The Debt Explosion

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At the end of September 2000, the US government had managed to accumulate nearly $5.7 trillion in debt since being debt free briefly in the mid 1830s. It took 165 years to build up that level of debt.  By the end of 2017, less than 20 years, the US will have nearly quadrupled that amount to more than $20 trillion.  How in the world could a country increase its debt nearly fourfold in less than a 20 year period over what it accumulated in over a century and a half?  And by the way, these numbers do not include unfunded liabilities such as future Medicare payments.  That would get the national debt up to around $75 trillion or so.

 

Let's see. First is the perpetual war machine and soaring surveillance state.  Second add to that a falling economy that has never gained full traction.  What has driven the economy since 2000 has been debt not investment and savings.  A debt based economy isn't driving tax revenues from higher incomes and productivity.  Third was the more than $10 trillion printed to save the banking sector.

 

Since 2009 the global economy has added about $70 trillion in debt.  Much of this for the US has come in the form of credit card, student loan and automotive, particularly sub prime, consumer debt.  The US government has added about $10 trillion.  Corporations have taken advantage of cheap money to borrow to fund stock buy backs, dividends and acquisitions.  None of this adds to employment or an overall productive economy.

 

Consequently, we are in a debt bubble like nothing known to mankind and well worse where we were in 2008.  Add to that the trillions if not a quadrillion plus of derivatives and we have debt loads that are endangering the human race.  Furthermore, none of this debt mathematically can be paid back to any measurable amount.  The US has not paid a penny in principal in decades and issues debt just to cover interest payments.  Normalizing interest rates could never happen.  The weaken economy and dying consumer demand prevents inflation from occurring, which could be used to inflate debt away.

 

All of this debt along with an ever declining employment market in terms of both quantity and quality is a severe drag on the economy.  Already tax receipts for the current fiscal year are expected to be down.  If Trump passes lower taxes and infrastructure the deficit could grow by $2 trillion a year unless the activity produces offsets.

 

Default rates on credit cards are rising while escalating on student loans and sub prime auto loans.

 

What to do?  Clearly its time for a jubilee and a debt reset. Consumer debt needs to be written off and the national debt needs to be severely restructured.  In doing so our society will revert back to prudent lending.  Gone will be the days of lending for wars and American hegemony.  Same for speculation and frills.

 

Americans will go back to savings and investing.  Instead of instant credit Americans will be forced to save for certain goods or at least have an appropriate down payment.  More importantly, a jubilee would unchain Americans from a ball and chain of debt.  With easy to get credit gone Americans might be likely to save more discretionary income.

 

Finally the US government would be forced to choose between maintaining a country or spreading its military and ruling hegemony.  Investors would no longer fund both.

Comments

Benjamin Goldstein Added Sep 5, 2017 - 11:34am
This article should be read to this song.
 
For a glimpse George W. Bush had it right. Let the suckers go down! Just don't bail out! That reasoning did not last long.
Pbier Added Sep 5, 2017 - 11:42am
If debt is increasing exponentially, I suggest that this is a natural outcome from the design of our modern day banking system in which money comes into creation precisely from issuing new debt.  Since debt has to be serviced (through interest), it follows that ever-more debt needs to be created. 
 
If, as you say, consumer debt is to be 'written off' and national debt 'severely restructured', how exactly would this work without changing the existing system? Who pays?
 
Since, until now, the US Dollar has been the world's reserve currency, the debt problem has grown far larger than it would have if it was merely a national currency. The era of the Petrodollar is ending; the Yuan backed by gold threatens to change everything. Technical analysis (as well as a study of long-term cycles), suggests the US Dollar is about to plummet quickly.
Leroy Added Sep 5, 2017 - 11:50am
Excellent article, George.  I don't see debt forgiveness happening.  It is unsolvable.  What I do see is printing more money.  Isn't that the easiest, short-term solution?  As a politician, the important issue is that it doesn't hit the fan on his watch.
 
How long can it last?  It's all relative.  If Europe prints money, there is no alternative, so the US remains on top of the heap.  If Europe or Asia gets its act together, then a shift in the balance of power will occur.  I don't see it happening.
opher goodwin Added Sep 5, 2017 - 11:53am
Our debt in the UK is spiralling out of control in the same way. But what the hell - it's only money! They'll print a lot more off.
When China gets a yen to call in its debt there might be fun?
George N Romey Added Sep 5, 2017 - 12:03pm
What will happen is more money will be printed to backstop failing debt markets but won't improve the general economy. This cycle will repeat until forced ultimate failure.
 
The Fed could provide helicopter money to individuals that might be inclined to pay down debt rather than spend.
 
The bottom line is that our debt situation is unwinnable. But I have no doubt debt forgiveness might be the last resort when all other gimmicks fail.
wsucram15 Added Sep 5, 2017 - 12:06pm
George..no matter how you say it, people are not going to accept what you are saying until things change and it hurts their football season or perhaps monster truck battles.   IDK..
People wont be able to afford gas or the price of a football ticket.  Wont that be odd, when those are no longer must haves or wants.   
 
Benjamin Goldstein Added Sep 5, 2017 - 12:19pm
As sick as it sound wsucram15 is right. There will only be hard a market correction. Things will bust and it will finally be sorted out what debts can be paid and what need to be written off. I'm serious that the 2007 bailouts were a huge mistake. It's like a delayed filing for insolvency, it just makes the problem grow.
 
