This Guy Has It Exactly Right Concerning The Debt

[FaninAma]

It's all theatrics and it is the unfunded mandates that will finally catch up to us....not the debt. He is also correct that the debt and entitlement mandates are making indentured servants out of the next several generations.

http://finance.yahoo.com/blogs/daily-ticker/america-declare-bankruptcy-doug-casey-124119100.html

What we are doing to our kids is immoral.

Another article that puts the problems facing the country in perspective:
http://finance.yahoo.com/blogs/the-exchange/treasury-already-minted-two-trillion-dollar-coins-005206800.html

And you wonder why Obama and the Democrats refusal to acknowledge and seriously deal with entitlement cuts/reforms irritates me so much. The GOP is far from perfect but at least they are acknowledging that we have a problem.

[cleller]

As long as young people are able to refuse to be educated, and reproduce without toiling, it will all be worth it. It must be our fault that they are so stupid, criminal and lazy, so our children deserve the burden.

[TheHumanAlphabet]

The Progressives in education don't want the upcoming generation to know anything about civics. How else are they able to perpetrate their agenda onto Americans? If people understood civics, understood capitalism and understood facism/socialism, none of this **** would be going on...Soon we will be at a tipping point where more people are taking than putting in...Then if we have guns, there will be a revolution and change in government, if not, Socialist States of America here we come...government will control and people will be beholding to the government for food and shelter...

[badger]

The kids in Greece are moving to other countries to get educated, to get jobs, to make their future and their own families' homes. If such a country-in-debt situation were to strike the U.S., I would expect the future generations to do the same, rather than stay behind and payoff their parents', grandparents', great-grandparents' (and so on) debts.

[FaninAma]

As long as young people are able to refuse to be educated, and reproduce without toiling, it will all be worth it. It must be our fault that they are so stupid, criminal and lazy, so our children deserve the burden.

And it is amazing that the voters under age 30 support Obama by a large majority.

[FaninAma]

The kids in Greece are moving to other countries to get educated, to get jobs, to make their future and their own families' homes. If such a country-in-debt situation were to strike the U.S., I would expect the future generations to do the same, rather than stay behind and payoff their parents', grandparents', great-grandparents' (and so on) debts.

I agree. The same thing is happening in Spain.
http://www.businessinsider.com/spain-risks-losing-an-entire-generation-to-unemployment-2012-2

[pphilfran]

If we go under he entire world sinks with us so there will be no place that would be worth a chit to run to....

[FaninAma]

If we go under he entire world sinks with us so there will be no place that would be worth a chit to run to....

I agree. we are the world's liferaft and why the world keeps buying our debt. That is why it is even more insane that our political and economic leaders refuse to make the tough decisions to get our financial house in order. I tis almost like they want the entire world to suffer.

[pphilfran]

We both agree that it is one hell of a economic/political mess but we tend to disagree on path of improvement...

[FaninAma]

We both agree that it is one hell of a economic/political mess but we tend to disagree on path of improvement...

I'm not so sure we do. We might disagree on how agressive we go about correcting the problem because I feel we are running out of time.

[pphilfran]

Probably true...you want to be more aggressive and I want to wait and get the economy running at a higher rate...

[TheHumanAlphabet]

If we go under he entire world sinks with us so there will be no place that would be worth a chit to run to....


Its about that way now...If you want to be left alone, work hard and enjoy your fruits of labor the way you chose where does one go? The U.S. unfortunately is about the only place left. Once we go down, one world government and black helicopters here we come...

[badger]

Anyone else watch Futurama? I felt this one episode's premise (http://www.tv.com/shows/futurama/a-big-piece-of-garbage-1541/) fit here:

1- Garbage that was launched into space 1,000 years ago is now coming back to destroy Earth.
2- They build another giant garbage heap to combat the first one.

Farnsworth: If my calculations are correct, this garbage ball will knock the other garbage ball directly into the sun.
Wernstrom: And if my calculations are correct, we're all going to die horribly.

3- So they succeed in launching a new garbage ball into space, saving the present day, dooming the future. Yay!

Leela: Should we really be celebrating? I mean, what if the second garbage ball returns to Earth like the first one did?
Fry: Who cares? That won't be for hundreds of years.
Farnsworth: Exactly! It's none of our concern.
Fry: That's the 20th century spirit!

