What's wrong with US national debt?

[Harv]

You'll find a "B" at the beginning of the respective version of "gnp" in not just most romance languages but in virtually all germanic* languages as well.
Like this:

Bruttonationalprodukt
Bruttotjóðarúrtøka
Bruto nationaal product
Bruttonationaleinkommen

*Except English of course.

Beer National Production

Does that work? The ratio of debt to beer produced nationally is simply too high. The government is drinking all of our beer!

 

[Zack]

I don't see a problem. The pills are working fine.

You'll be wearing that red dress* in no time.

<creepy ass image snipped>

*pun included.

To get this straight, someone from Greece is making fun of the USA #1's debt??

 

[Kyriakos]

Since the pic was, of course, from Requiem for a Dream, it alluded to the death of the murican dream, as well as the petitions for redress to follow. Just a harmless sarcasm, sorry mrUSA#1

 

[Harv]

Here is what I have trouble understanding - Given:

The US Federal Defecit, in Billions of Dollars and Percentage of GDP (FY14 750B, 5%?)
The US GDP (Gross Domestic Product) Growth Rate (1 or 2%?)
The Ferderal Reserve Bond Buying Program (75B/mo = 900B?)

How can US Treasury bonds possibly be a good investment? The interest rate should cover the inflation rate, but I think with the Federal Reserve buying all the bonds, the Federal Defecit is essentially being printed, and inflation will rise.

Since the USA also runs a trade defecit, I suppose this cuts into the inflation rate, as US dollars are being exported.

I struggle with this question. I do not see a happy ending.

 

[Cutlass]

Here is what I have trouble understanding - Given:

The US Federal Defecit, in Billions of Dollars and Percentage of GDP (FY14 750B, 5%?)
The US GDP (Gross Domestic Product) Growth Rate (1 or 2%?)
The Ferderal Reserve Bond Buying Program (75B/mo = 900B?)

How can US Treasury bonds possibly be a good investment? The interest rate should cover the inflation rate, but I think with the Federal Reserve buying all the bonds, the Federal Defecit is essentially being printed, and inflation will rise.

Since the USA also runs a trade defecit, I suppose this cuts into the inflation rate, as US dollars are being exported.

I struggle with this question. I do not see a happy ending.

When investing, investors look at 2 factors (among many, but we'll stick with the 2 for the purpose of your question). 1 is return on investment, that is, how much money do you stand to make. 2 is return of investment, that is, how safe and secure are you that you will get your money back at all. No investment in the entire world is more likely to allow you to get your money back than US bonds. It is, by a large margin, the safest investment which exists. And because of that, we can always sell more at low rates.

 

[El_Machinae]

That said, t-bills can be a bad investment. IIRC, the war bonds that patriotic people bought from the US gov't in WWII ended up giving negative returns due to inflation.

 

[Antilogic]

So is Hygro returning to this thread?

 

[classical_hero]

While the numbers right now aren't too bad, continuing to have the debt climb will eventually be a bad thing, but as long as we are seeing a trend in yearly deficits coming down, then soon we will see a net positive and slowly bring down the debt.

 

[duckstab]

Yes, the national debt is getting bigger. And Cavlancer was not referring to the deficit.

I stand corrected.

While the numbers right now aren't too bad, continuing to have the debt climb will eventually be a bad thing, but as long as we are seeing a trend in yearly deficits coming down, then soon we will see a net positive and slowly bring down the debt.

But this is what I meant. When people make overanxious pronouncements about the national debt it's almost immediately followed by calls to bring down the deficit through spending cuts.

 

[Zack]

But this is what I meant. When people make overanxious pronouncements about the national debt it's almost immediately followed by calls to bring down the deficit through spending cuts.

And they never articulate exactly why the debt is intrinsically bad.

 

[KMRblue1027]

While the numbers right now aren't too bad, continuing to have the debt climb will eventually be a bad thing, but as long as we are seeing a trend in yearly deficits coming down, then soon we will see a net positive and slowly bring down the debt.

You never want to see a real surplus though, all that leads to is artificial tightening of the money supply aka deflation. We already have low inflation tipping the scale any farther would be disastrous for the economy in general.

 

[Cutlass]

That said, t-bills can be a bad investment. IIRC, the war bonds that patriotic people bought from the US gov't in WWII ended up giving negative returns due to inflation.

But they at least get their nominal face value back. Many other investments don't even get that. Particularly in bad times. So when times are bad, more money flees to safety. Safety is T-bills.

 

[CavLancer]

No, it's not. The federal deficit is falling. Fast. In fact, some economists are worried it's falling too fast.

Congratulations America Your Deficit Fell 37% in 2013

Long term deficits are a problem. But there's a right and a wrong time to attack them. Now is the wrong time, when the economy is still wheezing along. The right time is to do so when things are humming along and strong federal revenues can be used to pay down the deficit.

This to me is double talk. Sure, we were spending way, way too much and we're now spending way too much. Woohoo.

Thanks for the answers folks, sorry I can't agree that we're not spending too much. Something called "bite the bullet" emerged from the WW1 generation iirc. We need to cut everything until spending and income is the same.

Should have done it in the 70s when the balanced budget amendment first came up that I know of. Politicians who wanted to bleed us dry paying off their constituencies in return for votes shot it down. Now, things are worse and the politicians are crying there's not enough money.

 

[Zack]

We need to cut everything until spending and income is the same.

But why do they need to be equal?

edit: And a different question - why not raise income instead?

 

[CavLancer]

Just wait, you'll find out.

 

[Zack]

What a lame cop-out.

 

[CavLancer]

Whatever works for you Zack. Sorry I wouldn't take the bait.

 

[Zack]

what bait? Of actually explaining your position?

 

[CavLancer]

There's explaining my position and explaining my position to a troll. The first I would do, but not the second.

 

[Zack]

How am I trolling? You haven't explained yourself at all. This is a discussion forum, not a monologue forum.