Talk:National debt of the United States/Archive 1
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Blatent disregard for accepted economic theory
The most concerning thing about this article is the blatent disregard for accepted economic theory (and facts for that matter). ["Blatent disregard for accepted theory" is the term used to describe most new ideas in science. It probably was used to describe Einstein's theory of relativity. Surely, Galileo heard it many times.] Response: Galileo had observational evidence. Einstein had an testable thory. It would help if you could provide something similar.
Saying that increasing money supply does not create inflation is irresponsible and more importantly, wrong. Inflation is not considered, specifically, to be a reduction in the value of money; but instead a rise in the wholesale price of goods and services. ["Rise in the wholesale price" is another way to say, "Inflation is the value loss of money relative to the percieved value of goods and services." The word, "inflation" describes a value relationship -- between money and goods and services. When corn was money, inflation meant the value of corn went down relative to the value of, for instance, leather.]
An increase in money supply has a clear and intuitive effect on the price of goods and services. At any given moment, there is a given amount of goods and services. The prices of said goods and services are based on their demand. ["Intuitive" is the operative word, here. But the history is science is littered with false intuitions. Facts are better than intuition.] Response: Yea, and you need to provide some facts!
[Money is one of the "goods" described here. A purchase can be viewed as an exchange. One person is a "buyer." The other is a "seller." The buyer exchanges money for goods owned by the seller. The value of money, and indeed the value of every form of goods and services, is determined by supply and demand. If the supply rises, without a corresponding increase in demand, the exchange value goes down. In the case of money, demand is based on risk and reward, where risk in the probability of value loss and reward is interest. Thus, inflation always can be prevented and cured by increasing the reward -- interest rates] Response: So we seem to agree that an expanding money supply lowers the value of money which must then be compensated for by increasing interest rates. Great. This does not really lend any crediability to your argument. Here's a fairly straight forward link.
http://www.huppi.com/kangaroo/L-presidentsresponsible.htm
On the other hand, expanding the money supply helps expand the economy. Businesses have more money to hire workers, and customers have more money to spend on goods, so unemployment falls whenever the Fed pumps more money into the economy. However, there is also a negative effect: it tends to create inflation. Why? Suppose that the Fed expands the money supply by 5 percent a year. If no one changes their prices, then the nation's productivity should expand 5 percent a year -- the result of more financial transactions being made possible. But suppose that businesses come to expect the 5 percent monetary expansion every year. It's in their interest simply to raise their prices 5 percent -- that way they make the same amount of extra money without having to work for it. Thus, in order to expand productivity, the Fed has to expand the money supply by 10 percent the next year -- but eventually businesses come to expect that too. The result can be runaway inflation of 20, 100, 5,000 percent.
According to basic economic theory, if there are 500 flat screen TVs, and there are 500 people willing to pay 1000 dollars for a flat screen TV, than the price of the TVs will be 1000 dollars. That is known as a market clearing price (supply forces also affect prices in the long run when producers decide based on the market clearing price as well as their own costs, whether it is prudent to continue producing TVs). When more money is injected into an economy (while no extra goods/services have been created), the amount of money people have to spend on what is available goes up. Now, say, there are 500 people willing to pay 1200 dollars for a flat screen TV; because they now have more money. The price of TVs will now be 1200 dollars. All goods and services will be similarly affected as the increase in available money continously "bids" up the price of the available goods/services. (I did not mean to make this that long) —C.Cohen
[This overly simplistic, intuition neglects the total economic effect of injecting money into an economy. Increased purchasing power results in increased production of many, many goods and services. That is why President Reagan was able simultaneously to stimulate the economy, while curing the Carter inflation, both with a massive injection of money.]
[By the way, when the federal government borrows money, it's called a "deficit." When banks and money markets borrow money, it's called "deposits." The same people who hate federal "deficits," admire banks with large "deposits." Both are debt, though the federal goverment is far better able to repay its debts than banks can pay theirs. So why are deficits bad and deposits good? Semantics, which have translated into intuition.]
Response to above: Oh on the contrary, I feel banks should be made to greatly curtail the ability to lend out "on demand" deposits. Furthermore, a money losing organization is a money losing organization. It doesn't somehow get better by comparing it to a bank. Lastly, third world countries typically suffer hyperinflation and depression from expanding the money supply, NOT this wealth of enhanced productivity and low inflation nirvana that you predict.
I'd also include an external link to this: http://www.truthout.org/docs_03/091903J.shtml [I'd also like to include an external link: http://www.rodgermitchell.com.] Response: That link doesn't say anything. It's an ad basically.
Except, it's very misleading, with the context Sloan provides. No one should read these numbers alone without an unfriendly analyst's analysis in the other hand. [The one question debt hawks never answer is: "If a growing economy requires a growing supply of money, where will the money come from to grow our economy?"] Response: I answered that at the bottom of the page. It's an idea with no validity that you keep coming back to.
It appears that the page U.S. national debt should probably be merged into this one. —Mulad 02:02, May 1, 2004 (UTC)
Debt level
I'm looking for a reference to verify this claim in the text, which I challenge.
"The debt of United States is much lower than what it is in many other developed countries, such as Japan and many parts of the western Europe, where the debt is generally over 100% of GDP."
The EU limits its members to deficits of 3% of GDP.
