EPTA Discussion of US Debt - Page 3
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stalking.d00m
213 Posts
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tube
United States1475 Posts
On April 09 2011 14:47 stalking.d00m wrote: To assume that a country like US will let itself die of economic starvation is naive in my humble opinion. well the thing about the US is that it's run by a bipartisan government so I think you're wrong, they don't seem to have much of a problem letting it die | ||
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jdseemoreglass
United States3773 Posts
On April 09 2011 14:51 tube wrote: well the thing about the US is that it's run by a bipartisan government so I think you're wrong, they don't seem to have much of a problem letting it die It's also much easier to die when you are in denial about your disease.  | ||
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andrewwiggin
Australia435 Posts
I love threads like this. I love them because I get to read every wannabe economist try and convince everyone the world's gonna end, the US will implode, blah blah blah. ...do you really think that the US, the country with the greatest number of billionaires, the country with the greatest military force in the world, the country with the greatest cultural impact in the world, the country with some of the smartest, brightest minds in the entire fricken world... ... is going to let itself fall apart, and not even realise it? Or do anything about it? HA!! you guise make me laff. User was temp banned for this post. | ||
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Broodwich
United States393 Posts
On April 09 2011 14:46 jdseemoreglass wrote: It is just as stupid to believe that diversifying in securities which have the same intrinsic value of paper money somehow protects you from the dangers of an all cash savings account in the modern economy. This isn't necessarily true. Most of the companies you would invest in have a large international presence and keep tons of capital overseas. They're not exclusively tied to the dollar or the US economy. | ||
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RebirthOfLeGenD
USA5860 Posts
I was wondering if anyone could answer why that is completely impossible, since I am sure if it had any merit some insane politician would be campaigning with that idea already. | ||
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Chocobo
United States1108 Posts
On April 09 2011 14:46 jdseemoreglass wrote: It is just as stupid to believe that diversifying in securities which have the same intrinsic value of paper money somehow protects you from the dangers of an all cash savings account in the modern economy. If you have savings, it has to be invested into something. It might be US dollars in a savings account, it might be gold coins, it might be mutual funds or real estate or rare baseball cards. The value of EVERYTHING is based on what it is worth to other people. Normally cash is pretty safe. If it starts to appear less safe, you may want to consider an alternative. That is the extent of what I'm saying and I can't see how that be looked at as stupid. | ||
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ampson
United States2355 Posts
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jdseemoreglass
United States3773 Posts
On April 09 2011 14:59 andrewwiggin wrote: lol... I love threads like this. I love them because I get to read every wannabe economist try and convince everyone the world's gonna end, the US will implode, blah blah blah. ...do you really think that the US, the country with the greatest number of billionaires, the country with the greatest military force in the world, the country with the greatest cultural impact in the world, the country with some of the smartest, brightest minds in the entire fricken world... ... is going to let itself fall apart, and not even realise it? Or do anything about it? HA!! you guise make me laff. The same exact arguments could be made about the financial giants such a AIG, Bear Stearns, and General Motors. You also have to understand how the political system in the U.S. actually works. You give way too much credit to our politicians if you think they have the understanding, political will, or social mandate to drastically increase taxation and decrease spending. The priority of of our elected officials is to get reelected and to avoid pissing anybody off. You also have to consider that the people who are in control of the finances are also the ones who are profiting from the failures of the system. I see this everyday in my home state of california, where every citizen agrees that changes must be made to prevent default, but the unions are perpetually unwilling to compromise on their salaries or pensions. | ||
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jdseemoreglass
United States3773 Posts
On April 09 2011 15:05 RebirthOfLeGenD wrote: I always wondered if it was possible to just tell everyone we owe money to to just fuck off. I mean I know geopolitically it would make us look like complete assholes and no one will want to lend us money anymore, but I think that would be a fine solution. It's not like there is any way to force the US to pay money to whoever it owes it to. I was wondering if anyone could answer why that is completely impossible, since I am sure if it had any merit some insane politician would be campaigning with that idea already. The problem that most people are explaining here is that debt is the tool we use to actually pay our obligations. We could tell everyone to fuck off, sure. But then when the next quarter comes around and we have bills to pay and not enough revenue to meet the bills, you need to borrow money. Except you won't be able to borrow money, because your reputation is in shambles. An individual could think the same way. They could decide to go on a credit card spending spree and then just declare bankruptcy. But in the long run, they will almost certainly regret it. | ||
