Thread: The debt ceiling increase put into familiar terms

Originally Posted by MattInFla

Pretty much sums up what the Congress is doing in terms of a household budget

Good video. This latest news is the same old, same old:
U.S. House Opposes Debt Limit Rise in Symbolic Appeal to Voters - Businessweek

There will be no end to government debt. The party which balances the budget will be known as the party which tossed the economy into chaos. It will be the party of "Never again" for voters. Vast parts of the US economy depend on government debt. Once this source of fresh money runs dry, the people responsible for this will be crucified. Their party will be stigmatized forever (or, at least until the other party screws worse).

Originally Posted by mabus

There will be no end to government debt. The party which balances the budget will be known as the party which tossed the economy into chaos. It will be the party of "Never again" for voters. Vast parts of the US economy depend on government debt. Once this source of fresh money runs dry, the people responsible for this will be crucified. Their party will be stigmatized forever (or, at least until the other party screws worse).

An understanding of human nature during a depression or recession destroys your argument. During economic downturns Americans tend to spend less and save more. Wouldn't it make sense that these same people appreciate politicians who do the same?

Originally Posted by mabus

There will be no end to government debt. The party which balances the budget will be known as the party which tossed the economy into chaos. It will be the party of "Never again" for voters. Vast parts of the US economy depend on government debt. Once this source of fresh money runs dry, the people responsible for this will be crucified. Their party will be stigmatized forever (or, at least until the other party screws worse).

Yeah, because that's precisely what happened in the early 90's....

What you folks forget is the size of the deficit (which is why I don't think one should compare the current situation to any situation in the past). And the debt dollars don't just dissapear. The deficit is covered by fresh printed debt money by a large margin and that fresh money generates a sizeable amount of GDP dollars by wandering among market participants. Quenching a source of fresh money of that size in this economic situation, I think that will have harsh consequences.

All that does is deflate the value of the dollars that people are saving. Most Americans understand that. I think you're assuming that people don't understand basic economics.

Originally Posted by Damn Yankee

All that does is deflate the value of the dollars that people are saving. Most Americans understand that. I think you're assuming that people don't understand basic economics.

Speaking about basic economics, that process is called inflation, not deflation. And yes, most people don't understand basic macroeconomic mechanisms. Most people I spoke to or I have met on this board have no idea where money comes from, what increases and decreases its value (beyond printing more or less) and what role debt plays in this ginormous ponzy scheme called investment banking.

Originally Posted by mabus

Speaking about basic economics, that process is called inflation, not deflation. And yes, most people don't understand basic macroeconomic mechanisms. Most people I spoke to or I have met on this board have no idea where money comes from, what increases and decreases its value (beyond printing more or less) and what role debt plays in this ginormous ponzy scheme called investment banking.

"Inflation" is defined as the price of good and services increasing. When you devalue the dollar, goods and services cost more.

You are correct that most folks don't understand the field of macroeconomics. But that field is dominated more by politics then mathematics. Most people understand basic economic principles, among these is that too much debt is irresponsible, and in order to reduce debt a little bit of pain has to be endured.

People generally don't mind enduring a little pain as long as it is shared. Winston Churchill and FDR both exploited this, and they are seen as effective historical leaders by both sides of the aisle.