National Debt And Stuff

[bilby]

I.e., it pretended to pay its debt, and the USA today could do the same, with its "unlimited ability to pay any debt of any magnitude" by creating the needed currency, as Germany did. What's the difference?

If a debt is denominated in gold, you need gold to pay the debt. Gold isn't easy to obtain in large quantities, unless you own a huge gold mine.

If a debt is denominated in Yen, you need Yen to pay the debt. Yen are not easy to obtain in large quantities, unless you're the Japanese government.

If a debt is denominated in US Dollars, you need US Dollars. US Dollars are not easy to obtain in large quantities, unless you are the US Government.

Germany isn't a significant gold producing nation. They had a large debt in gold. To pay it, they had to produce a lot of stuff that they could exchange for gold. This production of stuff, that immediately left their economy, rendered their currency worthless; People were earning it, but there was nothing anyone wanted to sell in exchange for it. Their response to the crashing value of their currency was to print more of it, to meet the need to have billions of Marks in cash if you wanted a loaf of bread.

The USA is by FAR the most significant producer of US Dollars - and the USA cannot ever find herself in a situation where any debt denominated in US Dollars is too large for her to pay. It's as impossible as running out of integers.

Seriously, I am struggling to understand why this concept is such a problem for you. Fiat money has no constraints on how much there is in existence at any time. It's issuer can always and trivially pay any debt denominated in that currency. 1920s Germany wasn't the issuer of the currency in which her debts were denominated, so they were fucked.

If the USA has to pay me a million bucks, then they can. If you had to pay me a million bucks, you'd be fucked.

The difference is that you can't issue US Dollars, but the USA can.

The difference for 1920s Germany is the same.

 

[bilby]

your point that the U.S. can run up all the debt it wants to and repay it by printing the necessary currency, as Germany did.

Germany didn't print currency to pay her debts, and the US wouldn't need to print anything to pay hers. Most money today is electronic, and doesn't need to be printed; Germany's debt was in gold, and you can't print gold.

So no, that's not my point; It's a collection of your own mistaken ideas, strung together into a parody of my point.

 

[Elixir]

Lumpy, they give you facts, you change the subject and never acknowledge your egregious errors, but rather carry right on as if your mistakes have been validated.
A shame - renders you NWRT.

 

[Elixir]

Gold isn't easy to obtain in large quantities, unless you own a huge gold mine.

Guess you never watched Gold Rush. Gold is a PITA to obtain in large quantities even if you DO own a huge gold mine. Might have something to do with the high market price …

 

[laughing dog]

When did the Great Depression "bad times" begin?

Why Congress should vote NO on raising the debt ceiling


Is the national debt too high? Are the annual deficits too high?

If the answer is "yes," then the next question is: What can be done to stop it from going ever higher?

And there's only one answer (at this time), and that is: a NO vote on raising the debt ceiling. Because there is no other mechanism to stop the increasing debt.

If this is a bad way to limit the debt, then we must find another way to limit it. What is that other way? Whatever other means there might be, it's obvious that it's not going to happen any time soon, probably not for many years, as long as the Reds and Blues keep bashing each other and living in their separate realities. Which they will probably continue to do. Not even the separate factions WITHIN each party can agree on this.

You must like 1929. Because this approach would make that look like good times.

You mean the crash brought on by excess debt?

Whatever similarity there is, the long-term damage will be greater if we keep increasing the debt as we've been doing. It's not true that inflicting net damage onto all future generations is the only way to avoid another 1929 crash.

Actually 1929-1930 was not bad times. Are you referring to the Great Depression of 1932 and later, which was caused largely by the new excess debt which began with Hoover running up unprecedented budget deficits? and interfering in the market rather than the laissez-faire approach years earlier when there was a similar recession which subsided in less than 2 years? in which there were spending cuts and balanced budgets and lots of whining before the quick recovery followed by several years of good times?

The Great Depression is acknowledged as starting in 1929 starting with the stock market crash in October, 1929.

But unemployment level is the usual indicator for "bad times" and recession and depression. This did not rise at all in '29, and only slightly in 1930. By '31 it was bad, but still far below the 1932-1940 average. Meanwhile the wage level rose strongly in 1929-32 rather than falling (maybe as a result of Hoover's intervention to prop up the wage level). So who was hurting during this early part of the "Depression"? Not the workers generally (except some layoffs in '31). Not until '32 and after did workers generally suffer.

By comparison, in 1921 there was a similar stock market crash, just as bad, with no intervention by the gov't or any "economic stimulus" deficit as in 1931-32, and the recovery was very quick, rather than dragging on and on for 10 years as in the "Great Depression" following the Hoover-FDR intervention to "stimulate" the economy.

