Economic Impact of Debt.

[Laodicean60]

Since I'm not a very good writer I'll copy and paste a portion of the talking points of this article. This article describes the effect of the ever-increasing sovereign debt and no money doesn't grow on trees. Everyhousold knows that.

Our National Debt

America’s fiscal health and economic strength are closely linked. Learn more about the drivers of our national debt and its economic impact.

www.pgpf.org

"Imperiling the Safety Net. America’s high debt jeopardizes the safety net and the most vulnerable in our society. If our government does not have the resources and stability of a sustainable budget, those essential programs and the individuals who need them most are put in jeopardy. (Our entitlements?)
Reduced Public Investment. As the federal debt mounts, the government will spend more of its budget on interest costs, increasingly crowding out public investments
Reduced Private Investment. Federal borrowing competes for funds in the nation’s capital markets, thereby raising interest rates and crowding out new investments in business equipment and structures. Entrepreneurs face a higher cost of capital, potentially stifling innovation and slowing the advancement of breakthroughs that could improve our lives
Fewer Economic Opportunities for Americans. Growing debt also directly affects the economic opportunities available to every American. If high levels of debt crowd out private investments in capital goods, workers would have less to use in their jobs, which would translate to lower productivity and, therefore, lower wages.
Greater Risk of a Fiscal Crisis. If investors lose confidence in the nation’s fiscal position, interest rates on federal borrowing could rise as higher yields would be demanded to purchase such securities. A rapid increase in Treasury rates could also lead to higher rates of inflation, which would reduce the value of outstanding government securities and result in losses by holders of those securities — including mutual funds, pension funds, insurance companies, and banks — which could further destabilize the U.S. economy and erode confidence in U.S. currency on an international scale.
(this is happening now with credit rating and countries offloading treasuries)
Challenges to National Security. former Chairman of the Joint Chiefs of Staff, put it: “The most significant threat to our national security is our debt.” As the national debt grows, we are more beholden to creditors around the globe and have fewer resources to invest in strength at home."

 

[Matt5]

There is no easy way out of our current debt problem. People need to brace for impact. Not easy when you're already living on the edge. What happens when your Social Security check stops coming?

No Way Out - Mauldin Economics

I let ChatGPT do the writing.

Summary with ChatGPT

- The author expresses concern about the historical cycles and massive debt facing society and searches for an "easy" exit, but believes there isn't one.
- The author fears that the building (representing the economic system) will have to collapse before any resolution is possible, emphasizing the seriousness of the situation.
- The lack of planning may lead to the collapse happening on individuals rather than around them, causing neglect of other issues and missed opportunities.
- The debt situation has no easy way out, and the impending crisis is a result of collective choices and the inability to take necessary joint actions.
- The two-party political system is criticized for paralyzing the government's ability to address significant problems decisively.
- The author suggests that a crisis is inevitable, and when it happens, the response may be poorly planned with massive side effects.
- Balancing the budget is described as mathematically straightforward but faces challenges due to reluctance to cut spending or raise taxes.
- A proposed value-added tax (VAT) system receives negative responses from readers, reflecting a general distrust of elected officials to make sound decisions.
- The author argues for a rational process of balanced, well-planned privatization, spending cuts, and tax reforms, which is currently not on the radar.
- The potential need for drastic spending cuts is highlighted, and the consequences of such cuts on various government programs are discussed.
- The author reiterates the inevitability of a debt crisis and suggests that timely action could have prevented the severity of the situation.
- The historical context of bipartisan cooperation leading to budget surpluses in 2001 is contrasted with the current state of increasing debt.
- Major factors contributing to the growing debt include tax cuts, spending increases, and responses to the Great Recession and COVID-19 pandemic.
- The author expresses regret that a period of bipartisan cooperation after 2001 did not continue, potentially leading to a better fiscal position.

 

[Laodicean60]

John Mauldin does a lot of horn tootin but he is right. Our government won't change until Americans educate themselves and demand from politician fiscal responsibility. I'm not against spending it is that our government doesn't have oversight on spending, There is a lot of fraud especially in healthcare. It's a big mess government is too bloated.

