Deficit/Debt Discussion Thread

[Kidlicious]

The Canadian economy could never handle debt like the US economy can.

[Vanguard]

Doesn't matter. The government can run a deficit indefinitely as long as debt doesn't grow faster than GDP/tax revenue. Ideally, spending and revenue are the same curve but they can be out of phase. That said, our debt has been growing much faster than GDP lately

Yes..... and a Ponzi scheme can continue to provide 10% annual return---- as long as new investment continues. But when that new investment stops.... disaster.

A government that run a constantly increasing deficit is a Ponzi scheme. The reason for this is fairly simple: when a government runs a deficit, it prints a type of money (its debt) that inherently increases the size of its GDP. Ridiculous though it may be, simply increasing a government's debt means that government can borrow more. Which it does, in an increasingly vicious circle.

Which is why our debt has been growing much faster than GDP lately. Thank Ronald Reagan.

[KrazyHorse]

You're an idiot. The US treasury prints treasury securities, not money.

[MikeH]

Pretty reasonable to say that treasury securities are "a type of money" isn't it?

[Kidlicious]

Yes..... and a Ponzi scheme can continue to provide 10% annual return---- as long as new investment continues. But when that new investment stops.... disaster.

Precisely my point about why Canada can't borrow money like we can.

[KrazyHorse]

Pretty reasonable to say that treasury securities are "a type of money" isn't it?

No, it is not.

When the us treasury increases the supply of treasury notes then their price goes down. That is the whole point.

[MikeH]

Is it much different to starting to print a **** load more bank notes?

The unarguable source of wikipedia says: http://en.wikipedia.org/wiki/Money

"Money is anything that is generally accepted as payment for goods and services and repayment of debts."

Which is how I always thought of it.

[MikeH]

I'm not being facetious BTW. I genuinely don't know anything about economics so am genuinely asking.

[Vanguard]

No, it is not.

When the us treasury increases the supply of treasury notes then their price goes down. That is the whole point.

That happens if you increase the supply of any type of money. (Well, almost any)

[KrazyHorse]

I was assuming you were being serious. There difference between an asset being liquid and an asset being money.

Bank balances are money because they represent a promise to convert to dollars on demand. UStreasuries are not redeemable at face value until they mature. There is a liquid market in them, but the price can fluctuate significantly. For example, 30 ye notes appreciated 35% in one month at the end of 2008.

[KrazyHorse]

I was assuming you were being serious. There difference between an asset being liquid and an asset being money.

Bank balances are money because they represent a promise to convert to dollars on demand. UStreasuries are not redeemable at face value until they mature. There is a liquid market in them, but the price can fluctuate significantly. For example, 30 ye notes appreciated 35% in one month at the end of 2008.

[KrazyHorse]

That happens if you increase the supply of any type of money. (Well, almost any)

How ****ing stupid are you?

USD is the money of the US, as are things convertible to USD at a fixed rate. Calling all liquid assets money makes the term useless.

[Vanguard]

So what? The value of the dollar also fluctuates signigicantly on exchange markets.

If there is a liquid market, then the asset is liquid.

[KrazyHorse]

So what? The value of the dollar also fluctuates signigicantly on exchange markets.

If there is a liquid market, then the asset is liquid.

OMFG. THAT IS BECAUSE THE USD IS NOT THE MONEY OF THE UK, FRANCE OR ANY OTHER COUNTRY NOT PEGGED TO IT.

Money is special because it is the unit of exchange and account. You buy things in usd in the us, not ****ing euros.

[Vanguard]

USD is the money of the US, as are things convertible to USD at a fixed rate. Calling all liquid assets money makes the term useless.

Well, what is money then? Just dollar bills in circulation?