- And the debt to 60% of GDP. - Jerryseinfeld 16:15, 20 Nov 2004 (UTC)
Next person to edit, please append "near Times Square" to "most famously at the corner of West 43rd Street and Sixth Ave (Avenue of the Americas)," as that address means almost nothing to 99% of Americans, whereas "near Times Square" is much more useful.
Social Security and debt
"There are different ways to lower, or pay off, the national debt. Though, if you consider social security as part of the national debt of the United States then the debt can never be totally paid off."
Is this true? Social Security is a pay-as-you-go program, so I don't see why it requires debt to operate, except in the sense that the government always owes a debt to its employees because paychecks are only issued twice a month. While it's true that the Social Security trust fund is running a surplus now, that won't always be the case. --Paul 20:16, 3 Feb 2005 (UTC)
True. I removed this text until I can see a good citation or arugment.
- While part of the Social Security Trust Fund comprises a significant portion of the national debt (about $1.7 trillion as of May 2005), it can never be totally paid off.
Prestonp 01:31, 23 April 2006 (UTC)
US "trillion"
In the United States, a "trillion" is 10^12, not 10^15, meaning that the debt is only 10 times (not 10,000 times) the amount of currency. See answers.com for confirmation. I edited the start of the article to reflect these changes.
POV issues
there are alot of normative statements in this article. for example: "The economy of Japan could be more worrisome" in the Calculating the debt section.
--GregLoutsenko 20:01, 3 September 2005 (UTC)
removed: "Although it is a significantly large figure, the debt to gross domestic product ratio is around 2:3 which is a median figure amongst many nations."
What does "many nations" mean? 50 nations? 150 nations? Industrial nations?
Presidential Debt Table
The following has been moved from the article itself. - RedWordSmith 00:22, 8 February 2006 (UTC)
"Of course since gov't budgets are primarily the responsibility of Congress, not the President, the entire table is a worthless piece of partisan propaganda. Can someone revise the table showing the increase in national debt under Democratic and Republican controlled Congresses?"
I find it comical that the chart is under "Modern presidential records" but cites this as it's source: "Congressional Budget Office". This chart is useless and I doubt the numbers were calculated correctly. I would accept a congressional version of this chart, but a presidential version is obvious partisanship. Its exists to incite flamewars, not truth or logic. - 216.21.215.250 23:02, 13 June 2006 (UTC)
Text removed
I've removed this text from the article:
- Far more serious than either of these questions, which involve "only money", is the question of the triple bottom line which is the financial, social and natural debt created by exploiting systems with an internal integrity, drawing on them as if they were free. Financial capital is not, in general, a good guide to social or natural capital flows, and many economists claim it is a contrary — even inherently contrary — process. See uneconomic growth for this discussion in detail.
- A serious failure in accountability for instance causes loss of social capital which decreases trust essential to commerce and polity, while loss of natural capital causes a reduction in nature's services (such as irrigation or flood control) that must then be made up for by human effort, stressing the human economy. There are no economists who claim that the financial debt or deficit is actually independent of these factors, and very few who claim that economic growth indicators or measures of national income work well enough to rely on them utterly.
- Thus, the ultimate political risk: collapse of an entire polity, which happened for instance in the collapse of the Soviet Union, or rise of a wholly different political economy, as happened after hyper-inflation in Weimar Germany, with the rise of Nazism. As this is in no state's interest (even China and Iran would suffer in the ensuing turmoil), it is likely that the world's nations are ready to do their utmost to back U.S. government debt.
This appears to be bordering on a personal essay/opinion piece, and I don't see any references backing it up in this article. I already removed this passage:
- Still, Congress has failed to act in time at least once. In 1995, the federal government closed down for six days from November 14 to November 20 due to partisan wrangling between the Congress and President Bill Clinton.
In its original context (and the fact that it's on this article), it's implying that this has something to do with the national debt. It didn't. The government failed to pass the required spending bills and failed to pass a continuing resolution to keep the government running, and that's why the government closed. The debt ceiling didn't play into it at all. —Cleared as filed. 14:56, 20 February 2006 (UTC)
Prestonp removed this text from the Replies to the Argument Against Paying Down the Debt Section because it lacks citation:
- Those who wish to reduce the US National deficit have difficulty answering the question: "Where will the money come from to grow our economy?" Since it can come only from entities that do not have the unlimited ability to service debt (consumers, businesses and local governments), so-called "debt hawks" ignore the question.
- Chairman Greenspan, however, never explained how reducing the amount of money in the economy could "free savings." In fact, reducing the amount of money in the economy reduces savings. Chairman Greenspan also never explained why savings were not already free, since every dollar of savings passes into the hands of a debtor (bank, money market et al), which then invests the money.
It lacks citation. Also, when the government borrows, it either borrows from other people's savings or expands the money supply. If the government ceases borrowing then it "frees savings" that otherwise would have been consumered by the government to finance other things- as Greenspan said.
I also removed this text from the Paying Down the Debt and the arguments against doing so because it lacks ciation and is essentially an opinion piece. :
The memory of people carting wheelbarrows filled with money has a strong emotional impact, which tends to confuse cause with effect. In each example (above), the printing of money was a response to growing inflation, not the cause. Though the amount of money seemingly increased, the amount of real money declined, as money lost value. It was this loss of money value that injured the economies. Wise governments deal with inflation by promptly increasing interest rates, making money more valuable, which increases the amount of real money.
