According to what’s occurred in Greece and other European countries, we all know from real-world signs that countries from the developed world can spend themselves into debt trouble. This has led. Where’s the point? Where’s the point where fascination with the debt becomes too much of a burden? Most famously, a couple of economists crunched numbers and warned that countries may reach a tipping point when debt is currently about 90% of GDP. I wasn’t persuaded by this search for 2 reasons. To begin with, I think that it’s a lot more important to concentrate on the inherent disease of too much government, and not get fixated about the symptom of too much borrowing. When I go see a doctor due to aggravation and he finds I have a brain tumor, I want him to deal with that issue and not get diverted from the fact that mind ache is among the signs. Secondly, there are large gaps between countries, and those differences have a huge effect on if investors are willing to purchase government bonds. The burden of debt is currently about 240% of GDP in Japan and the nation’s economy is moribund, for instance, however there is no indication that the “bond vigilantes” are about to pounce. On the other hand, investors are understandably leery about buying authorities debt, even though accumulated red ink is greater than 40% of economic output. So what about America, in which government borrowing in the private sector currently accounts for 82% of GDP? Have we reached a danger point for government debt? Based on Matthew Yglesias (who says I’m insane and absurd), the solution is no. I have many comments on this movie. 1. Some folks have complained that the movie is deceptive because it focuses on debt held by the general public in contrast to the gross national debt. The movie could have been more explicit and explained why that choice was made, but I have no objection to the focus on publicly-held debt. After all, that’s the measure of what government has borrowed in the private industry. The gross national debt, in contrast, also has money the government owes itself (such as the IOUs in the Social Security Trust Fund), but that kind of debt is just a bookkeeping entry. 2. The movie maintains that inflation is low and therefore we don’t have to worry that authorities might have to “print money” at some point to finance additional debt. I don’t think there is any immediate threat that the Fed is going to be placed in a situation of financing the national administration, but I nevertheless don’t like this particular logic. It’s kind of like saying that it would not be a problem to start eating ten leagues per day because you currently aren’t thick. The truth is that low inflation today doesn’t mean low inflation. 3. I reject the premise which the economy is driven by interest rates. Really, it is probably more true to say that the economy pushes interest rates, not the other way round. Suffice to state that the movie is based on exactly the same thinking that led the Congressional Budget Office to imply which you optimize growth by putting tax rates at 100 percent. 4. The video warns that politicians shouldn’t increase taxes or decrease government gains because both coverage would “make money from people’s pockets.” That can be Keynesian economic theory, which I’ve explained many times doesn’t make sense. You don’t have to regurgitate those arguments here. 5. Which brings us to the video’s problem. It dismisses the issue of unfunded liabilities. More especially, it does not deal with the fact that politicians have made commitments to spend far too much cash in the future, largely due to poorly constructed infantry programs. And it’s these built-in promises to spend cash that give America a very grim financial future, as display by this BIS, OECD, along with IMF info. Here is the movie, produced by the middle for Prosperity, which accurately puts all this information together (the data is now several years from date, however, the analysis is still spot on). Remember, the problem — both now and in the future — is the burden of government spending. from http://www.nwsuburban-bankruptcy.com/is-government-debt-a-problem/
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