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Thread: US must tackle government deficit, says IMF report

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    US must tackle government deficit, says IMF report

    BBC News - US must tackle government deficit, says IMF report

    Quote Originally Posted by article
    There is an urgent need for the US to tackle the deficit in the government's finances, according to the International Monetary Fund (IMF).

    The organisation has warned that the size of the deficit risks creating instability in the financial markets.

    "Among the advanced economies, the United States, in particular, needs to adopt measures that would allow it to meet its fiscal commitments," the IMF warned.
    Like people who live on credit cards, the US have wasted future growth for todays growth. A sad story indeed. Not exclusive to the US, but all across the west.

    National states taking on debt on behalf of the people without their permission should be illegal.
    Europe is illegally occupied by the US

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    Re: US must tackle government deficit, says IMF report

    Quote Originally Posted by Maximus Zeebra View Post
    BBC News - US must tackle government deficit, says IMF report



    Like people who live on credit cards, the US have wasted future growth for todays growth. A sad story indeed. Not exclusive to the US, but all across the west.

    National states taking on debt on behalf of the people without their permission should be illegal.
    I percieve this as the wealth of the people being transferred to the Corporations. Corporations are loyal to the strong currency. So they squirm to move their wealth to the Nations with the strong currency. They don't live and breathe, so the human considerations are non important, even anaethema. because they reduce the Corporate bottom line that is the purpose of a Corporation. The corporations take the loot and we will be stuck with the bill. The Reserve banks issue paper, good as gold, er, perhaps even blessed by the Pope himself. Really good paper as long as you have "confidence." So everyone associated with reserve banks and fiat oriented gov'ts have to speak confidently and loudly about those issues that generate confidence. Now if you or I issue paper with confidence, we are arrested as "Con Artists." If the confidence people have to invent numbers, etc. to boost "confidence, that is acceptable, even encouraged. Yessir, Confidence. If people think the paper backed by confidence is good stuff, then they don't need to soften that paper so it can be used in an outhouse where it belongs. I'm very confident that everything is OK, and especially confident that our monetary officials talk confidently on having confidence in our currencies.

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    Re: US must tackle government deficit, says IMF report

    Quote Originally Posted by Maximus Zeebra View Post
    BBC News - US must tackle government deficit, says IMF report

    Like people who live on credit cards, the US have wasted future growth for todays growth. A sad story indeed. Not exclusive to the US, but all across the west. National states taking on debt on behalf of the people without their permission should be illegal.
    What business model is there in the whole wide world where a company just keeps borrowing money and doesn't ever pay it back? What personal model? None. Fine, we all agree that a country has very good reasons for deficit spending. All well and good. But it is insanity to never pay it back.
    The devil whispered in my ear, "You cannot withstand the storm." I whispered back, "I am ​the storm."

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    Re: US must tackle government deficit, says IMF report

    Quote Originally Posted by MaggieD View Post
    What business model is there in the whole wide world where a company just keeps borrowing money and doesn't ever pay it back? What personal model? None. Fine, we all agree that a country has very good reasons for deficit spending. All well and good. But it is insanity to never pay it back.
    Maggie,

    You raise a good issue. Unlike with individuals, there is an underlying assumption that a state will exist forever. Hence, governments can expect to roll over their debt, paying off creditors (hopefully, on time and fully) while incurring new debt. A similar situation exists with companies, but their latitude is less than that for governments, as governments have taxing authority while companies depend on revenue (all from voluntary transactions). Having said that, there is a limit to how much debt relative to GDP that a government can incur before confidence in its ability to meet its obligations erodes. That limit (in technical parlance, its debt intolerance) varies from country to country. A country's debt intolerance largely depends on its past default history (extremely rare for the U.S.; arguably its shift from the gold standard during the Great Depression represented a partial default) and inflation experience (the U.S. has experienced a few major inflationary outbreaks, but those occurred after long intervals of quiescent inflation).

