The immorality of debt

When an individual dies, his/her kids are not liable for any debts outstanding. But gov't debt is a different matter, the national debt we are accumulating now has to be serviced. We are obligated to at least pay the interest on that debt, which last year was $420 billion dollars. That's a lot of money that could be spent on infrastructure or whatever, which leads to the question: Is it immoral for us to be creating more debt that our kids and grandkids are going to have to deal with?

Me, I have a problem with that. My parents and grandparents lived through the depression in the 1930s, and the life lessons they learned were passed down to me. You lived within your means and made do with what you had, cuz if you went into debt you could lose your house. Other thing is, it used to be that each generation wanted to pass on a better life or at least a chance at a better life to their offspring than they had. I don't doubt that ideal is gone, but it sure doesn't look like it is as pervasive and strong as it used to be. Looks to me like we're handing a steamin' pile of dung to future generations, and we're not even trying to mitigate it.

Do you think it's immoral to spend money that we don't have, thereby creating more debt that has to be serviced into perpetuity? Might not be that bad if it was minimal, but 10 or 12 years from now it could be over a trillion bucks a year just on interest payments if the interest rates go up, as they surely will at some point.

 

If you check out Obama's budget projection for the next ten years, you'll find that for the next couple of years the deficit spending will be $550 billion to $700 billion, then it quickly ratchets up to $1 trillion again supposedly to pay the increasing costs of Obamacare. So...deficit spending will be around for a very long time and I doubt this will change much based on which party is in office. It's kind of like our deficit spending has become TOO BIG to stop! And all of this spending exacerbates the annual debt interest payment which just happens to be a priority line item in the budgets...paid prior to any infrastructure projects! It appears to me that Obama and probably future presidents are waiting for Americans to consume themselves into economic prosperity...any day now GDP will increase and unemployment will drop to 5% and happy days are here again. In a few short years the national debt will be $20 trillion and this is a gigantic number. In order for future generations to pay down debt, first we and them must reduce deficit spending to $0...and this can be accomplished by reducing government, greatly increasing tax revenues, or some of both. Because IMO our deficit spending has become TOO BIG to stop, and assuming a generation is about 25 years, I'm betting it will take 25 years just to reduce deficit spending, then even if we have another $500 billion per year to pay down debt, this will require another 50 years, so in this mythical and/or imaginary scenario, at a minimum the next three generations will be paying for our excesses today. Of course there is zero indication this can happen since deficit spending will increase so someone much smarter than I can make an educated guess where we are headed...

 

IMHO, we need a paradigm shift in the concept of what gov't is and what it's supposed to do and not do. And an attitude change in the political system, if we don't hold our political leadership accountable by voting their sorry asses out of office, then we'll deserve the gov't we get. Which could eventually be another great depression as bad or worse than the 1930s. Gonna be a very hard time for everybody when that happens.

 

Depends what we spend the money on.

 

Good point. On an individual level, sometimes a person takes on a debt that allows him/her to prosper more than the cost of the debt. Same deal on the national level, the problem lies in the most effective and efficient ways to spend taxpayer dollars to get the best bang for the buck. We haven't been doing that for like forever, but up until lately we got away with it. Lately, not so much. If we are overspending for political reasons, which we are, and we have to borrow money to do that, then I contend that is immoral. And I do not exempt either political party from guilt.

 

I probably agree with you generally. If we acquire debt to build something that future generations might benefit from like a dam, then it could be an okay investment. If we spend the money on something like free needles for drug addicts, probably not so much since the person paying for that needle 50 years from now receives no realistic benefit from that needle. My general philosophy is I don't care what we spend money on, just so long as we collect the money we are spending when we are spending it. If it is going to be debt spending, then we need to put our needs ahead of our wants.

 

Government is a representation of People...so what we have today mirrors what People want...when People can understand where change provides benefits then things might improve...but I suspect People today are more concerned with their own benefits and not necessarily those which will benefit the nation...we will not be changing paths for a very long time...

 

Possibly, but IMHO if we don't change our path pretty damn soon then we're looking at some very big fiscal problems that will not go away.

 

A path of this bandwidth cannot change course quickly...to do so proactively could take 100 years and reactively it will depend on how much pain people must endure...