You could see that in Europe. When the banks were rescued, the states who invested most in rescuing them went bankrupt. They were rescued again giving up much of their sovereignty to Germany. Germany keeps afloat because it can pay off debt with the week currency that the economies that were thrown under the bus keep week. Procrastination that is. Germany will go down with the rest, we just don't understand it until it is too late.
Michael Cikraji Added Sep 5, 2017 - 12:21pm
George!
Always chasing the Boogieman! What you're not taking into account are two important variables: inflation and debt-to-GDP ratio. What you make sound like this massive issue, really isn't that bad when taken in context:
 
US National Debt
 
Yes, it is concerning, and we should work to help stem the problem, but it isn't the end of the world, like you make it seem. 
Ray Joseph Cormier Added Sep 5, 2017 - 12:22pm
George, I like and 'liked' this article, especially your call for a "Jubilee" as described in Leviticus 25.
 
The Jews of Israel claim the land belongs to them Today because it was given to their ancestors 3000 years ago. It comes with conditions.
 
This Generation of Israelis will not recognize or follow those conditions as this is the Jubilee Year of temporal Israel recreated from the Bible after an absence of some 2800 years.
 
If Israel did follow the conditions for the Jubilee Year, many of the roadblocks to reaching a genuine, Good Faith Peace with the Palestinians would be removed.
 
One version of The LORD's Prayer says 'forgive us OUR debts as we forgive those indebted to us.'
 
Benjamin, that would be a funny video if it was not such a serious matter.
Dino Manalis Added Sep 5, 2017 - 12:34pm
That's why we can only afford business tax cuts followed by raising the debt ceiling in conjunction with gradual long-term deficit and then debt reduction and elimination without hurting the poor or the economy.  It can be done, the Clinton-Gingrich way, without special interests.  Do it fairly; carefully; and gradually.
Benjamin Goldstein Added Sep 5, 2017 - 12:45pm
Dino Manalis: It won't happen. I might be wroing but as far as I know M. Thatcher was the only leader in the western world who ever paid back debt.
We are used to a government that is a ponzi scheme. It grows because nobody is ever accountable.
What struck me 2007 was that the debate was never about individuals who did specific things but about what I call cardinal sins 'greed' or 'gluttony'. It was a distraction. Some elites can't be bothered with responsibility.
George N Romey Added Sep 5, 2017 - 12:47pm
The debt cannot and will never be repaid.  The economy would have to be growing at a rate in excess of 5% and there would need to be significant inflation.  Since the economy is held back by debt laden consumers and a go nowhere employment situation (including social mobility) we can't even get real positive growth let alone 5%+.
 
One potential answer would be to blow the bank on a massive infrastructure program and full employment.  That could be the kicker but in the interim the debt would soar.  Otherwise, default rates will continue to rise while the US government will need to print more to bailout the over leveraged banking sector and the shortfall in revenues to expenditures. 
 
Ultimately, the answers to this situation need to be bold.  Anyone that think having a situation in which an entity needs to issue more debt just to cover interest payments on the existing debt is acceptable is surely ignorant of basic finance.  Or default rates on student loan debt well into the double digits-which the US government is on the hook for.
Benjamin Goldstein Added Sep 5, 2017 - 12:51pm
Michael Cikraji,
there is no reason why debt and GDP should be put into a ratio. The idea is that rich countries could pay back their debts easier with their higher tax income. However, they fail to do it and pay it with new debt. We are just used to see the debate ended with that irrelevant ratio.
Benjamin Goldstein Added Sep 5, 2017 - 12:56pm
"One potential answer would be to blow the bank on a massive infrastructure program and full employment. "
Could you translate that into English, please?
Michael Cikraji Added Sep 5, 2017 - 1:02pm
Benjamin,
We have to look at the ratio to make it relevant. You can't have an apples-to-apples comparison say, between debt responsibilities of Liechtenstein and the US. It's ridiculous.
The US is just a much bigger country, and aside from the ability to tax, it also has to do with economic expansion, which includes a multitude of variables.
Benjamin Goldstein Added Sep 5, 2017 - 1:49pm
Michael Cikraji,
You choose to address nothing I said. Nobody wants to compare Liechtenstein to the US. Only the people who try to downplay the US debt problem would do that and they throw around stupid debt-to-GDP ratios. What's the point?
William Stockton Added Sep 5, 2017 - 2:14pm
Here are the obvious facts to this not-so-obvious article.
 
George is mixing household debt and government debt into the same risk group.  This is incorrect.  I would have expected more from a finance person . . . ok.
 
If the government can't pay its debt, the government goes bankrupt and investors & those with capital take the hit . . . not the people who own household debt.  George might be in favor of this effect since he is quite keen in believing investors are the root of all our evils.
 
Secondly.  The immediate risk to individuals is their household debt.  Here are the graphs for household debt where we see today vs historically.  Not spiking.  Certainly is growing.  
 
The more alarming problem is the average debt to income ratios.
In the USA, this is averaging about 80% (40% is maximum for mortgages).  Student loans are outpacing all other types of household debt.
 
Here is the bright side.  Household wealth is higher than ever @ $300,000 per person over the age of 18.
 
