James Daulton
Footballguy
How much debt would be a "healthy" number? It's obviously not eleventy billion like it is now, but $0 isn't ideal either. Maybe $1T? I really have no idea.
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US DEBT : Passing $20,000,000,000,000 - Your Thoughts? (1 Viewer)
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jonessed
Footballguy
It does seem that way sometimes, but they will eventually return to normal levels.
jonessed
Footballguy
Maintaining a healthy budget isn't austerity. Healthcare costs, the military budget, SS will all have to be dealt with. This isn't a huge secret.
fantasycurse42
Footballguy Jr.
Disagree... In the next decade, we won't see anything close to 2006 levels.
Furthermore, the Fed has no ammo for the next crisis, which they might be steering us into with an precedented monetary policy for the last 10 years.
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The Commish
Footballguy
Don't look now Tim, but you're uniting Michigan and Michigan State fans....that should give you pause
jonessed
Footballguy
The only way that might happen is if the global economy never recovers. We would all be in a world of hurt.
Politician Spock
Footballguy
As long as things remain status quo, he's right.
The problem with deficits only return if/when the US dollar loses it's status as the currency of choice for international trade. That status, combined with the 1971 Nixon Shock, created a situation where the world demands us to export something that is just a claim on our future goods and services. Prior to the Nixon Shock, US Dollars were a claim on our gold, which represented our work of goods and services we did in the past. The US dollar was given it's international trade status in 1944 because we had two thirds of the world's gold. After the Nixon shock a US dollar is a claim our future goods and services. As long as the world continues to use the US dollar as the currency of choice for international trade, we can just keep making more and more claims on our future goods and services (US Dollars) as the world always needs the international trade currency supply to increase. If however, the US dollar is no longer the currency of choice, demand for more claims on our future goods and services decreases. Not only do we lose the ability to just keep making more of them, but the rest of the world cashes in on those claims. We then owe the world goods and services, and in exchange for them we don't get goods and services back. We just get our dollars back. We go from being able to consume more than we produce to having to produce more than we consume. Life will suck. This is what we are setting our children up for... unless the US dollar never loses it's status.... which is not likely. Jealously is human nature and it's only human nature that the rest of the world gets so jealous of the benefit we get of this status that international trade is redesigned to use a exhange system where no country gets this "deficits don't matter" benefit. Until then however, Cheney is right. They don't matter... at least today they don't.
Dinsy Ejotuz
Footballguy
Worth mentioning that the transition from the British Pound Sterling to the US dollar as the world's primary reserve currency was managed reasonably well over a long period of time. It encompassed one or two WWs (depending on when you think that transition started) and definitely hurt the British standard of living hard in the post-war era, but it was still a managed process.
There's always danger of an accident, but all those countries holding US dollars in enormous amounts have a vested interest in not seeing them become worthless as well.
There's always danger of an accident, but all those countries holding US dollars in enormous amounts have a vested interest in not seeing them become worthless as well.
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fantasycurse42
Footballguy Jr.
At the pace the Fed is going (25-50 basis points a year), by the time the rate even hits 1.5% (which is about 350% below 2006) it'll be 2018-2019. That would be 12 years since the last recession - Recessions happen, regardless of the euphoria everyone is feeling from a 7 year bull market. Then they'll just get back to zero.
Never again are we going to see normal rates. Good article from a credible source that supports this view - https://www.moodys.com/research/Moodys-Policy-rates-unlikely-to-climb-back-to-pre-crisis--PR_348628
Politician Spock
Footballguy
True. Circumstances are different though. Having the entire world on floating currency system is an experiment that is only 44 years old. There's really not much in history to look at to know how it will unfold ir/when the experiment ends. As long as the experiment continues however, Americans can drink and party as a result of being able to consume more than we produce. So drink up everyone while the party is still on!!!
spreagle
Footballguy
Obama managed to double the national debt with affirmatively low interest rates which is a pretty impressive accomplishment of running up the debt. He's worked harder to run up the debt than anyone before him. When he was elected I predicted 20 trillion by the end of his 8 year term but I thought interest rates would be somewhat normal. I'll go ahead and do my usual thing and predict another doubling or 40 trillion national debt at the end of Trump's or Hillary 8 year term.
cstu
Footballguy
Disagree - jealous or not, there's no other country the world trusts as much as the United States. I don't see that changing either*.
