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Rubio's plan to "pay off" our "horrible" "debt."

Can you provide your evidence for what happened to them? I'm making an educated guess, it's your turn.

The car became the center of Middle Class Life in the Early 1920s. There was a Depression in 1920-1921, in which unemployment jumped from 4 to 12%. President Harding cut the size of the government almost in half over two years, slashed tax rates, paid off some of the national debt, and unemployment was down to 2.4% by 1923.

Looks like those workers were pretty quickly re-integrated into the work force in new professions. Given the lack of a life-long safety net, that's not terribly surprising.

Their children probably grew up fine, well, if they didn't get shoved into a factory to scrape by.

I thought factories were what made America great, and it was a shame that we were shipping them overseas. ?


Their children went into different industries as well. There is not a permanent underclass of unemployed in our society due to the invention of the automobile, any more than there is due to the invention of the tractor (90% of our populace used to work in agriculture. Now about 2% do), any more than there will be due to the introduction of the robot.*

*So long, of course, as we don't muck it up with ill-considered government programs designed to "fix the problem".
 
Your response is based on heroism.

No. It is based on our fiscal reality. That solution leaves us with the exact same problem of not dealing with the structural deficits built into our non-discretionary spending, and still sends the signal that we intend to inflate our way out of the debt, increasing interest rates, and causing us to chase the goal further away the faster we run towards it.

I brought up 15/40, because that is a little less than double the current growth rate. We have 1% inflation with 8% money supply growth.

We have low inflation because we went through a massive deleveraging - we were re-capitalizing the banks. I don't think those conditions are going to hold for four decades. Nor would it be enough to achieve the goal of paying off debt, especially as it would increase interest rates, pushing that goal further away.
 
The car became the center of Middle Class Life in the Early 1920s. There was a Depression in 1920-1921, in which unemployment jumped from 4 to 12%. President Harding cut the size of the government almost in half over two years, slashed tax rates, paid off some of the national debt, and unemployment was down to 2.4% by 1923.

Looks like those workers were pretty quickly re-integrated into the work force in new professions. Given the lack of a life-long safety net, that's not terribly surprising.



I thought factories were what made America great, and it was a shame that we were shipping them overseas. ?


Their children went into different industries as well. There is not a permanent underclass of unemployed in our society due to the invention of the automobile, any more than there is due to the invention of the tractor (90% of our populace used to work in agriculture. Now about 2% do), any more than there will be due to the introduction of the robot.*

*So long, of course, as we don't muck it up with ill-considered government programs designed to "fix the problem".

Yes, and now fully automated robots that can perform virtually all jobs will become the center of life for the shrinking middle class. Great job.
Social Democracy for the 21st Century: A Post Keynesian Perspective: The US Recession of 1920–1921: Some Austrian Myths
About that depression..
http://www.epicoalition.org/docs/thayer.htm
1. 1817-21: In five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819
I don't really care about developing economies manufacturing these days. Oh, so you make a silly statement against successful government programs? You're not understanding. The automation from robots can't be compared to something like the tractor, which still required an operator. Robots can fill fast food jobs, manufacturing, transportation, and the list goes on.
 
Looks like those workers were pretty quickly re-integrated into the work force in new professions. Given the lack of a life-long safety net, that's not terribly surprising.

I don't believe the need for able bodies is infinite across time. During the early 20th century, the economy needed able bodies to perform new tasks. If a robot can perform the same tasks (better) and for less cost/hassle, it will replace manual labor. Im not speaking of specific industries... i am speaking of labor in and of itself.
 
No. It is based on our fiscal reality. That solution leaves us with the exact same problem of not dealing with the structural deficits built into our non-discretionary spending, and still sends the signal that we intend to inflate our way out of the debt, increasing interest rates, and causing us to chase the goal further away the faster we run towards it.



We have low inflation because we went through a massive deleveraging - we were re-capitalizing the banks. I don't think those conditions are going to hold for four decades. Nor would it be enough to achieve the goal of paying off debt, especially as it would increase interest rates, pushing that goal further away.

What makes you think we need to reduce the debt? You're assuming we're going to do that.
 
No. It is based on our fiscal reality. That solution leaves us with the exact same problem of not dealing with the structural deficits built into our non-discretionary spending, and still sends the signal that we intend to inflate our way out of the debt, increasing interest rates, and causing us to chase the goal further away the faster we run towards it.

