Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 02-03-2016, 08:55 AM   #21
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 1,713
The debt is a concern. Look what happened to Greece. We are not that bad off yet but could get there. What we need is to control the growth of overall entitlement spending, and then the debt would be manageable as a % of GDP. The politicians so not have the stomach for that since people will not vote for someone who rains on their parade, even if it is to prevent a hurricane.
__________________

__________________
"The mountains are calling, and I must go." John Muir
DrRoy is offline   Reply With Quote Reply
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-03-2016, 09:03 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by DrRoy View Post
The debt is a concern. Look what happened to Greece. We are not that bad off yet but could get there.
No, our situation is radically different from that of Greece. As others have mentioned, we have our own money and control our own monetary policy. Greece does not. And that makes all the difference in the world.

We're also are efficient at collecting taxes, have much smaller social spending obligations, have stronger institutions, less corruption, etc. etc.

Greece is Greece. And we are not they.
__________________

__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote Reply
Old 02-03-2016, 09:04 AM   #23
Recycles dryer sheets
 
Join Date: Jul 2013
Posts: 387
Quote:
Originally Posted by VFK57 View Post
On Monday the U.S. national debt hit a new record: $19,012,827,698,418.
What do you think about our economy and USD future?
Is there some difference between a debt of $18.99T and $19T?

Nope.
__________________
mrfeh is offline   Reply With Quote Reply
Old 02-03-2016, 09:07 AM   #24
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Eagan, MN
Posts: 3,040
Quote:
Originally Posted by Gone4Good View Post
No, our situation is radically different from that of Greece. As others have mentioned, we have our own money and control our own monetary policy. Greece does not. And that makes all the difference in the world.

We're also are efficient at collecting taxes, have much smaller social spending obligations, have stronger institutions, less corruption, etc. etc.

Greece is Greece. And we are not they.
+1. Greece has a huge tax avoidance/evasion issue too. Their tax compliance is no where near where the USA is.

You may be able to compare Argentina in the early 1900s to us though.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is online now   Reply With Quote Reply
Old 02-03-2016, 09:38 AM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by Senator View Post
You may be able to compare Argentina in the early 1900s to us though.
Are you referring to the Baring Crisis of 1890? I'm not super familiar with the specifics but I think Argentina was on a gold standard at the time. It's not like Argentina could print up more gold and inflate there way out of their debt burden to London.

So even with Argentina circa 1890, the analogy might still be more appropriate for Spain or Greece than the U.S.

Perhaps a better historic parallel for the U.S. might be Great Britain after the Napoleonic Wars where debt to GDP exceeded 200%. Or Japan today where debt has exceeded 100% of GDP for over a decade and exceeded 200% for 6 years. Neither instance resulted in a federal debt crisis.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote Reply
Old 02-03-2016, 11:29 AM   #26
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,811
Quote:
Originally Posted by Gone4Good View Post
The bad news is: things are expected to continue to get worse.
+1

$19 trillion would be manageable if we were running annual budget surpluses today. But, we're not.

And, the outlook is bad. The US gov't has made promises to us old folk that it can't keep without tax increases. There's no political will for either benefit cuts or tax increases. Just listen to the prez candidates these days.

I don't think it's okay to say "We're no worse than some other countries." It's possible that we all go down together.

I'm not comfortable with "We can just print money". That was okay when the debt was smaller. Prior to 2008, our base money supply was about $1 trillion. (The Fed increased it a lot without kicking off inflation, but that was possible due to very unusual economic conditions.) Other things being equal, doubling the money supply doubles prices. How much would we have to increase our $1 trillion to make a dent in a $19 trillion debt?

The issue for this forum is "personal, actionable" information. Are there any practical steps an individuals can take to protect themselves if they believe there is some chance (say 10%) that this ends badly before we die?
__________________
Independent is offline   Reply With Quote Reply
Old 02-03-2016, 12:05 PM   #27
Recycles dryer sheets
 
Join Date: Jul 2013
Posts: 342
My largest concern is rampant inflation. If we get to a stretch where the markets do not keep on with inflation, then the net worth takes a real hit. A pension with no COLA is seriously devalued.

