The Glade 4.0

If you refinance your house with affecting the principal balance, you're some sort of wizard or the recipient of a government subsidy that obviates the need for a new down-payment.Not in the slightest: you've increased your debt on the assumption you will continue to earn more money. Moreover, you're assuming you will do nothing with the increased income except pay for that car until it's free-and-clear. Still, you've done nothing but increased your debt.This is so far from the truth I can't help but laugh; at least, however, I know what they're teaching you in finance classes and on Wallstreet, now. No wonder **** is so **** up ...

You cannot borrow your way out of debt. If you're paying interest, you've time-shifted some amount of your future purchasing power on the bet that inflation, future gains in wages, and other returns will outstrip the interest. What you have not done, despite all of your bald-assertions otherwise, is reduced your debt-load or liability portfolio by assuming more debt.

Of course, since all of your examples require an external shift in the supply curve of your monetary supply beyond the initial debt assumption, I'll just guess you concede that you're wrong?

You can't borrow your way out of debt.

You cannot spend your way to liquidity.

Keep trying to tell me otherwise, and I'll keep laughing at you and your education, because obviously that J.D. and all prior education has failed you if you honestly think you're right on this matter.

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The whole "spend your way to liquidity" thing is irrelevant, whether or not its possible. No part of your government has shown any sign that this is the plan. Nobody is planning the deep spending cuts necessary to eventually start having a surplus.

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Well Ali Baba had them forty thieves, Scheherezade had a thousand tales
But master you in luck 'cause up your sleeves you got a brand of magic never fails...
...Mister Aladdin, sir, What will your pleasure be?
Let me take your order, Jot it down -You ain't never had a friend like me
█ ♣ █

Our government actually believes it can spend its way to liquidity by increasing our deficits.

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Are you starting from the assumption that the Federal Reserve is not part of the government? (Which it admittedly is not).

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Xeq:

I get your core point about the inflation transparency now. I concur, which is why nobody is as upset as they should be about it.

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“The duty of a patriot is to protect his country from its government.” - Thomas Paine

Yes, you've time-shifted some future purchasing power on the "bet" that the corresponding investment will pay off, but that's the same bet you make every time you make an investment. Doing it with leverage simply increases the magnitude of the potential downside and requires an upside that's sufficient to cover the interest plus yield the desired return. If it does, you will have borrowed your way to a lower debt load. If it doesn't, you'll be deeper in debt. Again, that's just the nature of business - sometimes you eat the bear, and sometimes the bear eats you. There's nothing special about doing it with debt, despite the current resurgence of anti-debt moralizing.


What was that you said about bald assertions?


I'm glad you're getting a good laugh. It's only fair, as I'm getting a fair amount of amusement from your usual bombast.

Common sense isn't bombast, RangerDave; but you are arguments are chicanery and childishness. Your initial post has so many logical fallacies in it, I only needed to point out the procedural fallacies, not even the substantive ones. Your argument is full of balderdash.

If you increase your debt load, you have increased your debt. You have not reduced your debt by borrowing more money, no matter what bets you are making with that money.

All of your examples function off an external increase in the actor's money supply, not one generated by their own actions or behavior.

Investments aren't debt. You borrow to invest. You sacrifice to invest.

Your post demonstrates everything wrong with our personal finance situation in the United States. Credit is bad; debt is worse. Both are enemies to financial and economic mobility. In terms your side of the fence likes, credit and debt actually decrease capital mobility and marginalize the economic impact of investments by time-shifting repayment and decreasing future profits. The same thing applies to our government: the U.S. Federal Government cannot borrow its way out of debt; it cannot spend its way to a balanced budget; it cannot spend its way to liquidity.

Nevermind that a loosely governmental but non-accountable agency is currently in the business of intentionally and haphazardly devaluing our currency, right? Nevermind that your president continues to lie about employment numbers? Do you even go read the official published document after they revise the numbers? Here's a hint: every month Obama has said had positive job growth has been revised negative the following month, without fail. He's lied to you guys 46 times about the employment situation. You keep believing it.

This isn't bombast, this is asking you to open your eyes and start thinking with your brain instead of pre-packaged bullet points from MediaMatters.org.

You cannot borrow your way out of debt. You cannot spend your way to liquidity.

The US Federal Governemnt has to stop borrowing money. It has to stop spending money it doesn't have. It has to stop leveraging the future of this nation against short-term political gains at the ballot box; otherwise, Obama will continue to perpetuate a deep-l depression just like FDR. See, we've been through this before, but your side wrote the history books. Too bad you're now learning that the 1930s didn't play out like the faerie tale they told us in Grade School.