This text was removed from "Paying down the debt and the arguments against doing so" because it really doesn't seen to add anything:
- Then, President Bush cut taxes and debt growth rose.
Removed another text about promotion of a forum on debt : debt relief advice. Was not required in the main text
- The fear of debt relates to the fear of inflation and hyper-inflation, which many believe result from excessive printing of money. Source: [1]
- It is also possible to repay the debt by simply printing more money. While conventional wisdom maintains that this is destructive to an economy, and results in inflation, or hyperinflation, Roger Mitchell argues that there is little or no historical evidence that this occurs. Soure: [Mitchell, Rodger Malcolm 2004: Free Money]. Others indicate that there are excellent examples from Economic history where this has occurred, for example: Germany in 1923, Argentina in the 1980's, and Zimbabwe in the 1980's.
- Inflation during the Carter administration -- a period of relatively low debt increase -- rose from 5.75% in 1976 to 15.89% at the start of 1982. Inflation during the Reagan administration -- a period of massive debt increase -- fell to as low as 1.87% in 1989.
- During the Carter and Reagan administrations debt as a % of GDP was fairly low. It is thought by some that debt becomes inflationary only when it is above about 45% of GDP. Because this ratio has happened only once in the past 10 years -- at the end of WWII -- and inflation has happened several times, it is difficult to substantiate this hypothesis.
- The belief that debt should be reduced is responsible for intermittent periods of federal surplus.
Benefits of debt
This article takes a very negative view on debt, and I understand the many reasons for doing so. However, I think that even a small mention of the benefits of having a debt would balance and improve this article well. Even economies (both public and private) which do well, often have debt (I hear that Norway doesn't but they're just lucky :)) -Samulili 11:57, 10 March 2006 (UTC)klkl
Unsourced
I rv the statement A recession began in 2001. to the prior statement A recession began in 2000. We'd prefer not to see this kind of arbitrary change made without some specific source cited. John Reid 23:31, 16 March 2006 (UTC)
Sorry, http://www.nber.org/cycles/slate011303.pdf, which I was going to post to the talk page
Or, if you want a more unbiased source, http://www.nber.org/cycles/recessions.html
Also, who is we?
If we is the Wikipedia admins, why didn't you catch this in the first place (2000 was either unsourced or incorrectly sourced). Or NBER is not the official source, which I'm sure is wrong because of the following link http://news.bbc.co.uk/1/hi/business/1407245.stm.
Paying the debt date edit
In the paying the debt article, in its large list of beginnings of recessions it states that the most recent recession began in 2000. Using either the traditional economic textbook definition of two consecutive quarters of negative growth OR using the National Bureau of Economic Research's more nebulous definiton the recession began in 2001, not 2000.
Also, the entire paragraph is extremely POV and seems to be taken straight from a POV book. I'm personally tempted to remove it, but having no background in economics, I will leave that to someone who knows what they're doing.
Is this not a POV-driven edit?
207.87.144.77 keeps making the following edit. He changes this:
"In 1998-2000 federal debt growth slowed to 1.4% annually (President Clinton’s surplus). A recession began in 2001. Then, President Bush cut taxes, debt growth rose, the recession ended, and the economy has continued to grow."
To this:
"In 1998-2000 federal debt growth slowed to 1.4% annually (President Clinton’s surplus). A recession began in 2001. Then, President Bush cut taxes and debt growth rose."
I reverted his edit, and then he changed it right back. He had this to say about it: "Economists are still debating whether or not the recession is "over", but it is clear that debt growth has continued."
1. What economists are these? Random Bush detractors? I recommend you go read the definition of recession, and go do some research. I suggest you read this page: Early 2000s recession. The National Bureau of Economic Research says the recession officially lasted from March 2001 to November 2001. It can be argued that it lasted, at the very most, until 2003. It is over now though.
2. It's clear that the national debt has continued to grow? Well no kidding. It has increased every single year for the past 46 years. King nothing 2 01:20, 20 March 2006 (UTC)
Replies to arguments against paying down the debt
At 06:13, 29 March 2006, I posted additional information about six periods of debt reduction listed in the section titled "Paying the debt and arguments against doing so" in a new section titled "Replies to arguments against paying down the debt". At 21:46, 29 March 2006, someone at IP 128.95.217.236 added an "original research or unverified claims" warning and at 22:46, 8 April 2006, someone at IP 24.127.189.67 totally removed my info and added info which, though it does have something to do with the arguments about paying down the debt, no longer addresses the six periods of debt reduction. As I have no idea whether either of the edits to my info were done by an admin, I'll leave them be and let an admin deal with them. The six periods of debt reduction remain unsourced though it appears to me that they likely come from past articles published by economist Frederick C. Thayer. In any case, I'll repeat my original entry (with a few minor corrections) below:
The main argument given above for not paying down the debt is that "every depression in American history began with a surplus, and every recovery coincided with a deficit". The source of the numbers for the six depressions up through the Great Depression appears to be economist Frederick C. Thayer who published an article on the subject about a decade ago. The article contains the exact same numbers and a version of it titled "Think big deficits cause recessions? Think again!" can be found at this link.
