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national debt question for a beginner

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national debt question for a beginner

Old 26th Jul 2011, 09:08
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national debt question for a beginner

Having read that the US is at the limit of its debt, and the solution is to just borrow more money. Can someone explain in simple terms...
Given that most countries and economies and banks are in meltdown who does the US borrow from? Also who is crazy enough to lend to someone that is $1⁴ trillion in debt! Or do they just print more money?
Same question to other countries.....
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Old 26th Jul 2011, 09:20
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It's all a giant Ponzi scheme. Everybody is lending all of their money they don't have to anybody else.

Even if the bullet is dodged now (by borrowing more money that doesn't exist from somebody else), someone will eventually be unable to source funding, then to avoid default, will have to print more money as you say to repay their debts.

What happens after that really depends... and what really scares me...
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Old 26th Jul 2011, 09:24
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The solution is to spend less than you earn in revenue. The expedient is to borrow more to keep the show on the road.

The solution is unpalatable to politicans since it involves cutting things people like such as welfare, military, infrastructure and so on. Most people deplore the debt, but wouldn't really like the consequences of tackling it. Your average politician knows this, so the issue gets swept under the carpet from one year to the next insofar as they can get away with doing so.

You elect the governmnent, they control the budget ergo, if you don't like what they're doing, vote 'em out.
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Old 26th Jul 2011, 09:58
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I'm a bit dumb and have a question along similar lines. Every country appears to owe a ton of money but who do they owe it to? I'm sort of under the impression that savings are where the money comes from but that seems a little simplistic.

BD
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Old 26th Jul 2011, 10:08
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BBC News - Explaining the national debt (in three minutes)
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Old 26th Jul 2011, 10:18
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General Kirby – the answer to the specific question is that they borrow from other countries. These days it’s mainly China and the Middle East, historically it was Japan.

Parapunter summed up the situation very well.

As I’ve mentioned before, Politicians have been feeding this meat to the lions for many years and they’re now fast running out of meat.

The welfare systems are a classic example of “the road to hell is paved with good intent”. I’m sure that nobody would object to the genuine sick and infirm being supported but, the systems have been extended to the point where they are a joke. I quote “immigrants doing jobs that we (European or US) won’t do” – There is an answer to that but politicians won’t face up to it, it’s too hard.

Secondly, because the systems are screwed tax has to be raised to fund them. Higher taxes have to be paid by cost/price increases; this makes us less competitive on the World markets. This double helix spiral (downwards) continues at an ever increasing pace.
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Old 26th Jul 2011, 10:21
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Isn't the answer to set up a company to trade with the South Seas and sell shares in it so that it can pay off the national debt?
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Old 26th Jul 2011, 10:24
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Radeng – I like it – turn debt into equity (It’s the old trick!!!)
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Old 26th Jul 2011, 10:40
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Have a look at this from the 22 minute mark:

The History of Oil - Robert Newman
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Old 26th Jul 2011, 11:01
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Also who is crazy enough to lend to someone that is $1⁴ trillion in debt!
as long as there are enough idiots working 16 hours daily,mainly at Asia but there are such idiots all around Europe and Middle East,standard american citizen has no solution other than laying on Miami beach and smokes occasionally cheap Mexican ganja.
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Old 26th Jul 2011, 12:17
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Just published on BBC News - Tests claim few benefit claimants 'unfit to work'

The current analysis following medical checks on Incapacity 1.3 million claimants - Oct 2008 to Nov 2010

The interesting figures are the 39% and the 36% - 75% in total

• 7% were incapable of any work
• 17% were able to do some sort of work given the correct support
• 39% were deemed to be fit for work and were moved onto jobseeker's allowance
• 36% dropped out of the application process
• 1% of applications were still in progress

We have a sick country but not a sick population
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Old 26th Jul 2011, 12:35
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A countries finances are similar to a households finances, the difference is scale and complexity.

At the moment the US government borrows 40c out of each dollar it spends. Obviously this can't go on forever. Income must increase or expenditure be reduced. Problem is no one wants to pay higher taxes and no one wants to accept reduced benefits and services.

There are also massive unfunded liabilities with social security and medicare. Basically it's a giant Ponzi scheme relying on taking contributions from people in return for a promise of future benefits, and using these contributions to pay todays recepients. Problem is fewer workers being expected to support increasing numbers of retirees.

No private company could get away with running its finances the way the US government does, the directors would be facing charges.

Unfortunately the voters won't accept the medicine and the government isn't able to make them take it.

The problem can only be kicked down the road for so long and it's increasing in size the whole time.
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Old 26th Jul 2011, 13:08
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Free beer syndrome I think. (Offer free beer you will always get plenty of takers).

China is USA's biggest "lender" and they get accused of currency manipulation to boost exports. They are asked to up-value the Yuan, but this means their US dollar loans are devalued.

Prediction: China does up-value the Yuan and then starts to buy up corporate America. Then same politicos in USA claim China is manipulating their currency to do this.
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Old 26th Jul 2011, 13:15
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What I don't get is the way countries, (e.g., the US, the UK, Australia), that are so in debt, for all intents and purposes they are bankrupt, dole of multi million pounds or dollars in aid, over and over again it seems to me, to other countries that are even more bankrupt than they are.

I think "giant Ponzi scheme" is pretty close to the mark.
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