DEBT LIMIT – A Guide to American federal debt made easy (Read 241 times)

"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."  Ludwig von Mises

The Fram Oil Filter man agrees.

http://www.youtube.com/watch?v=aq3wL8ZXjBU

Believe me all federal agencies are not the same. The military is in a class by itself when it comes to out of control spending and imo should be the #1 target for cuts.  I work for a federal contractor in health care and despite the impression of Obamacare being a boondoggle,we have been asked to do more with less year after year for the past 10 years at least.  Health care costs are increasing because demand for services is increasing, not because more federal resources are being thrown at it.  I'm sure there is waste to be found but the low hanging fruit is long gone.

...Now, this is only one tiny part of this one Air Force Base.  Let's just assume that this happens in all the different little sections of that particular Air Force Base.  Let's pretend that each of those little divisions is pulling the same crap and ordering stuff they don't need, just so they can have the same amount of money for the next fiscal year.  Apply that to every other Air Force Base, now add the wasteful spending of the other branches of the military into the mix: Army, Navy, Marines, Coast Guard.

 

Whew... I get kinda tired thinking about that.  I feel pretty guilty when in the past I've heard that troops haven't had enough protective gear or other necessary equipment, because my division and many others were so wasteful.  That's a tragedy.

 

 

I only touched on the military spending and there are numerous other wasteful spending practices of other agencies that Republicans and Democrats alike support.  It's disgusting.  It makes me apathetic.  It makes me not want to vote because I feel like I'm voting for sh#tty options....

 

I did not see it that way.  I saw it that the guy asking for money represents the government, our elected officials (party independent).  I saw the bank guy represents us, the voting public.  We understand that it is foolish to spend more money than we have and question it, but in the end we allow it to happen anyway.

 

In that respect I think that the video is a good representation of what is happening today (although of course the problem is certainly more complex than that).

Right, that's a good point. I guess I see the public as pretty different from a bank -- part of the complexity you are talking about.

I'll try a "Bigger picture" comment here:  "Money itself inherently has no value, but is merely a means by which goods are traded".  -- That quote asserts that "liquidity" and "Confidence in the currency" are what allow everything else in the economy to flow smoothly.

Now I know what you will say:  Too big a deficit and that may undermine confidence in the currency someday, right?  That is a good point.  But... Now a follow up question:   The USA has 15+ TRILLION in debt!  That is 15,000,000,000,000.00!  -- Do you really ever think that the USA, even if they balanced the budget, would EVER be able to pay back that 15 TRILLION?   Realistically, the answer seems an obvious no!  :-)

I'd like to touch on a couple other global "perspective setter" items as well.  First off, Debt as a percentage of GDP.  Look at other countries compared to the USA.    The USA is not even in the top ten as far as the Debt to GDP Ratio!  Here is a perfect slideshow to illustrate this point:  http://www.cnbc.com/id/30308959/The_World039s_Biggest_Debtor_Nations  A quick look at that slideshow will give you the bigger perspective on how other nations are further down this raod than the USA is, and by far.

Finally, now that we have talked about how Foreign countries are more in debt than we are (like most of Europe), look at how they are dealing with it.  Greece tried austerity... That didn't work.  Collapsed their economy in a downward death spiral.  But look what other European countries are doing:  They are somehow loaning money to the European Monetary Fund and similar enetities, which then turn around and "Buy up" a ton of this debt, and somehow, POOF.  The debt disappears.

And when you consider that ALL indutrialized nations are debtor nations, then how can all nations be in debt?  There are no creditors!  Much of that the Fed owes for example is debt it owes to itself!  So what all industralized countries will soon do (like europe) is play a shell game with massive chunks of debt, and "poof", the debt disappears.

And then we are back to square one, which is:  "Money itself has no inherent value, but is merely a means by which goods are traded".  When the day comes that the USA is up against the wall like europe is, they will merely do what Europe is doing and make massive chunks of this debt, "Disappear", the balance sheet stabilizes again, and onward things go, the 'monetary crisis' forgotten.

---Sorry so long, 1) Did anybody read through all of that?! :-)  And 2)  Did any of that make sense on the bigger picture of it all?

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1. Yes, I read through all of it.

2. No, it doesn't make sense.  I understand it's confusing (and can't say I understand the issue fully), but there's serious issues with the amount of debt (here and in Europe). There's no "'poof', the debt disappears".

My main point is that much of Europe is doing that right now.   If there were "creditor" and "debtor" nations, then there would a be a problem as the creditor nations would not want to allow debt to be written off.  But when you realize that almost every industrialized nation is a bigtime 'debtor' nation, Since most debt of debtor nations is owed to fellow debtor countries, it can, and is, being written off.  The Fed, IMF, European Monetary Fund, and other entities will be used for this purpose.

The USA can never pay back 15 TRILLION, and all these other countries with worse debt to GDP ratios than us have unrepayable levels of debt as well.  (Look at Switzerland for example... Every citizen's share of their national debt in Switzerland is over 300,000.00!)    Greece was in that group and tried austerity, there was no way that could work.  Creates a shrinking economy, shrinking GDP, and a death spiral.     That said, the only option left that I see is the one discussed about all industrialized debtor nations finding ways to shell-game massive chunks of debt away.  Since almost all industrialized nations are debtor nations, this is possible.  And in fact, is the only way, considering that rising intrest payment levels would eventually put the debt of all these nations on an upward E-curve.  But looking at the global picture, not just the political distractions within the USA, gives a better perspective on what has to be done.

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The debt held by the public is what matters since the debt that government agencies owe each other cancel's itself out. Public debt is around 74% of GDP. It's really high.

 

It could go "poof" but that would have catastrophic effects on the Global economy the likes of which would make 2009 look like the good old days. Most of the US debt is in the form of bonds and other securities that are held as investments by individuals, corporations, retirement plans, etc. Confidence in US debt as an investment vehicle is fairly fundamental to everything that holds our society together. If it goes poof, run for the hills.

I do agree that 74% of GDP is really high.  I can take some comfort in at least the fact that other nations have higher consumer debt levels than we do?  (Some comfort, not much... :-)

And I agree "Confidence" in the entirety of the USA and global monetary system is the only thing that holds it all together and makes it all work.  (IE.  "liquidity').  And not to pick on the Tea Party too much, but if the group who wanted "No Bank Bailout" would have gotten their way in 2008 and all US, then Global banks would have collapsed, then indeed when folks went to their ATM's and no money was available, and their bank issued credit cards did not work?  Loss of Liquidity, collapse of confidence, Fear takes over, and Anarchy globally would have likely ensued.    Thankfully we did not cross the point from which we could not turn back from.  If confidence is lost in the US and global economic system, run for the hills indeed!  (and bring a large supply of food and guns!)  ---I don't think people realize how close we came to complete collapse in 2008, thus why you saw the Fed willing to write massive 100+ Billion dollar checks overnight, with the details to be worked out later......  (Scary sh1t for a friday discussion!)  :-)

--The debt held by public would always be honored, but the vast portion of the 15 trillion isn't debt held by public and is workable.

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If it goes poof, run for the hills.

I hate running hills.  I'll just get a bunch of guns and guard the castle.  As a backup plan, having read "The Road", I'm also getting a shopping cart with some really solid wheels.  And  a good can opener.