Originally posted by JigtieI'm mostly concerned with the fact that money spent repaying debt is money that can't be spent on anything else.
I suppose it's a matter of how the debt came to be in the first place, but even if you don't consider
$50K to be a lot of money for one person to pay (even though that person has done nothing to
attract the debt in the first place or even benefited from the loan), I think it's sort of unfair in the
most basic sense of the word.
Following on from my post about the incoming Blair administration, I've had a thought. What if the government was to state that there would be a one-year period of austerity. Budgets for all government expenditures would be temporarily reduced, but only for that year. Pensions and benefits would be kept static; new equipment or resources would not be invested in, but only for that year. Public sector workers would suffer a paycut now, but this would be in exchange for a wage increase next year. All the money saved would be used to pay off a proportion of the national debt.
Next year, the government will have a smaller debt to service, and their financial commitments will be correspondingly lower. They will be able to spend the difference on keeping public services well-funded, while taxation can stay low. The above could be repeated every ten years or so, gradually paying off more and more of the debt and freeing up more money to pay for desired government expenditure without raising taxation.
Originally posted by TeinosukeThe country will always have a huge debt as long as money doesn't have to be backed by something tangible of value to all. Money is just a number. It can be toyed with for good or bad depending on how much faith people and other governments put into it. There will be a time when other nations will want something in return for their loans. China is a good example of that. When confidence wanes in the dollar, a whole new currency system will be brought about.
I'm mostly concerned with the fact that money spent repaying debt is money that can't be spent on anything else.
Following on from my post about the incoming Blair administration, I've had a thought. What if the government was to state that there would be a one-year period of austerity. Budgets for all government expenditures would be temporarily reduce ...[text shortened]... and freeing up more money to pay for desired government expenditure without raising taxation.
Originally posted by joe beyserTraditionally money is backed by gold. But gold doesn't actually have all that much value in terms of things you can do with it. Its value is simply based on the fact that people want it. If a currency was backed by gold, it would still be vulnerable to the fluctuating demand for gold.
The country will always have a huge debt as long as money doesn't have to be backed by something tangible of value to all. Money is just a number. It can be toyed with for good or bad depending on how much faith people and other governments put into it. There will be a time when other nations will want something in return for their loans. China is a good ...[text shortened]... f that. When confidence wanes in the dollar, a whole new currency system will be brought about.
So what's the difference between trusting in gold and trusting in paper currency?
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Originally posted by Teinosukea year of fiscal atonement every ten years. I like it.
I'm mostly concerned with the fact that money spent repaying debt is money that can't be spent on anything else.
Following on from my post about the incoming Blair administration, I've had a thought. What if the government was to state that there would be a one-year period of austerity. Budgets for all government expenditures would be temporarily reduce ...[text shortened]... and freeing up more money to pay for desired government expenditure without raising taxation.
I would combine it with an all-out effort to comb through every corner of government to weed out every possible instance of "waste, fraud, and abuse"
In preparation, various laws would be enacted to ensure that during such a year, there would be NO elections scheduled ANYWHERE in the country at any level of government. And there would a ban on any kind of campaigning (at least as far as constitutionally possible). And (unless there was an absolute emergency), there would be NO legislation on any government's agenda except for proposals whose single purpose is to reduce government inefficiencies or corruption.
I would also encourage the same process to occur within private businesses and personal households. The entire population will spend that year getting their budgets under control.
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Originally posted by Teinosuke
I'm mostly concerned with the fact that money spent repaying debt is money that can't be spent on anything else.
The original debt was spent on things. That's like getting a loan for a house and then complaining for the next 30 years that you can't spend your mortgage payments on anything else.
What if the government was to state that there would be a one-year period of austerity. Budgets for all government expenditures would be temporarily reduced, but only for that year. Pensions and benefits would be kept static; new equipment or resources would not be invested in, but only for that year. Public sector workers would suffer a paycut now, but this would be in exchange for a wage increase next year. All the money saved would be used to pay off a proportion of the national debt.