The author fears that the building (representing the economic system) will have to collapse before any resolution is possible, emphasizing the seriousness of the situation.

Agreed, Americans will have to face a depression before they ask themselves what the hell went wrong.

The debt situation has no easy way out,

Especially when the clowns in government don't recognize the problem.

The two-party political system is criticized for paralyzing the government's ability to address significant problems decisively.

I think it's us ignorant Americans. Both sides have good points like the 1%, Wall Street, and debt. But are too dumb to fix the problem or using these problems for votes, kicking the can.

A proposed value-added tax (VAT) system receives negative responses from readers, reflecting a general distrust of elected officials to make sound decisions.

Something needs to be change in our tax system and maybe a consumption tax because billionaires buy bigger toys than the rest of the 99% and a flat tax. Do away with loopholes. Something!

The potential need for drastic spending cuts

Absolutely! Before you raise my taxes. Work within your means as every household tries to do in America.

Major factors contributing to the growing debt include tax cuts, spending increases, and responses to the Great Recession and COVID-19 pandemic.

Dumb Republicans on tax cuts while out-of-control spending is lunacy. But they keep spending on budget deals and the left is just as worse.

 

[Richard T]

I was going to say that Japan's debt to GDP ratio was much higher than the USA, over 200% versus the USA at 120%. Thus, at a glance it would seem that Japan will falter first or that at a minimum the USA will have more room to run deficits. This still could be the case, as Japan's currency is devaluing pretty fast. This article looks under the hood though at the comparison and states the USA situation is likely not similar. What Lessons Can Be Drawn from Japan’s High Debt-to-GDP Ratio?
Inflation likely is going to be the way out. Even ten percent for a few years and the debt becomes easier to pay off. Japan too basically refuses to raise interest rates, so the interest payments are low while inflation eats away at the bigger numbers. One could perhaps engineer an easier path, but this could only be done if we (or Japan) would lower the annual deficits to a more controllable number. There is no will to do this, so it seems at some point we will have some serious pains. Your author is right too that defense will either suffer or if there is a war where defense spending is ramped up, the situation will be far worse.

 

[honey badger]

I was going to say that Japan's debt to GDP ratio was much higher than the USA, over 200% versus the USA at 120%. Thus, at a glance it would seem that Japan will falter first or that at a minimum the USA will have more room to run deficits. This still could be the case, as Japan's currency is devaluing pretty fast. This article looks under the hood though at the comparison and states the USA situation is likely not similar. What Lessons Can Be Drawn from Japan’s High Debt-to-GDP Ratio?
Inflation likely is going to be the way out. Even ten percent for a few years and the debt becomes easier to pay off. Japan too basically refuses to raise interest rates, so the interest payments are low while inflation eats away at the bigger numbers. One could perhaps engineer an easier path, but this could only be done if we (or Japan) would lower the annual deficits to a more controllable number. There is no will to do this, so it seems at some point we will have some serious pains. Your author is right too that defense will either suffer or if there is a war where defense spending is ramped up, the situation will be far worse.

Japan's currency is weakening because the are selling US debt as in US treasury bonds ...

 

[Laodicean60]

I was going to say that Japan's debt to GDP ratio was much higher than the USA, over 200% versus the USA at 120%.

Also, Japan is not the world's reserve currency. What happens when our credit rating goes down even further and our collateral (treasuries) aren't a premium form of collateral anymore? Around the world, there is a thing called the eurodollar system that uses US treasuries as collateral and the reason they use treasuries is because of trust. If someday we default by not being able to pay interest on our debt to other countries, no one will buy treasuries and China or Japan will repo America. Maybe the Great Reset? All in all, it's the American people that will suffer.

Printing money is not the answer,

Fed analysis warns of 'economic ruin' when governments print money to pay off debt

Fed economists note that countries that have gotten themselves into trouble and looked to central banks to bail them out haven't fared well.

www.cnbc.com

 

[Laodicean60]

Don't get me wrong but I do believe in spending as long as it benefits Americans. If the government controlled spending there might be a possibility for UBI or little stemi checks. I call it a bonus check to the American people. But I don't believe in wasteful spending and throwing taxpayer dollars all over the world. We all have jobs and have to live within our means or our stuff gets taken away and the government has tax revenue and should live within their means. That's why households budget as the government should budget.
It's going to take the American people to get in every one of their politician's ears to control it.

