Military History | How To Make War | Wars Around the World Rules of Use How to Behave on an Internet Forum
United States Discussion Board
   Return to Topic Page
Subject: Will the national debt cause the collapse of the US dollar and economy?
GreyJackal    11/24/2007 4:30:58 AM
As we all know, the US national debt stands and $9 trillion and growing. The consumption rate is through the roof and not enough people are saving money. Its clear that we can keep this up or we will become bankrupt. Can we ever repay our debt? If so, how?
 
Quote    Reply

Show Only Poster Name and Title     Newest to Oldest
Pages: 1 2 3 4 5 6   NEXT
PowerPointRanger    The Short Answer is "NO"   11/24/2007 12:37:07 PM
Right now, our debt stands at $9 trillion. 
 
 
Our GDP is at $13 trillion.
 
 
This makes our debt burden about 68% of our economy.  While this sounds like a lot, in historical terms, it isn't.  The modern US peaked at 109% just after WW II.  http://www.heritage.org/Research/Budget/bg1820.cfm
The UK had a burden of  about 250% at that time. http://www.dmo.gov.uk/index.aspx?page=About/treasury_history
 
In fact, debt in a range of ~50%-150% of GDP is actually a healthy amount.    A certain amount of debt can be used for investment which can cause an economy to grow (which has happened in the US).  So for example, in the 1970's we had a low debt burden, but growth stagnated.  In the 1980's our debt increased dramatically, but so did our economic growth.
 
Debt becomes a problem only when the interest payments become so great that they strangle economic growth.  Again, in historic terms, a debt burden of 200%-300% is cause for concern, but with a degree of economic discipline can be overcome.  Once the debt reaches <400% of GDP, you're in trouble.  It either means resorting to high inflation, default,  or a draconian level of economic austerity (or a combination of the three).
 
So to be clear, I wouldn't worry about our debt burden causing collapse until our debt increased to around $50 trillion, which I don't see happening.  Would I like to see our debt go down?  Sure.  Am I worried about it? Not at all.
 
 
 
Quote    Reply

YelliChink       11/24/2007 12:42:15 PM
If it weren't about the wars, Bush admin could have done better. Clinton admin got lucky because they've been experiencing expansion in IT industry and ballooning of .com frenzy that didn't break until early 2000.
 
Well, the US economy won't go down the hill abruptly, unless somebody is blockading on oil to the US, which is unlikely to suceed, but there will certainly be bad time in the future. The bad time will happen when global trade system re-organizes in conjunction of the migration to less oil-dependent economy. That's gonna be a lot of pain, but the collapse of global trade system will devalue US dollar to the degree that Americans have to suck it up.
 
If you think this is bad, wait until you see the bill for social security pension and global health insurance. On the other hand, the US population is still growing, thank to an influx of Hispanics, so the US is not in the same quagmire as Japan. The other problem in Japanese economy is that people don't spend much, and that only put heavy burden on their banking system. Their banking system is not profiting, and the interest rate is nearly zero for a decade.
 
How do you pay your debt? That's easy. Just simply screwing everybody in the world by triggering a global recession, you'll be able to to pay the debt. How that would happen? American is a success story, and anybody who touches her gets a spill-over of her success. By clogging the global trade, you basically turn the heat down, and US Government Debt, and so is US dollar will be worthless in no time. That means no more cheap oil, no more Wal Mart cheap crap and more people on food stamp programs, which translate as another great recession and short-term hyper inflation in US monetary market. If you think that's bad, then consider how China would survive in this abrupt trade clogging.
 
Unfortunately, no president will have balls to do that, because it means another potential world war. Economic expansion depends primarily on real estate growth, and everything follows. If you compare satellite images from 1960s to the ones just taken in 2007, you'll find that urbanization is not just a Western phenomenom, and urbanization means real estate expansion during 1960 to 2007. How real estate can still growing is out of my knowledge. Just look at Japan, their real estate is reaching developing limit. There's no new land, and there's no increasing population demanding for new homes, factories, offices and other facilities. China is currently doing this by demonishing houses as well as building new ones, but they are paying heavy prices, because the most valuable real estates are from re-development, which displaces quite an amount of people and created more losers than winners in the process. Their taste of spill-over from US success helped them keep growing, but they know it's like trade heroin to them. Once they have access to US market, they can't get enough of it.
 
So, there is no way out, unless there is new hope of innovation through technology, social engineering or some kind of miracle from devine interference.
 
Quote    Reply

displacedjim       11/24/2007 1:16:43 PM
Something I find curious is how our national debt has continued to grow or at best remained steady even during the recent couple years when we supposedly had budget surpluses during the last few years of the '90s.  It makes me question the official definition of "balanced" since I think everyone else in America would have to count their debt service as a liability and only be allowed to declare their budgets are "balanced" if they have money left over after paying their debts *AND* the interest on their debts.  I think it only makes sense that there's no way the budget could show a surplus unless the national debt actually goes down by the same amount over that same time span.
 
h*tp://www.uwsa.com/MonthlyUSdebt1.gif
 
 
Quote    Reply

GreyJackal    PowerPointRanger   11/24/2007 5:21:07 PM
It is said that the actual debt is about $60 trillion when you add the future obligations and promises by the government (medicare, social security, 78 million retiring boomers etc).
 