 

Our net interest payments were far less than $420 billion. In the $200 billion range, which is pretty much normal. The problem you guys have is you compare what debt means to a household/company versus what debt means to a fiat issuing country. It's not immoral at all and will be able to be paid and serviced to infinity.

 

You are making the same argument people have been making for the past century. You guys are always wrong and just change the numbers.

 

Immorality is irrelevant.

YOU ARE NOT A GOVERNMENT.

Stop making impossible comparisons. Government debt and household debt are functionally different. Accept it and GET OVER IT.

 

You tell me how you put it at $200 billion. Sounds like you read some disingenuous liberal website that played statistical tricks with the money.

So you think you can just print trillions of extra money to pay the debt without consequences? That's the problem you guys have, you think money grows on trees and can be created and put out there and no other country will do anything about it. You don't seem to care at all about the problems and issues we are creating now that our kids and grandkids will have to deal with. Spend like a drunken sailor without worries, cuz this is what we want and this is what we think should happen whether we can afford it or not. Aside from the responsibilities with paying the interest we are ringing up on their credit card, we are leaving posterity some really bad examples for how to deal with the difficulties that life presents. And that in and of itself is immoral.

 

I don't know how any adult person can exhibit this kind of attitude. To not care at all about the financial situation we are going to leave to the next generation is mind-boggling.

 

No, I just understand economics and our monetary system. The number you listed is the gross interest including interest paid to the Federal Reserve and interest paid on Intragovernmental Debt. Both of which are an asset and a liability to the government which means nothing to the tax payer.

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You have to be an educated mature adult to understand what he is saying. You are not the government. The rules you live by are not the rules the government lives by. It's hard to comprehend this stuff but when you are so convinced that you know what you are talking about just because it's based on your personal life experiences is very unscientific.

 

.I know what he and you are saying, I just think you're both dead wrong. Too bad neither or you addressed the points I made, I suppose that's because you had no answers. Made up facts, illogical assumptions, and demagoguery, the usual crap from the left. This is the truth right here:

Our national debt is rising.
Interest rates are low right now, but they won't stay low forever.
The $17 trillion dollar debt we have now is peanuts compared to the unfunded liabilities our gov't has.
The deficits will again be over a trillion dollars annually in a few years, we are going in the wrong direction fiscally.
IOW, we have not addressed the problem. Instead we will be passing it down to those who will follow us.

This uneducated, immature kid regrets that his unscientific personal life experiences leads him to believe that the failure to deal with this issue is irresponsible and immature. But here's what I know: when you're already paying over 400 billion a year just in interest according to the US Gov't (link provided above) and you are increasing the principal of the debt, and interest rates on that debt will eventually rise to the point where the US will be paying payments approaching a trillion bucks a year by some estimates, well that is a problem. No surprise that the left doesn't care or tries to mitigate the issue away by monetizing the debt; there are consequences to that, but since you guys do not accept that the problem even exists then I suppose it's a waste of time to take this discussion any further.

 

Not at all. It's because your conclusions aren't based on anything but your irrational fear of debt. You haven't any actual evidence that the debt is immoral or unsustainable.

Who cares? And why are we passing it down... did you have to pay for the debt the previous generation created? You are just saying statements with out any factual backing whatsoever. No one will ever be left with the "bill" for our national debt. And if we ever had to pay off the national debt we would be using the money the national debt created in the first place. It's a complex subject but if you are unwilling to learn you will never understand what intelligent people are talking about.

You still haven't explained why $400 billion in interest (even though it's not really $400 billion) is bad. You are just using a logical fallacy. The problem you are explaining doesn't exist, that is why I do not accept it. I'm scientific and objective. You have to drop your anti-government ideologies to understand why the national debt will continue to rise to infinity and we'll never have a problem paying interest or paying maturing debt. Everything you are providing is just conjecture.

 

You haven't explained why the interest on the debt isn't really over $400 billion either. Where's your link that supports your claim? But you asked why $400 billion in interest payments is bad, so I'll go first and explain that. If the gov't is paying $400 billion in interest to the debtholders, that's $400 billion the gov't isn't using for something more productive like oh, I don't know, education, medicare, all that stuff. And it's a growing expenditure that gets bigger every year, maybe approaching a trillion dollars annually in another 10-15 years. It crowds out the spending that we could be doing for better purposes, whatever we might think that should be.