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Avaloch
241 Posts
On April 09 2011 14:59 andrewwiggin wrote: lol... I love threads like this. I love them because I get to read every wannabe economist try and convince everyone the world's gonna end, the US will implode, blah blah blah. ...do you really think that the US, the country with the greatest number of billionaires, the country with the greatest military force in the world, the country with the greatest cultural impact in the world, the country with some of the smartest, brightest minds in the entire fricken world... ... is going to let itself fall apart, and not even realise it? Or do anything about it? HA!! you guise make me laff. You do realise that the bipartisan government cannot come to an agreement on the budget for congress right? If neither side is willing to compromise and swallow some pride, the budget will not be passed and congress cannot function. How is that not an indication that the government is falling apart? | ||
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Chocobo
United States1108 Posts
On April 09 2011 14:59 andrewwiggin wrote: ...do you really think that the US, the country with the greatest number of billionaires, the country with the greatest military force in the world, the country with the greatest cultural impact in the world, the country with some of the smartest, brightest minds in the entire fricken world... ... is going to let itself fall apart, and not even realise it? Or do anything about it? HA!! you guise make me laff. It's called denial, look into it. Many rich and powerful people lost a lot of money in the real estate market crash, and the subsequent economic downturn. Both the rich and the rest of the country wanted to prevent it from happening, but it couldn't be done. Certainly the country won't completely fall apart, but this is going to be an unavoidable problem. And due to our political system, no one will do anything about it until the crisis actually happens. On April 09 2011 15:05 RebirthOfLeGenD wrote: I always wondered if it was possible to just tell everyone we owe money to to just fuck off. I mean I know geopolitically it would make us look like complete assholes and no one will want to lend us money anymore, but I think that would be a fine solution. It's not like there is any way to force the US to pay money to whoever it owes it to. I was wondering if anyone could answer why that is completely impossible, since I am sure if it had any merit some insane politician would be campaigning with that idea already. I think this is exactly what will happen, except of course instead of "fuck off" it'll be "we're sorry, we're unable to meet our obligations" etc. The result is that other countries will stop funding the expansion of our debt (forcing us to cut spending), and will raise prices on goods sold to the US in order to make up for it. Everything we import, including gas, clothing, and many types of food would become much more expensive, and in time we all have to adjust to a somewhat lower standard of living. | ||
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gchan
United States654 Posts
On April 09 2011 11:36 jdseemoreglass wrote: What will not be reported in the official debt numbers, however, is that the United States federal government uses cash-basis, rather accrual-basis accounting, which is in violation of standard Generally Accepted Accounting Principles (GAAP), and utilizes a series of accounting labeling tricks which underscore the actual debt owed. In particular, "liabilities" are labeled transfer payments and are not considered a form of the public debt, though they do represent obligations which must be paid at some time in the future. How disingenuous it is to call these "transfer payments" can be seen in the fact that the Social Security payments have historically been used as a general slush fund for spending in the legislature and in fact is NOT transferred to future generations. While I do agree that the US has mismanaged it's debt, I wanted to clarify two technical things for other readers so as not to be misleading. The major portion of the US Government uses modified accrual basis accounting, not cash basis. With respects to the discussion, liabilities are still reported in the government wide statement of assets and liabilities (balance sheet), which includes all the government agencies together. That is, the transfer payments between different agencies are effectively offset against each other once all the individual government sections are consolidated. As a result of this, the government wide financial statement liabilities reflects what is owed to investors outside the government, and not necessarily what is owed between departments (typically in the form of US Treasuries). The other clarification is with how Social Security and Medicare is reported. While the overall Social Security/Medicare liability is not reported directly in the government wide statement of assets and liabilities, they are discussed in the Management Discussion and Analysis (MD&A). And in this section, they discuss their forecasted liabilities, incoming revenue, etc. This is actually comparable to pension fund accounting used by GAAP. In GAAP, pension funds obligations are only disclosed in MD&A; the only part reported