Admiral says:

I truly hope you are being sarcastic. If not then you have a poor grasp of basic economics. It would be childish to think that all we need to do to afford something is to print more money.

Paper money has a faith value. Also paper money is victim to supply and demand. The more we print the less valuable it is. Also the higher the debt we have is, the lower the value of the dollar is. Just check currency prices and you will see the sharp decline of the US Dollar over the past few years. This effects us all when we need more of our money to buy things. This is called inflation. This is made much worse when your employer cannot afford to give you more money so you pay out more but, receive the same amount from them. The employer cannot afford to pay you more because they have to pay more for the products they use or their product does not sell as well as in the past because the people who would buy it have less money (or the same amount of money but it is worth less) then they had in the past.

Vince says:

I understand where you’re coming from Andrew and I think you’re right to some degree. Admiral, also is right. We don’t have a huge check to pay individually, but the dollar is getting weaker. We can’t print more money, that’s out of the question because that just lowers the value.

My question is…we’re giving so much money to all these developing nations. If we stopped giving for one year, how much would that raise the value of the dollar? Pay off some of the debt with the money we didn’t pay out to some corrupt government in Africa and actually pay off some of our debt, or insure low income families with it?

I’m more of the thinking help the people here before we help everyone else. How do we benefit here if we save 50,000 people in Africa? They aren’t going to give us any tax money. How does it help us to help them? Why is it our job as Americans to give our tax money to people most of us will never see and never know (aside from being good people; but I think this should be done on a personal level, not a government level).

Admiral says:

Vince you have to understand something. If you do not let money go to where it is needed, then the need will come to you. Meaning if we stop providing assistance to people outside the US then they will come to the US for it. Cuba is a good example of this. Mexico too.

Are you anti-Abortion (pro-life) yet cry when your tax money is used to take care of the children you did not want aborted?

gnomic says:

Vince,

The forign aid is less than 1/2 of 1% of the budget - less than the amound that has been illegally stolen from tax payers by government contractors that we continue to do business with.

Much - but not all - of that money goes to stablize countries that would result in wars if the money wasn’t spent. It is cheaper to prevent war than to stop it. Its also more humane, but that doesn’t seem to be your concern.

Some of the money pays for food in areas that can’t grow food, some to areas that can’t grow food economically. We should spend that money to build a self-sustaining farming infrastructure, but then our government wouldn’t buy grain, etc. from farmers to prop up our prices and then give that grain to people and claim it as foriegn aid. But when you are starving, you don’t get to complain about it.

Some of that money goes to corrupt, abusive governments that torture, commit war crimes, and illegally imprison people. Other than ours, that is. Again, its the devil we know and its cheaper than a war. Still, there is a good case to not fund these petty dictators and make sure they go to jail. Justice starts at home though…

And to address your dollar getting weaker, keep reading.

gnomic says:

Andrew,

Debt does matter. As we are about to find out. Again.

As we spent more and more on the war, waste more and more on bad governement, and tax less and less on companies and the rich who have most of the money, we have to borrow more and more to glose the gap.

China and Dubai has lots of our money because we give it to them for trinkets and oil. They lend it back to us because we had a stable economy and safe returns on their investment.

But now we are borrowing so much and spending it on a war that produces nothing (except bodies and war profiters) that the dollar is dropping. And we have to bail out so many banks (100 projected to fail, and a lot more hurting) that the government will have to borrow more. And that means that they will have to pay more interest to attract investors to compensate for the falling dollar.

Worse yet, the Euro is stronger and paying more interest (cost adjusted). And other less predicable economies like China and India are paying much more return on investment. Risk adjusted, they are still paying less than the dollar, but not by much. So the US government has to pay even more interest to attract and retain foriegn investors.

Now, if we were borrowign and investing that money in things that have long term returns like infrastructure, energy, and innovations that the world would buy from us, we would be getting a good return on our investment and could pay down our mounting debt. But we continue to pay for wars and tax cuts and farm subsidies and cheap and easy living in the here and now.

Oh and we have to borrow to pay what we promised - social security and health care and the like. And the dollar goes lower. And foriegn companies currency buys more and more - so they buy the good assets from the US. Things like Citi Bank, and Anhauser Bush and others.

And we don’t have a lot of people that understand science and math. And we are doing much cutting edge research. Stem Cells are out. Energy is out. Space research is out. Climate reseach is out. Safety research is out. Physics research is out. but Faith-based funding to political hacks is in.

And the dollar keeps falling. And the tax cuts for the people that have money keep happening. And the people that don’t have money can’t borrow to get an education because they can’t afford the interest.

My student loans were at 11% in the early 80s. My house loan was 12%. They are gonna look like bargins.

But back to bashing brown people. Keep reading…

gnomic says:

And we’ll circle back to Vince who doesn’t like poor forigners. You know, the ones that live where we buy most of our food from And the ones that come here and work cheaply to pick the food we eat. Those countries are going to start selling the food to other countries that can afford it and have stronger currencies. And those workers are going to go to countries that can afford to pay them.

And we are going to find out just how much good will we have around the world once we can’t afford to bully everyone. Hopefully, they will send us more than 1/2 of 1% if we ever have to ask for help.

gnomic says:

Andrew,

So you are completely wrong about the debt. And you can check - Dick Cheney said that deficets don’t matter too. And if that doesn’t convince you that you are on the wrong side of the issue…

But you are right too. We should be insuring poor kids. We should be paying teachers more. We should be fixing our roads.

