United Nations of Debt

August 14, 2015 1:00pm by

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  1. dilbert dogbert commented on Aug 14

    MMMMM??? How about a pie chart using debt/GDP or debt/pop???? As the old saying goes: What can’t be payed back won’t be payed back.

  2. RW commented on Aug 14

    The chart is meaningless although
    A. what dilbert dogbert said would certainly help, however
    B. the chart would still be irrelevant to any question worthy of considered response; quod gratis asseritur, gratis negatur

  3. wally commented on Aug 14

    In the end debt=money, so this looks about right.

    • constantnormal commented on Aug 14

      Yup. This is the best answer.

      For those who doubt it, imagine the consequences if the US shrunk the amount of US Treasuries (the basis for the world’s economic exchange) to where the US had debt equal to, let’s say, 20% of GDP.

      The value of the US dollar (which is effectively backed by US Treasuries) would soar to unimaginable levels, and all US export businesses would promptly collapse, as inflation in the US gained some formidable bulk, due to the soaring price of imports.

      The most important thing to keep track of in the case of debt (personal or national), is the ability of the income stream of the one carrying the debt to service the interest payments. In the case of an individual, it is also somewhat important to pay down the balance, so as not to leave a nasty financial mess for one’s executor. For a nation, that point is (presumably) many lifetimes down the road, so paying down the principal is many times less important, depending on how the national economy is developing, and how resistant the population is to carrying a higher tax load.

      Bananamericans are operating under the lowest tax rates in about a century, so I suspect that, while it would meet considerable resistance, the nation could, if called upon to do so, muster the funds to pay down the debt. The big kerfuffle comes when we try to decide who gets their taxes hiked, those with all the money or the others.

      But there is, so far as I can see, no immediate need to begin paying down the national debt. As the global economy expands, we will probably need to expand out debt, to float the transactions of global trade. Don’t like that arrangement? Pick a currency better suited as the basis for global trade — and it had better be one that there is enough of to support current levels of economic activity, as well as be expandable to satisfy the demands of a future (hopefully) expanding global economy.

    • Futuredome commented on Aug 14

      Bananamericans lol to that one. My new favorite term.

      Yes, put it this way on America’s own personal debt issue: Not only do low effective tax rates raise debt, but they increase the “urge” to want to buy debt to fund US operations by boosting gdp.

      Buy reducing debt, you reduce gdp, reducing the need or desire to own public debt. That is why cutting spending to reduce debt with low taxes doesn’t work. It reduces gdp size. Grover Cleveland found out the hard way in 1895 and Morgan anally raped him in response.

  4. capitalistic commented on Aug 14

    We can assess debt to GDP ratios ad nauseam, but sovereign nations are different from corporations and households.

  5. willid3 commented on Aug 14

    course debt to time scale would also help. an example might be your mortgage. if its length was say 1/10 the time that it was written for, would it be worse than if it the time length was doubled? course then when hasnt there been debt in the last 1000 or so years?

  6. MidlifeNocrisis commented on Aug 15

    How refreshing to wake up in the morning and read comments from some people that are rational and intelligent. Today is going to be a great day.

  7. BajaMike commented on Aug 15

    Capitalistic is dead on when he says that sovereign nations are different from corporation and households. I’ll insert that what he really meant to say is that Sovereign Nations that can print their own currencies are different from corporations and households (unlike the European Nations using the Euro).

    Think about it, what is the real meaning of debt to a country that can print money at any time to remove the debt. Debt in the terms of a sovereign nation which can print it’s own money is really an incorrect definition. Debt in terms of a sovereign nation which controls it’s own currency is actually the measure of the wealth of it’s citizens. The last time this country made meaningful inroads into the “debt” of the country was under Bill Clinton and it triggered the Dot Com Recession of 2000.

    If you could pay off the national debt tomorrow, you’d have nothing left personally, because there would be no money- The national debt is the definition of the citizens private wealth. The reason the Fed went through all the goofy gyrations of quantitative easing is their realization that there was insufficient money in the system (not lending potential by the banks but the hi powered money of the Gov’t) and without increasing it there would be no recovery… and even with all it tried to do, we still really don’t have a recovery. McDonald’s jobs replacing $40,000 to $300,000 jobs doesn’t really hack it, but without more money in the system to increase demand for goods and services we’re screwed.

    The deflationary forces at work in the world are winning and until our Gov’t spends a lot more than it is now… we’ll continue to wallow in the muck.

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