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View Full Version : Who here really understands what the "National Debt" is?


Yellowbeard
01-22-2012, 09:20 PM
Just curious. Lots of misinformation about it that circulates.

Figbiscuit
01-23-2012, 07:21 AM
*waves hand in air*

Not me!!

maacaroni
01-23-2012, 07:28 AM
At its most simplistic, it is how much a central government of a country owes.

As to whether it is acceptable to have any debt at all is very much dependent on the economic school a particular adherent works from.

Were you making a more deep and meaningful request? I think most people know what it is.

Figbiscuit
01-23-2012, 07:43 AM
At its most simplistic, it is how much a central government of a country owes.

Oh. Well I knew THAT. I assumed it must be something more indepth from the OP. Is it offset against GDP or any such thing?

Davian93
01-23-2012, 07:53 AM
Debt is not a bad thing...Excessive debt is. Our entire financial system is based on debt as is our currency. As long as everyone (or at least a large majority of us) make payments on our debt, we can leverage that debt to create more financial opportunity.

As for the national debt, there a couple different ways to look at it. You could look at all of our obligations both funded and unfunded as "debt". You could look at all the money we've borrowed for gov't programs as debt. You could factor in projected revenue into that equation to see if our debt control measures are reasonable or not. For example, everyone on the Right likes to harp about the blackhole that Social Security is. However, since its enactment under FDR, SS has run a massive surplus in funding. I believe it was last year that SS, for the first time in its 80 year history that it took in less than it paid out in benefits. Before then, it was salting away money. Unfortunately, the gov't, in all its wisdom has been borrowing against that principal for decades. So, SS is not broke or even close to broke...the federal gov't simply doesnt want to pay back the money it has essentially stolen from the working public. We, the American people, are the lienholder on that mortgage. The gov't realizes it doesnt want to pay back those trillions so it talks about modifying SS and cutting benefits...even though the program itself has been hugely profitable.

Its pretty shady actually. The equivalent would be one of us buying a house and paying it off. Then we take out a 2nd mortgage against that house and go spend that money on a yacht and sports car. The bank comes asking for its money and we simply tell them to fvck off. This is illegal for the average citizen but completely okay for our government to do.

Figbiscuit
01-23-2012, 08:05 AM
Its pretty shady actually. The equivalent would be one of us buying a house and paying it off. Then we take out a 2nd mortgage against that house and go spend that money on a yacht and sports car. The bank comes asking for its money and we simply tell them to fvck off. This is illegal for the average citizen but completely okay for our government to do.

I would not be at all surprised to learn one of our MP's had done just that or something very like it, probably involving flipping properties funded by the taxpayer, and it only came to light in the recent expenses scandal.

Yellowbeard
01-23-2012, 05:32 PM
Were you making a more deep and meaningful request? I think most people know what it is.

Little experiment of mine, honestly.

It's like this...most people have no idea what the national debt really is. Or what it is comprised of.

I'll skip all the talk about T-bills and what not and put this in very simple terms.

Take a dollar bill from your pocket. Look at the front. Find the words "Federal Reserve Note". That actually has significance in this discussion. Means it represents a loan in the amount of the bill from the Federal Reserve Bank (referred to the rest of way as "The Fed"). Which is nothing but a privately owned bank.

It's just The Fed has loaned out all the money we currently have in circulation in our economy. Said currency is not backed by gold or other tangible goods that are held by the Fed. Instead it is backed basically by the total value of the goods, services, products, and wealth that is held by the all the people, states, corporation, etc. of the USA.

Contrary to popular belief, the Fed is not a division of the US government. It's a private bank. It loans money to the US government, who then puts said money into circulation. It also borrows money from foreign sources. You can actually look up the breakdown of how much the Fed has loaned out from itself and how much it has borrowed from foreign sources.

So what's the upshot of all this? It's this: Without a national debt, none of us that live in the USA have any cash. Period. If we pay off the national debt, then all those Federal Reserve Notes we call dollars we have get given back to the Fed. And we would then have no cash!!