Perhaps a more accurate view of debt is in order.  George will only give you the hyper-alarmist viewpoint.  And he foolishly believes all that debt can be erased by the bankers and investors . . . or the government.
 
omg.  It is not like we already have everything to fear from Antifa, alt-right, the government, Trump, Democrats, Republicans, BLM, the things we might say, the things we might not say, our health, what we eat, what we don't eat . . . we have taught each other to fear everything and each other.  fuck that!
 
And then we have our resident fear-monger George.  
Thanks, George.
Katharine Otto Added Sep 5, 2017 - 2:22pm
Good article, George.
A jubilee might happen, but I don't think anyone will do it intentionally.  I suspect it will happen by "default," meaning more people walking away from debt.  You don't mention medical debt, which is another black hole.
William Stockton Added Sep 5, 2017 - 2:27pm
Katharine, People are walking away from the debt.  The average debt owed as a US citizen walks into the afterlife is $65,000.
William Stockton Added Sep 5, 2017 - 2:28pm
Clarification . . . personal debt upon death is averaging $65,000.  That does not include government debt.
William Stockton Added Sep 5, 2017 - 2:38pm
Clarification #2:  $65,000 is gross . . . not net.  That number does not take into account assets & personal value upon death.  So even $65,000 is misleading.  
 
The net value for people who die and don't have a mortgage is about $12,875 debt.
Benjamin Goldstein Added Sep 5, 2017 - 2:41pm
Great, people are dying with $65,000 on average and the government budgets are a ponzi-scheme, yet George addressing it is fear-mongering.
William Stockton Added Sep 5, 2017 - 2:55pm
Yes, Benjamin.  Please tell me why average outstanding debt of $13k, upon death, is something I need to be alarmed about.  Can you do that?
George N Romey Added Sep 5, 2017 - 3:19pm
The major cause of the 2008/2009 meltdown was leverage including derivatives.  Today we have more debt with stagnant incomes and little productive investment.  Housing now accounts for about 50% of income, far higher than a couple of decades ago when it was 33% to 35%.  Younger people do not have the financial resources to buy homes and cars.
 
So should an alarm bell be going off.  Of course.  Unless you think bailing the banking and investment system out (now one with FDIC insurance covering investment banks) every decade a good idea.
 
Typically the time people had retired they are debt free.  This is necessary as income usually drops after retirement.  Now people have debts until they die or debt peonage. 
William Stockton Added Sep 5, 2017 - 3:28pm
"The major cause of the 2008/2009 meltdown was leverage including derivatives."
 
Wow.  You really dont get it, George.  Cheap, high-risk, government backed housing loans caused the meltdown.  People were not creating their own debt without these high-risk loans provided by the government.
 
OMG dude.  
William Stockton Added Sep 5, 2017 - 3:34pm
The other bullshit lie that you (George) have stated here is that Obama bailed out the banks in 2009.  No, he didnt.  Since those high-risk loans were backed by the government, the government had to pay them off.  
 
I didnt even like Obama and have been critical.  But he didnt deserve those acusations.  It was fucking crappy government policy that destroyed the economy in 2007.  Get a fucking clue, George.  Gawd.
John G Added Sep 5, 2017 - 4:03pm
The sky is not falling. The so called national debt is national savings.
Learn how the monetary system actually works and stop stressing yourself and others.into an early grave.
Private debt is the problem. Government debt is not.
John G Added Sep 5, 2017 - 4:07pm
No Stockton, virtually none of the subprime loans that blew up were in CRA banks or schemes.
You've fallen for Wall St lies.
John G Added Sep 5, 2017 - 4:11pm
Btw if you were to 'repaid' all the debt there would be no money.
People should learn about money before pontificating.
William Stockton Added Sep 5, 2017 - 4:18pm
"No Stockton, virtually none of the subprime loans that blew up were in CRA banks or schemes."
 
The subprime loans created a high-risk market where banks had to compete with their own high-risk loans.  Hence, the government had to bail out a problem itself created.  
 
This is the dirty truth which you and George won't ever accept. 
Benjamin Goldstein Added Sep 5, 2017 - 4:32pm
Stockton:
Ultimately everything is a matter of values. Of course, you can give a damn if you bequeath a plus or a minus to the future generation. That people don't ever break even in their lives and work like slaves to pay their mounting obligations doesn't need to worry you. It is really about in what world one wants to live.
You call George out on a "BS lie" that really amounts to hairsplitting. So the money transfer from government to banks for the faulting debts is not bailout but ....oh a squirrel. Whatever.
 
John G: Get off your high horse! People have different views on monetary policy. Please, don't pretend your view is the 'informed' one!
John G Added Sep 5, 2017 - 4:46pm
No Stockton, the CRA banks had to maintain impeccable underwriting standards. They did not create 'liars loans' and ninjas like Countrywide, WAMU etc etc etc.
Not one of the major mortgage factories was a CRA bank. NOT ONE.
You are being duped by the rich Wall St scum who ran the control fraud.
John G Added Sep 5, 2017 - 4:48pm
Goldstein. People are entitled to their opinions but they are not entitled to their own facts.
Fact. The 'national debt' is not a measure of debt, but a measure of saved dollars.
William Stockton Added Sep 5, 2017 - 4:50pm
Benjamin, Average people dying with $13k debt certainly sounds strange.  But we live in a debt driven market.  The same market for 90% of the planet.  Has been working for decades.  Will it all fall? Maybe.  But we will recover and learn.
 
