Well stated. I was surprised to see someone on this forum jump in with a real-world explanation instead of the knee-jerk reaction TurquoiseB had to offer.
The bottom line - no one would be loaning the US $2B/day (which comes out to much higher than the projected deficit for this fiscal year, so I'm assuming you're exaggerating for effect) if they didn't expect to get that money back plus interest. The challenge for the US is to continue to be the innovative, "free" place it has mostly been over the years, so that we continue to inspire confidence in the world's investors. --- In [email protected], akasha_108 <[EMAIL PROTECTED]> wrote: > --- In [email protected], TurquoiseB wrote: > > Wake up. The United States of America has to borrow > two billion dollars a day to stay afloat. I'd say > that the world was supporting them. > > > ---- > > A similar claim could be made of some one buys that $1,000,000 house > down the street. He only has $200-300 k in assets. He is way over his > head in debt. Is he a total loser? Not really (housing bubble aside.) > The reason banks are willing loan him the money is that his earning > power is such that he can cover the loan payments. AND he has a good > probability of being able to do so into the forseeable future. > > Similiar with the US. Foereign countries see the US as the, or among, > the safest places to invest. And see the US gov't as one of the most > reliable debtors -- that is they "never" default on loans or bonds. > > Why do some countries have so much to invest in US treasuries? Well, > China has a greatly undervalued currency. They keep it low so that > their exports appear cheap, thus propping up their economy. In the US > and other importing countries, they get a "bargin" -- goods with a > chinese gov't 30% discount. Thats a good deal for US consumers and > businesses. > > Why does the US issue its level of debt? The cartoon version is > similar to the homeowner -- don't pay 100% cash for a long term asset > -- borrow funds to match payments over the life of the asset. But in > this case its not houses but buildings, bridges and roadways. (Its > actually more complex -- the unitary budget process etc. ) Another > reason for borrowing is to stimulate the economy in times of > recession. Thats what has happened since the 2000 downturn in the > economy. And build up a surplus in times of strong economic growth. > Thats what happened in the last part of the 90s. > > So gov't borrowing is not per se bad. Running trade deficits is not > per se bad. Having a $2 billion daily debt service is not necessarily > bad per se. It can in some circumstances be a good thing, and does not > in itself indicate imminent demise. > > What are the conditions when that level of gov't borrowing is a bad > thing? Thats the relevant case to make. Which you have not begun. ------------------------ Yahoo! Groups Sponsor --------------------~--> Get fast access to your favorite Yahoo! Groups. Make Yahoo! your home page http://us.click.yahoo.com/dpRU5A/wUILAA/yQLSAA/JjtolB/TM --------------------------------------------------------------------~-> To subscribe, send a message to: [EMAIL PROTECTED] Or go to: http://groups.yahoo.com/group/FairfieldLife/ and click 'Join This Group!' Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/FairfieldLife/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
