The Shuffle

They’re already in that war, in the Middle East and trying to wrap Russia in too. But I was talking about civil war.

Yes. Historically said: it would have been quite alright, if they had stopped their debt policy in the 1960s (and not later!); but what they did was just the opposite and more, which means even much more accelerated, thus even much more exponentially increasing debts and a bastard economy.

Yes, or they start or let others start a war, so that they can say after that war: “we need to start with a new economy, a new currency, a new law of this and of that” and so on (blablabla - always the same).

[/quote]
K: I was in fact researching this exact same thing for a post pretty much along
these lines… beat me to it…

Kropotkin

The United States started going downhill when the boomers elected Ronald Reagan. Wallstreet loved old Ronnie and the banks did also.

double post

And in spite of the fact that the debt proponents do not like it.

This subject is just too important.

True. But here too method and madness brew credibility. Debt and inflation are circular, but never really meet at the middle.

How it goes down as an asset, rather then a debit, is that longer term debt eats itself, because, the longer the term of the debt, the less it really costs and it becomes easier to digest, because, especially if fixed, it looses inflationary value. This is why at the very top of the US real estate bubble, they introduced variable rates, to put a brake on long term fixed effects. Variable adjustment was supposed to slow down the inflation, but it came way too late.

Normally, the need for inflation as an incentive to borrowing is a must, without that incentive a cash only, or a barter type economy would reappear, necessitating a return to the silver and gold standard, which are impossibly unaffordable to most economies, except to those, who manipulate currencies, like the Chinese.

I would be in favor of a program like this. A lot of people live the majority of their lives in just a few places. When you spend some time living in another place (not just vacationing/sightseeing) you can’t help but gain perspective from the experience. It’s cliché, but it really does broaden the horizon of experience. Some colleges have scholarship programs that require students to spend at least one semester abroad. The amount received for scholarship at the student’s home university is applied towards the tuition/room/board at the international school of their choice. Course credit earned abroad can be applied toward the student’s major program(s) if the course matches up close enough to what is offered at the home university.

Apart from funding, I can’t really see a downside to a similar domestic program for young people.

By all means, familiarize me. But given that you think that defaulting on US sovereign debt is anything like a good long term policy move, I’m not going to hold my breath.

I basically agree with you here, Peter. While I personally value travel, I think as a society we should value it for the other things it ties into, including the willingness to move in response to changes in opportunity and need.

My policy thinking recently has been focused on small changes that are likely to have slow-building fundamental effects. Creating a generation of Americans who have seen significant parts of the country, who have lived and worked with people from different backgrounds and have learned that they can get by outside their comfort zone – increasing the resiliency and openness and risk-taking of a generation will have many small positive changes that together should significantly improve things.

One of my other motivations for this proposal was the increasing polarization of the country. My thinking was that having people go elsewhere, and having people form elsewhere come to them, will help everyone be more understanding. The progression of this conversation makes me think that an inter-generational exchange program will also be necessary :slight_smile:

Arminius, if I borrow $100, and give you both the debt and the $100 in stock, I have not made you worse off. Do you agree?

Sure, but government debt is also often good. The easiest case is if it were to go to a sovereign wealth fund, but it’s also true if it goes to infrastructure that benefits the local economy, or to education spending that makes society more productive, or even to military spending if it makes it cheaper and easier to export goods to and from the US. Even “just keep[ing] things afloat” can be a good investment, if that means keeping society functioning in a way that produces more tax dividends than the government puts in.

We can argue about what produces returns, but it’s ultimately an empirical question not governed by politics or even morality. My point is only that the claim that national debt is prima facie evidence of government wrongdoing and generational injustice is clearly incorrect, and many ways of borrowing and investing are the best way to provide a functioning society for future generations.

I certainly don’t mean to. I just think that, even if true, most of what you say about US “petrodollars” is irrelevant and at odds with the complaints voiced on behalf of millennials in this thread.

And I think that there is a strong economics-based argument that policies like the ones you describe are bad for everyone in the long run, even for the US beneficiaries.

Void, I’m not defending the current situation in the US, I’m defending the use of national debt to invest in a society and produce a net positive sum.

But in response to the claims you present, I think they undervalue liquidity in an economic system. I’m sure you’re aware of the parable of the $100 bill that:

A stranger comes to a small town one day and stops in at the hotel. He asks if he can see a room before he commits to staying there. The hotel manager says that he needs to put down a $100 deposit. The stranger does, and the manager hands him a key. Once the stranger is upstairs, the manager rushes out to the catering company, and pays them the $100 bill to pay off the hotel’s debts for the catering service. The owner of the catering company then goes to the farmer, and pays her $100 to pay of the catering company’s debts for the farmer’s produce. The farmer then goes to the mechanic, and pays off the farmer’s $100 debt for the mechanic’s services. The mechanic goes to the prostitute, to pay off his debt for her services. And the prostitute goes to the hotel, and pays off her debt for the use of the hotel’s rooms. The hotel now has the same $100 bill it started with, and the stranger comes back down from the room, says it’s not to his liking, takes his $100, and leaves.

The point of this story is to show that everyone has been made better off, each person has paid of his or her debts, and yet no new money entered the town’s economy. But the stranger’s money still introduced liquidity, which allowed the townspeople to take the debt off their books.

In a similar way, governments lending to each other, and banks being more able to lend to individuals, add liquidity in the market, which produces value. Liquidity tends to lower prices, benefiting consumers. And my understanding of what the Fed is doing isn’t trying to put money into peoples hands, but to introduce liquidity into the system. The banks provide a service of distributing the liquidity down through their branches to individuals and businesses that use the credit infusion to become more productive. That seems like a good investment.

