Borrowing money does not incur debt

More like 800,000 million

 

I, like most Americans, have no training in economics at the Federal level so all of us, for the most part, do not understand it. What most of us do however, is have a basic distrust of Government and all the economic experts that throw in their two cents of opinion on how to handle the debt. Are some of them completely off base, or are all of them partially correct? Federal economics is an extremely complicated issue and my own personal opinion is that even those that are responsible for it don't really understand all of it very well.

 

so admittedly so, you don't really understand its inner workings, so you can't say as to what another person really does or does not get about it, but you have a gut feeling that they also don't understand? haha just sayin', that's what that read like.

in all seriousness though... i'd say you're right and wrong. i would venture to say that most all of the economists at the BEA, and the Treasury, and the World Bank... probably all know how this works. Bernanke and Greenspan are not morons. any one who spends their life studying something is going to at the very worst, be better than 99% of everyone else in the world at it. it would be like saying, you don't understand how your nervous system works, but because you don't, your brain surgeon probably doesn't either? kind of a crazy concept. you get on your motorcycle and race it, do you know the make up of all the metals used in its construction down to the atomic level and how the molecules can be re-arranged thru heat processing and so on? i mean, i know OF these things, but i'm not a physicist or materials engineer. i still get on the bike tho cause i trust the guy that designed it.

the thing about it is, problems arise in 2 areas: 1) is just that there are a few schools of thought in general about the actual core of economics. so disagreements in the fundamentals and logic can create different viewpoints on a subject, and 2) i would agree with you in that most ALL the other people responsible for this subject in government don't understand it well enough at all, yet get to make the decisions.

if most congressmen and politicians grow up and become businessmen, lawyers, political science majors, etc... this is not their area of interest, yet they have to get involved in it by way of their job. that does not lend itself usually to understanding the foundation of the subject in depth, or be able to really formulate a solid position on the matter. while most of them have economic advisors, some one pager summary on a position to me is not justification for something so important. not to mention external pressures when it comes to being re-elected and other voting deals related to their own agendas. that to me is the core problem when dealing with this kind of stuff.

when i spent a chunk of my life studying this stuff though, and i'm interested in it willingly, and even my understanding only goes so far without having a PhD and devoting my life to research, i can only imagine what the average person's perception is and their knowledge base. it sounds kind of selfish, but i used to get annoyed thinking about it in the context of who gets to vote in this country when people get to influence something so important and have no idea about it at all. that's an odd concept to me that you don't really see in any other part of life except politics. you can literally know nothing, and still get to get on a soapbox and have a say. that doesn't happen anywhere else in any other facet of life.

 

I see Rome!

 

After reading the links, I have one thought that none of them really addressed. How is unrestrained printing of money good or sustainable?

Just because congress of the president want something, doesn't mean they should be able to open the treasury purse and buy it. Just because we can run up unlimited debt, doesn't mean that it is a good idea. Not all spending is good or valuable...some is just wasteful and that serves no purpose.

 

Debt free is not the same as out of control increases in spending. At some point, the currency becomes worthless. The house of cards works because the people that do not understand the fine points accept and believe that the system works. If you kill that confidence, the cards fall.

 

It's not and essentially reduces the value of money already in circulation. My guess is the plan is to devalue the dollar to the point of worthlessness while simultaneously watching hyper inflation drive the cost of a big mac up to roughly about half of what we borrowed from China. Then when they come to collect they'll hand them 2 big macs and tell them to go home.

 

that in itself is an absurd notion. china will never call in those debts. that conversation will go something like:

China: hey guys, we'd like all our investment money back now
US: oh ok. knock knock?
China: who's there?
US: ruined...
China: ruined who?
US: we just banned all trade with your country and single handedly ruined your entire economy which already has massive inflation and income disparity problems as well as a housing bubble 60x greater than the US one looming over it.

see how easy that was?


also, you two are blurring the lines between "running up debt" and "printing money". careful there. the debt ceiling and running at more of a budget deficit or contuing the budget deficit, has nothing to do with unrestrained printing of money. they are two mutually exclusive events, you can't interchange them freely in a conversation. also, we don't really "print" money anymore at all anyways. Quantitative Easing is not some dude sitting at a printing press with sheets of $1 bills.

 

I've spent more than my fair share of time being edumacated on the finer points of macro and micro economics and couldn't agree more with your assessment.

 

Print is a relative term. I suppose we are discussing "money supply" or some equally esoteric concept. At some point, continued "borrowing" is going to cause the system to have serious consequences. It is happening in Europe now.

 

Printing money was used as a catch all phrase to include computer generated money and balance sheet changes in addition to the old fashioned printing press.

Let me try and clarify my questions:
1) What is the downside of unrestrained printing of money? The linked articles touched on inflation but swiftly brushed it aside as a non-issue. I don't think they did due diligence to explain the down side of this.

