Isn't anyone leary of our government defaulting with our 8.5+ Trillion deficit?

[modhatter]

You know, something that puzzles me is the faith all of you seem to have in our governments monetary system. With 8.5+ trillion in debt and rising by the hour, and the individual debt of the population on top of it, why do you all feel so SAFE with buying government Tips or I-Bonds or other gov. securities.

Don't you think we can experience what Argentina, and many before us have?
Why do you think the US is so infalable. What logic precludes this possibillity with numbers so staggering and the worse yet to come with social security and medicare. How could our government be considered a "safe bet" at this juncture.
I would stake my faith in a well balanced, well run, and profitable company before lending any faith to returns from our government.

Is it so "unthinkable" that such a thing could happen to such a "once" powerful nation? I hate to be the bearer of bad news, but we are no longer the super power and we are invinceable. I know we all are hoping for the best and that we will somehow miraculously pull out of this. But what steps have you seen taken to have this actually happen. (other than getting the Repuplican's out of office)

There is some talk about the shaky future of the stock market, but never any question on buying these government securities. Why is that?

 

[Nords]

You know, something that puzzles me is the faith all of you seem to have in our governments monetary system. With 8.5+ trillion in debt and rising by the hour, and the individual debt of the population on top of it, why do you all feel so SAFE with buying government Tips or I-Bonds or other gov. securities.
There is some talk about the shaky future of the stock market, but never any question on buying these government securities. Why is that?

First, the government has the power to pay off the obligations (TIPS, I-bonds, whatever) by either raising more tax revenue (however that's done, not necessarily by just raising taxes) or by printing more money (with its attendant issues).

Second, more people in the world have faith in the U.S. dollar than they do in the British pound, the Swiss franc, the Euro, or the yuan. That all may be changing, but it's changing slowly enough to do something about it.

Third, the U.S. is perceived to have more regulations, more open reporting, and less restrictions on joining the "entitled class" entitled class than other countries. In other words the rules seem to be more public and the game, while it may still be rigged, offers more opportunities than elsewhere.

I'm not sure why anyone places their faith in the ideas that $8.5T is too much debt or how we calculate individual savings rates. On an individual basis, considering the country's gross domestic product, $8.5T may be a lot less debt than that handled by the rest of the world's countries.

But if there's a better asset class, then tell us about it!

 

[sgeeeee]

What would you suggest we do as an alternative? Panic?

It's possible that the US government could default on it's obligations. If that happens I guess you would have been wise to have horded guns and canned goods. I'm not ready to do that. I'm sure some misguided sole someone will bring up gold.

 

[Cut-Throat]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

What would you suggest we do as an alternative? Panic?

It's possible that the US government could default on it's obligations. If that happens I guess you would have been wise to have horded guns and canned goods. I'm not ready to do that. I'm sure some misguided sole someone will bring up gold.

Excellent point!

I think mod needs to read the thread I started on fear.

 

[d]

1) both the current fical deficit and the national debt compare favourably to those of many other developed nations ... over multi-year periods, note that the US better meets the economic requirements of the EU than do France, Germany and Italy.
2) evaluate both the deficit and the debt in terms of the nation's income and assets ...

 

[bpp]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Just diversify, and then quit sweating the details.

 

[kjpliny]

I read somewhere that gold/silver is the only money in the history of the world that hasn't eventually gone to zero, so while not a real good investment tool compared to normal markets, it carries value when fiat currencies fail. Probably not a bad idea to have a little bit laying around in the event you're expecting the worst.

 

[AltaRed]

For those of us outside the US, many of us worry and wonder when the US is going to eliminate its deficit and start to work on paying down the debt. Countries do start to get into trouble when their cumulative debt starts to reach, I think, about 30-40% of their GDP (I need to dig out that info). Interest rates have to increase to compensate debt holders for taking on more risk.

Because the USA is such a large portion of the world's economy, other countries will cut the US more slack than they would almost any other country, but they will want something tangible in return. Much of the world is establishing better trading blocs among themselves to be less reliant on trade with USA.

 

[FinanceDude]

You know, something that puzzles me is the faith all of you seem to have in our governments monetary system. With 8.5+ trillion in debt and rising by the hour, and the individual debt of the population on top of it, why do you all feel so SAFE with buying government Tips or I-Bonds or other gov. securities.

Don't you think we can experience what Argentina, and many before us have?
Why do you think the US is so infalable. What logic precludes this possibillity with numbers so staggering and the worse yet to come with social security and medicare. How could our government be considered a "safe bet" at this juncture.
I would stake my faith in a well balanced, well run, and profitable company before lending any faith to returns from our government.

Is it so "unthinkable" that such a thing could happen to such a "once" powerful nation? I hate to be the bearer of bad news, but we are no longer the super power and we are invinceable. I know we all are hoping for the best and that we will somehow miraculously pull out of this. But what steps have you seen taken to have this actually happen. (other than getting the Repuplican's out of office)

There is some talk about the shaky future of the stock market, but never any question on buying these government securities. Why is that?

