Generations and Solutions
Paul Krugman and his minions aside, most of us know that the massive federal debt (currently $17.5 TRILLION) is nothing short of inter-generational theft.
So often we complain that our worthless lawmakers are "stealing from our grandchildren."
But is that really true?
Of course, no-one (N O - O N E, nobody AT ALL) is calling for a balanced budget but let's just pretend for a minute.
Let's pretend we could balance the budget tomorrow. Let us pretend we could actually have a budget surplus in this twisted day and age.
And if we're dreaming we might as well dream BIG - let's imagine we could recreate the largest US Federal Budget Surplus in HISTORY ($236 Billion in the year 2000.) and do it every year, year-in year-out, for as long as it takes to pay off that huge debt.
How long would it take Paul Krugman's progeny pay off his Ponzi scheme?
Well, PK is 61 years old. Leaving his real kids out of it, let's just assume his offspring follows the oft-stated average of 20 years per generation. (That's about how long it takes for one baby to grow up and have another.)
OK, Paul's child is 41 and already paying, so is his grandchild at 21. His great-grandchild is only one year old but she'll get her turn when she starts working 15 years later (I started at 16, so have/will many others. Maybe not HER, but....)
Twenty years later (35 years from now), Krugman's great-great-grandchild will pick up the burden - as will, twenty years after that, his great-great-great grandson. In fact, his great-great-great-great-grandchild will dodge the bullet by only a year or so.
But this is a dream world of impossible expectations. What if we made it just a little more realistic - just the tiniest bit.
Assume every other condition remains the same but we can only manage the SECOND highest budget surplus in history - $127.3 billion in 2001.
If we still balance the budget tomorrow and keep it that way - and we pay down over a hundred billion a year, it'll take only... 137 years!
Paul Krugman's great-great-great-great-great-great-great-grandchild will write the last check to pay off the legacy of the "worst" generation.
Ten generations (including ourselves) - six of which as yet unborn - to pay off our folly.
And of course this is still living in a fantasy.
The obvious fact is that PK and his ilk have no intention of ever paying off this debt.
And some day, when the financial chicanery falls through,
when the artificially deflated interest on our Treasuries begin to rise from the lowest rates in history,
when the interest payment on all that debt doubles, triples, quadruples...! - the sh!t WILL hit the fan.
And then the pundits will say the obvious solution is to "forgive" this "crippling" debt,
and on that day untold trillions of dollars of invested wealth will disappear.
And our nation will fail.
Make no mistake we are talking financial collapse. Not a recession, not a depression, but the complete collapse of untenable economic "system".
And REAL bad things ALWAYS arise from such times.
We'll still be here. We'll still be Americans. But our Constitution will be "proven" "unworkable" and abandoned. And a strong-man WILL take over - they always do when the world goes to hell.
However, unlike the suppositions I started with, there is no fantasy here. This WILL happen. And it won't take generations.
But, there is an answer. It's not the answer to every problem we face, but it will buy us the time to work on all the rest.
A BALANCED BUDGET AMMENDMENT.
Nothing more - nothing less.
It can be done. It's just a constitutional amendment. We do them all the time (well, figuratively speaking). We just have to change some minds. Well, pretty much everybody's mind really, but still.
What could be more important.
Really.
-----------------
"I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing." Thomas Jefferson
---- (SHOW YOUR WORK) ----
($17,514,000,000 / $236,000,000 per year = 74.2 years)
($17,514,000,000 / $127,300,000 per year = 137.58 years)
now he pays
now child pays,
now grandchild pays,
15 years later great-grandchild begins to pay,
35 years later great-great-grandchild
55 years later great-great-great-grandchild
75 years later great-great-great-great-grandchild
95 years later great-great-great-great-great-grandchild
115 years later great-great-great-great-great-great-grandchild
135 years later great-great-great-great-great-great-great-grandchild
----------------------------------------------
So often we complain that our worthless lawmakers are "stealing from our grandchildren."
But is that really true?
Of course, no-one (N O - O N E, nobody AT ALL) is calling for a balanced budget but let's just pretend for a minute.
Let's pretend we could balance the budget tomorrow. Let us pretend we could actually have a budget surplus in this twisted day and age.
And if we're dreaming we might as well dream BIG - let's imagine we could recreate the largest US Federal Budget Surplus in HISTORY ($236 Billion in the year 2000.) and do it every year, year-in year-out, for as long as it takes to pay off that huge debt.
How long would it take Paul Krugman's progeny pay off his Ponzi scheme?
Well, PK is 61 years old. Leaving his real kids out of it, let's just assume his offspring follows the oft-stated average of 20 years per generation. (That's about how long it takes for one baby to grow up and have another.)