In order to evaluate Thayer's claim, one needs to look at all of the major changes in the debt during this period. The following table attempts to do that:
FEDERAL DEBT (in millions of dollars) AND PERCENT CHANGE
High Debt Low Debt
---------------------------- Prior Low High Prior Low
Year Debt Year Debt to High to Low to Low Events
---------------------------------------------------------------------------------
1804 86.43 1812 45.21 -47.69 War of 1812 (1812-14)
1816 127.33 1821 89.99 181.65 -29.33 99.04 Panic of 1819
1822 93.55 1836 0.04 3.96 -99.96 -99.96 Panic of 1837
1843 32.74 1846 15.55 87184.08 -52.51 41352.78 Mex-Amer War (1846-48)
1851 68.30 1857 28.70 339.25 -57.98 84.56 Panic of 1857
1861 90.58 215.61 Civil War (1961-65)
1866 2773.24 1873 2234.48 2961.61 -19.43 2366.84 Panic of 1873
1879 2349.57 1893 1545.99 5.15 -34.20 -30.81 Panic of 1893
1915 3058.14 97.81 World War I (1914-18)
1919 27390.97 1930 16185.31 795.68 -40.91 429.25 Great Depression
Source: Bureau of the Public Debt Note: the first 4 columns come from the above source and are used to calculate the next 3 columns.
The first period that Thayer cites is the five years from 1816 to 1821, when the debt was reduced by 29 percent. What Thayer fails to mention, however, is that in the four years from 1812 to 1816 (the War of 1812), the debt was increased by 182 percent. Hence, the debt in 1821 was still nearly double it's level when the War of 1812 began.
The second period that Thayer cites is the 14 years from 1822 to 1836, when the debt was reduced by over 99 percent, to $38,000. This is the one period that Thayer cites when a recently acquired debt was not simply being partially paid down. In fact, the debt was paid down to its lowest level on record.
The third period that Thayer cites is the six years from 1851 to 1857, when the debt was reduced by 58 percent. Once again, Thayer makes no mention of the fact that the debt had just increased 339 percent in the prior five years, driven largely by the Mexican-American War. Even after the 58% decrease, the debt was still 85 percent above where it had been just 11 years earlier.
The fourth period that Thayer cites is the seven years from 1866 to 1873, when the debt was reduced by 27 percent (19 percent by the latest Treasury estimates). Thayer makes no mention that this immediately followed the Civil War during which the debt increased by nearly 3000 percent! Even after the 19 percent decrease, the debt was still nearly 25 times its size at the beginning of the war.
The fifth period that Thayer cites is the 14 years from 1879 to 1893, during which the debt was reduced by 57 percent (34 percent by the latest Treasury estimates). In fact, this represented a further paying down of the tremendous debt run up during the Civil War. Even after this 34 percent decrease, the debt was still about 17 times its size at the beginning of the Civil War.
The final period that Thayer cites is the 11 years from 1919 to 1930, during which the debt was reduced by 36 percent (41 percent by the latest Treasury estimates). This followed another war which Thayer saw no need to mention, World War I. In the four years from 1915 to 1919, the debt had increased by 796 percent. Even after the 41 percent decrease, the debt was still over 5 times its size at the beginning of World War I.
Hence, four of the six periods of surpluses that Thayer mentions followed wars during which the debt rose far more than it was paid down during those periods. Another of the periods (1879 to 1893) was just a further paying down of the tremendous debt run up during the Civil War. Hence, only one of the periods represented a seemingly voluntary paydown of debt not recently acquired through war.
The above timeline suggests that the initial events that lead to financial crises are wars, not periods of paying down the resultant debt.
[Are we really suggesting that wars, not paying down the debt, caused the depressions? An apt analogy would be to say that jumping out the window did not kill the man. No, the man was killed by taking the elevator up to a high floor. Paying down the debt was akin to jumping out the window. Both were unnecessary and fatal.]
It is certainly possible that debt can be paid down too quickly. However, it is also possible that the U.S. would now be buried in debt had it never paid down any of its war debts. The best way to avoid the situation of paying down a debt too quickly is to avoid running up a huge debt to begin with.
[What does "buried in debt" mean? Does it mean an inability to service the debt? Does it mean bankruptcy? The answer is "yes," for you, for me and for every indebted entity, save one: the federal government. Alone among debtors, the federal government is able to service a debt of any size, as it proves every day. There never has been, and never will be a time, when the federal government is unable to service its debts. So we must assume that "buried" merely is a pejorative synonym for "having more than before." Unfortunately, the word "debt" has negative connotations. Were it properly called "money," everyone would be in favor of it.]
[Or better yet, the government should refer to its debt as "deposits," as the banks do. Everyone admires banks having large deposits, yet these deposits merely are debts to depositors (lenders). Sadly, our entire economy is trapped by semantics.]
One final note, I have not been able to find any source that suggests that the five financial panics that Thayer mentions each marked the beginning of a depression and, along with the Great Depression, marked the beginning of this country's only depressions. The Wikipedia's list of recessions includes the Panic of 1907, not mentioned by Thayer, and states that it "sets events in motion that will lead to a depression in the United States". Also, that page (as well as other sources) suggest that the panics were largely caused by bank failures and lack of confidence in the paper currency (likely due to the fact that bank accounts were not insured as they are today) and speculation.
That is the end of the original info that I posted. Following are additional comments:
Regarding sources for the table, the first four columns come directly from the Bureau of the Public Debt and the next three columns were calculated in a spreadsheet, directly from those numbers (specifically, the numbers in columns 2 and 4). I can add a note about this below the source if that will help.
