Did you even read what was posted? Do you understand how modern commercial banking works under the framework a fiat-currency based central banking system?
Xequecal wrote:
When you say debtor nation, what do you mean? It's perfectly plausible for every government in the world to run a deficit. Those debts don't have to be held by other governments, they can be held by individuals.
A debtor nation is a nation whose sum total current accounts deficit and outstanding liabilities is held by foreign trading partners, rather than citizens who trade, buy and sell in domestic markets denominated in the domestic currency.
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Overall, no, not every nation can be a debtor nation. But most people are saying that the cause of the US's economic problems is government spending. Namely, the government is spending a lot more than it takes in, which causes inflation, (decreases the currency strength) which destroys the economy.
No it doesn't. A deficit causes a deficit. Monetizing the deficit can create inflation. If the public works or whatever the budgets the inflation currency is used to fund actually increase productivity, inflation can be displaced and if the producitivy drives down aggregate prices, you could even say there is deflation because the productivity increase out-weighs the loss in the strength of currency. Image now, if those works weren't funded by monetized debt, but rather tax revenues and the currency didn't lose any strenght but productivity increased. How much better off would everyone be if suddenly they kept their current wages and prices decreased?
But this is predicated on a very important detail:
public works increase the economic productivity of individuals to contribute to an aggregate increase. We might argue this is subjective. And it is. Economics is not a study of objective fact, it is a study of law of cause and effect based on the mechanics of how specific trade markets are allowed to operate and how individuals will act as a result. So public roads, while there is not a quantitative way to substantiate this fact, probably do increase aggregate productivity through increasing the producitvity of the individual. But the case for other public works and programs is not so. Not to mention, the way funds are allocated at the State level, Federal level, and from Federal to State, as the case may be, is not so simple.
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But this doesn't make sense, because EVERY country does this. If this line of thinking is correct, every economy in the world is doomed. There are many Western countries with a worse debt to GDP ratio than the US. Japan's public debt is almost 200% of their GDP now.
No, that line of thinking only makes sense if you assume every quadralateral is a square, happen upon a rhombus and wonder where the hell the four right angles and equal length sides went. EVERY country does not run deficits where monetization occurs to pay for government issued secured debt obligations sold to our primary trading partners. China holds a large sum of outstanding obligations. We do not hold obligations of other countries. Secondly, GDP is a poor measurement of the aggregate economic productivity I alluded to above. It was derived from GNP, which is useful during times of war when large quantities of the productive capacity are devoted to supply war materials. There is an obvious goal during a time of war. Using this measurement during times when there is no clear unified goal is absurd and a fallacy. We could easily drive the GDP:debt towards 1:1 just by creating massive inflation, using the fake currency and paying it to employ everyone to sit around all day. That doesn't mean our economic producitivy as increased.
In other countries, they leave the red ink on the books. That is why their currency is strengthen to ours. That means they can purchase services and goods primarily purchased by those who live in a dollar denominated enviroment with more ease. Additionally, those economies produce many goods, goods that are bought by trading partnets in bulk. In the US, most of what we produce are consumed by us. It is not the economies that are doomed, it is the currencies. The problem is, the only thing we produce (to export) is our currency.
Additionally, the US borrow a lot of money back in the 1700's and 1800's. These were used toward productive ends: building factories, creating infrastructure, etc. Now, we stimulate the economy with inflated funded bailout packages to save unproductive jobs and companies and to encourage people to buy more cars and houses. How is this going to make us more productive?
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The US has other problems, like the savings rate, but you're not going to fix that problem unless you implement nasty consequences for not saving. In the US you can declare bankruptcy and wipe those debts, and even beyond that there's always a charity that will put you up or welfare. In China, if you run out of money, you starve to **** death. If you have a health problem that you can't pay for, you **** die. That's why their savings rate is so high.
Guess what? Take away money, take away currency. Think of everything in terms of labor performed, goods produced and services rendered. If there isn't enough food, people starve; you can't monetize this fact into oblivion like you can with budget deficits. That's why it is important to have savings; it represents economic underconsumption, so that real capital is available. It is real, discplined by those savings and thus, those that seek to borrow it are driven by the market to make a return on it. This controls the problem of malinvestment.
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