# Is US Federal debt sustainable? **URL:** \ **Category:** Great Debates\ **Created:** [January 27, 2015, 2:44pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001 "2015-01-27T14:44:54Z")\ **Posts on this page:** 20\ **Page:** 7
**Author:** ![JoeTheBartender](https://avatars.discourse-cdn.com/v4/letter/j/b5a626/32.png) [@JoeTheBartender](https://boards.straightdope.com/u/JoeTheBartender)\ **Post date:** [February 14, 2015, 9:37pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/121 "2015-02-14T21:37:36Z")
> [@John\_Stamos\_Left\_Ear](#): > > Ron Paul is an idiot. That is all. Quite the argument there. Personally attacking someone whose name I never mentioned! ---
**Author:** ![JoeTheBartender](https://avatars.discourse-cdn.com/v4/letter/j/b5a626/32.png) [@JoeTheBartender](https://boards.straightdope.com/u/JoeTheBartender)\ **Post date:** [February 14, 2015, 9:39pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/122 "2015-02-14T21:39:20Z")
> [@andros](#): > > I find this an entirely useless–and generally self-destructive–approach to to the world. Good, you stay mesmerized by the bright lights and big smoky explosions. I’ll be sneaking around and looking at the man behind the curtain. ---
**Author:** ![JoeTheBartender](https://avatars.discourse-cdn.com/v4/letter/j/b5a626/32.png) [@JoeTheBartender](https://boards.straightdope.com/u/JoeTheBartender)\ **Post date:** [February 14, 2015, 9:42pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/123 "2015-02-14T21:42:03Z")
> [@John\_Stamos\_Left\_Ear](#): > > And I’ll bet that he feels differently about the person who put all these dumb ideas in his head. People don’t put ideas in my head. People tell me their stories and I check the stories out. That’s the thing called “critical thinking”, you should really try it sometime. ---
**Author:** ![John\_Stamos\_Left\_Ear](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_stamos_left_ear/32/3198_2.png) [@John\_Stamos\_Left\_Ear](https://boards.straightdope.com/u/John_Stamos_Left_Ear)\ **Post date:** [February 14, 2015, 9:54pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/124 "2015-02-14T21:54:41Z")
> [@JoeTheBartender](#): > > Quite the argument there. Personally attacking someone whose name I never mentioned! You didn’t have to. ---
**Author:** ![John\_Stamos\_Left\_Ear](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_stamos_left_ear/32/3198_2.png) [@John\_Stamos\_Left\_Ear](https://boards.straightdope.com/u/John_Stamos_Left_Ear)\ **Post date:** [February 14, 2015, 9:56pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/125 "2015-02-14T21:56:18Z")
> [@JoeTheBartender](#): > > People don’t put ideas in my head. People tell me their stories and I check the stories out. That’s the thing called “critical thinking”, you should really try it sometime. A moderator might say your snark is too much for this forum. I can call Ron Paul an idiot because he’s a public figure. Oh, and also because I looked at the garbage he says and applied critical thinking and saw that he’s an idiot. ---
**Author:** ![Acsenray](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/acsenray/32/4519_2.png) [@Acsenray](https://boards.straightdope.com/u/Acsenray)\ **Post date:** [February 14, 2015, 10:09pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/126 "2015-02-14T22:09:02Z")
> [@JoeTheBartender](#): > > No I’m suggesting that I have seen many businesses make do without any debt. I have also seen businesses where debt got out of control and drove them to bankruptcy. > > Why do you think that’s clueless? I think it’s a very good business practice to avoid debt. I only invest in businesses that have low or no debt. Why should I as an owner of the company, share profits with bankers? Because debt is inherently neither good nor bad. It is simply a fiscal tool that often makes it possible to do things and achieve goals that would otherwise be impossible. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [February 14, 2015, 10:21pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/127 "2015-02-14T22:21:36Z")
> [@John\_Stamos\_Left\_Ear](#): > > A moderator might say your snark is too much for this forum. Actually, a moderator might well say everyone should calm the hell down. Next personal shot earns a warning. So do subsequent ones. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [February 14, 2015, 10:56pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/128 "2015-02-14T22:56:43Z")