Another item of interest concerning the source is that the Bureau of the Public Debt numbers from 1866 through 1913 differ a bit from another often-used source, the Historical Statistics of the United States, Colonial Times to 1970. Thayer was likely using this latter source (or a source close to it) as calculations using this source better approximate the numbers that he gave. Thayer's numbers of 29, 99.7, 59, 27, 57, and 36 are calculated to be 29, 99.96, 58, 22, 58, and 36. Only the 22 is significantly different. The following table shows the same calculations using this latter source:
FEDERAL DEBT (in millions of dollars) AND PERCENT CHANGE
High Debt Low Debt
---------------------------- Prior Low High Prior Low
Year Debt Year Debt to High to Low to Low Events
--------------------------------------------------------------------------------
1804 86.43 1812 45.21 -47.69 War of 1812 (1812-14)
1816 127.33 1821 89.99 181.65 -29.33 99.04 Panic of 1819
1822 93.55 1836 0.04 3.96 -99.96 -99.96 Panic of 1837
1843 32.74 1846 15.55 87184.08 -52.51 41352.78 Mex-Amer War (1846-48)
1851 68.30 1857 28.70 339.25 -57.98 84.57 Panic of 1857
1861 90.58 215.61 Civil War (1961-65)
1866 2755.76 1873 2151.21 2942.29 -21.94 2274.88 Panic of 1873
1879 2298.91 1893 961.43 6.87 -58.18 -55.31 Panic of 1893
1915 1191.26 23.91 World War I (1914-18)
1919 25484.51 1930 16185.31 2039.28 -36.49 1258.67 Great Depression
Source: Historical Statistics of the United States, Colonial Times to 1970, Part 2, Series Y 493, pages 1117-1118
As can be seen by comparing this table to the original table above, only the figures for 1893 and 1915 differ significantly and the same basic arguments hold despite the difference in numbers. In any case, the Bureau of the Public Debt numbers seemed likely to be the more accurate since they are on the Treasury website and can be easily updated whereas I don't believe that the other source is being updated. Until recently, I believe that it existed only in actual physical volumes and the online source simply contains copies of those volumes.
I well understand the value of sourcing and verifying all edits on Wikipedia. However, I would note that the dates of surpluses and depressions in the prior section (Paying the debt and arguments against doing so) are totally unsourced. It's only because I'm very familiar with Thayer's arguments that I deduced their source. I have no reason to think that Thayer's original arguments are political but I have heard those arguments cited numerous times in a political context. They seem to be a favorite argument on the Internet for excusing the debt. In any case, Thayer's arguments seem flawed or, at least, incomplete. He makes no mention of the wars during which the debt rocketed. Also, he states that the six periods that he lists were followed by the only six depressions in U.S. history. I have found no source that backs this up and several that seem to contradict it. If his arguments are to be allowed, it would seem that there needs to be some allowable way to objectively counter them. In any case, his arguments were added by someone with the IP 12.73.228.87 on 12 March 2006. I believe that this is the paragraph that the above comment under "Paying the debt date edit" is calling "extremely POV". Lineman 09:11, 9 April 2006 (UTC)
[Just FYI, I am Prestonp and I removed your text responding to the argument against paying down he debt and replaced it with the one that's there now. I wanted to incorporate what you had written, but it just didn't really seem to say anything definitive. US History is pretty dynamic and you can always find some event to blame something on. Furthermore, it's pretty well accepted that if you expand and contract the money supply, that it will cause a corresponding economic expansion and contraction.]
Thanks for the information. I did find a more definitive response on the balanced budgets (or surpluses) cause depressions arguments from economist Lawrence W. Reed and added that. Lineman 08:02, 25 April 2006 (UTC)
You believe it and I believe it, but the person who "answered" the "question that can't be answered" (below) doesn't believe it. He thinks deficits are a secret plot of some sort.
what is this section trying to suggest?
The belief that debt should be reduced is responsible for intermittent periods of federal surplus. It is not widely understood that every depression in American history began with a surplus, and every recovery coincided with a deficit:
In 1817-21 the federal debt was reduced 25% A depression began in 1891,many died a horrible depressiony death
In 1823-36 the federal debt was reduced 9.7% A depression began in 1892
In 1852-56 the federal debt was reduced 59% A depression began in 1836
How do those dates have anything to do with the federal debt reduction. [You have messed up the dates] I know this is wrong but don't know what is required to fix it. Oh yeah, what the hell does "depressiony death" mean? J Shultz 21:33, 5 April 2006 (UTC)
[Seems pretty clear. A series of debt reduction periods coincides with a series of depressions. Just a coincidence? Or is there a cause and effect relationship between taking money out of the economy and having the economy tank.]
The Question That Cannot Be Answered
There is one question debt hawks cannot or will not answer, because the answer is counter to everything they believe. A growing economy requires a growing supply of money. Where will the money come from to grow our economy?
[The idea that an increase in money supply is necessary for a growing economy is absolutely incorrect. As laid out by Murry Rothbard in his book "The Case Against the Fed" P. 20: All that an increase in the quantity of dollars can do is to diulte the effectiveness, the purchasing power of each dollar. Hence, the great theory of monetary theory emerges: once a commodity is in sufficient supply to be adopted as a money, no further increase in the amount of money is needed. Once a money had been established, any increase in its supply confers no social benefit.]
