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Post by Chahta on Feb 12, 2024 14:26:11 GMT
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Post by archer on Feb 12, 2024 17:05:25 GMT
That comment about "Stop admiring the problem" is golden.
History is full of failures that were preceded by a period of "it doesn't matter". Truth is, nothing lasts forever, and everything changes eventually. I'm sure debt not mattering also will not last forever.
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Post by uncleharley on Feb 12, 2024 17:37:21 GMT
It doesn't matter until it matters. When it matters, it will be a crisis. So far, so good.
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Post by yogibearbull on Feb 12, 2024 19:17:36 GMT
All governments run on some annual deficits and total debts. Some of it is due to government accounting that is different from corporate accounting. In Hoover's time of depression-era economy, tight monetary policy and budget surpluses (fiscal policy) were considered to be sound practices, but the thinking is different now about central bank and fiscal policies. A general rule of thumb is that national debts under 100% of GDP are fine (Canada, Germany), it's yellow-light zone when they are slightly above 100% (US), but red-light zone if they approach 200% or are higher (Japan); the EU has the goal of 60% of GDP. Specific details may vary by sources - depends on what is included in national debt. www.imf.org/external/datamapper/CG_DEBT_GDP@GDD/CHN/FRA/DEU/ITA/JPN/GBR/USAen.wikipedia.org/wiki/List_of_countries_by_government_debt
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Post by Mustang on Feb 12, 2024 20:41:10 GMT
Debt isn't a problem... until people stop buying it.
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Post by steelpony10 on Feb 12, 2024 21:49:36 GMT
I hope no one that comments invests in Treasuries and other government paper. Chahta, I won’t ruin your thread, lol.
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Post by johntaylor on Feb 14, 2024 14:50:52 GMT
Sure, always competing priorities, but the US has a lot of domestic needs (e.g., border security).
In the face of 34 trillion debt, the Senate just voted 60 billion more to Ukraine, 14 billion to Israel, 2 billion for Red Sea operations, 4 billion for Taiwan, and 9 billion Gaza/humanitarian
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Post by Mustang on Feb 14, 2024 16:34:36 GMT
The article has a lot of partially right comments. 1. National debt can be beneficial. It can be used to stimulate the our economy during a recession. A dollar spent has a multiplier affect as it goes through retailers, wholesalers and manufacturers. Each layer creates jobs and their employees then spend. If not in a recession its just inflationary and Americans lose purchasing power.
2. Inflation is good for the debt/GDP ratio. The higher products and services are priced the lower the ratio. But inflation is the invisible tax. The debt/GDP ratio might go down but if wage increases don't keep up (driving inflation higher) the GDP will stop growing.
3. US debt is sold in three markets: domestic, foreign, and federal reserve. If the debt/GDP ratio gets too high investors won't stop buying but they will require higher interest rates. As it is today, what isn't sold to domestic and foreign investors will be bought by the federal reserve. Whether the increase in money supply causes inflation depends on where the elected government spent the money.
If the stimulus eventually hits the American consumer it will cause inflation. Just like it did during COVID. It seems to me that if the money is given to Ukraine and it buys military supplies from Germany then the stimulus will impact the German economy. Eventually all dollars have to come back to the United States but that may take a little time since the US dollar is the world's reserve currency and is traded among various countries. If there is a loss of confidence in the dollar than the value of the US dollar will drop. Foreign goods will become more expensive. And since the US relies on foreign products the US consumer is till facing a decline in purchasing power.
I think any benefits of deficit spending is temporary at best. Unfortunately, our elected government is addicted to it. It buys votes. I was once a balanced budget advocate and voted for Ross Perot. I was naive and didn't really understand the impact of a third party candidate. I still believe in a balanced budget but we are so deep in the hole I don't think we can go cold turkey. We have to come up with a way to wean ourselves out of this mess before we become a third world country and the world's reserve currency is Chinese.
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Post by archer on Feb 14, 2024 17:05:41 GMT
Personal and business debt is different but I believe some basic principles still apply.
For business and sometimes with the US economy, there are times when it takes money to make money. Done right, debt can create the potential to be paid off and then some. Too much debt vs what a business can return, can become a burden that is unable to overcome. Higher interest rates make it worse.
I don't think debt is a problem, but excessive debt is, and IMO the US has more debt than is healthy.
Perhaps it is sustainable as long as there are no better alternatives. That is an "along as" I am not comfortable with.
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Post by yogibearbull on Feb 14, 2024 17:22:37 GMT
In government accounting, there are no earnings, liabilities, assets, depreciation, etc. If the Congress & President approve $xyz billions for a dam, bridge, highway, etc, it is all spent and the money looks gone. No company can get by with that type of accounting. So, government deficits should be looked at differently than personal or corporate debt.
