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Will America's debt doom us?

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Re: Will America's debt doom us?

#71

Post by [deleted] »

theflyinghorse wrote: post #60
dustingetz wrote: post #20

Earlier quoted context omitted.

The book "Looting Greece" by progressive economist Jack Rasmus explains in technical detail the "twin deficit" strategy budget deficit is balanced by trade deficit, which hints at why USA has aircraft carriers stationed around the world, projecting power that tilts the free markets in its favor which is what makes this strategy work. Here is an excerpt: http://www.dustingetz.com/:rasmus-usa-twin-deficit/

I don't understand why US having military presence around the globe tilts the free markets in their favour. Realistically, no military outside of perhaps Russian could stand up against the US but I don't think US are outright forcing trade agreements at a gun point, or am I wrong?

[deleted]

Re: Will America's debt doom us?

#72

Post by Transfinity »

theflyinghorse wrote: post #60
dustingetz wrote: post #20

Earlier quoted context omitted.

The book "Looting Greece" by progressive economist Jack Rasmus explains in technical detail the "twin deficit" strategy budget deficit is balanced by trade deficit, which hints at why USA has aircraft carriers stationed around the world, projecting power that tilts the free markets in its favor which is what makes this strategy work. Here is an excerpt: http://www.dustingetz.com/:rasmus-usa-twin-deficit/

I don't understand why US having military presence around the globe tilts the free markets in their favour. Realistically, no military outside of perhaps Russian could stand up against the US but I don't think US are outright forcing trade agreements at a gun point, or am I wrong?

The United States has a variety of techniques for making sure its business interests get what they want. Aircraft carriers are one (see Iraq, and possibly Iran if things go south), CIA-sponsored coups another (Guatemala, El Salvador), economic sanctions a third (Iran again, Russia, much of Latin America). Negotiation at gun point often takes the form of crippling sanctions until and unless a US-friendly regime is in power - there's no actual guns, but there's also no free elections.

Noam Chomsky is a great resource if you want to go deeper on this topic.

Re: Will America's debt doom us?

#73

Post by sschueller »

theflyinghorse wrote: post #60
dustingetz wrote: post #20

Earlier quoted context omitted.

The book "Looting Greece" by progressive economist Jack Rasmus explains in technical detail the "twin deficit" strategy budget deficit is balanced by trade deficit, which hints at why USA has aircraft carriers stationed around the world, projecting power that tilts the free markets in its favor which is what makes this strategy work. Here is an excerpt: http://www.dustingetz.com/:rasmus-usa-twin-deficit/

I don't understand why US having military presence around the globe tilts the free markets in their favour. Realistically, no military outside of perhaps Russian could stand up against the US but I don't think US are outright forcing trade agreements at a gun point, or am I wrong?

Look up petro dollar and how anyone who tried to build an alternative was overthrown or invaded.

The US will use all its might if someone threatens the stability and dominance of the dollar.

Re: Will America's debt doom us?

#74

Post by Mikeb85 »

throwaway156503 wrote: post #69

I no longer know how to view these concerns. The only mechanism I now know of that creates money in modern economies in order to purchase goods and services directly, without obtaining funds from circulation from other businesses, is debt created from financial institutions. In order to have healthy economies and create money and move capital, you must therefore have debt. How did western economies function prior to…

Land is a type of capital, landowners could produce agricultural products, accrue wealth, and debt was a thing back in the day as well. Often projects would be bank-rolled by wealthy landowners or even royalty (who accrued their wealth by taxing others). Labour also used to be extraordinarily cheap (or free). Go back far enough, everything was produced by individual labour, and things were simply traded for other things.

Re: Will America's debt doom us?

#75

Post by taylodl »

treis wrote: post #59
0x445442 wrote: post #48

Earlier quoted context omitted.

> that the government can create for "free" One of the very smart things the U.S. has done is take a good portion of those printed dollars and invest in weapons which allow us to force the world to accept the same printed dollars. That's what really allows our government to be in that globally unique position. Resistance to this by other nations has various consequences. If you're a country that doesn't have a certai…

That's not really accurate either. Switzerland and Japan aren't out there regime changing countries but their currencies are valued. The dollar is valued because the US is the largest economy and has a history of sound monetary policy.

Not only that, but the Nixon administration cut a deal with the Saudis to ensure that all OPEC oil would be sold in US dollars. This creates a demand for US dollars.

Re: Will America's debt doom us?

