Well, this is yet more evidence, as if anyone needed it, that budgeting for a sovereign nation -- particularly one whose economy the world revolves around -- is qualitatively different from budgeting for a household.
I don't find the assertion that "this would be bad" to be evidence that it would be bad.
Some questions: Would it be bad for a person to be debt free? A household? A neighborhood? A small company? A large company? A city? A state? A small country? A large country?
Why is it good for companies and people to be debt-free, but bad for countries?
Well, the assertion of the report in the main article is that, in essence, the economy revolves around debt, in one form or another. Remember, debt and investment are two sides of the same coin: you can't invest in something without someone else ultimately owing you money (i.e., being in your debt). And U.S. treasury bills are an investment/debt instrument that's hugely important to a lot of people and institutions, particularly the financial institutions that form the base for most of the economy.
Another way to look at it is that it's not just government debt that's important; there have to be some people who owe other people money or the economy doesn't function. The normal process of business institution-building is founded on the idea of loaning money (again, we usually call this "investment," but it's debt at its base). A good way to think about it is that if you are debt free, that's good for you, but if everyone were debt free, we'd still be living in an incredibly primitive economy.
As a private citizen no debt is generally the right way to go, but not always. It really depends on each situation.
A great example is buying a house. If you have the cash for the house that's great, but do you want want to tie up that much money into a single asset especially when the cost of money is so low right now? Other investments might not be that great today, but over the next 15 or 30 years you can probably find an investment that beats the current low rates of 3.75% or below.
The reason why buying a house is considered a good "investement" is because the government/federal reserve keeps creating more money and devaluing the dollar. Under such conditions, the person who borrows a lot of money now will do well. Homes are convenient for this because there is a lot of infrastructure/expertise in place to make this happen (mortgage industry), but the purchase of any large, permanent asset will work.
When you buy a house on credit now, you're spending newly created money. You're purchasing a large asset at current prices (which are set by the current money supply.) As the new money you've injected into the economy circulates, prices rise. But you had the advantage of buying before you injected the new money.
If money were not continually being created, eg if it were backed by gold, then prices would drop over time, because the rate of innovation and productivity gains is greater than the rate of new production of gold. In this scenario, houses should depreciate over time.
Have you ever heard the theory that a little debt is a good thing?
With businesses, investing borrowed money can help the company grow, and give returns greater than the interest on the debt.
With countries, the theory goes, a little debt means other countries have a vested interest in your success or failure. For example, why hasn't China invaded the USA yet? Perhaps they are waiting until they get their ~$4T back! :)
Well for starters, the Chinese don't seem to really be in the business of invading countries on the opposite side of the world, do they? Unlike another little country I can think of...
For example, why hasn't China invaded the USA yet? Perhaps they are waiting until they get their ~$4T back! :)
theoretically it is fairly easy to repay those $4T. you would need some large container ship to transport all of them back to China, but a lot of those go back over Pacific fairly empty anyway.
I think that should make you think about how there is a systemic failure in the global monetary system.
Many crazies advocate abolishing the Fed as they see it enslaving and controlling the entire economy without much supervision and control by the citizens of this country. Not saying they are completely right or anything, but it this is basically a warning or a symptom that something is perhaps fundamentally wrong (I sure don't know well enough how it works, it is just a feeling).
Think of it as what would the drug companies do if all of the sudden there were cheap easy un-patent-able cures for all the chronic diseases. Would they start selling herbal supplements? Go into homeopathy business? Would they invent more 'restless leg syndromes' type diseases. I think it is a bit like that. It shows perhaps there is something wrong with the system & the constraints and incentive are not working they way we'd expect.
I used to work as a technologist in a sleep lab. 'restless leg syndrome' is not some disease to shill drugs. It fucks people up quite badly by preventing them from sleeping properly.
Whether it was either just enough to stop them from getting to the deeper, restorative levels of sleep, or bad enough that they had to get out of bed and walk around for a couple of hours, restless leg syndrome is a clear blight on quality of life. Sure, it may not be fatal (except where increased tiredness is generally), but it's still a significant health issue to be afflicted by.
Hmm interesting. I understood it to be a made-up disease so people can 'talk to their doctors about it' and pay for medications. Basically pharma companies drumming up business by inventing diseases. How common is it? I had _never_ heard of it. I heard of heart disease, cancer, other things, I have plenty of doctors and nurses in my family. Never heard of RLS, until I started seeing commercials about.
Also wouldn't you working in a sleep clinic skew your perspective on how widespread the thing is? In other words you would only see people who have problems sleeping.
Sleep medicine is an extremely young field, beginning in earnest only in the 80s and 90s. It's not surprising that folks haven't heard of sleep disorders. Go back 10 years and ask if people had heard of sleep apnoea and you'll get a lot of puzzled looks too.
Also, I didn't say anything about how widespread it was - I said it fucked people up and it's not a pseudodisease.
It's not to say that there aren't overprescription issues, just don't fall into the Prozac trap - just because something's overprescribed doesn't mean there isn't a real disease around.
From what I and my fiance (pharmacist) have been able to gather about it, RLS only seems to occur in people taking a specific heart medication. So they (Merck I believe) made another drug to treat their own side effects.
Good to know. The correlation seemed very strong, so I'm glad to know it's not all just a result of this drug. She came to the conclusion after she noticed every single customer that came in for RLS medicine was taking this other Merck medication. Not proof, but it was there.
I am not trying to say if it would be right, wrong or would fix things, because I don't know. But usually though people who advocate it are into conspiratorial stuff. Maybe more sane people advocate it as well, it is just how I remember hearing it more from.
I'm not a crazy and I advocate the abolishment of the fed. People claim we need them as "a lender of last resort" and then they rally against bailouts. People don't realize that practicing the "last resort" lending is a bailout!
Also, Cantillon effects messing up the economy, putting more wealth in the hands of banking elite, growing the size of government, etc... are other problems made possible by central banking.
> why it's good to have a global economic system that is at great risk if the United States gets rid of it's debt
The banking industry makes money when it issues loans. So it's very important that people keep borrowing. To keep people borrowing from the banks and not from each other or private savings, the banks are allowed to create money and lend it at below-market rates. So in general, it's always a better deal for a borrower to borrow from a bank than from private savings.
The current system is great for bankers, great for government (who can essentially get all the money it wants from the bankers), and great for borrowers. It's bad for people who don't borrow, especially savers.
God forbid nobody could get rich simply by having a lot of money. If that were the case, people might have to actually provide society with a valuable product or service to earn a living!
Exactly. There's no global police force that comes to foreclose on your country when your debt hits a certain level. What happens is that when people have doubts about your ability to pay your debts on time (relative to other investment options,) you have to pay a higher interest rate.
Can someone explain why it's good to have a global economic system that is at great risk if the United States gets rid of it's debt?