    IMO, the U.S. is advancing toward a threshold where confidence in its ability to meet its obligations could begin to fade. Aside from the growing U.S. imbalances, there's also the growth of attractive alternatives for capital in rapidly growing economies. Not surprisingly, the IMF is also expressing growing concern about U.S. imbalances and its forthcoming Fiscal Monitor (May 2011) will report that the U.S. needs to make a fiscal adjustment > 10% of GDP and that the present U.S. course would achieve an adjustment that is under 40% of what is required. That could change if the U.S. adopts a credible fiscal consolidation path in conjunction with raising its debt ceiling ahead of the report, as the IMF's reports tend to reflect even very recent information. As the U.S. is a money center nation, the global risks associated with a debt crisis in the U.S. would be enormous and, unlike the spillovers associated with Greece, Ireland, and possibly Portugal, the contagion would spread extremely rapidly.

    Two things to watch for down the road if the U.S. does not move onto a credible medium-term fiscal consolidation path:

    1. Trends in long-term Treasury yields where the interest rates are rising faster and to levels that cannot be justified by inflation and inflation expectations (a hint of a growing risk premium).
    2. A shift in the debt structure toward shorter-term debt (an effort to reduce debt service costs but at the increased risk of a crisis, as excessive short-term debt is a better trigger for a crisis given the need to roll it over more quickly).
    Last edited by donsutherland1; 04-13-11 at 10:53 AM.

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    Re: US must tackle government deficit, says IMF report

    The USA defaulted on the Bretton Woods agreement in the early 70's when DeGaulle demanded $300 million in gold for our loans that financed the Vietnam War. Nixon did not honor the gold certificates, instead defaulting on the Bretton Woods agreement. Since then, currencies are "fiat" money. Money good because the printing Nation says in is. Now, it is good if you are a foreigner holding a few thousand $100 bills. You can bring them to the USA and buy gold mines, silver mines, oil wells, perhaps National Parks and gov't toll roads and bridges in the near future,. That abililty to get something for your "fiat" money is what really makes it good. Any other arguments about its nature are usually "confidence" stories. Feel good, sound good, must be good fantasies. If there is more "fiat" money issued than things to buy, the money is destined to fail. How is the USA doing. Parks, roads, bridges, military bases, and other Federal property will eventually back those wayward dollars. The taxpayers stuff will become China's or India's stuff and we'll still have politicians saving us from themselves.

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    Re: US must tackle government deficit, says IMF report

    Is the biggest shift of wealth in history already taking place? I thought it was further down the road.
    Imagine US confidence if the nation become bust.
    Europe is illegally occupied by the US

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    Re: US must tackle government deficit, says IMF report

    Quote Originally Posted by Maximus Zeebra View Post
    Imagine US confidence if the nation become bust.
    Given the size of the U.S. economy, magnitude of debt, and interconnectedness of the U.S. vis-a-vis much of the rest of the world, one would much more likely be dealing with a global confidence crisis. There would be substantial contagion from such a situation.

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    Re: US must tackle government deficit, says IMF report

    Quote Originally Posted by donsutherland1 View Post
    Given the size of the U.S. economy, magnitude of debt, and interconnectedness of the U.S. vis-a-vis much of the rest of the world, one would much more likely be dealing with a global confidence crisis. There would be substantial contagion from such a situation.
    I am not sure. What I am sure of is that the non fundmental part of the economy would collapse immediately, the financial markets. This would skim of some wealth and make for a more even society. The result of the collapse of the financial markets and banks would be cheaper property and general deflation. This would be positive for the fundamental part of the economy, taken into consideration that house prices only are what they are because of banks overlending to people. It would skim of perhaps 50% of consumption in the end. Life would change, but not completely much of what we know would remain the same, but the world would live in a more sustainable way. Perhaps if we live a bit slower like that we would have more time to think about what we really want from our society and what society we want to build for the next generations. This rather than distract ourselves with living life in a retarded fast lane, where our society marely reacts to things as they come, and we build the future based on the best way to make paper money, in other words let the fundamental part of the economy suffer to prop up finances and banks.

    I think the world needs a complete economic change and a change of focus. It shouldnt be about quick profit, it should be about fundamental change and improvement.
    Europe is illegally occupied by the US

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