The past number of years where we have had negligible inflation and strong equity markets has put many folks in a good position. I try to not become overconfident in my situation. At some point, you still jump into the deep end of the pool. I console my overactive brain with the idea that I (and in general on this board, we) are better prepared than the vast majority of the population.

I think there is much greater risk for the individuals that are 40 years old, have done well at getting a good start on a portfolio, and are looking to extrapolate the last 15 years out for the next 45 years.
__________________
Clone is offline   Reply With Quote Reply
Old 02-03-2016, 12:30 PM   #28
Recycles dryer sheets
 
Join Date: May 2011
Location: Maple Valley
Posts: 465
Before my retirement, I did accounting for over 30 years. If you do the simple math, the USA can not sustain our economy with 19 trillion in debt. You can not spend more than you take in without going into the red as we are now. It will catch up with us sooner than later. The saving grace is that we will all be in it together.
__________________
kimcdougc is offline   Reply With Quote Reply
Old 02-03-2016, 12:43 PM   #29
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 1,903
Quote:
Originally Posted by Independent View Post
+1

-snip-

The issue for this forum is "personal, actionable" information. Are there any practical steps an individuals can take to protect themselves if they believe there is some chance (say 10%) that this ends badly before we die?
I suppose the usual suspects would work. Guns, ammo, gold, a remote place with water and plenty of sunshine for solar so one can be off the grid, narrow canyon access so one can plink off the brigands and so on...
__________________
ejman is online now   Reply With Quote Reply
Old 02-03-2016, 12:59 PM   #30
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 1,713
Quote:
Originally Posted by Gone4Good View Post
No, our situation is radically different from that of Greece. As others have mentioned, we have our own money and control our own monetary policy. Greece does not. And that makes all the difference in the world.

We're also are efficient at collecting taxes, have much smaller social spending obligations, have stronger institutions, less corruption, etc. etc.

Greece is Greece. And we are not they.
I did not say that we are Greece. I was using Greece as an example of how runaway debt can matter. We are indeed in a much stronger condition than Greece, for the reasons you cited and more. However, too many people use that as an excuse that we do not need to get control of our debt. It has been extremely helpful that world central banks pushed interest rates to near zero (to fight the great recession), which has greatly reduced the cost of servicing our debt for the last few years. If rates were at historical norms instead of historical lows the interest on the debt would be on its way to becoming the largest expense in the budget. We cannot afford that.
__________________
"The mountains are calling, and I must go." John Muir
DrRoy is offline   Reply With Quote Reply
Old 02-03-2016, 01:10 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by DrRoy View Post
I did not say that we are Greece. I was using Greece as an example of how runaway debt can matter.
But even Greece wouldn't be in the condition Greece is in if they were still using the Drachma instead of the Euro. So it isn't a worthwhile comparison for the U.S. situation however one tries to use it.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote Reply
Old 02-03-2016, 03:44 PM   #32
Recycles dryer sheets
 
Join Date: Apr 2011
Location: Castro Valley
Posts: 400
Quote:
Originally Posted by REWahoo View Post
How is the national debt going to impact the US$? Way beyond me. Heck, I'm still trying to figure out where your lap goes when you stand up...
+1 Lol
__________________
jkern is offline   Reply With Quote Reply
Old 02-03-2016, 04:29 PM   #33
Recycles dryer sheets
 
Join Date: Aug 2015
Posts: 340
Quote:
Originally Posted by Gone4Good View Post
But even Greece wouldn't be in the condition Greece is in if they were still using the Drachma instead of the Euro. So it isn't a worthwhile comparison for the U.S. situation however one tries to use it.
That is the whole point. If Greece would print drachma as much as they need, nobody would take their currency in trade and they would not be able to purchase US$ or Euro with drachma.
Imagine how inflationary it is going to be to monetize $19 trillion Debt and continue to cover our chronic huge budget deficit with freshly printed US$. Many countries are already trying to establish trade bypassing the dollar just because of all of the above and if unneeded for the international trade dollars some day might start coming back it would trigger hyperinflation here. Is this scenario possible?
__________________
VFK57 is offline   Reply With Quote Reply
Old 02-03-2016, 05:05 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by VFK57 View Post
Imagine how inflationary it is going to be to monetize $19 trillion Debt
Good thing we won't have to do that.

