Economists Ring in Please

[Roamy]

So lets print 14 trillion dollars and pay off our debt. What happens then?
Or lets declare bankruptcy and move on with a zero balance.
What could the world do about it.
I am tired of hearing this sh!t
Every American ain't paying 120K so lets get freaking real !!

[Rollo]

If you were to just print $14 trillion, owing to the forces of supply and demand the acual value of those dollars would fall. Also, in order to print that sort of money, new debt has to be raised in order to securitise the money you've just issed, which further exascerbates the debt problem.

You could just declare bankruptcy as a nation. Upon declaring bankruptcy the outstanding creditors would take control of the assets.

[Roamy]

which assets are you referring to and what if we say "hell no" because the main fact here is every american is not going to pay 120k to get out of this mess..

[Mark in Oshawa]

Roamy, the economy could grow in the future allowing the government with cuts and current tax levels with a growing economy to actually pay that down without changing the livelihood of anyone. That is the theory, but it requires cuts, and it requires more enlightened tax policy. Reagan did the latter, but didn't do the former. A GOP leader who maximized the amount of money taken in and making cuts in spending across the board might change the direction of the ship.

Bankruptcy? Ya right...the Chinese own a lot of paper, they wont accept bankruptcy my friend....

[Zeakiwi]

http://useconomy.about.com/od/criticalssues/tp/future_predictions.htm

The US National Economy and the wider implications for the Global economy is a subject that I am researching at the moment.
Hopefully your journalists will read up on the important issues rather than focusing on the trillion dollar numbers.

[Steve Boyd]

So lets print 14 trillion dollars and pay off our debt. What happens then?
Or lets declare bankruptcy and move on with a zero balance.
What could the world do about it.
I am tired of hearing this sh!t
Every American ain't paying 120K so lets get freaking real !!
The attitude that caused the problem in the first place.
A bunch of Americans borrowed more than they could afford to buy real estate. They couldn't pay back what they'd borrowed. The mortgage banks foreclosed but couldn't recover the value by selling the properties so they couldn't pay back what they'd borrowed. Fannie Mae and Freddie Mac nearly collapse, other banks they'd borrowed off either nearly collapse or fold. The debt has to go somewhere - it's time to accept your responsibilities.

[Roamy]

The attitude that caused the problem in the first place.
A bunch of Americans borrowed more than they could afford to buy real estate. They couldn't pay back what they'd borrowed. The mortgage banks foreclosed but couldn't recover the value by selling the properties so they couldn't pay back what they'd borrowed. Fannie Mae and Freddie Mac nearly collapse, other banks they'd borrowed off either nearly collapse or fold. The debt has to go somewhere - it's time to accept your responsibilities.

The real estate will take care of itself if the gov quits bailing out the banks. Fannie and Freddie are done. But will all that 14 trillion ain't gonna get paid.

[schmenke]

We had a similar discussion in a previous thread.
Declaring bankruptcy would result in Chinese and Japanese seizing all assets.
The US dollar would be worthless; the cash in your saving account would be worthless. Hyperinflation would ensue. A loaf of bread would cost $100.00.
U.S. factory workers, if they’re lucky, would work 80 hours/week and be paid in either RMB or Yen.

Have at ‘er.

[Roamy]

We had a similar discussion in a previous thread.
Declaring bankruptcy would result in Chinese and Japanese seizing all assets.
The US dollar would be worthless; the cash in your saving account would be worthless. Hyperinflation would ensue. A loaf of bread would cost $100.00.
U.S. factory workers, if they’re lucky, would work 80 hours/week and be paid in either RMB or Yen.

Have at ‘er.

I seriously doubt it. And just which assets do you believe china and japan would be seizing? But again your solution to increasing the economy probably can't catch up to the debt.
14 trillion debt = 120K for every american. How do you think we will eliminate this debt?? I do believe the American people will require a balanced budget. So with hyperinflation we could easily pay off our debt. We should also raise the price of food to coincide with oil prices.

[Rollo]

So with hyperinflation we could easily pay off our debt. We should also raise the price of food to coincide with oil prices.

And if it costs ten trillion dollars to buy bread, then people's life savings become worthless overnight. That's what happened in Russia post 1991.
You might like to read a book by an ABC/SBS journalist, Kim Traill, called "Red Square Blues
A Beginners Guide to the decline and fall of the Soviet Union". There's quite a lot in there about the effects of hyperinflation in Russia.
http://www.redsquareblues.com/

Perhaps the story of John Law might be helpful. Charles Mackay wrote about him in his 1841 book "Extraordinary Popular Delusions and the Madness of Crowds". In a roundabout way, John Law with his Mississippi Company in a roundabout sort of helped to destabilise the French economy in the 1720s. I think that it also may have been a precursor to the French Revolution some 69 years later.

