Originally posted by aix_xpert:
3: This isnt relevant. Net private savings doesn't have any impact in the real world. Investments in the stockmarketare net zero (its savings for the investor but loans for the company). Second, it doesnt account for the quantityof thedebt that isn't owned by US buyers. So all the paper bought by China makes for a net negative adjustment. Finally, itdoesn't count other government debt, such as state or municipal debt which is also net positve for privatesavings. Infact, I would argue that if the government did not carry the debt, that the savings would be even better forthe economyas they would be supporting private business opportunity which maximizes the use of capital vs.governmententerprise which does not.
First, that is not at all how the "stock market" works. Second if I knew we were going to devolve into pedantry I would have usedtheterm "entities who do business in US dollars and are income constrained." As it stands it doesn't matter whether the entityisChinese or a Municipality, their desire to save US dollars affects the economy. If more people want to save versus loan andthegovernment is running a surplus then there aren't enough dollars to go around to buy what the economy can produce.
Originally posted by aix_xpert:
2: Yep. Which is seen as the interest rates continue to rise, yet the government has managed to eliminate ourabilityto control that rate by constantly lowering it to attempt to accelerate economic activity.
This is a giant non sequitor. "rates continue to rise" "constantly lowering" Do you agree or disagree that the only consequenceofexcessive debt is inflation?
Originally posted by aix_xpert:
1: So the solution to more debt is higher taxes. Yep. Which is why we need to manage the debt and not letitcontinue to grow simply for the day-to-day operation of the country. Otherwise, raising taxes only delaystheinevitable. At the current debt levels today, you would need to s
The solution to inflation due to an over heated economy is a tax increase. Why are tax increases bad? because they reducedemand, which is exactly what is needed to control inflation. what is the inevitable you speak of?
Originally posted by aix_xpert:
Again, I'm not against having debt. I'm not asking for the impossible of paying it off tomorrow. But we have to find abudget equillibrium. We cannot only generate more debt every year, or we will suffer massive inflation or default. That is the only end conclusion.
BTW, the country hasn't always had debt, but we've always had savings. Its just invested into other "private" entities(such as your bank who paid you a fair interest rate so they could loan it to other private entities). Its for this reason,that I believe that net private savings is a value that provides zero real economic benefit.
Justin
You are reaching unsupported conclusions. We are below full employment and have chronically low inflation indicating insufficient deficits, yet you are concerned about the debt. If you make the assertion that our current path is unsustainable then the burden is on you to show that. You know that an an involuntary default is impossible. The only danger is inflation, not hyperinflation mind you, and we have means to control that. There is no evidence that the debt is too high nor that it ever will be at our current pace.
We haven't always debt, you are correct. In our history we had one year with no debt. in 1835 the debt was zero. In 1836 we had the worst recession in our short history. The economy contracted 32%. In 1839 there was a worse recession yet. The economy contracted 34%. For context, the great depression was 27% and the great recession was 4.3%. Hard to conclude that net private saving have value from that record.
Consider our current situation. Even at record low interest rates, there are more dollars chasing savings than there are qualified borrowers. What happens to production when everyone wants to save? There is not enough money to buy the production and production contracts.
