The Changing World Order

With almost no exceptions, no country ever pays off its national debt. Reducing debt as a percentage of GDP reduces interest costs but increases opportunity costs. It's a tradeoff.Here's an example in everyday terms. Few people who refuse to incur any debt can purchase a house. Having no debt is good in the sense that no money is paid for interest, but it costs you the opportunity to live in a house, and the opportunity to make money in the form of increasing value of the house which is leveraged because you don't fully own the house whose appreciation in value is benefiting you.It's the same for a country. Having no debt might seem like a good idea, but nations that put too great an emphasis on debt reduction do not take advantage of certain opportunities, like investing in infrastructure, technology, education and health.That being said, it's difficult to deny that the national debt of the United States is too high. As a percentage of GDP the US has one of the highest national debts in the world. First world countries that are even worse are Japan, Greece, Venezuela and Italy, not the best company. On the other hand, other first world countries not far behind are Portugal, Spain, France, Canada, Belgium and the United Kingdom. We are not alone in having a high national debt, and that so many countries are doing just fine with a high national debt means that it is not the sign of impending disaster that you keep portraying it as.There is more than one way to look at the national debt, for example by interest payments. This year the interest on the national debt will be around 2.4% of GDP, which isn't bad. But it is expected to rise to 7.2% by 2053, which seems pretty bad.Strong and valid arguments can be made that we should be reducing our national debt. Stick to that and toss out the precious metal, gold-standard and CBDC nuttiness.--Percy

Tanypteryx didn't mean it that way. It's like the revolving credit on your credit card. Every month you pay off old debt and incur new debt. And of course it is the government paying back any debt it incurs.Typically governments issue bonds to raise money. For example, the US issues bonds with terms of 2, 3, 5, 7 and 10 years. When the treasury issues a $1000 10-year bond at an annual interest rate of 3.83%, that means you give them $1000 today, and then for the next ten years they give you $38.30 every year until maturity, at which time they give you your $1000 back. (In reality you would rarely deal directory with the treasury - you'd use a broker who deals in the bond trading market.) Again, bits of it are being borrowed and paid back all the time. It grows when more is borrowed than paid back, and it shrinks when more is paid back than borrowed.--Percy

All that raising the debt limit (an old compromise, an artificial requirement set in WWI to satisfy opponents to war spending) does is enable us to raise the cash to make payments.IOW, it's that dirty nasty "L"-word: Liquidity.It's what politicians with a business background brag about: making payroll. But what does making payroll actually entail? Borrowing money! That is the exact same thing as raising the debt limit, borrowing cash to make required payments.Don't confuse personal finances with business finances. As a person, the less debt we carry the better (eg, my condo and car are paid off, so all I owe is whatever I paid for this month with my credit cards, which I pay off completely every month). But debt can be a valuable tool for a business. Or a government. But explaining specific examples is above my pay grade. Basically, smart use of debt can help a business navigate the delicate liquidity balance that can mean life or death for a business, or a government. And debt can be used as an advantage in business negotiations. Or interest paid on a loan could be an attractive choice over an alternative -- eg, the old story of a wealthy person who didn't want to pay for a safety deposit box but carrying debt with the bank would qualify him for a free box, so he took out a loan he didn't need but whose monthly payments were less than the cost of the box. Debt can also be a good thing in the business' tax strategy.Cash (AKA "liquidity") is not a good thing for a business to hold; it's next to useless. In personal finances, it's like the stereotype survivor of the bank failures in the Great Depression who keeps all his savings as cash stuffed in his mattress. It doesn't do anything except lose value due to inflation. If he instead deposited it in a bank account that earns interest or invest it in other ways, then it would accrue interest; he would have his money work for him instead of just gathering dust.Instead of losing money by holding cash, a business will have other kinds of assets; eg, capital equipment, real estate, investments, inventory, accounts receivable. Those assets have the added benefit of earning money, which cash cannot do. They also have the problem of not being liquid.That liquidity problem is because to pay its bills, including payroll, the business does still need cash. The business' CFO needs to balance his assets in order to have enough cash at the right time to pay the bills. We mere individuals do this by not spending (though my decades-long strategy for big bills, "balloon payments" like home and auto insurance and property tax, had been to deposit part of my paycheck to savings and then use that; now it's my military retirement pay that serves that purpose), but a business cannot afford to do that. It also cannot afford to liquidate part of its capital equipment (needed to earn revenue), real estate or investments (taxes! I got dinged really hard a couple years ago disbursing part of my IRA to help my son). Accounts receivable is perhaps the best source for cash, but that check's still in the mail so no cash on hand. Liquidating your assets is bad for business!The solution is for the CFO to take out a short-term loan, to go further into debt in order to pay the bills. That means that when a businessman-turned-politician brags about making payroll, he's actually confessing to lots of visits to the bank to go into debt. Yes, that was short-term debt that could be paid off once the accounts receivable checks arrived in the mail, but it was debt nonetheless.That is what the government is doing: borrowing money to raise the cash to pay its obligations, AKA "its bills". Raising the debt limit enables the government to borrow that money to pay its bills.If you want to talk about lowering the deficit and paying off the debt, then the place for that conversation is in the budgeting process, not here. Raising the debt limit has nothing at all to do with the budget.And for that matter, you would want to vote in Democrats who are the fiscally responsible ones. All Republicans can do is spend like drunken sailors running up huge deficits and adding enormously to the debt while eliminating revenue streams (eg, massive tax cuts for the wealthiest).The choice should be clear, so don't play dumb.