 

[Richard T]

Also, Japan is not the world's reserve currency. What happens when our credit rating goes down even further and our collateral (treasuries) aren't a premium form of collateral anymore? Around the world, there is a thing called the eurodollar system that uses US treasuries as collateral and the reason they use treasuries is because of trust. If someday we default by not being able to pay interest on our debt to other countries, no one will buy treasuries and China or Japan will repo America. Maybe the Great Reset? All in all, it's the American people that will suffer.

Printing money is not the answer,

Fed analysis warns of 'economic ruin' when governments print money to pay off debt

Fed economists note that countries that have gotten themselves into trouble and looked to central banks to bail them out haven't fared well.

www.cnbc.com

They will print rather than default though this printing will fall short of MMT theorists expectations, which are incorrect. VP Cheney was incorrect too in saying "deficits do not matter." For a single year that is right but piled up it can lead to collapse. Still, Treasuries are the surest thing for now. I suppose the Swiss franc and a few other small nations would be better, but the reserve currency needs high volumes that these cannot provide. It is likely the Bric nations challenge will fail, leaving the dollar or the IMF SDR as the only potential means. China is on the ropes too by the way. China's unprecedented economic crisis worries the rest of the world What makes this interesting is that if all the currencies are equally bad the status quo will remain very slow to change. Only gold and hard assets will outperform.

 

[Laodicean60]

They will print rather than default though this printing will fall short of MMT theorists expectations, which are incorrect. VP Cheney was incorrect too in saying "deficits do not matter." For a single year that is right but piled up it can lead to collapse. Still, Treasuries are the surest thing for now. I suppose the Swiss franc and a few other small nations would be better, but the reserve currency needs high volumes that these cannot provide. It is likely the Bric nations challenge will fail, leaving the dollar or the IMF SDR as the only potential means. China is on the ropes too by the way. China's unprecedented economic crisis worries the rest of the world What makes this interesting is that if all the currencies are equally bad the status quo will remain very slow to change. Only gold and hard assets will outperform.

I agree and with that printing, we'll end up paying the price. MMT is a farse and the loons in government controlled by corporations are as ignorant as we are. I was naive to think they knew what they were doing with fiscal policy. Yes, China's problems might drag us down with them so buy gold or at least some silver and maybe a "Little" paper gold till this global economic storm passes.

 

[rjs330]

Inflation is what will happen. It's happening now. The left sees the government as the endless bucket of entitlements for everyone. The right sees the government the same way. Only they include a much larger group of "everyone". As long as neither side is willing to stop the spending then our debt will continue to rise and inflation along with it.

I keep hearing about how it's all going to come crashing down someday. Yet that someday never comes. I'm no expert. Maybe someday it will arrive. But it's going to need to come for the whole world. America isn't going to fall by herself.

 

[mindlight]

Since I'm not a very good writer I'll copy and paste a portion of the talking points of this article. This article describes the effect of the ever-increasing sovereign debt and no money doesn't grow on trees. Everyhousold knows that.

Our National Debt

America’s fiscal health and economic strength are closely linked. Learn more about the drivers of our national debt and its economic impact.

www.pgpf.org

"Imperiling the Safety Net. America’s high debt jeopardizes the safety net and the most vulnerable in our society. If our government does not have the resources and stability of a sustainable budget, those essential programs and the individuals who need them most are put in jeopardy. (Our entitlements?)
Reduced Public Investment. As the federal debt mounts, the government will spend more of its budget on interest costs, increasingly crowding out public investments
Reduced Private Investment. Federal borrowing competes for funds in the nation’s capital markets, thereby raising interest rates and crowding out new investments in business equipment and structures. Entrepreneurs face a higher cost of capital, potentially stifling innovation and slowing the advancement of breakthroughs that could improve our lives
Fewer Economic Opportunities for Americans. Growing debt also directly affects the economic opportunities available to every American. If high levels of debt crowd out private investments in capital goods, workers would have less to use in their jobs, which would translate to lower productivity and, therefore, lower wages.
Greater Risk of a Fiscal Crisis. If investors lose confidence in the nation’s fiscal position, interest rates on federal borrowing could rise as higher yields would be demanded to purchase such securities. A rapid increase in Treasury rates could also lead to higher rates of inflation, which would reduce the value of outstanding government securities and result in losses by holders of those securities — including mutual funds, pension funds, insurance companies, and banks — which could further destabilize the U.S. economy and erode confidence in U.S. currency on an international scale.
(this is happening now with credit rating and countries offloading treasuries)
Challenges to National Security. former Chairman of the Joint Chiefs of Staff, put it: “The most significant threat to our national security is our debt.” As the national debt grows, we are more beholden to creditors around the globe and have fewer resources to invest in strength at home."

