Tick, tick. August 2nd is the Debt Limit Armageddon. Or Not.

@Cycloptichorn,

What you say would be reasonable at very low debt/GDP ratios - then only a very few years of surpluses would be enough to pay down the entire debt. This is not our situation: we're at 100% federal debt/GDP and the ratio is higher still if gross debt (adding states and municipalities) is added to federal. We must attack the dynamic drivers of the debt itself if we're to have any hope of bringing it down any time soon. It's elementary differential/integral calculus.

1 Reply

@High Seas,

Oh, I see where this is headed. A 'grow our economy' by cutting taxes and regulations argument, while ignoring the fact that we will never grow our economy faster than the interest on our debt will continue to mount, if we cannot balance the budget - something which cutting taxes ensures will not happen.

Your argument is flawed, because we don't have to bring our level of debt down anytime soon. We just need to stop its growth in the future.

Cycloptichorn

1 Reply

@izzythepush,

Izzy - with respect it's my impression that you haven't studied closely your own country's economic history, or you wouldn't be saying that. Your total debt is almost 500% of GDP, a crushing burden. Do you know when the final payment for the US loan succeeding Lend-Lease (which we wrote off completely) negotiated in 1946 by Lord Keynes was made? In 2006. Keynes, btw, was a very great economist but at times elliptical to the point of obscurity, so is often misunderstood by the current crop of "Keynesians"; he made one of his more profound observations only days before his death:

Quote:

Over lunch at the Bank of England, Keynes tells Henry Clay of his hopes that Adam Smith's 'invisible hand' can help Britain out of the economic hole it is in:
"I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago."[/b]

http://www.maynardkeynes.org/john-maynard-keynes-world-bank-imf.html

1 Reply

@Cycloptichorn,

You make up your own arguments, then you shoot them down - go right ahead, but please don't pretend they have any connection with anything I wrote Smile

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@High Seas,

I don't need the History lesson, but it's refreshing to hear an American acknowledge that we paid our way in WW2. With respect, you seem to be ignoring a simple fact, you can't pay off a defecit/ reduce debt, in any meaningful way, if the economy is in stagnation.

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@izzythepush,

That's the same error Cycl made earlier - conflating stocks and flows. Of course you can pay back debt - regardless of a stagnant economy - by the simple expedient of monetizing assets; you offset one stock (assets) against another (debt). Households and companies do it all the time - governments can too:

http://media.economist.com/sites/default/files/imagecache/original-size/20110730_WOC181.gif

http://www.economist.com/blogs/dailychart/2011/07/world-debt-guide

That's how the British economy improved under Mrs Thatcher - she privatised state assets and faced down trade unions. Focusing on nominal tax rates is a fallacy demonstrated only too well after the Soviet collapse, when their economists admitted that even under communism (official tax rate 100%) the "take" of the state never exceeded 60%. So that's the empirical upper bound of the state's "take". As to the lower bound, it depends on the role of government - that's for the citizens to decide. Hope I've answered you - have to finish a report and get ready for travel tomorrow so won't be back for a while.

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@High Seas,

Thatcher sold off the family silver.

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@izzythepush,

Are you referring to the national railroads. Rather badly tarnished back then, I'd say.

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@georgeob1,

I've got nothing to say to you.

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@izzythepush,

izzythepush wrote:

I don't need the History lesson, but it's refreshing to hear an American acknowledge that we paid our way in WW2. ...

Perhaps not a history lesson, but definitely a finance lesson, as provided in Keynes link you disdained - it clearly states the 1946 loan was to replace Lend-Lease monies, remitted in their entirety. Lend-Lease totalled $50 billion (=$1 trillion in 2011 $) of which Britain received $30 billion (=$600 billion).

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@realjohnboy,

realjohnboy wrote:

It has been all over the media that the Dems and Repubs are at loggerheads over raising our debt ceiling. If that doesn't happen, the country will default on its obligations and the economy of the U.S. and the world will collapse. ......

Thanks for the welcome extended to those who actually posted facts on your thread. I hope, but don't expect, you and your fellow liberals have revised your original position; markets (what Keynes referred to as "the invisible hand", a term coined by Adam Smith) have a way of forcing such revisions. Goodbye.

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US STOCKS-Futures rebound from plunge, Fed statement due

Quote:

Both the S&P and Nasdaq sank more than 6 percent and the Dow lost more than 5 percent on the heaviest trading volume since the "flash crash" in May 2010. The CBOE Volatility Index .VIX jumped 50 percent. For more stories, see [ID:nN1E776092]

"There's so much volatility out there that both up days and down days are viewed as overdone," said Cort Gwon, chief strategist at HudsonView Capital Management in New York. While futures pointed to strong gains, he added, "it's really fear and panic that continue to lead the market."

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Obama's words and ideas bring negative results.

It seems that the less Obama runs his mouth about this the better the markets react, but
every time Obama goes on TV to read his teleprompters the market reacts negatively.

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@H2O MAN,

I'm not sure that is really true, and I don't see the negative correlation with the stock market's movements that you assert. However, it is an observable fact that his rhetoric is no longer having the effect in mobilizing support that it had say two years ago.

I believe the difference is that, though his rhetoric is still focused on the political as-pects of campaigning for the next election and on mobilizing various elements of the electorate to support his political views, in the eyes of a very large number of Americans he should now be more focused on finding concrete, realizable solutions to the specific challenges before us instead of just playing the political blame game.

As a senator Obama voted against an increase in the debt ceiling for stated reasons nearly identical to those currently professed by the tea party. His current rhetoric directly contradicts his words then.

1 Reply

@georgeob1,

The negative correlation with the stock market's movements and
Obama's words is that when he speaks people can see and hear how
cold he is and how clueless he is. Obama does not instill confidence.

0 Replies

Tick, tick. August 2nd is the Debt Limit Armageddon. Or Not.

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