US Government Spending Like a Sailor in a Brothel

Wookster

The point is, the US is bankrupt. Now way can they pay all that debt back.

The sooner they start to realise that they need to live within their means, the better.

Obama has continued what Bush started. Both of them have spent way more money than they can afford to.

One point you may not have taken into consideration Clapton, is the potential downside to spending - the US has a massive trade deficit, at some point investors could refuse to lend it money in which case there would be financial armagedon (not saying that is going to happen tomorrow but it is a risk).

Generali

kennyboy66 wrote: »

The trouble with the "crowding out" theory, particularly when it comes to Govt borrowing is that it is a little simplistic to say the least.

In what way is it simplistic, please? I thought there was very little controversy surrounding the existance of crowding out. Perhaps I'm wrong.

Mr_Mumble

I feel sorry for these drunk and horny sailors being compared to politicians. A sailor spends his own money and doesn't run up debt paid by others. A far more upstanding character than public officials.

Bill Clinton was awesome, I'm an utter chump for only realising this in the past couple of years. Bush was awful for fiscal conservatives but Obama.. well Obama is the reason Peter Schiff is predicting 15% unemployment and Meredith Whitney is saying 13-14% (and admits it could be higher). Business can't invest when it has complete uncertainty over cap and tax, healthcare rationing, dilution of the dollar, card check, et al.

CLAPTON wrote: »

Normally I take the view that the majority are usually wrong so I'm slightly embarassed by the fact that most of the economistics of all persuasions seem to see the general run of the current policies as being appropriate.

This is a myth created by politicians who always tout the same handful of loud-mouthed, usually micro, economists.

President Obama says that "economists from across the political spectrum agree" on the need for massive government spending to stimulate the economy. In fact, many economists disagree. Hundreds of them, including Nobel laureates and other prominent scholars, have signed a statement that the Cato Institute has placed in major newspapers across the United States.

michaels

But at 1% at least in the short term it is borrowed short it is only costing one fifth of that.

Crowding out may be happening as evidenced by the recent rises in the longer part of the curve but would business really be falling over itself to borrow and invest even if 10 year money was only 2% if the economy was contracting at twice or more the current rate (as it would be if govt expenditure was being reduced in line with tax receipts)?

CLAPTON

Generali wrote: »

In what way is it simplistic, please? I thought there was very little controversy surrounding the existance of crowding out. Perhaps I'm wrong.

I assume you are referring to financial 'crowding out ' rather than resource crowding out.

I'm not sure what evidence there is that companies can't borrow money to invest because of government borrowing... indeed much of the government borrowing was to prevent the collapse of the banks ... combining this with the QE which has expanded the money supply the evidence certainly isn't clear cut.

Many would say the reason that companies aren't borrowing it partly because they are making no profit
and partly because banks wouldn't lend to them because the banks are rebuilding their own capital base and
partly don't think they will get their money back (i.e. see companies that aren't making any money as high risk).

If indeed crowding out is a major factor then presumably interest rates should start to rise ..maybe there is some evidence of this

Wookster

CLAPTON wrote: »

I assume you are referring to financial 'crowding out ' rather than resource crowding out.

Isn't it common sense though? There are limited funds available (do we at least agree on that?), and if the state is borrowing so much then:
1. That limits what is available to private enterprise
2. It makes the cost of borrowing by private enterprise higher.

Not really conducive to recovering from a a serious crisis is it?

CLAPTON

Wookster wrote: »

Isn't it common sense though? There are limited funds available (do we at least agree on that?), and if the state is borrowing so much then:
1. That limits what is available to private enterprise
2. It makes the cost of borrowing by private enterprise higher.

Not really conducive to recovering from a a serious crisis is it?

common sense is usually common and rarely sense

however, the issue is whether at the moment companies can't boorow because of crowding out by the government.
the evidence is not clear... as I say the government has created more money by QE which has altered the total amoutn fo potential lending.

now I'm not sure that companies aren't borrowing because of high interest rates.. it may indeed be common sense to you but the evidence doesn't seem to be there.

lack of profit and perceived high risk may well be more significant factors.

Also it has to be considered whether the reduction in demand that may have taken place if the government had reduced borrowing and spending would have caused much greater collapse in private sector profits and hence reduction in demand for private sector borrowing.

sabretoothtigger

I read somewhere that each usa household has a overall total of half a million in debt to pay off
Kind of worrying that uk is said to be worse , really it needs a side by side comparison because the measures or estimates vary

the alterntive was 30s style unemployment

Some places have 25% unemployment anyway and its not certain the 30's would have been repeated without government debt increases

sabretoothtigger

Mr_Mumble wrote: »

Bill Clinton was awesome, I'm an utter chump for only realising this in the past couple of years. Bush was awful for fiscal conservatives

certainty looks better but clinton setup the fnm deal I think and also allowed banks to buy their own debt

vivatifosi

Interesting graph sabretoothtigger, but looking at the column size, doesn't that infer Obama will be in power for longer than he is able under the Constitution (22nd Amendment)?