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View Diary: Debt is Good. (61 comments)

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  •  I didn't say " deficits don't matter" (0+ / 0-)

    because clearly they do matter when inflation is high and increasing.  Then the federal debt must be reduced by increasing taxes and reducing spending.

    But just the opposite situation is what we have now and we should be increasing spending and reducing taxes on consumption to increase consumer spending.

    •  What we need to figure out is how (0+ / 0-)

      to get the people who are sitting on $2+ trillion in cash to spend or invest it and increase the velocity of money, rather than the volume.
      The latest line that's being fed to Republicans is that the reason the money bags aren't letting go of their hoard is because the future is uncertain.  What they really mean is that they fear losing control.  Which is exactly what's going to happen, if they don't start participating.
      Personally, I think the hoarders are just obsessed with hoarding.

      http://www.youtube.com/cyprespond

      by hannah on Thu Apr 14, 2011 at 03:08:05 PM PDT

      [ Parent ]

      •  There's no reason not to hold cash (0+ / 0-)

        With inflation very low, hoarding dollars is actually more efficient than hoarding gold which has carrying costs like storage and insurance.

        If inflation started to accelerate, people would start spending their cash instead of watch it lose value by hoarding it.  Likewise, the government could give consumers tax incentives, like Cash-4-Clunkers, to buy goods and services that would pump up the economy and get workers back on the job.

        Lots of people are hoarding cash now because they are afraid of the future, i.e., another stock market crash or whatever, so people need to lose their fear by seeing the rest of the " herd" return to normal behavior.  Of course the fear mongering RepubliCons want just the opposite.

    •  Since (0+ / 0-)

      Since the debt has never been reduced in good times or bad for about 50 years I'm not sure there is any money left to use in bad times.

      Basically with the world's reserve currency the US has a lot more rope than say Greece. That does not mean the US is in better shape. There is a trade deficit (money leaving the country) and a federal deficit. The only reason it is remotely affordable now is because of low interest rates and the Treasury moving debt to the short end. Any uptick in rates will have a devastating effect.

      You can't run these kinds of deficits and expect to get away with them for long. (oh and they will last for a lot longer than people think because the consumer is over leveraged still).

      "I can live with doubt and uncertainty and not knowing. I think it's much more interesting to live not knowing than to have answers which might be wrong". Feynman

      by taonow on Thu Apr 14, 2011 at 03:42:20 PM PDT

      [ Parent ]

      •  You really don' t understand the situation (0+ / 0-)
        I'm not sure there is any money left to use in bad times.

        There is unlimited money and we can "print" as much of it as we want.  Over the past 2 years, the Fed has "printed" trillions of additional dollars through its quantitative easing programs and it could print more if it wanted to.

        the US has a lot more rope than say Greece. That does not mean the US is in better shape

        The U.S. is in way better shape than Greece which CANNOT print its own money.  Greece' s debt is all in euros so it has NO options at all.

        The only reason it is remotely affordable now is because of low interest rates and the Treasury moving debt to the short end. Any uptick in rates will have a devastating effect.

        Treasury bond rates have moved up considerably over the past 2 years and it has had NO effect at all because the Fed can and does buy our debt (repaying the interest to the Treasury) and foreigners like China are anxious to buy our debt to depress the value of their currency.  Our debt service to income (GDP) ratio right now is less than 3% which is lower than Germany and Japan, which also has double the debt to GDP ratio that we have.

        You can't run these kinds of deficits and expect to get away with them for long.

        We have had a large federal debt for 80 years with no problems at all.  What you debt fear mongers never say is exactly when doomsday will arrive.  Obviously, you don't know because you are just  blowing smoke.

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