Out of curiosity.... (1 Viewer)

[Lutherf]

...if 29 of the 34 OECD nations are spending more than they take in then who are we going to borrow money from?

Last night I decided to look at the economies of the 34 OECD nations to see who we could borrow money from and my jaw pretty much hit the floor. Only 5 of the 34 member nations show more in revenue than expenses. Those 5 nations account for something like $110B in excess revenue. The other 29 nations....$1.9T in excess expenses.

Now I just want to note that the OECD was formed to stimulate international economies and trade. I mean, these are the guys we're supposed to be looking to for our model of economic excellence and as a whole this group is $2T in the red (half of that is just the US).

Anyway, after looking at that mess it occurred to me that everything will still be OK as long as some of the non-OECD nations are available to pick up the slack. So, with happy thoughts in mind I looked at China...$100B+ in the red. I looked at India.....$100B+ in the red. Brazil? They'd actually be good for about $60B but that's only 3% of the way to even.

So what does that leave us with?

Well, Saudi Arabia is roughly +$90B. The UAE could be good for another $30B. Kuwait should be good for about $60B and Russia should be available for another $55B......hell, if we wrapped them all up we'd be covered for......well....less than 25% of what we need to break even as a world economy.

So anyway, what's the answer? If the whole freaking world is spending more money than it makes then who are they paying it to? I mean all that extra expense is going somewhere so who has it and, more to the point, will they let us borrow more?

 

[clownboy]

Each other. It's the international equivilent of paying one credit card off with another.

 

[sangha]

...if 29 of the 34 OECD nations are spending more than they take in then who are we going to borrow money from?

Last night I decided to look at the economies of the 34 OECD nations to see who we could borrow money from and my jaw pretty much hit the floor. Only 5 of the 34 member nations show more in revenue than expenses. Those 5 nations account for something like $110B in excess revenue. The other 29 nations....$1.9T in excess expenses.

Now I just want to note that the OECD was formed to stimulate international economies and trade. I mean, these are the guys we're supposed to be looking to for our model of economic excellence and as a whole this group is $2T in the red (half of that is just the US).

Anyway, after looking at that mess it occurred to me that everything will still be OK as long as some of the non-OECD nations are available to pick up the slack. So, with happy thoughts in mind I looked at China...$100B+ in the red. I looked at India.....$100B+ in the red. Brazil? They'd actually be good for about $60B but that's only 3% of the way to even.

So what does that leave us with?

Well, Saudi Arabia is roughly +$90B. The UAE could be good for another $30B. Kuwait should be good for about $60B and Russia should be available for another $55B......hell, if we wrapped them all up we'd be covered for......well....less than 25% of what we need to break even as a world economy.

So anyway, what's the answer? If the whole freaking world is spending more money than it makes then who are they paying it to? I mean all that extra expense is going somewhere so who has it and, more to the point, will they let us borrow more?

Two things:

1) Do you really think that govts can only borrow from other govts?

2) Do you think the correlation between states that borrow and states with advanced economies is just coincidence?

 

[fmw]

Two things:

1) Do you really think that govts can only borrow from other govts?

Obviously not.

2) Do you think the correlation between states that borrow and states with advanced economies is just coincidence?

I don't think there is a correlation. I think governments of the largest economies borrow because they can. Borrowing is only a sound fiscal policy when its purpose a profit making investment. Otherwise it is an unsound one. Everywhere. For everyone. As a former businessman you know that. I realize that businesses borrow to get past cash flow binds but that doesn't make it a sound fiscal policy. Only a necessary one. It isn't necessary for governments. It is only convenient.

 

[AlabamaPaul]

Obviously not.



I don't think there is a correlation. I think governments of the largest economies borrow because they can. Borrowing is only a sound fiscal policy when its purpose a profit making investment. Otherwise it is an unsound one. Everywhere. For everyone. As a former businessman you know that. I realize that businesses borrow to get past cash flow binds but that doesn't make it a sound fiscal policy. Only a necessary one. It isn't necessary for governments. It is only convenient.

I would agree if you change the word profit to providing a return on investment...

