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To: Fiscally Conservative who wrote (3028)	2/18/2001 12:13:35 AM
From: Hawkmoon	Read Replies (2) \| Respond to of 3536

Interesting question... In short.. when the government issues debt, for whatever reason, it creates an obligation that future taxpayers have to pay off. It is not a "hard asset" because it is spent to fund day to day government operations to make up budgetary shortfalls, not to generate a profit. In contrast, a private entity borrows money for the purpose of financing growth that is assumed will exceed the amount of interest they are paying on their debt, thus creating wealth, if all goes well. The investor is providing his capital in exchange for a limited, but fixed, return, and the company goes out and either loans it out at an even higher rate, or invests in expanding their business operations. So the clear difference is that, anytime the government borrows money, it competes for capital with the the private market. That situation does not change when it is evident that the total US national debt is not decreasing, but expanding. The US private national debt (money the government owes to itself... ie.. SSTF) is expanding whereas the public debt is descreasing. publicdebt.treas.gov And since debt/surplus money is still being taken out of the private economy and spent by the politicians IN EXCESS OF PREVIOUSLY FORECAST BUDGETS... (hope I explained this last part reasonably well), it has the same result as deficit spending in terms of competition for capital. Now we could continue the status quo, where govt claims they are paying down the national debt, but are in fact increasing it because they are not able to pay down the public national debt as fast as the funds from the SSTF (private national debt/future obligations) flow in. To do so will distort the capital markets and especially the market in T-Bills. So if we're not paying down the public national debt as rapidly as the private national debt is growing(SSTF surpluses/T-Bill IOUS), we're effectively overtaxing the private economy and creating EVEN MORE competition for capital between government and private debt markets. But clearly, the government should not be draining money from the private economy by running surpluses, if it is not going to immediately return it in the form of public debt buybacks. If they are going to just spend it (as politicians are wont to do), they give it back to the private market to invest and create a hard asset that is held by a private investor (via IRAs). This is how I understand what's currently going on, and why it drives the requirement for reducing the amount of surplus the government is taking in. Regards, Ron