[Vampyr]

mike777, on 2014-January-11, 03:07, said:

but what is that? again vamp you seem to not care...really

over and over in your posts you say spend other peoples money

I'm not sure what you mean. Is it that I believe in a single-payer healthcare system? I don't remember commenting on anything else of a financial nature.

My post above was tongue-in-cheek. About whether I care, I don't really know enough; I prefer to leave the caring or not caring to people with far better economic knowledge than I have.

[Al_U_Card]

Just a quick two-part question. At 12.3 trillion national debt, who is the money owed to and where did they get the money that they loaned out, in the first place? Thanks.

[kenberg]

Al_U_Card, on 2014-January-11, 07:12, said:

Just a quick two-part question. At 12.3 trillion national debt, who is the money owed to and where did they get the money that they loaned out, in the first place? Thanks.

Although I am pretty sure that this isn't your point, this has got me to wondering if "ordinary folks", whoever they are, still buy government bonds. My parents bought them, some of them in my name. My uncle would sometimes send me a $25 bond, quite a bit in the 1940s, on my birthday. They, the bonds not my uncle and parents, matured sometime when I was in graduate school if I remember correctly. Do people still do this? It seems like an historical relic, like making Mayday cards and baskets in elementary school to bring home to our mothers. Maybe I am just out of touch.

Back to the intent of the thread. Vamp's note may have been tongue-in-cheek, but in fact I think that yearly interest payments on the national debt is significant, some $222 billion, according to Pew:
http://www.pewresear...ou-should-know/
And this is with the interest rates held lower than I expect are sustainable.
Actually the Treasury site at http://www.treasuryd.../ir_expense.htm says interst payments for the last three months of 2013 totaled 127 billion which is a considerably more than 222 if extrapolated to twelve months.
So the numbers vary with the source, what else is new? No doubt they are measuring different things.

As with so many things, a full understanding including all of the details requires a full-time commitment, if it can be achieved at all. But it seems fair enough to say that large debt implies large interest payments and large interest payments can have a restraining effect on what the government can do to help the economy, fund defense, promote education and the general welfare.

None of this means that we need to join the Tea Party, not at all. I'm not up for boarding ships and throwing tea overboard, not literally and not metaphorically. But the debt is a problem.

[Al_U_Card]

That is a lot of interest to pay to have so little interest in who receives the payment and where they obtained the funds to loan out in the first place. The question still stands. Who are they and where did the reserves (that are costing us so dearly) originate?

[barmar]

Al_U_Card, on 2014-January-11, 07:12, said:

Just a quick two-part question. At 12.3 trillion national debt, who is the money owed to and where did they get the money that they loaned out, in the first place? Thanks.

People who bought savings bonds and treasury bonds, institutions that bought treasury bonds (banks, mutual funds, insurance companies, pension funds), and other countries (China is our biggest creditor, right?).

Where did they get all the money? From their wages, revenues, or returns on other investments.

[Al_U_Card]

barmar, on 2014-January-11, 14:26, said:

People who bought savings bonds and treasury bonds, institutions that bought treasury bonds (banks, mutual funds, insurance companies, pension funds), and other countries (China is our biggest creditor, right?).

Where did they get all the money? From their wages, revenues, or returns on other investments.

This helps

So, the US Treasury basically prints up "securities" and then sells them to "creditors", right? (Which other countries, including my own, also do?)

[blackshoe]

sfi, on 2014-January-10, 00:37, said:

1835 was the only time the US had a zero national debt. Shortly after that the country went into the longest depression in the nation's history.

Planet Money discussed this in 2011.

This certainly proves that having no debt causes depressions.

[blackshoe]

barmar, on 2014-January-10, 11:28, said:

I vaguely remember my 8th or 9th grade Social Studies teacher telling us that the definition of a "nation" is that they can essentially have unlimited debt. They can print money, they can raise taxes, they decide their own credit limit.

They can, yes. Doesn't mean they should. Actions have consequences. Even nations don't get free money.

barmar, on 2014-January-10, 11:28, said:

Government debt is definitely necessary to the economy. How many things are tied to US Treasury rates? When someone wants the "safest" investment, they buy US bonds. Where would they go if we stopped selling bonds?