One thing that I think is poorly understood about government finances is that the U.S. never needs to pay down the money it has borrowed. We never repaid the money we borrowed to finance WWII and we'll never repay the $19 trillion we owe today. We'll roll it over until the end of time.

And that's OK. The giant WWII debt balances are positively trivial in size compared to today's economy. So too will $19 trillion be in the not too distant future.

That's not to say we don't have a long-run fiscal imbalance, we do; mostly due to rising health care costs. And we'll have to raise some taxes and cut some spending to address that. But we don't really have a debt problem. And I don't expect we ever will.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote Reply
Old 02-03-2016, 05:32 PM   #35
Recycles dryer sheets
 
Join Date: Aug 2015
Posts: 340
Quote:
Originally Posted by Gone4Good View Post
Good thing we won't have to do that.

We'll never repay the $19 trillion we owe today. We'll roll it over until the end of time.
It is true that most of this huge Debt is own by the Federal Reserve and they continue to print US$ and purchase the Treasury Notes as long as our Congress allows this scheme.
__________________
VFK57 is offline   Reply With Quote Reply
Old 02-03-2016, 05:38 PM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by VFK57 View Post
It is true that most of this huge Debt is own by the Federal Reserve and they continue to print US$ and purchase the Treasury Notes as long as our Congress allows this scheme.
No, that is not true. You can find a summary of the Fed balance sheet here:

FRB: Quarterly Report on Federal Reserve Balance Sheet Developments

As of the last report, the Fed held $2.5 trillion of U.S. treasury securities and that amount was basically unchanged from the year prior.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote Reply
Old 02-03-2016, 05:38 PM   #37
Full time employment: Posting here.
 
Join Date: Apr 2014
Location: Houston
Posts: 639
Quote:
Originally Posted by Independent View Post
+1
The issue for this forum is "personal, actionable" information. Are there any practical steps an individuals can take to protect themselves if they believe there is some chance (say 10%) that this ends badly before we die?
Here are the steps I have taken partly as a result of the countries financial situation:

(1) I took my 2015 retirement pension as a lump sum rather than as an annuity. The annuity was not adjusted for cost of living increases which could be a significant issue if inflation takes off. I am more confident that I can invest well enough to keep up with inflation than I am confident in our government's fiscal policy keeping inflation reasonable.

(2) Shifted a chunk of my assets to dividend paying equities (funds and individual stocks) to provide a large portion of our income. In the event of a market dive, I hope to have more leeway on when I may need to sell off equities for income. I'd prefer to give some time for a market rebound rather than being forced into a fire sale situation.

(3) I diversified portfolio more than it was and moved out of anything I personally considered high risk "fun" investing.

(4) We are keeping good track of expenses and have a good idea of where and how much we could cut back immediately if needed.

(5) Have started converting tIRA funds to ROTH (using I-ORP as guidance on how much each year) to hedge against possible rapid rise in taxes.

Don't know if these are applicable to your situation but they feel like common sense things for my situation and helps me sleep at night.
__________________
Whisper66 is offline   Reply With Quote Reply
US National Debt hit $19 trillions/Your thoughts on how it is going to affect...
Old 02-03-2016, 06:15 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,369
US National Debt hit $19 trillions/Your thoughts on how it is going to affect...

