National Debt

[highnote]

Here is a passage from economist John Mauldin most recent free newsletter:

http://www.mauldineconomics.com/frontlinethoughts/?utm_source=newsletter&utm_medium=email&utm_campaign=frontline

"If your income is $335,000 a year and you’re spending $390,000 a year, on top of the $2.3 million in debt you owe from previous years, plus the $10 million you are committed to pay in the future, are you overleveraged? And if you’re adding another $50,000 a year to your total debt in addition to your budgeted spending, I’d say you’re overleveraged. But that’s roughly the federal government’s condition.
(Would you loan still more money to someone in that condition? Probably not. But people do so every time they buy a T-bill.)

This is just the federal government. State and local governments spend roughly $2.8 trillion a year. Their debt is smaller, relatively speaking, than Washington’s, at only $3.2 trillion; but they are trying hard to catch up. The debt load will get worse at all levels when (not if) the economy goes into recession again. Spending will rise, and revenue will fall.
Now, it is easy for us to criticize the government, but we need to look in the mirror, too. We elected these people and let them run up this debt. Why did we do that? I think in part because we’re so indebted ourselves that we are numbed to the reality."

[HalvOnHorseracing]

Here is a passage from economist John Mauldin most recent free newsletter:

http://www.mauldineconomics.com/frontlinethoughts/?utm_source=newsletter&utm_medium=email&utm_campaign=frontline

"If your income is $335,000 a year and you’re spending $390,000 a year, on top of the $2.3 million in debt you owe from previous years, plus the $10 million you are committed to pay in the future, are you overleveraged? And if you’re adding another $50,000 a year to your total debt in addition to your budgeted spending, I’d say you’re overleveraged. But that’s roughly the federal government’s condition.
(Would you loan still more money to someone in that condition? Probably not. But people do so every time they buy a T-bill.)

This is just the federal government. State and local governments spend roughly $2.8 trillion a year. Their debt is smaller, relatively speaking, than Washington’s, at only $3.2 trillion; but they are trying hard to catch up. The debt load will get worse at all levels when (not if) the economy goes into recession again. Spending will rise, and revenue will fall.
Now, it is easy for us to criticize the government, but we need to look in the mirror, too. We elected these people and let them run up this debt. Why did we do that? I think in part because we’re so indebted ourselves that we are numbed to the reality."

I stopped reading after "if your income is $335,000 a year..." I figure if I was making that much and couldn't live within my means the problem was me.

Let's not kid ourselves. Some legislative body approved those expenditures for those things using the J. Wellington Wimpy theory of economics. I will gladly pay you Tuesday for a hamburger today.

[davew]

it works better if you can borrow your money at 1%

[Clocker]

it works better if you can borrow your money at 1% Not if you aren't allowed to borrow any money. :eek:

No one in Washington seems to remember the deal that Obama and Boehner made on the debt way, way back in ancient history, around October of 2015. They suspended the debt ceiling so that politicians would not have to deal with that nasty little issue during the 2016 elections.

Well, the chickens are about to come home to roost, to coin a phrase. The suspension ends a week from today, March 15. Beware the Ides of March.

Whatever the debt is on that day becomes the new ceiling. But hey, Congress has a whole week to deal with it. They might have to work the week-end, but that's why they get the big bucks.

[barahona44]

They can always try this :).

https://en.wikipedia.org/wiki/Trillion_dollar_coin

[highnote]

Let's not kid ourselves. Some legislative body approved those expenditures for those things using the J. Wellington Wimpy theory of economics. I will gladly pay you Tuesday for a hamburger today.

That's right. Debt is consumption carried forward.

My parents grew up without credit cards and lived within their means. They only borrowed for their mortgage and my dad fought in WWII so he got a good deal on a VA loan for his home and went to college on the G.I. bill.

Nowadays, people borrow on 50 year interest only mortgages and rack up tens if not hundreds of thousands of dollars of debt on 4 year colleges. People use their credit cards to consume more than their incomes allow and then are stuck paying high interest rates.

The problem with taking on debt for consumer goods is that the capital borrowed is not being put to productive use. This leads to stagnant or declining rates of growth.

The same goes for the U.S. gov. They borrow too much. Someday, the debt has to be repaid. Depending on who you ask, the amount of debt the U.S. has is between 1 and 2 million dollars per person.

Good luck collecting that debt.

