National Debt reaches $8,000,000,000,000 (8 trillion dollars)

[DVaut1]

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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]

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]

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]

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]

</font><blockquote><font class="small">En respuesta a:</font><hr />
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.

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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]

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]

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]

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]

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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)).