See, I know what you're thinking, then let's monetize the debt by creating more money. Are you aware that increasing the money supply, particularly by that much is highly inflationary? The dollar wouldn't be worth the paper it's printed on, and BTW what do you think the rest of the world will be doing? They'll be firing up their money machines too, resulting in world-wide inflation.

Scare talk you say; never happen. Tell you what, if you google 'monetizing the debt' I'm thinking you find a lot of people saying that an increase in money supply without an increase in productivity and value is inflationary. And I have to say, when I see people saying the national debt can rise to infinity and we'll never have a problem paying the interest, now that's really scary. Sure, we haven't seen signs of impending inflation to date, but many are concerned. Including Janet Yellen, who recently said the Fed is ratcheting back the QE program will continue. Why? Fears of inflation.

 

The amount they spend on interest has nothing to do with how much they can spend on anything else. And I already explained why the $400 billion isn't what is actually spent. Intragovernmental debt and interest paid to the Federal Reserve.

The debt is already monetized the second it is created. We can't monetize our own made up money.

Fears of inflation our a good thing. Much better than fears of deflation. And we don't monetize our debt. QE does not create inflation. Bank lending, deficit spending, and velocity create inflation. It's a very complex subject, you need to understand a lot of moving parts to understand what I'm talking about. It can't be explained in two or three sentences.

 

Yeah, fear of inflation IS a good thing, living with it is a different matter. Were you around during the Carter years when inflation was rampant and home mortgages were north of 20% in some places? Doesn't sound like it.

You can say we don't monetize our debt, but I'm thinking there are plenty of economists who would disagree.

 

There's plenty of economists who disagree on a lot of things. I happen to know we don't monetize our debt. And in fact the Federal Reserve does agree with me also. If we want to compare a fear of deflation vs inflation you will always lose. The worst depression in our country's history was a long period of deflation. The second worse we have done everything we could just to prevent deflation. It's not even a secret anymore. The Federal Reserve will do anything it can to prevent deflation.

 

If I had to argue a stance on monetization, I would say banks monetize our money supply. I say this because the Federal Reserve's (FR) actions do not affect the private sector money supply as that money already exists. From a banking/government perspective you can say that the FR is monetizing the debt with it's policies. But to the non-bank public, the only thing it affects is interest rates... which can lead to an increase in bank lending, but that's a different process.

The Federal Reserve defines their policies based on their intent. If it's permanent they believe they are monetizing the debt because those reserves can be used to finance government spending. Notice how they believe the monetary base is what finances the government. This is interesting because they are basically confirming that the nonbank-public is pretty meaningless when it comes to funding the government.

As for their recent policies, they view them as temporary transactions so in their view they are not creating a permanent supply of money to purchase government debt and therefore not monetizing the debt.

When all is said and done it's really just a matter of semantics and monetizing debt in a fiat issuing nation like the United States is not the same as monetizing debt in a commodity based or restrictive monetary system.

http://www.stlouisfed.org/publications/cb/articles/?id=2346

 

The latest numbers I have found say that the Fed has about $1.8 trillion in US Treasuries, which is also known as US GOV'T DEBT. The Fed buys those treasuries by issuing credit, essentially creating fiat money out of thin air. That is monetizing the debt. The Fed itself may not admit it, or call it something else, but that is precisely what is going on.

 

Like I said in my last post. You can make an argument from a banking/government perspective that the Fed is monetizing the debt. But that $1.8 trillion simply sits in an account at the Fed and is exchanged amongst banks. Has nothing to do with the nonbank public. The reason I argue that they are not monetizing the debt is that the $1.8 trillion already exists in the broad money supply. It's highly complex and you can make an argument either way. Because banks can use reserves to purchase government debt so from their perspective that can be seen as monetization. What this really shows is how the private sector literally plays very little role in the financing of our government.

 

This is double speak IMHO, what is the Fed going to do with the $1.8 trillion in US Gov't securities they have on their books now? So, once those treasuries are gone, the Fed can say look, we ain't got no debt here, we didn't monetize the debt. Well, yeah they are, they're buying US debt securities by issuing credit for them, and that is exactly what monetizing the debt means. They've been doing it since 2009, we can discuss the efficacy of it but not the reality. The Fed is buying US Debt instruments by issuing credit, in effect creating new fiat money that didn't previously exist. That is monetizing the debt, it matters not at all whether there is any new currency created or not.