These investments pay off over the long run. And we need to start now while we can still get people to loan us money. And we need to invest it in innovation and lead the country out of the nexxt great republican depression that Bush and his party has led us into.

gnomic says:

And some great charts and on-point commentary here: http://www.huffingtonpost.com/hale-stewart/its-the-deficit-stupid_b_115540.html

Andrew says:

OK, so let’s say that the Chinese can get a better deal on the euro than on the dollar. So what?

Gnomic wrote, “Oh and we have to borrow to pay what we promised - social security and health care and the like. And the dollar goes lower. And foriegn companies currency buys more and more - so they buy the good assets from the US.”

And I say again, so? If we have to pay off the debt with more debt, what’s the big deal? It’s not like a family where your Visa card has limits. The U.S. government doesn’t have a credit limit, as long as the country is stable and the government is strong.

A family would be foolish to, say, pay off their Amex with their Visa card, but that analogy doesn’t hold true for the government. We can borrow as much as we like and it makes no difference.

Think about it. Can you imagine a disaster and — forgetting FEMA’s bureaucratic screw ups — the government saying, “We don’t have the budget to pay for emergency medicine and supplies”? It ain’t gonna happen.

Politicians like to talk about such-and-such “costing the taxpayers billions,” but that’s meaningless. My taxes won’t go up because of the Iraq war, or because a new bridge has to be built, or because Social Security benefits go up a few bucks.

Now, a local school may have to raise property taxes to pay for improvements, because these same arguments don’t hold on the local level. But in that case there’s a correlation between income and out-go.

On the federal level there is no such correlation. As long as there appear to be reasonable income taxes, there will be “faith and credit” in the United States.

The value of the dollar isn’t based on gold, as you know. It’s based on the value of the country. We’ve got food, minerals, and a stable, tax-paying populace. We may not be the best investment, but we’re still a good one. And that means that there really is no limit to what we can spend — other than political ones.

What, is Lockheed Martin going to say, “We won’t build those F-22s until we see some gold (or euros, or pesos)”? Of course not. As long as the government is stable — which even under an idiot like Bush, it is — U.S. government IOUs are as good as gold.

Yes, we may have to “pay more interest to attract investors to compensate for the falling dollar,” as Gnomic said. So? That’s a bad thing only if you’re talking about real money. And I say we’re not.

(Of course, if we switched to a “pay as you go” system where we’d need to raise $300 million in taxes to pay for a $300 million project, that would be a different story. But we don’t.)

And sure, you might be able to make esoteric, theoretical arguments showing a long and questionable chain of events from a higher debt to a lower standard of living, but that would be iffy at best.

Once we can get people to realize that this is just play money, we should be able to get them to pay for things like universal health care (at least for poor kids), better schools, better equipment for soldiers, even trips to Mars.

So enough whining about “government spending.” It just ain’t real money.

Andrew says:

From that Huffington Post piece Gnomic referenced:

Total debt outstanding has increased from $5.8 trillion in 2001 to the current total of $9.5 trillion.

As a result of this problem, the currency markets have sent the dollar lower for six years straight.

The writer makes a good argument, but I have one nit to pick. He purports to explain how a big debt leads to inflation.

The crux of his argument — the cause and effect — is contained in those two sentences I quoted above.

But he states it as a given. He doesn’t justify it, and he doesn’t explain how a big debt leads to a lower dollar.

My experience tells me that when it comes to economics, especially on a national or international level, it’s impossible to pin a change on a single event.

The dollar could be lower for a lot of reasons: the euro gaining strength, distrust of American objectives, hatred of Bush, investments by major banks that we don’t know about, the growing Chinese and Indian markets….

You get the idea.

I’m not saying his entire argument is invalid. But I am saying that the entire argument is based on an almost off-hand statement.

gnomic says:

Oh, Andrew You know not what you wish for.

Remember the value of Mexican Peso dropping like a rock? Or the Argintina “Austerity” program? There are TONS of impacts from a devalued dollar. The current credit crunch is just one of them. Anything that we get from oversees - and we get nearly everything from oversees - would become unaffordable. The American economy would crash - joblessness would skyrocket, inflation would skyrocket, and everything that you are taking for granted would be gone.

Seriously, its not the apocolypse, but its the economic equivalent. Take some time to take some macro econ courses and you will understand why - especially in this global economy we have created - the deficiet does matter.

Its just like your credit card debt. Eventually, it has to get paid. And you can’t just print more money. That’s one of the things that result in inflation. And if you can’t trust that your dollar will buy anything, you don’t want them.

If you laid all the economists end-to-end, they still would not reach a conclusion. But I doubt if you would find a real economist that would support your assertion that deficits doesn’t matter. In fact, most of them believe the opposite.

It does seem that if you spend and go broke in this country and go broke BIG, my tax money will be used to bail you out. But ask the Soviet Union how that works on a national/global scale.

gnomic says:

Free course on economics: http://ocw.mit.edu/OcwWeb/Economics/index.htm

Overseas Sugardaddy says:

Sure, there will always be money. But the question is: whose money? Think of countries like companies. Right now, the US is like an airline that should have gone under years ago if it wasn’t propped up by government funds. But in this case, it’s the US government being propped up by foreign funds. The more an investor invests in a company, the more influence they have on that company. Who has influence on the US? The largest lenders to the US, at half a trillion dollars each, are Japan and China. You’re arguing that money grows on trees, but those trees are not growing in US soil.