> [@JoeTheBartender](#): > > I still would like to know from somebody why they think it’s a good idea that a certain privileged class known as banks get to create our money and derive the benefits from that activity? The way that private entrepreneurs set interest rates and extend credit, in effect creating paper money, does seem peculiar. But this has been a model at least since the Lombard bankers before the voyages of Columbus, and has dominated world finance since. _It has the advantage that political authorities cannot degrade money, e.g. with printing presses._ Libertarians will admire this use of free market principles. With the gold standard discarded almost a century ago, central banks have been created to provide a “monetary base,” but of course this is readily understood by the cognizant. Such government/bank cooperation combines the benefits of both free-market credit and regulation. A fair return to responsible entrepreneurs is fine. That regulations were lacking is shown by crises in the 1980’s and 2008, but I’d lay the blame for that on Congress and Executive branch, rather than on the central bank itself. > [@septimus](#): > > **JoeTheBartender** , may I please ask where you get your information about modern finance? Any particular teachings? Links to webpages or youtubes? My take on this issue is different from yours, **Joe**. That’s why I asked you the question. Answering my own question, I’ve read a variety of economics scholars. I’d love Friedman’s _Monetary History_ as a birthday present (but, since my yet-to-read list is very long, would prefer to have just an on-line URL for excerpts). But I’m certainly no expert. My last formal course in economics was in the 1960’s. :eek: I do read on relevant topics, including even [an article by Alain Pilote, probable crackpot](http://www.michaeljournal.org/plenty49.htm%5B/URL). (I’d ask SDMB experts on U.S. monetary history to comment whether that article, _ignoring_ its obvious spin, contains _factual errors_.) > [@JoeTheBartender](#): > > Quite the argument there. Personally attacking someone whose name I never mentioned! So is Paul a mentor or not? Are you willing to answer my question? ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [February 15, 2015, 1:19am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/129 "2015-02-15T01:19:48Z")
> [@JoeTheBartender](#): > > Banks are pretty much free to loan out as much as they want and as long as those debts are being serviced faithfully, the banks are fine. _Central_ banks, yes. The point of fractional reserve banking is to stop small banks from doing that and getting themselves in trouble. They have to keep a _fraction_ in _reserve._ > [@](#): > > When the US was on the bi-metal standard we had close to zero inflation for hundred and 50 years. Then the Federal Reserve was created, and the dollar has lost 97% of its value in 100 years. There was inflation well before then, as a cursory study of numismatics would indicate. Maybe not as much in the United States, which kept trying earnestly to get back to “hard money” even at the cost of frequent depressions. > [@](#): > > Did you see the latest? The banks give big bonuses to their executives that leave to go work for the government. I think that’s just a little bit of a conflict of interest, don’t you? Well, yes, that is bad. > [@JoeTheBartender](#): > > Burma can base their economy on anything, as far as I’m concerned, which is not very far. Aren’t we discussing the United States? The Long Depression started in the USA and spread through the international economy. Same can fairly be said of the present depression. Neither the economy nor the global market for money really stops at the border–maybe for a Marxist state it could. > [@JoeTheBartender](#): > > Why do you think that’s clueless? I think it’s a very good business practice to avoid debt. I only invest in businesses that have low or no debt. Why should I as an owner of the company, share profits with bankers? So you “invest” (that is, lend businesses money) and presumably expect returns, but decry banks (which pool money from many investors) when they do the same? :dubious: ---
**Author:** ![Deeg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deeg/32/2955_2.png) [@Deeg](https://boards.straightdope.com/u/Deeg)\ **Post date:** [February 15, 2015, 4:45am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/130 "2015-02-15T04:45:49Z")
> [@JoeTheBartender](#): > > Keep reading that list, it doesn’t much improve after the Fed took over. But it **does** improve, which pretty much invalidates your whole argument. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [February 15, 2015, 3:51pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/131 "2015-02-15T15:51:49Z")
