Wednesday, December 19, 2012

Managing our National Debt??

--------------------- #1533 Sustainable National Debt?
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- 4 years ago our national debt was $10.6 trillion. That is $10,600 billion. Today it is $16,400 billion
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----------------- FV = PV ( 1+i )^n
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------------- Future Value = Present Value * ( 1 + interest rate /year ) ^ number of years
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----------------- 16,400 = 10,600 (1+i)^4
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---------------- 1.55 = ( 1 +i )^4
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----------------- 1.12 = ( 1 +i)
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- So, out national debt is rising 12% per year. The Democrats in legislatures say that it is “sustainable“. Don’t worry. We need to spend even more money to continue to boost the economy. Present course and speed is the way to go.
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- Each family in America now owes $140,000 of the National Debt. At the same time the Federal government is borrowing $239 million every hour. We the people are the BANK. Somehow and someone has to come up with all this money?
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- We have always had debt. It is the American way:
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- Abraham Lincoln’s administration had a debt of $3 billion.
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- During the 1929 Depression the debt was $17 billion.
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- During 1945 WWII the debt rose to $259 billion.
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- With the 2008 recession it rose to $10,000 billion
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- Today the debt is $16,400 billion. The interest we pay on this debt will soon be greater than what we pay on Social Security, or on National Defense.
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- “Economic growth will solve this problem of paying off out debt.” A real economic recovery occurs when the private sector has money to spend and invest. But, the private economy has less when the government has more. There is only so much money to go around. The temptation is to just print more money, which means that it has less value and prices go up with inflation. We can inflate our way out of this and pay off the loan with cheaper dollars we’re home free.
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- Or, the government can spend stimulus money and grow the economy. Unlike the private sector the government does not need to make a profit. They can afford to waste the money with little incentive to be efficient. If more money is needed simply raise taxes.
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- The population is retiring into old age. This group is not paying taxes they are using taxes. The largest growth in expenditures is going to be their medical care. It alone will eat up all of Congress’s discretionary spending.
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- When will Congress tighten its belt? Keeping eating until it hurts. Then, we can stop. Let’s hope the parachute pops before we hit the pavement.
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