US GDP fell in 1930.

OK, you got me there. It fell in 1930 just like it did in 1920-21. But then why did the '21 Depression end so quickly, without any gov't intervention like in 29-32? There's obviously no evidence that the Hoover-FDR "economic stimulus" deficits worked, but rather that they did more harm than good.

And we have every reason to believe that "economic stimulus" deficits since then have done more harm than good, as in 1931-33 where all the following years were worse in comparison to earlier crashes and recessions.

Your argument indicates an unfamiliarity with the facts and a callous perception that the beginning of the Depression was not "bad times".

Again, who had "bad times" in 1929-30 other than some (no longer) wealthy stock market investors who leaped from high windows to their deaths? Who? not the workers.

Again, unemployment was not bad until 1931 -- slightly more than 1922 when that earlier recession was already decreasing after no action by Congress or President Harding to help them. And even in 1931 the unemployment was much lower than it became in 1932-40. There are many web pages which give these facts. e.g. https://shec.ashp.cuny.edu/items/show/1510 (graph of unemployment 1930-40)

But you're right about the gdp decline in 1930 and the usual mantra that the "Great Depression" began in 1929, even though no one but a few rich stockholders suffered at that time. Will you be taking up a collection for them when the next crash hits? Why do you shed more tears for the fat cats than the little guy?

The US unemployment rate jumped from 3.2% in 1929 to 8.7% in 1930. Given that the stock market crash started in September of 1929, a more than doubling of the unemployment is a significant cost to those who were unemployed given that there were no unemployment benefits. In addition, anyone who lost their savings in the last quarter of 1929 and during 1930 suffered significant losses. Losing a job can be traumatic, especiall for those who are the sole supporters for their household. My father, who lived through those times, told me stories of what he saw. While his family was fortunate (his father worked for the railroad and did not lose his job), many of my father's friends fathers lost their jobs quite quickly. Your dismissal of these costs to working people is appalling.

From my understanding of the US economy, around 70 banks per year went bankrupt in the 1920s, and over 740 went bankrupt in the first 10 months of 1930. There was no deposit insurance back then. Losing one's savings, however meager, is a significant cost.

Once again, your responses reveal a deep ignorance of the subject matter and an appalling indifference to human suffering.

 

[Loren Pechtel]

The USA is by FAR the most significant producer of US Dollars - and the USA cannot ever find herself in a situation where any debt denominated in US Dollars is too large for her to pay. It's as impossible as running out of integers.

Seriously, I am struggling to understand why this concept is such a problem for you. Fiat money has no constraints on how much there is in existence at any time. It's issuer can always and trivially pay any debt denominated in that currency. 1920s Germany wasn't the issuer of the currency in which her debts were denominated, so they were fucked.

What you are eternally missing is that creating those dollars causes inflation. Debt beyond what is needed to grow the money supply is bad. It's just the Retards want something far worse.

 

[bilby]

What you are eternally missing is that creating those dollars causes inflation. Debt beyond what is needed to grow the money supply is bad.

Except that I am not missing that at all. I have even mentioned it in passing, several times - debt beyond what is needed to grow the money supply is inflationary, and excessive inflation can be a bad thing.

Fortunately, it's not difficult for a nation to destroy some excess money if it's present in the economy, by collecting it as taxes; Nor is it difficult for them to increase the value of money by raising interest rates to counter inflation.

And better still, government spending typically leads to economic growth, particularly if that spending is on infrastructure. To the degree that expenditure encourages growth, it's not inflationary even when it's not offset by increased taxation.

Lumpy isn't suggesting that the national debt is bad if it causes excessive inflation; He is claiming that the national debt is bad, period. And that debt cannot grow indefinitely, without causing an unspecified crisis that he refuses to describe, presumably because he hasn't actually got a clue what that crisis might be, or at what level of debt it might be triggered.

I keep asking, but all I get in return are marathon rants about how debt cannot grow indefinitely, with no answers as to why the fuck not.

Indeed, debt MUST grow indefinitely, if the economy is to grow indefinitely. Neither continuous growth in debt nor in its corollary, GDP, is constrained by anything other than the limit of the integers.

Austerity - the attempt to reduce or eliminate national debt - is almost always a massive disaster. A national debt is essential to the economic health of fiat money issuing nations, unless they are massive net exporters of goods.