2) Not all government spending is good. Clearly the 2nd article identified the 09 stimulus as wasteful and not valuable for job creation or infrastructure improvement. I don't see how having a conservative approach to spending is harmful. Ok, so running up forever debts isn't a terrible or non-sustainable thing....you changed my opinion on that. Makes sense...that said, spending just to spend is stupid. We need a conservative approach to spending to get the wasteful programs eliminated and use that money on the big 3 (infrastructure, education and research). How is this concept damaging?

 

As to your first paragraph, yes. I'm saying that I and most other Americans do not understand all that's involved with the Federal Budget. How could we possibility know much about it when it's more complicated than anything that we've encountered before? Economics 101 does not come close to understanding the Federal budget because of it's complexity.

And also, yes. Most of our Congressmen, and women, do not understand it either. Just this morning I heard one of the Republican Congressmen that wrote the Republican's alternative to Obamacare talking about a Government shutdown. He was stating how if it occurred Social Security, and Military pay would be eliminated. Now, as far as I'm concerned, either he's a lying pos that's trying to scare everybody, or he's not smart enough on the subject to know the difference between a shutdown, and a default. In fact, I have not heard one single Congressman explain the difference. Ever.
The end result is that I, and a lot of other people, don't trust these people as far as we can throw them. Confusion reigns supreme.

 

LOL, what's the old saying about "you can fool all the people some of the time, and you can fool some of the people all of the time, but you can't fool all the people all of the time."

The inherent problem with printing money endlessly is that eventually inflation takes over. That is something that cannot be hidden, especially since the media would jump on that story and continue to harp about it forever. Even the average dummy would eventually notice that he's paying $12.50 for a gallon of milk.

 

Damn! That's brilliant.

 

LOL, come on....

US needs China way more than China needs US.

Just look at their investments in the last 5 years....total diversification away from US. If you said that 10 years ago i'd have agreed. Chinese are not stupid, they saw the writing on the wall. Housing crisis? You forget how ruthless the Chinese are? They will beat and enslave their population back into good worker bees.

US on the other hand. IF US does ban all trading what are 75% of the store in US gonna sell? Your entire industry other than a few sectors has been moved offshore to China....where are the hipsters gonna get their latest iphones from or whos gonna pay $2G's for an Iphone made in US. Sever ties with China and your store shelves will be empty and will implode the retail business.

Besides, burn the bridge with China and the rest of the world will dump US treasuries faster than you can say SHTF.

That talk of "trust" the only thing propping up the US dollar? Yea, it will be cheaper to wipe your ass with $20 bills than to go buy TP.

 

but you can't use europe as a prime example because being in the EU creates vast problems for those lesser countries and is probably the main factor contributing to their fucked up economies right now. after joining the EU, each individual country now has a common currency, but still is responsible for its own bottom line. by having a currency that they themselves are not able to manipulate as we are, they lose a HUGE tool in trying to fend off inflation. its totally fucking them big time. its like having their cake and eating it too, and that's why germany is really the only country that's like, "what recession" because their industry and economy is big enough to be in line with the positive side of the euro movement. all the countries with dickhole economies now get in a real bind because of not being able to influence their own currency, but still sharing their economy and trade.

1) inflation primarily. but what they're touching on that's also touched on in my first post, is that if we keep growth at a rate that equals or outpacing inflation, then relative to the inflated value of the dollar, you'd still be able to purchase an equivalent basket of goods or standard of living because you now also earn more (number equivalent, not worth) dollars. its only when inflation starts to greatly outpace growth, are the articles stating that we would then be trending towards problems. keep in mind this is a macro viewpoint too, so its not concentrated on the fact that one family making $40k a year might now be struggling. its the country/economy as a whole, so OVERALL... growth and inflation wise, nothing would change.

2) 09' was wasteful because it wasn't spending to create public debt at the benefit of the public by stimulating growth. it was private spending and wealth generation by use of public debt, leaving the average person with no increased benefit. that's why i mentioned the New Deal. if we had built roads, rail ways, power investment... this would have 1) spawned a ton of job growth, 2) put earnings into private hands by way of public debt, and 3) probably had a growth multiplier affect as now an increase in income levels would naturally lead to more spending and growth in other business areas. Getting rid of waste is always going to be good, but that doesn't mean conservative spending, it just means elimination of spending that is inefficient. the primary thesis behind capitalism is maximizing efficiency. if you're a hardcore capitalist with no soul (ha!), then you should always want to eliminate waste or loss, and maximize profit or good business. but that doesn't mean curtailing spending to try and tighten your wallet. a tightening of spending and elimination of social programs has many effects... one main one is that its negative multiplier effect goes down thru all markets. if you earn less, or get less help, times get tougher, you spend less, somebody else earns less at their store, they spend less, etc etc etc and so on. one of the other's is that society becomes worse of, or less competitive globally potentially, which we are seeing to a degree now. it is in the economy's best interest to have an educated competitive workforce that's healthy. if people have bad healthcare and are sickly all the time, they can't work. better educated people can produce and innovate more.

