How will the US pay back its debt? - Page 7 - Politics Forum.org | PoFo

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Everything from personal credit card debt to government borrowing debt.

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#15110039
The US minted $20 gold coins (.9675 oz. gold) for circulation until 1932. These coins purchased $20 worth of goods & services. Today you will have to pay in excess of $2000 for a common date of one of these coins. That is called inflation and demonstrates very succinctly how politicians of all stripes rob American citizens.
#15110044
I'm supposed to put this here with an edit rather than add a new reply.
Unthinking Majority, if the US keeps the debt at the current levels then there is always a chance that this level (which was unthinkable in 1982) is large enough for some group to attack the US using it.

The only way to avoid this is to pay the so-called national debt down a lot. But this can't be done the way MS economists imply, with tax revenues or spending cuts. [As I've shown above, this policy means a drop in incomes and GDP. There is NO WAY to avoid that with this policy.] It can't be done because the income drop would cause a EU like decades long period of sky-high unemployment.

That just leaves us with the pay it down some with newly created digital dollars. Right now the world wants US bonds. There is a shortage of them. Just like there is a shortage of German bonds because Germany is close to a surplus because of its exports. [Not all nations can have an export surplus at the same time. Some nation has to be importing the exports.]
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jimjam wrote:The US minted $20 gold coins (.9675 oz. gold) for circulation until 1932. These coins purchased $20 worth of goods & services. Today you will have to pay in excess of $2000 for a common date of one of these coins. That is called inflation and demonstrates very succinctly how politicians of all stripes rob American citizens.

I'm no expert but ---
1932 was 4 years into the Great Depression, one of the worst depressions in economic history. The one in about 1837 may nave been as bad.

So, what you could buy with a $20 gold coin in 1932 was skewed.
Besides I'm not sure what you meant there.
Did you mean that the $20 gold coin was worth just as much as a $20 bill?
IMHO, you need to compare 1928 with now.
You also need to discuss what a $20 gold coin could be converted into in paper money.
IIRC, the US had kept the exchange rate (gold to paper) the same for a while in 1928. It was $32/troy oz.

Today central banks have a target of 2% inflation.
I saw a 1903 Sears & Roebuck catalog many years ago.
At 2$/yr $20 would be changed to about $200 (=$198) from 1903 to 2020. So, a factor of 10. Compared to your factor of 100.

I was googling and found this link

https://theoldstonefort.org/Exhibits/vM ... 52%20weeks)%20are%20about%20%2413%2C000.

The method they used is to compare wages.
In 1903 they say wages were $1/day for 12hr day 6 day/week.
So, $1/day X 6 days/week X 52 weeks/yr =$312/yr less a few holidays and sick days might be the $300/yr; the site says.

The site then talks about today and says a min. wage worker working 40 hr a week will earn about $1300/yr.
My figures are $7.25 X 8 hr/d X 5 d/week X 52w/yr = $15080/yr, but we must deduct at least FICA tax = about $1090, so 15080 - 1090 = about $1400.
So, $1400 then less holidays and sick days might leave about $1300.

Then the site says that they use a rule of 50 to compare the 2 time periods.
So, $300/yr X 50 = $15000, compared to today's $13000.

Then it compared a old fashioned hand cranked coffee grinder then and now.
Then it cost (from the S&R catolog) $0.35 X 50 = $17.50
And now it costs $19.99 on Amazon + shipping.

So, wages are about the same then as now in terms of what you can buy with them.
The site does say that they compared the coffee grinder to get a "fair" comparison. That machine made or imported goods maybe different.

It's not really proper to compare gold then to gold now.
Holding gold pays no interest.
OTOH, holding gold is expensive. You have to pay to keep it safe.
Large amounts of gold can cost a lot to protect. Thieves love to steal gold.
If you just hide it, there is a chance it will disappear.
My dad had a soccer ball size bag of silver pellets from trading in silver certificates in the 60s. A burglar stole it.

The coffee grinder on amazon now costs about $20 ($19.99).

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#15110202
@jimjam,
you compared the price of gold in 1932 (4 years into the Great Depression) to the price of gold now.
Why is this any more valid than comparing the price of diamonds or even iron ingots?
Some say that money is not now and in fact never was a commodity like gold is.
That money was always an IUO.

