[ryanjend22]

Numbers don't lie...

"Staying the course" in Iraq is destroying our country.

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Nov 9 - U.S. national debt sets another record – 9.815 trillion dollars
Every U.S. citizen holds 33,000 dollars of national debt

The national debt of the United States of America exceeded the number of nine trillion dollars for the first time in history, the U.S. Treasury said. Treasury Secretary Henry Paulson told congressmen in the middle of September that the federal government would reach the legal limit of the national debt on October 1 – 8 trillion 965 billion dollars. The government would thus find itself in a state of technical default on its obligations, Paulson added.

Henry Paulson urged the Congress to pass the bill increasing the limit of the national debt. The U.S. lawmakers followed the advice last month and approved the new limit – 9.815 trillion dollars.

It was the fifth time during George W. Bush’s presidency when the Congress raised the limit of the national debt – in the total of 3.865 trillion dollars.

The U.S. Democratic opposition believes that the ongoing increase of the country’s debt testifies to poor financial policies run by the current U.S. administration. The White House explains its requests with the need to fund the wars in Afghanistan and Iraq and other conditions required for the national security.

The national debt of the United States reached the level of one trillion dollars during Ronald Reagan’s presidency in the 1980s. Nowadays, each American holds about 33,000 dollars of the national debt, ITAR-TASS reports.

When the expenses of the U.S. Government exceed the revenue collected, it issues new debt to cover the deficit. This debt typically takes the form of new issues of government bonds which are sold on the open market. However, the debt can also be monetized by which the Federal Reserve creates an entry on its books to credit the US Government for an amount equal to the dollar amount of the bonds the Federal Reserve is acquiring. The money created in this process not only includes the new dollars that came into existence just to purchase the bonds, but much more because this new money is now sitting in the form of checkbook money at the Federal Reserve. Under the scheme of Fractional Reserve Banking this new checkbook money is treated as an asset to lend against. Economists estimate the expansion of the money supply as being many times the amount of the initial money created with the exact amount of the expansion being a function of the marginal propensity of the consumer to consume (rather than save) each new dollar.

The United States has had public debt since its inception. Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly reported value of $75,463,476.52 on January 1, 1791. Over the following 45 years, the debt grew, briefly contracted to zero on January 8, 1835 under President Andrew Jackson but then quickly grew into the millions again.

The first dramatic growth spurt of the debt occurred because of the Civil War. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. The debt slowly fluctuated for the rest of the century, finally growing steadily in the 1910s and early 1920s to roughly $22 billion as the country paid for involvement in World War I.

The buildup and involvement in World War II brought the debt up another order of magnitude from $51 billion in 1940 to $260 billion following the war. After this period, the debt's growth closely matched the rate of inflation until the 1980s, when it again began to skyrocket. Between 1980 and 1990, the debt more than tripled. By the end of 2005, the gross debt reached $7.9 trillion, about 8.7 times its 1980 level.

http://english.pravda.ru/world/americas/100549-1/


...hello recession. its only a matter of time before the NAU and the amero now.

[Yega1979]

Yes, the Fed essentially creates money out of nothing to cover the government's irresponsible spending. The creation of this money, which is not backed by anything or any economic activity is what causes inflation.

The devaluation of our currency to fund their spending is a form of indirect taxation. This is what the King of England did in the 1600's to generate money for a war. He founded the Bank of England and recieved this money that was created from nothing, in exchange for a governmenet "IOU". This caused inflation to rise, and everyone's savings were suddenly worth less as goods became more expensive.

We're being treated like cattle, which the social elite own. They feel they can use us as their little private assets.

[Ed O]

The effects of the national debt are much more complicated and confusing than they appear at first. Crowding out and, to a lesser extent, the potential of international investment are much more dangerous than the direct effects of carrying a near-14 digit debt.

Ed O.

[Yega1979]

You think crowding out is a bigger problem than a 10 trillion dollar debt? That's like saying having a piece of bacon glued to your *** is a biggest danger when you are swimming in a pool of hungry crocodiles.