The USA isn't as "elite" as it once was in the world, and the Euro has had something to do with it..........although it is VERY interesting that the UK felt no need to join in........

However, I think if you are an exporter to the US, you still want the USD. It is still the universal currency of commerce. That is changing, but US dollars are still in demand. I doubt Argentina could happen here......the Fed has a lot more influence than the Argentin govt did and their fiscal policies were a mess.

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..........

 

[bosco]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

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..........

liberal commie

 

[Zoocat]

The USA isn't as "elite" as it once was in the world, and the Euro has had something to do with it..........although it is VERY interesting that the UK felt no need to join in........

Yes, that is very interesting. One reason, which I read about in "The Coming Generational Storm," is that the UK has the future senior entitlement situation well in hand whereas the Euro countries do not. Down the pike the Euro countries will be in financial difficulty while the UK will be sitting pretty and will not be entangled in their difficulties.

 

[FinanceDude]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

liberal commie

Hmmmmmmm......too bad I've voted Republican since 1980...............

I guess I'm a fiscal conservative, a moderate, a libertarian, an undecided

I understand the reasoning behind the tax cut Bush pushed after 9/11 to stimulate the economy...........but I have LITTLE faith Congress has ANY fiscal conservatives left in it...............

 

[Cut-Throat]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Hmmmmmmm......too bad I've voted Republican since 1980...............

I guess I'm a fiscal conservative, a moderate, a libertarian, an undecided

I understand the reasoning behind the tax cut Bush pushed after 9/11 to stimulate the economy...........but I have LITTLE faith Congress has ANY fiscal conservatives left in it...............

They're still running on the Reagan Plan which Bush 41 called 'Voodoo Economics' -

1.) You cut Taxes by X amount

2.) You increase spending by 10X amount

3.) Budget deficits grow by record amounts.

All of the folks that thought the Reagan Economy actually worked are Mathematically Challenged!

 

[MasterBlaster]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

Budget deficits grow by record amounts.

Well that is only true in nominal terms.

As a percentage of GDP the national debt is actually dropping by a fairly big margin - believe it or not ! So the debt load is actually dropping in real terms.

What has happened is that the US economy is growing faster than we are going into debt. That's a good thing.

Some believe that all the various economic stimulus has allowed the economy to grow faster than it otherwise should have.

 

[justin]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

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/factbook/rankorder/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...

 

[FinanceDude]

I'm surprised India and Pakistan are that high, but they are going through a transformation in infrastructure, so I guess that makes sense.......

Japan at 158%........ouch!!!!

 

[Running_Man]

Is it so "unthinkable" that such a thing could happen to such a "once" powerful nation? I hate to be the bearer of bad news, but we are no longer the super power and we are invinceable. I know we all are hoping for the best and that we will somehow miraculously pull out of this. But what steps have you seen taken to have this actually happen. (other than getting the Repuplican's out of office)

Any asset class that is to last upwards of 40 years is going to have risks attached to it. The idea is optimizing the risks with the rewards, if you become frozen in taking risks then the reward of early retirement will be deferred or put off until it will be past the point of enjoyment. Of all the risks for the next 40 years, Stock Market falling, Insurance companies bankrupting annuitites, global depression, the least likely is a default of the US obligations.

Now this may change, but if you live in the United States, a failure of the US to meet obligations is going to result in most of the other likely systemic failures to occur as well in the majority of asset classes.

Personally as a means to survive such a possibility I feel one should keep 5-10% of your assets in physical gold and silver as in such a case their value would rise far above their current value in relationship to other assets and increase purchasing power. For many, this is too expensive insurance for such a low-probability event and mocking this thought is the best way to avoid engaging in analyzing the consequence of this occuring in their life.

Do not confuse political party with any kind of fiscal policy, politicians of all parties and nationalities are not the best keepers of fiat funds. They tend to not have a 40 year horizon.

 

[modhatter]

I have been reading alot about it, and also saw a documentory on it the other night. Just never heard anyone on this board quetstion our government and though that I should bring it up.

Even Ben Stein seems to be very concerned with it in his book. Not that he is an authority. I hope you are all correct in your complacency, and there is no need for concern.

 

[Mr._johngalt]

I hope you are all correct in your complacency, and there is no need for concern.

Not even on my list of things to worry about.

JG

 

[bpp]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

I hope you are all correct in your complacency, and there is no need for concern.

Not complacency, just accepting that some of the assets you hold stand a chance of blowing up, but if you are diversified then any one thing shouldn't kill you.

Sure, US government bonds might default. So make sure not to put all your eggs in that one basket. What else can you do? Continuing to worry after you've done whatever you reasonably can is counterproductive.

 

[sgeeeee]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

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/factbook/rankorder/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.

 

[Delawaredave]

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

 

[bpp]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

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.

 

[Cut-Throat]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

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

 

[WanderALot]

Re: Isn't anyone leary of our government defaulting with our 8.5+ Trillion defic

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.

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?