The Deficit

[ripdog]

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Yes, it is a problem.

No, it won't be solved.

See how calmly I just said that. It's cause I know I can't change anything. And the people that can won't.

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Your response is precisely why people now refer the the United States as a "Once great nation". I agree that the people who can won't, but if everyone who felt as you and I do stood up and got angry as one, something would happen.

[ripdog]

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"330 B odd in intrest a year is probably very slightly +EV"

If that interest was going into US banks and being pumped back into our economy it would be good for us. However each year more of our debt is bought up by forgien banks/countries, and larger chunks of that 330b are going overseas.

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This is precisely why I'm nervous. The folks buying up our debt do not have our best interest in mind when they do it.

[adios]

Considering that the U.S. could buy back most of the debt issued in the last few years (sell high, buy low) at lower prices why is this such a bad thing? Just curious.

[ripdog]

Responding one by one:

I don't care about what Kerry would have done. He lost and is a non-factor. I hate what Bush and Company are doing, and I really hate the media for being such wusses about reporting it. As far as checking out the trend in job growth since the tax cuts were enacted, I'm not sure I buy that as an explanation. I think the money could have done greater good if it were applied to education and lifting more people into the middle class, whatever that is.

The second article was a joke--pure political grandstanding.
I stopped reading when Mr. Paul said that the debt that China is buying up eventually has to come back to us. Like they're just going hand it back on a silver platter.

I liked the Lieberman article too. I think that we have to realize that we are competing against well over 1 Billion Chinese and close to a Billion Indians. If we don't invest heavily in our education as Lieberman noted, we're in for a serious ass kicking. All we get from these a-holes is lip service about the importance of education.

Thanks for the response.

[ripdog]

[ QUOTE ]
Considering that the U.S. could buy back most of the debt issued in the last few years (sell high, buy low) at lower prices why is this such a bad thing? Just curious.

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That would kick ass. Except that I don't see it happening. Is this a strategy that Bush is ready to employ? Nah, it's more pipe dreams...

[adios]

Corporations do it all the time. Actually as the economy grows and the deficit is reduced, the deficit becomes less of a concern. I also point out that the current amount of deficit spending when normalized for GDP isn't anywhere close to a record. I'd also point out that one of the reasons that foreign buyers buy U.S. treasuries is to inhibit their currencies from appreciating more against the U.S $. If they stop intervening on behalf of their U.S. treauries will be worth even less. If you look at the federal budget outlays for interest rate payments on U.S. debt, you'll see that in the first years of the Bush administration these payments dropped a lot even though the deficit rose.

[Arnfinn Madsen]

Hi,
Large deficit is no problem as long as GDP is substantially growing, as it will erode with GDP-growth. The US economy is driven by consumption and such the Adminstration's philosophy is that as long as it keeps the consumption growing the deficit is not so dangerous, and this is true.

Could it pose a problem?
It poses a problem if treasury bonds starts to lose the 100% credibility they have now. Then lenders will demand higher interest rates and this will often coincide with a recession. Then you enter a bad cycle that is very difficult to get out of (has happened to a lot of countries many times).

So basically the US economy is a bubble since government spending is higher than government income and imports higher than exports but still the chance of it bursting soon is small.

[Felix_Nietsche]

[img]/images/graemlins/smile.gif[/img]

[QuadsOverQuads]

[ QUOTE ]
The US economy is driven by consumption and such the Adminstration's philosophy is that as long as it keeps the consumption growing the deficit is not so dangerous, and this is true.

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And growth in consumption, in turn, must be fueled by growth in (1) wages, (2) savings or (3) consumer debt.

Guess which one is fueling it right now.


q/q

[adios]

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The US economy is driven by consumption and such ...

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Which economy isn't driven by consumption?