Carleas.
Are you really serious or just cynical when you state that you “don’t think the national debt is a bad thing”?
Debt is a bad thing. Of course. It is bad, wrongful, unfair, unjust, especially when it comes to the following generations.
If you want to have a sustainable development (which also means a development of fairness, justice, goodness, rightness!), then debt must be a taboo.
K: I have been paying into the SS and Medicaid and retirement pensions for decades even
after a decade of anarchism…I have worked for over 40 years and I have had long stretches
of 50 plus hours of work at different jobs… I now only work at most 32 hours and that
is because my body can’t take working any more hours then 32 hours…
and I am certainly not alone… Millions upon millions of boomers have paid into the
SS and Medicaid and other such programs for decades… a few boomers I know
are retiring but most have to work on and many I know don’t have enough saved
up to retired and so many boomers will wind up working up to and perhaps for some,
more then 50 years… I think we have paid our dues…I know a lot of boomers who
have nothing saved up but the equity in their home… basically the only way we are going
to retire is to sell our homes because that is the only thing of value we have…
I too basically have only my condo as my retirement account…
and the only reason that has value is because of the extreme rise in home and condo
prices here in the bay area… the average home around here is worth a million two
and most condo’s are over 700,000 and climbing… a fall in the price of homes and condo’s
will destroy the retirement of millions… and that is a scary prospect…
we have paid into the system for decades and we expect to have something
for us after decades of putting into the system but again, most boomers I know
understand that they will probably won’t get their SS and are expecting nothing
from SS…so don’t go judging us from a young kids perspective because unless
you have walked in our shoes for decades, you have nothing to compare it to…
Kropotkin
Oh there are plenty of “solutions” to the problems dominating u.s. and other western countries.
Main problem is, most people, and the baby-boomers too, will not like those solutions, at all.
I’m with Arminius. The national debt needs to be confronted squarely before anything else can be done.
Otto, Peter, can’t we agree that identifying the right policy is highly unlikely to turn on the number of hours anyone in this conversation has worked?
I am serious.
Look, currently, the US can borrow money for 30 years at an effective interest rate of 1%. That is ludicrously cheap relative to expected market returns between 4% and 8%. If the government borrowed a bunch of money and invested that money in a sovereign wealth fund, odds are that we would be better off. Let me put that another way, because I’ve been accused of advocating gambling for similar statements in the past: given what we know about the cost of borrowing money, and the likely return on investments, the most reasonable prediction is that we will be better off in the case where we borrow and invest than in the case where we don’t borrow and don’t invest.
Debt is bad when you have nothing to show for it. It seems like we have a lot to show for the debt we’ve taken on as a country. And so long as we borrow for a good investment, the debt isn’t bad.
Sorry, but what you are saying here has (almost) nothing to do with fairness, goodness, rightness, justice, especially generational justice.
Every nation or common must guarantee a sustainable development (the German word “Nachhaltigkeit” should better be used here), which includes just fairness, goodness, rightness, justice, especially generational justice; otherwise it will experience the “tragedy of the commons”.
I thought we were talking about debt. Let me rephrase it in your words, if that will help: “If you want to have sustainable development,” borrowing at 1% and investing at 4% is “fair, good, right, just, and especially generational[ly] just.”
Are you even familiar with the subject of American financial debt? LOL!
Well, guess what? After your generation has outsourced all the good paying jobs or have them automated the pool of younger people in the working force to pay for your entitlements are not there in any meaningful way. Looking to the future I see a social security and retirement pension crisis along with a currency crisis also. All of you baby boomers better have a plan B…
More likely than not all your years of hard work and paying in the system will be all for nothing. Don’t get too comfortable skippy.
it is quite true that depending on how the debt is spent on,
it can be a good thing or a bad thing…
think about it in terms of personal finance… we go into debt
quite willingly if we think the debt will achieve some goal…
buying a new car puts us into debt but the payoff of
having a reliable car that will insure us getting to our
destination is a payoff… most people will take that…
taking on debt for a long term goal…
a good deal of the debt in this country is in pensions
and we have a deal in regards to that…
a pension is a contract… we agree to work for you in return
for a pension…to negate a pension is to negate that contract…
that is why pension and social security are contracts that can not
be touch because to touch them is to violate or break the contract
made…now those who are whining about Obama debt should
actually know something about history… Bill Clinton left bush Jr.
