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
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)]