*barring Trump.
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Politician Spock
Footballguy
Ending the US dollar as the mechanism for international trade doesn't require putting trust in another country. In fact, the fact that the current system requires trust in the US is a key motivation for ending the current system. The new system will not require trust of any one country above the others, nor produce a benefit to one country over the others such as the current system does.
fantasycurse42
Footballguy Jr.
cstu
Footballguy
fantasycurse42
Footballguy Jr.
Politician Spock
Footballguy
It doesn't exist yet. It is however what the world wants. Wherever there is a desire for something, mankind eventually figures out how to get it done. When that time comes, it will NOT be good for the US. The party is over on that day.
fantasycurse42
Footballguy Jr.
I think the "we're ####ed" option should be changed to "those we owe are ####ed"
timschochet
Footballguy
So exactly what would happen if President Trump attempts to renegotiate what we owe and threatens bankruptcy unless our debtors lower the amount?
cstu
Footballguy
It wouldn't be good for the rest of the world if we stopped being the world's policeman. Let's not pretend the world isn't getting something out of this arrangement.
Politician Spock
Footballguy
Countries in the Euro have been doing that frequently over the past 10 years. So take what you see has been going on there and multiply it.
dparker713
Footballguy
Politician Spock
Footballguy
bagger
Footballguy
Sounds like a plan. We'd still be ahead of all of the other countries' military prowess as well anyway since everyone relies on us to sell and steal our ideas from.
The Commish
Footballguy
This is a good point. We are in a "confidence" model now if you will. The theories we all learned in school don't have the same weight they once did. We aren't on the gold standard anymore. This is the primary reason $20T in debt isn't quite bothersome to me right now.
fantasycurse42
Footballguy Jr.
I don't even factor SS in my retirement plans. Japan/China own almost 15% of our debt.
lod01
Footballguy
Never going to happen. If Trump gets elected, the real people in charge will notifiy him that the debt doesn't matter and to drop the whole idea.
lod01
Footballguy
Exactly. We take our ball and go home, the world goes into a depression. Thus, like I said, the debt doesn't matter. It's all a giant unstoppable Ponzi scheme. The fake concern, that Washington brings up every time we hit the debt ceiling, just keeps the commoners thinking it (the debt) actually matters.
lod01
Footballguy
Arsenal of Doom
Footballguy
I haven't read through the whole thread but the debt itself is less important than how we manage our future revenue and outlays. We need an overhaul/modernization of our tax and safety net programs.
Not starting anymore unnecessary wars without raising taxes to pay for them is probably also a decent near-term goal.
Not starting anymore unnecessary wars without raising taxes to pay for them is probably also a decent near-term goal.
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bagger
Footballguy
So you are for spending on entitlement programs to boost the economy?
Very progressive of you. :highfive:
lod01
Footballguy
We've gone past the point of no return with the loser population out there. I'm patiently waiting for my cut of BIG.
Buzzbait
Footballguy
Somewhere between "We're headed down a dangerous road and need to fix it" and "We're ####ed....."
I'm an eternal optimist and still think we can eventually turn this thing around but it's really troubling that the numbers are still clicking forward. You have to stop the bleeding before you can get better and I'm not seeing that yet.
I'm an eternal optimist and still think we can eventually turn this thing around but it's really troubling that the numbers are still clicking forward. You have to stop the bleeding before you can get better and I'm not seeing that yet.
Redwes25
Footballguy
I tend to like to focus on the deficit as a percentage of GDP as that shows if our deficit is manageable or not vs total debt which I think is a less important metric (though debt to GDP is important). Think it is a little high right now (as of December 31, 2015) at 2.5% as the U.S. has entered into a long term phase of slow/modest GDP growth of around 2%. Would like to see that number lowered to about 1.5% which would shrink our total debt as percent of GDP and is a manageable deficit. Of course 2.5% is much improved from the totals in 2008 - 2012 which were unsustainable and result of the last recession. Think the numbers peaked at just over 12%
Niles Standish
Footballguy
The problem is if a politician runs saying he wants to raise taxes to eliminate the debt he won't win. And when you're cutting spending you can't just cut welfare and food stamps. That's a drop in the bucket. We have to cut military spending, we have to cut social security, we have to cut health care spending. You have a politician running saying that they aren't winning. In fact they aren't getting out of the primaries.