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Post by mozart522 on Feb 14, 2024 21:27:36 GMT
The only way out of this is to raise taxes and cut spending to some degree. Lowering taxes on individuals and corporations and both parties printing 8 trillion in paper money to buy votes has made the problem even worse. Nothing good will happen on this front, IMO, until we get a congress that will be willing to get things done through compromise. Extremes on both sides are hurting us.
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Post by gman57 on Feb 14, 2024 22:53:02 GMT
Debt Smept... I've been reading the same thing for over 30 years now. Maybe, maybe, maybe someday it'll be a crisis? I'll probably be long gone if it ever happens. When YOU print the money you can keep that wall of worry just over the horizon. Now if something else ever becomes the world currency reserve then I'll wor.... ahh never mind I'll be gone.
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Post by archer on Feb 14, 2024 23:06:16 GMT
In government accounting, there are no earnings, liabilities, assets, depreciation, etc. If the Congress & President approve $xyz billions for a dam, bridge, highway, etc, it is all spent and the money looks gone. No company can get by with that type of accounting. So, government deficits should be looked at differently than personal or corporate debt. True it is different in the way you state, but isn't is similar in that dams, bridges, etc. aid in GDP? I always looked at GDP as sort of like earnings for a business, at least in the context of whether or not the US is over extended, hence the significance of debt vs GDP.
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Post by Capital on Feb 14, 2024 23:09:27 GMT
I'm just happy to have T-Bills and T-Bonds to buy.
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Post by yogibearbull on Feb 14, 2024 23:17:46 GMT
archer, I agree that some national debt as % of GDP is fine - as implied in my 2 previous posts. The current threshold is around 100%.
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Post by Chahta on Feb 15, 2024 1:16:04 GMT
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Post by Chahta on Feb 15, 2024 1:19:18 GMT
archer, I agree that some national debt as % of GDP is fine - as implied in my 2 previous posts. The current threshold is around 100%. Actually 120% per the article I posted above.
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Post by gman57 on Feb 15, 2024 1:47:49 GMT
Oh, it's a big deal. I'm just saying people have been saying it's a big deal for 30+ years and nothing has been done about it. The government doesn't react until in crisis mode. When is that crisis going to happen? 5 years? another 30 years? Who knows.
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Post by Norbert on Feb 15, 2024 6:26:34 GMT
For a deep dive into the issue of high national debt, read this ... carnegieendowment.org/chinafinancialmarkets/86397#. Snippet: "As the impact of a high debt burden eventually causes growth to slow, this slower growth in turn raises the existing debt burden and causes new debt problems to emerge in sectors once though relatively safe. These dynamics in turn reinforce factors that caused growth to slow. It is notable that in almost every case in history when a country’s rapid growth has been associated with even more rapid growth in its debt burden, the subsequent adjustment has always turned out to far more difficult than even pessimists had predicted. People have always systematically underestimated the positive impact on economic activity of rising debt and the negative (and asymmetrical) impact on economic activity of the subsequent adjustment. There is little reason to believe that the future will be much different." Basically, increasing debt that creates high, real sustainable increases in growth isn't a problem. But, building bridges to nowhere, or handing out cash like it's confetti, will lead to problems. As investors, we have to wonder if high stock market prices are simply the result of rapidly increasing debt, not of real growth. That could turn out badly. N.
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Post by mnfish on Feb 15, 2024 11:51:39 GMT
From the CBO Director’s Statement on the Budget and Economic Outlook for 2024 to 2034 - In the projections we released today, the deficit grows from $1.6 trillion in 2024 to $2.6 trillion in 2034. Measured in relation to economic output, deficits during that period are about 50 percent larger than their historical average over the past 50 years. Net interest costs are a major contributor to the deficit Also boosting deficits are two underlying trends: the aging of the population and growth in federal health care costs per beneficiary Measured in relation to economic output, federal debt held by the public rises from 99 percent in 2024 to 116 percent in 2034, surpassing its historical peak. Then it continues to rise, reaching 172 percent by 2054. From 2024 to 2033, the deficit is about 7 percent smaller than we projected last year, primarily as a result of the Fiscal Responsibility Act of 2023 and subsequent continuing resolutions. Together, those laws reduce the growth of discretionary spending. Including the effects on debt service, legislative changes reduce deficits by $2.6 trillion over the next 10 years. In our projections, the deficit is also smaller than it was last year because economic output is greater, partly as a result of more people working. Two key factors partially offset that deficit reduction relative to last year’s projections. First, net interest costs rise as a result of higher interest rates. Second, the costs of energy-related tax provisions are much higher than the staff of the Joint Committee on Taxation originally projected. Since February 2023, when CBO published its last full economic forecast, the agency has lowered its projections of economic growth and inflation (as measured by the PCE price index) for 2024. CBO also expects interest rates to be higher from 2024 to 2027 than it projected last year
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Post by Chahta on Feb 15, 2024 12:01:53 GMT
I hardly believe anything the government puts out. Predicting 10 years into the future is dumb. Another covid could happen or WW3. Budget deal, the deficit is slowing. Just means the debt grows slower.