your concept isn't damaging. i agree 100%. we need to do exactly that IMO. but that doesn't mean we need to balance the budget to do so. again, i distinguish between spending cuts, and cutting waste.

yea cause he's a fucking idiot, and/or also trying to scare to pander for votes. i dont think any of them do an effective job because of one human trait: greed. and greed will instantly deviate you from "the right choice" to the choice that best suits you or your small group for personal gains. i would really like to see his factual basis for making those claims, i really can't even picture how the 2 would correlate. :crackhead:

 

1) China is on the verge of social crisis, they have been taking measures to hold social uprising at bay in many areas. They very well might enslave their population, but it won't be easy, and i doubt that's in their best interest.

2) Ghost cities and projects to nowhere just to artificially inflate their GDP is also a giant problem for them. they can't just sweep that under the rug.

3) All the love of capitalism and you guys don't realize what would happen? hell its already happening. if we banned trade with china, all our production would instantly shift to another country. capitalism profit maximization will always look for the lowest cost. already there has been tons of articles in the past few years of companies leaving china for places like vietnam, due to the increase in standard of living in china and new salary demands after years of increased earnings by producing the world's goods. that's always the chain of events in any market... you're a slave wage producer, somebody else is the innovator. you export goods. as you get more money, you increase your standard of living, you become more educated, you start innovating, you now go from a production economy to a creation economy. the last stage is the service stage, which we mostly find ourselves. where now we are just idea men and managers of ideas and production. we pay others to create our ideas, we or they pay others to manufacture those creations.

 

Dammit. You are starting to make sense. That disturbs me.

 

As for number two.

Which one is it? Public debt being used to create jobs through manufacturing and infrastructure is good if US does it, but bad if China does it?

I saw first hand the ghost cities. Its absolutely bizzare but i can see where they are coming from. They expected manufacturing growth in that area to increase and to stem the tide of lack of future infrastructure they built massive cities ahead of the labor force that would have populated those cities/towns.

This only came to light in 2008 when the whole shebang nailed the brakes and threw it in reverse. Other cities that are older were built the same way but they were populated and the plan worked out.

North America does this same thing on a smaller scale. How many times have you seen a massive mall in the middle of nowhere and said to yourself "thats idiotic" only to return 10 years later and the housing caught up and now everything looks normal?

Chinese arent stupid. In regards to capitalism and industries leaving China for "greener pastures". This like everything else is an engineered move.

They first attracted investors and business on the low scale of industry. Basic industry. Textiles, raw material manufacturing. Industry comes in, builds factories, trains personnel, they learn everything about that industry, assimilate all the good, learn from the bad, then dump it.

Why should they focus on T-shirt making for next 30 years, let some other 3rd world country take that over, they want to attract 2nd tier manufacturing, electronics, etc etc....so on and so fourth. Perfect example. Apple manufacturing in China. 20 years ago that would have been impossible, the knowledge wouldnt have been there, start up costs would have been insane. But over the last 20 years they have raised their industry levels to the point that high end, precise manufacturing is within their grasp.

They make bringing an industry into China dirt cheap, so cheap that no-one else can compete. North America has first hand seen what the effects of that is. They create a monopoly on it through rock bottom prices that it guts and destroys North American manufacturing. Skill and trade that would take years to build back up.

If China was to close their doors to US right now, how long before all that manufacturing is to come back or be transferred to another country? All the hardships of starting new?

BTW here's a scenario playing out in my head

US: Hey, We just told China to fuck off, can you make Wal-mart crap for us?

3rd world country: No, your currency is worthless, nor do i have any confidence that you wont do the same thing to me. I'll make and sell stuff to China instead.

 

First, I want to say that I really appreciate you taking the time to flush out this in some detail...it is most enlightening.

This is where I think we disagree. I think being conservative is being a hardcore capitalist with no soul. Nothing is given...everything should be earned. Welfare, food stamps, every social program requires the recipient to work to earn that product. This will eliminate a ton of waste and help create the workforce you are talking about. Not tightening the programs, just getting something in return for the money. Most fiscally conservative people that I know think long term and want to spend in the areas that make sense. It does not equate to being "short sighted" as you seem to imply.

Spending on the big 3 makes a ton of sense to me and I'd be 100% in favor of that. I can think of a ton of areas that I would take money from to make that happen. If those three are such a huge impact long term, then I think we could suffer a bit in the short term to make sure we get there.

FWIW - I fear the inflation that I believe is coming. I don't see how QE could result in anything other than the 80s style inflation. I remember 17% mortgage interest on a home purchased in 1984...ouch.