 

[Copernicus]

My grandfather lost his trust in banks after the Crash in 1929, and he lost money to a bank failure. He was also upset when the government took the dollar off the gold standard in 1934 and made it illegal to own gold coins that were not collector's items. So he filled a large jar with gold coins in $20, $10, and $5 denominations, and he buried that jar on his farm. That was technically illegal hoarding, but he got away with it. He told my father where it was buried, so I was there when he dug it up after my grandfather died. Those coins were worth far more than their face value, because paper money had undergone inflation.

Unfortunately, Gramps didn't trust the banks, so he buried a stash of paper money, too. It stank pretty badly when we dug it up, and it was worth far less than it would have been, if he had only used it to earn interest instead of burying it. We had a good laugh over that, when we stopped retching, but he didn't understand how money or inflation worked, just that it was worth something to him. So, while it made sense to bury the gold from a personal financial perspective back then (although it was illegal hoarding), it was stupid to bury the paper money. The federal government had passed new laws to protect depositors from bank failures, so, by the time the movie "It's a Wonderful Life" came out to dramatize runs on banks, people didn't need to rush to withdraw cash from banks that were in danger of failing.

Returning the US dollar to the gold standard would be suicidal for the US and world economies. One major tool that gives us any hope of mitigating booms and busts in economic activity is the ability of a national government to expand and contract the money supply. When the economy turns down, businesses need to be able to borrow money more easily, but when it overheats, interest rate hikes are needed to curb the appetite for borrowing. Another tool is for the government to increase deficit spending or cut government spending to meet the ups and downs of economic activity.

Unfortunately, fiscal conservatives are prone to favoring policies like bringing back the gold standard and balancing the budget, even though those policies would pretty much destroy the ability of a government to manage its economy intelligently. And people generally, like my grandfather, feel in their gut that fiscal conservatives are right. So Republicans tend to be seen as better managers of the economy, even though they tend to advocate very dangerous financial policies.

 

[laughing dog]

The ability to use counter-cyclical policy to mitigate the economic cycle has reduced the frequency of downturns and booms, as well as their amplitudes - something fiscal "conservatives" ignore.

The notion that the deficits has to be reduced sooner rather than later and that they require cuts in spending and/or increases in taxes is very simplistic thinking. For example, it is well-established that tax revenues tend to grow at the rate of nominal GDP which is equal to the rate of growth of real GDP plus the rate of inflation. Limiting the rate of growth of federal spending to inflation while keeping tax structures unchanged has to reduce the federal deficit over time and the ratio of debt to GDP. Such a policy simply keeps federal spending roughly constant in real terms.

 

[Lumpenproletariat]

No evidence that "economic stimulus" deficits work
only a stampede of dedicated believers and their cult-leaders

It's to pay previous debt but also the current budget. And when the debt ceiling is not raised, that will lead to cuts in the current budget, if nothing can be done to increase revenue.

The cuts will be MUCH bigger than Lumpen seems to imagine. Interest rates now 4.7% for 1-year Treasury and 3.9% for 20-year. That's $1.2 Trillion (or more!) for the foreseeable future unless inflation can be got under control quickly. Tax hikes are off the table as long as the Gaetz-Boebert faction has veto power. The GOP is not only NOT going to allow tax hikes, neither will it even fund the IRS. preferring to let tax cheats roam free.

Interest on Debt $1.2
Mandatory $5 T
. $2 Medic & Unempl
. $2 SocSec etc.
. $1 Other
Military + VA $1T
Other Discretionary $1
--------
total $8.2 T

Revenue
Pers Income Tax $2
Payroll taxes $1.3
Other $0.7 (includes corporate income tax)
---------
total $4.0

As seen there is a $4.2 Trillion annual deficit.
@ Lumpen — How do you propose to get these funds?

Cut SocSec and Medicare in half and double the payroll tax . . . — And you STILL haven't recovered enough for budget balance!

I can't figure out what your point is. Lots of numbers coming from and going to nowhere. It sounds like you're saying that even Biden's budget deficit isn't enough, so the US will default even if the debt ceiling is raised as he's requesting.

His deficit is for $1.2 trillion (or maybe it's $1.5) -- but you're saying the real deficit is $4.2 trillion, so even if Congress gives him everything he demands, we still have a 3 trillion or so shortfall = default. So something doesn't add up.

How about simplifying it so it makes sense to retards like me. Why shouldn't it be possible for anyone to understand it? What's the $4.2 trillion you refer to?


pattern of debt rising percentagewise

Here's a simpler way to see it: The total budget is about 7 trillion, and the deficit is 1.2 or 1.5 trillion. So almost 20% of the budget is paid for with debt. I'm saying that's too high. Maybe a 10% deficit is reasonable for an emergency like the Pandemic, or like the 2008 crash, maybe even a bit higher, but certainly not 20%.

