Budget Deficits by Fiscal Year, Comparing Trump to Democrats

@LeopoldBloom While ever word you say is true, can you think of a better way of actually getting the US economic balance sheet back in balance?? OK. The White Supremacist theocracy aside.. But the problem really has become that extreme, because everyone put off solving it to the next administration. If the US defaults, the $US will lose its global standing as a safe bet, lose its reserve currency status, the price of imports into the US will more or less double, making US manufacture competetive again. Americas standard of living will fall through the floor short term and the whole world will move on and not worry about America and more than we do Greece or France. I get this is a pretty brutal picture for Americans. But can you see flaws in my logic?😷

@whowasthatmaskedman The US doesn't have to default. Most countries have no debt ceiling, or it's tied to the budget and is therefore irrelevant. If Republicans want to cut spending, they should cut spending, not hold the world economy hostage. I support any shenanigans Biden pulls to avoid default. One proposal is to issue consol bonds. These are bonds with no maturity date, so they're not debt, they're equity. Another is to ignore the debt ceiling and continue to borrow based on the 14th Amendment overruling the law. Anything Biden does will roil the financial markets and the rating of US savings bonds will be damaged for a long time.

As for balancing the budget, that's not necessary as future payments will be made in cheaper dollars as long as we have positive inflation. If we go through a prolonged period of deflation, we're in big trouble.

@LeopoldBloom I agree completely. The easiest path is to remove the debt ceiling entirely. It doesnt remove the problem of the nations indebtedness to other countries. But the market will decide that when its ready. Then $US will not be accepted as payment of the debt. But thats a question for a different day..😷

@LeopoldBloom in a sane country there's no firing squad.

@Roundandroundwego I remember a death row prisoner in Utah, Gary Gilmore, who demanded death by firing squad. If done correctly, it's very effective and humane, certainly better than injecting people with poison or electrocuting them.

@whowasthatmaskedman Eliminating the debt ceiling would have no effect on the national debt whatsoever; it would simply allow the US to continue to fulfill its obligations.

I'm pretty sure Biden isn't going to allow the US to default on his watch. He will come up with a 14th amendment solution and dare the Republicans to impeach him for following the Constitution. But the most likely outcome is a negotiated solution. McCarthy surprised me by getting the Republicans to support his proposal. If the Senate Democrats had come up with a clean debt limit increase and told the House to take it or leave it, that would have been better, but McCarthy beat them to it. So I'll give the guy credit for better leadership skills than I thought he had.

@LeopoldBloom I agree with your opening line.. With the rider that sooner or later all debts need to be paid. And that overseas debt represents goods and services already consumed by Americans and their government. Now that has to represent belt tightening for somone, since America didnt follow Japan, Korea and China and invest heavily in export industries.😷

@whowasthatmaskedman Of course all debts would have to be paid; defaulting isn't an option. What people don't understand is that the national debt is [i]always[/i] being paid; this is what happens whenever someone cashes in a US savings bond.

It's not that the US didn't invest in export industries, just the opposite. Starting in the 1980s, the Reagan administration encouraged businesses to outsource. I just heard a podcast about Jack Welch, the CEO of General Electric. He was typical among business leaders in selling assets and outsourcing, which boosted stock prices at the cost of hollowing out the company and basically destroying the middle class. By the end of his tenure, GE wasn't even making light bulbs, they had outsourced that to a Chinese factory. He greatly expanded the GE credit department, turning the company into an unregulated bank. Shortly after he retired, the company's stock collapsed and GE required a multi-billion dollar bailout from the Obama administration.

@LeopoldBloom Yes. GE is the classic textbook case. And yet it didnt have to be. Its a catch 22. If the currency has remained backed by gold, credit would not have been able to expand as quickly as it did. But what expansion there was would have been solid gold, literally. Now imagine GE's situation transposed to the US foreign debt that creditors no longer wish to accept $US paper dollars to pay for.... Now imagine China in the place of Obama offering that bailout...It really isnt that much of a stretch..😷

@whowasthatmaskedman The problem with tying currency to a commodity like gold is that it allows excessive fluctuations. Also, there isn't enough gold on earth to run the economy on the gold standard anymore. Besides, gold is only worth what people are willing to pay for it.

A sovereign country isn't the same as a private company.