The other thing I’ll say is that, assuming you’re right that there’s $300,000 of government debt per person (this article puts it around half that, but maybe they’re under-counting or it’s really changed that much in 2 years), that is a bargain relative to the value of being born an American. Being an American gives near frictionless access to the strongest economy in the world, free public education, incredible cultural capital, amazing infrastructure and legal systems (by global standards). The return on that access is huge, and a lot of it has been purchased by taking on debt. I would argue that the ROI is significantly positive.

Even though your post is largely positive, after the discussion of debt I can’t help but reading that “apart from funding” as a pretty serious indictment!

[EDIT: misspellings, including someone’s name (my apologies, Arminius)]

Carleas, if your parable of the $100 was anything like real life then the debt would be going down as we print (or rather, digitize) more money, and yet it is precisely the opposite. As the article I posted mentions, the new made up money isn’t going into the American economy, people aren’t getting it to pay off their debts; rather it is going to purchase more debt, as the invented money is used to buy government treasury bonds and mortgage backed securities. Do you know how QE works? And the money that is entering the economy is mostly pooling in the upper echelons of the largest financial institutions, it isn’t entering the broader economy, certainly isn’t being used so regular people can run around paying off their debts.

Also, your parable is stupid because if it didn’t magically make the $100 come back to the hotel owner in the end, then it wouldn’t have worked, because the hotel owner would have had to cough up his own $100 when the prospective tenant returned and wanted his deposit back.

Money is merely a symbolic stand-in for value created. If you make money without having also made value, then that is irrational.

You didn’t address my comments about the federal reserve. And our comments about how it is literally impossible to pay back $20 trillion of debt, or about how the US is propping up the global economy by being the consumer of last resort which requires an influx of a billion dollars a day into the US from outside (annual trade deficit). These are real problems. They require to be really addressed, beyond quaint parables that obviously aren’t how things work in reality.

Scenario:

A couple take out a $600,000 loan on a house. They were duped. The house is actually worth $300,000. The u.s. middle class has been gutted. Higher wages become scarcer and scarcer. The couple must work more hours, for lower wages, to pay off that $600,000 loan. If they ever hope to retire they can get $300,000 max for the house. Nobody will pay higher, anymore. Meanwhile the couple wastes a lifetime, perhaps, paying off the imaginary, fraudulent $300,000 difference.

Many people, stuck in similar holes, will never climb out of debt. And the national debt does not represent wealth, not when there’s fraud and false values. If the assets are worth half of what the loan was made for, then there is no future. Previously you’ve talked about retaining the value of loans. If a couple cannot pay their loans then the house is repo’d. Bankruptcy becomes the only method of “cancelling” the debt, with many subsequent negative results and consequences.

U.s. wealth is only a fraction of the debt. The real value is less than the perceived value.

Furthermore, using this logic, people are implying that u.s. can or will be, bought and sold to the highest bidders. That when debts default, and they will eventually, that the future of u.s. is at stake. And it is.

Real value is the key. And when you default on loans, cancel debts, then real value can drop even lower when people become desperate.

The banks will reap the leftovers. The u.s. has no future, at this rate. Everything needs to change, and the sooner, the better. I shouldn’t even say “better” because that implies a semblance of hope and positivity. The sooner, the less catastrophic.

What alternatives are there other than defaulting on sovereign debt at this point? Please indulge us with your ideas.

What is the value of a $50,000 car…when it can’t drive, when it’s broken?

It’s $0

Values are relative to function and utility. There are so many false values floating around society now, that people believe the u.s. national debt is backed by wealth? What wealth? Child sex slaves? No…

If the u.s. national debt is back by anything, then it is the threat of all out nuclear warfare. Maybe, just maybe, that is worth the trillions dollar price tag. Other than that, can you think of anything worth $1,000,000,000,000.00 ?

You can’t, can you???

An aircraft carrier costs: $13,000,000,000.00.

The u.s. debt is: $20,000,000,000,000.00.

Let me get my calculator…

The united states is worth 1,540 aircraft carriers.

We only have 19.

(And most of those cost less than 13 billion)

How much is a nuclear missile pointed at you and everybody you love, worth?

I wonder?

Carleas.

The debt problem we are talking about is 73 years old, if the basis is the 1944 starting system of Bretton Woods, or 46 years old, if the basis is the 1971 starting system of the bastard economy, of the reversing the gold backing of the US Dollar, of the dictatorship of the inflationism, of the exponentially increasing debts.

Keynes said in the 1930s that the government should contract debts in order to kick-start, to stimulate economy. When somebody critizised that this would lead to increasing debts and asked Keynes what should be done in the long run, Keynes answered cynically: "In the long run we are all dead“. With that cynical statement he admitted to know the evil consequences of his theory.

By the way: Keynes had no children.

Now, 73 years after 1944 (see above) and 46 years after 1971 (see above) there are generations who had already huge debts when they were born, not to mention the generations of the future who will be born with even huger debts. We all know that if debts will not be paid back by money, they will be paid back by blood, by death. Certain generations will have to pay back the debts in the uncertain future (whenever that will be - perhaps tomorrow).

Do you have children?

How much do you guys think we could sell New York City for?

We could probably get $1 at least, right?

It doesn’t help when the United States spends more money on its military than it does on its own infrastructure or public services by that of 3-1.

A lot of major US land and landmarks, including real estate, have already been sold to foreigners as a means of paying down debts. Look it up sometime, which major US landmarks and pieces of land and real estate aren’t owned by Americans.