OK, Paul's child is 41 and already paying, so is his grandchild at 21. His great-grandchild is only one year old but she'll get her turn when she starts working 15 years later (I started at 16, so have/will many others. Maybe not HER, but....)
Twenty years later (35 years from now), Krugman's great-great-grandchild will pick up the burden - as will, twenty years after that, his great-great-great grandson. In fact, his great-great-great-great-grandchild will dodge the bullet by only a year or so.
But this is a dream world of impossible expectations. What if we made it just a little more realistic - just the tiniest bit.
Assume every other condition remains the same but we can only manage the SECOND highest budget surplus in history - $127.3 billion in 2001.
If we still balance the budget tomorrow and keep it that way - and we pay down over a hundred billion a year, it'll take only... 137 years!
Paul Krugman's great-great-great-great-great-great-great-grandchild will write the last check to pay off the legacy of the "worst" generation.
Ten generations (including ourselves) - six of which as yet unborn - to pay off our folly.
And of course this is still living in a fantasy.
The obvious fact is that PK and his ilk have no intention of ever paying off this debt.
And some day, when the financial chicanery falls through,
when the artificially deflated interest on our Treasuries begin to rise from the lowest rates in history,
when the interest payment on all that debt doubles, triples, quadruples...! - the sh!t WILL hit the fan.
And then the pundits will say the obvious solution is to "forgive" this "crippling" debt,
and on that day untold trillions of dollars of invested wealth will disappear.
And our nation will fail.
Make no mistake we are talking financial collapse. Not a recession, not a depression, but the complete collapse of untenable economic "system".
And REAL bad things ALWAYS arise from such times.
We'll still be here. We'll still be Americans. But our Constitution will be "proven" "unworkable" and abandoned. And a strong-man WILL take over - they always do when the world goes to hell.
However, unlike the suppositions I started with, there is no fantasy here. This WILL happen. And it won't take generations.
But, there is an answer. It's not the answer to every problem we face, but it will buy us the time to work on all the rest.
A BALANCED BUDGET AMMENDMENT.
Nothing more - nothing less.
It can be done. It's just a constitutional amendment. We do them all the time (well, figuratively speaking). We just have to change some minds. Well, pretty much everybody's mind really, but still.
What could be more important.
Really.
-----------------
"I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing." Thomas Jefferson
---- (SHOW YOUR WORK) ----
($17,514,000,000 / $236,000,000 per year = 74.2 years)
($17,514,000,000 / $127,300,000 per year = 137.58 years)
now he pays
now child pays,
now grandchild pays,
15 years later great-grandchild begins to pay,
35 years later great-great-grandchild
55 years later great-great-great-grandchild
75 years later great-great-great-great-grandchild
95 years later great-great-great-great-great-grandchild
115 years later great-great-great-great-great-great-grandchild
135 years later great-great-great-great-great-great-great-grandchild
----------------------------------------------
How are we as mere individuals to argue with this kind of group-think logic?
The mouthpieces - the leaders with the megaphones - are simple thieves lying to themselves.
John Q. Public is easily mislead.
And our opposition's pat reply?
That our children are getting the COUNTRY. That the deficit spending is necessary to keep the country intact to be able to hand over to them!
What nonsense! As if our nation would fail should we learn to live within our means.
The things grown people say.
If you ignore this I believe there is precedent for paying off this level of debt (Oh yeah, ignoring state and local debt) and that was Great Britain after the Napoleonic Wars.
I was trying to keep it simple but I should have at least made mention. Truth is though, all that other stuff only made the pay-off worse, not better, so I didn't feel dishonest when I chose to oversimplify.
But thanks for pointing those out - that needed to be said.
As for precedent, that's cool as heck - did not know that.
Truth is, I don't doubt for a second that we WILL survive if we can simply staunch the wound.
But until the budget is balanced - the REAL budget, sans accounting gimmicks (thnx DB) - we can't even begin to shrink the sheer mass of debt. Debt in such titanic numbers is intrinsically dangerous, disastrously sensitive to even the smallest up-tick in interest rates. (Think "balloon payments" every time your mortgage rate goes up.)
But we'll make it - IF we get that Balanced Budget Amendment.
run amok, right? -- must be an Alinsky tactic! -- j
But we can't just lay it on the "progressives". Every politician plays that game. They just spend it on different stuff.
(Don't get me wrong - I still vote Republican, but what else can you do?!)