 

[head of joaquin]

So anyway, what's the answer? If the whole freaking world is spending more money than it makes then who are they paying it to? I mean all that extra expense is going somewhere so who has it and, more to the point, will they let us borrow more?

You're looking at debt as a zero sum situation. It isn't. IBM borrows money, increases productivity, and increases profit. It uses the increased profit to pay off the debt and increase the wealth of shareholders. Everybody's happy. It happens everyday. Indeed it is the basis of a modern capitalist economy. Without credit, our economy would quickly revert to 1880 levels.

So, the issue is not sovereign debt but what is the sovereign debt used for? If a nation borrows to build or update infrastructure, educate its citizens, keep them healthy, or otherwise increase productivity, it can pay back the loans, increase GDP, and have a more prosperous nation and everybody's happy. If they spend the loaned money on tanks and aircraft carriers, that's another matter.

Most nations are using their debt to increase productivity, more or less. The most obvious exception is the US, which is wasting hundreds of billions on useless military expenditures. So we need to look out more than many other nations.

 

[fmw]

I would agree if you change the word profit to providing a return on investment...

No. Governments do not invest. They spend.

 

[head of joaquin]

No. Governments do not invest. They spend.

So infrastructure is . .. . ?

 

[AlabamaPaul]

No. Governments do not invest. They spend.

There is spending that provides a return (e.g. Interstate Highway system) and then there are transfers of wealth, which I believe you're referencing...

 

[fmw]

There is spending that provides a return (e.g. Interstate Highway system) and then there are transfers of wealth, which I believe you're referencing...

Addressing the common good is not a return. A return on investment means that you end up with more wealth than you had before. Addressing the common good is the theoretical basic role of government. Borrowing for it is not necessary. It is convenient.

Again. Governments are net spenders of wealth. None of them are net creators of wealth. Government "investment" is an oxymoron.

 

[AlabamaPaul]

Addressing the common good is not a return. A return on investment means that you end up with more money than you had before. Addressing the common good is the theoretical basic role of government. Borrowing for it is not necessary. It is convenient.

You don't think some government spending provides for economic expansion, thus more revenue?

 

[fmw]

So infrastructure is . .. . ?

The physical or organizational structure necessary for a society or an enterprise to operate effectively.

 

[fmw]

You don't think some government spending provides for economic expansion, thus more revenue?

Government revenue isn't tied to economic expansion. It is tied to legislation. I repeat. Governments are not NET creators of wealth. They are NET spenders of wealth. Government "investment" is an oxymoron.

 

[sangha]

Again. Governments are net spenders of wealth. None of them are net creators of wealth. Government "investment" is an oxymoron.

Government revenue isn't tied to economic expansion. It is tied to legislation.

This sort of nonsense explains why the american people have rejected libertarianism

 

[head of joaquin]

The physical or organizational structure necessary for a society or an enterprise to operate effectively.

Yep, a capital investment, not an operating expense. So when government builds road and regulates airlanes and funds education, it's investing. It's just that the productivity that accrues benefits all of us, not just shareholders in a business entity as with private investment.

 

[Dittohead not!]

Should the US go back to being a creditor nation, as it was before the Reagan Administration?

 

[Lutherf]

Two things:

1) Do you really think that govts can only borrow from other govts?

2) Do you think the correlation between states that borrow and states with advanced economies is just coincidence?

Hmm...so they keep on borrowing from "the people". Well, that makes sense.

Of course that brings up another question......when and how are the people going to get paid back?

 

[Lutherf]

You're looking at debt as a zero sum situation. It isn't. IBM borrows money, increases productivity, and increases profit. It uses the increased profit to pay off the debt and increase the wealth of shareholders. Everybody's happy. It happens everyday. Indeed it is the basis of a modern capitalist economy. Without credit, our economy would quickly revert to 1880 levels.

So, the issue is not sovereign debt but what is the sovereign debt used for? If a nation borrows to build or update infrastructure, educate its citizens, keep them healthy, or otherwise increase productivity, it can pay back the loans, increase GDP, and have a more prosperous nation and everybody's happy. If they spend the loaned money on tanks and aircraft carriers, that's another matter.

Most nations are using their debt to increase productivity, more or less. The most obvious exception is the US, which is wasting hundreds of billions on useless military expenditures. So we need to look out more than many other nations.