directly on the financial statements is if the net assets/obligations of the fund have an abnormally large annual fluctuation. I point out these two things because I want to make something clear--the government financials aren't necessarily trying to deceive the public, which the OP is implying. There is transparency in liabilities reporting and transparency in SS/Medicare reporting. The problem isn't with the actual reporting, but the consequences of the reporting style. When governments make budgets for the current fiscal year/half year, the only consideration they have to look at is the Statement of Revenues and Expenditures (Income Statement). That is, they do not have to take into consideration the government wide statement of assets and liabilities. This creates a situation where government congressional bodies and heads of agencies create budgets that only look at their current year. And in this respect, liabilities are essentially cash basis for individual funds/departments. The result of this is that government programs become more of a series of patching up the previous administrations shortsightedness..and the problem perpetuates. | ||
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Wegandi
United States2455 Posts
On April 09 2011 14:59 andrewwiggin wrote: lol... I love threads like this. I love them because I get to read every wannabe economist try and convince everyone the world's gonna end, the US will implode, blah blah blah. ...do you really think that the US, the country with the greatest number of billionaires, the country with the greatest military force in the world, the country with the greatest cultural impact in the world, the country with some of the smartest, brightest minds in the entire fricken world... ... is going to let itself fall apart, and not even realise it? Or do anything about it? HA!! you guise make me laff. Because it has never happened before. Rome never existed. Victorian Britain never existed. Imperialist France never existed. USSR never existed. The fact of the matter is that all Empires collapse, and they do so for monetary reasons. The US is stuck in an awkward position. Either we choose crippling inflation or we choose to bankrupt the same institutions that we 'bailed out'. In other words, the correction will need to take place and it will eventually. As short-term debt rolls over (that 15 trillion), and the Federal Reserve chooses not to continue QE (printing money), interest rates will sharply rise. Since the banks hold mortgages mostly around ~4% - 5%, they will be unable to afford to pay the now higher rates of interest. Similarly, even a modest increase of 4% interest on the national debt will send it into compounding hell (we currently spend about 20% of our revenue on our debt obligations). If the Fed continues printing to keep interest rates low to avoid the bankruptcy of the financial sector (which would conversely cripple the economy), inflation will skyrocket. Either way what we live through today is just the beginning. Now, we could avert this by fixing the problem -- spending. However, as evidenced by today's circus show, neither party is willing to touch even 0.1% of the budget. I'll let that speak for itself. http://www.beaconequity.com/jim-rogers-u-s-dollar-may-be-near-“tipping-point”-2011-03-21/ http://www.bloomberg.com/news/2011-03-31/bill-gross-says-u-s-debt-has-little-value-echoes-buffett-3-.html | ||
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gchan
United States654 Posts
There is a potential conflict of interest in governmental reporting in that it is the Government Accountability Office that prepares the financial statements. The comptroller of GAO is appointed by the President for 15 year terms, and the appointment has to be approved by the Senate. In addition, the GAO is the auditing body for governmental programs--that is, there is nobody above them to audit them. That means that it comes down to their internal controls to determine whether or not the GAO can be relied on. In practice though, these are rarely issues simply because the GAO fights tooth and nail for their independence (like the Fed does). The second unrelated point is that the Social Security Fund is obligated, by law, to invest in US treasuries only. This creates a bit of an odd situation because it is essentially one part of the government funding the other part (and vice versa). In years when SS revenues exceed expenses, the extra money is put into Treasuries. In years where SS expenses exceed revenues, the overall government has to transfer money into the SS fund. This is accomplished normally through issuing US Treasuries and using that cash to transfer into the SS fund. The result of both of these scenarios is that the US ends up owing money--whether it's to the SS fund or to the general public. This means that the US is screwed either way. But oddly enough, it's actually not that big of a problem. You have to keep in mind that the US is in the unique position of dictating where the market goes. US Treasuries essentially determine the rates of all other issued debt securities. Even if every complains that US issues way too many treasuries, what is anybody really going to do? Nothing. There's always talk about this currency or that currency taking over as the de facto head, but in reality, that's never going to change. The private costs of changing to Euro or Yuan is probably in the trillions (pulling this number out of my ass). So the point is that in this situation, the US is basically just taking advantage of it's position as the market maker for fixed income securities. I don't blame the government for maximizing it's position--isn't that what any other private enterprise would do? | ||