Quote    Reply

GreyJackal    Interesting thing I recently heard   11/24/2007 5:28:45 PM
There are many that say, that if OPEC were to switch to the Euro it would spell the end of the greenback. It would have to be a group decision by the OPEC countries for this to occur,  but there is one country in OPEC that has enough clout to single handedly change the currency, that would be Saudi Arabia. If this happens many foreign countries that hold US dollars will drop them like hot potatoes.
 
I don't know if this is true or not, but if it is how on earth can we pay the debt then?
 
 
 
Quote    Reply

Bluewings12       11/24/2007 6:52:53 PM
GreyJackal is spot on .
If this happen , it is going to be the 3rd Wold War .

Cheers .

 
Quote    Reply

Nanheyangrouchuan       11/25/2007 2:16:01 AM

There are many that say, that if OPEC were to switch to the Euro it would spell the end of the greenback. It would have to be a group decision by the OPEC countries for this to occur,  but there is one country in OPEC that has enough clout to single handedly change the currency, that would be Saudi Arabia. If this happens many foreign countries that hold US dollars will drop them like hot potatoes.

 

I don't know if this is true or not, but if it is how on earth can we pay the debt then?

 

 



Saudi Arabia has over $1 trillion invested in the, they switch to euros and they cut their nose off to spite their face.
 
Quote    Reply

sentinel28a       11/25/2007 5:35:21 AM
A switch to Euros would only benefit Iran, which coincidentally is the reason Ahmadinejad is pushing for it.  The Saudis won't do it, and I doubt the Gulf Kingdoms will either.  Venezuela is only calling for it because Chavez doesn't like us either.  Chavez is also driving his economy into the ground, so he's probably not the best authority on wise decision making.
 
However, I will agree with Jackal that not enough Americans are saving money.  I attribute that to the past two generations of American society, which are addicted to instant gratification.  Much like Queen, we want it all and we want it now.  Since we're convinced that it's best not to live past 40 (even though we secretly hope we live to be twice that), we spend all our money on fripperies and use our credit cards to do it.  When the instant gratification bug bites us on the ass, we scream and whine and demand the government bail us out from our own stupidity. 
 
(I include myself in this number, mainly because I'd be a hypocrite if I didn't.  After all, I just sunk almost a thousand smackers into a new computer system I didn't need, mainly because my old system wasn't getting me my kicks fast enough.  Damn Call of Duty 4 anyway!)
 
 
Quote    Reply

Pseudonym       11/25/2007 8:44:25 AM
I find it funny how little of the OPEC articles about currency that people actually read, and who the main drive behind those stories were.
 
Quote    Reply

YelliChink       11/25/2007 11:53:26 AM

A switch to Euros would only benefit Iran, which coincidentally is the reason Ahmadinejad is pushing for it.  The Saudis won't do it, and I doubt the Gulf Kingdoms will either.  Venezuela is only calling for it because Chavez doesn't like us either.  Chavez is also driving his economy into the ground, so he's probably not the best authority on wise decision making.

 

However, I will agree with Jackal that not enough Americans are saving money.  I attribute that to the past two generations of American society, which are addicted to instant gratification.  Much like Queen, we want it all and we want it now.  Since we're convinced that it's best not to live past 40 (even though we secretly hope we live to be twice that), we spend all our money on fripperies and use our credit cards to do it.  When the instant gratification bug bites us on the ass, we scream and whine and demand the government bail us out from our own stupidity. 

 

(I include myself in this number, mainly because I'd be a hypocrite if I didn't.  After all, I just sunk almost a thousand smackers into a new computer system I didn't need, mainly because my old system wasn't getting me my kicks fast enough.  Damn Call of Duty 4 anyway!)

 


Poor and salary class Americans don't have much saving because they are more or less depend on pension and welfare. Richer Americans don't have much saving because it doesn't make sense to put money in bank accounts when you can make money by purchasing mutual funds or stocks. Why let the banks earn interest from your money? Also, the computer you just bought is nothing compared to your insurance expenditure and mortage payment. The real spenders are women. Men's toys might be expensive, but we only buy what we can afford, and the fringe benefit of these toys is usually close to their manufacturing cost. Women stuff, however, can be ridiculously expensive for their production cost, and women seem never get enough of them.
<\theme_music=Pink_Floyd_Dark_Side_of_the_Moon_Money>
 
Quote    Reply
1 2 3 4 5 6   NEXT



 Latest
 News
 
 Most
 Read
 
 Most
 Commented
 Hot
 Topics