— Thomas Jefferson
I do not believe the Paul Krugmans of the world have any integrity. They care not for personal responsibility, or what they leave behind... believing they will not be around when the spit hits the fan. I do not understand how this boat stays afloat. One day (and I hope Krugman is alive to see it) people will need a wheelbarrow of money to buy a loaf of bread like in the Weimar Republic. I hope Krugman is still alive for two reasons: one is so we can defrock the fraud and the other is because the longer it goes on the greater the pain for us and our posterity. Perhaps after the collapse or by some other unforeseen awakening (twist of fate/fortune) we can once and for all stop this Keynesian madness and see the Krugmans to deserved derision and finally relegate this absurd economic doctrine to the scrapheap of bad ideas. I do not wish to suffer economic hardship or depression any more than anyone else, but I feel a moral duty to pull my own weight. I could suffer no greater disappointment than to have Krugman outlive me before seeing this. Where are my vitamins? :)
Regards,
O.A.
I believe PK is a real life Elsworth Toohey. Perhaps not intentionally seeking to destroy, but fully aware of his own manipulations
But I don't welcome the inevitable collapse. As I've said above - I don't think our Constitution will survive it.
1. We could turn around the deficit problem with sensible economic policies that encourage real economic growth and put an end to unending freeloading and handouts to the politically favored. This would have the effect of turning tax-eaters into tax-payers. (No, it's not politically possible, but I can dream...)
2. The assumption that the repayment of 236B remains the same. If it's increased by 3% per year, payoff is in a little over 40 years. 5% translates to a little over 30 years.
Another ridiculous idea: Assuming 6% GDP growth per year, dedicating 10% of GDP over the current GDP to debt repayment pays off the debt in 22 years. This does assume that government revenue and expenses remain constant (yeah, right).
Compounding can both produce and destroy very large sums of money, when allowed to continue for long periods of time.
And for that - only a Balanced Budget Amendment will do.
If we never stop borrowing more - every year - year-in year-out - we will never be safe from the weight of that ever increasing mountain of debt.
We must Balance the Budget.
we have a number of precedents, now, of the feds ignoring the constitution and its bill of rights, plus its amendments -- like, for example, the 10th when it comes to States', and "we the people" rights.
would we be wise to expect future feds to behave differently? -- j
But at least a Balanced Budget Amendment can begin to attack the money supply and force them to screw us over within our means!
Like I said - it won't solve every problem but it will by us time to work on the rest.
You need a series of amendments to correct the problems we face.
see: http://www.TheSocietyProject.org
Politicians ARE sensitive to public opinion, and people don't like to have their taxes raised all the time. That's why there are so many means of hidden taxation.
Public resistance is inevitable.
A Balanced Budget Amendment would be ours for the writing. Make it say what it needs to say.
But, as I said in the post, the BBA would not be the answer to all problems - it just buys us the time to deal with the rest.
Don't this calculations depend on the value of the dollar not changing? The situation gets worse if the dollar is devalued more, and better if the dollar value goes up, doesn't it?
Caught me napping on that one.
Ultimately doesn't change much though, for the reasons stated above.
We should not be hoping for rampant inflation to make a mountain of debt more manageable.
You should prepare for the worst, of course, but if it's not too late to save it....
(Yeah, that one big IF!)
But that, in itself, doesn't solve the problem. We can't just "grow out of it" if we never balance the budget.
No matter how big the economy gets, if our gov't still spends more than it takes in then we're still hosed - forever adding to a mountain of IOU's.
Your right, of course that dollar valuation and inflation effect the calculations but not the scale - and thus the point.
Should there come a time that inflation renders $17 trillion ($20T by then? 30?) harmless, well... we'll pretty much be at the end anyway.
One more thing - that idea of avoiding our problem by "growing" instead of "paying off" surely must assume continuous growth, right? But uninterupted expansion seems a tall order. How many down-turned years can such a system survive with burden of debt even larger than todays. How many more booms and busts past that one.
But all other arguments are smoke and mirrors.
The bottom line is we spent the money on ourselves and we're passing the buck to someone else - and we expect them to do the same. What could possibly go wrong?!
We need to stop it.
We need a Balanced Budget Amendment.
I wasn't saying growing *instead* of paying off. I was saying growing so we *can* pay off.
I agree with the need for a balanced budget amendment.
Who was it that advocated cutting all spending of all departments by one penny for every dollar?
Sorry I misunderstood, H.
And you can forget about EVER paying off the debt if interest rates rise AND the lower payoff is used.
What should not be forgotten is that these are some seriously scary numbers. The debt service payments alone are enough to fund a significant chunk of the military and enough to buy a couple of small countries!
SERVICING the debt is just another line item in the budget - an interest-only payment to "roll-it-over" every year.
But even a moderate spike in interest rates could balloon that interest-only payment beyond the entire federal budget.
I haven't done the math myself but understand that, if you include unfunded mandates, each working person owes $1.4M.
Good luck with that, America. It's O-f'ing-ver baby...
By the way, there's no horror film, that is half as scary as the tale of Krugman's progeny. Godzilla by comparison is a puppy's squeaky-toy.
Sorry for the subject matter but I always appreciate a compliment!