The deficits used to be much more modest -- smaller % of the budget -- How did anyone survive back then, if 20% was the right percent? 1970s and 80s and 90s it was typically more like 5%, seldom 10%. It went up and down, so sometimes maybe to 10%, which was probably too high. After the Happy 90s it got back to that, maybe 200-300-400 billion deficit for a budget of 3 or 4 or 5 trillion. So 10% was higher than the norm. Upward in 2008 or so, then downward after the 2008 crisis subsided, to 700 and 600 and 500 billion deficit, for a budget of around 5 trillion. Before Trump I think the annual deficit was back down to under 10%, but then he started it back up again. So 10% was becoming the new norm, or even higher. This increase is part of the slow trend toward higher and higher debt. There's no reason to have this ever-upward trend in the debt. There's no evidence that it has ever produced a net benefit overall.


percent of the economy: Debt/GDP ratio

Another way to look at it is with the debt/GDP ratio. This too shows a gradual and persistent trend upward. Pretty steady upward pattern overall, little ups and downs along the way. But the extreme high peak in 1946 was followed by a normal decline, which is what we should expect to happen after the worst emergency in history. So the graph shows the appropriate decline during that period, 1950-1975: https://fred.stlouisfed.org/series/GFDGDPA188S

So for about 25 years you could say there was a downward trend after that extreme high WW2 peak. But otherwise the trend is always upward. Before WW2 it was upward, and then upward again around 1975-85 and beyond. Maybe if the current pandemic crisis has ended there can be a downward trend again, or at least there should be.

Or here's a better graph -- https://www.longtermtrends.net/us-debt-to-gdp/ -- showing the debt/GDP all the way back to before the Civil War. It shows the same pattern. Back then it was the lowest of all, but it jumped up with each war, then back down after each war, but always a little higher than before. Which might be OK because of the emergency which had to be paid for. But what was the emergency in 1931-33? This was the first time ever that big deficits were done for something other than war. There was no need for this new dependency on high debt. And we have no evidence that such deficits ever made the economy better off, as these were then repeated several times after WW2 -- no evidence that something was gained for the extra money that was paid to "stimulate" the economy.

US Debt to GDP - Updated Chart | Longtermtrends

The Debt-to-GDP ratio is the ratio between a country's debt and its gross domestic product. These charts show the government-, corporate-, and household-debt to gdp.

www.longtermtrends.net

Did the debt/GDP really decline after WW2? Only a little, according to this graph, compared to the extreme increase earlier. It declined back to a level about even with the highest peaks of WW1 and the Civil War. That is not really a low debt/GDP. A level equal to the peak of those costly high-debt wars is not a low level.

It's correct to call this "chronic" debt, when everyone says it should come down -- even FDR said it was too high, in 1932 in his campaign against Hoover, saying he would reduce Hoover's irresponsible deficits. Yet the debt/GDP just has to keep increasing, despite everyone saying it must not. And now it's at the highest level ever. With no war to explain it.

With no one giving any reason to believe these high deficits have produced a net benefit, no economic principle or empirical evidence, something has to change, because 100% debt/GDP is way too high, by any standard before about 2000. The rule then was that 80% is the maximum, and any higher was dangerous. So the bar keeps going up, the trend overall is upward, with only tiny exceptions, and the late 90s is really the only time when this trend did not dominate.

This is the best way to judge whether it's too high, without getting bogged down in all the particular numbers, which become meaningless. We can let the experts, the Treasury Secretary, etc. worry about the fine details.

According to your calculations, the Biden budget is already a disaster and the deficit must be driven up much higher -- I'm not going to try to figure it out. Tell it to Biden and Yellen -- I'll just trust them that the $1.2 trillion is enough, and so all the cuts (or trick revenue-raising measures) must total up to that much. And that's now almost 20% of the whole budget, which is really too much -- we can't continue paying such a high % of the budget with debt. The "leaders" (and their experts) are crunching the numbers and dealing with the minutia. Whatever it takes, they must get that deficit % down, or get the debt/GDP down to what everyone used to say was a safe level.

But let's move on.

With Executive Orders, it's possible to do almost anything that has to be done, even increasing revenue, even if it's illegal. But cutting spending would probably be easier.

Can you give specific practicable examples? Remember we need $1 Trillion or more just to have even slight effect on the deficit.

I'm for increasing taxes (mostly on the rich). But my tax ideas won't happen, nor yours, nor will Reds & Blues agree on it -- so maybe some kind of revenue-increasing tricks are possible, with Executive Orders -- they have to do something, probably in addition to the spending cuts also using some gimmicks in their "tool kit."

