Four Ways Out

Posted by $ Abaco 10 years, 4 months ago to Economics
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I recently was listening to a smart economist. He said there are three ways for the United States (or any country) to get out from a massive pile of debt like ours:
1). Grow the economy.
2). Inflate our way out of it.
3). Assign losses.
4). Default

The fourth is the one I added. What are your thoughts on this? Assigning losses is called "austerity" in the news lately. Nice-sounding word. I expect inflation. I don't expect any growth in real GDP above the growth in population. Default is a last resort...a massive resignation.

I think we'll see further real restrictions, probably in the form of means tests, for Social Security. Sure, you paid into it. Here's a quarter - go call somebody who cares. We'll see inflation. So, I'm predicting mainly 2 and 3.

All Comments

  • Posted by $ blarman 10 years, 3 months ago in reply to this comment.
    One or two businesses may profit (as long as their productive facilities don't become casualties), but the economy in general doesn't because it is consuming and destroying far more than it is producing. It is the quintessential example of the "broken window" fallacy. The gist of the fallacy is exposed by realizing that the efforts and materials which went into the production of war-fighting materials could have been used for new automobiles, machinery, etc. which would have been used for productive rather than destructive ends.
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  • Posted by term2 10 years, 3 months ago in reply to this comment.
    There shouldn't BE government debt at all, I think. It just distorts the economy through the printing of money that they do when they can't finance the debt.
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  • Posted by vggrafe 10 years, 3 months ago in reply to this comment.
    Good points, and I agree on your last one (unhappily). The US government debt has a very important difference from private debt. The interest rate on private debt is not affected by whether you make more money. But the interest rate on US government debt is historically and logically tied to economic growth, so if you grow the economy (make more money) you also pay higher interest, and the higher interest overwhelms the increased taxes from growth. More complete discussion at http://thecognitist.blogspot.com/2016....
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  • Posted by vggrafe 10 years, 3 months ago
    I don't think that the US can grow its way out of the current debt. The US is such a large factor in the global economy that our interest rate is connected to GDP growth, such that faster economic growth means higher interest rate paid. Our total debt is so large that increased taxes from economic growth are overwhelmed by increased interest payments. More detail at http://thecognitist.blogspot.com/2016.... Interested in other perspectives...
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  • Posted by $ blarman 10 years, 4 months ago in reply to this comment.
    War as a catalyst for economic improvement is a fallacy. War is in the business of capital destruction - not capital creation.
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  • Posted by $ Olduglycarl 10 years, 4 months ago in reply to this comment.
    Ah...but in a kakistocracy what's left over from the worst is the unqualified...abet, I'm sure there are a few with a good mind...they'll survive and prosper...no worries mate.
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  • Posted by mia767ca 10 years, 4 months ago in reply to this comment.
    just thru luck I found a couple that winter's here in florida and has a 7,000 acre working ranch/hunter's paradise in Colorado just north of Aspen...it will serve as a nice retreat when the collapse comes...he has an original 1873 Winchester in his gun safe...property goes from 8,000 ft elevation to 11,000...three catch and release fly fishing ponds at different elevations and wild game hunt in the fall...guest house that sleeps 22...200 head of cattle, few sheep, and some pigs and chickens...helped him with some stock he owns (turned out to be $6 mil worth) and had been sitting idle since 2007...hell of a nice couple... his youngest son runs the ranch year round...when the lights are out at night, every star is bright...there are no lights within sight....no neighbors...
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  • Posted by mia767ca 10 years, 4 months ago in reply to this comment.
    in ohio right now with my brother and sister...my parents died in 2014/2015...natural causes and had them cremated...finally buried them today in west Virginia...21 gun salute from local VFW unit...dad was marine in WWII...I was Air Force pilot in Vietnam...
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  • Posted by $ MichaelAarethun 10 years, 4 months ago in reply to this comment.
    COG or Cost of Government column in book keeping is common around the world except the USA. It should go after Legitimate Overhead, sub total , and before Profit or Loss.
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  • Posted by $ MichaelAarethun 10 years, 4 months ago in reply to this comment.
    At the polls this fall? I'm supporting None Of The Above. As a laugh some local friends and I were discussing where we were to be buried. I'm a fan of cremation if i have to pay in advance as it's cheaper. My second thought is this. Is it not up to whomever is around to pay the bill? I'm quite sure at that point I shall not worry.

