Is the US national "debt" an illusion?

[MF Doom]

at least part of the debt is owed to itself, in terms of social security, municipal bonds, and some to the fed.  only about 15/16% is owed to china & japan

[Natalia_AnatolioPAMM]

No country should have debt. It's as simple as that. Debt for a country is either stealing from the future or stealing from your debtors if the country currency goes under. Sure debt speeds up things for businesses, but who here trusts their country to always do the right thing.

no country can survive without debts nowadays.

[manselr]

No country should have debt. It's as simple as that. Debt for a country is either stealing from the future or stealing from your debtors if the country currency goes under. Sure debt speeds up things for businesses, but who here trusts their country to always do the right thing.

no country can survive without debts nowadays.

Yeah, all businesses work on debt. Your only chances to make it outside the class you are born with is getting into debt to make your business a reality, and have luck that it is a succeed and you can pay it back + make profit.

[5970]

it's always been a confidence game, "con game" in short.

[B.A.S.]

We can sit around and talk about this for eternity regarding how it affects nations or individuals: plain and simple - worry about yourself and those important to you.

Live within your means, adapt to the changing systems of the world and plan for the worst (hoping for the best).

[Natalia_AnatolioPAMM]

No country should have debt. It's as simple as that. Debt for a country is either stealing from the future or stealing from your debtors if the country currency goes under. Sure debt speeds up things for businesses, but who here trusts their country to always do the right thing.

no country can survive without debts nowadays.

Yeah, all businesses work on debt. Your only chances to make it outside the class you are born with is getting into debt to make your business a reality, and have luck that it is a succeed and you can pay it back + make profit.

but this luck goes to 1 out of 100 

[Erdogan]

No country should have debt. It's as simple as that. Debt for a country is either stealing from the future or stealing from your debtors if the country currency goes under. Sure debt speeds up things for businesses, but who here trusts their country to always do the right thing.

no country can survive without debts nowadays.

Yeah, all businesses work on debt. Your only chances to make it outside the class you are born with is getting into debt to make your business a reality, and have luck that it is a succeed and you can pay it back + make profit.

Currently, most businesses work on debt. But with sound money, this will not be strictly necessary. If one person or association does not have enough money to buy the capital needed, they can just team up with more persons. Lending to a company, or investing directly, both involve risk. The owners can take up a loan to avoid diluting their projected profit, and for a lender, the loan can be less hazzle and less risky (since loans have priority over share owners). A loan fraction of about half, was considered prudent in the old days. Loans for business is useful, but not absolutely necessary.

Private loans, however, are sometimes necessary. Sometimes you need a house or a car right now. Life does not wait. The "collateral" for the loan is your future earning potential. With a risk premium to the interest, risk can be spread over several loans, and can thus be quite safe for the lender.

This reminds me of an old school shipowner, when asked about the equity, he said: We have as much in the bank as all the ships costed. That means the equity was 200 % of working capital, 400% if you consider that the ships were worn by half on average. The point of the large equity base was, since shipowning is a risky business, to avoid having to sell when prices were low. Analogous to being margin called when you play with futures.

 

[johnyj]

No country should have debt. It's as simple as that. Debt for a country is either stealing from the future or stealing from your debtors if the country currency goes under. Sure debt speeds up things for businesses, but who here trusts their country to always do the right thing.

Debt is very different from the view of a private person than the view of the whole society

A private person can keep fiscal discipline and always first make more money then spend, so he don't need to take any loan. But in order for everyone as a whole to make more money, some money must flow into the society at the first place, and this new money is injected in the form of loan

Before, new money is injected by newly mined gold/silver, but since the removal of gold standard, new money only enter the society in the form of loan, e.g. government borrow it from central bank and spend, company borrow it from banks and spend. Since each borrowed dollar carry an interest, it is impossible to repay the loan with existing money, so more money must be borrowed each year just to cover the cost in interest, thus the debt keeps going up

Even the interest is zero, if economy expands and society becomes more wealthy, there will be more money needed each year, and those money can not be mined like gold as before, they must come into existence in the form of loan. In fact FED can purchase assets to issue money, that does not involve loan, but unfortunately they already ran out of assets to purchase, the only one left is bond

[Dick Trump]

The corporate oligarchy is another ball of wax. At the end of the day, it really is the government's fault. In this case, I blame the SBA.

Isn't the widespread corporate consolidation really just a result of the difference between the cost of capital for small and big business? Big business borrows at a 2.5% interest rate, paying only interest for the term of the loan. Small business borrows at 5-7%, amortizing (paid off in full) over 5-10 years.

The debt constant (annual payment/total loan) for small business can be upwards of 25%-30% vs 2.5% for big business. Small business loan payments are typically TEN TIMES MORE EXPENSIVE than big business loan payments.

Additionally, small business loans are capped at $2-5 million. Big business loans have no limit. Also, small businesses loans restrict passive and "rent extracting" activities. Big business loans encourage them. These economic realities make small business investment nearly imposible and big business consolidation inevitable.

If America cares about small business and the middle class, we must lower interest rates on government-guaranteed small business loans (through SBA reform), offer more "interest only" options to keep small and big business borrowing costs competitive, increase small business loan limits, and widen the scope of small business loans to include financial and rent extracting activity. These moves would strengthen the small businesses that currently exist, stimulate the formation of new small businesses, and enrich American business owners and small business employees alike.

