News What is the real reason the US is in so much debt?

[KingNothing]

Well, I guess it's settled then - the US should borrow Gold and re-pay in canned goods (by weight).

Yup. Nothing more to see here, guys. Case closed.

 

[Ryumast3r]

Wanting to spend even more than Bush is a reasonable viewpoint? I say nay. I say the spending under Bush was very unreasonable, and advocating spending even more is preposterous.

Take it into context, one was unreasonable because it didn't need to happen, the other is reasonable because if it hadn't happened, our recession would've become a great depression instead of just a recession.

Spending more in general, no, not reasonable. Spending more to prevent more damage was, imo, very reasonable.

Here we go again.

Yes.

 

[CAC1001]

Take it into context, one was unreasonable because it didn't need to happen, the other is reasonable because if it hadn't happened, our recession would've become a great depression instead of just a recession.

Spending more in general, no, not reasonable. Spending more to prevent more damage was, imo, very reasonable.

If you're talking about spending as in the bailout of the financial system, then yes, but if you mean the stimulus, there is no way to claim that that prevented any great depression. In fact, it may have only lengthened out the current recession we are in.

 

[CAC1001]

Rarity is half the equation, but it does have high utility. It's a ductile, malleable, durable metal that does not rust or tarnish, in addition to being a good electrical conductor. Gold has more practical utility for many uses than any other metal. If it were not scarce, it would be used for everything from building materials to car parts to silverware instead of cheaper, inferior materials. It doesn't "do much" because it's too expensive (scarce and valuable) to use, not because it's not useful.

Do you really think humans have valued gold so highly just because it's pretty?

Those things don't necessarilly make it valuable though. It may be great for electrical conducting and not rust at all, but it is rarely used for any of that because of its scarcity. So for all intents and purposes, it is pretty worthless. There isn't any demand for it for those particular things. It only really has value because humans say it does and because you can make shiny things with it.

It would be akin to if the world had only a tiny amount of petroleum and someone saying, "Petroleum has immense potential to be used in everything from manufacturing to consumer products to energy production. It is one of the most useful substances of all materials on Earth. If it wasn't so scarce, it would be used in almost everything to some degree." Now imagine that despite this, petroleum is valued very highly nonetheless, but is only demanded because it also is great for making shiny things.

If gold was a greyish sludge color, it probably would not be valued very highly at all.

 

[Al68]

Those things don't necessarilly make it valuable though. It may be great for electrical conducting and not rust at all, but it is rarely used for any of that because of its scarcity. So for all intents and purposes, it is pretty worthless. There isn't any demand for it for those particular things. It only really has value because humans say it does and because you can make shiny things with it.

That's putting the effect before the cause. Humans say gold has value because of its value, not vice versa. Humans make shiny things out of it because it's valuable. And value (per unit) is a function of scarcity, so it makes no sense to say it's scarce instead of valuable.

Is the relationship between scarcity and value that hard to understand?

 

[KingNothing]

Al, I don't think everyone carries the same definition of "value" in their head that you do.

 

[Al68]

Al, I don't think everyone carries the same definition of "value" in their head that you do.

I'm referring to value in the economic sense, which includes all value, not just whatever value you or I consider important or justified. And remember, we were referring specifically to value per unit mass, which logically must be a function of scarcity.

A pound of food is just too easy to produce to compare to gold. Easier to produce and plentiful means less valuable. A pound of dirt has virtually zero value, regardless of how important dirt is, because it is plentiful. That's just reality.

 

[BobG]

If gold was a greyish sludge color, it probably would not be valued very highly at all.

If the only way to use gold were to turn into gaseous carbon emissions, it probably wouldn't have the same value, either.

The fact that gold doesn't lose its value when used is important, as well.

Food is only useful for consumption, same as using petroleum for fuel. Worse yet, most food has to be consumed fairly soon or it becomes worthless even for consumption.

A better analogy of an artificially valued object would be diamonds. They're as valuable as flint. Incredibly useful provided one has the skill to cut or break it into useful objects and those objects last for a long time, but there's no way to return it to the potential it had before it was actually used. But both diamonds and flint have a longer lasting value than food.

 

[Vanadium 50]

Is the relationship between scarcity and value that hard to understand?

At best, it's only approximate.

Gold is $50K/kg. Rhenium, which has less than half the abundance and about 2% of the annual production is $6K/kg.

 

[Al68]

At best, it's only approximate.

Gold is $50K/kg. Rhenium, which has less than half the abundance and about 2% of the annual production is $6K/kg.

Sure, scarcity is one factor, not the only factor.