You're basically arguing that government debt is necessary because you can't imagine a society without it. Sorry, but that's a silly argument.

US bonds are considered safe because the US has never (so far) defaulted on its debt. What happens when we do?

That the US has the largest and most powerful "economic engine" the world has ever seen does not mean that we can continue on our present course indefinitely.

[blackshoe]

ArtK78, on 2014-January-10, 11:51, said:

Obama inherited a disaster from Bush. The immediate effect of the fix to the economy was a continuation of the increase of the debt in excess of the rise in GDP. That is now behind us, and has been for some time.

Quite frankly, while I am reasonably sure that the eventual success of Obamacare will be a large part of President's Obama legacy, his fix of the economic disaster left to him by Bush should also be viewed very well in the light of history.

Are you arguing that Bush caused this economic disaster, or that he failed to fix it? Either way, what precisely did Obama do to fix it? Or is it simply that it somehow got fixed on Obama's watch?

[blackshoe]

barmar, on 2014-January-10, 16:34, said:

No one is going to foreclose on Yosemite National Park.

It would be ridiculous to suggest that anyone can foreclose on Yosemite National Park - unless you know of some mortgage holder on that property that I've never heard of.

[blackshoe]

kenberg, on 2014-January-11, 08:33, said:

Although I am pretty sure that this isn't your point, this has got me to wondering if "ordinary folks", whoever they are, still buy government bonds. My parents bought them, some of them in my name. My uncle would sometimes send me a $25 bond, quite a bit in the 1940s, on my birthday. They, the bonds not my uncle and parents, matured sometime when I was in graduate school if I remember correctly. Do people still do this? It seems like an historical relic, like making Mayday cards and baskets in elementary school to bring home to our mothers. Maybe I am just out of touch.

From Wikipedia:

Quote

Savings bonds are debt securities issued by the U.S. Department of the Treasury to help pay for the U.S. government’s borrowing needs. U.S. savings bonds are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.

and

Quote

In 2002, the U.S Department of the Treasury's Bureau of Public Debt made Savings Bonds available for purchasing and redeeming online. Finally, on January 1, 2012 banks and other financial institutions terminated their sales of bonds. Currently, Americans can only buy U.S. Savings Bonds online at a government website.

and also this overview:

Quote

•Minimum Purchase: $25

•Maximum Purchase: $30,000 per person per year

•Interest: 90% of 6-month average of 5-year Treasury security yields, added monthly and paid when the bond is cashed

•Minimum Term Of Ownership: 12 months

•Early Redemption Penalty: Forfeit three most recent months' if cashed before 5 years

When I was at boot camp in the Army (1967), we were "encouraged" to allot some portion of our pay to the purchase of these bonds. So, at Ft. Jackson, when they suggested this, I signed up for a $75 bond - which cost me some $40 a month, almost half of my base pay. Okay with me, I didn't figure I was going to need much cash while in boot camp anyway. But then after a week at Ft. Jackson, some of us were sent to Ft. Gordon, due to "overcrowding". There, some LT got up in front of us and told us the paperwork for our bonds was "lost" and we would have to resubmit it. So I did. Payday came around and I got five bucks. Why? Because that sonofabitch lied - and I ended up with two $75 bonds taken out of my pay. It took three months to get that straightened out. Fortunately for both of us, I never saw that LT again.

[blackshoe]

Many years ago, I read a "how to manage your money" book that suggested the following rules:

1. Establish an "emergency fund" of three to six months' expenses in highly liquid investments (like a savings account).
2. Establish a "base fund" of ten percent of your net worth. Revise it (hopefully upwards) every year. Otherwise, never touch it.
3. Allocate ten percent of your income to your investment fund every month.
4. Never borrow to pay day to day expenses.
5. Never borrow to buy depreciating assets (such as a car).
6. Borrow to buy appreciating assets (such as real estate) only when the expected return on the investment exceeds the interest rate on the loan.

I wish I had always followed this advice.