I don't know the exact tricks to get the revenue, but those means will be determined by those experts helping Biden. And the program cuts are clear enough. The funds can be impounded as needed, however much Biden will be hated for it. But he has to do it because there's no other choice. Yes, even 50% cuts in Medicare and SS (but you and everyone knows that won't really be necessary). Leave it up to Yellen etc.

No. If trickery is to be the order of the day for White House, they can simply mint the platinum trillion-dollar coins. Too big to circulate they'd simply be held in the Fed Res vaults, with FedRes using them as collateral to print Benjamins by the container-full. The mintings are accounted as seignorage paid to the U.S. Mints, and not as any debt.

Whatever you're talking about -- I haven't a clue -- just tell it to Biden and Yellen and I'm sure they'll hire you for Secretary of Platinum if you have a good plan.

It's difficult to imagine the President doing some form of tax increase, without Congress, but what he'd have to do is negotiate with some members of Congress, or someone important, so it's not totally himself personally who decides it. Who's going to stop him? The U.S. Marines? obviously not. All Congress could do is impeach him, perhaps even get a ruling from the Supreme Court ordering him to stop it. But what then? Even that won't stop him from doing what's necessary.

It really sounds to me like you're arguing — just as I am — in favor of the platinum coins. Totally legal. Totally bypasses the debt ceiling.

Have I figured out your position?

You have everything figured out. It's just that you don't seem able to explain it without making it complicated and tossing around loose numbers from the minutia of details from somewhere.

The Court does not have it's own police force to invade the White House and arrest the President!

You could argue that the President could even single-handedly increase the future debt....

Wasn't it Cyprus which seized bank accounts? It won't need to be that drastic, but . . .

Drastic? Why the need to be drastic? See my simple platinum coin solution above. Surely you read about it a decade or so ago?

No, I'm too confused already to take on any brilliant new schemes to save the world. I hope you win a Nobel Prize in Economics and that the President will find some metal to pin on you.

But for now, I'm looking for any argument why we should believe the great Utopian Schemes for repeated high deficits which began in the 1930s. So far none of the believers in that religion are giving any reason or evidence for it. Other than the Instant-Gratification argument:
"Austerity doesn't work" -- translation: it produces only long-term good rather than the instant gratification we get from higher spending and tax cuts.

 

[Swammerdami]

The cuts will be MUCH bigger than Lumpen seems to imagine. Interest rates now 4.7% for 1-year Treasury and 3.9% for 20-year. That's $1.2 Trillion (or more!) for the foreseeable future unless inflation can be got under control quickly. Tax hikes are off the table as long as the Gaetz-Boebert faction has veto power. The GOP is not only NOT going to allow tax hikes, neither will it even fund the IRS. preferring to let tax cheats roam free.

Interest on Debt $1.2
Mandatory $5 T
. $2 Medic & Unempl
. $2 SocSec etc.
. $1 Other
Military + VA $1T
Other Discretionary $1
--------
total $8.2 T

Revenue
Pers Income Tax $2
Payroll taxes $1.3
Other $0.7 (includes corporate income tax)
---------
total $4.0

As seen there is a $4.2 Trillion annual deficit.
@ Lumpen — How do you propose to get these funds?

His deficit is for $1.2 trillion (or maybe it's $1.5) -- but you're saying the real deficit is $4.2 trillion, so even if Congress gives him everything he demands, we still have a 3 trillion or so shortfall = default. So something doesn't add up.

Mea culpa. I started with crude numbers and rounded them; my main purpose was just to show that there was little "discretionary" in the budget. One of the biggest "discretionary" items is Veteran's Benefits. Many would agree that disabled veterans should be treated as respectfully as retirees; Veterans Benefits should be treated as Mandatory and/or part of Defense spending.

But yes, the rounded numbers were way off. Much apologies. I'm not going to try to reconstruct my blundering — it's too embarassing — but almost all the error was due to two big discrepancies:
* I was using 2021 numbers, not 2022.
* I assumed that the Debt was refinanced at today's interest rates. Most of the debt is bonds and notes issued years ago with very low yields. As this paper comes due, Treasury will issue new debt. The $1.2T interest figure would be the cost of the present debt financed at today's interest rates.

The crude break-down still fulfills its primary purpose: to show how brutal spending cuts would need to be to balance the budget.