 

[CAC1001]

That's putting the effect before the cause. Humans say gold has value because of its value, not vice versa. Humans make shiny things out of it because it's valuable. And value (per unit) is a function of scarcity, so it makes no sense to say it's scarce instead of valuable.

Is the relationship between scarcity and value that hard to understand?

Humans have been using gold for things for thousands of years, not because it is really valuable, but because it is shiny. It is a shiny thing people like that is scarce. They didn't know about manufacturing or electrical conducting back then.

I can understand gold being valuable because there is high demand for it with very limited supply, sure, but I do not believe it has high demand because you could use it in automobiles, electronics, and so forth, as it is just too limited in supply for this. I think it is valued highly due to people just wanting it because it is gold and it is limited in supply. People value it highly because you can make shiny stuff with it. It is far too limited in supply to be valued highly as something to use in manufacturing or electronics because you can use alternatives easily in place of it.

It would only be valued highly for manufacturing and electronics if it was the only thing that could be used for those things.

 

[Al68]

People value it highly because you can make shiny stuff with it. It is far too limited in supply to be valued highly as something to use in manufacturing or electronics because you can use alternatives easily in place of it.

Part of it also is that gold is malleable, durable, corrosion resistant, and very dense, all which make it very useful for it's primary historical use: money. Gold's density and scarcity make it the ultimate store of value.

But this is one debate that was over long before it started: a pound of gold is more valuable than a pound of food in an objective sense, ie in the sense in which the particular reasons for its value are irrelevant.

 

[CAC1001]

Part of it also is that gold is malleable, durable, corrosion resistant, and very dense, all which make it very useful for it's primary historical use: money. Gold's density and scarcity make it the ultimate store of value.

Many things have been used as money historically. Money itself doesn't need any inherent value. Money is just what we use as a medium of exchange to exchange all the goods and services produced in society.

 

[Al68]

Many things have been used as money historically. Money itself doesn't need any inherent value. Money is just what we use as a medium of exchange to exchange all the goods and services produced in society.

Yes, but unlike fiat or representative money, gold is a store of value. Not sure what your point is here, but paper fiat currency clearly does not serve the same purpose that gold or silver money does (did).

It does not store inherent value.

 

[Vanadium 50]

Neither does gold and silver. If gold and silver both stored "inherent value", the ratio of gold to silver prices should be constant. In fact, over the last 40 years or so, this ratio has varied by a factor of ~6. Even if you ignore the silver bubble in 79-80, it's still a factor of 5.

 

[WhoWee]

Actually, If the US could borrow in Gold - I wouldn't mind the printing presses running 24/7 (as much).

 

[Al68]

Neither does gold and silver. If gold and silver both stored "inherent value", the ratio of gold to silver prices should be constant.

That's simply not true. Inherent value doesn't mean fixed or constant value. Of course the ratio between them, and other valuable commodities, varies, depending on supply and demand.

"Good store of value" just means that the commodity is compact, durable, and doesn't rust or degrade over time. It doesn't mean the value is constant relative to any other commodity.

But you bring up a good point in that the U.S. government initially tried to artificially "fix" the ratio between gold and silver at 15:1 by fiat, ie a bimetallic gold/silver standard for the dollar. (A silver dollar had 3/4 as much silver as a $20 gold coin had gold). When the actual gold/silver value ratio increased above the ratio fixed by law, silver coins started trading at a discount to gold coins relative to their marked value. They were inherently worth their metal content, and it was metal content, not a fixed value or buying power, that was guaranteed by the U.S. Mint. (I don't think I have to tell you what the penalty was for any officers of the mint who debased coinage).

 

[mugaliens]

The question is: "What is the real reason the US is in so much debt?"

How's this for an answer: We spent more than we had to spend. "The National Debt has continued to increase an average of
$4.03 billion per day since September 28, 2007." That's $13 a day for every man, woman, and child. Put other ways, that's $390 per month. Can you cover that debt? I can't. How about $4,745 every year?

http://www.brillig.com/debt_clock/" ...

With that, I could buy a replacement used car every year.

 

[turbo]

Debt is money borrowed against current or past expenditures. There is nothing mysterious about it. If our government can only raise capital through taxation, then it must raise taxes OR reduce expenditures to reduce debt.

Do we have to keep shoveling money to energy companies? Do we have to keep paying huge agri-businesses to keep growing corn to turn into over-priced ethanol to mix with our gasoline? Do we have to pay GE and other huge companies to export jobs overseas? Our system of government is designed (by perversion and not original intent) to do these destructive things (and many others) because people with a lot of money have bought off our elected officials and judiciary.

 

[mugaliens]

Debt is money borrowed against current or past expenditures. There is nothing mysterious about it. If our government can only raise capital through taxation, then it must raise taxes OR reduce expenditures to reduce debt.