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RD you're advocating that a gambler who has borrowed money because they expect to win their next game has not increased their debt simply based on their expectations.

It is, as Khross has stated, nonsense.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

I suspect the majority of these arguments stem from the post-Great Society definition of 'afford': most Americans believe they can afford anything they can pay for.

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RD, blathering from politicians about "investing" in education, infrastructure, or whatever aside, there is certainly no strategic plan of "if we put X amount of money into <insert program here> it should, in Y years, return Z amount of net profit in the form of increased tax revenue based on economic growth, allowing us to pay off Q amount of debt." There is no long-term spending plan at all for the government, nor any real effort to create one; spending on what politicians like to call "investment" is simply throwing money at programs that are demanded by the public/press/business/unions/interest groups/whoever right now.

To go back to the Penn Central example, that's basically what doomed that company; borrowing money at ~10% interest overall and then throwing it at various ventures in hopes of earning a return that would allow them to pay the interest and still generate a profit. In the case of the Penn Central, they at least had the excuse of almost a century of hilariously misguided regulation of railroads making it impossible to generate that >10% return running a railroad in the first place, so they had no choice but to try to earn profit somewhere else, plus the weight of the various idiotic conditions and endless delay created by the ICC in the process of the merger that created the PC from the Pennsylvania and the New York Central. The government, however, has no such excuse.

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"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."

No, he's not. He never said borrowing money reduces your debt immediately. He said borrowing money can be part of a long term strategy to reduce your debt, and if that strategy plays out as planned, your debt will decrease. Seems like common sense to me.

It is for a consumer who borrows $20k for a new car to commute to work, but what if instead of paying off the car loan when it comes due you buy a 3.5M Leer jet and when the jet comes due you instead buy an Airline for 1.2bn and when that debt comes due you instead buy a fleet of space shuttles?

It works for an individual because the assumption is that you actually pay back that borrowed that money. The Federal Government has never paid off its debts, it continues to borrow more and more and more because there has never been a day of reckoning and there is no one to hold them accountable because voters like RD simply continue to pass the debt along because some day every thing just HAS to come up roses.

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Huge IF. Larger still since the expansion of our economy is usually fueled by the very same debt increasing which causes mal-investment which causes the expansion to contract.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

The real reason that the government continues to run up debt is that the government structure is essentially unaccountable for it, but the politicians themselves are overly accountable to a combination of the voters, the press, and various interest groups that finance their campagins for what they spend, or rather, what they don't spend.

Regardless whether or not there's a significant difference between parties or politicians, there's a very significant difference to that particular politician if he's in office or not. Therefore, a politician will only ever advocate spending cuts to the degree that his constituents want him to. John McCain, for example, will be very likely to call for cuts to AmTrack subsidies but won't call for cuts to commuter air because that's what the citizens of Arizona use. People want someone else's spending cut if they want it cut at all, and large numbers of people don't want anyone's spending cut because they think only about the direct consequences to that person or group of not getting their government money, especially when it's back up by highly emotional wailing.

In the case of the President, he's doing that for the entire country, and hence no president can really advocate serious spending cuts. The differences are in how much is spent on what.

Congress has even created its own mechanism, "mandatory spending", to insulate itself from this, and create the appearance that it can't control spending. In the case of debt servicing, it really can't, but it certainly can stop piling on more and more debt.

The reason is that the President and the Senate are now too accountable to the voters and because they are elected directly (in the case of the Senate) or by an electoral college that is selected by state popular vote (President) they no longer have the insulation of a state legislature in order to allow them to act as a brake on the House of Representatives power to spend. The President isn't all that much of a problem, but direct election of Senators makes this incredibly problematic. Without a balanced budget amendment, or any other Constitutional limit on how much can be spent, the fiscal situation of the country is set to permanent free-fall.

Essentially, we removed all the safety features of the Constitution as far as government spending goes, and didn't add any new ones. We're not going to ever get state selection of Senators or the President back, but we might get a balanced budget amendment. Happily, the same circumstances that result in the population and the various organizations that create this situation demanding endless spending also might promote the balanced budget. It's a lot easier to promote the virtues of the balanced budget politically than it is to actually balance it and it might be quite possible to get the states to pass the amendment as a political expedient when the people don't realize until afterwards that "balanced budget" means that wailing in distress about widows and orphans won't work in the face of the fact that the government now simply has to cut.

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"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."