If we pay down the balance on the national debt, unless we are purely paying off foreign debt, we are reducing the amount of currency in circulation in the USA's economy. This has led to recession every time it's happened going back to the creation of the Fed (I think it was in 1913).

The US government actually pays interest to the Fed. That's the interest rate (I think) the Fed is alway tweaking. Those payments come from our tax dollars. They are actually quite small compared to the debt, it's a very small interest rate.

Without increasing the debt limit, we cannot grow our economy because then the Fed can't loan more money out into the economy. It's not like your credit card balance. In order to grow the economy, and create more wealth, the Fed has to loan out more money. So the debt has to constantly increase.

Note this is also totally independent of government spending. The government's overspending did not create all of the national debt. Again, there are sources that show the breakdown between cash in circulation, debt, and foreign debt.

Now, the Fed is privately owned. They like to pretend they're not, but they really are. Groups like Citibank and other banks and corporations are owners. The twelve branches of the Fed I also believe each have varied ownership. I've also seen articles with what seemed reputable sources that and wealthly families like the Bush Family, the Rockefellers, and the Saudian Arabian Royal family have ownership stakes. So those are the entities that make money off this racket through the interest paid back to the Fed.

I can't say I'm a supporter of this basis of our economy, but it's the current system that we have in place, and until it's changed, it's the system that the leadership in Washington needs to understand and manage in order to grow a successful economy and have the people that live and work in here be able to earn their own prosperity. Unfortunately, at this point, I think there are probably hordes of elected officials in Washington (both democrat and republican) that are horribly ignorant of how this thing works.

The amount of misinformation spread about it seems to me more bent on stirring up the masses for political reasons than anything else. I guess I don't see the statistics that each American now owes so many thousands to pay off the national debt as being true. Instead, I'd say each American, on average, is responsible for performing that amount of economic value. And as always, some perform a lot more, and some a lot less. And that's fine. I personally design and build water and sewer infrastructure. I oversaw the design and construction of about $millions worth of construction last year and we made a nice profit, as evidenced by my nice Christmas bonus, so I know I pulled my weight!

Anyway, I was originally wondering if anyone would comment back, and what they would say.

Davian93
01-23-2012, 05:34 PM
Means it represents a loan in the amount of the bill from the Federal Reserve Bank (referred to the rest of way as "The Fed"). Which is nothing but a privately owned bank.

That's a bit simplistic...there are multiple levels of federal oversight. We could go back to having a national bank but they dont want that for various reasons.

Ozymandias
02-04-2012, 06:02 PM
That's a bit simplistic...there are multiple levels of federal oversight. We could go back to having a national bank but they dont want that for various reasons.

Technically there is federal oversight of essentially every bank in the US, which makes the Fed no different from Bank of America or Citi, except that it serves a much more official function.

And you're forgetting State and local government debt. Its a matter of some dispute as to whether the federal government would let a state government default on its debt in this day and age. Especially one of the biggies, like California or New Jersey.

And if they eliminate municipal debt tax exemption, then they might have to do some sort of insurance against muni debt, as it would considerably raise the cost of accessing capital markets, especially for the smaller guys.

Davian93
02-04-2012, 06:34 PM
Well, the Board of Governors is appointed by the President and the GAO can audit the Fed at any time it chooses. It was also created by a Congressional Act.

Its a bit more than just standard federal regulation over a bank.


I agree on State debt...I dont see Federal government allowing a state to go bankrupt like that. I mean, theoretically I could see it but I dont know that they'd let CA, NY, TX, FL, etc do it. maybe a little state that doesnt matter to the national economy.

GonzoTheGreat
02-05-2012, 03:41 AM
If the Republicans were in charge when it happened, they would allow any or all of the states to go bankrupt. They are always so very concerned about state rights, after all, and the right to bankruptcy is one of the fundamental American freedoms.