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Post by Chahta on Feb 15, 2024 12:09:49 GMT
It doesn't matter until it matters. When it matters, it will be a crisis. So far, so good. It’s funny that the country operates in crisis. SS and Medicare must not be in crisis yet, otherwise they would be repaired. But debt is closely tied to these two. What do we get for all this debt? Victory in Ukraine? Security in Israel? Free solar panels for all citizens? No more spam phone calls and phishing emails? Just seems a tremendous waster of $357b. The point isn’t for me to bitch but when intelligent people like Dimon speak up it’s important.
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Post by mozart522 on Feb 15, 2024 13:00:22 GMT
Unfortunately, congress always wants to kick the can down the road because hard decisions lose them votes. Eventually, they will deal with SS, medicare, debt, and taxes, but only when they have no choice. The problem is crisis interventions may not generally have optimal outcomes because options may be limited. But then, I always do my taxes in January...
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Post by mnfish on Feb 15, 2024 13:33:52 GMT
I hardly believe anything the government puts out. Predicting 10 years into the future is dumb. Another covid could happen or WW3. Budget deal, the deficit is slowing. Just means the debt grows slower. From the Congressional Committee for a Responsible Federal Budget The gross federal debt is the sum of virtually all debt the federal government owes, including what it owes to itself. Specifically, gross federal debt is the sum of debt held by the public and intragovernmental debt. (on 09/23) "As of today, the gross debt is $33.0 trillion" ( 120% of GDP from the article from Chata) Debt held by the public is all debt that the federal government owes to those outside of the federal government. (on 09/23) "As of today, federal debt held by the public is about $26.2 trillion" ( 99% of GDP is what CBO used) I learned something about "debt" and the 2 different measures used. Not that it really matters, IMO. As far as projections are concerned, here is a snippet from CBO in Feb 2020 (pre Covid) "In CBO’s projections, federal debt held by the public reaches $17.9 trillion at the end of 2020." It was $27.7T in Q4 2020. Now it's $33.1T.
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Post by Chahta on Mar 4, 2024 23:10:31 GMT
Just heard on the news: for each dollar the GDP rose last year we spent $2.50 in debt to make it happen. Does this even make any sense?
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Post by mnfish on Mar 15, 2024 12:00:05 GMT
Just heard on the news: for each dollar the GDP rose last year we spent $2.50 in debt to make it happen. Does this even make any sense? Q4-2022 to Q4-2023 Debt rose $2.582T Q4-2022 to Q4-2023 GDP rose $1.536T I come up with $1.68 - Is that correct? "Since June (2023), the last two $1 trillion jumps occurred in about 100 days." CNBC Mar 1 If GDP grows 2% from Q4-2023 ($27,944T) that would be an increase of $558.9B. On its current trajectory, debt would be about $36.5T or an increase of $2.3T.
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Post by daddymisc on Apr 4, 2024 14:38:17 GMT
Funny thing about National Debt.
When congress (both parties) passes the budget, we know the debt will increase but suddenly we are concerned now - is it because Biden (Elected Democratic) is the president? Was 27T debt OK in 2020 when Trump was president?
Better discussion should be - what is holding us from passing 'Balance' budget law?
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Post by archer on Apr 4, 2024 15:11:05 GMT
Funny thing about National Debt. When congress (both parties) passes the budget, we know the debt will increase but suddenly we are concerned now - is it because Biden (Elected Democratic) is the president? Was 27T debt OK in 2020 when Trump was president? Better discussion should be - what is holding us from passing 'Balance' budget law? On the main page of this forum under "Off Topic" reads "discuss anything here except politics" Sometimes there is a grey area between politics and subject at hand, in this case national debt. I'm thinking your post is past the grey area. But to answer the better discussion question, I believe it is greed (not wanting to cut back goods and services) and avarice (not wanting increase taxes or effort needed to generate money.
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Post by johntaylor on Apr 4, 2024 16:04:37 GMT
Debt as a percentage of GDP sounds better when you are fighting WW II versus some later projects, eh?
Reading a 1979 novel where the author observes: "There is a debt of perhaps two trillion dollars out there...and there is not one chance in hell it can ever be paid back."
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Post by anovice on Apr 4, 2024 18:00:26 GMT
Debt as a percentage of GDP sounds better when you are fighting WW II versus some later projects, eh? Reading a 1979 novel where the author observes: "There is a debt of perhaps two trillion dollars out there...and there is not one chance in hell it can ever be paid back." Please share with us which later projects that you have in mind.
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