> [@foolsguinea](#): > > _Central_ banks, yes. The point of fractional reserve banking is to stop small banks from doing that and getting themselves in trouble. They have to keep a _fraction_ in _reserve._ I should note that a central bank can probably survive \*not \*seeing interest paid on its debt, given it has a literal license to print money; but that’s still not desirable most of the time. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [February 15, 2015, 9:11pm UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/132 "2015-02-15T21:11:17Z")
> [@JoeTheBartender](#): > > Yes they shaved it away, and you grew it back like a beard down below. If you look further in the Bank of England article, they have a lengthy discussion (with graphs) covering reserves. The paper is not an attack on fractional reserve banking, as far as I can tell based on a skim. It’s an argument for adjusting the way textbooks describe things. It certainly isn’t the final word. [In fact, I’m surprised I couldn’t find a reference to the alleged obsolescence of reserve requirements: maybe I didn’t look hard enough.] > [@JoeTheBartender](#): > > I’m sorry, I don’t know how you can call not liking the fact that privately owned institutions are given the privilege of creating money willy-nilly at interest, “fringy”. Sheesh Joe, you’re calling the for abolition of a practice that has existed for hundreds of years, spans all the countries of the world and has been considered and rejected by a variety of thinkers. Done carefully, that can be a fringe argument. Work hard enough and you might bring it to the level of minority opinion: we’re not there yet. But usually it’s in the realm of cranks. “Fringe” in my nomenclature would be something to aspire to. > [@](#): > > My objection is to a special class of artificial “persons” given the privilege of creating the nation’s money, in direct violation of the Constitution. Article I Section 8 says “[Congress shall have the power] to coin money and regulate the value thereof…”. “Coin money”. What do you suppose that means? Do you think it means palm off the money creation to a cabal of private banks? You need to question your information sources. Paper money existed between 1790 and 1860. It was issued by banks. A _fraction_ of the value of the notes issued were backed by gold. Merchants would consult tables to put varying discounts on the value of different banks: a dollar bill wasn’t worth a dollar. Scammers would try to pass off bills from shoddy banks in the hinterlands with mixed success. Commerce was awkward, but dodgy bills still beat barter. Again: question your info sources. Any published author who quotes Article I, section 8 without a discussion of early 1800s private money creation is either a crackpot or a charlatan. Seriously: you can’t study that period without running into these sorts of facts. So you have to consider the possibility that your info sources are trying to pull the wool over your eyes. That said, I and a lot of people will agree with you that 2007-2008 was a grand clusterf&$%. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [February 16, 2015, 12:41am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/133 "2015-02-16T00:41:53Z")
> [@JoeTheBartender](#): > > Oh please. MSFT has over $80 billion in cash reserves, Apple has over $16 billion. Bershire-Hathaway has $60 billion. GE has like $80 billion. > > So what were you saying about them laughing? BTW, MSFT just borrowed a bunch of money. Turns out that much of their cash is overseas, and they’d have to pay tax on it if they brought it back. Plus they paid almost nothing for it in interest. If you can borrow at X% and get 2X% return, you are crazy not to borrow. It’s why paying off a low interest mortgage is a bad idea if you can get a better return on the money elsewhere. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [February 16, 2015, 1:53am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/134 "2015-02-16T01:53:05Z")
> [@Voyager](#): > > BTW, MSFT just borrowed a bunch of money. Turns out that much of their cash is overseas… Huh, so has Apple for the same reasons. At any rate, you can go to google finance and look at the financials of any major corporation. Exxon has $5.0 billion in cash and $11.6 in long term debt. Walmart has $6.7 billion in cash and $41.7 billion in long term debt. Debt is a fixture of American capitalism and heck worldwide capitalism. It would be intriguing to locate a major company that has avoided it altogether over its lifecycle. ---