Oh yes, that's a "great theory" all right. By the same "logic," a decrease in the supply of money should have no adverse effect. Does Mr. Rothbard expect us to believe that the government could remove all but, say $1 billion, from our economy, and things would be fine? Not likely.
And there remains the nasty question about why tax cuts, which increase the money supply, always seem to stimulate. And government spending increases, which also increase the money supply -- they seem to stimulate, too. And of course, government surpluses, which decrease the money supply, they seem to cause depressions. And government spending, which increases the money supply, is the only thing that gets us out of depressions. Mr. Rothbard has a "great theory," based not on history, but on . . . well, on nothing.
The absolute, positive fact is, adding money to the economy always has stimulated the economy, and taking money from the economy always causes recessions and depressions. Better look to history rather than to Mr. Rothbard and his "great theory."
Hey, you aren't Mr. Rothbard, are you???
[Dr. Rothbard is dead. He was former professor of economics at UNLV. We can agree that decreasing money leads to a economic contraction, but you are arguing that more money has to be added to accomodate more people. That's not true. If you wish to continue this coversation, I invite you to provide a citation. Incidentally, Dr. Rothbard's book covers a HUGE amount of history. You have not. Here's a quote from Greenspan for you from Alan Greenspan Gold and Economic Freedom, "This is the shabby secret of the welfare statists' tirades against Gold. Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism towards the Gold Standard." ]
Perhaps the most annoying aspect of any conversation is when someone tells you you said something you never said, and then argues against it. I never said "more money has to be added to accommodate more people." Those are your words. I said, A growing economy requires a growing supply of money.
As for deficit spending being a "scheme for the hidden confiscation of wealth," that's truly humorous. Between 1980 and today, the federal debt has increased more than 700% -- a monumental increase, especially since that's only a 25 year period out of our 200+ year history. Surely that sort of increase should have "confiscated" all the wealth in the country. Yet our economy has grown magnificently, and even the poor today have more wealth than ever. So who is doing the confiscating?
[When working in fiat money, the government is basically allowed to conterfeit. They make more money because they said so. So, to answer your question, the government confiscated the wealth when it expanded the money supply. The people hardest hit by this wealth confiscation are often those who are least able to pay- those on a fixed income or living off of savings. That would have not confiscated all the wealth in the country. Again, you seem to try to make points that aren't really points- by saying all the money in the country would have been confiscated, say, or that a money losing organization is a good one because it's like a bank. Those points haven no merit, and, when confronted, you merely seem to dance around the issue. As for growing magnificently, that has more to do with a couple of world wars that it does anything else.]
Then you say, I've not covered history. How about 6 depressions, *all* of which began with federal surpluses and *all* of which recovered because of federal deficits (you know, those "hidden confiscation" deficits.) Six depressions and every single one of them began the same way (surpluses) and ended the same way (deficits)! Now, that's what I call history.
[Expansion followed by contractions is what one would expect. The contraction would have to be brought on by either hyperinflation if the money supply continues to expand, or a recession if it does, in fact, contract. Note that a growing economy does NOT require a growing money supply. The economy of CHina is growing admirably despite, or perhaps because of, their higher per capita savings rate and that they continue to loan us money therefore shrinking their own supply.] This is sad. Lending money does not shrink anyone's money supply. When you lend money to your bank -- otherwise known as making a deposit -- your money supply doesn't shrink. That's the difference between a loan and a gift. In a loan transaction, the lender retains the same amount of money, and the borrower increases his supply of money. That's how lending creates money.
A little more history: As you may or may not know, all money is debt. The best measure of the money supply is not M1, M2, M3 or L. It is Total Debt. If you graph annual changes in Total Debt from 1956 through today and compare it with a graph of annual GDP changes, you'll see something remarkable. The graphs are essentially parallel. That is, annual increases in Total Debt correspond with increases in GDP. Wealth confiscation??
[Nice dancing. However, all money is debt only in our present society. That's right. All money is debt in our present society. What society do you live in? In the absense of fractional reserve banking, money is simply wealth and is not tied to debt in any way. Your savings account is money right? It also is a debt, owed to you by the bank. You cannot name a single form of money that is not debt. Try it. By the way, money is different from wealth. For instance, real estate is wealth, but not money. Furthermore, if you don't seem to understand that inflation is a hidden tax that robs from those whose money loses value, I suggest you take some time to work through the problem yourself before continuing.] As for gold being a "protector of property rights," here's a bit more history. In 1980 gold was over $800. Today it's a little over $600, after languishing at $300 for years. So the US dollar has been a far better protector of property rights than gold -- and unlike gold, dollars don't require you to pay for storage.
[The price of gold has beeb carefully managed so as to maintain the value of fiat money. This website nicely explains it and it will only take you 10 minutes or so to read. [2]] Or if you don't like that guy, here's Ron Paul saying the exact same thing. Source: [[3]] In fact, the price of gold has absolutely nothing to do with the value of money. Not since Nixon. That's why it has bounced around from $800 to $300 to $600. And what do you mean by "maintain the value of fiat money." Do you mean the dollar has maintained its value (huh?) and it's because of gold? If there were not a single ounce of gold in Fort Knox, the dollar's value wouldn't change.
