[Vision2020] yay! we passed $18 trillion!

Fri Dec 12 20:35:41 PST 2014

Thanks, Ron, for these valuable references.  I despair, however, at  thought of sending these for our GOP politicians, knowing full well that they will be rejected outright.  The libertarian economic ideology, which has been repeatedly and empirically disconfirmed, will, sadly, prevail.

nfg

________________________________
From: vision2020-bounces at moscow.com <vision2020-bounces at moscow.com> on behalf of Ron Force <rforce2003 at yahoo.com>
Sent: Friday, December 12, 2014 4:59 PM
To: Paul Rumelhart
Cc: vision 2020
Subject: Re: [Vision2020] yay! we passed $18 trillion!

Here's a couple of references on the debt and deficits:

British, but applies generally:
Breaking the Cycle of Deficit Fetishism<http://www.pieria.co.uk/articles/breaking_the_cycle_of_deficit_fetishism>

[image]<http://www.pieria.co.uk/articles/breaking_the_cycle_of_deficit_fetishism>

Breaking the Cycle of Deficit Fetishism<http://www.pieria.co.uk/articles/breaking_the_cycle_of_deficit_fetishism>
Government deficit sounds a lot worse than private surplus

View on www.pieria.co.uk<http://www.pieria.co.uk/articles/breaking_the_cycle_of_deficit_fetishism>

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Referenced in the above article. It was published a week before the Reinhart-Rogoff errors were revealed, so they get more attention than required:
Why do people hate deficits?<http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/08/why-do-people-hate-deficits/>

[image]<http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/08/why-do-people-hate-deficits/>

Why do people hate deficits?<http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/08/why-do-people-hate-deficits/>
It's far from obvious why people care about balancing the budget. So what are the most common reasons given?

View on www.washingtonpost...<http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/08/why-do-people-hate-deficits/>

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Ron Force
Moscow Idaho USA

On Thursday, December 11, 2014 11:02 AM, Paul Rumelhart <paul.rumelhart at gmail.com> wrote:

Thank you for the information.  I will have to do some research when I have more time.

Paul

On Thu, Dec 11, 2014 at 9:00 AM, Ron Force <rforce2003 at yahoo.com<mailto:rforce2003 at yahoo.com>> wrote:
The question of debt on economic growth was a hot topic a year or two ago. Reinhart & Rogoff (Harvard) produced a study showing that debt greater than 90% of GDP adversely affected economic growth. Unfortunately, a grad student asked them for their data, and found a number of errors in their spreadsheet. When these were corrected, the effect disappeared. Most other studies haven't found a relationship.
 Certainly debt to GDP ratios have been higher than the US's current 70%. It was 134% at the end of WW2, prior to a period of unprecedented growth. In Japan, the ratio is 200%, and the government can still sell long-term bonds at 1% interest.

Most progressive economists hold that as long as the economy grows faster than the debt, and the country borrows in its own currency, there's little chance of a debt crisis. Much of the hoo-rah about US government debt has been fueled by Pete Peterson, the multi-billionaire investment banker, who endowed the Peterson Institute with a billion dollars to push the idea that the solution to the debt problem is reducing or eliminating Social Security, Medicare & Medicaid. The debt panic seems to have subsided with the deficit, but some economists say that the consequences of the rapid reduction has been the slow economic recovery.

The problem with paying down the debt is that historically when that's been tried a recession or depression follows soon after, since if you shrink the debt, you also shrink the money supply. Sorry I don't have any links for you as usual, I'm busy with other stuff and can't take the time to do extensive research. The above stuff is from my reading over the last several years and following the economists Paul Krugman, Brad DeLong, Dean Baker and Mark Thoma.

Ron Force
Moscow Idaho USA

On Wednesday, December 10, 2014 11:14 AM, Paul Rumelhart <paul.rumelhart at gmail.com<mailto:paul.rumelhart at gmail.com>> wrote:

That's basically my question.  My common sense tells me that having debts larger than what we can even make in a year is a bad idea.  Weren't we all rabidly complaining about this under Bush II?  What if they start selling oil in euros?  What if the dollar takes a nosedive for some other reason?  Hell, a quick Google shows that there are 117,538,000 households in the US.  Why not spend another 1.17538 trillion and give us all a check for $10,000?  Or spend $11.7538 trillion and give us all $100,000?  Why not cut the fat in our budget just as a matter of principle?

Paul

On Wed, Dec 10, 2014 at 11:03 AM, Sunil <sunilramalingam at hotmail.com<mailto:sunilramalingam at hotmail.com>> wrote:
Paul,

What economic theories are used to analyze those questions? What are the competing viewpoints? On what basis should we decide whether we should sleep at night?

Sunil

________________________________
Date: Wed, 10 Dec 2014 10:54:04 -0800
From: paul.rumelhart at gmail.com<mailto:paul.rumelhart at gmail.com>
To: ngier at uidaho.edu<mailto:ngier at uidaho.edu>
CC: vision2020 at moscow.com<mailto:vision2020 at moscow.com>

Subject: Re: [Vision2020] yay! we passed $18 trillion!

Is there a number past which we should be worried when it comes to our national debt?  Estimates put the GDP for the US at $17.416 trillion (http://www.statista.com/statistics/263591/gross-domestic-product-gdp-of-the-united-states/).  Is it smart to have our national debt be larger than our gross domestic product?  Is there a line past which we shouldn't sleep so soundly at night?  The national debt has gone up $2 billion since I looked at it two days ago.  When do we hit the number beyond which it is dangerous to have that much debt as a nation?  Whatever the number is when the Republicans take control?

