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The debt is ASTRONOMICALLY greater than it was .... any debt reduction in the private sector is just accounting trickery and cooked books, which is transferring the defaulted and discharged debt in unprecedented bankruptcies and foreclosures which is then just heaped onto the toxic debt MOUNTAIN in the financial sector receiving HUNDREDS OF BILLIONS in bailout funds. What this means, translated is, that the FED will literally print/create as much counterfeit money as they need to buy up every residential and commercial mortgage in existence ... slap the bill for that onto the National Debt ledger, and resell these mortgages on the open market in the form of 10 fold leveraged derivatives, creating several more (4-5) Trillion in toxic debt just over the next 12 months!!!!!!
They've just announced QE III .... which should be called what it is ... FINAL RAMPAGING DEATH BY MACHETE of the country, creating hyper-inflationary depression. They are going to issue 40 Billion PER MONTH of dollars created out of thin air, INDEFINITELY to buy mortgages to float the ponzi scheme for a few more months. And over the course of the next several months, watch consumer price increases (inflation) run 5-10% per month starting between now and January 2013. By this time next year (if these psychopaths haven't already started Nuclear WW III) you will be paying at least TWICE if not Triple what you are paying now, for just about EVERYTHING.
And you want to know why they are doing this? Because they can. Because the level of flat lined, brain dead zombi psychopathy of the American public has reached a point where no lie is too large, and no level of insanity is too great to generate neural activity.
There never has been a more brain dead populace to breathe air than the delusional American public who will buy any BS story presented, no matter how idiotic.
So you don't believe that people have stopping spending money that they don't have and are acting more responsibly?
All we hear is how people should not live on credit, live within their means, etc. and then, when it appears that people are actually doing that, no one believes it.
You pose great questions. Without a doubt, household deleveraging by paying down debt and building savings balances bodes very well for the long term. Think about it: if $1 of credit card debt gets paid off, that is 24 cents per year FOREVER of increased discretionary income--money that used to go for credit card payments. Over time, consumer spending will rise naturally as people feel better about their situations and gain confidence from their low debt and high savings.
But short-sighted government policy, focused on "stimulus" and trying to crank the economy, attempts to juice things exactly in the same way that crack cocaine makes you feel good. Not a great long-term plan.
We'd be better off if the politicians would stop trying to help us, stop trying to fix things. The country has recovered from every recession in its 236 year history, most of them without the help of smart people in expensive suits.
If it is a permanent change, we'll have slower but more sustainable growth in the short term and we will be better off in the long term. Human nature being what is is, however, sooner or later we'll be in another totally unsustainable boom--like the tech sector in the late 1990's or housing in the middle 2000's. Boom and bust is wired into our DNA.
Thanks and I appreciate the great answers.
I would like to think that we are seeing a change in behavior that could be long-lasting and that would improve our overall economic health, but, I suspect that you are correct and that we won't be able to control ourselves forever.
Coming back to the OP...I regard it as a very good thing that individuals and corprations are getting their debt under control. I am doing the same myself...reducing the purchasing of unnecessary items and paying off credit card and other debt. It's a great feeling, and once the mandatory credit payments start falling, the cash remaining to make new purchases is greatly boosted. A little delayed gratification is a good thing!
Now, if only our government were as responsible as our people...perhaps as a nation we would not be broke.
As do I. And, I am doing the same.
I would like to think that as people become more responsible, that there will be less need for stimulative and bail-out spending and such. Probably wishful thinking, but, I try to stay optimistic.
I don't think it is deceiving - U.S., as is citizens, debt is down.
Other thoughts: People clearly can be fiscally responsible when they have to be, and as I think is illustrated by the WalMart link, people seem to have found ways to spend money that seems to not involve acquiring more debt.
They have also learned to live with delayed gratification.
What I keep mulling over, though, is this: while this is a very good thing for personal finances, has it kept the economy from recovering faster?
And, if this is a permanent change, what does that mean for our economy moving forward?
"Rising wealth would bolster the ability of the government to service its debt, even after the amount of Treasury securities outstanding soared to a record 71 percent of GDP from 36 percent five years ago. "
Consumers make up 70% of the GDP. If we don't buy more and more stuff, the country goes nowhere.
It is a Catch-22 isn't it?
Either we do the right thing and save so that we are fiscally secure, or we prop up the economy by buying useless or over-priced stuff.
It is a Catch-22 isn't it?
Either we do the right thing and save so that we are fiscally secure, or we prop up the economy by buying useless or over-priced stuff.
What to do, what to do.
There's no question what to do. We are a consumer society now, not a producer society.
We will buy less and the GDP will shrink.
In theory lower debt loads should be good for the economy.
In practice, you want deleveraging to occur outside of a recessionary environment, and you want it to involve debt getting paid down -- a large portion of the decrease has been foreclosures.
"Rising wealth would bolster the ability of the government to service its debt, even after the amount of Treasury securities outstanding soared to a record 71 percent of GDP from 36 percent five years ago. "
Internal debt load is irrelevant to wealth. Lets take a group made of person A, person B, and person C. The group has $300 each, for $900 total. Person A lends person B $100. The group has the same amount of wealth. Now Person B pays back half that loan and has $50 in debt to person A. The group still has the same amount of wealth.
Debt loads are only directly* relevant to national wealth when they are debts from or to foreigners.
* - of course excessive amounts of debt in the system or insufficient credit can cause indirect harm, there's a balance to be struck, but, that is an efficiency issue, not a wealth issue.
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