Hmm.....if 29 of 34 OECD nations are all spending more money than they take in for the purpose of improving their economies then at some point shouldn't they stop needing to borrow?

 

[sangha]

Hmm...so they keep on borrowing from "the people". Well, that makes sense.

Of course that brings up another question......when and how are the people going to get paid back?

Not "the people". Just "people"

And if they keep choosing to buy more of our debt then we need not ever pay them back. Just keep paying the interest

 

[sangha]

Hmm.....if 29 of 34 OECD nations are all spending more money than they take in for the purpose of improving their economies then at some point shouldn't they stop needing to borrow?

Only if they want to stop improving their economy

 

[AlabamaPaul]

Government revenue isn't tied to economic expansion. It is tied to legislation. I repeat. Governments are not NET creators of wealth. They are NET spenders of wealth. Government "investment" is an oxymoron.

I don't believe I ever implied revenue to the government tied to economic expansion, but it would be hard to deny that some projects have benefited the economy as a whole...

 

[Lutherf]

You don't think some government spending provides for economic expansion, thus more revenue?

In some cases it does. A classic example is all the money that got dumped into NASA and out ballistic missile programs. One of the pieces of fallout from those programs was the modern consumer electronics market. The trans national rail service in the 1800's and the interstate system of the 50's and 60's were other examples. Hell, the Louisiana Purchase was a prime example.

It should be noted, however, that those expenditures were for a framework into which private enterprise could expand. It was private enterprise and the risk of private investment that made these expenditures a success.

 

[AlabamaPaul]

In some cases it does. A classic example is all the money that got dumped into NASA and out ballistic missile programs. One of the pieces of fallout from those programs was the modern consumer electronics market. The trans national rail service in the 1800's and the interstate system of the 50's and 60's were other examples. Hell, the Louisiana Purchase was a prime example.

It should be noted, however, that those expenditures were for a framework into which private enterprise could expand. It was private enterprise and the risk of private investment that made these expenditures a success.

Agreed. I was trying to make a point that there is a Constitution framework for government for a reason other that what it has been turned into by some as years passed...

 

[head of joaquin]

Hmm.....if 29 of 34 OECD nations are all spending more money than they take in for the purpose of improving their economies then at some point shouldn't they stop needing to borrow?

Yes, during periods of sustained growth, debt payoff should be emphasized and less debt should be incurred (assuming aggregate demand is sufficient to keep the economy expanding without more robust government intervention). That's basic Keynesianism.

The problem is the last recession was more like a depression and resulted in long-term unemployment and anemic and sporadic growth, especially in Europe (whose major economies didn't take on that much debt by the way)

 

[rjay]

...if 29 of the 34 OECD nations are spending more than they take in then who are we going to borrow money from?

Last night I decided to look at the economies of the 34 OECD nations to see who we could borrow money from and my jaw pretty much hit the floor. Only 5 of the 34 member nations show more in revenue than expenses. Those 5 nations account for something like $110B in excess revenue. The other 29 nations....$1.9T in excess expenses.

Now I just want to note that the OECD was formed to stimulate international economies and trade. I mean, these are the guys we're supposed to be looking to for our model of economic excellence and as a whole this group is $2T in the red (half of that is just the US).

Anyway, after looking at that mess it occurred to me that everything will still be OK as long as some of the non-OECD nations are available to pick up the slack. So, with happy thoughts in mind I looked at China...$100B+ in the red. I looked at India.....$100B+ in the red. Brazil? They'd actually be good for about $60B but that's only 3% of the way to even.

So what does that leave us with?

Well, Saudi Arabia is roughly +$90B. The UAE could be good for another $30B. Kuwait should be good for about $60B and Russia should be available for another $55B......hell, if we wrapped them all up we'd be covered for......well....less than 25% of what we need to break even as a world economy.

So anyway, what's the answer? If the whole freaking world is spending more money than it makes then who are they paying it to? I mean all that extra expense is going somewhere so who has it and, more to the point, will they let us borrow more?

Hey, if your country needs to borrow money, no problem. My country`s printing presses are working fine. How much should we whip up for you.