My overriding objection to this article is its fear-factor.  This is click-bait.  George is the fear-factor guru.  Not one single word from George on how to fix it.  Interesting right?  But he loves to complain and loves to mire in fear & loathing.  And most of the crap isn't even backed by any sources other than George's imagination.
 
So alright Benjamin.  Let the children play.
Donald Swenson Added Sep 5, 2017 - 4:57pm
A debt reset is necessary. We first delete all the existing debt. We then ask the people for their approval on a new system. All is possible now that our entire financial system is imaginary. Virtual is another word for imaginary. The current system is beyond repair. Look at the numbers: www.usdebtclock.org. D
George N Romey Added Sep 5, 2017 - 5:07pm
So debt hasn't actually increased? Those who think so should check out usdrbtclock.org.
John G Added Sep 5, 2017 - 5:12pm
The 'national debt' is national savings. If you 'pay it off' by running fiscal surpluses, you will have drained the private sector of its savings.
When Clinton ran surpluses private debt sky rocketed.
That's mathematics.
George N Romey Added Sep 5, 2017 - 5:30pm
The national debt will grow this year by about 3.8% while the economy will grow around 1%. Public debt at least in the interim is not as onerous as the US can monetize the debt. Private individuals have no such luxury.
Benjamin Goldstein Added Sep 5, 2017 - 5:33pm
John G: That is at least an argumentation one can work with (just saying I'm smarter than thou isn't).
 
English is not my first language, so give me some leeway in following your thoughts.
 
You say that having a surplus, i.e. more tax income than gov spending, always comes with private companies having less money to save.
 
I don't know what model you have in mind. This is usually not advanced mathematics. Can you type some equations (maybe latex notation or whatever you like) to show what you mean?
 
According to Wikipedia National savings is the combination of private and public savings. Public savings is such a myth that it does not have its own wikipedia entry. So...hm...I end up with national debt is private savings. That needs some explanation.
 
Thanks
John G Added Sep 5, 2017 - 5:40pm
Romey: the US can monetize the debt.
Can you tell us what that means?
John G Added Sep 5, 2017 - 5:43pm
Goldstein. You say that having a surplus, i.e. more tax income than gov spending, always comes with private companies having less money to save.
I didn't say that. What I said was fiscal surpluses drain private sector savings. That clearly is a net effect, not an individual certainty.
Benjamin Goldstein Added Sep 5, 2017 - 6:15pm
So it isn't a certainty. Under which conditions does a fiscal surplus drain private sectore savings?
 
Let's say that I agree with you that reducing spending does reduce the money flow in the economy and that does reduce short-term GDP growth and also accordingly the money private companies can save or invest.
 
However, that does not mean that blindly making debts or printing money out of thin air is the motor of GDP growth. There is, for example, such a thing like hyperinflation. The money must to some extent represent the value of the goods.
 
Only flooding the market with money in itself does not make more valuable goods (and services). It does to some degree as a net effect, but that can easily be outpaced by the devaluation of the currency. You might not see this immediately. Currencies can also be bubbles that can bust.
John G Added Sep 5, 2017 - 6:18pm
So it isn't a certainty. Under which conditions does a fiscal surplus drain private sectore savings?
Yes it is a certainty. 
John G Added Sep 5, 2017 - 6:21pm
All money comes from thin air. Whether by government spending or banks creating deposits as loans.
Any spending carries an inflation risk. Vast amounts of money are created and destroyed every day but we don't have hyperinflation.
Deflation is the danger.
Ray Joseph Cormier Added Sep 5, 2017 - 7:57pm
I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happens to them all.
Ecclesiastes 9/11
 
TODAY, Time and Chance led me to this brief educational/Spiritual video called 'Sacred Economics.' The 12 minute video is worth the TIME to watch because it is related to the theme of this article. It may make you question more, before the system in which we are all trapped, self-destructs by the weight of it's own corruption.
 
The Bible has a lot of 'Economics' in it, like this, from the Revelation of Jesus Christ;
And the kings of the earth, 91%, Presidents, Prime Ministers, CEOs and other Idols of the people including religious leaders) who have committed fornication and lived deliciously with her, shall bewail her, and lament for her, when they shall see the smoke of her burning,
Standing afar off for the fear of her torment, saying, Alas, alas, that great city Babylon, that mighty city! for in one hour is your judgment come.
And the merchants of the earth shall weep and mourn over her; for no man buys their merchandise any more:
The merchandise of gold, and silver, and precious stones, and of pearls, and fine linen, and purple, and silk, and scarlet, and all thyme wood, and all manner vessels of ivory, and all manner vessels of most precious wood, and of brass, and iron, and marble,
And cinnamon, and odours, and ointments, and frankincense, and wine, and oil, and fine flour, and wheat, and beasts, and sheep, and horses, and chariots, and slaves, and souls of men, (extension and extrapolation, by extension and extrapolation over the last 2000 years and before.)
Revelation 18
 
ECONOMIC RAT RACE
Saint George Added Sep 5, 2017 - 11:27pm
What I do see is printing more money.  Isn't that the easiest, short-term solution? 
 