Greenspan, in his first speech after leaving the Fed, said that gold prices were up because of concern about terrorism, and not because of monetary concerns or because he created too many dollars during his tenure. Gold has to be discredited and the dollar propped up. Even when the dollar comes under serious attack by market forces, the central banks and the IMF surely will do everything conceivable to soak up the dollars in hope of restoring stability. Eventually they will fail.
Also, one of the many things Chairman Greenspan must have forgotten is why we came off the gold standard. More history. We ran short of gold. France was hoarding it. We were headed toward a depression, because we were unable to create enough money to grow our economy. When President Nixon allowed the dollar to float, that finally gave us the power to create the money a growing economy needs.
[We ran short of gold because we were expanding the money supply beyond our ability to back our currency with the money that we had adopted as our standard. It is a falsehood to say we needed more money to grow our economy. In fact, after the gold standard was abandonded was one of the worst recessions and bear markets in our history, complete with high inflation, high interest rates, and a falling stock market. This scenario from history invalidates what you've been saying, BTW.]
The problem with gold, or with any other physical commodity, acting as money is: Inevitable shortages cause inevitable economic disasters.
[That assertion is entirely false and unfounded.]
So we continue to ask the question, where will the money come from to grow our economy? [Economies grow or shrink on their own merits. One can play parlor games with the money supply to engineer short term effects, but those chickens always come home to roost.] What does "on their own merits" mean? What are the merits? This is just blowing smoke, when you have no idea what moves an economy.
Here are a couple more questions: Where does money come from?
[Money is a reflection of value. Value comes from having things that are valuable.]
Who creates it? Who destroys it?
[Value is created or destroyed depending on circumstance, but I'm sure you can figure that out for yourself. As for money, if money is tied to value, as it is with a gold standard, then money is only created when more value is brought into the picture. In a strict gold standard with no fractional reserve banking, money can only be created or destryoed by physically creating or destroying the money itself. In our modern, fiat money society, money is created or destroyed at whim depending on the interactions of the parties involved.]
If there were no federal debt at all, how much money would there be in America?
[Easy, adopt a gold standard, and moneny would be based entirely on value. End of story.] You didn't answer the question. No surprise, there. What is there about gold that gives it value, as opposed to any other commodity? Why not silver? Why not diamonds? Helium? Why gold? Oh, and as long as we're recommending books, I recommend FREE MONEY by Rodger Malcolm Mitchell. All of the above is explained simply, clearly and with lots of history. [Well, since you have yet to make a cogent, well reasoned arguement, I'll just stick to reading economic hacks like Alan Greenspan.] Then you will learn only what you already believe. So, why read. You already know all you want to know.
Free Money Debunked
Instead of gnarling a topic with reponses within responses, I am just going to adopt a new topic specifically to replying to the stubborn person who persists in foisting this "Free Money" tirade on the rest of us. Although I have given up trying to convince him- he has consistenly replied to historical fact or the statements of well recongized economists by simply dodging the topic.
The free money guy wrote: "This is sad. Lending money does not shrink anyone's money supply. When you lend money to your bank -- otherwise known as making a deposit -- your money supply doesn't shrink. That's the difference between a loan and a gift. In a loan transaction, the lender retains the same amount of money, and the borrower increases his supply of money. That's how lending creates money."
I have already said, and he has already ignored, that comparing things to banks is misleading. It is obvious that lending money does shrink one's money supply. If I loan you $10, that's $10 I can't use until you give it back. Now banks loan other people's money while it's in transit and that inflates the money supply. It's a facet of fractional reserve banking.
The free money guy wrote: In fact, the price of gold has absolutely nothing to do with the value of money. Not since Nixon. That's why it has bounced around from $800 to $300 to $600. And what do you mean by "maintain the value of fiat money." Do you mean the dollar has maintained its value (huh?) and it's because of gold? If there were not a single ounce of gold in Fort Knox, the dollar's value wouldn't change.
At this point, it's obvious that he didn't read the privateer website about how the value of gold has been managed and is instead just generating more verbage and repeating the same talking points. For those of you who are interested in a brief discussion about the connection between gold, the US dollar, and how the price of gold has been managed, I would encourage you to visit [[4]]
To which the free money guy wrote: This will be my last post, and the last time I visit this site. Anyone who visits the above web site will "discover" that the dollar is not money and the modern economic system should be replaced by something used in the dark ages. Goodby and good luck.
I wrote: Economies grow or shrink on their own merits. One can play parlor games with the money supply to engineer short term effects, but those chickens always come home to roost. To which the Free Money guy replied with:
What does "on their own merits" mean? What are the merits? This is just blowing smoke, when you have no idea what moves an economy.
The basic theory of economy regarding free trade is that free trade is healthy for the world because each country can do what they do best (i.e. at the lowest cost) and export it to their neighbors thereby lowering the total cost of all goods. Being good enough at something to compete in the global market place is part of basic economic theory regarding free trade, and is what is meant by "on their own merits." This is not blowing smoke. The idea that all it takes to grow an economy is inflating the money supply through growing your debt level is pollyannically naieve and misguided.
The free money guy asked the question : If there were no federal debt at all, how much money would there be in America?
The answer is pretty simple- the right amount. The money simply acts as a medium and as such does not need to be managed by the government. Just because it's done now does not mean that it's the only way to go. In fact, the historical predicent in the US is very much against it. The government inferring in our money is just a creation of the last century.