a very small debt… I recall in fact, how the GOP was very unhappy with
such a small debt and claimed that it was BAD for America to have such
a small debt… (research 1998 and 1999 to see this) the massive expansion
of debt occurred under bush Jr. (a minor side note is that the debt
falls under democratic adminstrations and rises during the GOP administrations,
historical fact, easy to looked up) but the real point is that debt can be
a good thing or a bad thing depending on its uses… going into debt as
a country can be good if we use the debt to work on infrastructure rebuilding
because that actually becomes beneficial… the return on one dollar spent
on infrastructure spending is $2.34 return for every dollar spent…
and the return on a dollar going to a tax cut is .84 cents…(several studies
done over the year has concluded this) so going into debt to rebuild actually
does have a return on the dollar that is much better then just a tax cut…
so as usual, most stories have more then one aspect to them…
just as there are rarely ever one solution to any given problem…
solutions and problems have a multitude of possibilities within them…
that is the problem with solutions and problems… there is rarely ever
one problem with one answer… now do I see the initial problem stated by
Carleas as young people unable to move as often as their parents or grandparents
being a problem, no, but within that lies other problems as stated,
the young don’t have the resources to move out and other similar
problems… but I think this tied into a bigger problem as most problems
do tie into larger problems… we have yet to face the question of
the value of a human being… a human being has certain inalienable rights
and among those rights are life, liberty and the pursuit of happiness…
and we have increased those rights to include an education, to love, medical,
treatment, the right to shelter and eating and safety among our certain
inalienable rights… rights that are guaranteed by our existence as living
human beings…rights that exist for every single living human being…
that is the real problem… we have yet to include human beings, little less
ALL living things into our equation of what is valuable…
Carleas question is but a small portion of the larger question…
as I grow older, I see everything more as a question and not an answer…
life is an question and what is the solution?
everything is really connected and asking for specific answers to
specific questions is to disconnect aspects of answers and questions
that need to be asked and answered together, not separately…
Kropotkin
The only way for the United States to restructure its debt nationally is through bankruptcy, of course this would cause the collapse of the American government and economy however there is no other recourse as all of that is inevitable.
Debt is just the opposite of generational justice (a.k.a.: intergenerational justice). We should also have in the case of money what we should have in the case of all products and goods coming from nature: Nachhaltigkeit (“sustainable development”).
Debt has definetely to do with the future. Nobody can deny that.
So if you burden the generations of the future with debts and/or a dirty natural (and probably also social) environment, then you are not fair, not just, not good, not right.
As you most likely know, there’s good debt and bad debt. Good debt is when you borrow to invest in something that will bring in a return; bad debt is when you borrow to pay for something that won’t bring in a return. This is why debt is often separated into private and government debt. The former is often good; the latter is often bad as the government usually needs money just to keep things afloat rather than to invest.
If it wasn’t for the wars, the U.S. would have crashed ages ago. The perpetual wars are what’s keeping the U.S. going.
They’re not just keeping a huge military-industrial complex humming along or gaining access to more oil, but more importantly, the wars are taking out dictators who challenged the U.S. petrodollar.
There are several reasons for the never ending wars (which is why lots of interest groups support them) but the one that’s related to the economy/finance/debt is the U.S. petrodollar.
The recent turmoil started in the 70’s when Saudi Arabia threatened to use oil as a weapon against the U.S. for its support of the Zionist regime in Israel. The U.S. threatened to bomb Saudi Arabia back to being a desert if they didn’t start selling oil again and only trading it for U.S. dollars. They accepted. 
More recently, Saddam was attacked after he said he’d only accept Euros for his oil. Gaddafi was attacked after he dropped the U.S. petrodollar AND the Euro (notice the British and French largely led that war). Gaddafi went further by beginning to set up a new currency for a United Africa that was outside of the control of the International banking system.
My point being that if you stopped the wars, stopped overthrowing countries that wanted to take control of their own financial futures, stopped rigging the system and stopped inflating the value of the U.S. dollar through extreme violence, the U.S. would crash under the weight of their debt.
People like you, Carleas, speak about the economy as though everyone’s playing the game according to rules. Nothing can be further from the truth. The entire system is rigged from top to bottom.
(Sorry if I don’t respond further. I have a ton of work to do. Boomers are still booming 
)
.
That would only work if we had governments revolving around sustainable development of all kinds instead we have governments owned by banks and corporations. Until that changes nothing will and probably won’t until what has become of our unsustainable societies fully collapse internally.
