Asking important questions..........

 

How Much Has the U.S. Government Borrowed to Pay Back What It Owes Itself?

-deficits matter if you plan on living past 2033

From your lips...................

 

Our national debt is just shy of 100% of GDP ($31 trillion), but we are not on the brink of a fiscal abyss. On the contrary, it is not unreasonable to think that Congress can manage some degree of spending control, and it is not the case that the economy faces a crushing burden of debt in any event, as Chart #13 shows. The true burden of debt is not the size of our national debt, but the cost of servicing that debt as a percent of our national income. Today that burden is significantly less than it was during the 1980s, mainly because interest rates are far lower than they were back then. If Congress exercises even modest restraint and the Fed doesn't have to raise interest rates (which they won't have to if inflation remains under control), then we can gradually reduce our deficits and the burden of our debt

All things considered, things don't look so bad at all!

-Calafia Beach Pundit, from this chart-filled post

debts.....................

 

It's almost impossible to go broke without borrowed money being in the equation.

-Peter Bevelin, Seeking Wisdom: From Darwin to Munger

about those rates................

 

In truth, Child's advocacy for lower rates was intensely self-interested.  Like a modern buyout baron's, his control of the East India Company, where he was shortly to become Governor, was maintained through the extensive use of debt: the greater the gap between the company's profits and the cost of borrowing, the greater his personal gains. . . .

There was a sense that higher interest rates improved the quality of lending.  The author of 'Usury at Six percent Examined' (1669) claimed that a reasonable lending charge ensured that money got into the best hands:  "Tis much better for the publick,' . . . Thomas Manley added that lowering the rate of interest would involve robbing Peter (the creditor) to pay Paul (the borrower).

-Edward Chancellor, The Price of Time: The Real Story of Interest

A really good question....................

 

Solvency is maintained by means of the national debt, on the principle, "If you will not lend me the money, how can I pay you?"

-Ralph Waldo Emerson

Whose...........................?

                        via

It looked so easy in the history books.....

 

But George Washington had a vision.  At the war's end, he had circulated a letter to the thirteen governors outlining four things America would need to do to survive, if not to attain its rightful place on world stage:  The states would have to be consolidated under a vigorous "federal" government; there would have to be timely payment of the staggering debts left over by the war; and army and navy needed to be created; and finally, there must be harmony among the people.  This was the theory at least; in truth, the reality was a cyclone of bewilderment and confusion.

-Jay Winik, The Great Upheaval: America and the Birth of the Modern World: 1788-1800

Productivity-debt..................

 

      A done list isn't solely a way to feel better about yourself, though.  When you start to view each day not as a matter of paying off a debt, but as an opportunity to move a small-but-meaningful number of items over to your done list, you'll find yourself making better choices about what to focus on; and you'll make more progress on them, too, since you'll be wasting less energy stressing about all the other tasks you're (inevitably) neglecting.

-Oliver Burkeman, Meditations for Mortals: Four Weeks to Embrace Your Limitations and Make Time for What Counts

On volatility, debt, and endurance..................

 I think this is the most practical way to think about debt: As debt increases, you narrow the range of outcomes you can endure in life.

-Morgan Housel

and what are the odds of that happening....

 

We can’t default on government debt unless a crazy politician does something stupid.

The wonder of accounting..............

 Washington DC continues to spend much more than it gets in revenue.  In the Calendar Year of 2023, the federal government spent $6.3 trillion, but only collected $4.5 trillion in taxes.  This $1.8 trillion gap drove the national debt to $34 trillion in December 2023.  And it is only going higher.

One problem with these budget numbers is that government accountants, rightly or wrongly, lowered spending in 2023 by about $300 billion after the Supreme Court struck down a large part of President Biden’s proposal to forgive student loans.  That legal decision didn’t change the government’s cash flow last year in any significant way, but it did let the Department of Education “write up” the value of its loan portfolio by about $300 billion.  This, they counted as “negative spending,” which then reduced the official budget deficit.  So, while the reported deficit in 2023 was $1.8 trillion, the Treasury needed to borrow more than $2 trillion to make ends meet.

The high levels of borrowing are causing some investors to fear some sort of imminent and unprecedented snowballing of federal debt.  Continual borrowing will lead to skyrocketing interest rates (and higher interest payments), which will lead to severe problems in the financial system.

-as extracted from here

part of the disciplinary process.....................