That all dollars are still IOUs. Just like in a friendly game of poker where the players can use other player's IOUs as money.
'All dollars' means: paper dollars, digital dollars, and bond dollars are all IOUs.
Which is my best reason why the US should not pay down its debt ever (or almost never).
If taxing IOU dollars away from the rich is necessary to pay off the IOU bonds held by the rich and this will do *any* tiny bit of damage to the economy, then why do it?
. . . [I want a good reason, not a "Well, maybe 'someday' there *might* be a problem if we don't" kind of reason. It ought to be possible to outline some sort of actual possible problem. So, that is all I'm asking for. Surely the text books outline some actual reason (and not rely on economists gut feelings). BTW, the old reason was that we were on the gold standard and creating too many dollars could lead to a run on the gold supply.]
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#15110287
Steve_American wrote:@jimjam,
you compared the price of gold in 1932 (4 years into the Great Depression) to the price of gold now.
Why is this any more valid than comparing the price of diamonds or even iron ingots?
Some say that money is not now and in fact never was a commodity like gold is.
That money was always an IUO.

That all dollars are still IOUs. Just like in a friendly game of poker where the players can use other player's IOUs as money.
'All dollars' means: paper dollars, digital dollars, and bond dollars are all IOUs.
Which is my best reason why the US should not pay down its debt ever (or almost never).
If taxing IOU dollars away from the rich is necessary to pay off the IOU bonds held by the rich and this will do *any* tiny bit of damage to the economy, then why do it?
. . . [I want a good reason, not a "Well, maybe 'someday' there *might* be a problem if we don't" kind of reason. It ought to be possible to outline some sort of actual possible problem. So, that is all I'm asking for. Surely the text books outline some actual reason (and not rely on economists gut feelings). BTW, the old reason was that we were on the gold standard and creating too many dollars could lead to a run on the gold supply.]
.


@Steve_American First off I appreciate your well thought out responses to my post. I am essentially a lazy poster. I come here for stress release and fun ….. not enlightenment …. This does not mean that enlightenment has been ruled out :). I sleep about 9-10 hours per night and am still drinking my coffee and trying to wrap my brain around the "real world". I generally feel that the US paying off it's debt is not a should or should not question but simply a thing that is fullfilling it's purpose to society and best left alone. BUT I will do your thoughts greater justice and get back to you …. but, first, I must shake off my inherent laziness and give your thoughts the time they deserve. I'll be back … thank you.
#15146891
@Agent Steel

OHH NO Agent Steel. Nothing in this world is free. I thought you republicans believed in that notion. You have to pay the piper. The only way to pay that debt back is to RAISE TAXES. It's THAT, or our credit as a nation takes a SERIOUS HIT with DIRE CONSEQUENCES TO OUR ECONOMY. You got to pay your bills one way or another. You want something for nothing and it doesn't work that way.
#15172271
Politics_Observer wrote:@Agent Steel

OHH NO Agent Steel. Nothing in this world is free. I thought you republicans believed in that notion. You have to pay the piper. The only way to pay that debt back is to RAISE TAXES. It's THAT, or our credit as a nation takes a SERIOUS HIT with DIRE CONSEQUENCES TO OUR ECONOMY. You got to pay your bills one way or another. You want something for nothing and it doesn't work that way.


WRONG.!

The only way to pay that debt back is to HAVE A SURPLUS.

MMTers point out that all 7 times in American history the Gov. had a surplus for 3+ years, it resulted in a bank panic, recession, or depression. MMTers claim and go on to explain how and why this will always happen.

You don't grok that the US will never pay-off its debt, never. The *only* way would be to create $25T in cash & electronic dollars to exchange for the bonds. It is flatly impossible for the Gov. to run a $25T surplus over any number of years, even a thousand. The economy would be in a deprssion after about the 1st 5 of those years.
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#15172336
Politics_Observer wrote:@Steve_American

Evidence to back up your claim? Wouldn't it make logical sense to raise taxes to generate more revenue to apply to paying on the national debt?


Not evidence, an argument for why.
The US Gov. is not lke a corp. or family, but I'll assume here that it is.
So, if the Gov. is like a family, then tax revenues are income from a job, and borrowing is borrowing, and paying down loans and bills is spending.
So, on a yearly basis,
a family has an income (taxes) of $100K and pays loans totalling $500K (tot. naional debt).
In the year it spends $120K (like the Gov. it has a deficit). To do this it borrows $20K.
Its books balance. But, it has to borrow to do that.

To pay down its debt it must stop boorrowing. It can increase its income (raise taxes) or cut spending, or both. [Well, it can borrow some to roll over some debts.]

If it increases its income to $110K (gets $10K more tax revenue) but is still spending $120K, it still needs to borrow $10K to balance its books. Because it is still net borrowing, it can't be "paying-down" its debts.

All raising tax revenues does is slow the growth of the USGov. national debt. This is not reducing THE BURDEN ON THE GRANDCHILDREN. Well, the burden is less.
. . . Except, I don't feel the burden now. The Gov. borrows to pay off bonds and to pay the interest, too. [There is no surplus, so we can easily assign those payments as being made with borrowed money.] If I/we don't feel the burden now, how will future people feel it?