Who, exactly, is the debt owed to? Well, a huge portion of it is owed to the so-called "central banks" that were instrumental in getting us into this quagmire of debt in the first place. What if we simply declared that debt null and void? Yep, we just invalidate the debt these banks have put us into, and move on. Oh, and yes, we arrest these thieves and put them in jail for their crimes!
I'm not sure I follow.
Since 1913, our currency has lost 97% of its purchasing power (due to designed-in inflation) and that same currency is an instrument of debt (hence "Federal Reserve Note) that the country has obligated itself to pay for the privilege of using the dollars the Fed creates out of thin air.
It can be argued that the Fed is, in fact, running a huge Ponzi scheme and we're paying for it through our system of debt-based currency. So, since this whole thing is nothing but a scam, why not just put a halt to it, invalidate the criminal debt, and put the criminals in jail? Do some basic research if you doubt anything I've said here.
The central banks are not the perpetrators of this crime - they are the facilitators. The money was spent on politician's agendas. It was borrowed from nations, corporations, and just about every Tom, Dick and Harry in America.
T-bills are the foundation of every diversified holding. Indeed, they are the foundation of the world's economy.
To invalidate them - to say they are worth nothing - would be an economic crime beyond precedent.
Assuming the "dollar" is worth saving, I would favor a "pay as you go" system to replace our debt-based money system. Redeem government bonds as they mature with unbacked and non-interest-bearing paper money or its electronic equivalent, and likewise finance any federal deficit with non-interest-bearing paper money. (A small amount of such money already exists in the form of U.S. notes.)
The problem of inflation would still remain, but at least the problem of an overwhelming national debt would go away.
Say it ain't so, CJ!
Runaway inflation is the hallmark - the most defining feature - of an economic collapse.
No - just Balance the Budget - forever. The rest will take care of itself.
That's why you pass a Balanced Budget Amendment.
Staunch the Bleeding!
I can't believe what I'm hearing.
If it was a terrible idea when the Fed did it, why is it suddenly a good idea now.
I'm sorry about higher taxes, but at least that will create a backlash - AND NO FURTHER HARM IS TAKING PLACE.
Yes the drain on production is lamentable, but nothing compared to eviscerating our economic system.
The problem with a balanced budget is that you can achieve that by taxing the people more.
I think that if a balanced budget amendment were enacted it would have to include some cap on taxing as a percent of overall GDP.
Yeah, I gotcha. O hale yes, I''m all for that.
Like I said before (somewhere in all these branches) the Balanced Budget Amendment would be our construction - we'll have to be sure to write it right
By that you infer that they can actually decrease their debt by punishing the most productive even more.
I realize the interest rate is next to nothing, but don't nations, banks, institutions, funds and even very affluent private citizens buy T-bills for their rock-solid safety.
Once you get above $100K (or so) the FDIC doesn't cover it. And once you get above a certain $Net Worth it becomes more about preservation of capital.
Just the foundation of the investment pyramid, of course, not the whole thing.
I don't know - just what I learned a zillion years ago.
They do buy T-bills for their "rock-solid safety", but with the way that the Fed is printing money, the value of those T-bills is decreasing far quicker than most people think.
I used to own T-bills earning 8% per year. At that rate it made sense. At the rate they return now, it really isn't worth any more than a dollar itself, and you don't have any immediate liquidity.
For preservation of capital, I got an annuity guaranteeing me 5% or more every year. It is not quite as "rock solid" as T-bills, but frankly I trust MetLife more than I do the government now.
It is the foundation of the investment pyramid, and that is what is so ******* scary. The foundation is not rock solid anymore. Frankly it is ripe for a fall, and that is exactly what George Soros is trying to engineer.
All that changes, however, once interest rates go back up. That is why having the banks who run the Fed holding all that debt is such a big deal: they buy the debt now for basically the cost of money, then cash in big in the future! And inevitably, the rates WILL go up.
Another one of the dangers of fiat currency: you can print and issue it and get it backed by an international cabal that only really is out to cash in on the inevitability of rising interest rates.
Not sure China would like that.
It would be easier to stop the pensions of the poticians who were part of the scheme, and that would be nearly impossible.
I'd miss my country.
What a nightmare - to exchange Jefferson's vision of America for Obama's!
Off shore cities and space habs.
It's inevitable. We want it too much.
He claims to be spouting Economic Philosophy, but in reality, he's interested in just One Thing...
The same thing that all major party politicians are only interested in.... Control (and personal power.)
You should not let yourselves be deceived by what comes out of their mouths.
The only time eco/politico's think farther than the next election is when they're planning their own dynasties.
You and I? We're fodder.
I don't think PK and BO really believe this treatise. Though how they can deny it - I don't know.
I would actually be very interested in seeing a counter from the opposition.
But you're right NP, they don't give a damn about us at all.