No. If trickery is to be the order of the day for White House, they can simply mint the platinum trillion-dollar coins. Too big to circulate they'd simply be held in the Fed Res vaults, with FedRes using them as collateral to print Benjamins by the container-full. The mintings are accounted as seignorage paid to the U.S. Mints, and not as any debt.

Whatever you're talking about -- I haven't a clue -- just tell it to Biden and Yellen and I'm sure they'll hire you for Secretary of Platinum if you have a good plan.

Briefly, the U.S. Treasury has three main ways to get revenue: (1) taxing, (2) borrowing, (3) the seignorage fees from creating fiat money. In this scheme it is important to distinguish money created by banks (including the FedRes banks) from ordinary fiat money. The Treasury mints coins and prints postage stamps and thus creates money WITHOUT borrowing. The amounts are small; and Treasury loses money when it mints pennies. The "problem" is that it is no longer legal for the Treasury to print fiat paper money. Instead paper money (and electronic money) is created by private banks and the FedRes banks. This money is backed 100+% by assets on the books of those banks.

All U.S. paper money today is created by the banking sector. (This topic causes much confusion. If anyone needs to dispute this summary please bump one of the several threads on this topic.) The U.S. Treasury hasn't printed its own fiat money since about the JFK Administration, and is not legally authorized to do so. The minting of gold, silver and base-metal coins is also restricted by law. However there is apparently a "loophole" that allows Treasury to mint platinum coins with whatever metal-to-dollar ratio it wants. The difference between the cost to mint and the face value of the coin would not be borrowing, it would be pure profit for the government.

If this remedy were actually adopted, the American people would deserve a good explanation. "This coin will be redeemed with ordinary borrowed money as soon as sanity returns to Congress; as soon as power is wrested from Boebert, Gaetz, McCarthy and other anti-Americans who are trying to make the U.S.A. laughing-stock of the world."

The platinum  Trillion-dollar coin was discussed during the Obama Administration and more recently as a way to circumvent the treasonous anti-American agenda we see from Jordan, Boebert and other QOPAnoners. At one point, the Obama White House may have been seriously considering the idea. Whether legal or not, minting the trillion-dollar coin would have huge political cost and given that a majority of the present-day SCOTUS seems to support the Hannity-Boebert-QAnon traitors, it might now be disallowed by the high court.

"Deficits don't matter!"
- President Dick Cheney

The full quote as I recall it was "Reagan proved that deficits don't matter."

 

[bilby]

Austerity doesn't produce long term good at all. It fucks everything up until people finally get so sick of it that they stop kicking themselves in the arse and vote in someone who stops the insanity.

Austerity is a fucking disaster in the short, the medium, and the long term. It's a perfect example of what not to do.

 

[Swammerdami]

Austerity doesn't produce long term good at all. It fucks everything up until people finally get so sick of it that they stop kicking themselves in the arse and vote in someone who stops the insanity.

Austerity is a fucking disaster in the short, the medium, and the long term. It's a perfect example of what not to do.

Yes.

The 1997 Asian crisis may be almost forgotten in the West, but I was living in Thailand at the time. When the Thai currency fell from 26 to 39 baht to the dollar the Bangkok Post reported that "the baht has lost half its value." (39 minus 26 is indeed half of 26.) The baht continued to fall and was soon 52 baht to the dollar (52 minus 26 is 100% of 26). I was curious whether the arithmetic geniuses at the Bangkok Post would be consistent and now report that the baht had lost ALL of its value!

Austerity was the remedy prescribed by the international lenders of lost resort — IMF and the World Bank. In fact however it was the countries who defied the austerity recommendations that did best. It was very easy to conclude that IMF was more concerned for the profits of Western banks with large amounts of Asian debt paper than it was for the impoverished Asian people.

This study makes damning indictments about IMF policies: [my emphasis]

