look guys all of you and all of the masses are scared shitless of being in debt but look, you can relax now because im explaining to you why it is good to borrow money with some real life scenarios. 1. say you have 1 million dollars to invest in a security that yields 10%... after a year you will have 1.1 million. a gain of 100,000 .1(1000000) = $100000 if your broker let you leverage 20 times and you invest 20 million in the same security, your gain is now 2,000,000 taking you from 10% to 200% .1(20,000,000)/1,000,000 = 200% the government works the same way, and takes on much less risk. a recession, representing a loss on investment, amplifies losses, but in a inflationary period like right now, borrowing produces more revenue. 2. the second scenario deals with the law of demand. hypothetically, pretend you have projects to fund worth 1 million dollars and you can borrow at 1% today or 5% a year from now. obviously you choose to lock in the low rate and have interest expense at 10,000 instead of 50,000. the prudent thing is to issue your debt now instead of later.
Did you just confuse investing and borrowing? I'm not sure what your point is. Borrowing only produces revenue if you invest it and the investment is sound. The problem with government spending is that most of it goes into a hole. Debt is bad if you can't pay it back, which we can't, and if you've become reliant on it, which we have. Eventually nobody will lend us money anymore and then we'll only have theft and inflation. That would make sense if we could see into the future. But we can't.
i was talking about using leverage in a broad sense it doesnt necessarily mean specific investments the government makes but when the economy grows all sectors grow an produce a return on investment in the form of tax revenue.
Growth isn't always good. Do you know what a bubble is? The business cycle is caused by this government pump-priming. All that graph shows is a price bubble collapsing. By lowering the interest rates when they should actually be higher you are flooding easy money into a risky market in attempt to stave off depression, and will inevitably cause another bubble.
Six Fundamental Errors of the Current Orthodoxy - Robert Higgs - Mises Daily MP3 reading of article - http://media.mises.org/mp3/audioart...ce=mp3&utm_medium=web&utm_campaign=Direct_MP3
government intervention can impact bubbles forming but the real cause is information asymmetry and speculation. case in point is the chinese real estate market right now, where the government is doing everything it can (a lot more than ours) to cool the market down yet prices skyrocket regardless. i was using the graph to show the correlation between interest and inflation, you can somewhat see that the fed targets higher interest lagging from when inflation increase. my original post wasn't about intervening in the recession, it was about the government seeking revenues in the future. im not saying the current structure is sustainable, but that's a different topic.
yea i just read those and they're not related to the topic at all. however i thought it was pretty funny that the whole piece was based on the author's assumptions on what a keynsian believes instead of coming up with ideas of his own. reminded me a lot of some forumers of gc.
Well, I disagree. I would argue this is about sustainability You say the debt is the solution to our economical woes but how is increasing the debt sustainable at all?? gov't investing is a joke, look at our debt lol. what you call investment is actually reckless spending the gov't engages in
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Wow, you can calculate simple interest compounded annually? Congratulations! Unfortunately, the debt is still approaching $15,000,000,000,000. Let's say you had a family of four (with two small children). You're the major breadwinner and you take in $100,000 every year. Your spouse takes in $50,000 every year. Now let's pretend they don't have to pay taxes. Now, do you think it would be a good idea for someone in this situation to borrow $975,000? If so, explain why... I got these numbers by reducing the scale of the federal budget and debt down to the size of a family of four. The federal government took in $2.16 trillion in tax revenue in 2010. By the end of 2010, they owed over $14 trillion. 14/2.16 is approximately 6.5 (6.5 times 150,000 is $975,000). So, the feds owe about 6.5 times what they pull in annually on average. I don't think it is a good idea to owe 6.5 times what you take in annually. I would love to hear your rationale for this though. How many people do you know that owe 6.5 times what they make in a year? Your second point is sort of irrelevant as even with the ridiculously low interest rates that the Federal Reserve sets, that doesn't make it intelligent to just borrow until you owe 5+ times what you make in a year. EDIT: I forgot unfunded liabilities in my calculation which would have to be accounted for if you were audited. Including those pretty much guarantees insolvency. Shocker, I know...
Someone please correct me if I'm wrong, but I think I see something very simple going on here: In order to have money, you must borrow it. In order to borrow it, you must repay it with interest. You cannot accumulate more interest on what you make via investing than it "costs" to get loaned that money. Any amount of money you make by accumulating interest on your invested debt is never going to equal what you owe to the private corporation that printed that money.
No, oil is always in demand. First we have to sort out the governments top priorities: Oil: Investment-Blood. Return: Lots of Green Paper-Oil is ALWAYS in demand. A plus with the oil deal is that OPEC relies on the U.S.A. for their biggest chunks of profit. The would wage wars against their own people to get oil to the US. Homes: Investment-Crashing Economy. Return-HUGE Profit. As soon as the housing crisis stabilizes, the prices will shoot up like none other; and with the new generation (which is by far, the biggest wave of adults to hit the streets in Americas history), there is immense profit to be had. Outsourcing Jobs: Investment: Ruining (US citizen) Lives; Unemployment. Return: Building a MASSIVE military. Also, when a new wave of technology hits, and the immense amount of jobs hit the market, they will be up for grabs by OUR citizens first. Everybody else will be working the "dead end" jobs.
I don't think the bolded is right (at least at this moment), but I may be misunderstanding what you mean by "interest" and "investing". I can accumulate things that I want in exchange for money. I value these things more than the money itself; otherwise, I would keep the money. Also, you can easily accumulate more interest on your invested debt if you're able to consistently turn a reasonable amount of profit using that debt as an investment.
what do you mean? every day traders in all types of securities get loaned money to speculate and make profits or losses if you borrow 20 million dollars and made 10% back with anual interest of 5% then the difference is your profit. you get loans from financial institutions and i dont know what private corporations printing money means either so either you're stoned or i am
if thats how you look at it. it really doesnt matter because as long as the government has a role to play- which it does, then it will need money to fund its operations.
yea i didnt word that last part correctly. i mean this isnt about sustainability as a whole only the revenue side. you can think of this theory as a timeline with streams of payments in and out for revenue and expense from now to some point in the future. i used the examples to show that 1) borrowing is necessary and profitable and 2) the timing of borrowing plays a role in how much debt we have. the government invests in things like keeping its citizens safe and providing an environment where business can be done. you might think the us government only spends recklessly but i bet you wouldn't want to live in another country because no other government has been as successful at fulfilling those roles.