The Free Money guy asked: You didn't answer the question. No surprise, there. What is there about gold that gives it value, as opposed to any other commodity? Why not silver? Why not diamonds? Helium? Why gold?
The answer is that gold was historically favored because it is a fairly concentrated form of wealth (that is, people inherently value it come hell or high water) that can be melted down and standardized in an fashion that is ideal for exchange. That same is true of silver, and silver has often been used as currency. This is not true of diamonds of helium.
The Free Money guy wrote :There are thousands of things that meet the criteria of being melted down and standardized. But the point is, what makes gold a concentrated form of wealth? Why do you think people "inherently" value it? Gold has minimal inherent value. It's used in electronics and by dentists and by NASA. Maybe a few other things. But in of itself, gold is not a particularly valuable commodity. Most of its use is for jewelry, which doesn't have inherent value.
So why does gold have value? Only because people say so. Why does the dollar have value? Because the US says so. The day the US would say the dollar has no value, is the day the dollar would have no value.
And that is essentially the position of gold. So long as people are willing to buy it, it will have value. But when people stop buying it -- as the US already has -- gold will be just another metal, having only intrinsic value.
The fundamental law of modern economics is, money has value, not because of its intrinsic worth, but because countries say it has value. The dollar has no intrinsic worth. You can't eat it, melt it, breath it. Mostly, you can't even see it, because most money is only computer data. It is backed only by "full faith and credit."
To which I replied, Pay special attention here, because here is where we both basically agree. Gold has intrinsic value, whereas money has no intrinsic value. This is why people such as myself argue for using something that has intrinsic value to back money. '
The Free Money Guy wrote: Gold never again will be money, and never again will back money. Why? There isn't enough of it to support the world economy. For money to be backed by gold, the price of gold would need to rise thousands of times. That's why we went off the gold standard.
So far, a total of 193,000 metric tons of gold have been discovered (http://interactive2.usgs.gov/faq/list_faq_by_category/get_answer.asp?id=89). If the US owned every ounce of gold on this planet, the price of gold would need to be about $1,200 an ounce to support our economy. And the price would need to rise at least 5% a year to support next year's economy.
And by the way, please talk with another economist, if you don't trust me. Every economist will tell you that borrowing increases the quantity of money. Can you name a single form of money that is not debt?
To which I replied, You continue to persist in the notion that an expanding economy necessitates an expanding money supply. This is not true. Secondly, if I lend you money, I do not have the use of that money until you pay it back. My money supply has decreased. China is lending us money and decreasing their own supply, thus defeating the key point in your argument to which you return over and over again. If China uses their profits from trade to purchase our bonds, then their money supply is decreasing by the money they shipped over here to buy our bonds. Their money supply has shrunk until we redeem those bonds. Period.
As for your notion that gold will never be used as money, keep in mind that at no time in history outside. of the last 35 years or so, has every money in the world been fiat currency. We are embarking on a grand experiment to see if the governments of the world can manage all this inherently worthless fiat money to avoid economic calamity. Personally, I'm not a huge believer in the ability of the governments of the world to act in a coordinated fashion so as to socially engineer how we the people value money and would by far prefer to see us return to a money that has inherent value.
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A question that I fail to find an answer to:
This page covers the United States debt at Federal level
it is obvious that states, counties, municipalities, etc. -- borrow, issue bonds, etc. Consolidated, it should sum up to significant amounts.
Where is that debt covered (IMHO, that is obviuosly a public debt as well)?
Net debt position
I'm surprised to see that there's no section about the US's net debt position. Back in high school, someone in my U.S. history class yelled that other countries owed us because of wars. The BBC has an article about the UK paying off the last of its loans from the US for WWII. The following is the link and the purpose is to clarify and stimulate thinking about this matter so that hopefully someone writes about it in this article. -Amit[5]
Extremely biased article
I just read the "United States public debt" article for the first time. It is very biased and political in nature, much more so than most Wikipedia articles. The section on foreign holdings of US debt is a particularly egregious example. There is absolutely no discussion of the benefits of foreign holdings of dollar assets, including government debt, or of the unlikelihood that foreign investors would dump their dollar assets. Does anybody else agree that this article needs a major rewrite?
--Bond Head 16:15, 7 June 2006 (UTC)
- One way we address such proposals is to create a temp page (e.g. United States public debt/temp) and editors can re-write the article there and present it to the interested community for review. bd2412 T 16:33, 7 June 2006 (UTC)
I'll look at whatever major re-write you propose, but that idea that foriegn ownership of US assetts is some great thing is itself a biased standpoint.
- OK, thanks for the feedback. I wasn't suggesting that the article present only the arguments in favor of non-US investment, but rather that it present both sides, in contrast to the current version, which only presents the arguments against foreign holdings. I'll start working up some ideas. Bond Head 05:57, 21 June 2006 (UTC)
Can the U.S. go bankrupt?
Hey, everyone, I revised the "Risks" category (adding some sub-categories) and added a new paragraph asking "Can the U.S. go bankrupt?" The paragraph has a source from a Federal Reserve Bank of St. Louis official (via the London Telegraph). The source is here:
I also added this source to the "External links" section. Keep up the good work. ProfessorPaul 17:43, 15 July 2006 (UTC)