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What will really happen when the US Defaults?
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Darrell Benvenuto Send message Joined: 14 Oct 00 Posts: 23 Credit: 17,457,177 RAC: 58 |
If you shrink governments enough, you will shrink the US economy and then you will need to shrink governments (federal, state and local) further - which will shrink the economy further -- you get the drift here right. Hmmm, I'm not sure that I agree with the concept that making a nation's government smaller through austerity measures will reduce the size of that nation's economy (save in Communist nations where all industry is owned by the government), since it is privately-owned Business & Industry that drives a Capitalist nation's economy, but we can happily agree to disagree. |
Darrell Benvenuto Send message Joined: 14 Oct 00 Posts: 23 Credit: 17,457,177 RAC: 58 |
I'd love to see all sorts of entitlement reform -- INCLUDING 'rich corporation and rich people' entitlement reform. Although again I don't want to get up on any kind of a soapbox, when I say I am in favor of a total overhaul of the tax code, I would go so far as to say that what I would be in favor of would include a flat tax across the board, and the elimination of most subsidies and entitlements. When other countries in the world can't afford such entitlements, they simply don't have them -- and while painful to cut after they have been in place for such a long time, the alternative is far worse -- and could well spell eventual economic collapse. |
skildude Send message Joined: 4 Oct 00 Posts: 9541 Credit: 50,759,529 RAC: 60 |
1.) That participation in the Program would be Completely voluntary. Actually it still is voluntary but takes a great deal of work to get out of Social Security. By doing so you'd also forsake unemployment benefits, medicaid, medicare and of course Social security if you happen to ever need any of those things In a rich man's house there is no place to spit but his face. Diogenes Of Sinope |
skildude Send message Joined: 4 Oct 00 Posts: 9541 Credit: 50,759,529 RAC: 60 |
Which of course is very much what the Norquistian/Tea Party cabal running the Republicans in Congress definitely wants to see. Wish someone would have told that to W instead if him spreading the surplus in a meager attempt to garner praise(votes) to himself In a rich man's house there is no place to spit but his face. Diogenes Of Sinope |
skildude Send message Joined: 4 Oct 00 Posts: 9541 Credit: 50,759,529 RAC: 60 |
If you shrink governments enough, you will shrink the US economy and then you will need to shrink governments (federal, state and local) further - which will shrink the economy further -- you get the drift here right. Gov't spending leads to economic growth. IF the fed were to stop spending we'd have economic turmoil in no time In a rich man's house there is no place to spit but his face. Diogenes Of Sinope |
skildude Send message Joined: 4 Oct 00 Posts: 9541 Credit: 50,759,529 RAC: 60 |
I'd love to see all sorts of entitlement reform -- INCLUDING 'rich corporation and rich people' entitlement reform. Lets be clear a flat tax helps the rich and never the poor. A flat tax that starts after the first $100k might work but the wealthy would be very unhappy with the absence of deductions and tax shelters and the actual rate that would be needed to balance a budget. In a rich man's house there is no place to spit but his face. Diogenes Of Sinope |
Darrell Benvenuto Send message Joined: 14 Oct 00 Posts: 23 Credit: 17,457,177 RAC: 58 |
Gov't spending leads to economic growth. If the fed were to stop spending we'd have economic turmoil in no time. Well, as a former Economics Major, while that is technically correct it is more accurate to say that any spending leads to economic growth -- be it consumer spending, business spending or government spending (which is simply spending of taxed revenue from the other two parties in most cases). The three parties are closely linked. If there is less government spending, but more consumer or business spending, there is no net difference in terms of growth, and possibly a gain or loss depending if the other two parties choose to spend more or less than they would have paid in taxes. Conversely if the government taxes and spends heavily but their taxation causes the other two parties to stop spending and start saving, the overall result is usually a net loss -- the government can't outspend its own tax base in most instances. But even with all of that said, there is only one real way money is generated in any country that leads to true economic growth, and that is through business. Everything else is trickle-down from that point. The consumer gets income from business, be it job paychecks or return on investments. The government gets income either directly from the businesses or secondarily from the consumer, both in taxes (income, property, sales, etc). More business = more jobs = more taxes. QED. Therefore it can be easily inferred that onerously taxing businesses, the primary source of revenue to the consumer and government, to the extent of causing them to suffer financially, lay off employees, or even (at the extreme) move the bulk of their money and operations offshore (such as Cisco, Google, etc), go bankrupt, etc., results in a rippling domino effect all the way down the chain, costing jobs and impacting the very tax base that the government subsists upon -- and to make up this shortfall governments can only fall back on printing more money (or via using "quantitative easing" where you use electronically created "virtual" money at banks instead of actually printing more money), both of which results in inflation, and in extremes, what is called "hyperinflation". There's a tale about a man in Germany after World War II who rolled a wheelbarrow full of money down to a store to buy bread. It is said that when he turned his back, someone dumped the money out on the ground and stole the wheelbarrow. Urban legend, to be sure, but it still has a kernel of truth -- there are photos on Corbis of a German woman burning banknotes in her stove because doing so provided more heat than using them to buy other fuel would have done. Another image there shows German children playing with blocks of banknotes in the street. Just think -- in October 1923, German prices rose at the rate of 41 percent per day. And in July 1946, Hungarian prices more than tripled (over 300%) each day. Hyperinflations tend to be self-perpetuating. Suppose a government is committed to financing its expenditures by issuing money and begins by raising the money stock by 10 percent per month. Soon the rate of inflation will increase, say, to 10 percent per month. The government will observe that it can no longer buy as much with the money it is issuing and is likely to respond by raising money growth even further. The hyperinflation cycle has begun. During the hyperinflation there will be a continuing tug-of-war between the public and the government. The public is trying to spend the money it receives quickly in order to avoid the inflation tax; the government responds to higher inflation with even higher rates of money issue. I'm not suggesting that we're about to drop into hyperinflation, but all of the quantitative easing the current administration has been doing in an attempt to maintain inflation instead of permitting deflation to take its natural course has continued to steadily devalue the dollar -- to the point now where at the time of this posting one US Dollar is worth LESS than one Canadian Dollar ($0.98), and LESS than one Australian Dollar ($0.95). It was Calvin Coolidge who said, "After all, the chief business of the American people is business." -- and in this, he was quite correct, although that message seems to have been lost on most of today's Economists. It seems obvious that it is central to the success and strength of any nation that businesses, and the success of businesses, should be first and foremost amongst their governments' concerns if they are to achieve any degree of success at a national or global level. Even Communist China has seen the truth of this, and its ongoing, intense focus on business and industrialization throughout the past few decades has transformed it from a simple agrarian nation suffering from regular famines to one of the world's most technologically advanced and wealthy. Helping countless Small Businesses get started and succeed is the greatest way to help a nation succeed as a whole. Small Businesses create more jobs and revenue for their size than large companies do. In my opinion, we should follow China's excellent example and promote each of our respective nation's businesses first and foremost, to help the tax base flourish as a whole. Oh dear, I'm on a soapbox. :\ It must be the lateness of the hour. Sorry, ha ha! |
Gary Charpentier Send message Joined: 25 Dec 00 Posts: 30653 Credit: 53,134,872 RAC: 32 |
Is it time to get worried yet? It was time to be worried a couple years ago when the spend and make our great-grandkids pay party got control of the purse strings. |
skildude Send message Joined: 4 Oct 00 Posts: 9541 Credit: 50,759,529 RAC: 60 |
Gov't spending leads to economic growth. If the fed were to stop spending we'd have economic turmoil in no time. An economics major. I assume you didn't graduate with an economics degree otherwise you'd either be working at McDonalds or CNN either way you wouldn't be having this chat right now. It's typically been the Gov't's job to stimulate the economy when businesses and individuals won't buy. In the end the Gov't reaps the benefit of increase production and spending through taxes. This time the downturn is vastly different. We don't make anything here. Not anything substantial that could get people working. Sadly, we are just a support as services economy. We don't work unless something needs repairs. As long as a less than free market economy like China can flood markets with its slave labor products we will spend decades recovering from the debt and lack of actual production. As long as those in Washington DC blame each other for the nations problems thing are unlikely to recover In a rich man's house there is no place to spit but his face. Diogenes Of Sinope |
Darrell Benvenuto Send message Joined: 14 Oct 00 Posts: 23 Credit: 17,457,177 RAC: 58 |