Given the state of long term inflation expectations, doubling the current rate of money supply growth is unlikely to force inflation and then interest rates up to a self-defeating levels. Your argument is based on assuming some sort of response, which is not based on our reality.

We have low inflation because we went through a massive deleveraging - we were re-capitalizing the banks.

Now?

I don't think those conditions are going to hold for four decades. Nor would it be enough to achieve the goal of paying off debt, especially as it would increase interest rates, pushing that goal further away.

Without population growth, the only way modern economies are going to outstrip their current trends is to dramatically increase productivity. Otherwise, you will not see the requisite consumption growth that releases our current condition; a decreased demand for labor. It is entirely within the realm of possibility (and probability) that for the next 40 years, 3% real gdp growth is a great year. Given the decreased demand for labor and the reduced population growth that accompanies higher incomes, it's worth considering my argument.
 
Given the state of long term inflation expectations, doubling the current rate of money supply growth is unlikely to force inflation and then interest rates up to a self-defeating levels. Your argument is based on assuming some sort of response, which is not based on our reality.

You are making a steady-state prediction in a scenario where the underlying fundamentals are dramatically changing. That's like using the current Oil Futures market as the likely bench for oil prices should large sections of the Middle East go up in nuclear flame.


Now less so. (sadly, imo), households have largely ceased deleveraging, setting us up for future pain. However, when you pick up the effects over the last 6 years, you can't toss that out as though it weren't a major factor.

Without population growth, the only way modern economies are going to outstrip their current trends is to dramatically increase productivity. Otherwise, you will not see the requisite consumption growth that releases our current condition; a decreased demand for labor. It is entirely within the realm of possibility (and probability) that for the next 40 years, 3% real gdp growth is a great year. Given the decreased demand for labor and the reduced population growth that accompanies higher incomes, it's worth considering my argument.

What is the consumption of retired baby boomers going to look like in real terms when you cut their savings in half? Consumption increasing through inflation is a theory that worked poorly for us in the 70s, as I recall.

I don't non-concur that we may face low growth for some time. We have a lot of debt to unravel, and we seem to be making very stupid and short-sighted decisions as a nation. Decreased demand for labor is additionally tied to its' increasing costs (which include tax and regulatory), we chose to have fewer kids, and now, apparently, everyone thinks that the brilliant thing to do is to start trade wars with China.

That being said, it remains reality that large deficits are currently baked into our fiscal cake due to the structure of non-discretionary spending. It remains reality that if we choose to try to print our way out of debt, we will increase the cost of borrowing, pushing that goal ever further from our reach. How much of our debt can we pay off by increasing M1 Supply by 15% a year if interest rates go back (as he suggested) to 5-10%? What do we do when the cost of rolling over our debt more than quintuples?
 
1. Bonds are an investment.
2. The bonds are replaced with dollars over time anyway. What is happening under this idea is that we are simply dramatically increasing the M1 supply, while continuing to issue more bonds.
3. In an inflationary environment, holding on to cash is taking a deliberate loss.


You can't sectuple the monetary supply in a handful of years without inflation, any more than we could cut the monetary supply to 1/6th of it's current amount without deflation.

Sorry I missed so much of the discussion.

1,3. Bonds are a place to park your dollars safely. There are already some cases of people paying for the privilege.

2. It was a hypothetical - what if we stopped issuing bonds altogether? I think, for the most part, bondholders would simply choose to sit on their dollars. Other investments have always been available, yet bondholders still opt for close-to-zero yields. In the absence of bonds, the second-safest choice is to hold dollars.

So what difference does it make if M1 increases, if people/countries don't spend their dollars?
 
Sorry I missed so much of the discussion.

1,3. Bonds are a place to park your dollars safely. There are already some cases of people paying for the privilege.

2. It was a hypothetical - what if we stopped issuing bonds altogether? I think, for the most part, bondholders would simply choose to sit on their dollars. Other investments have always been available, yet bondholders still opt for close-to-zero yields. In the absence of bonds, the second-safest choice is to hold dollars.

I think you are conflating (broadly) "Bonds" with "Treasuries". If we stop issuing treasuries, that money will go to other "save" securities, lowering interest rates there, and pushing some of those investors into slightly less safe securities, and onward and upward.