People would borrow to cover the short-term setback and pay it off on the future when their wages rose. The National Statistics Online (UK version of the BEA) still only has your Debt/GDP ratio at 55% which pretty modest. Some project it to rise as a result of the crisis to near 80% over the next 5 years. Even that isn't too bad and can be paid back down smoothly over time rather than all a once as you propose. In general high income volatility isn't a good thing. Besides UK debt doesn't pay a high return. Households would be better off investing their wages, earning higher returns, and paying taxes to bring the debt down.
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Originally posted by telerion[/b]I think Teinosuke was referring to the interest payments. If you only spent money you have, without going into debt, the interest payments you avoid incurring could instead go towards something else.
Originally posted by Teinosuke
[b]I'm mostly concerned with the fact that money spent repaying debt is money that can't be spent on anything else.
The original debt was spent on things. That's like getting a loan for a house and then complaining for the next 30 years that you can't spend your mortgage payments on anything else.
What i f investing their wages, earning higher returns, and paying taxes to bring the debt down.
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Originally posted by TeinosukeYou never really trust the gold, paper or digital data. You trust the people who claim these have
So what's the difference between trusting in gold and trusting in paper currency?
value. When you think about it, it's all really confusing. We don't need gold, and we don't need
paper. What we need is food, a place to live and (in some parts of the world) clothes. Anyone can
grow food, build a place to live and make his/her own clothes. So, we can't really have it that way.
Let's say we can own land and prevent people from growing their own food and building their own
homes. That way, they'll need us for these things. Now, let's say that if they work for us, on our
land, we can give them this paper, and using it they can get food, living quarters and clothes in
various stores. The store owners also pay us to have these stores on our land, and the
manufacturers pay us for the raw material and yes, the land. Now, let's compete. Who can grab
the most land and push this concept the furthest? Never mind we're actually putting people's lives
to the abstract value of so and so many pieces of paper. It's an excellent way to control people,
'cause most of us are too damn dumb to figure it out, and those who won't accept their from
birth disadvantage: well, that's what force is for, right? Since the dumbarses by far outnumber the
wise, there'll never be a problem finding people to manipulate into oppressing others through
forceful means.
I think that pretty much sums up the origin of the entire modern world's current economical
system, don't you?
Hey, come to think of it. Screw that. I'm a genius. I just described politics in its entirety using one
post. Is that a Nobel price for clarity I smell around the corner?
Originally posted by JigtieWell, I don't mind if you get a Nobel prize for it. I mean, why not?
You never really trust the gold, paper or digital data. You trust the people who claim these have
value. When you think about it, it's all really confusing. We don't need gold, and we don't need
paper. What we need is food, a place to live and (in some parts of the world) clothes. Anyone can
grow food, build a place to live and make his/her own clothes. ...[text shortened]... using one
post. Is that a Nobel price for clarity I smell around the corner?
But I think you might need to think that through a bit more. Are you saying that having currency is a bad thing?
Originally posted by MelanerpesI think there's just a severe misunderstanding of the purpose of lending and interest.
I think Teinosuke was referring to the interest payments. If you only spent money you have, without going into debt, the interest payments you avoid incurring could instead go towards something else.[/b]
Originally posted by teleriona big issue is why a nation takes on debt. In some cases, it can be argued that the money is an actual investment - such as to pay for an upgrade in infrastructure, to greatly improve education, or whatever - so the increased economic growth rate would be enough to justify the extra interest payments.
I think there's just a severe misunderstanding of the purpose of lending and interest.
it is also understandable if there's an emergency that requires a large amount of additional spending immediately - such as in the case of a war or a need to stimulate the economy. Although in these cases, there needs to be an legitimate effort to reduce that debt once the emergency passes.
But I suspect that the great majority of debt is just a matter of political cowardice - so much easier to just borrow more money instead of raising taxes or cutting spending. In this case, a nation is just making "needless" interest payments. Something you could call a "Coward Tax".
