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10. ### joepistoleDeacon BluesValued Senior Member

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22,908
It's amazing what you can learn when you actually look and learn and get beyond the ignorance and hysteria.

11. ### CarcanoValued Senior Member

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6,865
This is a good example of how NOT to do economics.

Economics is not about any particular person's status...and esp not about whether that person can watch football or not.

Economics is about the WEALTH of NATIONS.

However, how these two words are defined has changed drastically in the west, over the last few hundred years.

1. 'Wealth' was originally defined in terms of median net worth...what the majority of citizens own minus what they owe. Since 1933 it has increasing been defined as the volume of transactions...the Gross Domestic Product. The GDP was originated by the economist Simon Kuznets...who specifically warned that it was NOT a measure of wealth.

2. 'Nation' was originally defined first as a people with a genetic kinship and common culture, and second as the geographical area they hold through military force. This second aspect is now primary...as the west increasing becomes a culture-free zone.

12. ### CarcanoValued Senior Member

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6,865
So why is federal debt a problem? The primary reason is that it compels the government to devalue the currency, but there is a secondary reason when so much of that debt is owed to foreign countries...now up to 5.5 Trillion in the US as of 2015. The least problematic debt is that owned to the central bank...the Federal Reserve.

Why, because the Federal Reserve is required by law to remit all profits from interest back to the US Treasury. Its a cozy relationship that does little harm to the overall economy.

13. ### joepistoleDeacon BluesValued Senior Member

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22,908
Well, that's not exactly true. Economics covers everything, individual economics as well as the whole. That's why the study of economics is divided into micro economics, the study of the small, and macro economics, the study of the large.

No. Economics isn't about the "Wealth of Nations", that was a book written by Adam Smith at the beginning of the Industrial Revolution and is a fundamental work of classical economics.

Economics isn't about wealth. It's about how a society allocates resources. It's "the study of scarcity, the study of how people use resources, or the study of decision-making." https://www.aeaweb.org/resources/students/what-is-economics

Wealth is just one issue. It isn't the whole of economics. Neither is economics about nations, it's about the study of scarcity and how resources are allocated. The fundamental problem of economics is scarcity. So, you are failing to see the forest for the trees.

14. ### ForrestDeanRegistered Senior Member

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307
I'm not interested in economics. My point is, is this a problem? If this is a problem how do you propose to fix it?

15. ### joepistoleDeacon BluesValued Senior Member

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22,908
Well, you still haven't answered my question. Why does debt compel government to devalue its currency? And why does it matter who holds a country's debt? Please be specific and avoid partisan platitudes.

That is correct, and it greatly benefits the economy.

16. ### Michael歌舞伎Valued Senior Member

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20,285
Carcano likes this.
17. ### CarcanoValued Senior Member

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6,865
Yes its an economic problem...if you're not interested in economics you wont be able to fix it.

18. ### CarcanoValued Senior Member

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6,865
Paul Volcker is the author of the Volcker Rule...as an attempt to re-establish the restrictions of Glass-Steagall. However, it been years now since being passed into law and several major banks still refuse to comply.

19. ### ForrestDeanRegistered Senior Member

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307
Hehe ok. So anyway, back to doing what I do everyday.

20. ### joepistoleDeacon BluesValued Senior Member

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22,908
Volcker and Peterson clearly say the US does not have a debt problem. They say it may have a debt problem down the road in 10 or 20 years because of anticipated future spending. There is a big difference. But given, the US effective tax rates are incredibly low by any measure, there is plenty of room to increase taxes. Taxes increases can offset anticipated future expenditures. Volcker and Peterson admit our anticipated debt problems are solvable. The only issue here, and it's a big one, is do we have the ability to act responsibly? Fiscal responsibility has been a rare commodity when Republicans control Congress.

21. ### joepistoleDeacon BluesValued Senior Member

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22,908
The Volcker Rule and Dodd-Frank have nothing to do with US debt, and banks don't have the option of not complying. Dodd-Frank is a very complicated law. It took a long time to write the rules. Banks are not happy with Dodd-Frank and Republicans in Congress have changed the law. They have weakened the law.

22. ### iceauraValued Senior Member

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27,811
In this case, the US government would refuse to allocate money from its general tax revenues to repay the money it borrowed from (sold bonds to) the Social Security trust fund, money which had been supplied in the first place by a different tax stream dedicated to that program (the "payroll" deduction).

The Social Security administration would then be forced to reduce or suspend its benefit payouts, or make other adjustments, because the US government had defaulted on those bonds held by the Social Security administration.

Got it?
I never said the US government and country hadn't benefited - in some comparatively small ways, of course, considering the alternative uses of those hundreds of billions of dollars - from TARP. The question was whether the bailout monies had been fully repaid, and the answer is no - there are hundreds of billions still out on ostensible loan.

I agree that US tax rates on rich people are very low. But I lack your confidence in the ability of the US to increase them substantially - enough to pay for the current debt of 17 trillion. That is not an abstract economic questions - of course it would be economically possible without great harm, and probably it would be of serious and significant benefit. But that doesn't mean we can actually do it, politically.

23. ### joepistoleDeacon BluesValued Senior Member

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22,908
Uh, no. Social Security is a government owned and run program. If the government doesn't fund the program, the program dies. There's no default involved. There is no obligation to pay anyone. Social Security benefits are whatever the Congress says they are. Congress could say tomorrow there will no longer be a Social Security program and the whole thing would go away.

Now, it wouldn't be politically popular. But it could happen. The Social Security program has always been a pay as you go program which has been funded by tax revenues. You just can wrap your head around that very basic fact.

The answer is you were wrong. Got it? Contrary to your assertion the government has been repaid, and it has made a profit. Your reference clearly identified the outflows and the inflows and the inflows of cash greatly exceed the outflows of cash. It really is that simple. Got it? This isn't rocket science.

As has been previously pointed out to you, you are grossly overstating US debt. The real US debt is around 11 trillion dollars, and as perviously pointed out the US need never pay off its current debt - ever. All it need do is service its debt, and it can clearly do that.

Your concern about the future ability of the US government to effectively govern itself is warranted. We have already seen Republicans repeatedly attempt to engineer debt defaults for political gain. That's very dangerous stuff. We can always screw things up. My point is we don't have to, and too many people, victims of demagoguery, think the die has been cast and it hasn't.