[FaninAma]

Badger, it seems that attitude is becoming more and more prevalent. I think when we don't consider the consequences of our actions on our kids and future generations we lose a lot of our humanity. We start creating a very dangerous social dynamic of everybody being out just for themselves without consideration for the consequences it holds for the future. And if we don't have any consideration for the consequences of our actions on kids and future generations we sure as hell won"t have consideration for the consequences on our fellow citizens whom we share this society with.

If there is a God then our only connection to him is through our ability to procreate and how we are able to selflessly subordinate what our needs are for the needs of our kids and future generations.

I am as empathetic as the next person in regards to the plight of poor children but I have worked with families chained to government handouts for a long time and I know that the system we have now is harmful, addicting and counterproductive to giving kids what they really need......attentive, mature, loving parents who put their children's needs first. The first requirement for having kids should be that you can take care of yourself adequately first before you take on the responsibility of bringing kids into this world.

[XingTheRubicon]

Probably true...you want to be more aggressive and I want to wait and get the economy running at a higher rate...

Serious question...

Rounding off, right now we're at 2.5 T in revenue and 3.5+ in spending...(ala the 1T deficit)

If we were at 4% GDP growth and got down to 5% unemployment (or whatever the optimal realistic recovery numbers that everyone wants)...... what would that leave us at deficit-wise and moving forward debt/interest on debt. In other words, how good would the economy have to improve (compared to past economic booms)...to get to at least one balanced year with spending close to 3.5T?

[badger]

Fanny, I just don't see how anyone can expect a majority of people to not act selfishly. They may find righteous ways to justify being selfish (You have to take care of yourself before you can take care of others! Charity starts at home!) but regardless, most people will act selfishly at least some of the time.

Thus, perhaps it's time to pitch the "save for tomorrow" campaign with this in mind. We're not saving for our children's future, we are saving for our own future. We don't want the gravy train to grind to a screeching half, we want things to be acceptably good for the long term. Thus, we're going to deal with driving around a Chevy Cobalt for a bit rather than a Corvette, so that we don't end up on a bicycle in a few years (ewwww, exercise! boooo).

It's like the Republican/Democrat thing. I strongly feel that if the Republicans sold themselves to minorities, women and young people more, they'd draw more of them in. Hell, if Democrats can recruit Warren Buffett, then why can't Republicans recruit college students?

[diverdog]

Serious question...

Rounding off, right now we're at 2.5 T in revenue and 3.5+ in spending...(ala the 1T deficit)

If we were at 4% GDP growth and got down to 5% unemployment (or whatever the optimal realistic recovery numbers that everyone wants)...... what would that leave us at deficit-wise and moving forward debt/interest on debt. In other words, how good would the economy have to improve (compared to past economic booms)...to get to at least one balanced year with spending close to 3.5T?

I think 3.5%-4.0%.

[pphilfran]

Serious question...

Rounding off, right now we're at 2.5 T in revenue and 3.5+ in spending...(ala the 1T deficit)

If we were at 4% GDP growth and got down to 5% unemployment (or whatever the optimal realistic recovery numbers that everyone wants)...... what would that leave us at deficit-wise and moving forward debt/interest on debt. In other words, how good would the economy have to improve (compared to past economic booms)...to get to at least one balanced year with spending close to 3.5T?

I will give it my best shot...

Revenue would be in the 19.0% GDP range (imo best case)
We are currently at 15.5 -16% of GDP

We would gain 3% of GDP in revenue...say 16 trillion GDP...480 billion..

Spending on less unemployment benefits, Medicaid, food stamps, and other peripherals would get at least 200 billion...

So you get the economy running and nearly 2/3rds of the deficit are wiped away...

But then debt servicing will eat up a couple hundred billion of the savings...

So...half...we could cut half the deficit by improving the economy...

And it won't impact one single paycheck negatively...

[pphilfran]

Slowly cut a couple hundred billion out of the military
Raise SS and Medicare age requirements slowly

Now we are down to a quarter trillion...

[XingTheRubicon]

So, best case (with all the cuts and economic growth), we're 250 billion short.


Ok, even if we had these optimal results for 4 years straight...we'd be at or around 17.5T in debt.

Doesn't servicing the debt become an even bigger issue going forward...don't we have to run a surplus at some point? and if so how much and how quickly

[XingTheRubicon]

also, we might not want to ban assault weapons just yet...because that's what it's gonna take to get R's to cut 200B (30%?) from defense and the Donks to cut unemployment, caid and food stamps by 200B.


also, won't these cuts make it pretty difficult to attain 3% GDP growth?

