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Topic: Federal Debt and Deficit
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medinabuckeye1 · « **Reply #252 on:** May 27, 2025, 03:47:17 PM »

Quote from: Gigem on April 04, 2025, 07:44:45 AM

On the surface this seems appealing. But I’ve often wondered about any negative consequences. Kinda like how you’ll see some headline about some asteroid having enough precious metal to be worth $20 quadrillion or whatever. They fail to take into account supply and demand. The instant you bring that sucker home the supply increases dramatically and the price would go down.
All that guaranteed money in the market, probably more than the private sector has invested would artificially influence the market.

Interesting historical example:
When the Spanish (they were mostly first among European Powers) got their American Colonial Empire up and running their first priority was GOLD! They found a LOT of it in Central and South America and brought it home and this caused a massive shift in prices.

This actually was a catalyst to ending feudalism throughout Europe. Prior to the Gold from the New World prices had been so stable for so long that there were a lot of gold-denominated perpetual contracts. Ie, if @Cincydawg is the wealthy landlord of this place his great-grandfather may have signed contracts with all of our great-grandfathers specifying that he was he and his heirs would rent a specified plot of farmland to our great-grandfathers and their heirs X oz of gold per year. That may have then existed for generations with no need to change the price because prices were THAT stable.

All the new gold, however, bankrupted the landowners. Ie, lets say that @Cincydawg 's father rented out 500 acres at 2 oz of gold per acre per year so that works out to 1,000 oz of gold for Cincy's dad. Just assume that 1,000 oz of gold is sufficient to live a REALLY opulent lifestyle but then the Spanish Gold causes the value of gold to drop by 1/2 or 3/4 and now all of a sudden Cincy isn't nearly as wealthy as his father and grandfather were. Meanwhile for us peasant farmers this is a financial windfall because while the crops that we could grow on an acre used to bring us say 4 oz of gold per year and we had to pay 1/2 of that to the landlord (Cincy in this example) now the crops that we can grow on an acre bring us 8 or 16 oz of gold but we still only have to pay the landlord 2 oz which is now 25% or 12.5% of our gross.

MikeDeTiger · « **Reply #253 on:** May 28, 2025, 09:56:42 AM »

Maybe I'm missing something, but how is that analogous to our society now? In today's world, Cincy would not be locked into any sort of generational contract. If the value of the dollar plummeted, CD would just raise the cost of rent and the peasants would be in roughly the same boat. The Spanish example doesn't seem to have inflation. But we do.

medinabuckeye1 · « **Reply #254 on:** May 28, 2025, 10:18:12 AM »

Quote from: MikeDeTiger on May 28, 2025, 09:56:42 AM

Maybe I'm missing something, but how is that analogous to our society now? In today's world, Cincy would not be locked into any sort of generational contract. If the value of the dollar plummeted, CD would just raise the cost of rent and the peasants would be in roughly the same boat. The Spanish example doesn't seem to have inflation. But we do.

@Gigem specifically said:
"But I’ve often wondered about any negative consequences. Kinda like how you’ll see some headline about some asteroid having enough precious metal to be worth $20 quadrillion or whatever. They fail to take into account supply and demand. The instant you bring that sucker home the supply increases dramatically and the price would go down."

That is what I was comparing to. The massive increase in the supply of Gold due to the Spanish Colonization of the New World caused exactly what he was talking about there.

medinabuckeye1 · « **Reply #255 on:** June 23, 2025, 01:22:34 PM »

I wanted to revive this thread because we got onto a tangent discussing it in the politics thread and it was also recently brought up by @SFBadger96 somewhere.

Debt is currently ~120% of GDP.

I think everyone here agrees with me that the relative measure is exactly that, % of GDP. Measuring debt in dollars is a convenient way for the other party to blame the current party in power for the "largest ever increase in the debt" but that is just a silly game (played by both sides for decades). What really matters isn't how many TRILLION dollars the US Government owes but how that compares to the ability to repay which is a function of GDP.

