레이블이 Us Debt Crisis Solution인 게시물을 표시합니다. 모든 게시물 표시
레이블이 Us Debt Crisis Solution인 게시물을 표시합니다. 모든 게시물 표시

2013년 11월 28일 목요일

About 'what is the us debt today'|...this is what gives us our leverage. The US prints currency that is not backed...this excessive debt does not...drastically. In fact, today, the existence...







About 'what is the us debt today'|...this is what gives us our leverage. The US prints currency that is not backed...this excessive debt does not...drastically. In fact, today, the existence...








               Did               you               know               that               the               US               National               Debt               is               almost               $17               trillion               and               growing               at               a               rate               of               hundreds               of               billions               of               dollars               a               year?

Or               wait,               maybe               the               debt               is               at               $70               trillion.

Or               is               it               $86.8               trillion?
               Regardless,               what's               important               is               that               our               country               owes               a               zillion               bajillion               dollars               and               that               growing               number               will               lead               to               the               federal               government               going               bankrupt               like               the               City               of               Detroit,               the               Chinese               marching               in               with               their               US               debt               holdings               and               taking               over,               or               worse!

Even               in               the               short               term,               you               have               people               like               Donald               Trump               stating               that               "When               you               have               [debt]               in               the               $21-$22               trillion               [range],               you               are               talking               about               a               [credit]               downgrade               no               matter               how               you               cut               it."               A               credit               downgrade!

That               means               the               US               would               have               to               pay               even               higher               rates               on               the               money               it               borrows,               meaning               the               debt               would               increase               even               faster!

And               Donald               Trump               is               really               rich,               so               you               know               he's               smart               and               wouldn't               be               making               ludicrous               claims               with               no               basis               in               reality.
               
               Are               you               terrified               yet?

Ready               to               demand               that               the               government               balance               the               budget               or,               better               yet,               pay               off               our               debt               entirely?

Relax.

I               was               once               like               you,               worried               that               the               US               Government               was               overspending               and               undertaxing               our               way               to               financial               collapse               and               putting               an               undue               burden               on               future               generations.

I               cringed               at               the               thought               of               the               US               government               paying               nearly               $3               trillion               in               interest               -               almost               $10k               per               American               -               while               I               responsibly               paid               all               my               credit               cards               and               debt               payments               in               full               each               month.

I               got               a               warm,               fuzzy               feeling               from               politicians               and               journalists               who               talked               of               balancing               the               federal               budget               (that               would               probably               include               almost               every               politician               these               days).

But               I,               like               many               others,               bought               into               a               critical               misunderstanding               of               how               taxation,               spending,               and               public               debt               work               with               fiat               currency               like               the               US               Dollar.

In               reality,               there               is               no               coherent               possibility               for               the               US               government               to               go               bankrupt,               experience               a               credit               downgrade,               or               be               coerced               by               foreign               debt-holders               due               to               excessive               debt.

These               are               all               logically               absurd               outcomes               that               don't               even               merit               acknowledgment.

In               fact,               just               the               notion               of               any               government               being               in               debt               of               the               currency               it               issues               is               rather               absurd               as               well.
               Chuck               E.

Cheese's               and               the               Never-Ending               Supply               of               Fiat               Currency
               Anyone               familiar               with               the               term               "fiat               currency"               is               aware               that               the               US               government               has               an               infinite               supply               of               dollars               at               all               times.

Every               dollar               in               circulation               today               was               created,               and               distributed,               by               the               US               government               at               one               point               or               another.

Note               that               I               used               the               term               "distributed"               instead               of               "spent,"               but               those               words               are               equivalent               in               this               context               since               the               distribution               of               dollars               from               the               US               government               to               other               parties               is               the               very               definition               of               government               spending.

Once               a               dollar               is               in               circulation,               it               can               be               used               to               pay               taxes               or               exchanged               for               goods               and               services               in               the               free               market.
               The               US               government's               capacity               to               produce               dollars               is               quite               similar               to               Chuck               E.

Cheese's               capacity               to               produce               its               tickets.

It               can               create               them               and               distribute               tickets               however               it               likes,               and               it               also               collects               them               at               their               arcade               stores.

But,               the               process               of               awarding               tickets               through               its               machines               doesn't               depend               on               how               many               tickets               are               collected               at               their               stores.

Quite               simply,               Chuck               E.

Cheese's               can               never               run               out               of               tickets               or               ever               have               a               compelling               need               to               acquire               them.
               
               Now,               imagine               a               world               where               Chuck               E.

Cheese's               is               duly               elected               to               represent               the               people,               and               a               new               constitution               is               drafted               giving               them               powers               of               taxation               and               declaring               the               ticket               as               the               national               currency.