[JustRalph]

50 yr interest only mortgages? :rolleyes:

Come on......? The longest I've ever seen is 10 yrs

[lamboguy]

50 yr interest only mortgages? :rolleyes:

Come on......? The longest I've ever seen is 10 yrsi have one of those, my payment went from $550 to $3000 after the ten years. its sticker shock now! i it was an original 25 year deal with a very low adjustable rate. my rate has doubled in the last year. i have excellent credit and tried to get a new mortgage and was told that i do not qualify for one because i don't have enough income which happens to be $0 these days. so i am forced to pick winners betting on horses for now in order to payoff my mortgage and my 2 x wives. trust me it gets tougher and tougher every month as you go along.

[highnote]

50 yr interest only mortgages? :rolleyes:

Come on......? The longest I've ever seen is 10 yrs

http://www.mortgagenewsdaily.com/5162006_50_Year_Mortgage.asp

[elysiantraveller]

That's right. Debt is consumption carried forward.

My parents grew up without credit cards and lived within their means. They only borrowed for their mortgage and my dad fought in WWII so he got a good deal on a VA loan for his home and went to college on the G.I. bill.

Nowadays, people borrow on 50 year interest only mortgages and rack up tens if not hundreds of thousands of dollars of debt on 4 year colleges. People use their credit cards to consume more than their incomes allow and then are stuck paying high interest rates.

The problem with taking on debt for consumer goods is that the capital borrowed is not being put to productive use. This leads to stagnant or declining rates of growth.

The same goes for the U.S. gov. They borrow too much. Someday, the debt has to be repaid. Depending on who you ask, the amount of debt the U.S. has is between 1 and 2 million dollars per person.

Good luck collecting that debt.

No they can't.

I'll happily provide my NMLS #.

[elysiantraveller]

http://www.mortgagenewsdaily.com/5162006_50_Year_Mortgage.asp

That article is from 2006...

[JustRalph]

I read the article, but I've never heard of one.

I have a Realtors license here in Texas. I've never seen anything offered longer than ten years.

I don't use my license, unless for personal stuff, .........so maybe they do exist

[Actor]

The same goes for the U.S. gov. They borrow too much. Someday, the debt has to be repaid.Only the interest has to be paid. The U.S. has been in debt since the revolution. The only time the country has not been in debt was Andrew Jackson's last year in office. After he left office congress ran the debt right back up. We can probably get away with paying only the interest ad infinitum.

[classhandicapper]

Only the interest has to be paid. The U.S. has been in debt since the revolution. The only time the country has not been in debt was Andrew Jackson's last year in office. After he left office congress ran the debt right back up. We can probably get away with paying only the interest ad infinitum.


Debt also has to be rolled over when it matures. So the actual quantity of outstanding debt can sometimes be a huge issue, especially if interest rates are high or people lose faith in your ability to pay that interest without printing more money and devaluing the currency.

[davew]

Only the interest has to be paid. The U.S. has been in debt since the revolution. The only time the country has not been in debt was Andrew Jackson's last year in office. After he left office congress ran the debt right back up. We can probably get away with paying only the interest ad infinitum.

Is that like getting more credit cards to pay interest on all of your other maxed out credit cards? Can this go on forever?

[Actor]

Debt also has to be rolled over when it matures. So the actual quantity of outstanding debt can sometimes be a huge issue, especially if interest rates are high or people lose faith in your ability to pay that interest without printing more money and devaluing the currency.You are right of course but the government has been "rolling over" the debt for 240 years and I don't see that changing in my lifetime.

[Clocker]

Debt also has to be rolled over when it matures. So the actual quantity of outstanding debt can sometimes be a huge issue, especially if interest rates are high or people lose faith in your ability to pay that interest without printing more money and devaluing the currency.

Interest on the debt in round numbers is over $200 billion a year. Interest rates on that debt is relatively low, because with the Fed keeping rates down, the Treasury has been doing a lot of borrowing in the shorter term market, rather than in the usual 30 year bond market. Which means debt has to be rolled over much faster than usual. I have seen estimates that a return to interest rates in anything like a "normal" rate would more than double our current spending on interest.

One writer said that the US has the biggest adjustable rate mortgage ever, and it can only go up from here.

[Actor]

One writer said that the US has the biggest adjustable rate mortgage ever, and it can only go up from here.What gets repossessed if we default? :coffee:

[johnhannibalsmith]

Districts before states, I hope.

[Clocker]

What gets repossessed if we default? :coffee:

That was what is called an analogy, something that represents or explains something without being literally true. :rolleyes:

And you don't have to default if you can print your own money.

Printing your own money is also an analogy, not a literal fact. :p