Quote:
Originally Posted by DAVES
Realize, we are being had. Say something often enough and people think it is true and it makes sense. We are being told the deficit is. truth I am loosing count, 26 Trillion dollars? Stop, think realize do we understand what one Trillion dollars is let alone 26 Trillion? Who do we owe that money to? Most of us would say China. I looked it up a while ago, actually we owe slightly more to Japan but more important, together Japan and China together hold roughly 20% of our National Debt. More shocking is that Social Security holds 40% of the national debt. All of this is simply insane accounting. If a company, a corporation was doing this we would expect, we would demand that our government close them down. The same government that is feeding us this same
information.
How to pay this debt? The answer is simple. You cannot pay this with a few $10,000 toilet seats. You have to cut the big stuff and that is Education, Military, and Welfare (Social Security) of course the people will scream. What they will say, what we will say is cut him not me. Increase his taxes not mine.
So far we've paid the deficit with slight of hand. Interest on a 10 year treasury is below 1%-the lowest in American history. Our Fed is telling us they want a 2% rate of inflation.
Oh and you, if you buy a Treasury pay whatever your highest Federal tax rate in that below 1% that they will pay you.
You are, we are being had.
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Agree with a lot of what you stated, specifically that our countries deficit/debt level is the most toxic cloud hanging over our country’s future. There is no way to reduce our deficit and pay down our debt without severe pain. The longer our leaders take to finally address the problem, the bigger the bubble gets. The bigger the bubble gets, the worse the explosion will be when the bubble finally bursts.
Long standing financial theory has been thrown out the window. Interest rates used to be set so that bond holders would earn a REAL rate of return, above the inflation rate. If inflation was expected to run at 2%, interest rates used to be set around 3 1/2 to 4%. When the economy was good, higher rates would keep the economy from overheating and keep inflation in check. Good economy’s were not fueled by low rates and cheap debt, but rather real fundamentally solid underlying economic growth. Then when the economy began to slow down, and inflation resulantly became less of a concern, there was adequate room to lower rates TEMPORARILY to reignite the economy while still providing bond holders with a positive REAL, inflation adjusted, rate of return. During strong economies, our country ran a budget SURPLUS and PAID DOWN our debt, leaving comfortably breathing room to run TEMPORARY deficits during periods of economic slowdown.
Unfortunately, sound historical financial and economic logic and theory has been abandoned. Interest rates are no longer set to allow bond holders to earn a REAL rate of return, we run huge budget defects every year regardless of the strength of the economy, our national debt never gets paid down but instead grows at an exponential pace, and economic growth is fueled by cheap borrowing and ever increasing debt, not strong underlying fundamentals. We learned nothing from the last severe housing market economic crisis fueled by cheap and poorly underwritten debt and unstainable leverage. Instead of learning from our mistakes, our country doubled down on the same mistakes. Unsustainable economic practices can survive for a long time and nobody really knows when the bubble will finally burst, just that eventually it is inevitable.
One thing about the above post that I can’t let go and have to comment on is the statement that social security is welfare. Both social security and Medicare are often referred to as entitlements and in lesser references welfare. Both programs are in the crosshairs of the easiest way for the government to cut it’s out of control spending. Welfare is designed for the needy that are not capable of providing entirely for themselves and entitlements are handouts to people who did little or nothing to earn them. As someone who paid into both of those programs for my entire working career, I do not feel that I am entitled to receive benefits and the benefits I am owed certainly are not welfare. The benefits I expect to receive from these programs are OWED to me as repayment for all the money I paid into the programs over my working career. If I was able to keep all the money I paid into those programs, and invest it myself, then I wouldn’t need the benefits or be owed anything.