Sure, some people base everything they say on politics, but that is not a reason to reply with name calling, etc. and show no substance in your arguments. I offered some information on how large the debt is, and the responses I received were "run, hide, it's the same as the 70's, 80's, etc."
It is NOT the same as 70's, 80's. BOTH political parties have created this mess. Democrats are the party of "tax and spend" and the Republicans are the party of "borrow and spend." It amounts to an entire country that began with good ideas, but as it became successful, it followed the path that individuals do -- wanting more and more and more no matter what the cost.
It has created a CONSUMING nation with total disregard for future consequences. If anyone had bothered to actually look at the charts on the debt, they would see that this is not a chicken little problem. I'd like to see just ONE bullish person on CNBC (and they routinely parade dozens of them across the screen daily) have an open debate with someone knowledgeable. CNBC would never air it because their daily bullish stance (which they must use to keep money flowing to their industry) would be shown for the sham that it is. They would have no answers, just as the bullish posters here do not, other than the flippant -- you're a pessimist; people have always worried about something; that does not even deserve an answer; name me a better country; if you don't like it here, then move; look, things are getting better, the economy is improving, jobs are being created, some people just have to have something to worry about (I've actually heard Krudlow use many of these). Yet, have you seen ONE logical, well-researched argument about how the exponential debt is going to be stopped from rising until the interest payments cannot be made?
The Congress recently approved an $800 billion increase in the federal debt limit to $8.18 trillion - $2.23 trillion higher than when Bush became president in 2001, and more than eight times the debt President Reagan faced when he took office in 1981.
In October, the government reached its $7.38 trillion borrowing cap, and from then until they raised the ceiling, the Treasury Department paid federal bills by taking cash from a civil service retirement account (which it plans to repay).
What is sad is that our forefathers recognized debt as a real problem, and many Presidents dealt with the issue of debt (usually caused by wars) by implementing plans to actually reduce the debt during their term as President. Jefferson inherited a debt of 83 million dollars, but by the time he left office, it stood at 57 million dollars. Through wars with England, the depression of 1839-1843, war with Mexico, the Civil War, and the gold standard, the national debt stood at about 1.2 billion dollars in 1900. Then WWI, the Great Depression, Roosevelt's "New Deal", and WWII brought the debt to an astounding 260 billion by 1945. The debt was 390 billion dollars by 1970 and 930 billion dollars by 1980. Under Reagan, the debt reached 2.7 trillion, and under Clinton, it reached 5.7 trillion. Now, under Bush, we have passed the 7.5 trillion dollar mark with a new (TEMPORARY) ceiling of over 8 TRILLION dollars!
Let's see -- 1800 to 1900 debt goes from 83 million to 1.2 billion -- 1900 to 1945 debt goes from 1.2 billion to 260 billion -- 1946 to 1970 debt goes from 260 billion to 390 billion -- 1971 to 1980 debt goes from 390 billion to 930 billion -- 1981 to 1990 debt goes from 930 billion to 2.7 trillion -- from 1991 to 2000 debt goes from 2.7 trillion to 5.7 trillion -- and from 2001 until 2004 debt goes from 5.7 trillion to roughly 7.5 trillion
Greenspasm, however, sees no problem in rising debt. He believes (or at least tells the American people) that the foreign investors (especially central banks) will continue to finance the debt even if the dollar falls because the US is the largest CONSUMER of the goods they produce. China's recent lifting of interest rates (which does not seem to be working), however, may signal that things are not going according to a perfect plan. By buying all these paper dollars from the US, China is sparking a fast rising property market (ever hear the word "bubble?") and much financial speculation in the entire economy. The US needs something like 2 BILLION dollars EVERY day, and China is probably the largest buyer. If China begins to see the need for stronger action, they risk upsetting the "bubble" there, and then they would have no choice but to need the money they are now sending to the US (to prop up US debt) to avert a banking crisis in their country. So you have this "wild card" along with the "war on terror" and the many unknowns there, rising energy costs and potential for much higher prices (which are NOT being counted on by Greenspasm and company), and unheard of monetary stimulus and policies going on daily -- all of which could easily create a situation where foreign sources stop propping up the US dollar. If these foreign funds slow down, Greenspasm will not have the luxury of keeping interest rates at unheard of low levels (which has sparked a housing bubble and record levels of consumer debt by the way -- Americans have been spending more than 3 times the amount their income has been rising!). Greenspasm, again, does not acknowledge this consumer spending/income imbalance as a problem because property values keep rising, so he does not see this increasing personal debt as a financial burden.
This is a house of cards at best. The consumer debt is not a problem as long as property values keep rising, and property values will keep rising as long as consumers keep spending, and consumers will keep spending as long as they can get low interest loans, and consumers will keep getting low interest loans as long as Greenspasm keeps interest rates artificially low, and Greenspasm will keep rates low as long as foreigners keep buying US dollars, and foreigners will keep buying US dollars as long as their own economies experience no property "bubbles" or other economic troubles, etc. etc. etc.
For our own government, and Greenspasm in particular, to "sell" this circular way of thinking to the US public and the rest of the world is not only irresponsible but highly dangerous. Unfortunately, they really have no choice having created this huge debt burden over the past 25 years.
So go ahead and act like the typical American "consumer" and say "you're a pessimist", "stop complaining", "move somewhere better". The reality is that most Americans have become enamored with "things" and "stuff" and "entertainment", and they have dismissed rational, economic thought in the process. Why not borrow beyond your means? Why can't housing go up forever if Greenspan says it can? What's wrong with bankruptcy -- it's legal? The foreigners have to buy our debt because we have to consume their goods.
You better hope the "perfect" picture that Greenspasm paints and our government lives by stays on course until you die, but know that it can't forever, and your children will pay for your generation living beyond their means. That's the best scenario, however, when I look at all the pieces in place, I believe that it will come unraveled in your lifetime, and many of those selfish people who have set up this problem will be forced to face the consequences they had hoped would only be faced by others in the future.
I remain,
SOROS
ps American consumer debt -- not counting mortgage debt -- now equals almost 2 trillion dollars (a record).
A trillion is a hard concept to grasp. It’s a million million. A thousand billion.
A billion is hard enough to understand. A billion is a thousand million.
A billion seconds ago, in 1972, President Richard Nixon visited Mainland China. Later in the year five "burglars" broke into the Democratic National Committee headquarters in the Watergate Hotel.
A billion minutes ago it was the year 103 A.D.
A billion hours ago our ancestors were living in the Stone Age.
But a billion dollars ago for consumer debt was just about two weeks ago! |