Otherwise we all be working at Wal-Mart for the rest of our lives. F- that. Let them eat my cake.

[doggieTattoo]

The issue is not as much the ratio of debt to wealth as much as it is the ability to pay off the debt.

yeah, I don't see how OP didn't think of that.  The National Debt is literally the Debt that we owe.  Isn't there a U.S national debt counter in Arizona or something?  the more the Debt goes up, the more there is an issue, when it starts decreasing, that is when we know the problem is fixed and over with. 

[Dick Trump]

The issue is not as much the ratio of debt to wealth as much as it is the ability to pay off the debt.

yeah, I don't see how OP didn't think of that.  The National Debt is literally the Debt that we owe.  Isn't there a U.S national debt counter in Arizona or something?  the more the Debt goes up, the more there is an issue, when it starts decreasing, that is when we know the problem is fixed and over with.  

There are alternative, non-debt based fiat options the US Treasury could employ to pay off the debt and continue to stimulate economic growth. However, these strategies would be completely revolutionary, and would essentialy make the president an elected king. Conspiracy theorists suggest this was JFK's intention with EO 11110. I read the order and do not interpret it the same way as the tinfoil hat crowd, but I do understand the underlying philosophy. It is good economics, but terrible politics.

Any major move away from the Fed would be the nuclear option of monetary policy. It would result in an entire shift in the world order, and would not be without consequence. The emotional sense of false scarcity that central banks and sovereign debt create governs the amount of natural resources populations consume, and forces societies to work together. Unless your favorite movie is "300," the current world order is probably for you. It is better we play along with the debt game as enlightened participants than experience a complete revolution. And by revolution, I mean bloody.

However, if we don't step on the gas now and print our way out of this mess there will likely be another type of revolution. Or at least a big fire. That fact is pretty well laid out in history books, including the one King James commissioned.

[manselr]

Most people do not know that the american dollar (fiat currency) is a government i.o.u. that you used to be able to cash in at a bank for gold or silver. the problem now is that there is only pennies of collateral (ffort knox) backing up all of the i.o.u. dollar bills floating around the world, so, when a large amount of them are cashed in...ooops, bye bye economy, us declares bankruptcy, and anyone that is invested in the us dollar goes down with it. no wonder all the u.s. creditor nations are selling u.s. dollars (fto other fools) for real assets like gold and other "real", tangible goods. The thing is this time there is also Bitcoin and the sky is the limit.

[johnyj]

As long as people trust USD and use it to measure value, the debt can always be paid back by printing USD. For most of the people, including people in other countries, that trust is almost unshakeable. So debt is the least to worry about

Sure, banks have printed 5x more USD and diluted the USD value dramatically, but for average people, they will never raise the price of their products/services based on USD money supply, their pricing is depends on cost and competition, and since we have continuous improvement over efficiency due to automation and computer, the price might even drop

[Dick Trump]

*bump*

[Erdogan]

As long as people trust USD and use it to measure value, the debt can always be paid back by printing USD. For most of the people, including people in other countries, that trust is almost unshakeable. So debt is the least to worry about

Sure, banks have printed 5x more USD and diluted the USD value dramatically, but for average people, they will never raise the price of their products/services based on USD money supply, their pricing is depends on cost and competition, and since we have continuous improvement over efficiency due to automation and computer, the price might even drop

This works for a while. It depends on what the market actors think. If they think, in aggregate, that bonds can fall in real value, they would be reluctant to hold them. Therefore they can fall, in a chain reaction.

The keynesians believe you can just loan money in the form of bonds, issue new bonds when they expire, effectively pushing the repayment into the distant future (Varoufakis' words). The state lives for ever, right? A bond with repayment in the distant future, with no interest, and transferable, is equivalent to money, which eventually will be a price-inflating force. Price inflation is never proportional to money volume inflation, but there is a force, and money volume and prices will tend to balance in a longer timeframe.

But there is a limit, again it is the market participants who decide. When they start to believe they are being ass-fucked, they act. First slowly, then suddenly.

[Erdogan]

The human nature of the market is generally underestimated.

The prices come from what people own, what they need and want, and take action on through person to person exchange. In the market, they prefer one thing over another and take action. It is not the aggregate, it is not the average or mean, rather the price on the market is for one less or one more of what we already have. The price is never rational, and it can not be computed from history.

Therefore the price is a perfect input to the entrepreneurs; what they do when they start a business, is to provide a little more of something, and when they close a business they, provide a little less. Total harmony.

[Pab]

 It is very real ilussion and can be more and more real
 Now money is debt,money lost his value like a national money it is all global debt
virtual hype pyramid

[masterzino]

If you asking if it's assets outweigh it's debts than yes they do. However many of those assets are very difficult to liquidate...

[ridery99]

Debt doesn't matter as long as investors believe in the system. It's just a matter of faith. Fiat and debt exists as long as people believe they are real and have value. Santa Claus exists also because so many kids believe it's real.

[kylo87]

No, the US debt is real, because the repercussions if US does not pay are real. Slavery is an illusion? Yes, a slave can leave, but before it gets a step will be recaptured.