If this debt is bought in the form of bonds, does that mean that US will have to pay these bonds (China) on an already set schedule, when the bonds appreciate. Or does China wield some sort of power over the US and can demand payment on the bond when they want?

Arnfinn Madsen

10-26-2005, 01:47 PM

Yes, all schedules are set and the bonds (representing claims for these schedules) are then traded between investors (however, for practical and balancing reasons the government also trades in this market).

China's only real way of cashing in earlier, is to sell the bonds at the market. This market is liquid, and China should be able to sell all the bonds if wanted, but it would probably send interest rates higher (but not crisis-like higher).

See link for nationality of foreign holders:

Foreign holders of debt (http://www.ustreas.gov/tic/mfh.txt)

vulturesrow

10-26-2005, 02:07 PM

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our trade deficit is about 600 billion dollars,I dont think it is a big deal , but if our economy keeps growing it will probably become a bigger percentage of our GDP.

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Irrelevant. Trade deficits are a non-issue for the most part.

10-26-2005, 02:26 PM

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...Just ask the Mexicans. Or the Argentinians.

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Are you saying people welched on debts the Mexico and Argentina? All this time I thought they were the ones that did welching. Did I miss another memo?

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FishHooks

10-26-2005, 03:11 PM

No because it has to do with this global economy, which is why we wont get screwed over by other nations.

vulturesrow

10-26-2005, 03:26 PM

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No because it has to do with this global economy, which is why we wont get screwed over by other nations.

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What are you talking about? The trade deficit is not a particularly worrisome thing, in fact is a sign of economic strength. What exactly is your point?

bobman0330

10-26-2005, 03:32 PM

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Investors know that bonds backed by the U.S. government are basically 100% risk free which is why they offer such low interest, so your argument about people not going to buy bonds is pretty irrelevent.

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Typically, the investors which choose government bonds are those who are the most risk-averse, does not take much of risk to remove their demand. It is only a change in perception of risk which is needed, not an actual change in risk. Such a change in the perception of risk may happen, the US is in no way immune to that (it has happened in other countries with large populations as well(you will probably counter that those were poor countries but then again you forget that their is no certainty that US will not be viewed as a poor country in future)).

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There is a fundamental dissimilarity between the US national debt and the debt of coutntries like Argentina. To wit, US bonds are denominated in US dollars. Argentinian bonds are denominated in... US dollars. Or Euros, or something other than the Argentinian peso (?). There is literally no risk that the government will fail to pay every debt obligation it owes at face value. It can simply print the money it needs to do so. That would be an economic catastrophe, but there's always an out.

Arnfinn Madsen

10-26-2005, 03:43 PM

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Investors know that bonds backed by the U.S. government are basically 100% risk free which is why they offer such low interest, so your argument about people not going to buy bonds is pretty irrelevent.

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Typically, the investors which choose government bonds are those who are the most risk-averse, does not take much of risk to remove their demand. It is only a change in perception of risk which is needed, not an actual change in risk. Such a change in the perception of risk may happen, the US is in no way immune to that (it has happened in other countries with large populations as well(you will probably counter that those were poor countries but then again you forget that their is no certainty that US will not be viewed as a poor country in future)).

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There is a fundamental dissimilarity between the US national debt and the debt of coutntries like Argentina. To wit, US bonds are denominated in US dollars. Argentinian bonds are denominated in... US dollars. Or Euros, or something other than the Argentinian peso (?). There is literally no risk that the government will fail to pay every debt obligation it owes at face value. It can simply print the money it needs to do so. That would be an economic catastrophe, but there's always an out.

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Yes, it is so. To be able to print dollars without destroying the economy there needs to be some economical basis for the money put into circulation (I know you know this). I visited Belarus some times and generally old people & government workers were happier there than in Russia since the government kept printing money to pay them whereas in Russia payment was often delayed due to insufficient funding. It led to terrible inflation though and anyone trying to exchange Belarussian rubles into foreign currencies could be imprisoned since a collapse in the official exchange rate would lead to Belarus being unable to pay for necessary imports. On the black market you could get 3 times more rubles for your dollar than you could in any bank.

FishHooks

10-26-2005, 03:44 PM

You just aren't very smart, having a trade deficit, as I said before if you can remember, was no big deal. It promotes a global economy, we buy so much crap from countries such a china, that they have no incentive to screw us over in terms of trying to promote higher intrest rates with regards to the national debt, which if you can remember the nation debt is what this thread is about.

vulturesrow

10-26-2005, 04:27 PM

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You just aren't very smart,

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This is coming from the guy who if I didnt know he was in college, would assume he is functionally illiterate based complete lack of ability to use the English language. Listen kid, taking a freshmen economics course doesnt make you the second coming of Alan Greenspan.