The only way to really work on the debt is to raise taxes and cut spending IMO raising taxes or cutting spending isn't going to get it done considering how high our deficit is. And we aren't going to vote for anyone who runs on cutting the debt. We will vote for people offering lip service as long as they don't actually plan to do anything about it.
The best are the flat taxers who say 10-15% tax which is everyone who ever brings up flat tax. Considering federal tax revenue is ~20% of GDP I'm not sure how that works.
I know I know lower taxes and people will work harder. I agree that's the case at higher tax thresholds (like when we were 80-90%) but that has never been shown to be the case when you go from 34 to 37 or whatever we're generally talking. At least not enough to move the budget more than the tax amount.
The only way to really work on the debt is to raise taxes and cut spending IMO raising taxes or cutting spending isn't going to get it done considering how high our deficit is. And we aren't going to vote for anyone who runs on cutting the debt. We will vote for people offering lip service as long as they don't actually plan to do anything about it.
The best are the flat taxers who say 10-15% tax which is everyone who ever brings up flat tax. Considering federal tax revenue is ~20% of GDP I'm not sure how that works.
I know I know lower taxes and people will work harder. I agree that's the case at higher tax thresholds (like when we were 80-90%) but that has never been shown to be the case when you go from 34 to 37 or whatever we're generally talking. At least not enough to move the budget more than the tax amount.
lod01
Footballguy
That's a good one. I can see Congress now 'we are raising taxes because we are planning on a war'. 'oops, cancel the war, we will just pocket your cash for ourselves'.
Arsenal of Doom
Footballguy
Typically it has been done as a special surtax during the periods of conflict. It's historically unusual that this didn't happen for the Iraq and Afghanistan wars.
spreagle
Footballguy
I think we are all stuck in the paradigm that the dollar is the dollar and will always be the dollar. The dollar is nothing more than a concept and what I think might happen ifor it gets to your point is that the dollar itself will split into two different concepts, with domestic citizens using one type of dollar and foreign holders of US debt stuck using the old type of dollar. The US citizen dollar will be a Venezuala banana republic type of dollar, subject to frequent step devaluations as our wise leaders slowly lower us to our new lower standard of living, while the foreigners will scramble to exchange their UST debt for gold and other such assets.
Different categories of dollars being used in the US at the same time is infrequent but definitely not unprecidented, after the civil war we still had greenbacks in circulation which were not gold backed, and constitutional dollars which were gold/silver backed and an effort was made to redeem thone unbacked greenbacks to get back on a uniform gold standard. 100 to 150 Greenbacks were being redeemed (taken out of circulation) for 1 ounce of gold which is quite remarkable for the times considering a greenback was originally on par with the dollar a few years before and gold was 20 dollars per ounce. Consider what would happen if that 20 trillion dollars of unbacked UST debt, basically the same unbacked thing as greenbacks, had to instantly flood back into some other kind of money. After getting shafted on a paper promise it is very unlikely that USTs will go into another paper promise, so it will probably go partly into gold.
If you think about it we have all sorts of different categories of dollars right now, for example IRA dollars can't be used until retireement, some types of dollars in some accounts can't be touched in bankruptcies, the whole progressive income taxation thing, etc. All dollars are treated differently now, why not treat domestic and foreign dollars different if we have to.
This time perhaps it may be like the post civil war period with greenbacks except in reverse and on a must larger scale, so rather than call the greenbacks/USTs in for a instantly disruptive exchange we just sorta break in two categories of dollars and manage the fall of both with lots of lies and deception and wars and such.
There is really no way we can predict with 100% certainty what will happen, we can only guess based on history, the money changers have lots of tricks up their sleeves we can't possibly fathom what they will do. What is certain is that the American citizen will feel like they were treated very badly.