Do we have to keep shoveling money to energy companies? Do we have to keep paying huge agri-businesses to keep growing corn to turn into over-priced ethanol to mix with our gasoline? Do we have to pay GE and other huge companies to export jobs overseas? Our system of government is designed (by perversion and not original intent) to do these destructive things (and many others) because people with a lot of money have bought off our elected officials and judiciary.

Exactly. SCOTUS didn't help in the least when it granted corporations the same access to lawmakers as the Constitution grants to citizens. I sincerely believe that move was diametrically opposed to the intent of our Founding Fathers, as well as to the vast majority of U.S. citizens.

Capitalism is good in many respects, but it has it's dark side, and that dark side must be kept in check lest it strike deeper into the heel of our democratic Republic.

 

[Al68]

Exactly. SCOTUS didn't help in the least when it granted corporations the same access to lawmakers as the Constitution grants to citizens. I sincerely believe that move was diametrically opposed to the intent of our Founding Fathers, as well as to the vast majority of U.S. citizens.

If our founding fathers had intended that U.S. citizens should have their political speech restricted in that way (by restricting the tools used for the speech, such as corporations), they would have said so. Instead they said the opposite.

Capitalism is good in many respects, but it has it's dark side, and that dark side must be kept in check lest it strike deeper into the heel of our democratic Republic.

The "dark side" I assume you're referring to isn't a part of capitalism, it's a part of politics and republican government. Blaming capitalism for government corruption is like blaming caged monkeys for animal cruelty.

 

[klimatos]

I believe that Alexis de Tocqueville once observed that Democracy will persist in America until the American Congress learns that it can bribe the America people with that people's own tax revenues.

 

[klimatos]

If our founding fathers had intended that U.S. citizens should have their political speech restricted in that way (by restricting the tools used for the speech, such as corporations), they would have said so. Instead they said the opposite.

Corporations--as we know them--did not exist at the time of the founding fathers. The idea of a stock company having existence apart from its stockholders ("corporation") did not then exist, and limited liability stock companies did not come into common use until almost the Civil War era. I believe that our founding fathers would have reacted with disgust at the idea of a body not being fully and legally liable for all of its actions and their consequences.

If corporations were prohibited from contributing to political causes, no U. S. resident would thereby be deprived of his or her right to free political expression. To the contrary, stockholders who objected to the political bias of the corporation, would not see their assets used to promote ideas to which they object.

 

[WhoWee]

Corporations--as we know them--did not exist at the time of the founding fathers. The idea of a stock company having existence apart from its stockholders ("corporation") did not then exist, and limited liability stock companies did not come into common use until almost the Civil War era. I believe that our founding fathers would have reacted with disgust at the idea of a body not being fully and legally liable for all of its actions and their consequences.

If corporations were prohibited from contributing to political causes, no U. S. resident would thereby be deprived of his or her right to free political expression. To the contrary, stockholders who objected to the political bias of the corporation, would not see their assets used to promote ideas to which they object.

I'll assume your intention is to include unions in this category?

 

[CAC1001]

Capitalism is good in many respects, but it has it's dark side, and that dark side must be kept in check lest it strike deeper into the heel of our democratic Republic.

Capitalism is no better than socialism morally. It's just that when paired with a free-market and a democratic form of government, along with certain checks and balances (laws and regulations), it is the system that works the least badly.

It's like democratic forms of government. Our government is just an example of a version of government that works the least badly.

 

[CAC1001]

Corporations--as we know them--did not exist at the time of the founding fathers. The idea of a stock company having existence apart from its stockholders ("corporation") did not then exist, and limited liability stock companies did not come into common use until almost the Civil War era. I believe that our founding fathers would have reacted with disgust at the idea of a body not being fully and legally liable for all of its actions and their consequences.

If corporations were prohibited from contributing to political causes, no U. S. resident would thereby be deprived of his or her right to free political expression. To the contrary, stockholders who objected to the political bias of the corporation, would not see their assets used to promote ideas to which they object.

Corporations existed at the time of the Founders, because Adam Smith was distrustful of them when they first came into existence I remember reading. He viewed them as miniaturized versions of socialism. For this same reason, Karl Marx embraced them (initially). No one at the time thought that corporations would become the dominant form of economic organization as they are nowadays, however.

 

[WhoWee]

Corporations existed at the time of the Founders, because Adam Smith was distrustful of them when they first came into existence I remember reading. He viewed them as miniaturized versions of socialism. For this same reason, Karl Marx embraced them (initially). No one at the time thought that corporations would become the dominant form of economic organization as they are nowadays, however.