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having a trade deficit, as I said before if you can remember, was no big deal.

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Yes you did and then confused the issue with your incoherent reply to me.

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It promotes a global economy, we buy so much crap from countries such a china, that they have no incentive to screw us over in terms of trying to promote higher intrest rates with regards to the national debt, which if you can remember the nation debt is what this thread is about.

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Why the hell are you telling me this, I didnt comment on this issue at all.

FishHooks

10-26-2005, 05:21 PM

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This is coming from the guy who if I didnt know he was in college.

[/ QUOTE ] One of the questions you never answered was what college you went too...so what college did you go to?

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having a trade deficit, as I said before if you can remember, was no big deal.

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Yes you did and then confused the issue with your incoherent reply to me.

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Are you sure your comprehension skills aren't just very medicore?

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It promotes a global economy, we buy so much crap from countries such a china, that they have no incentive to screw us over in terms of trying to promote higher intrest rates with regards to the national debt, which if you can remember the nation debt is what this thread is about.

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Why the hell are you telling me this, I didnt comment on this issue at all.

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Thats what the thread is about, the national debt, your basically saying the only reason why you commented in this thread was to dissagree with me, which is fine, I wouldn't expect nothing more from you.

Arnfinn Madsen

10-26-2005, 05:35 PM

Much of this is becoming nitting, FishHooks; but your fundamental basis in understanding this is wrong. Of course Japan, China etc. does not want the US to go broke, however Japan or China will not abstain from selling its bonds in order to keep the interest rate low. If i.e. a severe recession happened in the US and Asia at the same time they would sell the bonds and spend the money at home. The bonds are not bought and owned as a form of charity.

The US economy is healthy and one of the best in the world, however it is not automatic or bullet proof.

BadBoyBenny

10-26-2005, 06:04 PM

Who said "it never happened before" was anyone's arguement? My arguement was that the global economic system is so reliant on US spending that no one can afford to let it stop. The rest of the world would be in as much trouble as us if credit got overly tight.

BadBoyBenny

10-26-2005, 06:09 PM

You make a good point and it will happen.

However, IMO the rest of the world's central banks are going to ease into it, so it will be a gradual shift of US inflation and low GDP growth relative to the developing world. Eventually American goods will become cheaper on the world market and we will not be able to afford as many foreign goods.

Arnfinn Madsen

10-26-2005, 06:15 PM

Yes, it will with high probability be solved, since it is in everybody's interest. Just pointing out that if the world leaders would look as naively at it as FishHooks it probably would go wrong, since at some time in future action is probably needed.

10-26-2005, 07:09 PM

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...Just ask the Mexicans. Or the Argentinians.

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Are you saying people welched on debts the Mexico and Argentina? All this time I thought they were the ones that did welching. Did I miss another memo?

/images/graemlins/confused.gif

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No, you missed the post I was responding to, which claimed that nations that are big debtors don't get screwed.

vulturesrow

10-26-2005, 08:04 PM

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One of the questions you never answered was what college you went too...so what college did you go to?

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The more you ask me this, the less I am inclined to answer it. If you are that interested, do a search in the Other Other Topics forum, Im pretty sure there was a thread within the past year where people volunteered this info. If not, it might be found in the archives of this forum as well.

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Are you sure your comprehension skills aren't just very medicore?

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100% sure, which is bolstered by the fact that about 75% of the time you post, no one is quite sure what the hell you are trying to say.

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Thats what the thread is about, the national debt, your basically saying the only reason why you commented in this thread was to dissagree with me,

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Wow, talk about reading comprehension, I chimed in to agree with you, my only real disagreement was that you indicated that it [i.e., the trade deficit] might become an issue.

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which is fine, I wouldn't expect nothing more from you.

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If you think I cruise this forum looking for chances to disagree with you, get over yourself. I dont pick battles of intellect with the unarmed. The stuff in the other thread however was so grossly in error I felt obligated to comment. /images/graemlins/wink.gif

FishHooks

10-26-2005, 09:20 PM

You must have a lot of time on your hands...

10-26-2005, 09:52 PM

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No, you missed the post I was responding to, which claimed that nations that are big debtors don't get screwed.

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Yes, I did miss it. Yes, I know how the guy who owes the bank 250k, and no way to pay, has a problem. And when Donald Trump owes that same bank 250mm and no way to pay, well that's the bank's problem. Been there, done that. /images/graemlins/frown.gif

ty for the clarification

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