Yep. That's what will most likely occur.
Saint George Added Sep 5, 2017 - 11:28pm
Can you tell us what that means?
 
Why don't you tell us what "monetize" means, skid-mark-g. You flunked out on your understanding of "tautology" but maybe you'll do better this time around.
John G Added Sep 5, 2017 - 11:36pm
I asked the question because I've no idea what it means in the context of a modern monetary system.
Does it mean moving the numbers from the t-bill ledger to the reserves ledger as is the case when any government security matures?
Doesn't sound that dramatic or sinister to me.
But then you and George don't understand the workings of the system.
Saint George Added Sep 5, 2017 - 11:53pm
I asked the question because I've no idea what it means in the context of a modern monetary system.
 
Well, then, moron, fuck the "context" of modern monetary theory, and answer the question utilizing that "vast storehouse" of knowledge and wisdom you've often bragged about regarding your superior knowledge of orthodox economics.
John G Added Sep 6, 2017 - 12:08am
I'm asking the question, Einstein.
I'm not the one claiming superiority. That's your conceit.
Although entirely unwarranted.
And btw, MMT is heterodox, genius.
John G Added Sep 6, 2017 - 1:09am
What I do see is printing more money.
The government spends its money into existence by computer keystroke marking up numbers in private sector bank accounts.
There is no 'printing' involved.
 
Minister Peaceful Poet Added Sep 6, 2017 - 1:11am
Someone had explained why we support Israel like we, because the owner of Israel is our banker.
I think things are reversing.  I read something about the BRICS buying up the petro dollar and securing it with gold.  Also Bitcoin and other software currencies are growing rapidly.   Someday we will nolonger be using the U.S.Dollar but another currency to buy and sell our products. 
John G Added Sep 6, 2017 - 1:17am
John G Added Sep 6, 2017 - 1:20am
Someday we will no longer be using the U.S.Dollar but another currency to buy and sell our products. 
Only if the Federal government stopped enforcing taxation. Tax creates and maintains the demand for the government's currency.
Reading the Rothschild conspiracy nonsense will only harm your knowledge. It's a complete crock.
 
Benjamin Goldstein Added Sep 6, 2017 - 2:31am
John G: Before I can proceed asking questions about your thoughts on this, I'd like you to clarify something first.
 
You wrote "If you 'pay it[some portion of the national debt] off' by running fiscal surpluses, you will have drained the private sector of its savings."
 
I tried to translate that for me into:
"having a surplus, i.e. more tax income than gov spending, always comes with private companies having less money to save."
 
You correct that with:
I didn't say that. What I said was fiscal surpluses drain private sector savings. That clearly is a net effect, not an individual certainty.
 
I thought only difference to my understanding was the phrase 'individual certainty'. So I asked for some detail. Outlining after the following phrase also how much I go down the road with you already:
So it isn't a certainty. Under which conditions does a fiscal surplus drain private sectore savings?
You respond with:
Yes it is a certainty
 
Can you clean it up? Is it now always or sometimes that a restrictive fiscal policy results in less private savings. Please keep in mind that I have already said that government spending increases money in the short run. You could mean that as a net effect, people will have more of the money saved. I assumed that you mean businesses, but you could mean individuals (what business runs on significient savings?).
 
Maybe, I go into too much detail about my assumptions. Could you just clarify if you now mean with or without certainty? Maybe you could expand on why you think an increase in national savings reaches the people who you want to reach. I would also like to know if you think that the dollar could be a bubble that looks more stable than it is because it came to represent the goods and services of the global markets rather than of the US and that a look at the inflation rate could be deceptive.
John G Added Sep 6, 2017 - 2:38am
Goldstein. If the government runs a fiscal surplus the private sector (in total) will have less savings i.e. net. (Assuming there is no current account surplus).  
That doesn't mean every individual will have less savings. My savings can be your debt.
Benjamin Goldstein Added Sep 6, 2017 - 2:40am
John G: Forget this sentence:
Maybe you could expand on why you think an increase in national savings reaches the people who you want to reach.
John G Added Sep 6, 2017 - 2:46am
I'm more interested in income rather than savings. When the private sector wishes to save the government has to run a deficit.
I would have a government jobs guarantee that paid anyone (who wanted a full time job) a living wage. 
Minister Peaceful Poet Added Sep 6, 2017 - 2:59am
John G -  The Rothschild style bankers (The Conspiracy that JFK talked about before he was killed is real) However the debt money does not really exist and cannot be paid back - ever.  They just print it out and charge interest for lending it to us.  The more they lend, the more they make and wars create a whole lot of debt, they love them wars.  The total global debt is 230 trillion.  Most of that is owed to handful of bankers that were created by Rothschild and his sons.  Rothschild bought Palestine from the Turks, that's not a conspiracy, that's a fact. 
John G Added Sep 6, 2017 - 3:11am
John G -  The Rothschild style bankers (The Conspiracy that JFK talked about before he was killed is real) 
No it isn't. There are no privately owned central banks.
They just print it out and charge interest for lending it to us.
No they don't.
The total global debt is 230 trillion.  Most of that is owed to handful of bankers that were created by Rothschild and his sons.
Nope. That's just nonsense. Government debts are not debt.
Rothschild bought Palestine from the Turks, that's not a conspiracy, that's a fact.
Nope that's just ridiculous. When the zionists expelled the Palestinians they only owned about 6% of the land inside the Green Line.
Benjamin Goldstein Added Sep 6, 2017 - 6:21am
John G: I think you would help yourself if you could become more open-minded. You may well be on something, but you claim now that you don't care about savings and, strange enough, you try to change the topic to talking about investments and full employment.
There is a reason why you can't stay focused. Your entire argument was about your "fact" that national debt was some savings, once you called it "saved dollars" and once you contribute it to national savings. You don't give a damn about government debt because you think it is some savings. That is your argument.
You are also strawmanning me. I did not say that I understood you having said every individual has less savings. You put in this 'every individual'. The current account surplus sentence is also a statement that is likely there only to confuse. I'm saying that you need these tactics because you are not perfectly honest to yourself.
My suggestion is that you put together the inspirations from this discussion threats and line out your thoughts on how government debt is merely a mirror of private savings in a separate article. Let people look into it in more detail. I'm not saying that you are wrong, but your tactics show dispair. Relax. We are only curious. Maybe it leads us to something.
 