Do you know anyone over the age of 30 that hasn't invested in the stock market - either a trading account, a company issued share (many types), or a 401K or other retirement plan? Are people who own shares of corporations somehow less moral? Don't public corporations provide a way for everyone to own a business and participate in the economy?

Would you prefer to go back to the days when the largest companies were privately held - when all of the wealth and power really was held by a few?

 

[CAC1001]

Do you know anyone over the age of 30 that hasn't invested in the stock market - either a trading account, a company issued share (many types), or a 401K or other retirement plan? Are people who own shares of corporations somehow less moral? Don't public corporations provide a way for everyone to own a business and participate in the economy?

Would you prefer to go back to the days when the largest companies were privately held - when all of the wealth and power really was held by a few?

I am not saying corporations are bad, I said that Adam Smith didn't trust them originally.

 

[klimatos]

I'll assume your intention is to include unions in this category?

Absolutely. I believe that political contributions should be limited to individual adult U. S. citizens only. No corporations, unions, companies, associations, partnerships, or political action groups. Individuals only, and those individuals must identify themselves in such a manner that anyone can verify that they are qualified to contribute. No anonymous donations of any kind.

These donations should then be a matter of public record. Any and all donations received by any political organization that could not be properly attributed would automatically go into the general fund.

Better yet, only those qualified to vote should be qualified to donate. However, there are probably constitutional problems with this restriction.

 

[ParticleGrl]

Do you know anyone over the age of 30 that hasn't invested in the stock market

Yes. I know quite a few people whose companies provide no retirement planning and who have no savings in the 30-36 age range. Part of being a scientists is living with low income and no benefits until you are in your late 30s.

Would you prefer to go back to the days when the largest companies were privately held - when all of the wealth and power really was held by a few?

It still is. The top 10% of wealth holders have 80%+ of all financial wealth (stocks, bonds,financial securities, etc).

 

[Al68]

Corporations--as we know them--did not exist at the time of the founding fathers.

Neither did video cameras, radio, or TV.

The idea of a stock company having existence apart from its stockholders ("corporation") did not then exist, and limited liability stock companies did not come into common use until almost the Civil War era. I believe that our founding fathers would have reacted with disgust at the idea of a body not being fully and legally liable for all of its actions and their consequences.

Nonsense. A corporation is a tool. Our founding fathers never reacted with disgust because a knife used to murder someone wasn't fully and legally liable for its actions and their consequences. Thinking of a corporation as something different from the knife in this context is absurd, if one understands that a corporation is used as a tool by real people to perform actions for them.

If corporations were prohibited from contributing to political causes, no U. S. resident would thereby be deprived of his or her right to free political expression.

They would be deprived of one of the tools they use for political speech: corporations.

 

[Al68]

Capitalism is no better than socialism morally.

It most certainly is better morally. Capitalism relies on voluntary transactions, not the use of force to coerce transactions. The initiation of force against citizens for economic purposes is immoral. In plain language, it's theft and oppression instead of voluntary transactions and liberty.

 

[CAC1001]

It most certainly is better morally. Capitalism relies on voluntary transactions, not the use of force to coerce transactions. The initiation of force against citizens for economic purposes is immoral. In plain language, it's theft and oppression instead of voluntary transactions and liberty.

Immoral stuff can occur with capitalism. If I own a water company in some country and I buy/bribe the government with favors and then charge people 2/3 their income for a water bill because I have a monopoly, and then I also get the government to make it illegal for the people to collect rainwater, well I mean that is the kind of capitalism that occurs in some of these Third World nations. That is why capitalism must be paired with a free market and liberal demoracy.

 

[Al68]

Immoral stuff can occur with capitalism...

I didn't say that immoral behavior of people was impossible in a free society. I said a free society was morally superior to a government using force against honest citizens for economic purposes.

That is why capitalism must be paired with a free market and liberal demoracy.

Capitalism should be paired with a government that exists for the purpose of protecting liberty, not taking it away.

"Liberal democracy" is pretty ambiguous, but if you are using the word "democracy" loosely to refer to a republic like the U.S., and the word "liberal" in the classical sense, ie libertarian, then I would agree.

If you are using the word "liberal" as a synonym for "socialist", as is common today, and the word "democracy" to mean that people can vote themselves someone elses property by thievery, then I would disagree.

 

[CAC1001]

"Liberal democracy" is pretty ambiguous, but if you are using the word "democracy" loosely to refer to a republic like the U.S., and the word "liberal" in the classical sense, ie libertarian, then I would agree.

If you are using the word "liberal" as a synonym for "socialist", as is common today, and the word "democracy" to mean that people can vote themselves someone elses property by thievery, then I would disagree.