That being said, if we simply stopped issuing Treasuries, the amount of money we would have to print every year would be immense; the Deficit + the amount of Debt being rolled over.

So what difference does it make if M1 increases, if people/countries don't spend their dollars?

Countries would dump their dollars to move to an asset that wasn't rapidly depreciating.
 
Honestly, this is all the same **** on a different day. The politics of selling these ideas are continually trying to remove economics from the debate. It is nothing more than capitalizing on buzzwords in an effort to gain support, what makes it sad is we have a healthy percentage of the nation that buys into the rhetoric. It all sounds plausible until you look under the hood and realize the economics and even prior political positions that got us to today's numbers.

The problem is that the debt and interest on that debt is getting out of control.
I think they said by 2030 or so government spending on social programs and our debt interest
will consume the entire budget.

that means all the money that we bring in will be consume that means even more borrowing and more interest.
the fact is we are spending our way into a hole that we won't be able to get out of.

every American in the country owes the government around 44k dollars that includes your kids.
 
I have just found Rubio's web page where he talks about the debt. Let's have fun reading this disaster together. :cool:
https://marcorubio.com/issues/debt/

First of all, Rubio, leaders in washington don't have to "scramble" to meet any obligations, not operationally.
Yep this disaster of a post is fun to read but common.
Technically true the treasury constantly collects money so therefore they can pay their debts.

Rubio and other republicans actually believe we can get by without raising the debt limit.. Rubio and other republicans want to "reduce spending" while reducing tax revenue, they don't care about "paying off the debt" and why should they? The debt is hardly even a "debt."

Well if you spend what you bring in then you don't have to raise the debt limit or only raise it as you need it.
18 trillions dollars is not what some people would call hardly even a debt. back in 2011 the national debt was equal to 100 of our GDP.

Obama has been reducing deficits. A mistake on his part, but goes against Rubio's talking point.
Not really the republican congress lowered the deficits by stopping Obama's constant trillion dollar deficits.
Obama didn't reduce a thing. in fact he wanted more spending.

Yeah, the debt from world war 2 is going to shackle us any day now. Take notes, Rubio, the debt is not a problem. We're a fiat regime and we can create dollars from nothing. We're nowhere near full output either.

sorry you just can't print money willy nilly witout consequences. if you think we can then why not just print 18 trillion dollars and pay off the debt.

This tells you all you need to know about the economic knowledge Rubio has. None.
way more than you so far.

Why doesn't rubio get the opinion of actual economists?
why don't you actually learn about how our economy works?

Yeah, you want a balanced budget amendment to do it. Tell me Rubio, why do you hate the private sector? You socialist.
would have little to no affect on the private sector. in fact would probably strengthen the private sector.

Not operationally. In fact, these programs can't go "bankrupt" at all.
technically they can. which means that the federal government will have to borrow the money to pay it.

What does Rubio actually think the debt is? He has absolutely no idea what he's talking about.
so far he seems to know more than you do.

Oh, so he believes he can collect tax revenue years after balancing the budget every year, not adding dollars to the economy. Rubio believes we don't need deficit spending at a time when more and more money is getting trapped at the top not being spent. In fact, rubio wants to lower taxes on the rich, for some strange reason. His donors, hint hint..

what he says is correct the best way for more tax revenue is a stronger economy. nothing he said was incorrect.
the money supply is not debt. you obviously don't know what debt is.
prove more money is getting trapped at the top and getting spent. you obviously don't understand basic economic activity
prevents this from happening. actually the entire tax code needs over hauled.

Absolute lunacy. There's no way this will happen if Rubio "balances the budget" and guts deficit spending.
because you technically don't need deficit spending. the only time the government should be deficit spending
is if there is a major economic situation and a limited stimulus is needed to try and get things going again.

Another gem from rubio:

I now know that Rubio knows nothing about deficits and the reality that deficits benefit the private sector.

not really deficit can and do create economic bubbles that soon burst leaving people worse off than before.
 
The problem is that the debt and interest on that debt is getting out of control.
I think they said by 2030 or so government spending on social programs and our debt interest
will consume the entire budget.

that means all the money that we bring in will be consume that means even more borrowing and more interest.
the fact is we are spending our way into a hole that we won't be able to get out of.

every American in the country owes the government around 44k dollars that includes your kids.