An economics major. I assume you didn't graduate with an economics degree otherwise you'd either be working at McDonalds or CNN either way you wouldn't be having this chat right now. My goodness, that's quite correct. Once I had taken in the full scope of it, I promptly transferred my Major to Computer Science and never looked back. It's typically been the Gov't's job to stimulate the economy when businesses and individuals won't buy. That is a role they have taken upon themselves, it's true, but it is not the reason for which Government was enacted. In a true lasseiz-faire economy there are no bail-outs, only buy-outs. As long as a less than free market economy like China can flood markets with its slave labor products we will spend decades recovering from the debt and lack of actual production. While its true there are many political internment and labor camps all across China, the real money and technology is taking place elsewhere, in major businesses working hand-in-hand with their US counterparts. There is no slave labor in those markets, and China's massive, emerging middle class is not composed of what one would call slave labor by any means. As long as those in Washington DC blame each other for the nations problems thing are unlikely to recover You are quite correct -- blaming someone or something has no role in finding a solution unless it is to identify the source of a problem that must be corrected. Until and unless real action is taken to create an ongoing surplus that can be used to pay down the National Debt each year, I honestly do not see any hope of progress. |
skildude Send message Joined: 4 Oct 00 Posts: 9541 Credit: 50,759,529 RAC: 60 |
It's typically been the Gov't's job to stimulate the economy when businesses and individuals won't buy. truth be told businesses frown on risk. which is silly since Capitalism is risk. So typically the one part of the equation, the gov't, takes the risk and in the end reaps the benefit from increase employment and production by collecting taxes. We know banks are holding enormous cash reserves but are refusing to lend. Seems they need an incentive. perhaps a bank money inactivity tax. whereby, banks are taxed on cash holding that are idle. Say at a level of 50% idleness gets you a hefty tax which would encourage them to do at least a minimum of lending In a rich man's house there is no place to spit but his face. Diogenes Of Sinope |
Gary Charpentier Send message Joined: 25 Dec 00 Posts: 30653 Credit: 53,134,872 RAC: 32 |
We know banks are holding enormous cash reserves but are refusing to lend. Seems they need an incentive. perhaps a bank money inactivity tax. whereby, banks are taxed on cash holding that are idle. Say at a level of 50% idleness gets you a hefty tax which would encourage them to do at least a minimum of lending And thank your lucky stars they won't. In 1929 wall street lent money to any comer. Look what the result was! In this century, the CRA forced banks to loan money to anyone, and now look at the mess we have! |
BarryAZ Send message Joined: 1 Apr 01 Posts: 2580 Credit: 16,982,517 RAC: 0 |
True enough -- though there is a bit of self-fulfilling prophecy going on -- because of a fear of a double-dip recession (or worse), corporations, banks and individuals who have capital are holding on to it, reducing growth, jobs, etc. - which pushes toward a double dip (or worse). It is a difficult balance for sure.
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Gary Charpentier Send message Joined: 25 Dec 00 Posts: 30653 Credit: 53,134,872 RAC: 32 |
Give it 20 years and the Far East will be running the whole world, no-one will care about the US any more...... That was called a Savings and Loan in the USA. http://en.wikipedia.org/wiki/Savings_and_loan_crisis |
skildude Send message Joined: 4 Oct 00 Posts: 9541 Credit: 50,759,529 RAC: 60 |
nobody said to blindly loan like they did with savings and loans or our recent mortgage debachle. What's being said is start loaning as you would normally. See the fun things with banks is that they used to make money on mortgages now they're satisified by ripping us off on ATM and credit card fees. Banks were at one time considered a solid investment with little risk. Now banks feel the need to be major money players, which they shouldn't. In a rich man's house there is no place to spit but his face. Diogenes Of Sinope |
Gary Charpentier Send message Joined: 25 Dec 00 Posts: 30653 Credit: 53,134,872 RAC: 32 |
May I suggest reading http://en.wikipedia.org/wiki/Moral_hazard combine with fiduciary duty and you have a recipe for disaster. |
bobby Send message Joined: 22 Mar 02 Posts: 2866 Credit: 17,789,109 RAC: 3 |
nobody said to blindly loan like they did with savings and loans or our recent mortgage debachle. Are you sure about that? The income evidence rules changed on the secondary market for home loans (Fannie and Freddie) in the late 90s and again in the early 00s. Self certified income statements became acceptable. Says the man who was a juror on a federal mortgage fraud case and heard that from several bank and federal officials that were under oath ... I think you'll find it's a bit more complicated than that ... |
Dena Wiltsie Send message Joined: 19 Apr 01 Posts: 1628 Credit: 24,230,968 RAC: 26 |
From the Wall Street Journal Link |
nemesis Send message Joined: 12 Oct 99 Posts: 1408 Credit: 35,074,350 RAC: 0 |
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