The only reason the US can borrow money at 1% for a 30 year bond is because the federal reserve and other reserve banks such as in Japan and Europe are subsidizing that. The Fed Reserve has some 4 trillion dollars of assets on its books, including bonds and securities. The securities aren’t a problem so long as the Fed doesn’t dump them into the market (sell them) but simply keeps hoarding them, and continues to buy more with more invented money.
For the treasury bonds, the Fed is legally obliged to not make a profit, so when bonds come due and the US treasury transfers money to the Fed then at the end of the year the Fed simply transfers it back to the treasury again, minus costs of overhead and paying the dividends to large banks that own stock in the Fed. So it’s basically a huge scam.
Japan owns more US debt than does China. Japan is also heavily leveraged with its own reserve bank, and is doing the same thing. You notice a pattern: reserve banks around the world are printing or digitizing money out of thin air and using it to buy US treasuries, but why? Because the US is the globe consumer of reliability that keeps the world economy afloat. The world economy keeps going at the cost of the US importing a billion dollars a day from other economies, like those of China and Japan. That’s why China and Japan are happy to keep loaning money to the US.
How long is that sustainable? We are using borrowed money to over-consume so that foreign economies keep going by selling us their goods and services. And there is no way the US can ever pay back 20 trillion dollars. Although remember that maybe up to half of that is debt held in the US already, by the Fed and by US federal government departments like social security, and also by major banks.
The Fed Reserve is legally forbidden from purchasing treasury bonds directly so it does so via the intermediary of the large banks: large banks buy treasury bonds and then sell those to the Fed for a small fee, thus “everybody wins”… except the US taxpayer who is now born into the US owing over $300,000 from the very beginning.
Debt is bad, but a small amount of debt is good if managed well because it allows you more capital to invest in something that produces a rate of return higher than the cost of servicing that debt. But we aren’t just taking about the straight 20 trillion in already existing debt, we are also talking about unfounded liabilities in social security, Medicare and welfare that reach up into the quadrillions.
I’ve heard liberal leftists, always the apologists for big government (when was the last time you heard any democrat even mention the US debt or deficit as being a problem?), say the same thing as Carleas is saying, “don’t worry about the debt”. Sorry, but some of us have this little thing called common sense. We realize that the US economy, a consumer economy, with more outstanding debt than the size of the entire US yearly GDP and then constant deficits on top of that plus even more unfounded liabilities, in an economy that is basically stagnating and already not working for most Americans, is a bad thing. The US will eventually suffer a loss of its credit rating, it already has with the former crisis over raising the debt ceiling and shutting down the federal government over failure to pass budgets.
The Fed is propping up the housing bubble, which never really popped, with QE 1-4 and is artificially stimulating the market for treasury bonds in the same way. Other nations are in on the game so long as US consumers keep buying the goods and services made by those other nations. But how long can this scam keep going? One cannot print oneself into prosperity, and debt isn’t a recipe for success unless the debt is kept to a responsible minimum and that debt is being used wisely. Neither of those are the case anymore.
The US consumer is already crushed with debt, personal debt and car debt and mortgage debt and student loan debt, to the point where the middle class is no longer able to lift the economy back up into a prosperous situation. But people like Carleas are happy to tell you to “not worry about it” and keep on going with business as usual, probably because they are personally not affected by it and don’t want to admit the whole house of cards is going to collapse down the road.
^^^Essentially the BOJ, FED, and ECB are all propping each other up simultaneously. That’s how desperate this international financial debt is becoming. What will destroy this last ditch effort of all three central banks of course will be credit rates, treasury bonds, and stagflation which will eventually transfer to a hyperinflationary unprecedented disaster.
Right, and as others have pointed out these central banks are running out of places to stash their made-up money:
Does the Federal Reserve Print Money?
JULY 15, 2014 BY JOHN LAWRENCE
The Federal Reserve is America’s Central Bank
By John Lawrence
The Fed doesn’t actually “print” money in the sense of ink on paper hundred dollar bills. But what it can do is create money with a few keystrokes on a computer.
Money so created is called “fiat money” since it’s not backed by gold or anything else. The Fed currently prints the money to purchase $40 billion in mortgage backed securities and $45 billion in government bonds each month. The rationale for doing this is that it keeps interest rates low which is thought to be necessary to keep the economy humming.