* IMF-required austerity is commonplace and did not diminish in intensity after the 2008/2009 financial crisis.
* Borrowing countries are less likely to face required austerity if they are strongly tied to Western Europe, either through trade or diplomatic channels, or if they receive significant aid from non-OECD countries (mostly China).
* Borrowing countries are more likely to face austerity if they are host to significant foreign direct investment (FDI), particularly from Western Europe.
* IMF-required austerity is significantly associated with rising inequality, by increasing the income share to the top ten percent at the expense of the bottom 80 percent. Unsurprisingly, the impact can also be seen in significantly rising poverty levels in countries facing tighter austerity requirements.
... As Figure 3 above shows, three of these variables were associated with significantly more lenient (less austere) IMF agreements.
The strongest of these impacts is a country’s diplomatic relationship with Western Europe, measured as its average voting alignment with Germany, the UK, and France at the UN General Assembly (UNGA). An increase of one standard deviation in this variable was associated with IMF agreements that were less austere by a whopping 0.9 percent of GDP per year.... Austerity often falls on the shoulders of the nation’s most vulnerable people.
With this in mind, an additional GDP Center working paper explores the impact of IMF-imposed fiscal adjustment on inequality and poverty, using the same dataset. In this new paper, “Poverty, Inequality, and the International Monetary Fund: How Austerity Hurts the Poor and Widens Inequality,” authors Thomas Stubbs, Alexander Kentikelenis, Rebecca Ray, and Kevin P. Gallagher find that greater IMF-imposed austerity is associated with increased inequality and poverty in borrower countries.
Figure 4 below summarizes the findings of ten separate regression models, showing the impact of IMF austerity on the income share of each income decile (each representing ten percent of the population), from the poorest ten percent (decile one) to the richest ten percent (decile ten).
The results show a statistically significant negative effect of fiscal adjustment on the income share of the bottom 80 percent of the population: income deciles one through eight. For the top ten percent — decile ten — the effect of the IMF adjustment coefficient turns positive and is large relative to the other deciles (coefficient, 0.198).
In other words, IMF-required austerity is significantly associated with the highest earners receiving more at the expense of the bottom 80 percent. The biggest losses are accrued by middle-class earners, in deciles six through eight, plausibly a product of wage, employment, and pension cuts for civil servants.
These results have serious implications for families facing poverty. Figure 5 below shows the results of a model of the impact of IMF-required austerity on the poverty rate at $2.50 per person, per day. This model varies IMF fiscal adjustment and averages the remaining covariates in the sample. It finds IMF-mandated austerity to be significantly associated with higher poverty rates.

Another paper reaches similar conclusions:

... the IMF arrived in Thailand in July with ostentatious declarations that all was wrong and that fundamental surgery was needed" when, in fact, "the ink was not even dry on the IMF’s 1997 annual report, which gave Thailand and its neighbours high marks on economic management!"

... The rescue agreement thus repeated the pattern of the IMF-US Mexican bailout in 1994 and the IMF structural agreements with indebted countries during the debt crisis of the 1980s, in which public money from Northern taxpayers was formally handed over to indebted governments only to be recycled as debt service payments to commercial bank creditors.
To many, there was something fundamentally wrong about a process that imposed full market penalties on Thailand while exempting international private actors – indeed, socialising their losses. As the Nation put it,
"The penalties imposed on foreign creditor banks which have lent to the Thai private sector must be precise and applied equally…Thailand and Thai companies may bear the brunt of the financial crisis but foreign banks must also share part of the cost because of some imprudent lending. It would be irresponsible to lay the blame entirely on Thailand."

 

[ZiprHead]

Did the debt/GDP really decline after WW2? Only a little, according to this graph, compared to the extreme increase earlier.

Are you reading a differant graph than the one you linked to?

 

[ZiprHead]

I found this explanation elsewhere. Maybe it will help Lumpen to understand but I have my doubts.

Let me explain this because it's so stupid it sounds like a joke.

Congress, by law, decides two things.

1. How much money the government will spend.
2. How much money the government collects in taxes.

The President, by law, must

1. Put the budget AND tax law Congress sets into action.

Here's where it get stupid.

Congress can make the amount they want to spend bigger than the amount they want to bring in in taxes, leading to a deficit.

The President must then ask Congress for permission to borrow over a set limit in order to pay for the things Congress says he has to buy with the amount of money Congress gives him.

And Congress can tell him no. That's where reality breaks. In any sane world if Congress goes "You must spend 10 dollars and I'm only giving you 5" the right of the President to borrow the remaining 5 would be implied but that's not how it works in this nut house.

That's it. That's all this is. THAT'S ALL THIS IS. A quirk of governmental procedures allows Congress to go "Here's 10 dollars. Go to the store and buy 20 dollars worth of things. You can only put 5 dollars on the credit card."

That's it. Seriously look at me. Look me in the eyes. That's all it is. I tell you this because literally any moment now Republican Trolls are going to flood this thread to tell you that it is literally anything other than that and it is not, they will be lying.

 

[Copernicus]

I found this explanation elsewhere. Maybe it will help Lumpen to understand but I have my doubts.

Let me explain this because it's so stupid it sounds like a joke.

Congress, by law, decides two things.

1. How much money the government will spend.
2. How much money the government collects in taxes.

The President, by law, must

1. Put the budget AND tax law Congress sets into action.

Here's where it get stupid.

Congress can make the amount they want to spend bigger than the amount they want to bring in in taxes, leading to a deficit.

