TakeYouToTasker Posted February 4, 2015 Share Posted February 4, 2015 So, we are suppose to concentrate on paying back now? Instead of spending on government you want to pay down debt? Counterproductive Yes, part of our focus should be running at a surplus in order to pay down the debt, which, of course, means an end to non-defense relate emergency deficit spending. Link to comment Share on other sites More sharing options...
Tiberius Posted February 4, 2015 Share Posted February 4, 2015 Yes, part of our focus should be running at a surplus in order to pay down the debt, which, of course, means an end to non-defense relate emergency deficit spending. Economically counterproductive Link to comment Share on other sites More sharing options...
TakeYouToTasker Posted February 4, 2015 Share Posted February 4, 2015 Economically counterproductive Untrue. It's unideal in the short term, but in the long term it's economically advantageous. Link to comment Share on other sites More sharing options...
Chef Jim Posted February 4, 2015 Share Posted February 4, 2015 Economically counterproductive So making government more efficient, reducing the deficit or at least balancing the budget and putting more money in to the hands of the middle class is economically counterproductive. But, but, but, what about that middle class economics youre hero has been talking about? Ohhhh wait I get it. That money gets to the middle class from the "rich" people not from a more efficiently run government. Why does the government never have ANY skin in the game? Link to comment Share on other sites More sharing options...
3rdnlng Posted February 4, 2015 Share Posted February 4, 2015 So, we are suppose to concentrate on paying back now? Instead of spending on government you want to pay down debt? Counterproductive I'm sorry, are you suggesting we pay off the debt? We can borrow pretty cheaply and do all those things we totally need to do. What happens when the interest rate on a large share of the existing federal government debt goes from 1% to 5% or 10%? Link to comment Share on other sites More sharing options...
DC Tom Posted February 4, 2015 Share Posted February 4, 2015 What happens when the interest rate on a large share of the existing federal government debt goes from 1% to 5% or 10%? Government debt is fixed rate. Debt servicing levels stay the same. What happens is that the face value goes down - i.e. $10k of 30-year bonds at 2.5% has a market value of $5k at 5%. Though the bondholder still gets $10k back at maturity, which the government likely has to borrow. Link to comment Share on other sites More sharing options...
Chef Jim Posted February 4, 2015 Share Posted February 4, 2015 (edited) Government debt is fixed rate. Debt servicing levels stay the same. What happens is that the face value goes down - i.e. $10k of 30-year bonds at 2.5% has a market value of $5k at 5%. Though the bondholder still gets $10k back at maturity, which the government likely has to borrow. That's the servicing part of the debt no one talks about. Sure the outstanding bonds have a fixed rate but where is the money going to come from when the bonds mature? And sure the value of the bond fluctuates prior to maturity however that is meaningless unless you're planning on selling in the secondary market. So the bondholder gives the government $10k in return for $250 in annual income. At the end of the 30 years the government gives the bondholder his $10k back. Edited February 4, 2015 by Chef Jim Link to comment Share on other sites More sharing options...
Tiberius Posted February 4, 2015 Share Posted February 4, 2015 That's the servicing part of the debt no one talks about. Sure the outstanding bonds have a fixed rate but where is the money going to come from when the bonds mature? And sure the value of the bond fluctuates prior to maturity however that is meaningless unless you're planning on selling in the secondary market. So the bondholder gives the government $10k in return for $250 in annual income. At the end of the 30 years the government gives the bondholder his $10k back. But, but...slashing government spending will negatively affect GDP and leave us with a smaller economy to service the debt. Better to let it be and grow our way out Link to comment Share on other sites More sharing options...
DC Tom Posted February 4, 2015 Share Posted February 4, 2015 And sure the value of the bond fluctuates prior to maturity however that is meaningless unless you're planning on selling in the secondary market. So the bondholder gives the government $10k in return for $250 in annual income. At the end of the 30 years the government gives the bondholder his $10k back. Or unless you're a financial institution holding government debt as part of your reserve requirements, and have to mark it down to market value. Link to comment Share on other sites More sharing options...
Chef Jim Posted February 4, 2015 Share Posted February 4, 2015 But, but...slashing government spending will negatively affect GDP and leave us with a smaller economy to service the debt. Better to let it be and grow our way out Not if it puts money back into the hands of the citizens who will spend or invest it. The money just doesn't disappear. So you're saying only the government drives GDP? Oh that's right of course you are. I forgot who I was talking to. Or unless you're a financial institution holding government debt as part of your reserve requirements, and have to mark it down to market value. Point taken. I was looking solely at servicing the debt not the affect of interest rates on the economy. Link to comment Share on other sites More sharing options...
IDBillzFan Posted February 4, 2015 Share Posted February 4, 2015 Economically counterproductive Hey, we're still waiting for you to explain your belief that balancing the federal budget is bad for the economy. I'll make more popcorn while we wait...once again. Or is it possible that, y'know, you have no idea what you're talking about? Link to comment Share on other sites More sharing options...