Quote:
Originally Posted by Gone4Good View Post
No, that is not true. You can find a summary of the Fed balance sheet here:



FRB: Quarterly Report on Federal Reserve Balance Sheet Developments



As of the last report, the Fed held $2.5 trillion of U.S. treasury securities and that amount was basically unchanged from the year prior.

That is true but also $5 trillion plus of that $19 trillion is owned by intergovernmental holdings such as the SS trust fund, etc... So a good chunk (well over a third) is apparently paper shuffling inside government somewhere.
I would like to make fun of their accounting but I do the same thing. I buy my own debt all the time. Except its not in the trillions and I do eventually pay it all back in time to myself.


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote Reply
Old 02-03-2016, 06:31 PM   #39
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,815
Quote:
Originally Posted by Independent View Post
The issue for this forum is "personal, actionable" information. Are there any practical steps an individuals can take to protect themselves if they believe there is some chance (say 10%) that this ends badly before we die?
I ran into a guy's web page (his goal is to sell instructional videos) that talks about the situation being discussed in this thread. Unfortunately, he only hints at what one should do to defend against getting swept away by it, should things go in a southerly direction. Unless you like very wordy repetitive prose, don't go to the web site in the graphic below.

Quote:
Originally Posted by ejman View Post
I suppose the usual suspects would work. Guns, ammo, gold, a remote place with water and plenty of sunshine for solar so one can be off the grid, narrow canyon access so one can plink off the brigands and so on...
Someone usually starts down this path when financial turmoil is discussed. There's a LOT of room between even serious financial turmoil and having to defend yourself with weapons or not having a currency that's trusted enough to earn, buy and sell.

Quote:
Originally Posted by Gone4Good View Post
One thing that I think is poorly understood about government finances is that the U.S. never needs to pay down the money it has borrowed. We never repaid the money we borrowed to finance WWII and we'll never repay the $19 trillion we owe today. We'll roll it over until the end of time.
It was kind of paid back, I think.

But "paid back" is not the right term. It was paid off with cheaper dollars than the ones that were borrowed. If I borrow 1 unit of economic production, then later pay you 1/2 a unit to call it even...that's how it's done. You've inflated the fiat currency and so taxed people that saved their money in a way that didn't defend against inflation. One such group are the foreigners that hold the USD. There's supposed to be $580 billion in currency outside the US that's getting happily inflated away. Not all in one year. But year after year after year. The steady drip can be quite effective.
__________________
sengsational is offline   Reply With Quote Reply
Old 02-03-2016, 07:19 PM   #40
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 1,903
Quote:
Originally Posted by sengsational View Post

It was kind of paid back, I think.

But "paid back" is not the right term. It was paid off with cheaper dollars than the ones that were borrowed. If I borrow 1 unit of economic production, then later pay you 1/2 a unit to call it even...that's how it's done. You've inflated the fiat currency and so taxed people that saved their money in a way that didn't defend against inflation. One such group are the foreigners that hold the USD. There's supposed to be $580 billion in currency outside the US that's getting happily inflated away. Not all in one year. But year after year after year. The steady drip can be quite effective.
It's interesting that the lowest point in modern times for national debt according to the chart is in the late 1970's. That was the point if memory serves when talk was the greatest about national debt being a malaise that would take the country down. And also if memory serves that was the time when the lower tax movement would save us all and spark the economy into mountains never climbed before. I see from the chart what mountain they were talking about...
__________________

__________________
ejman is online now   Reply With Quote Reply
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How will a fight over the debt ceiling affect the market? donheff FIRE Related Public Policy 68 01-27-2011 04:41 PM
How's the 600 billion going to affect the market and inflation? novaman FIRE and Money 101 11-17-2010 08:09 AM
How would national health plan affect ER? David1961 Young Dreamers 90 01-10-2008 09:50 PM
Glacier National Park in Montana - thoughts? soupcxan Other topics 22 05-17-2007 10:39 AM
National Debt Mountain_Mike FIRE and Money 45 08-24-2005 05:50 PM

 

 
All times are GMT -6. The time now is 12:10 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.