Why the national debt of the USA grew. - Politics Forum.org | PoFo

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#15008140
The national debt of the United States is growing like a snowball. For the first time, the debt of the US federal government to creditors exceeded $ 22 trillion. Thus, Trump's promises to stabilize the economic situation did not meet his expectations. During his presidency, the US national debt not only did not decrease, but, on the contrary, grew by more than $ 2 trillion. This, of course, is not a record increase (the US state debt reached a critical level during the eight years of Barack Obama’s rule, having increased from $ 10.63 trillion almost in two times), but even such growth may lead to the collapse of the American economy in the next five years.
The US national debt consists of domestic and public debt, constituting $ 5.9 trillion and $ 16.2 trillion, respectively. If domestic government debt is related to US government debt, such as state pension funds, public debt is related to securities owned by individuals, corporations, the US Federal Reserve (FED), as well as the state and foreign governments.
Despite the fact that the yield of US bonds is small - about 2.68% per annum, they represent a stable income without possible risks. That is why foreign countries willingly invest in valuable American securities. So, China owns $ 1,121 trillion in securities.
But it seems that trade wars will soon put an end to foreign investment from the Middle Kingdom. In addition to the sanctions already imposed on China, Trump is going to impose duties on Chinese goods for another 325 billion dollars - in fact, we are talking about all exports from China to the United States. Beijing, in turn, can respond radically: reduce investment in US government debt, or even sell part of it. So it was in 2016, when the Celestial Empire sold bonds in the amount of 188 billion dollars. Over the past five years, Beijing has already reduced the portfolio of US government bonds by 13.8 percent.
The story with Huawei also does not improve the situation with public debt. Unsubstantiated accusations of a Chinese corporation in "activities contrary to US national security" could lead to serious sanctions against American business in the Chinese market.
The main reason for the growth of public debt is the constant growth of the budget deficit, which is covered by the issue of public debt. The budget deficit continues to grow. At the same time, payments on debt in the first quarter of 2019 amounted to $ 221 billion, which is 9% more than in the same period in 2018.
Moreover, the option of paying off debt by raising taxes or cutting costs is not even considered. On the contrary, in recent years, Trump has been pursuing a policy that supports raising public debt. For these purposes, the US president advocates the abolition of the procedure for consideration of this issue by the Congress (since only Congress can prohibit the federal government to take unlimited amounts of loan). So, in 2018, the parties reached an agreement according to which the government can increase federal loans without limit until March 1, 2019.
Thus, the US national debt has long been out of control of the federal government. According to the forecasts of American economists, payments to the United States on public debt in 2019 will amount to 600 billion dollars. This exceeds the entire budget deficit in 2014 (439 billion) and in 2015 (483 billion) years. By 2024, the US Treasury Department is predicting the US economy will pass through the so-called “point of no return”. Situations where every dollar borrowed by Washington will go to pay off previously taken loans. This will lead to the inevitable collapse of the US economic system in the near future.
#15008341
Truth To Power wrote:It has to matter, because banksters are getting something for nothing. That means others are getting nothing for something.


Well, that's a bit broader of a point you're making.

If we strictly just talk about the debt, money supply, and inflation. Growing the debt isn't that big of a deal. We have historically low interest rates, and yet inflation has been kept under control. There's a school of economic thought call modern monetary theory. It's very interesting. The premise is that we should grow the money supply more freely, we should encourage more government spending. The claim is, there's a huge ceiling before inflation becomes a problem. Further, if inflation did become a problem, you can shrink the money supply through taxation.

This is the source of my statement that an argument could be made that the debt isn't a problem.

Anyway, yes you are right that when money is created is basically taxes all of us at about the rate of inflation.
#15008343
Rancid wrote:Anyway, yes you are right that when money is created is basically taxes all of us at about the rate of inflation.

Bankster-created debt money is destroyed through repayments of loan principal, so they are not taxing us through capture of seigniorage as inflationary fiat money issuers have historically done. They are taxing us by making us pay interest for permission to use the debt money they are privileged by government to create.
#15009467
Rancid wrote:THere's an argument to be made that the growth of the debt doesn't really matter....


It doesn't matter so long as the oil's supply increases or remains stable, its demand increases, and that each barrel is ultimately consumed out of market circulation.

or, if all the creditors to which the debt is owed permit default or forgive the debts without any ramifications if the above does not hold true.

Otherwise, no.

For massive runaway debt is always a symptom of civic decline and tyranny.

Typically worse with representative governments wherein those who run the government are not personally and financial liable for their political decisions of a fiscal nature.

Which is predictable.
#15010136
Victoribus Spolia wrote:or, if all the creditors to which the debt is owed permit default or forgive the debts without any ramifications if the above does not hold true.

What usually happens is that the value of government debt is reduced by inflation, which also reduces the value of private debt. This is a gradual process that is normally less disruptive than an outright default or debt jubilee.
Typically worse with representative governments wherein those who run the government are not personally and financial liable for their political decisions of a fiscal nature.

Well, elected officials are "responsible" in that they get the PR benefit of economic growth and good times when they inflate the money supply, much as Trump has done; but they are usually safely gone, like W, when the chickens come home to roost. An elected official who is in power during a decline in money supply is rarely re-electable.