Ari Silverstein Added Sep 6, 2017 - 8:42am
Benjamin Goldstein:  You’re doing a great job.  For some reason liberals believe that debt and deficits don’t matter and I have no idea how to convince them otherwise until it’s too late.  One point of disagreement, I think the deficit to GDP ratio is a great way to keep things into perspective.  Just how spend-happy was the Obama administration compared to the Reagan administration, the ratio speaks for itself. 
Katharine Otto Added Sep 6, 2017 - 11:41am
George,
It occurs to me that money for its own sake is as empty as spending for its own sake and can do more harm than good.  My biggest contention with government spending (and resultant government debt) is that government is spending on all the wrong things, like war, government contractors for services governments should be providing themselves, or passing legislation that favors the eco-rapists' profiteering.
 
As long as the federal government retains a monopoly on the currency, it can jerk people around any way it wants.  Why is gold no longer legal tender?  Maybe John G could answer that. 
 
Bill Kamps Added Sep 6, 2017 - 12:52pm
As long as people will lend you money at near zero percent interest, it is foolish not to borrow the money.  This is especially true if you can print the money to pay them their interest.
 
Measuring the badness of debt requires knowing more than just the amount of debt.  For people, you need to know their income, and their assets.  The more income and assets you have, the more debt you can easily support.   For a country you need to know the size and health of their economy.  If the USA and Greece each have the same debt to GDP ratio, which country is the better bet?  One economy  is much larger and has control over its money, the other economy is tiny, failing, and is tied to a currency it cant control. 
 
I have a lot of problems with how the government spends money, mostly because it wastes so much of it.  However, the debt by itself is not the biggest problem.  The  biggest problem is that the money is not wisely spent. 
 
Kattharine, one reason gold is not legal tender, is because even with the most conservative practices of money management, the money supply needs to grow at a rate that matches population growth, plus inflation.  If our supply of physical gold did not increase to match these rates, then we would have deflation, which is worse than inflation for an economy.  In addition, following the most conservative money management practices, is not necessarily a good thing.  Even though the recovery from the 2008 recession was not a boom, there would have been no recovery at all had we been on a gold standard.  One could say we wouldnt have gotten into the trouble on a gold standard, but there were financial panics when countries were on the gold standard, and they were pretty awful, worse than 2008.  So shit can always happen, and being fixed to gold, limits the flexibility we have to address financial problems. 
 
Another problem with being on a strict gold backed currency, is that you lose control of your rate of exchange which is a stabilizing mechanism in the world economy.  Look at the problems that exist in Europe, because the Greeks cant devalue  their currency relative to the Germans.  While devaluation is not a great thing, not being able to devalue as a safety valve, makes things worse.   Having currencies that float relative to one another helps to achieve stability. 
 
Economies are complex things, and fixing a currency to anything, gold or other currencies, reduces the daily feedback we get from a floating market.   Every day we know what the rest of the world thinks about the value of the dollar, because it is exchanged all over the world.  When they lose a bit of confidence it goes down a bit, when they think it is more valuable it goes up a bit.  This is far safer than trying to defend some arbitrary exchange rate with gold, or sliver or something else.
 
 
George N Romey Added Sep 6, 2017 - 2:38pm
A return to the Gold standard is not realistic.  What should concern us is the sheer velocity of the debt since Bush took office, and as Bill points out most of that money poorly spent.  Unfortunately, there is absolutely nothing to point towards growth much beyond 1% and that is needed for tax receipts and inflation.  The debt will become more problematic as the real economy continues to stagnant and more pressure is placed on social services.
 
I belong to a non denominational church.  It is located in one of the most wealth areas of South Florida yet the Pastor tells me request for financial assistance, which government increasingly doesn't have the funding, is skyrocketing.  She pointed towards an overfilled binder.  Clearly something is not right in the land.
 
Yes debt is someone's asset and debt to a certain extent spurs spending.  However, recent studies show debt no longer has the multiplier effect it once did.  Why?  Because debt is being used increasingly to cover daily living expenses not even frill purchases like items for the homes or vacations.  That asset isn't worth much at all if the debtor defaults.
 