Well, as long as there is no hyperinflation. MMTers say that the key is to keep deficit spending "within reason" and avoid shortaes of key resources like oil, food, or water.

MMTerspoint out that every case of hyperinflation (ever) as found by the Cato Inst. happend after 1900 and every single case involved debts in a foreign currency or shortages of food or oil.

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#15172352
@Steve_American

First off, I don't know what an "MMTer" is. That's an acronym nobody has taken the time to explain to me. In addition, you can't just perpetually keep going into debt forever and ever without eventually paying the consequences somewhere down the line, like a reduced national credit rating which can harm your economy for example.

If you wish to avoid those consequences such as a reduced national credit rating that can have a negative impact on the national economy, then you have to pay your debts plus interest. If you want to pay down the debt, eventually you are going to have to raise taxes to do so. If you don't pay down your debt, you will eventually run into a situation where your national credit rating takes a hit which in turn will have a negative impact on the national economy.

Lastly, it certainly helps to provide some hard evidence to back your claims and assertions. It strengthens your argument and could make it more persuasive to more rational and logical thinking people (not that everybody you meet is exactly rational or logical).
#15172397
Politics_Observer wrote:@Steve_American

First off, I don't know what an "MMTer" is. That's an acronym nobody has taken the time to explain to me.

. . . Sir, MMT stands for Modern Monetary Theory. It has been around since about 1992. Some of its leaders are Bill Mitchell, R. Wray, Stephanie Kelton, and Waren Mossler.

Politics_Observer wrote:In addition, you can't just perpetually keep going into debt forever and ever without eventually paying the consequences somewhere down the line, like a reduced national credit rating which can harm your economy for example.

. . . Sir, if by "you", you mean a corp. or person, then fine. However, if you mean a nation like the UK or US or Japan., then you should substantiate this. MMTers point out that in 1971 Nixon took the world of the gold standard, making all curriences into fiat currencies. Most economists have ignored this key event. MMTers see it as the key event.

Politics_Observer wrote:If you wish to avoid those consequences such as a reduced national credit rating that can have a negative impact on the national economy, then you have to pay your debts plus interest.

. . . Sir, again, if here "you" means the subject of discussion, then it means the US Gov. I have pointed out (>4 timesin othher posts here) that the UK (aka England) has had a national debt in every year since 1694, 325 years ago. This fact seems to disprove your claim. Also, after WWII the US had a 'huge' national debt. In the years since, the US had a surplus in just a few years. So, since 1945 the US national debt has increase in about 70 of the 76 years since WWII ended. In 1946 it was $269B, now it is over $24T. Sir $24T is 89 times $269B. This increase of 8900% (IICalcC) has not caused much of a problem. [Well, except that it was the cause that Nixon had to take the world off the gold standard.]

Link : https://www.google.co.th/search?q=US+na ... CAc&uact=5

Politics_Observer wrote: If you want to pay down the debt, eventually you are going to have to raise taxes to do so. If you don't pay down your debt, you will eventually run into a situation where your national credit rating takes a hit which in turn will have a negative impact on the national economy.

. . . Sir, the US could also slash spending, on the military for example.
. . . Also, the US Gov. credit rating was downgraded several years ago and it had zero effect on bond sales and yields.

Politics_Observer wrote:Lastly, it certainly helps to provide some hard evidence to back your claims and assertions. It strengthens your argument and could make it more persuasive to more rational and logical thinking people (not that everybody you meet is exactly rational or logical).

. . . Sir, where is your hard evidence? ISTM, that I have provided you an infinte amount more hard evidence (at least 3 hard facts) than you have provided to me (zero evidence) to back up your claims.

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#15172469
@Steve_American

I appreciate you telling me what the acronym MMTer stands for. However, I am not familiar with the theory. I didn't know this as I am not a trained economist. So, if YOU are trained economist, you should have no problem producing solid sources to back up your assertions and claims. A trained economist should be able to produce facts from authoritative sources to back up their claims when explaining their assertions to others.

You say you have provided three facts, but in your responses specifically to me, I haven't seen you produce any facts that are backed up by authoritative sources. You were the one who made the initial claims. The burden rests with you to back up your claims with facts from authoritative sources, otherwise your argument is not going to be persuasive to logical and rational thinking people.

I'll gladly concede my position if you are able to back your assertions with facts from authoritative sources and are on the same token able to debunk my mathematical assertion that the more you spend the more you need to bring in revenue wise to service a higher debt or to pay off a higher debt in order to avoid the consequences of getting a bad credit ration as a nation.

I assure you I have an open mind, but you have to make your case to me not with blanket assertions of unsubstantiated "facts" but with properly sourced facts from authoritative sources. Otherwise, you really do not have a case for your position.

