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pan6467 · 11-05-2004, 07:32 PM

There are 2 aspects to a GOVERNMENT's deficit spending:

1) Who is buying the bonds, treasury bills and so on. If it is the citizenry then you have faith in the government and deficit spending won't be much of a problem. However, if you have what we are experiencing you have a major problem. What we are seeing is our debt being bought up very fast by foreign countries. In and of itself this can create problems because the interest earned on the bonds and so on is exiting our economy and going into foreign coffers. The greatest worry is that when a foreign government buys these commodities and if our treasury cannot repay the debt then the foreign countries can come in and collect collateral.

2) If the debt becomes a true burden then you have a serious problem because the first thing most people will want to do is increase the money being printed. That is what happens to countries like Argentina. Your treasury prints up money to pay the bills BUT the value of your money freefalls, inflation skyrockets and you're in worse shape then ever. That was a problem Carter faced, and why his economy was so desolate.

Now, you add trade deficit (private debt) onto the government deficit and you are walking a fine edge. What we are seeing is China among other countries building up a HUGE ownership of the private debt also. Now you have a 2 headed monster to fight with. The only saving grace is that a country like China has so much invested in us they lose their economy if we default. However, they can always start cashing in and taking what they can get.

As I said in a previous posting, the economy and problems with it are in such a mess and we owe other countries so much that we are going to have to either reform the government (which means some states may secede) or we go into default, wipe off all debt and start over. Neither is very palatable and neither is very likely but with countries becoming more and more independant of our economy there are some serious issues we better be looking at.

11-05-2004, 07:32 PM	#4 (permalink)
pan6467 Lennonite Priest Location: Mansfield, Ohio USA	There are 2 aspects to a GOVERNMENT's deficit spending: 1) Who is buying the bonds, treasury bills and so on. If it is the citizenry then you have faith in the government and deficit spending won't be much of a problem. However, if you have what we are experiencing you have a major problem. What we are seeing is our debt being bought up very fast by foreign countries. In and of itself this can create problems because the interest earned on the bonds and so on is exiting our economy and going into foreign coffers. The greatest worry is that when a foreign government buys these commodities and if our treasury cannot repay the debt then the foreign countries can come in and collect collateral. 2) If the debt becomes a true burden then you have a serious problem because the first thing most people will want to do is increase the money being printed. That is what happens to countries like Argentina. Your treasury prints up money to pay the bills BUT the value of your money freefalls, inflation skyrockets and you're in worse shape then ever. That was a problem Carter faced, and why his economy was so desolate. Now, you add trade deficit (private debt) onto the government deficit and you are walking a fine edge. What we are seeing is China among other countries building up a HUGE ownership of the private debt also. Now you have a 2 headed monster to fight with. The only saving grace is that a country like China has so much invested in us they lose their economy if we default. However, they can always start cashing in and taking what they can get. As I said in a previous posting, the economy and problems with it are in such a mess and we owe other countries so much that we are going to have to either reform the government (which means some states may secede) or we go into default, wipe off all debt and start over. Neither is very palatable and neither is very likely but with countries becoming more and more independant of our economy there are some serious issues we better be looking at. __________________ I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"