This idea that the US government debt isn't really debt is stupid talk.  At some not too distant point, particularly as other countries stop using the dollar as reserve currency purchasers of debt are going to get skittish and want a higher return for their risk.  The only saving grace for the US is that Europe and Japan are in worst economic shape.
 
Right now the US borrows about $275 billion a year for interest payments and that's with bond rates at 2% or so.
Bill Kamps Added Sep 6, 2017 - 2:53pm
In some places its you are mixing your discussion of consumer debt with Fed debt.
 
Because debt is being used increasingly to cover daily living expenses not even frill purchases like items for the homes or vacations. 
 
That is not government debt. If you are not confused, then your readers possibly are.  Consumer credit card debt is actually going down in the US.  The problem one is the Student Loan debt.  So there are all different kinds of debt, and each has its own merits or detriments.  It is difficult to mix them all together, and just paint them all with the same brush.
 
The Fed debt is the least problematic because the Feds can create money.  States, cities and people cannot.  So that debt is more important to manage.  Too much of that debt does strangle the economy, at least more so than the Fed debt.
 
We will know when our government debt is a problem because interest rates will rise.  In the meantime we should lower government spending not just because of the debt, but because it is a waste of money, and takes resources out of the private sector.
John G Added Sep 6, 2017 - 4:46pm
Goldstein. I'm not trying to change the subject.
You haven't understood anything I've said and you know nothing of where the argument goes.
You're an arrogant arse.
George N Romey Added Sep 6, 2017 - 4:58pm
According to usdebtclock.org credit card debt is rising.  I've heard this from multiple sources. 
John G Added Sep 6, 2017 - 5:03pm
Silverstein.  For some reason liberals believe that debt and deficits don’t matter
Actually liberals don't believe that at all.
They believe, as you do, that the government is like a household.
And they never give a thought, again like you, about how money comes into existence.
So everything you think about the economy is based on false premises.
John G Added Sep 6, 2017 - 5:06pm
Goldstein. and line out your thoughts on how government debt is merely a mirror of private savings in a separate article.
It is an accounting reality. Government debt is non-government savings.
Assets = liabilities.
I've written articles for WB and got nowhere.
John G Added Sep 6, 2017 - 6:44pm
Kamps. In the meantime we should lower government spending not just because of the debt, but because it is a waste of money, and takes resources out of the private sector.
Only in opposite world.
Government deficit spending is private sector income and savings.
John G Added Sep 6, 2017 - 6:48pm
Romey: According to usdebtclock.org credit card debt is rising.  I've heard this from multiple sources. 
When government spending is insufficient, private sector debt, and particularly consumer debt, will tend to rise until the servicing (FIRE sector profits) strangles the productive economy.
And you have people wanting less government spending.
More unemployment, more poverty, lower wage growth and ultimately bigger deficits.
It's madness.
 
Saint George Added Sep 6, 2017 - 11:07pm
The so called national debt is national savings.
 
Better: According to MMT hallucinations, national debt is so-called national savings.
 
Fixed it. The phrase "so called" should be around "national savings", not around "national debt."
 
National income tautologies express identities. Like any tautology, they causally explain nothing.
John G Added Sep 7, 2017 - 12:53am
There you go again. Saying MMT is true and then a lie in the same paragraph.
You're a loon.
Benjamin Goldstein Added Sep 7, 2017 - 1:32am
John G: You have already explained the debt = savings thing? Could you give us a link? I really haven't understood anything yet so maybe I should question then.
Sincerely,
your arrogant ass
(I take no offense; just note your tactics; they tell you something about yourself)
John G Added Sep 7, 2017 - 3:29am
If you don't want to be called an arrogant arse don't be telling people what they 'should do'.
If you can't understand this then I can't help you.
http://heteconomist.com/verticalhorizontal-vs-exogenousendogenous/
John G Added Sep 7, 2017 - 3:39am
Romey: This idea that the US government debt isn't really debt is stupid talk.  At some not too distant point, particularly as other countries stop using the dollar as reserve currency purchasers of debt are going to get skittish and want a higher return for their risk.  
The idea that a currency issuing government is like a household is asinine.
Government deficit spending does not drive interest rates up. If anything it does the opposite.
More government dollars spent = more excess reserves in the banking system = more desire for government securities (aka risk free savings accounts).
Maths. I know you will ignore it because you can't argue your case.
 
The only saving grace for the US is that Europe and Japan are in worst  (sic) economic shape.
What a nasty piece of work you are George. 
I'm not so sure that Japan is in a worse place is it?
Handy hint: the Yen is not the world reserve currency and their bond issues are always way over subscribed.
How could that be under your 'understanding' of government finance?
Oh that's right,. It couldn't.
 
 
Saint George Added Sep 7, 2017 - 6:09am
Saying MMT is true
 
I have never denied that tautologies are anything BUT true. A tautology is always true. But so what.
 
That doesn't mean POLICY DECISIONS claiming to be based on tautologies are true. In fact, arse-wipe, NO POLICY DECISIONS AT ALL, can be derived from a tautology. "A = A" cannot be used to support some policy decision by the Department of Health or by the Federal Reserve.
 
