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Tue Jun 12, 2012, 06:52 PM

The Debt Is Not a Measure of Generational Burdens...

O.K. folks, today we are going to learn why the national debt tells us nothing about the burdens or benefits that we are bequeathing to future generations. This will require a few minutes of clear thinking, so for the moment put out of your head whatever nonsense you just heard from a politician or economic commentator about the debt or deficit.

Suppose that we have two economies at the same level of per capita income, both growing at the rate of 2.0 percent a year. Let's call them Germany and the United States. For simplicity, we will say that both have zero growth in the labor force so that the growth is all due to productivity growth, meaning that each worker is producing 2.0 percent more for every hour that she works.

After ten years, both economies will be roughly 20 percent richer. Now, suppose that Germany reaches 2022 with zero public debt. It managed to run surpluses and still maintain healthy growth. By contrast, the United States had to run budget deficits to keep its economy moving. By 2022, its ratio of debt to GDP is 200 percent. That's not quite up there with Japan, but substantially larger than anything the United States will see anytime soon under almost any circumstances.

The next question is which country is richer? If you answered Germany, then you get an op-ed column in The Washington Post and an "F" in economics. You were just told that the countries started with economies of the same size and that they grew at the same rate, how could Germany be richer?

http://truth-out.org/news/item/9711-the-debt-is-not-a-measure-of-generational-burdens


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So what all the pundits and economists and doomsayers say about what your children and grandchildren will owe is pure horseshit.....expensive horseshit at that....

10 replies, 1335 views

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Response to MindMover (Original post)

Thu Jun 14, 2012, 01:16 AM

1. Based on this the Greek people must wonder why everything isn't fine.

 

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Response to dkf (Reply #1)

Thu Jun 14, 2012, 03:04 PM

4. The Greek people know why everything isn't fine..... it is the Politics in Greece

and in 3 days, that will change......

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Response to MindMover (Reply #4)

Thu Jun 14, 2012, 06:15 PM

5. Greece is a disaster no matter who gets in

 

They don't produce enough to support what they have promised to their people.

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Response to dkf (Reply #5)

Thu Jun 14, 2012, 10:19 PM

6. Whatever that has to do with the price of tea in China....?

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Response to MindMover (Original post)

Thu Jun 14, 2012, 04:02 AM

2. I felt like the author was just lying in every paragraph.

His credentials notwithstanding, this defies basic common sense.

Did you believe Cheney when he said "Deficits are irrelevant"?

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Response to earthshine (Reply #2)

Thu Jun 14, 2012, 03:03 PM

3. Probably the only thing Cheney said that I did believe.....

"To put this in perspective, the government is currently paying about 2.7 percent interest on 30-year government bonds. If we equate the additional revenue going to drug companies because of government-granted patent monopolies to interest payments on government debt, it would take more than $11 trillion debt (at 70 percent of gross domestic product) to impose an interest burden on US taxpayers that is comparable to the burden created by patent monopolies on prescription drugs. In other words, patent monopolies on prescription drugs impose roughly the same burden on taxpayers as the entire publicly held debt."

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Response to MindMover (Original post)

Sat Jun 16, 2012, 11:40 PM

7. Big Fail. The debt that is crushing America is the debt owed China.

In other words, the problem isn't government deficits, but the expanding trade deficits.

If we manufactured goods in the U.S. that we now import in massive amounts from China and other low-wage countries, then government deficits wouldn't be a problem, since income tax revenue from working Americans would pay off the debt at some future time.

The only statement that is accurate in the article is:

"O.K. folks, today we are going to learn why the national debt tells us nothing about the burdens or benefits that we are bequeathing to future generations."

The rest of the article is gibberish.

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Response to AdHocSolver (Reply #7)

Sat Jun 16, 2012, 11:48 PM

8. Well, at least it is intelligent gibberish ....

So your statement of course is true that "If we manufactured goods in the U.S. that we now import in massive amounts from China and other low-wage countries, then government deficits wouldn't be a problem, since income tax revenue from working Americans would pay off the debt at some future time."

Why do you say his statements are gibberish when he is just showing how ridiculous a statement like our children and grandchildren are in debt up to their eyeballs is simply made up to scare .....

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Response to MindMover (Reply #8)

Sun Jun 17, 2012, 12:25 AM

9. His article detracts from the REAL problem which is the trade deficits.

A better comment, in hindsight, would be that the rest of his article is irrelevant.

If he had described how the trade deficits have contributed to the fact that China, being flush with U.S. dollars, is essentially buying the U.S., both by buying private companies as well as "loaning" us the money with which to import more of their manufactured goods, then his article would be worth reading.

This absurd situation for Americans is what people need to understand. This country is going to collapse if this activity continues. At some point, the debt to China (as one example) will be so great, that they will refuse to lend us any more money.

The U.S. will be like a bad mortgage to China. They will stop lending us money and "foreclose" on the loan.


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Response to AdHocSolver (Reply #9)

Sun Jun 17, 2012, 12:46 AM

10. Since the money is all central banksters buying and selling....

Last edited Sun Jun 17, 2012, 01:54 AM - Edit history (1)

foreclosure will not happen any time soon.....and especially not because we owe the Chinese.....your analysis is what banksters want you to think.....

and right now the world is witnessing central banksters punishing Greece who has been playing the whipping boy, but its citizens deciding to stop playing along.....which will be tough for Greeks for 6-12 months but it sure is better than accepting austerity on steroids....

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