Let's               assume               that,               on               day               one               of               this               new               order,               the               government               has               not               yet               distributed               any               tickets.

Although               they               still               have               infinity               of               them,               as               they               always               do,               the               people               have               none               and               are               using               a               barter               system               (or               maybe               SOJs               and               Bitcoins)               for               trade.
               It's               not               really               a               government               without               any               government               spending,               so               President               Cheese               himself               declares               that               they               are               hiring               policemen,               teachers,               road               builders,               and               miscellaneous               paper               pushers               to               be               paid               in               tickets.

To               his               dismay,               he               gets               exactly               zero               applications.

Nobody               is               trading               tickets,               nobody               has               a               need               for               them,               and               in               fact               tickets               don't               even               burn               well               enough               to               heat               one's               house.

Likewise,               nobody               is               willing               to               take               a               job               that               pays               in               tickets.
               But               President               Cheese               is               a               resourceful               mouse               and               he               figures               out               a               solution.

"All               citizens               will               be               required               to               pay               a               tax               of               10               thousand               tickets               at               the               end               of               the               year,               and               violators               will               be               thrown               in               jail               for               tax               evasion!"               he               decrees.

Now               that               may               not               be               the               fairest               way               to               allocate               tax               burdens               to               the               population,               but               it               does               the               job.

People,               now               clamoring               for               tickets               to               avoid               jail               time,               sign               up               to               become               government               employees               in               droves.

Those               that               don't               join               the               public               sector               instead               trade               their               goods               and               services               to               government               employees               in               exchange               for               tickets.

Soon,               everything               from               aardvark               meat               to               zucchini               bread               can               be               bought               and               sold               for               tickets.
               For               the               sake               of               this               example,               suppose               that               10               billion               tickets               are               paid               to               government               employees               in               the               first               year,               while               9               billion               tickets               are               collected               in               taxes.

With               10               billion               tickets               going               into               economy,               and               9               billion               coming               out,               that               leaves               1               billion               tickets               in               circulation.

It               also               means               that               the               government               spent               a               billion               more               tickets               than               it               collected,               although               strangely               there               is               still               no               government               debt.

At               the               end               of               the               day,               the               government               leveraged               its               power               of               taxation               to               take               some               of               the               workforce               and               put               it               towards               providing               roads,               police,               and               teachers.

The               government               can               continue               operating               with               this               budget               as               long               as               it               wants.

The               only               direct               impact               of               the               deficit               is               that               a               billion               tickets               are               put               into               circulation               each               year.

Sounds               all               well               and               good,               right?
               Does               the               Deficit               Matter               at               All?
               Remember               that               government               spending               injects               money               into               an               economy,               while               government               taxing               takes               it               away.

If               you               have               too               much               of               the               former,               but               not               a               lot               of               the               latter,               the               supply               of               money               grows               at               a               very               fast               pace.

When               it               grows               faster               than               the               output               of               the               economy,               the               currency               in               question               experiences               inflationary               pressure.

Inflation               is               not               always               a               bad               thing               -               it               is               effectively               equivalent               to               a               tax               on               those               who               hold               money               -               but               large               or               unpredictable               amounts               of               it               usually               are               undesirable.

Yet,               sometimes               inflationary               pressure               and               putting               money               into               an               economy               can               actually               result               in               a               more               productive               and               prosperous               society.

This               is               generally               true               during               recessions,               including               the               recent               2008               crash               that               we're               still               recovering               from.

In               a               recession,               businesses               lose               revenue               and               therefore               lose               money               available               to               spend               on               wages.

Cutting               the               price               of               products               or               services               is               easy               -               consumers               love               a               good               price               reduction               -               but               wages               are               another               story.

Wages               are               sticky,               meaning               that               people               don't               like               accepting               pay               cuts,               so               instead               businesses               employ               fewer               people               to               reduce               their               wages               paid.

That               leaves               us               with               unemployment,               and               unemployment               represents               wasted               production               in               an               economy.

Reduced               taxes               would               give               businesses               more               money               to               spend               on               wages               and               individuals               more               money               to               buy               what               they               want,               decreasing               unemployment               and               helping               put               an               end               to               the               recession.

Alternatively,               increased               government               spending               could               make               use               of               the               labor               being               wasted               to               unemployment               and               end               the               social               ills               that               come               with               it,               also               leading               to               a               faster               recovery               from               recession.

Either               of               these,               of               course,               would               result               in               a               larger               deficit.

