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Topic: When debt surpasses GDP
Replies: 13   Last Post: Feb 23, 2021, 10:33 AM by: SOLOS®
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Replies: 13  

When debt surpasses GDP

[1]
Posted: Feb 22, 2021, 8:55 AM
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what is the plan?

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happened 5-6 years ago.


Posted: Feb 22, 2021, 8:57 AM
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Believe it may have happened during WWII too.

No plan that I can see.

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If things go well, we look like Japan. If they don't go

[2]
Posted: Feb 22, 2021, 9:15 AM
    Reply

well, look at Venezuela.

Either way, our standard of living will decline at some point. Has to.

Read an interesting article the other day about inflation. It's happening, and in a big way, BUT it is limited to assets, not labor/income. Property, stocks, things like that have massive inflation, but things like gas, food, and other necessities are not having much inflation. It's happening mainly where debt is being leveraged the most, which isn't in salaries, or income, but much more in asset prices and valuations.

Best case is a prolonged period of stagflation, economic anemia, and we maintain our debt load throughout, but don't collapse. That's what has happened in Japan with their 200% GDP inflation, over time. We will probably go the same way since we will hopefully manage it in a similar way. Japan played our game back in the 80's and by the late 90's they had a reckoning. They played it too fast. We, on the other hand, have managed our economy much better and as such, we've played the game for 40 years now. SLOWLY going along the same road Japan went on in a decade or two.

Just look at historic GDP figures from any country on Earth. They all have peaks, valleys, and most move up and down regularly. NOW, take a look at the US. It's a chart unlike any other when it comes to GDP over the past 40 years. SOme countries have GDP spikes, much bigger than the US, and others have sharp declines. But no one has 40 years of steady increases. At the same time we've leveraged debt with slow decreases in interest rates. We've legislated deflationary policies to the hilt with free trade and illegal immigration.

Anyway, it is what it is. Let's just hope our debt bubble springs a leak, and doesn't pop. If we spend 40 more years letting it slowly deflate, that would be preferable.

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Those Venezuelan sanctions are bound to hurt...***


Posted: Feb 23, 2021, 12:30 AM
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Re: When debt surpasses GDP


Posted: Feb 22, 2021, 9:15 AM
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The key to putting our debt into its proper perspective is looking at debt as a % of GDP. We are just over 100% right now. There is a need to be concerned, but not any need to panic.

There are two ways to reduce this %.
1. pay down the debt
2. grow the economy (GDP)

If you look at the following chart, you can see that we had an even higher % after WW II. We never did pay down that debt - we grew the economy. I think that same process is the best way forward now. The money that we are about to spend on relief and stimulus is designed to help invigorate our economic recovery (and to keep Americans from having to suffer this downturn anymore than necessary)

https://tradingeconomics.com/united-states/government-debt-to-gdp#:~:text=Government%20Debt%20to%20GDP%20in,of%2031.80%20percent%20in%201981.&text=United%20States%20Gross%20Federal%20Debt%20to%20GDP%20%2D%20values%2C%20historical%20data,updated%20on%20February%20of%202021
.

Usually using a microeconomic example to explain a macroeconomic situation often leads to misunderstanding, but I am going to try this simple one to make a single point. When I went back to school to get my Master's degree, my debt increased to over 200% of my income (GDP). But the Master's degree lead to a significant increase in my income - and allowed me to reduce my debt % over time.

We are going to make an investment in our economy to help it grow - and reduce our debt %.

link

Referring to WWII shows the seriousness of the problem today

[1]
Posted: Feb 22, 2021, 11:10 AM
    Reply

It then spiked above 100% for a short period, a year or so, for very specific reasons, and sharply came back down. Today we have a general trend upward for ideological reasons, the trend is upward, and there is not even a proposal for bringing it down.

The size of the debt is about the same as the entire money supply. To pay it off will cut the value of every dollar in half. The only question is how fast this happens. Inflation is already very high in the financial markets (money is worth very little there). It will come into goods and services.

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What would Rush do?


Posted: Feb 22, 2021, 10:09 AM
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Do the opposite?

Seriously....
Increase taxes to increase revenue.
Stimulate growth to increase revenue.
Cut government expenses to decrease expenditures.
All of the above

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One of those options has never been done

[1]
Posted: Feb 22, 2021, 10:11 AM
    Reply

in my lifetime.

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Re: One of those options has never been done

[1]
Posted: Feb 22, 2021, 8:58 PM
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there are eleven year olds who were not alive when the last budget was signed

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Re: What would Rush do?

[1]
Posted: Feb 22, 2021, 9:33 PM
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Your forgot Biden’s plan:
Increase taxes to stimulate growth

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None of that will happen


Posted: Feb 22, 2021, 10:24 PM
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especially reduction of spending.

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IMF's got this...***


Posted: Feb 23, 2021, 12:31 AM
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Iave Matthews Fand?***


Posted: Feb 23, 2021, 7:47 AM
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Dominant arm of the World Bank... Everything's covered.***


Posted: Feb 23, 2021, 10:33 AM
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