Now go shit your pants, you skid-mark-fuck-all. You're an ignorant hate-monger along with your fellow BDS-holes.
John G Added Sep 7, 2017 - 4:07pm
LOLz.
Saint George Added Sep 8, 2017 - 4:50am
Skidmark-john-g (named after "Toilet G" on the Ground Floor of the brothel his mother squeezed him out into [father unknown]) trolls this site because he shills for Russia and Palestinian terror groups that commit, or enable others to commit, atrocities against innocent people.
 
Who is your ideological compliance officer, skid-mark-g? Do tell.
 
Curious minds want to know.
John G Added Sep 8, 2017 - 10:38pm
Goldstein is too stupid to understand balance sheet accounting so instead of trying to learn he just calls it 'ideology' and pretends mathematics doesn't exist.
Fascists eh?
Saint George Added Sep 9, 2017 - 3:56pm
Skidmark-john-g (named after "Toilet G" on the Ground Floor of the brothel his mother squeezed him out into [father unknown]) trolls this site because he shills for Russia and Palestinian terror groups that commit, or enable others to commit, atrocities against innocent people.
 
Who is your ideological compliance officer, skid-mark-g? Do tell.
 
Curious minds want to know.
 
"Balance Sheet Accounting" is just "accounting": it ain't neurosurgery and it ain't rocket science. Accounting is completely subservient to basic laws of economics, which arise on their own, spontaneously, with no direction from a central authority like a king, a dictator, a president, a congress, or a parliament, simply from the purposeful and voluntary goals and decision-making of many individuals in a division-of-labor society.
 
To sum it up concisely: fuck accounting, and fuck you.
John G Added Sep 9, 2017 - 7:18pm
"Balance Sheet Accounting" is just "accounting": it ain't neurosurgery and it ain't rocket science. 
Correct. But your compadre (sock puppet?) can't seem to grasp that. Or more likely doesn't want to because he'd rather set up a dishonest strawman to burn down.
Who else here does that on a regular basis?
Saint George Added Sep 11, 2017 - 2:51am
Who else here does that on a regular basis?
 
You?
 
Oh, sorry. You just go into denial or attempt a pathetic misdirection. Never mind.
Donald Swenson Added Sep 11, 2017 - 3:36am
It's time for our Congress to deal with our debt explosion. Avoidances of reality produces a sleep mentality. Why pass all problems on to our children? Who will stand up and demand immediate action on our debt explosion? D
wsucram15 Added Sep 11, 2017 - 8:42pm
George..if you see this, I was wondering if you and family fared alright in the storm.  I have some friends both on the west coast, and in central Florida and they didn't fare as well as expected.  Not horrible, but storm was more than anticipated. 
I just hoped you were ok.
John G Added Sep 11, 2017 - 8:58pm
"When the mobilization began, the U.S. was still struggling to emerge from the Great Depression. Most households had scant savings to spend on War Bonds, and could hardly afford the burden of higher taxes, so the idea of taxing and borrowing their money to pay for the building of a great war machine was not even a viable option. Nor was it necessary. Instead, the sovereign government simply issued the U.S. dollars, by fiat, as it needed them to buy materials and pay wages: It declared the dollars into existence—and then it paid those dollars to the American people to build the ships and planes and guns. In the historical narrative by professor Klein, we never encounter someone saying, “Sorry, Mr. Roosevelt, we need to sell another billion dollars in War Bonds before we can build that new aircraft carrier.” That conversation just doesn’t come up. By the time 1941 rolls around—and especially in the months after the Pearl Harbor attack—mobilization has pushed the economy to virtually full employment: Millions of previously unemployed people (including women who’d never before been in the workforce) were suddenly pulling paychecks as engineers, technicians and machine operators."
Mobilization and Money
Saint George Added Sep 11, 2017 - 11:17pm
Skidmark-john-g (named after "Toilet G" on the Ground Floor of the brothel his mother squeezed him out into [father unknown]) trolls this site because he shills for Russia and Palestinian terror groups that commit, or enable others to commit, atrocities against innocent people.
 
Who is your ideological compliance officer, skid-mark-g? Do tell.
 
Curious minds want to know.
 
"Balance Sheet Accounting" is just "accounting": it ain't neurosurgery and it ain't rocket science. Accounting is completely subservient to basic laws of economics, which arise on their own, spontaneously, with no direction from a central authority like a king, a dictator, a president, a congress, or a parliament, simply from the purposeful and voluntary goals and decision-making of many individuals in a division-of-labor society.
 
To sum it up concisely: fuck accounting, and fuck you.
John G Added Sep 12, 2017 - 2:54am
Give it a rest, you twat.
John G Added Sep 12, 2017 - 5:19am
"If economists wished to study the horse, they wouldn't go and look at horses. They'd sit in their studies and say to themselves, 'what would I do if I were a horse?'" — Ely Devons (1913-1967)
Saint George Added Sep 12, 2017 - 6:44pm
"If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand."
— Milton Friedman
 
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
— Friedrich Hayek
John G Added Sep 12, 2017 - 7:18pm
I prefer Salma.
Saint George Added Sep 12, 2017 - 8:13pm
I prefer candy canes.
John G Added Sep 13, 2017 - 4:36am
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The attraction that this stuff presents to prospective writers and readers is immeasurable.
Saint George Added Sep 13, 2017 - 5:18am
Thank you for your contributions to this Web site. They fill a much-need gap.

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