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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-20-2006, 06:11 PM   #21
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Quote:
Originally Posted by justin
Here's a listing of countries of the world in rank order based on total debt as a percentage of their GDP.

https://www.cia.gov/cia/publications.../2186rank.html

USA has debt of 65% of their GDP.

France, Germany, Austria, Italy, Japan, and 31 other countries have a higher debt to GDP ratio than the USA.

Not too worrying to me...
It depends on what they considered in that debt number. I am guessing that the problem is the promised social security and medicare benefits that are not included in debt.

It's interesting to me that several months ago we heard people telling us Social Security was on the verge of colapse and we needed to abolish it or it would lead to economic colapse. Now many of the same people are telling us that the deficit is no problem.
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?
Old 11-20-2006, 06:16 PM   #22
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

Quote:
Originally Posted by FinanceDude
Japan at 158%........ouch!!!!
This is amazing - I thought the Japanese "paid cash for everything" and avoided excess consumption. Must be government / banking system / real estate debt.

The government budget deficit doesn't bother me. The trade deficit bothers me.

I do have 1/2 my equities in currency unhedged global funds / ETFs. I'm also moving more of my REITs into global REITS.

I like the diversification. I also think the dollar is going to sag against other global currencies.

"In the long run we are all dead." John Maynard Keynes
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-20-2006, 06:37 PM   #23
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Quote:
Originally Posted by Delawaredave
This is amazing - I thought the Japanese "paid cash for everything" and avoided excess consumption. Must be government / banking system / real estate debt.
The table is titled "public debt," so government bonds, presumably.

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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-20-2006, 06:37 PM   #24
 
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Quote:
Originally Posted by sgeeeee
It's interesting to me that several months ago we heard people telling us Social Security was on the verge of colapse and we needed to abolish it or it would lead to economic colapse. Now many of the same people are telling us that the deficit is no problem.
What is really funny, is those same people were actually telling us this at the Same Time
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-20-2006, 06:57 PM   #25
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Quote:
However, as I have stated before..........if you repealed the tax cuts, and legislated some fiscal controls on the
US budget, the deficit could be cut in half inside 4 years.........
I believe the deficit has already been cut in half to about $250 billion from it's peak of $521 billion (FY2004). Still has a ways to go. I don't expect to see fiscal restraint anytime soon from either party.

Quote:
USA has debt of 65% of their GDP.
France, Germany, Austria, Italy, Japan, and 31 other countries have a higher debt to GDP ratio than the USA.
All of those EU countries also have lower growth rates than the US economy which translates into lower tax revenues to dig out of deficits. In fact, I think Ireland and maybe Sweden are the only EU countries whose economies are grower faster than the US.

What surprised me about the chart was Canada. Canada's national debt is listed as 69% of GDP, slightly higher the US. I figured that Canadians have been paying down their debt since their economy has been doing really well?? Or is that just in Alberta?
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-20-2006, 07:24 PM   #26
 
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Quote:
Originally Posted by WanderALot
I believe the deficit has already been cut in half to about $250 billion from it's peak of $521 billion (FY2004). Still has a ways to go.
You make it sound like this is a good thing. The only reason it has been cut in half is that FY2004 was about 10 times too much! - So now, when it is only 5 times too much, we should celebrate it !
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?
Old 11-20-2006, 07:53 PM   #27
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

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I am guessing that the problem is the promised social security and medicare benefits
we've been promised neither soc.sec. nor medicare benefits ... both are dependent only on the whims of congress. it is, of course, not likely that either would entirely disappear, but one should recognize both programs for what they are, not what one would like to think they are.
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-20-2006, 08:19 PM   #28
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Quote:
Originally Posted by Cut-Throat
You make it sound like this is a good thing. The only reason it has been cut in half is that FY2004 was about 10 times too much! - So now, when it is only 5 times too much, we should celebrate it !
I don't think it's a good thing, that's why I said: "Still a ways to go". Regardless of revenue increases, if the spending doesn't get under control, it won't matter. The same applies to CA's state government which started spending like crazy during the dotcom era.