Because of these factors, money supply should be removed completely from the control of elected officials. Ideally, it would be issued by an independent Mint according to a mathematical formula designed to stabilize prices -- preferably commodity prices rather than consumer prices, as only then can we be sure the prices are for the exact same items.
#15015396
Well I'm not impressed by the OP. In fact, I stopped reading it pretty soon after he said the China held $1,000+ trillions in US bonds.
OTOH, maybe he just comes from a nation that uses commas instead of periods in numbers like that.
Also, I'm sorry but he totally lost me when he tried to define what "debt" he was complaining about. As I understand it the $22T figure is the US total national debt. This includes the Soc. Sec Trust Fund and some other such debts where the Gov. owes itself. It also includes the part of the debt that the Fed. Res, holds, which is again money that the Gov. owes to itself. But, the OP went on and included state pension funds and private debt. I think he was just confused.

As I have said on this site twice before, the UK has had a national debt for over 425 years. It has not needed to "pay it off" in all that time. Even when it lost almost all its Empire, it didn't need to pay it off. So, all claims that the US will have to pay its debt off some day need an argument to show why this is so.
. . MMT, modern monetary theory, says that the US Gov. can roll-over its debt forever. That it can borrow the money to do it or just create new dollars to pay some bonds if it can't sell more bonds. That it can borrow the money to pay the interest on the bonds forever. That it can set interest rates on the bonds at any level it wants, maybe even zero%. That these bonds are, therefore, not a burden on future generations that will have to pay higher taxes as a result.
. . MMT says and proves that deficit spending now keeps the economy moving. MMT points to the situation in southern Europe where a lack of enough deficit spending is causing massive unemployment as what the alternative to "enough" deficit spending is, in the now. I'm sorry, my opinion about some future tax increases that are required to slow inflation when the US economy is fully utilizing all the resources in the US including the labor of EVERY PERSON who wants a job; is that , it is better for every person to have a job and pay slightly higher taxes, than to have them not have a job. In fact, it is better for the small business owner to be in that economy than to be in the economy that results from austerity, like we see now in southern Europe.
. . Again, the bonds that are the US Gov. debt are not a liability of the people of America, those bonds are assets of their holders. Taxing the money directly away from the holders is just a form of slow default. Taxing the money away from someone else is a massive transfer of wealth from those taxpayers to the bond holders. This will destroy the US economy when the people stop spending on stuff; and comps. layoff workers to stop making stuff they can't sell; so the people have to spend less; so comps. make less; etc., etc., etc. This is the trap that FDR got the US out of in the Depression. He had to massively deficit spend and tax the rich to some extent to do it. So, trying to pay off the debt with tax dollars is a fools errand.
.
#15015809
Steve_American wrote:Well I'm not impressed by the OP.


Me neither. Apart from not understanding what exactly the national debt is (which TBF is shrouded in layer upon layer of obfuscation), it never actually gets round to saying "why the national debt of the USA grew."

The national debt of the USA grew because its govt is legally obligated to grow the national debt - i.e. to issue bonds - whenever it expands the money supply. That is, whenever it spends more into circulation than it taxes out. And the money supply needs to grow with the economy otherwise growth is hindered by deflation.

Either stop issuing the bloody bonds and regulate the money supply on some model which doesn't pretend we're still on the gold standard or just call them something else - govt issued financial assets, for example.

The only other way the money supply can expand is through commercial bank lending - private, not public, debt. That is what we've become over-reliant upon and that is the source of the recurring financial turbulence :

Image
#15015888
The confusion around national debts for monetarily sovereign nations appears to stem from a misunderstanding that the monopoly issuer of the currency is fiscally constrained in the same way as all of the entities that use the currency (as opposed to issuing it).

Perhaps it may be helpful for deficit hawks to do a thought experiment -- what would happen if the US did pay off ALL of its debt? For starters there would be no Treasuries against which to value other debt instruments and various related securities.

Be careful what you wish for ...
#15015963
eg1 wrote:The confusion around national debts for monetarily sovereign nations appears to stem from a misunderstanding that the monopoly issuer of the currency is [NOT] fiscally constrained in the same way as all of the entities that use the currency (as opposed to issuing it).

Perhaps it may be helpful for deficit hawks to do a thought experiment -- what would happen if the US did pay off ALL of its debt? For starters there would be no Treasuries against which to value other debt instruments and various related securities.

Be careful what you wish for ...

I think you left out a "NOT" there. See where I put one in.

Also, as I have said elsewhere on this site, the only way for the US to pay off all of its national debt is with money from the magic Money Tree. That is, with newly created dollars. This would maybe be rather inflationary. It would certainly cause a scramble for corps. and rich people to find another place to invest their money.
#15016000
Steve_American wrote:I think you left out a "NOT" there. See where I put one in.

Also, as I have said elsewhere on this site, the only way for the US to pay off all of its national debt is with money from the magic Money Tree. That is, with newly created dollars. This would maybe be rather inflationary. It would certainly cause a scramble for corps. and rich people to find another place to invest their money.