#76

Post by wang_li »

metabagel wrote: post #65
mdorazio wrote: post #49

Earlier quoted context omitted.

Worth noting is that Clinton was president during the dot com bubble, which enabled that surplus... until the economy came crashing down a short while later. Also worth noting is that some of the policy changes of the Clinton white house + Greenspan federal reserve enabled the housing crash as well. I personally feel like we got a surplus only by taking out a mortgage on the next ~15 years of America.

Rather, President George W. Bush used the existence of the surplus as a reason to enact two tax cuts. Those tax cuts, their extension (mostly) by Obama, the Trump tax cuts, the wars in Iraq and Afghanistan, and sizable increases in the defense budget are the major contributors to the budget deficit and hence the accumulation of debt since 2001.

You left out the fact that nearly 2/3 of Americans are net tax recipients. Everything that the government does at all levels is paid for by either debt or the highest 40% of earners.

Re: Will America's debt doom us?

#77

Post by pjc50 »

NTDF9 wrote: post #47
pjc50 wrote: post #37

Earlier quoted context omitted.

The normal management of inflation by raising interest rates works by slowing economic growth. There's no reason to raise rates in a recession.

In a recession: People lose jobs Govt pays out more social security benefits Govt earns lesser tax revenue Govt interest payments on bonds are still at pre recession levels So, govt has to issue more bonds Nobody has the money to pay for those bonds Thus, interest rates would naturally rise. The fed could print money to buy bonds causing inflation or the fed could not print money causing rise in interest rates and fu…

True up to "nobody has the money to pay for those bonds": there's often a flight to safety in recessions of people moving money out of the stock market. Plus all the big international investors. Shortage of buyers is a risk but not one we've been close to so far.

One lesson of QE seems to be that the Fed can print money in a recession without causing inflation. Or at least only inflation of asset prices, not wage/consumer goods inflation.

Re: Will America's debt doom us?

#78

Post by pjc50 »

wang_li wrote: post #76
metabagel wrote: post #65

Earlier quoted context omitted.

Rather, President George W. Bush used the existence of the surplus as a reason to enact two tax cuts. Those tax cuts, their extension (mostly) by Obama, the Trump tax cuts, the wars in Iraq and Afghanistan, and sizable increases in the defense budget are the major contributors to the budget deficit and hence the accumulation of debt since 2001.

You left out the fact that nearly 2/3 of Americans are net tax recipients. Everything that the government does at all levels is paid for by either debt or the highest 40% of earners.

Seems reasonable - after all, those people have more money.

Re: Will America's debt doom us?

#79

Post by dpc_pw »

istjohn wrote: post #64
Apes wrote: post #50

It's always great to see an extremely intelligent person try to rationalize a core belief that's at direct odds with the cold, hard, and unforgiving reality they live in. The amount of mental gymnastics done here are Olympian, and this guy deserves a gold medal. However, even the fanciest mental tricks are never going to change the fundamental laws of reality. In the entire article he dances around second order effec…

On the other hand, top marginal tax rates are a fraction of what they were at their peak last century. We could double tax revenue at the drop of a hat, paying down our debt and ameliorating toxic wealth inequality simultaneously.

I agree that in principle the inequality is causing instability and , and as much as I detest socialism, I don't see a peaceful way out of where we are not involving the "tax the wealthy... a lot".

Some comments: income taxes are the most stupid taxes ever. Rich people don't have incomes, they have capital gains. Increasing income taxes hurts middle-class: the rich wannabe. We need to abolish income tax, and turn it into asset tax, or at very least increase the capital taxes significantly. Tax people that are already rich, not the ones that are motivated to try to get there! Once they get there - then you can tax them.

Having said that - the taxes can't be too high, because people don't like taxes and rich people have plenty of resources to run away with their wealth.

So... there's no really easy way to get out of this mess.

Re: Will America's debt doom us?

#80

Post by yasp »

dpc_pw wrote: post #67
plantain wrote: post #54

Earlier quoted context omitted.

>Low rates are a result of boomeres all over the world saving for retirement [citation needed] How did you come to that conclusion?

There is 70M of Boomers in US. (Generally) about to end a decade or two of their most productive years: highest skills, highest level jobs, house paid off, kids out, etc. - trying to save and invest enough to give themselves a good retirement. Just yesterday I was listening to some YT podcast and boomers own ~74% of all US economical activity. Many of them accepted low salaries, for the promise of pensions and so on.…

> How else would your explain negative interest rates?

Um, central banks that are charging negative interest on reserves.

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