What will happen when forgien government's stop funding our debt? Will we look to our fed to exclusivly pring all of this fiat money and drive the dollar down to nothing? And what of the huge interest expense? Every year, we spend hundreds of billions on interest payments, which go up in smoke. If you were wealthy and had a financial advisor, how would you feel if he went out and purchased more than you could afford on a credit card, and only paid off the monthly interest?

I don't think people realize what a dangerous path our economy is on.

But many americans are living in this fantasy land that the national debt is no big deal, the off-shoring jobs is good....pathetic.

[Ed O]

Originally Posted by Yega1979

You think crowding out is a bigger problem than a 10 trillion dollar debt? That's like saying having a piece of bacon glued to your *** is a biggest danger when you are swimming in a pool of hungry crocodiles.

How many degrees in economics do you have again?

Seriously. Why should anyone think you have anything approaching an educated opinion on the matter?

Ed O.

[ryanjend22]

^ no offense Ed. O, but to me the issue is just common sense. you don't need a degree to see the potential for a major collapse. we are following the blueprint of the late roman empire.

[MARIS61]

This isn't rocket science.

Spending borrowed money you don't have any hope of ever paying back equals financial ruin.

[Ed O]

Economics is NOT common sense. It just isn't.

Does it have elements of common sense? Sure. But it's way, way too complicated to simply look at numbers and think that you can predict what is going to happen. To discount the crowding out effect, as Yega did, shows ignorance of the real danger of the debt.

But crowding out isn't as sexy or as easy to understand as bankruptcy, so I'm not surprised he went the way he did.

Ed O.

[ryanjend22]

^ Ed, i claim ignorance on "crowding out." would you please elaborate on what this means?

[R-Star]

Originally Posted by Ed O

Economics is NOT common sense. It just isn't.

Does it have elements of common sense? Sure. But it's way, way too complicated to simply look at numbers and think that you can predict what is going to happen. To discount the crowding out effect, as Yega did, shows ignorance of the real danger of the debt.

But crowding out isn't as sexy or as easy to understand as bankruptcy, so I'm not surprised he went the way he did.

Ed O.

With almost 10 trillion in debt, a dropping dollar, sagging economy, ect, does it really matter if its complicated or not? The signs are all there. The US is in a hard way, and something needs to be done. Maintaining the current course is a recipe for disaster.

[Ed O]

Originally Posted by ryanjend22

^ Ed, i claim ignorance on "crowding out." would you please elaborate on what this means?

It's, at its core, the public debt using up all (or too many) available investment funds so the private sector goes underfunded.

Look at it this way: imagine there is $100 to be invested in the US. Ignore where the money comes from (US or foreign sources) but consider that some of that money can go to fund the debt (the money that the Federal government has borrowed) and some can go to private investment (building businesses, etc.)

There is an ideal point where private investment is optimized... throwing all $100 at the businesses might be inefficient because of limited growth opportunities, etc. So maybe the ideal level would be $80.

As long as the money needed to fund the public debt is less than $20, things are fine. The private sector gets what it needs.

But let's say the US government has borrowed so much that it needs to take $25. Or $30. All of a sudden, money that should go to a private business is going to the government. Businesses don't get the money they need and the economy is worse off for the lack of investment.

It's more complicated than this, of course, and the US government essentially bids up the interest rates to make sure it gets what it needs, and investors choose the government because it will pay more (HAS to pay more) than the corporations.

Private borrowers (businesses/corporations) are "crowded out".

It's nasty, and will be the real danger of a massive debt being passed down through the years IMO.

Ed O.

[Ed O]

Originally Posted by R-Star

With almost 10 trillion in debt, a dropping dollar, sagging economy, ect, does it really matter if its complicated or not? The signs are all there. The US is in a hard way, and something needs to be done. Maintaining the current course is a recipe for disaster.

What is the current course?

The deficit has been shrinking. Projections call for a budget surplus in several years (although these projections might prove overoptimistic).

A weak dollar means more exports for our economy, lowering trade deficits and increasing the money flowing into some key manufacturing sectors.

The subprime mortgage issues has been a tough pill to swallow, and there is probably more nastiness to come... but is that a systemic problem, or just something that will be fixed and avoided in the future?

So what is the current course?

And how can you possibly doubt that the level of complication of the myriad of issues is relevant?

Ed O.

[R-Star]

Originally