Here is a link to the St. Louis Fed's Fed Debt as a % of GDP since 1966
link to the St. Louis Fed's Fed Debt as a % of GDP since 1966, briefly:

in 1966 it was ~40% and the massive WWII was still being paid down.
it bottomed out at ~30% in the mid 70s and again in the early 80s.
From the early 80s to the mid 90s it climbed from ~30% to just under 65%.
In the mid 90s we started paying it down and it bottomed out just under 55% immediately prior to 9/11.
From 9/11 to immediately prior to the 2008 credit crunch it grew from just under 55% to about 62%.
Then things went haywire. The response to the mortgage meltdown and associated recession caused Debt to spike from ~62% of GDP in 2007 to ~100% of GDP in 2012.
Then the growth slowed but did NOT reverse such that debt was a little over 100% of GDP immediately prior to COVID.
Then it spiked again to ~120% of GDP where it remains today.

Realistically, the best we could probably hope for is to slow the growth of the debt to less than the growth of the economy then wait literally decades to grow our way out of this problem. The US Economy typically grows at ~3.2% per year (average, obviously there are good and bad years) so if that continued and debt growth was held to something less than that, we'd be gaining on it.

Example, if growth of debt was limited to 2% per year (average) and the economy continued growing at 3.2% (average) then:

In 10 years it would be down to ~107%
In 20 years it would be down to ~95%
In 30 years it would be down to ~85%
In 40 years it would be down to ~75%
In 50 years it would be down to ~67%
In 60 years it would be back to roughly where we were immediately before the credit crunch.

MikeDeTiger · « **Reply #256 on:** June 23, 2025, 01:45:33 PM »

My question is can the economy feasibly grow ad infinitum?

We know the debt can keep growing.

Gigem · « **Reply #257 on:** June 23, 2025, 02:02:21 PM »

I have decided that the "powers that be" simply don't give a shit about the debt, whether they are R's or D's or independents. Sure, there is and always will be a few in congress that raise concerns repeatedly (like Rand Paul comes to mind) but the vast majority of them simply don't care.

I have been thinking on this lately about the lack of concern and I can only come to one conclusion. They don't care because it doesn't matter. So now that I know that the measure of the debt is not a concern, I have to flesh out why it doesn't matter.

To that end, I have come to two conclusions.

One, the amount of the debt doesn't matter because something in the future will render it moot. What that is, whether good or bad, I don't know. Maybe the country won't exist. Maybe AI will do "something" that makes money moot.

Cincydawg · « **Reply #258 on:** June 23, 2025, 02:06:07 PM »

They don't care (beyond some lame complaints) because WE don't care.

MikeDeTiger · « **Reply #259 on:** June 23, 2025, 02:56:14 PM »

Quote from: Gigem on June 23, 2025, 02:02:21 PM

I have decided that the "powers that be" simply don't give a shit about the debt, whether they are R's or D's or independents. Sure, there is and always will be a few in congress that raise concerns repeatedly (like Rand Paul comes to mind) but the vast majority of them simply don't care.

I have been thinking on this lately about the lack of concern and I can only come to one conclusion. They don't care because it doesn't matter. So now that I know that the measure of the debt is not a concern, I have to flesh out why it doesn't matter.

To that end, I have come to two conclusions.

One, the amount of the debt doesn't matter because something in the future will render it moot. What that is, whether good or bad, I don't know. Maybe the country won't exist. Maybe AI will do "something" that makes money moot.

That, I think, is an unwarranted leap.

Gigem · « **Reply #260 on:** June 23, 2025, 03:30:52 PM »

Quote from: MikeDeTiger on June 23, 2025, 02:56:14 PM

That, I think, is an unwarranted leap.

How can you conclude otherwise?

Gigem · « **Reply #261 on:** June 23, 2025, 03:58:44 PM »

Quote from: Cincydawg on June 23, 2025, 02:06:07 PM

They don't care (beyond some lame complaints) because WE don't care.