Before the financial crisis of 2008-09, the Fed managed to keep interest rates low by adjusting the interest rate at which banks borrow overnight. But after the financial crisis, the Fed needed a more robust policy which is called Quantitative Easing or QE. This policy is mainly a giveaway to the big Wall Street banks to augment their reserves. The lack of sufficient reserves is thought to have been the problem that caused the financial crisis.
The Fed’s massive QE program was ostensibly designed to lower mortgage interest rates, stimulating the economy. And rates have indeed been lowered – for banks. But the form of QE the Fed has engaged in – creating money on a computer screen and trading it for assets on bank balance sheets – has not delivered money where it needs to go: into the pockets of consumers, who create the demand that drives the real economy.
Low interest rates will certainly stimulate the economy in the sense that they will encourage the sale of cars and houses, both of which are usually done by borrowing money at interest. So the Fed’s policies are all about generating economic activity by creating more debt for average Americans and this results in bigger profits for Wall Street.
The Fed’s QE policy means that the Fed buys government bonds and mortgage-backed securities from private investors – mainly the big Wall Street banks – and then credits the accounts of those banks with the cash. In return the Fed takes possession of the bond or security it has just bought which is just added to the Fed’s balance sheet.
Now if the Fed sells that bond back into the market or redeems it from the government, it would get the cash that it had created back and could just extinguish it by a few more keystrokes on the computer. At that point the money that had previously been created will have been destroyed and would be subtracted from the Fed’s balance sheet. So in that long run scenario the Fed would not have “printed” or created any money at all except on a temporaray basis.
The rub is that the Fed may never remove that money from its balance sheet. It certainly hasn’t done so thus far. The Fed has been buying bonds since early 2009. During that time its balance sheet has increased from $900 billion to over $4 trillion today.
A secondary effect of keeping interest rates low is that it lowers the Federal government’s interest payments on its gargantuan Federal debt.
That tends to neutralize the issue of government spending and deficits as a political issue. The Fed has also been buying the bonds being sold by the US government to finance its deficit. This is considered a Ponzi scheme by some writers as the Fed buys up government deficits and in effect disappears them making sure that bond redeemers always get paid. Bernie Madoff went to jail for doing the same thing except Bernie could not create money with a few keystrokes on a computer like the Fed can.
The negative side of low interest rates is that it hurts savers. Saving accounts produce hardly any interest so there is not much incentive to save. There is, therefore, an incentive to invest in the stock market which has risen dramatically and basically has become a bubble similar to the rapid increase in home values prior to the Great Recession of 2008. When that bubble burst, home values fell precipitously.
The same thing could happen to the stock market if the Fed eases off its policy of QE and interest rates rise. Then the stock market could deflate like a punctured balloon.
So what is the other negative aspect of the Fed’s QE policy? All that money the Fed is creating or printing, if you will, is pooling in the financial system mainly among rich investors. It is not going into the real economy or into the average person’s pocket. If that money were injected into the real economy, it could be used for rebuilding, repairing and building new infrastructure, for example, which would create jobs.
Instead the Fed’s idea of creating jobs is to keep interest rates low so that more cars and houses will be built and sold. The jobs created will be mainly for car salesmen and real estate salespersons as well as construction crews and assembly line workers.
Money pooling in the financial system and not entering the real economy has only an indirect effect on economic growth, and has the primary purpose of making rich people, especially bankers, richer. This is thought to be a good thing in that it shores up bank reserves which were drastically depleted due to the casino operations leading up to the Great Recession when the banks collapsed not essentially because they had little in the way of reserves but primarily because they had run up their gambling debts to excessive levels with nothing to back them up.
So what will the Fed do now? It may never be able to reduce its balance sheet by either redeeming government bonds or selling them into the market because that would raise interest rates and drive up the amount the Federal government would have to pay in interest on its debt. At that point paying interest on the debt might take up the entire or almost the entire Federal budget.
In addition raising interest rates would put a damper on economic activity in the form of discouraging people from purchasing cars, houses and other consumer items. Since consumption is 70% of GDP, this could lead to a recession. This would again place the big banks in jeopardy because, as economic activity diminishes, interest payments to the banks – a big part of their income – will go down, and this will add to the downward spiral which could produce Great Recession, Part 2.