The problem with the American safety net is the inefficiency of the current spending patterns. For example, you spend more per capita on health than any other nation by a considerable margin but with much lower outcomes than countries like Japan only spending half your levels. Big Pharma, legal costs and competitive duplications are all to blame here. So part of the solution lies in serious reforms. The problem is political and the power of big pharma and your legalistic model of resolving problems.

The stupidity of deficit financing is a common sense thing that America has lacked since Clinton and especially under the Republicans. You cannot spend more than you earn but no one seems to get this in the USA right now.

Inequality is a major driver here. Tax cuts for the super-rich, who do not need the money are part of the problem. Anything that smacks of redistribution is dubbed socialism but the American dream of social mobility (anyone can make it) has been dead for a generation because of the growing and entrenched disparities between rich and poor

I would agree that debt levels and deficits are a major reason why American global leadership and the stability that grants the rest of us is now in jeopardy.

 

[Vambram]

‘As Serious as a Heart Attack’: Economist Warns of Economic Consequences of Spiraling Debt

A leading economist is warning of the dire economic consequences of a U.S. national debt that is currently increasing by $1 trillion every 100 days.

washingtonstand.com

A leading economist is warning of the dire economic consequences of a U.S. national debt that is currently increasing by $1 trillion every 100 days.

On Monday, Stephen Moore, a distinguished fellow in Economics at The Heritage Foundation, joined “Washington Watch with Tony Perkins” to discuss the current economic outlook for America as the national debt continues to balloon at an unprecedented rate.

“We’re talking about almost $300,000 of debt for every family, which is a gargantuan amount of money,” he pointed out. “… I call this fiscal child abuse because it’s your children and grandchildren and mine that are really going to pay the cost of this. … I think it’s immoral.”

In response to Family Research Council President Tony Perkins remarking that American voters “keep electing the same people who are spending this amount of money,” Moore pushed for change in the upcoming elections.

 

[Fantine]

It's arithmetic. Britain tried it during the last recession with disastrous results.
Greatly reduce spending and the lack of government investment and benefits throws the country in recession.
In recession, tax revenue goes down.
So let's say Rick Scott succeeds in lowering social security benefits. The elderly make less, pay less taxes. They shop less--the retailers pay less taxes. The retailers buy less from factories-- the factories lay people off and pay less taxes.
So if government spending becomes X-10%, tax revenue might be X-15%. The deficit goes up due to revenue loss.

 

[Vambram]

There is a LOT of wasteful, or unnecessary, spending that ought to be decreased without even touching the Federal budget for Social Security.

 

[Hans Blaster]

‘As Serious as a Heart Attack’: Economist Warns of Economic Consequences of Spiraling Debt

A leading economist is warning of the dire economic consequences of a U.S. national debt that is currently increasing by $1 trillion every 100 days.

washingtonstand.com

A leading economist is warning of the dire economic consequences of a U.S. national debt that is currently increasing by $1 trillion every 100 days.

Only if you manipulate the data.

On Monday, Stephen Moore, a distinguished fellow in Economics at The Heritage Foundation, joined “Washington Watch with Tony Perkins” to discuss the current economic outlook for America as the national debt continues to balloon at an unprecedented rate.

Stephen Moore is the leading MAGA economist (non-incarcerated). I don't know that that gives him much overall "cache".