And also personally. Without personal debt fewer people would own houses or cars, or they'd own crappier houses or cars, or do without that addition or repair. And they'd taker fewer or more modest vacations. Paying off debt is also a great motivator. They also cut the IRS budget to the bone to hobble their ability to collect taxes.--Percy

My point is that the debt itself is increasing and not shrinking. I have never seen it shrink in the last 10 years. It is irrelevant if some bit of it gets paid back by new borrowed money.We call this kicking the can down the road. How would you like to have $100,000.00 in debt that you could never pay back? If you paid part of it using another credit card, you would be simply transferring it from old debt to new debt.The National Debt is the shortfall from each years budget deficit. It only goes up...never down. All that Clinton did was eliminate the deficit for a short time. He never addresssed the long term debt. Nor can anyone else. Eventually, the reality will become evident to the entire world. Likely the only reason that they even play along is because a US default would hurt them too.Bottom Line: Is an ever increasing debt good for America? How about for the world?

By eliminating the deficit, he started the repaying of the debt.The Republicans sabotaged this by cutting taxes and pushing the deficit back up.Obama attempted to address this, but the Republicans would not allow any tax increase. The same with Biden.If you want to see the debt paid down, why do you vote Republican? No, it needs to be reduced. But that requires a willingness to pay a little more in taxes. Most of the world is not much affected. But they will be seriously affected if congress fails to raise the debt limit.

What do you think happens when the deficit is eliminated?

The debt then gets paid down. Keep in mind, however, that
1) It is a drop in the ocean
2) Clinton was the last and only recent president to not add to the overall debt. Neither side can get it together nowadays. Which is why talk exists about setting a ceiling on long term debt. Not that I agree with the Republicans. Their grandstanding may get us all in trouble.Basically, it appears as if we are stuck. We are so far in debt that all we can now do at best is balance the budget enough to pay the interest.

I am an unaffiliated voter. I do not vote along party lines(either way)And don't you yet understand that the debt will NEVER be paid off nor will it EVER go down substantially.I worry about social security, health care, and cost of living. Tax hikes will never make a dent in the debt. Its too late for that.

I addressed this in Message 286. If you get a chance give it another read and see if that answers your question.Nearly all countries have a national debt. That's not going to change. But if a country's national debt grows too large then it can be ruinous and cause runaway inflation. Germany's war reparations debt after WWI is the classic example.Countries never really reduce their national debt in any significant way if you're measuring it terms of a currency, say the dollar. The practical approach to reducing the national debt is to measure it as a percentage of GDP. In that way a country can grow its way out of debt.--Percy

Are you nuts? The entire net worth of the Forbes 400 is slightly under 3 trillion dollars...a mere drop in the bucket. The numbers being discussed are far higher than what would be solved through a tax increase.

When did you last vote for a Democratic candidate?Instead of just bitchin, do you have a solution?

So we do nothing and just run around like Chicken Little. Quit bitchin' and propose a solution.

I did not say that the debt needs to be eliminated. I just said that it needs to be reduced.If taxes exceed expenses, the debt is reduced.Think of this as a kind of buffer. In good years you reduce the debt, or even build a surplus. In bad years, you spend down the surplus or build up debt. It's impossible to get it exactly right every year, so we need this buffering. But we should keep the buffer size manageable. If debt is increasing every year, then we need a small increase in taxes. We should be aiming for a reasonably stable level of debt, but of course there would be year to year fluctuation.

It seems that Phat's hero is a bigger asshole and entitled POS than I even suspected. He is obviously mentally ill and a deranged narcissist. Which is pretty typical for the billionaire set.
Lots of articles out discussing his bizarre behavior and "rules". Here is one.

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There’s piss on the floor.

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So read the email from Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, and a billionaire many times over. It would be read by more than 1,000 of his underlings at the company.

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Everyone at Bridgewater would soon learn the backstory. Dalio had excused himself from a meeting and walked to the nearest restroom at Bridgewater’s sprawling, medieval-stone-style headquarters near Westport, Connecticut. After relieving himself at the urinal, Dalio glanced down. There was piss on the floor.

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This couldn’t be allowed to go on, Dalio said. Whose was it? And who had permitted it to happen?

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“If people can’t aim their fucking pee, they can’t work here,” Dalio proclaimed.

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It seemed inconceivable that it could be an accident. After all, Dalio ruled Bridgewater under what he called his “Principles,” which held that no matter was too small for investigation. There were hundreds of Principles, including one that stated, “People have to value getting at truth so badly that they are willing to humiliate themselves to get it.” Employees were instructed to “probe” one another’s work, as Dalio put it, on a daily basis. That wasn’t all. As part of what Dalio called “radical transparency,” a team of videographers and editors made tapes and videos of Dalio’s many lessons to his staff. These were uploaded into what Bridgewater called its “Transparency Library,” viewable internally. All employees at Bridgewater — from top investment strategists to receptionists — were required to view cases pulled from this library.
That puddle of urine on the bathroom would be the subject of one of these cases. Dalio summoned the hedge fund’s head of facilities for questioning. Staff were assigned to a rotating guard, standing outside the restroom to take notes on all who entered — and whether they left clean floors. After each visitor, a member of the cleaning crew would rush in to mop. New urinals were brought in for testing. Stickers were applied to the porcelain to give men a more effective target. Then the exact placement of the stickers was probed.

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For all that, Dalio was never able to figure out exactly what had happened at that urinal.

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‘Ray, This Is a Religion’: Inside Ray Dalio’s Hedge FundAnd this. Read it. Stunning. He recorded it and showed it repeatedly to all employees.
Ray Dalio Interrogated His Pregnant Employee Until She Cried: Book