@LeopoldBloom Its true that there is not enough Gold to run the global economy. But the problem with one nation owning the reserve currency is they there is t terrible temptation to just print more to buy things the nations economy really cant afford to buy. Or even to meet the repayments on last months bills. Which is precisely what has happen.. Now explain to me in finance terms exactly HOW a large conglomerate like GE, 3M or Monsanto is not the same as a trading nation?? And lets not hear the bit about a nation being able to print money to pay its bills. A corporation can bottow or sell stock to do the same thing and with similar consequences. Just ask GE..😷

@whowasthatmaskedman Any sovereign country that can print money has the same temptation to raise money by printing more. It doesn't matter if it's the world's reserve currency or not.

Another problem with the gold standard is inflating the price of gold. There's a lot of gold in private hands and held by various countries. The way to ensure that there's "enough" gold is to raise its price to several million dollars an ounce. The disruption this would cause is immense. Gold is also used in various industrial applications, so the cost of any goods associated with these would skyrocket.

Businesses have to engage in accounting tricks, or issue stock to raise money, so there are at least some external limits on what they can do.

@LeopoldBloom OK. Lets call a halt here as you see the currency as the fixed item here with the value beinf subject to inflstion. I see value (including the value of gold) as being the fixed horizon and the fiat currency having the assigned fictional value that isnt attached to anything. It doesnt make either of us wrong. Just a matter of perspective. Like a group of skydiver jumping together. they appear to each other to be remaining stable, until one pulls a chute and flies up. But in fact its them that are plummeting. Its all perspective..
The gold is going to be worth more or less the same value any place..But it makes a nonsense of it to assign it a dollar, euro or yen value. Its an ounce of gold.. The paper value is meaningless.😷

@whowasthatmaskedman But nothing has a "fixed value." The value of gold would fluctuate based on demand and what real goods, like food, clothing, and shelter, that it could be exchanged for. Fixing the dollar to a specific amount of gold would simply substitute dollars for gold. It wouldn't mean anything if you say that gold's value is "fixed" if the real cost of basic commodities fluctuated.

It would be interesting to see what happens if the currency is attached to some element that has no other use. I remember reading a science fiction story where the currency in society was based on the "HUC." It turned out that "HUC" stood for "human unit currency." Because the only thing of value was human life, they had these tiny unconscious humans kept in storage as the measure of national wealth.

@LeopoldBloom I understand that there is fluctuation of value ever with gold. But the total amount of wealth in the world is them limited to the gold, plus the value of goods and services accumulated. You can will anothe couple of $trillion into existence just by running the presses for a weekend.😷

@whowasthatmaskedman If you limit the amount of wealth, that's a problem unless the population isn't growing. More people means more production and more goods and services. This would apply even in an ideal socialist society where everyone is at the same level of wealth.

I think what would happen is people would be forced to barter or engage in some other underground economy if the amount of currency wasn't sufficient.

@LeopoldBloom OK. Now we are getting somewhere. You dont limit the supply of wealth. Just the amount that can be held as free cash.. You can still buy shares in companies. Their wealth will be in inventory and intellectual property and the can issue dividends. Even call for loans. All these things are still possible, because there is value to back them. Lets try another example.. Parker Bros who make the game Monopoly issue shares and pay a dividend. Thats fine. But Parker Bros cant run the presses for a month printing monopoly money and pay their staff with it, and buy raw materials with it, because it has no intrinsic value..As long as value exists everything is fine, granted there is always a difference in valuation between a place where an input is cheaper than more expensive. But thats how trade works even now..😷

@whowasthatmaskedman I think everyone is aware that money is a shared fiction, and it only has value as long as people believe it does.

I'm not sure how you can limit the amount of cash unless you pass a law against it. When investors move more of their money into cash, it takes it out of circulation. This is also why the easiest way to give the economy a temporary boost is to send cash to working people, who immediately spend it.

@LeopoldBloom OK. Now we are comparing apples with apples. You get that no nation just printing money can go on doing so in the long term. Inflation and even hyperinflation occur. At this point it gets really complex, because you are comparing Western style Capitalist "free markets" with centralised economies. So how efficiently and quickly they can react, plus how accountable they are to the people, makes it impossible to push the point much further. Of course you can in theory.. But economic theory disappears the moment you add people... 😷