Quote:
I believe the deficit has already been cut in half to about $250 billion from it's peak of $521 billion (FY2004). Still has a ways to go. I don't expect to see fiscal restraint anytime soon from either party.
EDIT: Grammer
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?
Old 11-21-2006, 12:09 AM   #29
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

Quote:
Originally Posted by d
we've been promised neither soc.sec. nor medicare benefits ... both are dependent only on the whims of congress. it is, of course, not likely that either would entirely disappear, but one should recognize both programs for what they are, not what one would like to think they are.
While any legislation can be changed at any time in theory, I suspect there are far more legislators who would want to distance themselves from such a statement than would be willing to embrace it. A 70 year history of Social Security paying benefits is considered a promise by most American voters.

But the real point about the tabulated debt-to-GDP ratio is more important. If people want to look at that table and conclude that there is no problem with our current deficit, they need to admit that they are implicitly saying that there is no problem as long as we are willing to screw future generations out of both Social Security and Medicare benefits. The support they get from American voters will drop signficantly when they add that proviso.

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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-21-2006, 08:08 AM   #30
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Quote:
Originally Posted by sgeeeee
It depends on what they considered in that debt number. I am guessing that the problem is the promised social security and medicare benefits that are not included in debt.
SG,

I think the $8.x trillion dollar debt does include the amounts owed from the general fund to the SS and medicare trust funds.

The CIA world factbook I linked to states the US debt is $8.837 trillion (30 June 2005 est.). It further states the US GDP is $12.49 trillion (2005 est.). This gives me a debt-to-GDP ratio of 70%, but it's close enough for goverment work to 65% that they calculated.

The Bureau of the Public Debt (what happens if we pay off all our debts?!), a subentity of the US Treasury Dept. lists the "public debt" at $4.9 trillion (this includes bills, bonds, tips, savings bonds, etc). Intergovernmental holdings debt, at $3.7 trillion includes the SS and medicare trust fund debt. That totals to $8.6 trillion.

I have to go along with what other posters have said - accept the risk of default for what it is, and diversify into other asset classes to prevent against credit risk/default/slow devaluation. Buy unhedged foreign stock or bond mutual funds. Done.
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?
Old 11-21-2006, 12:59 PM   #31
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

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Sure, US government bonds might default. So make sure not to put all your eggs in that one basket.
I would like to know what investment other than gold will hold up OK if US govermment bonds default. The stock market in that case will be down 75-80% and insurance companies will be unable to meet their annuity payments. Most other foreign governments holding the debt would be crippled as well, it would be extrodinarily ugly if this were to occur and other than gold/silver you will not be able to diversify away this risk. Of course that is what makes this occurence to be so unlikely to occur as goverments will do everything to avoid.
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-21-2006, 01:25 PM   #32
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

As has been said in other areas--if things get that bad, gold may not be worth much, either. It might be more useful to have something you can eat, shoot, or that your car can use for fuel. It's not gonna get that bad.



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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-21-2006, 05:07 PM   #33
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Quote:
Originally Posted by Running_Man
Quote:
Sure, US government bonds might default. So make sure not to put all your eggs in that one basket.
I would like to know what investment other than gold will hold up OK if US govermment bonds default. The stock market in that case will be down 75-80% and insurance companies will be unable to meet their annuity payments. Most other foreign governments holding the debt would be crippled as well, it would be extrodinarily ugly if this were to occur and other than gold/silver you will not be able to diversify away this risk. Of course that is what makes this occurence to be so unlikely to occur as goverments will do everything to avoid.
There is always a scenario bad enough that you can't protect against it. On the other hand, I don't necessarily believe that if the US defaulted on its debts that the whole world would have to come to a stop. It would make a mess, sure, but I suspect that the rest of the world would recover soon enough. And remember, the goal is not to make a profit in this scenario, it is just to survive.