      The habituation of workers to the assembly line was thus perhaps made easier by another innovation of the early twentieth century: consumer debt. . . . One symptom Lears points to is a 1907 book with the immodest title The New Basis of Civilization, by Simon Nelson Patten, in which the moral valence of debt and spending is reversed, and the multiplication of wants become not a sign of dangerous corruption but part of the civilizing process.  That is, part of the disciplinary process.  As Lears writes, "Indebtedness could discipline workers, keeping them a routinized jobs in factories and offices, graying but in harness, meeting payments regularly."

-Matthew B. Crawford, Shop Class as Soulcraft: An Inquiry Into the Value of Work

I was a history major.............

..........who only took two econ courses, so maybe I'm wrong, but sooner or later, this is going to hurt:

. . . the US is currently running the most reckless budget in the history of the country.  Never before has the deficit soared so quickly to such a high level when the US is still at peace and not in recession. 

-as culled from Brian Wesbury's most recent post

We will see..............................

 Debt used to be frowned upon. Now it’s a way of life.

-Ben Carlson, from this post on why he isn't worried about $1 Trillion (in total, not his personally) in credit card debt

Risk-sharing................

 The issue of "student debt" doesn't seem to be going away.  My parents paid for my education, my wife worked her way through school paying her own way,  and we paid for our kids' education. All of which may explain my lack of sympathy for those who find themselves deeply indebted by the acquisition of a degree that won't pay for itself.  Been reading stuff recently suggesting the radical notion that colleges should bear some responsibility and participate in the resolution of this problem.  Here is an interesting proposition from 2017.

The real issue, though, isn’t outright fraud — it’s that colleges are partially insulated from basic market forces, and they behave accordingly. They have financial incentives to enroll as many students as possible, and little incentive — or at least, little direct financial incentive — to ensure that those students will graduate on time and find jobs that pay well enough to repay their loans. The issue is particularly acute at less selective institutions including, but not limited to, for-profit colleges.

One proposed reform to the student loan system that has bipartisan support is known as risk-sharing. In its simplest form, a risk-sharing system would directly tie an institution’s finances to the outcomes of its students.

"social debt".............................

 . . . once money goes from being a tool you can use to make yourself happy to a symbol of what other people measure you by, you are buried in a kind of social debt that’s hard to measure but has a real impact on your happiness.

-Morgan Housel, from here

This chart measures.................

 .........the growth of interest payments on the U. S. debt.  Hang on.  It will be an interesting ride.

Profligacy............

 Don't think for a moment that such profligacy in the United States is limited to finance, real estate, and energy.  The last American president to even pretend to care about fiscal prudence was Bill Clinton, a dude not known for . . . prudence.  On his watch, the U. S. government did indeed balance the federal budget.  Then along came George W, Bush, who ran some the  largest deficits since World War II.  His successor, Barack Obama, doubled those deficits.  The next guy, Donald Trump, doubled them again.  At the time of this writing, in early 2022, the next dude in line, Joe Biden, bet his political life on multiple spending plans that if enacted would double those deficits again.

-Peter Zeihan, The End of the World Is Just the Beginning:  Mapping the Collapse of Globalization

A brief primer on "money"...............

 In the beginning, someone with a business wanted money from someone with money.

There are two and only two voluntary (i.e., without the threat of physical violence) ways of doing this. In exchange for the money, the person with a business can promise the person with money a share of the future economic activity of the business, or they can promise to repay the money in the future along with more money. In general, we call the former promise “equity” and the latter promise “debt”, and people with money have been collecting these promises from people with businesses since money was invented. These collections of promises are called “investment portfolios”.

About a nanosecond after money and equity and debt were invented, the business of facilitating these transactions was invented. Today we call this business “Wall Street”, but of course it goes back thousands of years, way before there were things called streets. The business of Wall Street consists of two and only two things: thinking up news ways to create a transferable share of some future economic activity, and thinking up new ways to borrow money today for a promise to repay that money and more in the future. We call the former activity “securitization”. For example, equity promises are securitized into “stocks” and debt promises are securitized into “bonds”, which makes the sale and resale of these promises sooooo much easier. We call the latter activity “leverage”, which is just a ten-dollar word for borrowed money.

Every bit of financial innovation over the past ten thousand years or so – all of it! – has been in service to one or both of those two activities: securitization and leverage.

-Ben Hunt, from this post

True this..................

 It is a vicious thing some writers do, to excite the minds of readers with the big profits available in real estate while downplaying the work and the risks required to make such returns.

-Jon Hanson, Good Debt, Bad Debt: Knowing the Difference Can Save Your Financial Life