By "liberal democracy," I mean the former, as in the classical definition of liberal. Hence the term, liberal democracy. A democratic system that protects liberty.

 

[Al68]

By "liberal democracy," I mean the former, as in the classical definition of liberal. Hence the term, liberal democracy. A democratic system that protects liberty.

Then I agree with you. It's a shame that the word "liberal" has been corrupted so badly by politicians and the media that we can't even use it anymore with any clarity.

 

[glueball8]

There are a lot of reasons, and it doesn't just come down to "hey we spent too much." I mean, of course we spent more than we're taking in... that much is obvious.

A lot of our debt is because of this... oh... I don't know... TWO TEN YEAR WARS WE HAVE BEEN FIGHTING. The cost of these wars has been $1,291.5 BILLION dollars.

This equals, just for those who don't like seeing a thousand billion 1.2915 TRILLION dollars. Just in the wars alone.

This is not the only reason we have a debt issue. So, on top of the 1.3 trillion dollars from the wars, we have a revenue issue.

Many people tend to forget that many of the large corporations that are multi-billion dollar corporations do not pay a lot of money to taxes. Not even the taxes that the U.S. government says they should be paying.

Basically, it comes down to not just a spending issue, but also a revenue issue. The U.S. is simply not earning as much as it "should." Sure, you can say we need to be more "responsible" but it's also not entirely the gov'ts fault since corporations and many wealthy americans "fail" to pay taxes, or the amount of taxes that they should pay.

I would love to go on about this, but there are also so many little intricacies on top of the two relatively simple issues I brought up that I don't really wish to type it all whilst in class.

Keep in mind I am not saying "TAX EVERYONE" and am not calling for 100% taxes. Not even close. I'm just saying that people often look at this issue as "hey we spent too much, it must be healthcare, or the gov't workers wages" when really there's so many little things that add up, and a lot of big things that add up.

One small thing: The U.S. has 2x as many "supercarriers" as the ENTIRE WORLD has regular carriers. Supercarrier is defined by me as being a carrier that carries 120+ (unclassified) jets, whereas most of the world's carriers do not carry even 40 jets, and a lot of them just carry helicopters, or are dry-docked.

Things like this add up over time, even if they account for less than 1% of the budget.

Yup, I think its spending unnecessary money and they added up to a huge debt. Sometimes spending on so much on defense is really a waste. Plus the US government spend around 7.4 Trillion (!) on nuclear weapons. (I'm guessing 5 Trillion of that are totally unnecessary. They do give people work and improve job rates... but they give no real benefits to society. Its like moving a mountain over there and back 10000 times, sure it give people something to do but you end up borrowing money to pay those people.)

 

[edpell]

I have not seen it said, I may have missed it, I would say the reason we are in debt is we spend more than we make.

Why? Because it produces immediate satisfaction and the idea of future pain is an abstraction that has little influence on peoples minds/actions/reasoning. Some even expect to be dead or out of office when the pain comes and they do not care (simple selfishness).

 

[Office_Shredder]

Plus the US government spend around 7.4 Trillion (!) on nuclear weapons

This is an amazing statistic considering the whole DoD budget is somewhere around one tenth that number
http://en.wikipedia.org/wiki/Milita...es#Audit_of_Implementation_of_Budget_for_2010

 

[glueball8]

This is an amazing statistic considering the whole DoD budget is somewhere around one tenth that number
http://en.wikipedia.org/wiki/Milita...es#Audit_of_Implementation_of_Budget_for_2010

That's from the start of research of nuclear bombs in US. Not this year. I remember it as a estimate too, since the US government doesn't release this.

 

[edpell]

There are only four big federal spending items 1) military about 1000 billion, 2) health care about 800 billion, 3) interest about 400 billion, and 4) ag subsidies about 300 billion. If we cut all of these by 50% we would almost have a balanced budget. Social security is of course off-budget because it has its own tax base and 2.4 trillion in treasury notes.

Why? Because no one wants to cut any of these.

 

[WhoWee]

Social security is of course off-budget because it has its own tax base and 2.4 trillion in treasury notes.

 

[Ryumast3r]

I have not seen it said, I may have missed it, I would say the reason we are in debt is we spend more than we make.

Why? Because it produces immediate satisfaction and the idea of future pain is an abstraction that has little influence on peoples minds/actions/reasoning. Some even expect to be dead or out of office when the pain comes and they do not care (simple selfishness).

Look up a couple of posts, and several times in this thread:

There are a lot of reasons, and it doesn't just come down to "hey we spent too much." I mean, of course we spent more than we're taking in... that much is obvious.