B-Man Posted February 4, 2015 Share Posted February 4, 2015 The Legacy of Debt: Interest Costs Poised to Surpass Defense and Nondefense Discretionary Spending by Josh Zumbron The U.S. has come a long way since the days of trillion-dollar deficits, just a few years ago. The White House projects 2016 will have the smallest budget deficit in eight years. Yet the budgetary impact of the debt that’s been accumulated–$18 trillion in total, $13 trillion of that owed to the public–will reassert itself. Currently, the government’s interest costs are around $200 billion a year, a sum that’s low due to the era of low interest rates. Forecasters at the White House and Congressional Budget Office believe interest rates will gradually rise, and when that happens, the interest costs of the U.S. government are set to soar, from just over $200 billion to nearly $800 billion a year by decade’s end. Graph at the link By 2021, the government will be spending more on interest than on all national defense. according to White House forecasts. And one year later, interest costs will exceed nondefense discretionary spending–essentially every other domestic and international government program funded annually through congressional appropriations. (The largest part of the budget is, and will remain, the mandatory spending programs of Social Security, Medicare and Medicaid. Mandatory spending is over $2 trillion and is set to double to $4 trillion by 2025.) More at the link: http://blogs.wsj.com/economics/2015/02/03/the-legacy-of-debt-interest-costs-poised-to-surpass-defense-and-nondefense-discretionary-spending/?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth Link to comment Share on other sites More sharing options...
Chef Jim Posted February 4, 2015 Share Posted February 4, 2015 Hey, we're still waiting for you to explain your belief that balancing the federal budget is bad for the economy. I'll make more popcorn while we wait...once again. Or is it possible that, y'know, you have no idea what you're talking about? Nah, he just knows you love popcorn. Link to comment Share on other sites More sharing options...
keepthefaith Posted February 4, 2015 Share Posted February 4, 2015 But, but...slashing government spending will negatively affect GDP and leave us with a smaller economy to service the debt. Better to let it be and grow our way out You don't embarrass easily do you. Link to comment Share on other sites More sharing options...
Tiberius Posted February 4, 2015 Share Posted February 4, 2015 Not if it puts money back into the hands of the citizens who will spend or invest it. The money just doesn't disappear. So you're saying only the government drives GDP? Oh that's right of course you are. I forgot who I was talking to. Point taken. I was looking solely at servicing the debt not the affect of interest rates on the economy. You are involved in finance some how? Wow. Money actually would "disappear." Money in the bond market is safe haven money--the bonds--and money that gets put into circulation, money based on bonds. So it actually increases the money supply, bond+money spent. You might not get that, but its true. It rolls outward from there. If I buy a bond I own the bond and the government gets money to spend. Did you take Econ 101 in college? You don't embarrass easily do you. About what? Being asked stupid questions by morons that forget the punctuation? What point are you trying to make? Link to comment Share on other sites More sharing options...
Chef Jim Posted February 4, 2015 Share Posted February 4, 2015 (edited) You are involved in finance some how? Wow. Money actually would "disappear." Money in the bond market is safe haven money--the bonds--and money that gets put into circulation, money based on bonds. So it actually increases the money supply, bond+money spent. You might not get that, but its true. It rolls outward from there. If I buy a bond I own the bond and the government gets money to spend. Did you take Econ 101 in college? About what? Being asked stupid questions by morons that forget the punctuation? What point are you trying to make? So if the government left more money in the hands of the people how would it disappear? Why is the government spending good but the citizens spending not? Edited February 4, 2015 by Chef Jim Link to comment Share on other sites More sharing options...
Azalin Posted February 4, 2015 Share Posted February 4, 2015 (edited) About what? Being asked stupid questions by morons that forget the punctuation? What point are you trying to make? He was only commenting on your impressive ability to be so fearlessly oblivious to anything factual or relevant so much of the time. Edited February 4, 2015 by Azalin Link to comment Share on other sites More sharing options...
IDBillzFan Posted February 4, 2015 Share Posted February 4, 2015 So if the government left more money in the hands of the people how would it disappear? Why is the government spending good but the citizens spending not? I'm sure he'll get to those questions RIGHT after he explains how balancing the federal budget is bad for the economy. Link to comment Share on other sites More sharing options...
DC Tom Posted February 4, 2015 Share Posted February 4, 2015 You are involved in finance some how? Wow. Money actually would "disappear." Money in the bond market is safe haven money--the bonds--and money that gets put into circulation, money based on bonds. So it actually increases the money supply, bond+money spent. You might not get that, but its true. It rolls outward from there. If I buy a bond I own the bond and the government gets money to spend. Did you take Econ 101 in college? You are the reason the housing market collapsed in 2007. Link to comment Share on other sites More sharing options...
Chef Jim Posted February 4, 2015 Share Posted February 4, 2015 And the magic number shall be............ http://finance.yahoo.com/news/problem-obamas-plan-limit-retirement-141531109.html Link to comment Share on other sites More sharing options...
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