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Originally posted by MelanerpesMy problem with this is threefold. First, there is a time perspective problem. From the viewpoint of the govt who is about to accumulate more debt, the ensuing debt service payments are not needless or wasteful. They are price worth paying for credit. From the the point of view of govts in the subsequent periods, these service payments are a waste of resources. The reason that some are viewing debt service as a bad is because they are taking future-looking-backward position instead of a time-independent view.
a big issue is why a nation takes on debt. In some cases, it can be argued that the money is an actual investment - such as to pay for an upgrade in infrastructure, to greatly improve education, or whatever - so the increased economic growth rate would be enough to justify the extra interest payments.
it is also understandable if there's an emergency t ...[text shortened]... ation is just making "needless" interest payments. Something you could call a "Coward Tax".
Second, the proposal put forth with harmful to households than alternatives with smoother repayment schedules. Why drastically increase the volatility of income, particularly those households who make the most use of government spending (i.e., the poor so you have a regressive policy)? There's this implicit assumption that forcing households to go without for one period is more than made up for by the low return that govt debt pays. I don't see why we should assume that to be the case. The longer you wait between austerity years the more severe the austerity must be. Thus, the more infrequent the austerities the more painful the process. This leads one to the idea of having more frequent but less severe austerity years, and finally this leads to the conclusion that smoothing these payments out over time makes the most sense.
Third, I don't see how having a ten year austerity cycle would get current politicians to internalize the costs of future debt service payments. Most election cycles are much more frequent than once every ten years. The politician will still have an incentive to buy more now and let future politicians pay for it.
A final thought (not fleshed out enough to be counted as a formal objection) is what a planned 10-year contraction would do the nature of the business cycle, the purchasing decisions of households, and the investment/production decisions of firms. Just think about the impact on interest rate expectations alone! I'll have to give this objection some more thought.
Originally posted by TeinosukeThe government can not operate outside the physical quantity of gold.
Traditionally money is backed by gold. But gold doesn't actually have all that much value in terms of things you can do with it. Its value is simply based on the fact that people want it. If a currency was backed by gold, it would still be vulnerable to the fluctuating demand for gold.
So what's the difference between trusting in gold and trusting in paper currency?
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Originally posted by TeinosukeI wouldn't say that traditiaon money is backed by gold. You might say that antiquated currencies were backed by physical materials (sometimes gold, sometimes silver, sometimes both or other stuff). You are right to think that the value of these objects is tied to their demand (as well as their supply) and that the value of an commodity-backed currency would then just fluctuate with those commodity markets.
Traditionally money is backed by gold. But gold doesn't actually have all that much value in terms of things you can do with it. Its value is simply based on the fact that people want it. If a currency was backed by gold, it would still be vulnerable to the fluctuating demand for gold.
So what's the difference between trusting in gold and trusting in paper currency?
I would add that in contrast to what Joe B wrote, a gold standard isn't necessarily that effective in tying a government's hands when it comes to currency printing. When you look at the US history of the gold standard we tended to suspend conversion during times when it was most tempting to print money anyway (like during a war).
Originally posted by telerionI see what you're saying. The one-year spending freeze idea is too simplistic.
My problem with this is threefold. First, there is a time perspective problem. From the viewpoint of the govt who is about to accumulate more debt, the ensuing debt service payments are not needless or wasteful. They are price worth paying for credit. From the the point of view of govts in the subsequent periods, these service payments are a waste of re ...[text shortened]... ct on interest rate expectations alone! I'll have to give this objection some more thought.
But the main idea for me is more a case of having a year where everyone at all levels clears away all other matters and focuses on evaluating their financial situation and consider all of the ways they can actually reduce wasteful spending.
Because it seems like the last thing anyone in government ever really wants to do is to put on the green shades and spend lots of time looking for ways of doing stuff a little more efficiently. So if we could force all the other issues (except absolute emergencies) off the docket, maybe some of the "waste, fraud, and abuse" that everyone keeps promising to get rid of might actually get tackled.