There is also the tale of Germany post WW1... but that didn't have any lasting consequences at all ;)

[Mark in Oshawa]

Roamy, you can believe what you want, but with some of the statements you have made on this topic before brother, leads me to believe you might want to sit in on some courses of economics and business investment. Believe me, your idea would destroy the US dollar to the point where a wheel barrow will replace your wallet....

[Roamy]

Roamy, you can believe what you want, but with some of the statements you have made on this topic before brother, leads me to believe you might want to sit in on some courses of economics and business investment. Believe me, your idea would destroy the US dollar to the point where a wheel barrow will replace your wallet....

Well I would imagine there are brighter minds than us thinking about this. And Rollo speaking of Russia in 1991 - They seem to be doing ok now. But I am not accepting that well will retain our current status and payoff 14 trillion. So apparently you are getting this. That is why things are different today than yesterday. You can't live in the past to forge the future. Russia I doubt had borrowed debt. So forget the wheelbarrow sh!t we at least would be smart enough to print larger bills.

[Roamy]

By making sacrificial and proportional cuts in your own personal budget, you can appreciate that budget cutting really cuts to the quick.

Please accept my apology in advance for the following email about an unpleasant subject. I tried very hard not to do it, but because it helped my perspective and made me feel much better; I thought perhaps it would do as much for you. It's tough, but we all need to do our part.

The President ordered the cabinet to cut a whopping $100 million from the $3.5 trillion federal budget. I'm so impressed by this sacrifice that I have decided to do the same thing with my personal budget. I spend about $4,000 a month on groceries, medicine, bills, etc. etc., and now it's time to get out my budget cutting axe, go line by line through my expenses, and get to work.

I'm going to cut my spending at exactly the same ratio as the President - 1/35,000 of my total budget. After doing the math, it looks like instead of spending $4,000 a month; I'm going to have to cut that number downward by eleven cents!

Yes, I know that’s a lot and I must somehow get by with $3,999.89, but that is what sacrifice is all about. The President has requested us to get some of our own “skin in the game” with everyone else. So we'll just have to do without some things, that are, quite frankly, luxuries those eleven cents normally buy us.

Guess I'll have to put a little less Vermouth in my Manhattan or give up lemon in my gin and tonic! Tough decision

Hope this helps brighten your day ... and gives you a little better understanding of just how serious our President is.

Feel better now?

There are still people who believe in him, and think he's doing a great job...

[markabilly]

Let's think. I don't see a problem here at all. Turn on the printing presses and let rip out those dollars!!!

Easy example would the buying and selling of the german mark. (no, not the brit mark or the canuck oshawa mark, the money mark--Beside they got all these stupid laws about buying and selling people nowadays)

Before wwi, a dollar would buy you about 3 or 4 marks, depending.

By 1923, before the new RM bills were introduced, 1 dollar would buy about 4 or 5 million marks or more; 2 dollars would buy 8 or 9 million marks


Today, depending where you go, you should be able to buy a loaf of bread, for abut $2.00---with that kind of inflation, in just a short time, you would be able to buy that loaf of bread for about $2,000,000, give or take a couple of hundred thousand.

Hence the good news, is that you are a milionaire and make a million dallars a day, :D

the bad news is that everyone else is a millionaire; :(

the really bad news is that after working two whole days to buy that loaf of bread, the price of the bread just doubled :eek:

[markabilly]

some comments here hint at the real problem. Current economics (with excellent justification) teaches that when times are bad, the government should spend money to put people to work.
Unfortunately local and state governments do not work like that; when times are good tax revenue goes up, so they spend. When revenue goes down, they cut back and lay off people. The result is to create a downward spiral that easily plumments into a depression. They have not the discipline to avoid the overspending when times are great, and lack the courage to raise taxes and spend when times are bad.

we also fall victim to the quick fix, looking at this year, rather than the next ten years

What I will say next is very unpopular with some, but for all of his faults, Hitler engaged in many public works projects and pulled his people out of a near state of starvation. People do not forget that, and hence explains a large part of the blind loyalty to the man. Give the devil his due. He created and lead one of the most incredible economic turn arounds of a country of the last one hundred years!!!! Of course, there are those who say if france and great britain had listened to Wilson after wwI, there never would have been a need for hitler, but that is another story for another day.


Now Putin and russia have some similarities there. There are the comments by Rollo who seldom has the good sense to agree with me, but his post here, is well worth careful consideration. from my visits over the years to Russia, the first, saw much misery among the average person I encountered. No real hope for the future, massive money problems. Many were (and continue) living on a monthly income of less than what someone would spend for gas in a month. Meanwhile there were more millionaires in Moscow than any other city in the world.