I've heard that many times, but why is it now that things just seem to escalate with no end in sight? For no obvious reason. Why didn't we just run the debt up in the 1960's/70's/80s/90's? It has been reported on this very thread about measures that were undertaken to stave off the SS trust fund running out of money including upping the retirement age, cutting benefits, upping taxes. It's been done several times over the last 50-80 years. So why is it now just being ignored? I know we can just keep saying that the politicians just don't care, but what is so special about the last ~15 or so years that has changed?

I think we can all agree 100% that the deficit spending absolutely drives inflation. I think we can all agree that our money does not go as far as it did 5, 10, 15, 20 years ago with inflation being a major cause. It's near universal that today's young people have it much harder in terms of doing things like buying a house, going to college, and just living a normal life compared to years past.

Do they not care about the country at all, not see that the spending like this is totally out of control but yet nobody gives a shit? Why would you care about not getting re-elected if the result of you're actions will sink the country? Surely they have to care about their kids/grandkids/etc. And I'm not just saying financially, I'm saying don't they want their children/heirs to grow up in the USA?

Again, it truly seems to me that the politicians just don't care at all.

MikeDeTiger · « **Reply #262 on:** June 23, 2025, 03:59:38 PM »

Quote from: Gigem on June 23, 2025, 03:30:52 PM

How can you conclude otherwise?

Because I think it's entirely possible for politicians to not care about something that matters.

Or, it's possible for them to care, but they fail to act for a variety of reasons that don't include not caring.

Either way, it's plausible that the debt matters.

In fact, the only way I can see that it wouldn't ultimately matter is if modern monetary theory were true, which none of the economists I trust adhere to. But, take that with a grain of salt, because the idea that MMT is the only paradigm where debt wouldn't matter is my own thought and not something I heard from them.

NorthernOhioBuckeye · « **Reply #263 on:** June 23, 2025, 03:59:51 PM »

Quote from: Cincydawg on June 23, 2025, 02:06:07 PM

They don't care (beyond some lame complaints) because WE don't care.

To paraphrase Thomas Sowell, Congressmen are concerned with only 2 things. 1) Getting elected and 2) getting re-elected. Anything that gets in the way of either of 2 goals, is brushed aside.

So as Cincy says, if we don't care and keep voting for those that don't do anything about the debt, they never will.

Gigem · « **Reply #264 on:** June 23, 2025, 04:02:39 PM »

Quote from: NorthernOhioBuckeye on June 23, 2025, 03:59:51 PM

To paraphrase Thomas Sowell, Congressmen are concerned with only 2 things. 1) Getting elected and 2) getting re-elected. Anything that gets in the way of either of 2 goals, is brushed aside.

So as Cincy says, if we don't care and keep voting for those that don't do anything about the debt, they never will.

100% agree with #1 and #2, but setting aside cookie cutter phrases what has changed over the last ~20 or so years? We had a balanced budget in the 1990's, and low-ish deficits in the 2000's. So in 2008 we just hit the SPEND button and never looked back? And yes, I know that entitlements are driving a lot of that, but why did we lose the will to do something about it?

GHW Bush cared so much that it cost him an election, probably. Maybe there's my answer.

Cincydawg · « **Reply #265 on:** June 23, 2025, 04:22:31 PM »

Federal spending USED to be 20% or so of GDP, and tax revenue ran around 18-19% of GDP, I'm talking 2000 era. After 2008, spending was used to restart the economy, then it stabilized to some extent, then it was used during COVID, and has really not come back down enough. Note that interest expense now is about a trillion a year, that can't be cut without bad things.

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Topic: Federal Debt and Deficit

medinabuckeye1

Re: Federal Debt and Deficit

MikeDeTiger

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medinabuckeye1

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medinabuckeye1

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MikeDeTiger

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Gigem

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Cincydawg

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MikeDeTiger

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Gigem

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Gigem

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MikeDeTiger

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NorthernOhioBuckeye

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Gigem

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Cincydawg

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