**Author:** ![JoeTheBartender](https://avatars.discourse-cdn.com/v4/letter/j/b5a626/32.png) [@JoeTheBartender](https://boards.straightdope.com/u/JoeTheBartender)\ **Post date:** [February 20, 2015, 1:28am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/135 "2015-02-20T01:28:22Z")
> [@John\_Stamos\_Left\_Ear](#): > > You didn’t have to. Right there you lost because you made a bad assumption. While I did read “End the Fed”, by the time I read it it was a lightweight piece of work on the subject. And I’m really not a libertarian. ---
**Author:** ![John\_Stamos\_Left\_Ear](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_stamos_left_ear/32/3198_2.png) [@John\_Stamos\_Left\_Ear](https://boards.straightdope.com/u/John_Stamos_Left_Ear)\ **Post date:** [February 20, 2015, 4:10am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/136 "2015-02-20T04:10:11Z")
> [@JoeTheBartender](#): > > Right there you lost because you made a bad assumption. While I did read “End the Fed”, by the time I read it it was a lightweight piece of work on the subject. And I’m really not a libertarian. So your anti-Fed, allusions to a standard - say, maybe a Gold Standard - just happen to coincide with Ron Paul. But you don’t like the guy. Okay. Whomever else gave you these ideas was dumb. And so is Ron Paul who also has them. ---
**Author:** ![JoeTheBartender](https://avatars.discourse-cdn.com/v4/letter/j/b5a626/32.png) [@JoeTheBartender](https://boards.straightdope.com/u/JoeTheBartender)\ **Post date:** [February 20, 2015, 4:12am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/137 "2015-02-20T04:12:05Z")
> [@Acsenray](#): > > Because debt is inherently neither good nor bad. It is simply a fiscal tool that often makes it possible to do things and achieve goals that would otherwise be impossible. Well that’s a personal opinion that I don’t share with you at all. Oh about 50 or 60 years ago, debt was something you avoided. And I have to object, those goals are certainly possible by just having a little patience and saving towards them. All debt does is reward you for impatience and then penalize you with interest for your lack of patience. ---
**Author:** ![SenorBeef](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senorbeef/32/2220_2.png) [@SenorBeef](https://boards.straightdope.com/u/SenorBeef)\ **Post date:** [February 20, 2015, 4:16am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/138 "2015-02-20T04:16:13Z")
> [@John\_Stamos\_Left\_Ear](#): > > So your anti-Fed, allusions to a standard - say, maybe a Gold Standard - just happen to coincide with Ron Paul. But you don’t like the guy. Okay. > > Whomever else gave you these ideas was dumb. And so is Ron Paul who also has them. This isn’t a useful contribution to this thread. At best it’s an ad hominem by proxy, and it’s an inappropriate proxy since you’re pulling Ron Paul out of left field. He’s not the only person to advocate for a gold standard, and he’s not otherwise relevant to the discussion at all. You do your side a disservice by your participation. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [February 20, 2015, 5:42am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/139 "2015-02-20T05:42:52Z")
> [@JoeTheBartender](#): > > Well that’s a personal opinion that I don’t share with you at all. Oh about 50 or 60 years ago, debt was something you avoided . . . . I’d like to see some serious data on this, as I can’t believe that IBM or Ford didn’t borrow money to finance business expansion, back in the 1950’s. Or the 1920’s. ---
**Author:** ![John\_Stamos\_Left\_Ear](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_stamos_left_ear/32/3198_2.png) [@John\_Stamos\_Left\_Ear](https://boards.straightdope.com/u/John_Stamos_Left_Ear)\ **Post date:** [February 20, 2015, 5:46am UTC](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001/140 "2015-02-20T05:46:13Z")
> [@SenorBeef](#): > > This isn’t a useful contribution to this thread. At best it’s an ad hominem by proxy, and it’s an inappropriate proxy since you’re pulling Ron Paul out of left field. He’s not the only person to advocate for a gold standard, and he’s not otherwise relevant to the discussion at all. You do your side a disservice by your participation. The Gold Standard is dumb no matter who advocates it. End stop. [Previous page](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001.md?page=6) [Next page](https://boards.straightdope.com/t/is-us-federal-debt-sustainable/711001.md?page=8)