“We’re talking about almost $300,000 of debt for every family, which is a gargantuan amount of money,” he pointed out. “… I call this fiscal child abuse because it’s your children and grandchildren and mine that are really going to pay the cost of this. … I think it’s immoral.”

This $1T in 100 days implies a deficit of about $3.6T for the year. When you consider the variability of revenue and expenditures over the course of the year, the FY24 deficit is tracking closely to last year's value of $1.7T.

Anyone who tracks the deficit and federal fiscal situation will know this. The dishonesty is palpable from Moore.

Here is a link showing the month-to-month variability in net outlays for the federal government this FY.

The Current Federal Deficit and Debt

I leave it as an exercise to the reader to determine why the net revenue in April is positive (surplus).

In response to Family Research Council President Tony Perkins remarking that American voters “keep electing the same people who are spending this amount of money,” Moore pushed for change in the upcoming elections.

Tony Perkins and the FRC posting a misleading/false article on their blog? Who'da thunk it? Shocking, well, not that shocking.

 

[Laodicean60]

Only if you manipulate the data.

It is happening also in the Federal Reserve data collection model. The unemployment rate has been low but the data doesn't show how many are taking two full-time jobs which makes the numbers look good.

 

[Hans Blaster]

It is happening also in the Federal Reserve data collection model. The unemployment rate has been low but the data doesn't show how many are taking two full-time jobs which makes the numbers look good.

No one number tells the full economic picture, even about a single topic like employment. There is also underemployment and those that have (involuntarily) removed themselves from the labor market.

 

[Laodicean60]

No one number tells the full economic picture, even about a single topic like employment. There is also underemployment and those that have (involuntarily) removed themselves from the labor market.

I knee-jerked (I'm glad I got to fess up because it would have been embarrassing if you had asked me for sources) you on manipulation because I was heading to the dispensary and I don't have absolute proof. When the data comes out on the Fed calendar you can see disparities. The MS media headline numbers show extraordinary employment growth and the stock market and the public get excited but after the third revision three months later, the numbers are not as rosy as they seem for the original month. Fed/ MS media uses psychology to manipulate us into thinking everything is ok.
This image is from the 7/5 Fed Calender and shows the NFP beat the forecast and that's because government jobs are included in the NFP report. The private sector which most of us serfs employed failed miserably on forecast. This is not a good sign for many Americans. Can anyone guess how many homeless will come from this if this keeps progressing negatively, I can't.

I won't beat a dead horse because I've complained about the debt plenty on this forum but the day the fecal matter hits the fan, We the people will be devastated. Plus every human on the planet knows what accumulating debt is and knows the consequences of not paying it back. The old saying still holds that money doesn't grow on trees.

 

[Hans Blaster]

I knee-jerked (I'm glad I got to fess up because it would have been embarrassing if you had asked me for sources) you on manipulation because I was heading to the dispensary and I don't have absolute proof.

I didn't think you were manipulating data. Perkins, Moore, Heritage, FRC -- its more their bag.

When the data comes out on the Fed calendar you can see disparities. The MS media headline numbers show extraordinary employment growth and the stock market and the public get excited but after the third revision three months later, the numbers are not as rosy as they seem for the original month. Fed/ MS media uses psychology to manipulate us into thinking everything is ok.
This image is from the 7/5 Fed Calender and shows the NFP beat the forecast and that's because government jobs are included in the NFP report. The private sector which most of us serfs employed failed miserably on forecast.

I think the serfs are on the FP. I haven't seen any break down of those new government jobs or why it is bad.

This is not a good sign for many Americans. Can anyone guess how many homeless will come from this if this keeps progressing negatively, I can't.

I'm at a loss to understand how new jobs are causing homelessness.

View attachment 351203
I won't beat a dead horse because I've complained about the debt plenty on this forum but the day the fecal matter hits the fan, We the people will be devastated. Plus every human on the planet knows what accumulating debt is and knows the consequences of not paying it back. The old saying still holds that money doesn't grow on trees.

It would at least be on the topic of the thread. (I know things don't usually go that way here...)

 

[Laodicean60]

I haven't seen any break down of those new government jobs or why it is bad.

I didn't say it was bad because a job for an American is good. But it's the demographics of the private sector. I'm not sure what FP means.