I appreciate that you are trying to help here, since we are in agreement that monetarily sovereign states are NOT currency constrained -- I wrote it the way I did in an attempt to describe the error that is made when people equate federal budgets with their own household budget or perhaps their own business balance sheet. This error is central to the cognitive capture neoliberalism continues to exercise over a public ill-educated in economics.
#15016226
eg1 wrote:I appreciate that you are trying to help here, since we are in agreement that monetarily sovereign states are NOT currency constrained -- I wrote it the way I did in an attempt to describe the error that is made when people equate federal budgets with their own household budget or perhaps their own business balance sheet. This error is central to the cognitive capture neoliberalism continues to exercise over a public ill-educated in economics.

This site needs what they did on another site.
Someone for the 4th time suggested that they put things that are the opposite of what they really think in Green ink. That is, irony and sarcasm.
It caught on and about 70% of them now do that.
As I read what you wrote it said the opposite of what I thought you meant.
It's possible that I am confused, but I still think that.
Too bad this site would not understand if you put it in green.
#15016979
Steve_American wrote:Well I'm not impressed by the OP. In fact, I stopped reading it pretty soon after he said the China held $1,000+ trillions in US bonds.
OTOH, maybe he just comes from a nation that uses commas instead of periods in numbers like that.
Also, I'm sorry but he totally lost me when he tried to define what "debt" he was complaining about. As I understand it the $22T figure is the US total national debt. This includes the Soc. Sec Trust Fund and some other such debts where the Gov. owes itself. It also includes the part of the debt that the Fed. Res, holds, which is again money that the Gov. owes to itself. But, the OP went on and included state pension funds and private debt. I think he was just confused.

As I have said on this site twice before, the UK has had a national debt for over 425 years. It has not needed to "pay it off" in all that time. Even when it lost almost all its Empire, it didn't need to pay it off. So, all claims that the US will have to pay its debt off some day need an argument to show why this is so.
. . MMT, modern monetary theory, says that the US Gov. can roll-over its debt forever. That it can borrow the money to do it or just create new dollars to pay some bonds if it can't sell more bonds. That it can borrow the money to pay the interest on the bonds forever. That it can set interest rates on the bonds at any level it wants, maybe even zero%. That these bonds are, therefore, not a burden on future generations that will have to pay higher taxes as a result.
. . MMT says and proves that deficit spending now keeps the economy moving. MMT points to the situation in southern Europe where a lack of enough deficit spending is causing massive unemployment as what the alternative to "enough" deficit spending is, in the now. I'm sorry, my opinion about some future tax increases that are required to slow inflation when the US economy is fully utilizing all the resources in the US including the labor of EVERY PERSON who wants a job; is that , it is better for every person to have a job and pay slightly higher taxes, than to have them not have a job. In fact, it is better for the small business owner to be in that economy than to be in the economy that results from austerity, like we see now in southern Europe.
. . Again, the bonds that are the US Gov. debt are not a liability of the people of America, those bonds are assets of their holders. Taxing the money directly away from the holders is just a form of slow default. Taxing the money away from someone else is a massive transfer of wealth from those taxpayers to the bond holders. This will destroy the US economy when the people stop spending on stuff; and comps. layoff workers to stop making stuff they can't sell; so the people have to spend less; so comps. make less; etc., etc., etc. This is the trap that FDR got the US out of in the Depression. He had to massively deficit spend and tax the rich to some extent to do it. So, trying to pay off the debt with tax dollars is a fools errand.
.


Well, in short, debt is debt because it must be returned.. So I`m just curious what other arguments do you need? Your mom did not tell you that if you borrow money, then you need to return the debt? And I am tired of reading the "poem" you wrote
#15017007
Tintin Storm wrote:Well, in short, debt is debt because it must be returned.. So I`m just curious what other arguments do you need? Your mom did not tell you that if you borrow money, then you need to return the debt? And I am tired of reading the "poem" you wrote

We are receiving a lot of money from the tariffs on China. And as long as we keep a strong military, we want have to worry about the national debt.
Praise the Lord.
#15017022
Tintin Storm wrote:By 2024, the US Treasury Department is predicting the US economy will pass through the so-called “point of no return”. Situations where every dollar borrowed by Washington will go to pay off previously taken loans. This will lead to the inevitable collapse of the US economic system in the near future.

It's more likely that they will drop rates to zero, borrow a ton of money and retire all previous debt yielding higher coupons--forcing investors back into the market for risk-based returns.
#15017269
Hindsite wrote:We are receiving a lot of money from the tariffs on China. And as long as we keep a strong military, we want have to worry about the national debt.
Praise the Lord.


But I`m not sure that we can compete with the Chinese military power cause China is a nuclear power. And despite the withdrawal of the US from the INF Treaty, we will need a very long time to catch up with China or Russia in this area.
#15017416
Tintin Storm wrote:But I`m not sure that we can compete with the Chinese military power cause China is a nuclear power. And despite the withdrawal of the US from the INF Treaty, we will need a very long time to catch up with China or Russia in this area.

In case you did not know it, the USA was the first nuclear power. That is part of what Trump means by his "Make America Great Again" slogan.

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