    We finally decded on a small patch of desert for the traditionalists and call it Abandonment Acres. For those who fought and were abandoned by their friends and neighbors. Sort of a play on words from a fromal draft notice.
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  • Posted by $ MichaelAarethun 10 years, 4 months ago in reply to this comment.
    If you kick ass properly there are no names left to take.

    If the world believes you will leave nothing but stacked skulls ....and have the strength, skill, 'will' to do so it will stop wars before they start.

    If you have leaders with 'will' Otherwise you get fifteen years of war and not much to show for it. Or however long it's been.

    the worst part is the war on terrorism was lost the second we had to change our way of life and our values and I see no move to give them back. How did the government get the power? Elected by people who haven't the will be be free and independent citizens and are deserving of serfdom. Serf's breed draftees by the way. Wait until you hear the screaming, whining and crying when that happens. 'I didn't vote for this one to start drafting us,' the plaintive cry of despair.

    I'm the one sideliens laughing my ass off.
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  • Posted by Herb7734 10 years, 4 months ago in reply to this comment.
    I don't know what you can do about the assholes who think that constant, lingering war solves anything. It's the military that should be our #1 concern when it comes to expenditure. They should be the biggest and the best in the world so that even crazies like North Korea would think twice or thrice before even considering an attack. The best way to avoid a war is to demolish your opponent within days, with a well thought-out plan as to what to do with them afterwards, which well may be taking them over until they are deemed safe to us, but keeping a force there to make sure.
    No war if there's a quick victory, and it is possible with today's armament and the will to go all the way.
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  • Posted by $ MichaelAarethun 10 years, 4 months ago in reply to this comment.
    Thanks did I leave out the cost of money in order to get a loan for a house or a credit card is affected by money available. GDP-NDP = low or high rates as everyone scrambles for whats left. As your candidate that question next time around. WHAT is NDP?

    Chances are you will get the deer in the head light look and they wil change the subject. That's a sure and certain signal why NOT to vote for someone.
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  • Posted by $ MichaelAarethun 10 years, 4 months ago in reply to this comment.
    Yes you are the first that's come up with a good source. My point was the old simple formula Gross minus expenses equals profit or equals money left to use for other things. For a country the size of ours 2.5 trillion after expenses which includes one trillion interest on the national debt and adjusted for the loss of buying power or value of the dollar doesn't seem like anything to celebrate. IF it was adjusted for loss of the worth of the dollar which is I believe depreciation perhaps?

    I see a lot of hoorah about GDP all the time but it doesn't explain how much a continuous debt on deficits that will not be repaid as we think of it is going to cost not generations ahead but grandpa, grandma and retirees who can't make it up save by working for WalMart. Its great we have one major corporation that is socially conscious enough to provide jobs for retirees who got screwed by the government devaluation and repudiation the last time. Why do I say that? Was it counted in the COLA adjustments? NO! it was not. So that one percent or zero percent last year really wasn't truthful was it? NO

    Still want to vote Socialist again?
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  • Posted by Enyway 10 years, 4 months ago in reply to this comment.
    I remember Reagan commenting on government spending. Paraphrasing, It has been said that the government is spending money like a drunkin' sailor. The difference being, at least the drunkin' sailor is spending his own money.
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  • Posted by Herb7734 10 years, 4 months ago in reply to this comment.
    Idiots are legion.
    They never stop to think where the money comes from.
    "Ask not for whom the bell tolls,
    It tolls for thee." -- John Donne
    Old John Donne was talking about death, but he might just as well have been talking about taxes.
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  • Posted by Enyway 10 years, 4 months ago in reply to this comment.
    As far as welfare goes, I am not an advocate. However, the welfare system, like so many other programs, has been altered to keep people on the program. Gets more votes when the level of people on welfare is higher. Originally, it was designed to help in times of trouble. Now, if you earn a nickle, the government wants half of it. My sister had to go on welfare for a couple of years while she was going to college. Eventually, she worked for Budweiser in engineering. When she retired, her pay was $30 an hour. Not only did the government get back their welfare payments, they got it back 100 fold. Helping someone through rough times is not a problem and, certainly, not the role of the government. The welfare system, as it is, should be eliminated. It was more the help of her husband that got her through. She has now been diagnosed with lung cancer. She is fighting it AND SHE WILL WIN.
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