Before I agree or not with "debt and interest on that debt is getting out of control," by why measure have you made that conclusion?

As a qualifier, understand that I agree it becomes very problematic based on some of the outlooks to consider the social safety net spending, in relation to the interest on debt, in relation to all the other spending in a given year. 2030 or some other date we should be concerned based on some of these projections but also based on some things remaining a constant.

But question still stands on making a definitive statement on what is and it not out of control debt. (To help you, I'll ask you to consider the difference between Debt held by the Public and Intergovernmental Debt.)

The real reason I am asking is when I consider something "out of control" I personally am looking to compare any years deficit or any years Total Debt number as it relates to something.
 
Before I agree or not with "debt and interest on that debt is getting out of control," by why measure have you made that conclusion?

As a qualifier, understand that I agree it becomes very problematic based on some of the outlooks to consider the social safety net spending, in relation to the interest on debt, in relation to all the other spending in a given year. 2030 or some other date we should be concerned based on some of these projections but also based on some things remaining a constant.

But question still stands on making a definitive statement on what is and it not out of control debt. (To help you, I'll ask you to consider the difference between Debt held by the Public and Intergovernmental Debt.)

The real reason I am asking is when I consider something "out of control" I personally am looking to compare any years deficit or any years Total Debt number as it relates to something.

Will entitlement programs and debt swamp federal revenues in the near future? | PolitiFact Oregon

the problem is that the government brings in X amount in a year.
it then has to pay those money's out.

if nothing is done to stop the bleeding of government spending and reign social programs in like by 2030 or so
the total amount will consume all government revenue. which means all the other programs that the government
funds including out military will have to be borrowed.

that is not a good fiscal position to be in. it means that people we are borrowing money from have all the leverage.
the fact is something has to be done to get the debt and the budget under control.

it is not a the free for all the people think it is.
 
Who ran up the debt in the first place, and why is it now "ours"?
 
The debt isn't a problem. We don't need to "reform" entitlements. Austerity isn't a solution, just ask everyone who has tried it.

Delusional.
 
I think you are conflating (broadly) "Bonds" with "Treasuries". If we stop issuing treasuries, that money will go to other "save" securities, lowering interest rates there, and pushing some of those investors into slightly less safe securities, and onward and upward.

I am lumping all federal bonds together in the hypothetical. What if there were no 100% safe U.S. bonds to park dollars in?

If I had fleshed out the question a little more, I would have asked it in two different contexts; one where all countries stop issuing bonds, and one where only the U.S. does. I still think that U.S. bondholders are so risk-averse that they wouldn't invest in anything else.

That being said, if we simply stopped issuing Treasuries, the amount of money we would have to print every year would be immense; the Deficit + the amount of Debt being rolled over.

But the total liabilities of the government would increase less than they do today. Replacing bond liabilities with dollar liabilities + deficit spending adjusted for less (and eventually zero) bond interest.

Countries would dump their dollars to move to an asset that wasn't rapidly depreciating.

I'm not convinced that dollars would rapidly depreciate under these circumstances. We already offer far less of a return than Eurozone bonds.
 
I am lumping all federal bonds together in the hypothetical. What if there were no 100% safe U.S. bonds to park dollars in?

If I had fleshed out the question a little more, I would have asked it in two different contexts; one where all countries stop issuing bonds, and one where only the U.S. does. I still think that U.S. bondholders are so risk-averse that they wouldn't invest in anything else.

I sincerely doubt this - there are investments that have a higher rating than a US Treasury, which isn't 100% safe. Given that bond values fall as interest rates rise, and we are currently pretty much bottomed out, an argument could be made they are anything but. Especially if the intent is to repay them with depreciated dollars.

But the total liabilities of the government would increase less than they do today. Replacing bond liabilities with dollar liabilities + deficit spending adjusted for less (and eventually zero) bond interest.

:roll: which is one way to ignore the point. Inflation, which is large loss in the value of each individual dollar, would occur rapidly with that massive influx of new dollars.

I'm not convinced that dollars would rapidly depreciate under these circumstances. We already offer far less of a return than Eurozone bonds.

Our current M1 supply is around $3.1 Trillion. How much debt are we planning on rolling over this year in total, added to our deficit? As a percentage of 3.1 T?
 
:roll: which is one way to ignore the point. Inflation, which is large loss in the value of each individual dollar, would occur rapidly with that massive influx of new dollars.

