On Jan 26, 2013, at 2:11 PM, Eric Walker wrote:
On Sat, Jan 26, 2013 at 12:16 PM, Edmund Storms
<stor...@ix.netcom.com> wrote:
No Steven, what you say is not the issue. The issue is that money
has been lent to the US in various forms and by various people and
they want their money back eventually. Meanwhile they want to be
paid interest. The US is rapidly approaching a level of debt such
that if the interest rates rose to normal levels, we could not pay
the interest without shutting down significant parts of the
government. The US is presently printing dollars to cover this
expense. As a result, the debt is growing because this money is
borrowed from the Federal Reserve, which is a private bank owned by
individuals who want to be paid. At some point in the near future,
the debt will be so large, it simply can not be paid. At that point,
the US is in default, and the financial system of the world
collapses. This means starvation and civil strife. The problem is
serous and can not be solved without great pain, which means further
loss of jobs. The fools in Congress over the last 20 years have
created a no win situation that very few people understand.
I should clarify an earlier remark I made about people who propose
deep budget cuts not wanting to think through the implications.
This is obviously not the case for everyone making such a proposal,
as Ed's thoughtful analysis here shows. What becomes clear is that
there is a complex situation that must be carefully worked through.
I see no need to slash government entitlements that are basically
self-funding and which, if anything, help to bring down costs. But I
also appreciate the reasoning behind calls to limit the amount of US
government debt that has been issued.
Debt is good within limits, Eric. The problem comes when the amount of
debt exceeds the ability to pay back or even to service, i.e. to pay
the interest. This is why people lost their homes. The US government
has now reached a debt so large that it cannot be paid back and can
barely be serviced. This is a fact. We had been living off China,
who lent us the money we had spent on items made in China. China has
largely stopped doing this. To keep interest rates low on this debt,
the FR is printing money and lending it to the US government, i.e.
buying Treasury bonds , which artificially keeps interest rates low so
that the interest payments are low. So they are fixing one major
problem by creating another. As the debt grows, the amount of interest
grows. At some point, the government does not have enough money to pay
this interest without taking the money from a government program. The
hope is that the economy would repair itself and start to generate
income for the government before the debt become impossible to
support. That hope has not been fulfilled. So, we are essentially
having to sell the furniture to pay the mortgage. The next step is on
the street. The family cannot agree who's bed to sell, so the sheriff
will decide when the house is foreclosed. God help us all, everyone.
Ed
As with any complex problem, there are no simple solutions.
Eric
