What's the Meaning of $9 Trillion in Debt?

American Gold Exchange ^ | 4/27/06 | American Gold Exchange

[wotan]

After rising to $570 an ounce in February and correcting down to $540, gold has been on a tear. In the past sixty days the spot price surged by an astonishing $100, closing above $635 an ounce yesterday, its highest close since 1979. Even more stunning has been the performance of silver. After hitting new highs in February at just under $10.00 an ounce, silver skyrocketed by 50% to almost $15.00 before profit-taking cooled the rally. Palladium and platinum have also enjoyed strong gains during this time frame, but not quite as sensational as gold and silver.

Just as remarkable is the time frame of these gains. Historically, the first quarter of the year is the weakest time for metals. Once Chinese New Year and the Indian festival season pass, international demand for physical gold generally subsides for a while and prices soften. But not this year. As 26-year market veterans, we haven't seen this kind of late-winter rise since the “mother of all bull markets,” the record-breaking run from 1976 to 1980, when gold reached its all-time high of $850 and silver peaked at $50 an ounce.

[Raycpa]

"The borrower is the lender's slave."

Not when the borrower has bigger guns.

[N. Theknow]

What's the Meaning of $9 Trillion in Debt?

9 trillion pieces of paper?

[jpl]

Hint: The risk taker in a loan is the lender, not the borrower.

Yet the bottom line is that I'd still better continue paying off those loan payments, or else eventually I'm getting a eviction notice, the lender gets my home, and my title becomes invalid.

[Doe Eyes]

It will become a crisis when the we are forced raise interest rates to entice foreigners to continue investing in the US. Then sit back and watch the bankruptcies

Also, a large part of the Federal Budget is interest on the debt.

As interest rates goes up, the budget deficit goes up, we have to borrow even more, so interest rates go up more, so we have to borrow more ...

[avacado]

The debt is meaningless as a raw number. The ability to pay back a debt is what needs to be looked at and that is the debt-to-GDP ratio. The USA has a very healthy debt-to-GDP ratio.

[P8riot]

What it means is that they are gonna keep comin after us to foot the bill.

[Vaduz]

At least we know it can't be the mafia because the FBi said the mafia is busted wink wink nod nod know what I mean.

[farmguy]

Well as someone who has spent the last 20 years selling American-designed and manufactured technology that significantly improves productivity of especially large, critical industries, I'd say you don't know what the hell you are talking about.

Yeah right. Specifics please.

[farmguy]

Not to worry. We have the best economy that 8+ trillion dollars of borrowed money can buy

[InterceptPoint]

You might note that we are currently depreciating the value of a dollar at the rate of about 3% per year. This has the very "nice" effect of reducing the real value of that $9 trillion by $270 billion each and ever year.

It is also worth noting that Congress elects to spend that $270 billion too by adding to the deficit by about that much. The net effect is that the real debt grows more slowly than you think at first glance - but it does grow. Also, if Congress and the Prez would just cool it on the spending we could let the printing presses at the Fed take care of the whole thing. Remember, even at 3% annual inflation eventually the minimum wage will be $9 trillion per year although that will take quite awhile.

[OB1kNOb]

"The borrower is the lender's slave."

Not when the borrower has bigger guns.

The day that the USA directly threatens another country with military action in order to default on repayment of our debt, is the day we fatally wound our own economy and future as a superpower nation. If we ever try to head down that road, we have sealed our own demise.

[Roccus]

T-Bills are looking better every day.

[Ditto]

Yeah right. Specifics please.

Go here and look it up. I can give you examples I have been involved in of steel mills outfitted with modern continuous casters that produce more tonnage now with 700 employees than they did 30 years ago with 7000.

Of refineries, petro chem, and power plants that have increased production, reliability, and safety significantly over the last 20 years by applying advanced control systems technology. Look at design and engineering and understand the time to market and costs have dropped in major ways thanks to things like CAD and advanced modeling software.

Maybe to do live on a farm that is still plowing with mules, but if you haven't noticed the massive growth of technology driven productivity increases over the last few decades, you haven't been paying attention.

[Roccus]

How and what are these lenders going to forclose on? Are they going to annex Alaska maybe?

[farmguy]

So you've sold CAD/CAM systems to steel markets and refineries. Where are the steel mills located that your software going into. If you've been doing for 20 years I doubt the majority are American steel mills (unless you are a really small operation). Whose oil is being refined? And while we're at it, where are your programs written?

Sorry, it may look like big bucks to you, but your product is dwarfed by the industries it's being used in and for the most part those industries are foreign.

[Raycpa]

or else eventually I'm getting a eviction notice, the lender gets my home, and my title becomes invalid.

Who is going to evict the US?

[Raycpa]

The day that the USA directly threatens another country with military action in order to default on repayment of our debt,

The beauty of being a powerful soverign nation is it never needs to threaten.

[american spirit]

I think there's a good chance we'll see some of othe country's infrastructure sacrificed in sort of a debt/equity swap and a whole lot of FREEways are going to turn into TOLLways. Other similar scenarios might also include our water resources.

[stainlessbanner]

[Ditto]

So you've sold CAD/CAM systems to steel markets and refineries. Where are the steel mills located that your software going into.

Pennsylvania, Indiana, Alabama, China, India, Russia -- you name it. It's a global business and the outfit I work for happens to be the world leader, not some small niche firm. It's a 100+ year old US headquartered Fortune 50 firm. The majority of our sales (~65%) are in the US because that is the single largest market industrial market in the world. We don't sell CAD/CAM, -- I just used that as an example of how things have changed for the better.

But your argument that the US does not make anything is total urban myth. We make a lot of stuff -- and a lot of that stuff didn't even exist 30 years ago. You see a downturn in manufacturing employment as a sign that we "don't make anything anymore". The reality is we make just as much with a lot fewer people. That is the definition of productivity.

I posted the recent industrial productivity reports -- did you even bother to look, or is your myth to sacred to you to worry about facts? The economy has changed significantly. It no longer hangs on every up or down of US Steel or GM. It's grown and changed beyond the ability of a cycle of one industry or even one company to upset the apple cart they way things were in the past.

I remember in the 50s recessions being touched off by the USW or UAW going on strike. That will never happen again. I remember the 70s when we went into a major recession with double digit unemployment and interest rates because of a quick run up in oil prices. We have had a quick run up in oil this past year and the economy keeps ticking along nicely despite the prayers of the Democrats. It's a different and far better economy today.