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Billyssjssfj
104 Posts
On April 09 2011 13:04 Sajimo wrote: Money is Debt The federal reserve was created in 1913 by Woodrow Wilson. A very very short synopsis of how money has worked since goes like this.... The government needs 10 millions dollars to be put into the money supply. They call up the Fed and ask for 10 million. The Fed prints it (or makes it electronic for modern purposes), and gives it to the government and asks for 10 million in some sort of bond. However, the newly created money has interest assessed to it. The government, and the US people, now owe more money to the Fed then is actually in circulation. Multiply this by billlllions of dollars and other tricks the banks use (90% of the money a bank takes in can be used to create to currency) and we end up in a deep deep hole. The economy is meant to collapse. I started buying gold about 5 years ago, after I finished college and could afford to, knowing that the price was going to continue to sky rocket. The rich of the rich are way ahead of this 'new' knowledge. They have been sitting back making money off this disgusting tapeworm while hard working Americans keep finding themselves trapped in this cycle. It didn't start here in the US but it may just end... Sup my awake brother. I find it interesting that whenever the toPic of the national debt arises, the people who are the self-proclaimed experts never address the issue of why or how we got into so much debt. They talk about the sPending and they talk about budget cuts, but they never address the parasite that is the federal reserve. | ||
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tyCe
Australia2542 Posts
On April 09 2011 14:59 andrewwiggin wrote: lol... I love threads like this. I love them because I get to read every wannabe economist try and convince everyone the world's gonna end, the US will implode, blah blah blah. ...do you really think that the US, the country with the greatest number of billionaires, the country with the greatest military force in the world, the country with the greatest cultural impact in the world, the country with some of the smartest, brightest minds in the entire fricken world... ... is going to let itself fall apart, and not even realise it? Or do anything about it? HA!! you guise make me laff. Famous last words imo | ||
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Railxp
Hong Kong1313 Posts
And the people driving the sinking ship will blame current policies or the previous president's inept decision making, and while the general population is growing angry at all these figure heads, the getaway jet airplane has already left to the Bahamas. And even if they do find the people responsible, and people decide to protest or riot on the streets, the damage has already been done. No amount of protesting or angry rhetoric is going to get poor people out of the welfare quagmire. The only sensible advice seems to be, invest in something substantial, grab whatever you can and get out while you can. | ||
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Rabiator
Germany3948 Posts
On April 09 2011 12:02 NEWater wrote: The way I see it, America is in a world of shit. Its the same in germany as well, where the debt has risen to ridiculous amounts after the unification. From 500 Billion in 1990 to 2000 Billion Euros right now. http://www.staatsverschuldung.de/ The bottom line is that every second Euro we pay in taxes is used to pay for the interest of our debts. If we didnt have as much debt we could have our children eat from golden platters in their daycare ... | ||
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revy
United States1524 Posts
On April 09 2011 13:27 Broodwich wrote: Gold is the worst hard metal investment, and most of its skyrocketing value is being driven by crazy people who think the world is going to end. If you know who Alex Jones is, the guy who owns his radio network is a gold dealer, and because of the AJ show that guy is one of the 5 largest gold dealers in the US. Crazy people are driving the price of gold through the roof. If you're going to be crazy and invest that way, at least pick a different hard metal. Gold's value is a massive bubble currently, although I think it'll go a little higher in the short term (until the economic worries / housing stuff / unemployment stabilizes a bit more there's going to be a fear factor driving stupid people to gold). There is almost no industrial use for gold. Pretty much every major hard metal besides gold has industrial value that will limit the downside, and is also being invested in by crazy people so it's seeing the same value appreciation. Not to mention that most of the other industrial metals have China desperately driving up their value (except for the rare earth metals, which they pretty much have a monopoly on) and China is only going to keep raising demand for the non-gold industrial metals. The other doomsday guy in the thread suggested silver, which while I'm not investing in metals currently, would be the one I'd go to if I wanted a metals play. I don't have too much to add to this discussion as I'm an engineer by trade and economics is so interconnected, I just cant spend the time to take it apart and analyze it right now. I'm interested in the last part where you speak of silver. Recently I've been trying to order some electrically conductive epoxy (essentially 40-80% silver by volume) and have been running into supply issues because there is currently a shortage of silver. | ||
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