US Senate approves debt limit increase

[John D Harris]

The person to person comparison depends on the ability to repay, which is where the GDP parts comes in. so no real disagreement here.

I guess we're both saying to be careful cause it can get out of control, we may have differant levels on what we think out of control is. But I'm an Internal Optimist I come from a Scot theif that was given the choice of serving time in a British prison or coming to the New World and serve 7 year indenturued servant. He servered his 7 years got out before the war then started running guns for the Colonists, from his loins sprung forth my Harris clan, and by and large we'd done well over the years.

Very valid points on all the rest!!! I don't like the lack of Fiscal responseablity either. I have a gut feeling that if we held the budget to the rate of inflation we could restart paying off the debt in 6 years, no data to back that up just an faith in the American people. The dot.com stock market bubble is a perfect example of how a stock drop can harm the economy. People have a tendency if their stocks(money on paper) are doing well to over spend, past their ability to repay, so they get in trouble thinking they can always fall back on their stocks. I think the problem is we have forgoten to put money away for a rainy day.

[ 11-30-2004, 05:54 PM: Message edited by: John D Harris ]

[shamrock_uk]

Crikey, just for some perspective:

After the Second World War, Britain had a balance of payments deficit on her current account about 1/6 of national income, a budget deficit of about the same size, and a national debt of more than double her entire national income!

That would make it around 22 trillion dollars if a similar situation occurred in America - we survived that, so maybe 8 trillion isn't so bad after all!

[Azred]

Quite right. A nation's debt/defecit is nowhere nearly as important an economic factor as the inflation rate, the prime lending rate, the GDP, the unemployment rate, the currency exchange rate, and the trade defecit (imports - exports).
This is not to excuse overblown Washington spending, though, because the only way to make the government's bottom line better is to a) raise taxes or b) reduce spending.

[John D Harris]

Originally posted by Azred: Quite right. A nation's debt/defecit is nowhere nearly as important an economic factor as the inflation rate, the prime lending rate, the GDP, the unemployment rate, the currency exchange rate, and the trade defecit (imports - exports). This is not to excuse overblown Washington spending, though, because the only way to make the government's bottom line better is to a) raise taxes or b) reduce spending.

Here Here!!! people's personal spending is what makes money, it's our money not the Gov'ts. When ever anybody buys some of my t-shirts that puts money in my pocket, alowing me to buy things and put money in somebody else's pocket for them to buy things, and on and on.

Az, do you know, or have an idea at what point the weak dollar reaches a diminishing return? I don't know where that point is. I remember that the weak dollar was a big thing during the 80's, and we got through it. From what I can see as the dollar moves south, our exports increase-imports decrease, making a stronger domestic/export market bringing more business/more jobs. I'm sitting here outside of Tuscaloosa, Alabama we have a Mercedes plant built during the late 80's early 90's becasue it was cheaper to build cars here then export to the USA. But there has to be a point where it starts to hurt and causes more problems then it solves.

IIRC as a kid the Pound was worth about 2 dollars during at one time.

[ 12-01-2004, 11:02 AM: Message edited by: John D Harris ]

[shamrock_uk]

I don't have a complete answer for you JD, but the dollar fell by around 30% in the 1980s and has only fallen around 15% so far, so the general feeling is that it'll have to fall twice as far before it reaches this 'break-even' point you refer to.

The 30% fall is ony a guide, but given that international currency markets are almost perfectly competitive, I guess it is reasonable to assume that this is the point at which the diminishing returns 'kick in' and prevent further falls.

[John D Harris]

Thanks Sham, I knew the dollar fell during the 80's but couldn't recall by how much.

I'm assuming that the Dollar rose inbetween the last loss and the current one, if that is the case then it's only fair that while it rose and we made money that we give some of it back, let's spread the wealth.

[Azred]

Originally posted by John D Harris: Az, do you know, or have an idea at what point the weak dollar reaches a diminishing return? I don't know where that point is.

Unfortunately, I don't. I suspect that there is no set point or formula and would depend more upon the overall economic state at a particular point in time. That is to say, a devalued dollar would have different effects depending upon whether you consider 1978 (high inflation and unemployment) or 1998 (low inflation and unemployment).

[John D Harris]

Originally posted by Azred: quote: Originally posted by John D Harris: Az, do you know, or have an idea at what point the weak dollar reaches a diminishing return? I don't know where that point is.

Unfortunately, I don't. I suspect that there is no set point or formula and would depend more upon the overall economic state at a particular point in time. That is to say, a devalued dollar would have different effects depending upon whether you consider 1978 (high inflation and unemployment) or 1998 (low inflation and unemployment). [/QUOTE]Fair enough, inflation and employment along with the other factors you sited earlier would have some effect on the over all.

It's a lot like "Engulf and Devour" from Mel Brooks Silent Movie They got their fingers in everything, it's all intertwined and more then one factor has an effect.