[FaninAma]

So, best case (with all the cuts and economic growth), we're 250 billion short.


Ok, even if we had these optimal results for 4 years straight...we'd be at or around 17.5T in debt.

Doesn't servicing the debt become an even bigger issue going forward...don't we have to run a surplus at some point? and if so how much and how quickly

And the debt doesn't include the future unfunded mandates. Even if the retirement age is raised and Medicare is means tested and cut the nation's aging demographics will eventually devestate the budget. Tinkering around the edges won't get the job done.

Plus there has been nothing mentioned that adresses the rising enrollment on SSI, SNAP, subsidized housing or the new funding requiremtns of the new health care legislation. There is a reason most of the spending mandates kick in either after Obama leaves office or in his last year in office.

[pphilfran]

So, best case (with all the cuts and economic growth), we're 250 billion short.


Ok, even if we had these optimal results for 4 years straight...we'd be at or around 17.5T in debt.

Doesn't servicing the debt become an even bigger issue going forward...don't we have to run a surplus at some point? and if so how much and how quickly

Now, I am going to make your head explode...

17,5 trillion debt
16 trillion economy
4% growth
250 billion deficit each year

Current 108% debt to GDP

2017
GDP 19 trillion
Debt 18.9 trillion

100% debt to GDP...

[hawaii 5-0]

Phil, another unfunded war or two and your figures will be even more astounding.


5-0

[FaninAma]

Phil, another unfunded war or two and your figures will be even more astounding.


5-0

Yes, but when the economy craters in the next 2 years are you still going to blame it on Bush?

[badger]

Yes, but when the economy craters in the next 2 years are you still going to blame it on Bush?

I'll admit that I (and likely other Republicans) may blame Obama even into the next guy's second term :)

[pphilfran]

Phil, another unfunded war or two and your figures will be even more astounding.


5-0

In DC there is nothing better than a good war....

This thing is doable at current debt levels and interest rates...

Do that basic stuff and then freeze spending at that years level...3 or 4% inflation and we would be making great progress...

[pphilfran]

Yes, but when the economy craters in the next 2 years are you still going to blame it on Bush?

Let's see how things look if the economy craters...

17,5 trillion debt
16 trillion economy
2% growth
650 billion deficit each year (income tax revenue would dive and you would lose much of the 480 billion gain...social services wouldn't decline a hundred bullion or so)

Current 108% debt to GDP

2017
GDP 17.2 trillion
Debt 19.5 trillion

113% debt to GDP...

[FaninAma]

In DC there is nothing better than a good war....

This thing is doable at current debt levels and interest rates...

Do that basic stuff and then freeze spending at that years level...3 or 4% inflation and we would be making great progress...

No, it won't. Again, the demographic issues facing the country are similiar to what Europe and Japan are facing now. Even if you cut a little off entitlement reimbursement and raise the age for recipients the retiring Baby Boomers are going to crater the system. And you apparently have a lot more faith that the surge in enrollment in other social programs like Medicaid, SNAP, Social Secutiry Disability etc can be easily reversed than I.

Now, lets address your 3 to 4 % inflation projection. At some point the Fed is going to have to unwind their balance sheet. It won't be easy to do that without collapsing prices and causing deflation. And, there is always the possibility that if the Fed has to continue its monetary injection into the system we will get higher inflation which will result in higher interest rates and a much higher cost of servicing the debt.

Talk about walking a tight rope. Cut back on QE too quickly and we fall into another economic contraction. Cut back on QE too late and inflation hits with all the added pressure it places on servicing debt including the collapse of the bond market.

If the Fed and other central banks hadn't started engaging in their massive monetization programs I would say your plan had a chance. At this point there are just too many moving parts for the economy to come in for a soft landing and start expanding with real growth (growth not fueled with government debt).

I suspect the inflationary course will be the path the Keyensian morons choose.....or have already chosen.

[pphilfran]

You say a crash is going to happen...

I hope it doesn't and I cling to any small ray of sunshine...

[pphilfran]

You gotta remember that everyone in our economic league has a losing record and we have the best economic losing record around...

Europe is still stumbling around and that buys us a couple of years...their bullpen is weak and batting is under par

[FaninAma]

You say a crash is going to happen...

I hope it doesn't and I cling to any small ray of sunshine...

Debt always crashes. It never grows into infinity. Debt is useful for growth but it is dangerous in undisciplined hands.