While one might dispute the reality, (but as some would say pereption is reality, while reality is not always perceived), Putin turned things around in the eyes of the citizens, bringing a perception of the re-establishment of the rule of law, political stability and solid economic growth and well being for many citizens.

In the west, and that includes the good ole USA, where is that type of leadership???
I fail to see it. Of course, yeah we do not need another Hitler, or Putin here, but sooner or later, if there is not solid stability, and there is a crash, that is what we could end up with. But where is the discipline and courage to do what is necessary to create a solid economic base of industry that has evaporated over the last thirty years? My godness, the Chinese own what?? 40 or 50 % of our debt?

okay, let us suppose that instead of turning on the printing press, the chinese just stop buying the notes and dump what they got. Bingo, we are in the deep bucket of manure......

[markabilly]

And if it costs ten trillion dollars to buy bread, then people's life savings become worthless overnight. That's what happened in Russia post 1991.
You might like to read a book by an ABC/SBS journalist, Kim Traill, called "Red Square Blues
A Beginners Guide to the decline and fall of the Soviet Union". There's quite a lot in there about the effects of hyperinflation in Russia.
http://www.redsquareblues.com/

There is also the tale of Germany post WW1... but that didn't have any lasting consequences at all ;)

That is a great book as it mirrors my own experiences (despite accusations of sterotyping somewhere else).. Russia is a place where there seems to be little concern for anyone that is not a friend or relative.....Highly recommend the book

[Jag_Warrior]

We have to remember that we're talking about two different things when we talk about the debt and the deficit. While not ideal and quite high at almost 90%, still, a $14 trillion debt is not unmanageable for a $16 trillion economy. Japan, Italy, France, Canada, the UK and Germany all have higher debt to GDP ratios than the U.S. What is approaching the level of "unmanageable" is the U.S.'s (annual) deficit contribution to that debt. In other words, we're adding debt (by way of the deficit) at an alarming rate.

Public debt only becomes a (major) problem when it cannot be serviced. Or if in servicing/refinancing it, other (private) areas of the economy begin to suffer because the government's supply of debt stifles out private debt offerings.

As for declaring bankruptcy, that's not going to happen. For one, politics and "national pride" won't allow it. For another, our economy is the largest in the world. How could such a HUGE bankruptcy be managed? That was one of the reasons that GM couldn't have declared (Chapter 11) bankruptcy without government assistance. Unless you're talking about a straight liquidation/"going out of business sale", bankruptcies have to be funded.

IMO, what the U.S. (and its citizens) has to do is learn that fiscal discipline means pain sometimes. As long as people (on both sides of the political aisle) hang onto their sacred cows (defense, entitlements, tax policy, etc.) we will NOT be able to balance the budget.

As for "growing" our way out of this debt hole, while possible, it is not likely. Some of the faux supply siders in the Reagan/Bush administration sang that song 25 years ago. While more possible then, it was just a fantasy then too. Fairly simple math: if you amortize the current $14 trillion debt (no more additions by way of deficits!), apply an interest rate of say 4% and began running a $500 billion surplus this fiscal year and EVERY YEAR THEREAFTER (applying ALL of the surpluses to debt payments), it would take 30 years to pay off the debt. Now who here believes that the U.S. will have uninterrupted growth, at a level that we'll have at least $500 billion every year for the next 30 years??? :rolleyes: Anyone? Anyone? No one?! Bueller?

But we don't NEED to pay off the entire national debt. What we really need to do is stop contributing (so much) to the deficit year after year. And at least every now and again, pay some of it off. But just like the people of Greece, who refuse to accept reality, we are no different. Right up to the day that we're doing a sale/leaseback deal with the Chinese on the White House, there will continue to be those Americans who will not accept that we cannot afford to be the world's unpaid (often unwanted) policeman or even fund certain domestic programs that many take for granted.

People often (erroneously) claim that Attila the Hun did in Rome. But when they write our obituary, I think it will be true that the U.S. was done in by a cow... a sacred cow. :dozey:

[Roamy]

wrongammendo Jag This USA should never owe any muthaf___er a nickel - Where is your pride??

[Jag_Warrior]

The United States wouldn't even exist today if not for debt. From the first day of its existence forward (except for a very brief time in the 1830's), this nation has carried some level of debt. And it has nothing to do with pride. Unless it's part of some religious belief that you have, there is no sin in having debt - as long as it is manageable. And that's the part that we are struggling with now (or soon). The mission to be debt free might be good for John and Jane Q. Public. But for a major economy, it is not necessary to be debt free.

[Roamy]

see post #18

[Jag_Warrior]

see post #18

See post #19.

See sig at bottom of post #19.

;)