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Ah! A visual representation of US debt...


Teddy Rogers

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That's what happens when you don't put anything aside for the bad times. "Hey, our economy is going well for a change, let's lower taxes and fight two wars." doh.gif

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yup, afaics the western principle of kensianism didnt work out.

The initial idea was that the government borrows money in economically difficult times to get the economy going, and then pays it back in good times.

yes, there were bad times, yes we borrowed money, yes there were good times, NO, we NEVER payed back anything...

(although ofc the borrowed money wasnt only used to get the economy back going...)

I still dont understand why this time it`s such a big deal, though...?

The debt ceiling has been raised 74 times since March 1962,[12] including 18 times under Ronald Reagan, eight times under Bill Clinton, seven times under George W. Bush and three times (as of August 2011) under Barack Obama.
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Teddy Rogers
I still dont understand why this time it`s such a big deal, though...?

Because they are borrowing money from our children's generation to pay for things today?

Ted.

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sure, but the debt ceiling has been risen multiple times in the past, 3 times under obama alon (see my quote above).

I havnt even heard of the first two risings, but that third one was in the news for weeks (incl. countdown....).

why was this time different? Because tea party & co were provoking bankruptcy? :)

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Teddy Rogers
why was this time different? Because tea party & co were provoking bankruptcy? smile.png

Raising the debt ceiling is normally not a problem. The big difference this time around is that US growth domestic product has fallen quite drastically over the past few years. This means the US cannot generate enough revenue to pay its bills and to cover what it is borrowing. To put it plainly the government is spending more than it is earning and if there is a further economic decline or major crash it could take the US decade(s) to pay off what it currently holds. The US economy has been shrinking but the level of spending has been increasing so the margin between GDP and the debt level have passed each other in to the negative. If your GDP is 14 trillion but your actually spending 15 trillion then its a problem. To get GDP kick started again you can drop interest rates and hope people will borrow more money to buy things which in turn generates jobs and stimulates the economy. The problem at the moment is interest rates are at around 0.25% and there isn't any kick start or growth and your asking already debt laden people to get further in to debt and that is not a responsible way to manage an economy. The Federal Reserve played their last get out of jail free card by dropping it as low as they have. They can risk leaving it and hope the economy picks up and GDP improves but if people (bankers, countries, etc.) don't get their borrowed cash (including interest) back then chances are the US will have to default. This means it will be harder for the government to borrow money and at a much higher cost to do it in future. Other options are to cut public spending such as the austerity plan or raise taxes - or both...

Ted.

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Teddy Rogers

I forgot to add... the other option is to keep printing money and devalue the dollar as has been happening over the past year...

Ted.

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It's a big issue this time because the total US debt is at 100% of the GDP now, it's never been that high since the end of WW2.

You can only raise your debt so far, at some point people (China cc_chinese.gif) will stop buying government bonds, the US can't lend as much as they need. No money = no economy = no taxes = even less money = ...

Sure you can print money but hat brings all kind of new problems...

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Teddy Rogers

If they keep devaluing the dollar its good news for me. I can import goods in from the US cheaper than what I can buy them here. Maybe those Klipsch Palladium speakers I have been dreaming about for years will finally be affordable. A 90% devaluation of the US dollar?... tongue.png

Ted.

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