The real problem you might have is if your foreign assets are all held through US brokerages; if the US instituted Argentinian-style currency controls, you might not be able to access your foreign holdings even if they have retained some value, until well after the crisis had passed. This is when you might want some gold, guns, and a deep-freeze to store your self-hunted venison. Alternatively, the approach I use is to have brokerage accounts in two different countries, with minimal cross-holdings between the two. But this option is not readily available to most.
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-21-2006, 05:46 PM   #34
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

I wrote:

Quote:
Originally Posted by bpp
This is when you might want some gold, guns, and a deep-freeze to store your self-hunted venison.
Actually, more soberly, one could look back at the numerous instances of default or hyperinflation in the past century to see what would really have been useful. I'm not sure guns and gold were called for in most instances, though foreign currency (in the form of cash bills) probably proved useful in most cases. Maybe a little stash of Euros in the back of the sock drawer would provide some cheap comfort?
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic
Old 11-21-2006, 10:58 PM   #35
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Quote:
Originally Posted by WanderALot
What surprised me about the chart was Canada. Canada's national debt is listed as 69% of GDP, slightly higher the US. I figured that Canadians have been paying down their debt since their economy has been doing really well?? Or is that just in Alberta?
I think the devil is in the details on what is included I imagine. I looked up Canada because I knew 60+% was way too high. This link Canada's Fiscal Progress states a number cited a lot more often at 38.7% of GDP in 2004-2005 and I believe it is under 35% now.

FWIW, Alberta paid off its net debt in 2005.
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?
Old 11-22-2006, 12:22 AM   #36
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

Quote:
Originally Posted by Running_Man
I would like to know what investment other than gold will hold up OK if US govermment bonds default. The stock market in that case will be down 75-80% and insurance companies will be unable to meet their annuity payments. Most other foreign governments holding the debt would be crippled as well, it would be extrodinarily ugly if this were to occur and other than gold/silver you will not be able to diversify away this risk. Of course that is what makes this occurence to be so unlikely to occur as goverments will do everything to avoid.
If things were that bad, it's reasonable to ask if gold held in something like the
GLD ETF would be worth much. Maybe it'd need to be bullion in your well-fortified
house ?

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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?
Old 11-22-2006, 06:06 AM   #37
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

Precious metals would do well in a default / dollar hyperinflation, by definition ... you would view them in terms of their dollar value per ounce. Of course, this would work great for paying off the mortgage and other debt ... fixed dollar obligations. Adequate for buying consumables ... but since every other tangible asset would be worth more in "dollars", you would roughly hold your own, not prosper per se. [A few gold and silver coins are easy to put away, though the timing is rough right now.]

I always get a kick out of those on this board who trivialize any investment in precious metals. I suppose they've never looked at a chart of VGPMX ...

Government debt and budget deficits are misunderstood so often. I have concerns, but it doesn't keep me up at night. The long term pandering to the AARP, etc. with SS, medicare and especially the recent prescription drug benefits concern me most. Eventually we may spend ourselves into an entitlement situation where we cannot pay for an adequate defense, and that could make for a very uncomfortable retirement.

All you can do is diversify / hedge, and speak your mind politically / vote.
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?
Old 11-22-2006, 06:34 AM   #38
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

Quote:
Originally Posted by Running_Man
I would like to know what investment other than gold will hold up OK if US govermment bonds default. The stock market in that case will be down 75-80% ...
This would be a meltdown that you shouldn't try to cover yourself for - there's more risk to damaging your portfolio growth making radical changes guessing on meltdown.

However, I do like fairly aggressive diversifying into non-dollar based international funds.

I think the dollar is "more at a top than a bottom" - and stands to slide to rebalance the trade deficit.

But -- Warren Buffet has believed dollar demise for a bunch of years, took enormous Forex positions, and I don't think it has panned out so far...
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?
Old 11-22-2006, 07:16 AM   #39
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

There is no need for the U.S to default as long as the Treasury has printing presses. Hyperinflation and the resulting high interests rates indicate a government going bankrupt. If you are worried, hold a bag of old silver dimes as insurance.
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?
Old 11-22-2006, 07:48 AM   #40
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Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

For empires that have declined in the past, e.g. Rome, what debt to GDP ratio did they have before it all went to hell? How about the USSR?


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