But it's not a massive influx of new financial assets. You had $1 million in bonds, now you have $1 million in dollars. How much is your behavior going to change because of that? When you had the bonds, you had $1 million you could have spent or invested differently anytime you wanted.

Our current M1 supply is around $3.1 Trillion. How much debt are we planning on rolling over this year in total, added to our deficit? As a percentage of 3.1 T?

What difference does M1 make? Quantity theory of money?
 
:roll: which is one way to ignore the point. Inflation, which is large loss in the value of each individual dollar, would occur rapidly with that massive influx of new dollars.
In a vastly different economy, yes. We must remember that monetary inflation that you're describing only occurs when the production of goods and services can't keep up with income. Historically, that's only ever happened with the loss of industrial capital, such as after war. I would LOVE for income to outstrip capacity without war, if it were possible; you do have a hefty claim to make in saying that it is.

But it's not a massive influx of new financial assets. You had $1 million in bonds, now you have $1 million in dollars. How much is your behavior going to change because of that? When you had the bonds, you had $1 million you could have spent or invested differently anytime you wanted.
Dollar velocity. It's a fine point, but a relevant one, because it makes all the difference in monetary inflation.




To throw my own wrench into this, I think the debt is a problem, but not the government's problem. The government makes money, and there's no large reason it shouldn't, especially in a trade deficit economy. The only big reason that the national debt is a problem is that it's a mechanism of economic inequality. A bond is nothing more than a claim by one population (the bond holder) against the taxes from another population (everyone else), and the more capital one has access to, the higher yield that claim receives. It's nothing but rent seeking on a massive organizational scale. The government supposedly gets 'funded' in the process, but with a sovereign fiat currency, that's hardly the point anymore.
 
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I sincerely doubt this - there are investments that have a higher rating than a US Treasury, which isn't 100% safe. Given that bond values fall as interest rates rise, and we are currently pretty much bottomed out, an argument could be made they are anything but. Especially if the intent is to repay them with depreciated dollars.



:roll: which is one way to ignore the point. Inflation, which is large loss in the value of each individual dollar, would occur rapidly with that massive influx of new dollars.



Our current M1 supply is around $3.1 Trillion. How much debt are we planning on rolling over this year in total, added to our deficit? As a percentage of 3.1 T?

The US treasury is only unsafe because of political nonsense. There will never be any need to be concerned about the US' ability to retire bonds, as it can always issue more, and even buy them itself. This argument that low interest rates signify some kind of debt catastrophe is irrelevant. Paying down bonds with depreciated dollars would make the bonds better investments anyway, by definition.

Inflation occurs when dollars are being created without having new production to show for the created dollars. Our dollar's value is a function of the money supply and the relative productivity of our country. If we increase the money supply while being more productive, we will not see inflation. If this confuses you, just ask yourself why all this debt hysteria of our scary, big-number deficits has resulted in ridiculously low inflation:

1c72b42457f797cafc79e421827c9e6f.jpg


Why does money velocity matter ...? Do you know where the government gets money for deficit spending ? Somewhere OTHER than the private sector. When you want to reduce deficits, that money you're using to pay down the debt comes out of the private sector.
 
The US treasury is only unsafe because of political nonsense. There will never be any need to be concerned about the US' ability to retire bonds, as it can always issue more, and even buy them itself. This argument that low interest rates signify some kind of debt catastrophe is irrelevant. Paying down bonds with depreciated dollars would make the bonds better investments anyway, by definition.

Inflation occurs when dollars are being created without having new production to show for the created dollars.

Yes. Like, for example, in a scenario where we decide to monetize the debt.
 
Yes. Like, for example, in a scenario where we decide to monetize the debt.

Those dollars are still being spent into the economy, eliciting more production.

Your whole argument here is predicated on the idea that there is a meaningful difference between holding dollars and holding very liquid, very low interest bonds. Those bonds aren't preventing anybody from spending or investing in other instruments. So why would replacing bonds with dollars cause inflation? (And just saying that M1 will go way up is not an explanation.)
 
Yes. Like, for example, in a scenario where we decide to monetize the debt.

When we have millions of Americans whose labor sits idle, when we have resources like lands and factories being underutilized, it's pretty easy to see how the government's expenditures can help us to be more productive.
 
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