The President must then ask Congress for permission to borrow over a set limit in order to pay for the things Congress says he has to buy with the amount of money Congress gives him.

And Congress can tell him no. That's where reality breaks. In any sane world if Congress goes "You must spend 10 dollars and I'm only giving you 5" the right of the President to borrow the remaining 5 would be implied but that's not how it works in this nut house.

That's it. That's all this is. THAT'S ALL THIS IS. A quirk of governmental procedures allows Congress to go "Here's 10 dollars. Go to the store and buy 20 dollars worth of things. You can only put 5 dollars on the credit card."

That's it. Seriously look at me. Look me in the eyes. That's all it is. I tell you this because literally any moment now Republican Trolls are going to flood this thread to tell you that it is literally anything other than that and it is not, they will be lying.

It isn't lying, if they really believe what they are saying. That's just stupidity.

 

[Lumpenproletariat]

Cuts in SS are not DEFAULT.

If this means that SocSec commitment is also debt, that is false. This is not debt which has to be repaid in order to avoid default. The recipients are not creditors who must be repaid legally in the way that bondholders (creditors) have to be repaid. So this is not part of the national debt.

You are confused. When SS runs surpluses, it is required by law to buy specially issued federal gov't debt (because when SS was enacted, allowing SS administration (SSA) to buy private assets was considered a form of socialism).

Those technicalities, whatever they mean, are irrelevant to my point, which is that the SS payments are not payment of debt legally owed to the recipients. Is this correct or not? This has nothing to do with the mechanics of who is buying or issuing assets. If any SS reduction happens, that is not default, or default on the debt, whereas failure to make repayment to bondholders is default. And the latter default would bring far greater disaster later than some current SS reduction would bring. The imperative to not default to bondholders is legally binding and takes priority over protecting SS from any cuts. Promoters of raising the debt ceiling should stop speaking of possible SS reduction as "default" -- It is not. Even if all your other claims about SS being sacred may be true.

While SS is running deficits and not buying debt, it is a holder of around 2.75 trillion dollars of Federal debt. Intragovernmental agencies (including SSA, the Federal Reserve, various federal, state and local pension funds) hold approximately $7 trillion of the almost $31 trillion in outstanding federal debt.

Nothing I've said disagrees with this.

My only point was that the SS payments are not part of the national debt owed. So if there's any reduction of those payments, it's not any kind of default on debt owed, like the national debt. I was responding to someone (far back there -- I'm too lazy to go back and dig it out) who seemed to suggest that SS is a kind of debt owed, in the same way there is debt owed to bondholders. I'm just clarifying that it's not debt in the same sense, and reducing such payments is preferable to defaulting on the debt to bondholders.

It does once you realize that SS expenditures might be cut to meet spending reduction targets.

"It does" what? Nothing I've said disagrees that SS reductions or cuts could happen in order to meet spending reduction targets. But the same is true of other programs also which might be cut, so you have to include them and quit pretending that only SS is threatened by possible cuts. SS would be more of a "last resort" than other reductions, like corporate welfare, pork programs, bridges to nowhere, "relief" waste, high-speed rail waste, etc. Don't obsess on only the SS as possible target for reductions. According to Ralph Nader, corporate welfare is the first target for the cuts. And since it's the President, not Congress, who would make the spending cut decisions (if the debt ceiling is not raised), probably corporate welfare would be higher on his cuts list than SS.

 

[jonatha]

If any SS reduction happens, that is not default, or default on the debt, whereas failure to make repayment to bondholders is default

The Social Security Trust Fund is a holder of rather many bonds (and nothing else, as the only thing it's allowed to invest in are those bonds...)

Granted, how the Trust Fund distributes the proceeds of the retirement of its bonds could certainly change from present practice...

 

[jonatha]

And since it's the President, not Congress, who would make the spending cut decisions (if the debt ceiling is not raised), probably corporate welfare would be higher on his cuts list than SS.

If it were me I'd have the executive branch (including the Social Security Administration) withhold payments to any address in a Congressional District represented by a member who voted against raising the debt ceiling.

 

[Swammerdami]

If it were me I'd have the executive branch (including the Social Security Administration) withhold payments to any address in a Congressional District represented by a member who voted against raising the debt ceiling.

But let's not sink to their level. Recall that Donald Trump held up the mailing of stimulus checks so that he could have them all signed with DJT signature facsimiles.

Just have the checks delivered by paper to GOP districts with the name of the Congressman who voted against SocSec mentioned, and Biden taking credit for defying the debt ceiling to mail the checks.