PDA

View Full Version : Public Debt - how much is too much?



David G
06-03-2015, 03:32 PM
A report from the IMF --

http://www.economist.com/blogs/freeexchange/2015/06/public-debt?fsrc=scn/fb/wl/bl/st/howmuchistoomuch


Public debt in rich countries exploded between 2007 and 2012, rising from an average of 53% of GDP to nearly 80%. Some people think this is a problem, and say that governments need to do their best to cut it. But that view has been challenged in a new paper from the International Monetary Fund, which suggests that “paying down the debt” is not the most sensible approach...

Norman Bernstein
06-03-2015, 03:43 PM
Seems like a sensible article. Therefore, be prepared for the right wingers to rush in and contradict it :)

John Smith
06-03-2015, 08:05 PM
I don't think it's all that complex. It's just simple math.

Income has to equal outgo. Some things simply NEED to be done, and they cost money. Fixing our infrastructure, for example, won't cost less to do if we put it off longer. It will cost more. Some things are investments, but you have to put money into something before it can yield a positive revenue stream.

Waddie
06-03-2015, 11:58 PM
Why worry about it? We ain't gonna pay it back, no how. We just gotta hope interest rates stay low so we can afford the interest payments. Right now those payments total $192,769,531,880.68....... enough to fund many, many government programs, including the VA and Education. In fact, if we had no debt, there would be no need for any cuts and every department could get a nice increase in their budgets. Oh.....well...... easy come, easy go...

regards,
Waddie

varadero
06-04-2015, 01:37 AM
It all depends on the reason for the debt. comparing it to a household if it is mortgage debt, no problem, you are paying for an asset. If it is debt incurred for a holiday, or for buying a flat screen television that either depreciates, or has no residual value, A waste of money. Greece has been borrowing money to pay public servant salaries, bad. Spain has been borrowing money to improve infrastructure and education, good.

Waddie
06-04-2015, 01:45 AM
We've borrowed our debt to fund a huge military machine, finance wars, pay pensions and other entitlements, and for administrative costs.

regards,
Waddie

purri
06-04-2015, 01:59 AM
The graph appears to favour some whilst ignoring the current and productive capacity of those nations with a "nil" status. It might be better demonstrated by an index of potential and ongoing productive capacity.

skuthorp
06-04-2015, 02:02 AM
If you borrow money to build a bridge that cut's commuter time, transport costs, less wear and maintenance on the other route, less fuel used, less green house gases, and it's safer so accident injury and health costs are less it's good.
If you borrow money to get involved in a war on spurious political grounds, less good I'd say. What would you say?

Governments can usually borrow money at lesser rates than private borrowers (Greece excluded). There will never be a better time to borrow for infrastructure. a government might find the money is free for the time being because it's safe. Such borrowings would create businesses, a construction company for said bridge, contractors, suppliers, workers, food sales, the knock on effect is always big. Ideologies that say that all public debt is bad, is bad.
You never know, even gun sales might benefit………...:cool:

Waddie
06-04-2015, 02:19 AM
Borrowing and building a new bridge that cuts transport time in half is indeed a good thing, and a stimulus. Borrowing and repairing a bridge already in use or even replacing that bridge is not stimulus, and not necessarily a good thing.

Borrowing and spending on R&D that leads to new products and improved manufacturing is a good thing, and has a stimulus effect.

Borrowing for any infrastructure, however, is always only a temporary boost to any economy. When the spending ends, so do the jobs, and so do the supporting jobs. Taxing (like the gas tax) to pay for maintaining infrastructure is a long term commitment and a more permanent boost to any economy.

BTW; there is one infrastructure project that is both. We lose almost half of our electrical power generation over our antiquated power grid. Rebuilding the nations power grid would quickly pay for itself and prove to be a stimulus.

regards,
Waddie

skuthorp
06-04-2015, 02:27 AM
One presumes, and probably it's a big presumption that when the original bridge was built (see para 1) it had a planned depreciation lifetime, and even a planned replacement time due to increased use. However I agree in that a bridge built for say coal truck traffic should hold up for longer if that industry disappears. And again I agree that technology and the changing pattern of jobs might also alter the circumstance. However it could wok both ways as trucks carry bulk loads that once were the preserve of the railways. It's a moveable, and not always predictable feast.
And even construction jobs carry a permanent benefit in the skills learnt, the capital injected into the economy and the increase in wealth of the workers concerned. Quite apart from the knock on effects of materials mined and used, coffee and burgers bought etc.
Of course automation, miniaturisation, robotics and artificial intelligence is likely to replace us all except the owners of capital. And I mean the actual 'owners' not those who work in the establishment. The actual bankers may be amongst the first to go.