You shouldn't get upset with people challenging your position when it is not properly backed up with facts from authoritative sources. It's nothing personal against you at all.
Last edited by Politics_Observer on 14 May 2021 20:53, edited 1 time in total.
#15172472
@Rancid

I never studied it before and don't know much about it. :lol: Still, that doesn't change the fact that @Steve_American needs to back up his claims and substantiate them from authoritative sources. Not everybody here is a trained economist or knowledgeable about MMT. At least I'm not.
#15172473
Politics_Observer wrote:
In addition, you can't just perpetually keep going into debt forever and ever without eventually paying the consequences somewhere down the line, like a reduced national credit rating which can harm your economy for example.



Image

Except for one year, we've been in debt since Alexander Hamilton created the national debt.

Nations don't work like your household finance.

"But nothing like that has happened in the U.S., even during periods when monetary aggregates like M2 have increased dramatically. Anyone claiming that big increases in M2 presage surging inflation was wrong again and again since the 1980s. I mean really, really wrong:
Image

But when interest rates are very low — which they have been for years, basically because there’s a glut of savings relative to perceived investment opportunities — money is, at the margin, just another asset. When the Fed increases the money supply, people don’t feel any urgent need to put that cash to more lucrative uses, they just sit on it. The money supply goes up, but G.D.P. doesn’t, so the “velocity” of money — the ratio of G.D.P. to the money supply — plunges"

https://www.nytimes.com/2021/05/13/opinion/cryptocurrency-inflation.html?searchResultPosition=1

Partly this is a result of income inequality.
https://www.amazon.com/Price-Inequality-Divided-Society-Endangers/dp/0393345068/ref=sr_1_1?dchild=1&keywords=price+of+inequality&qid=1621020393&sr=8-1
#15172480
jimjam wrote:
The US minted $20 gold coins (.9675 oz. gold) for circulation until 1932. These coins purchased $20 worth of goods & services. Today you will have to pay in excess of $2000 for a common date of one of these coins. That is called inflation and demonstrates very succinctly how politicians of all stripes rob American citizens.



It's not that simple.

We have some real problems, the top of the list is income inequality. I am constantly suggesting people read Stiglitz's Price of Inequality, but no one ever does.

But.

Overall, people lead much better lives than they did a century ago ( I went back a little to dodge the Great Depression).

If an hour of work buys twice as much as food as it did back then, does the numbers on the bills matter? Gramps used to cut the maintenance on his 1950 Chevy in half, and made it last 10 years that way. My Prius is a 2010, and if I can keep it running, I will. It should last as long as I do.
#15172486
@Politics_Observer

There is a difference between 'paying off' the national debt and fiscal responsibility. It has been clear since 2008 that MMT is correct but that doesn't mean you can continue to spend without taxation and expect no consequence. I think that is where Steve gets things wrong. There is nothing wrong with borrowing for growth and nobody says there is. And there is never a need to actually pay off the debt being inflation seems to control it one way or another. But an over supply of currency has historically increased inflation and really that seems to be the concern today. What impact will we see today and can inflation be contained.
#15172488
B0ycey wrote:[usermention=78111]

@Politics_Observer[/usermention]

There is a difference between 'paying off' the national debt and fiscal responsibility. It has been clear since 2008 that MMT is correct but that doesn't mean you can continue to spend without taxation and expect no consequence. I think that is where Steve gets things wrong. There is nothing wrong with borrowing for growth and nobody says there is. And there is never a need to actually pay off the debt being inflation seems to control it one way or another. But an over supply of currency has historically increased inflation and really that seems to be the concern today. What impact will we see today and can inflation be contained.



"But nothing like that has happened in the U.S., even during periods when monetary aggregates like M2 have increased dramatically. Anyone claiming that big increases in M2 presage surging inflation was wrong again and again since the 1980s. I mean really, really wrong" Krugman

See my post above for more.

Also:

"Spikes in inflation aren’t a new thing. There was huge inflation during World War I; there were bursts of inflation during World War II, after the war when price controls were lifted, and again during the Korean War. However, all of these inflation surges were brief. It wasn’t until the 1970s that we got an extended period of high inflation.

Why do I suspect that this time will be different? Mainly because the pandemic had weird economic effects, sharply depressing some activities while boosting others. And this probably means that we’re going to have a weird recovery too, with huge surges in things like travel, plus an unusual set of bottlenecks, like the global container shortage, resulting from the pandemic hangover.

This doesn’t mean that we should discount inflation risks entirely. It does mean that we’ll need to kick the tires on whatever inflation readings we get, and try, as objectively as possible, to figure out whether or not they’re actually reason for concern."

https://www.nytimes.com/2021/04/16/opinion/economy-inflation-retail-sales.html?searchResultPosition=4
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