[Al_U_Card]

From my link above:

Debt Held by the Public - Foreign governments and investors hold about half of the nation's public debt. A little over one-fifth is held by other governmental entities, like the Federal Reserve and state and local governments. Fifteen percent is held by mutual funds, private pension funds, savings bonds or individual Treasury notes. The rest is held by businesses, like banks, and insurance companies and a mish-mash of trusts, businesses and investors. Here's the breakout (as of March 2013):
Foreign - $5.724 trillion
Federal Reserve - $1.794 trillion
State and Local Government, including their pension funds - $703.5 billion
Mutual Funds - $946.4 billion
Private Pension Funds - $457.7 billion
Banks - $341.4 billion
Insurance Companies - $263.3 billion
U.S. Savings Bonds - $181.7 billion
Other (individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors) - $1.497 trillion.

So the countries get their credit from their workers (taxes) and balance of payment trade suplus? I wonder where the banks get theirs? Surely from savings deposits....

[sfi]

blackshoe, on 2014-January-11, 18:21, said:

This certainly proves that having no debt causes depressions.

That's not a conclusion I or the article drew.

[1eyedjack]

jjbrr, on 2013-December-29, 17:35, said:

Would someone explain to me what are the units of the vertical axis supposed to be? Deaths per mile? per 100 miles? thousand? thousand deaths over the entire US?

[Vampyr]

1eyedjack, on 2014-January-11, 21:45, said:

Would someone explain to me what are the units of the verticle axis supposed to be? Deaths per mile? per 100 miles? thousand? thousand deaths over the entire US?

My concern on seeing this post was that it was too late for nominations for Post of the Year.

[1eyedjack]

Vampyr, on 2014-January-11, 21:48, said:

My concern on seeing this post was that it was too late for nominations for Post of the Year.

There’s always next year.

[jjbrr]

1eyedjack, on 2014-January-11, 21:45, said:

Would someone explain to me what are the units of the verticle axis supposed to be? Deaths per mile? per 100 miles? thousand? thousand deaths over the entire US?

per 100,000 population afaict

eta: lolwiki

[32519]

Ever figured out how much your government siphons off of your hard earned money? Here is but a short list of the obvious areas where you keep contributing to the government coffers –
1. During the month you contribute via:
a. VAT or GST (whichever is applicable in your country) on most of what you buy
b. Sin tax on booze and cigarettes
c. Fuel tax/ levy every time you fill up
d. Toll fees every time you pass through a toll-gate (Excuse me, but why must I pay a third time for the use of public roads? Is that not supposed to be covered by the fuel levy and my monthly/annual tax?)
e. (Tax on luxury items/imports are normally larger items and not something we buy every month)
2. At the end of the month, PAYE gets withheld from your salary and handed over to the tax authorities.
3. Annually you need to submit your tax return. The lucky ones get a tiny refund. The unlucky ones end up making another substantial contribution to the government coffers.

But that is only part of the story.
4. Every month a portion of your salary gets paid over to your retirement funding administrator who invests it on your behalf (after taking a substantial commission for themselves to do so). In my own country it is compulsory for these retirement funds to invest a % of what they administer into some or other government bond. So there the government gets use of some more of your money.
5. Many of you who still have some surplus money left over after meeting all your other obligations “dutifully” buy more of these government bonds.

What is the VAT/GST rate in your country? In my own country the rate is currently 14%.
How much of the pump price you pay for fuel is loaded with all sorts of government levies? In my own country well over a third of the price is tax.

The government fleeces us around every corner and still they somehow manage to run up a national debt, for the USA in excess of USD 17 trillion. Somehow we manage. Somehow we survive. If we don’t we get liquidated by our creditors. Check out this list again List of Countries by External Debt. Worldwide governments are effectively bankrupt. A fresh trigger that sparks a collapse/recession/depression does not leave many of them with any wriggle room to stimulate their economies again. I fear the consequences.

[barmar]

blackshoe, on 2014-January-11, 18:46, said:

It would be ridiculous to suggest that anyone can foreclose on Yosemite National Park - unless you know of some mortgage holder on that property that I've never heard of.

My point exactly.