Debt Crisis...

Jarod

Jarod

Well-known member
Contributor
I hear Conservatives go on and on about the coming "Debt Crisis", I am convinced its a scare tactic and that there is no coming crisis. I know we have a lot of debt, but we have had a lot of debt in the past and come out of that easily....

So... Just so we are all on the same page...

Will someone who is concerned about the "Debt Crisis" explain to me:

1) What exactly is the "debt crisis".

2) What negative effects will we or are we seeing from the "debt crisis".

3) When will the "crisis" hit and what will that look like economically?
 
You don't think there is a problem. So we should just keep spending and spending and spending. What could go wrong? Gobblement can always print more money. History shows us that it has never turned out badly
 
Teflon Don said:
You don't think there is a problem. So we should just keep spending and spending and spending. What could go wrong? Gobblement can always print more money. History shows us that it has never turned out badly
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A problem might develop, but I don't see one currently and I don't know what it will look like if it does. I do know that the economy of the United States is not akin to my bank account like it keeps being described to me by Conservatives.

I know many screamed about the problem when Reagan was President and he had a huge debt for his time, and we ended up with no crisis.

I think the use of the word "Crisis" is fear mongering.
 
So, nobody wants to define what a "debt crisis" looks like?

What are the negative effects of a "debt Crisis"?

When will we start to feel these effects?
 
Since you asked from a partisan perspective Jarod wasn't it liberals that said our debt crisis caused the Great Recession?
 
cawacko said:
Since you asked from a partisan perspective Jarod wasn't it liberals that said our debt crisis caused the Great Recession?
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If they did, I missed it. I personally don't believe that is what caused the recession. The recession, in my opinion was caused by a variety of factors. One being the attempt to finance the Iraq war while at the same time lowering Taxes. It was not the debt per se. That was the first time we opened a war, while lowering taxes. That on top of the HUGE Real estate bubble burst plus some other factors caused the Recession.
 
I am far from an expert on this subject but I do know a few things. If we have a central bank that is growing the size of their balance sheets with QE, printing money to finance deficits and basically keeping interest rates at zero and we think there will be no repercussions then we shouldn't be surprised at what happens next. We've all the adage 'there's no such thing as a free lunch'.

We already saw what happened with the real estate bubble. That won't be contained to only real estate. We could see it here with the stock market as well.

I was with my buddy this weekend who deals in bonds who said government bonds are trading below the level of inflation. I take his word for it but I don't know if that's true or not. I wish I understood more about bonds. But basically that means an investor who holds his bond to maturity will lose money (in real terms). We are seeing investors take more risk for smaller returns as a result. That's not a good thing.
 
If the Debt Crisis caused the recession, why would we be pulling out of it while still further in debt?
 
Jarod said:
If they did, I missed it. I personally don't believe that is what caused the recession. The recession, in my opinion was caused by a variety of factors. One being the attempt to finance the Iraq war while at the same time lowering Taxes. It was not the debt per se. That was the first time we opened a war, while lowering taxes. That on top of the HUGE Real estate bubble burst plus some other factors caused the Recession.
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How did cutting taxes and financing the war actually cause the recession? I mean yes those events happened and there was a recession but how did they actually cause it?
 
cawacko said:
I am far from an expert on this subject but I do know a few things. If we have a central bank that is growing the size of their balance sheets with QE, printing money to finance deficits and basically keeping interest rates at zero and we think there will be no repercussions then we shouldn't be surprised at what happens next. We've all the adage 'there's no such thing as a free lunch'.

We already saw what happened with the real estate bubble. That won't be contained to only real estate. We could see it here with the stock market as well.

I was with my buddy this weekend who deals in bonds who said government bonds are trading below the level of inflation. I take his word for it but I don't know if that's true or not. I wish I understood more about bonds. But basically that means an investor who holds his bond to maturity will lose money (in real terms). We are seeing investors take more risk for smaller returns as a result. That's not a good thing.
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I think what you are saying about bonds is true. I also expect the Stock Market to shift in response to the end QE, but the Administration is trying to make that shift as gradual and easy as possible by very slowly ending the QE. Interest rates will jump, and should, they have been way too low for way too long. But that is hardly a "Crisis".

Eventually, inflation will increase, along with natural economic growth and the debt will drop drastically, in fact we have already seen the budget deficit decrease dramatically. A dollar will be worth less than its current value, but people will be earning more, paying more in taxes, but the dollar value of the debt will be less. Basically what we are using to pay the debt will be new money, but we will be paying on the old value of the money.
 
cawacko said:
How did cutting taxes and financing the war actually cause the recession? I mean yes those events happened and there was a recession but how did they actually cause it?
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It devalued the dollar based on prospective worth.
 
cawacko said:
I am far from an expert on this subject but I do know a few things. If we have a central bank that is growing the size of their balance sheets with QE, printing money to finance deficits and basically keeping interest rates at zero and we think there will be no repercussions then we shouldn't be surprised at what happens next. We've all the adage 'there's no such thing as a free lunch'.

We already saw what happened with the real estate bubble. That won't be contained to only real estate. We could see it here with the stock market as well.

I was with my buddy this weekend who deals in bonds who said government bonds are trading below the level of inflation. I take his word for it but I don't know if that's true or not. I wish I understood more about bonds. But basically that means an investor who holds his bond to maturity will lose money (in real terms). We are seeing investors take more risk for smaller returns as a result. That's not a good thing.
Click to expand...

Yes, bonds are trading low, all the while the big banks continue to make billions in risk free arbitrage.
 
cawacko said:
Since you asked from a partisan perspective Jarod wasn't it liberals that said our debt crisis caused the Great Recession?
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Theres many schools of thought as to what caused the depression, I dont think any one thing caused it.
 
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