[XingTheRubicon]

Ok, so percentage wise, what is the chance at January 18, 2018 (5 years from today), that the National Debt will be below 17 Trillion. (without defaulting)

20%?

1%?

[FaninAma]

Ok, so percentage wise, what is the chance at January 18, 2018 (5 years from today), that the National Debt will be below 17 Trillion. (without defaulting)

20%?

1%?

0.000001% with the caveat that we haven't declared bankruptcy. In fact i think it is a done deal that by 2020 our national debt will exceed $22 trillion becuase the entire system is so broken that it is totally dependent on deficit spending to survive. The acceleration of the debt we have seen over the past 8 years will continue. At some point it will convert from linear acceleration into exponential.

[XingTheRubicon]

<buying more silver>

ok, then

<buying more silver>

[pphilfran]

It doesn't need to be below 17 trillion...the debt to GDP is far more relevant...

We have a couple years to find a way to get four percent growth..do my suggested cuts and nobody gets a big hit to the pocketbook...

A dropping debt to GDP would ease concerns significantly...magically hold things together for 5 or 6 years and we are golden...

[XingTheRubicon]

It doesn't need to be below 17 trillion...the debt to GDP is far more relevant...

We have a couple years to find a way to get four percent growth..do my suggested cuts and nobody gets a big hit to the pocketbook...

A dropping debt to GDP would ease concerns significantly...magically hold things together for 5 or 6 years and we are golden...

So, in other words, short everything except precious metals and weapons...


joking....sort of

[pphilfran]

If things go right we could avoid draconian cuts and come out smelling like a rose...odds of that happening are slim to none but there is a chance...

[pphilfran]

Pubs offering a three month extension on the ceiling...dems raising hell...I side with the dems...let's get this ceiling **** over with..

[okie52]

Pubs offering a three month extension on the ceiling...dems raising hell...I side with the dems...let's get this ceiling **** over with..

Shouldn't offer any compromise at this point...they already caved on the fiscal cliff.

[FaninAma]

It doesn't need to be below 17 trillion...the debt to GDP is far more relevant...

We have a couple years to find a way to get four percent growth..do my suggested cuts and nobody gets a big hit to the pocketbook...

A dropping debt to GDP would ease concerns significantly...magically hold things together for 5 or 6 years and we are golden...

Are you shocked I disagree? I would agree if government spending weren't included in the calculation of GDP. But is seems a bit disingenuous to me to go deeply in debt then count that deficit spending as legitimate GDP growth. it would be akin to you or I borrowing a lot of money from one bank then using that borrowed money to claim our assets warranted us being able to borrow more money from another bank. If anything government deficit spending should be deducted from the GDP because the government does not create any real wealth. It takes and it redistributes wealth. And when it engages in deficit spending it is taking wealth from future generations and redistributing it the greedy SOBs that keep voting for the politicians that promise them the most stuff.

[SoonerorLater]

It's impossible. Can't be fixed. GDP is just about worthless indicator of wealth and productivity.

GDP = Consumption + Investment + Government spending + (Exports - Imports)

Guess which two components are going up and which two are going down.

[pphilfran]

Even with it's flaws debt ratio is far better than just a multi trillion number....

Your slash and burn on spending cuts will limit growth to 1% or less...hell, that could happen without spending cuts...unemployment will go up...additional benefits to the unemployed...like I showed you up above you will end up adding more to the deficit..

The focus must be on getting the economy to 4% growth..and my method, unlike yours, gives us a chance of curbing the future cost increases...

[FaninAma]

Get rid of dynamic accounting. Freeze spending until revenues equal outlays.

[diverdog]

Get rid of dynamic accounting. Freeze spending until revenues equal outlays.

What do you mean by dynamic accounting? Is this a reference to the practice of baseline budgeting vs zero based budgeting?

[FaninAma]

What do you mean by dynamic accounting? Is this a reference to the practice of baseline budgeting vs zero based budgeting?

Yeah, I meant baseline budgeting. My accountant's company name is Dynamic accounting. Thanks.

[diverdog]

Yeah, I meant baseline budgeting. My accountant's company name is Dynamic accounting. Thanks.

Hope you did not think I was being smart. I just thought congress figured out a new trick.

Do you or Phil know anything about the economic theory of the velocity of money? Do either of you know how it relates to QE2? I am trying to get my head around how it works because QE2 seems like it did not have the desired effect of injecting collateralized liquidity into the market.