Considering               all               this,               cutting               taxes               and/or               increasing               spending               until               a               recession               is               over               and               unemployment               goes               down               to               low               levels               seems               to               be               a               pretty               obviously               good               idea.

Yet               our               government               doesn't               do               it               nearly               as               much               as               it               should.

Why               not?

Because,               as               I               indicated               in               the               beginning               of               this               article,               too               many               people               are               paralyzed               over               fear               of               national               debt.
               Instead               of               issuing               new               currency               to               cover               deficits,               the               US               government               issues               treasury               bonds.

Issuing               these               bonds               is               not               necessary               for               government               spending,               it               is               merely               a               relic               in               constitutional               procedure               from               when               the               US               dollar               was               on               the               gold               standard.

The               only               practical               difference               between               issuing               currency               and               issuing               treasury               bonds               is               that               bonds               pay               interest,               effectively               encouraging               saving               and               putting               upwards               pressure               on               interest               rates               in               the               free               market.

This               occasionally               results               in               weird               situations               when               the               Federal               Reserve               decides               it               wants               to               lower               interest               rates,               like               the               government               buying               treasury               bonds               from               itself.

It               also               means               the               government               has               an               obligation               to               redeem               those               bonds               for               dollars               when               they               mature,               and               this               is               what's               known               as               the               national               debt.

The               term               "debt"               is               something               of               a               misnomer               and               is               not               the               same               debt               that               people,               businesses,               and               local               governments               are               used               to.

To               "pay               off               its               debts",               the               government               must               merely               convert               outstanding               treasury               bonds               back               to               dollars.
               The               Phony               Debt               Crisis
               Rather               than               handling               fiscal               policy               in               a               way               that               maximizes               the               well-being               and               productivity               of               society,               policymakers               in               Washington               bullheadedly               pursue               disastrous               policies               in               the               name               of               debt               reduction               with               little               basis               in               reason               or               reality.

The               size               of               government               is               a               legitimate               question               for               society               to               debate,               yet               rather               than               compromise               between               cutting               taxes               and               increasing               spending               during               a               recession,               we               often               do               the               opposite.

In               the               face               of               a               rampant               unemployment,               Republicans               ask               for               spending               cuts               while               Democrats               ask               for               tax               increases.
               And               now,               with               the               debt               rapidly               approaching               a               completely               arbitrary               debt               ceiling,               some               congressmen               are               threatening               to               allow               the               US               to               default               on               its               debt               payments,               despite               the               massive               negative               impacts               that               could               have               on               the               economy.

That's               like               the               ocean               defaulting               on               payment               of               water.

Or               Chuck               E.

Cheese's               defaulting               on               payment               of               its               tickets.

And               before               you               blame               it               all               on               the               Republicans,               keep               in               mind               that               it               wasn't               long               ago               that               our               current               President               voted               against               a               debt               ceiling               increase               himself:
               Increasing               America's               debt               weakens               us               domestically               and               internationally.

Leadership               means               that               ''the               buck               stops               here.''               Instead,               Washington               is               shifting               the               burden               of               bad               choices               today               onto               the               backs               of               our               children               and               grandchildren.

America               has               a               debt               problem               and               a               failure               of               leadership.

Americans               deserve               better.

I               therefore               intend               to               oppose               the               effort               to               increase               America's               debt               limit.

None               of               this               is               accurate,               except               perhaps               the               part               about               a               failure               of               leadership.

Our               children               need               not               be               burdened               by               today's               deficits               because               the               government               doesn't               need               anything               from               them               to               pay               off               its               debts.

What               matters               for               our               children               is               that               they               have               the               technology,               education,               and               infrastructure               to               provide               for               their               generations.

Even               if               this               quote               were               true,               the               right               away               to               do               something               about               it               wouldn't               be               to               default               on               debt               payments.
               Why               can't               our               policymakers               simply               set               government               spending               at               a               level               that               allows               it               to               provide               the               services               that               society               desires               from               it,               and               then               set               taxes               at               a               level               that               minimizes               unemployment               without               letting               inflation               get               out               of               hand?

Why               must               our               leaders               posture,               fear-monger,               and               repeat               blatant               falsehoods?

Is               that               really               too               much               to               ask?
               This               kind               of               nonsense               policy               and               rhetoric               will               continue               as               long               as               Americans               continue               to               miscomprehend               the               nature               of               our               debt               and               the               effects               that               deficit               spending               has               on               an               economy.

Politicians               will               capitalize               on               fear               and               misunderstanding               of               our               national               debt               to               help               their               election               chances,               but               don't               allow               yourself               to               be               fooled.

I               only               hope               that               this               article               takes               us               a               step               in               the               right               direction.






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