Paul

On Tue, Dec 9, 2014 at 10:23 PM, Gier, Nicholas (ngier at uidaho.edu<mailto:ngier at uidaho.edu>) <ngier at uidaho.edu<mailto:ngier at uidaho.edu>> wrote:
Hi Ron,

Thanks for the correction.  I'll sleep easier tonight.

nfg  (guess what one of my mean teenage bosses made the "f" into)

________________________________
From: Ron Force <rforce2003 at yahoo.com<mailto:rforce2003 at yahoo.com>>
Sent: Tuesday, December 9, 2014 10:02 PM
To: Gier, Nicholas (ngier at uidaho.edu<mailto:ngier at uidaho.edu>); Paul Rumelhart

Cc: Moscow Vision 2020
Subject: Re: [Vision2020] yay! we passed $18 trillion!

Only a third of US debt is owned by foreign countries--China and Japan each have 7%. 65% is held domestically: Social Security (16%), other government entities (13%) and the Federal Reserve (12%).
Who Owns The Most U.S. Debt?<http://www.forbes.com/sites/mikepatton/2014/10/28/who-owns-the-most-u-s-debt/>

[image]<http://www.forbes.com/sites/mikepatton/2014/10/28/who-owns-the-most-u-s-debt/>

Who Owns The Most U.S. Debt?<http://www.forbes.com/sites/mikepatton/2014/10/28/who-owns-the-most-u-s-debt/>
The U.S. debt continues to climb. Who owns the majority of it? How much is owned by foreign nations? The answers might surprise you.

View on www.forbes.com<http://www.forbes.com/sites/mikepatton/2014/10/28/who-owns-the-most-u-s-debt/>

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Ron Force
Moscow Idaho USA

On Tuesday, December 9, 2014 9:51 PM, "Gier, Nicholas (ngier at uidaho.edu<mailto:ngier at uidaho.edu>)" <ngier at uidaho.edu<mailto:ngier at uidaho.edu>> wrote:

Hi Don and Others,

The debt tripled under Reagan, and his advisers were wise to convince him to raise taxes in 7 years of his 8-year term.  I posted all of the data here on the Vision.  See all of my columns on Reagan at http://www.NickGier.com/ReagamPage.htm.<http://www.nickgier.com/>  For debt for each president see http://www.NickGier.com/DebtGOPObamaTables.pdf.<http://www.nickgier.com/DebtGOPObamaTables.pdf>  As I wrote in a recent column, Reagan and Bush II borrowed money to wage one unnecessary cold war and two hot wars, and Obama borrowed money at near zero interest rates to save the economy and gave 8 million plus people health insurance.  By 2021, the two largest items on the national debt will be Iraq and Afghan wars and the loss of revenue due to the Great Recession.

Japan's debt is 200% of GDP, but they owe it all to themselves.  The problem with our debt is that the Chinese and other sovereign wealth funds (e.g., Norway and Saudi Arabia) own a great deal of it.

nfg
________________________________
From: vision2020-bounces at moscow.com<mailto:vision2020-bounces at moscow.com> <vision2020-bounces at moscow.com<mailto:vision2020-bounces at moscow.com>> on behalf of Paul Rumelhart <paul.rumelhart at gmail.com<mailto:paul.rumelhart at gmail.com>>
Sent: Tuesday, December 9, 2014 7:18 PM
To: Ron Force
Cc: Moscow Vision 2020
Subject: Re: [Vision2020] yay! we passed $18 trillion!

Well, I'm not an economist.  I do think that $18 trillion is perhaps both feet across the ridiculous line, though.

There are a lot of things about how the system works that I find strange.  For example, I googled how much cash there is in circulation at the moment.  According to this link (http://www.federalreserve.gov/faqs/currency_12773.htm), there is roughly $1.29 trillion in circulation, with $1.25 trillion of that being in the form of Federal Reserve Notes.  So it's all just smoke and mirrors anyway.

Hopefully our currency will stay strong on the international stage, otherwise we will probably be having quite a different conversation.

And I know the idea is old-fashioned, but maybe we should be looking closer at how much bang we are getting for our buck instead of just adding some more to a fictitious number somewhere and hoping it will all sort itself out sometime.

Paul

On Tue, Dec 9, 2014 at 10:33 AM, Ron Force <rforce2003 at yahoo.com<mailto:rforce2003 at yahoo.com>> wrote:
And this is a problem...because?
Debt for a sovereign government that issues its own currency and has the power to tax is different from an individual or a government that doesn't have its own currency (ie, Greece). Read here:

The Federal Budget is NOT like a Household Budget: Here's Why | Roosevelt Institute<http://www.rooseveltinstitute.org/new-roosevelt/federal-budget-not-household-budget-here-s-why>

The Federal Budget is NOT like a Household Budget: Here's Why | Roosevelt Institute<http://www.rooseveltinstitute.org/new-roosevelt/federal-budget-not-household-budget-here-s-why>
The Federal Budget is NOT like a Household Budget: Here's Why L. Randall Wray takes the fear and loathing out of understanding federal budget deficits.

View on www.rooseveltinstitute.org<http://www.rooseveltinstitute.org/new-roosevelt/federal-budget-not-household-budget-here-s-why>

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  It's the same thing my Econ 101 professor taught back in the last century.

Ron Force
Moscow Idaho USA

On Monday, December 8, 2014 3:29 PM, Paul Rumelhart <paul.rumelhart at gmail.com<mailto:paul.rumelhart at gmail.com>> wrote:

I hadn't looked at http://usdebtclock.org<http://usdebtclock.org/> for a while, and just noticed that we passed the $18 trillion dollar mark.  I'm not sure exactly when we crossed it.

Perhaps we should be doing something about this.

Paul

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