Therefore, the government bonds and mortgage-backed securities that the Fed is taking on its balance sheet via their money printing operations may never be redeemed or sold and may have effectively disappeared into a black hole as the Fed’s balance sheet continues to increase. The Fed may be stuck printing money ad infinitum and subsidizing the banks at the expense of the average American in perpetuity.
The Wall Street banks, it should be pointed out, make money every time the Fed purchases a government bond or mortgage backed security from them. Since the Fed is prohibited by law from buying government bonds from the government directly, Wall Street banks effectively act as middle men and they do so for a price, a price the Fed gladly pays, and for no risk on the part of the banks.
As the Fed continues to subsidize the big banks with money pooling at the upper end of the income spectrum, inequality increases in American society. The Fed policy of QE is a policy designed to increase inequality as the price to be paid to keep the economy rolling. The price of increased economic activity and rising GDP is the further indebtedness of the American people as they buy cars, houses and other consumer items with borrowed money.
The Fed, which is not publicly owned, functions to improve the financial prospects of the Wall Street banks which are its real owners. (They actually own most of the stock in the Federal Reserve.) Is it any wonder then that the Fed’s policies primarily serve the interests of its owners – the big Wall Street banks? A truly public central bank, one owned by the people of the US, could have the same function of increasing the money supply as needed, but it might do so by using the fiat money so created to more directly benefit the American people.
Germany tried “abnormal” money printing in the early 1920s after WW 1 and the result was hyperinflation, collapse of the German economy, and the rise of Hitler. The same might happen in the US if hyperinflation were to start taking place while the Fed is stuck in handing out money to the big banks in order to keep them afloat.
To fight hyperinflation the Fed would have to raise interest rates and this might bring the US economy to a grinding halt. The policy of reducing the amount of QE on a monthly basis is called “tapering.” This doesn’t mean that the Fed is selling off the government bonds or mortgage backed securities on its balance sheet, just buying less of them than they had previously. The Fed will still be adding billions to its balance sheet every month. Inflation is the only thing that will force the Fed to reduce its balance sheet. Otherwise, it could disappear government deficits and bank owned mortgage backed securities into its black hole indefinitely.
If the Fed starts to taper, the big boys at the Big Banks might take this as a signal to short the stock market, and this might cause the stock market bubble to burst as stock values are driven down. The average non sophisticated 401k investor would probably panic and sell on the dip losing the value of his or her retirement savings as the Wall Street guys make a killing.
When the market reaches its lowest ebb, the Big Guys will start buying again driving the market back up. After the market rallies sufficiently, the average guy will work up the courage to get back in with his 401k, having lost a ton of money selling on the dip and buying on the rally, just the opposite of what sophisticated investors do.
Concomitantly, the Fed will probably reintroduce its policy of QE in order to stabilize the economy, and it might have to admit that this policy will continue indefinitely or even ad infinitum. The denouement is that the rich will have gotten richer while the middle class will have been reduced to penury, just the same tendency as happened after the recession of 2008.
This debt-based, Wall Street centric, unstable economy known as US capitalism could be changed by replacing the privately owned Federal Reserve with a publicly owned central bank that created and extinguished fiat money. This would more directly benefit the American people, and serve the needs of the real economy rather than being an effort to stabilize and profit Wall Street banks. Rather than providing jobs indirectly only if more debt for the American people is created, a public central bank could inject money as needed directly into the real economy creating jobs in the process and building wealth for the average American while reducing inequality.
Basically things like quantitative easing is where central banks syphon money off the population at large to fund their corporate debt holdings and more importantly keeps their doors open or lights on. This of course is systematic financial parasitism and even more the host these financial parasites or vultures are feeding on is dying where once again this desperate measure of a last ditch effort to keep the west financially solvent will backfire tremendously. The question of course becomes when all of this will occur. For the United States at least there is chatter or rumors by banks and corporations to initiate some kind of QE4 next year as the United States economy has become anemic. There’s just one problem, there is no money or pound of flesh to extract left. Next year around April things are going to get very interesting. The western Ptomekin village is dying.
It’s sad but true. A massive scam, the largest in history, that has transferred pretty much all of the US, Canadian and European wealth out of the hands of the people and into the hands of elites. A scam perpetrated by traitors and subhuman garbage and defended by pseudo-intellectual, sycophantic useful idiots and hoards of virtue signaling people everywhere, none of whom with even an ounce of reasoning in their brains.
And as others have noted, when the coffers are empty and there is no pound of flesh, the last resort for such a society is to go to war. Indeed, war is coming.