I have an issue with both. The household analogy is an appealingly oversimplification of what the U.S government does. Unlike a household, the government can raise and levy taxes; and it can it can print money. Unlike a household, the goal of the government isn’t to do what’s good for the family, but to solve problems that families can’t handle on their own: paving roads, national defense, cushioning the blow of a economic recession.
This is untrue. Since America’s founding, debts incurred from wars are paid down substantially within a generation. The War of 1812 and the Civil War was paid off in 20 years for example. Also, if we go with your mortgage analogy, wouldn’t a bank expect a homeowner to pay back their loan within the loan period?
The problem with this is that raising taxes in the future causes a distortion in the present and future economy. Deficit spending is not free. Look at how the stock market plummets whenever the talk of higher taxes or interest rates. The current economy is built upon an engine that runs specifically on low taxes and deficit spending. This is not sustainable.
Let me try this again.
My issue is that the U.S is using a broken system comprising of a low taxes, low regulation, and deficit spending, all of which will likely bring financial ruin to the United States in our lifetime. We’re living in an era where the financial services industry has a disproportionate affect on the lives of everyday Americans; for example, a few days ago, JPMorgan Chase was found out to be sequestering aluminum in warehouses, in order to drive up prices of the commodity. If a consortium of farmers did this with wheat or corn, they’d be brought up on charges and thrown in jail. What good reason is there for the financial industry to have such a widespread and immediate affect on everything else - oil, food, housing, etc etc - disproportionate to their contribution to the economy?
What you’re trying to say is that “The U.S pays bondholders, so we’ve always paid our debts!” but that’s ridiculously easy to say. If we continue with deficit spending, low taxes, low regulation, the U.S will go the way of Detroit. In the early 1990’s, the State of Michigan reconfigured the formula so that Detroit will less in revenue in sharing, then again, in 1996 (?) a deal with Michigan Governor Engler and Detroit Mayor Archer to reduce the amount of money to Detroit. If you look at the chart of revenue sharing from the 1990’s, there’s be a continual decline; indeed, from 2011 to 2012, the State of Michigan reduced the amount of revenue sharing to Detroit by $66 million - yes, you heard right, in *one *year! Over the last two decades, Detroit relied more and more on municipal bonds, although the depressed revenue sharing, reduced tax base, and corruption, led them unable to bring enough revenue to service payments on those bonds. The Michigan Treasury dealt Detroit a coup de grace in 2012 when they refused to return to Detroit the proceeds from the muni bond sale, thereby (artificially) facilitating the crisis for an “emergency manager”.
Now, Detroit is bankrupt and you have an entire nation penning a new chapter in American history. This chapter is where we serve a bankrupt city on a silver platter to corporations, selling piece-by-piece to private creditors. The U.S population gives a standing ovation of schadenfreude. What is fascinating is that President Jackson warned about this in 1837, he said, unless we’re mindful of our politicians and business interest, we “will in the end find that the most important powers of Government have been given or bartered away, and the control over your dearest interests has passed into the hands of these corporations.” Interesting words, don’t you think?
I’m angry that we have a group of representatives who refuse to raise taxes, no matter what. It should be obvious: deficit spending isn’t free. What is interesting is that once we get on that path - reducing our debt - more people will flock to purchase U.S debt, which will make us richer.
Farmer cooperatives have a limited antitrust exemption. Even when a farmer’s organization loses in court, no one, to the best of my knowledge, goes to to jail.
In as much as farmer cooperatives don’t choose to withhold product in order to force up prices, it’s because government grain purchases give them the same benefit with little need to actually withhold from market, as is explained here:
J. P. Morgan should be broken up because it is too big to fail, not because they profit from providing storage facilities to allow other people to drive up aluminum prices. In this they are little different from big grain silo operators, who, quite rightly, don’t go to jail either.
The duration of the bond/bill is the loan period, and the US is certainly expected to pay back that loan within the period.
Deficit spending pertains to the budget, not the debt. I know it may sound like semantics, but it’s really an important distinction to make when you’re talking about the economy
Taxes, regulations, deficit spending, and the banking industry are each massive, complex topics that really muddy the waters in a conversation about debt. I’m not trying to dismiss your talking points but that’s the reality of the situation.
The food supply industry are no angels either. They’ve been wantonly taking and spending taxpayer money in the form of subsidies approved by law to drive up prices of foodstuff commodity for years - to the tune of some $20 billion dollars a year.
I find it a bit disingenuous that you dismiss household analogies because a household cannot print money and are now comparing Detroit to the US.
You mean the same Andrew Jackson that a) freely gave and bartered away control of important cabinet positions with the spoils system and b) killed the national bank and handed over the right to print money directly into private banks (corporations)? Seriously though, Jackson is not exactly a credible authority on macroeconomics.
I agree that deficit spending isn’t free. It spells disaster for whoever takes it on be it household, city, or nation. Just don’t get bogged down on the debt part. [caution, I’m about to make a household analogy here]: Just as there are many people with mortgages and car payments that have perfectly balanced checkbooks, so can America exist with debt.
The US can wake up tomorrow with 0 dollars worth of debt, pay for all of its bills with cash straight up and still see the ill-effects of inflation, corruption, wastefulness, etc. just as rampant, if not more.
Realistically? No. There is concern that if China/Japan owns enough (which they don’t, and no single entity does), they can use it to fuck with interest rates.
Interest rates don’t change the amount of the debt but if rates are low people - Asian and Caucasian alike, sell. We already weathered the potential of the worst case scenario where China and Japan had a chance to unload their dollar holdings but didn’t. BTW, this is what people mean when they say that China is buying our debt - they’re buying bonds. It’s not like how some would like to imagine it - Obama going over to Beijing, hat in hand, and palms out looking for a dole out.
I don’t think there’s any evidence to believe that foreign-owned debt is more problematic than domestically owned debt.
I’ll be sure to keep this in mind the next time I’m at Wal Mart. “Gee, I kinda need a new pack of boxer-briefs but in order to keep Doom evitable, I really should go buy this T-bill instead.”
I hope I decipher your “we’s” correctly between when it pertains to the American government vs the American public. The government issues bills and bonds that get immediately bought up. The rest of the transfers take place on the bond market. It’s just the same as the stock market. When facebook went public, their stock got bought up. The rest of the trading taking place now and the prices thereof, facebook has no hand in.
So no. If you bought a T(reasury)-Bill, and then bought a pencil from China or a Mango from the Phillipines rather than a homegrown Amerian pencil or Mango doesn’t make a bit of difference. Once the maturation date of the bill hits, you get paid your dollar + whatever interest the bill says it’s good for.
The real reason that Japan, and now more recently Japan has so many T-bills is merely convenience. The balance of trade is decidedly in their favor. When Wal-Mart imports a boat of goods, Wal-Mart has to pay for it, and they cut the check in dollars.
That shipping company and that factory now has a bunch of US dollars. Well what’s China going to do with a bunch of dollars when it pays its employees in RMB? Should it convert all those dollars back into RMB? Heck no. The RMB is undervalued. Keep it in dollars! Can we keep that in the bank? Do you really want to keep 1.4 trillion dollars in a bank account? Can we buy stocks? What are you crazy? Hi? Charles Schwabb? I’d like to buy $1.4 trillion dollars worth of Apple stock, please? Hm. Well, in order to keep these dollars in terms of dollars, the only place large enough for me to put this money AND collect interest rather than just have it sit and de-value as inflation marches steadily onwards would be… Treasury notes. Nothing more sinister than that. Seriously.