<p>Ok, I have been talking to a fair few number of people about this but wanted more opinion. Considering that the United States Debt is 9 trillion dollars approximatly 3 times our annual budget, is the United States setting its self up for a financial meltdown?</p>
<p>The debt number you used includes $5 trillion in debt held by the public and $4 trillion by other arms of the government, mostly Social Security which continues to run a surplus (from GAO website). The current GDP is about $56 trillion per year. The US spends about $400 billion a year on payments to service that debt, out of tax collections of about $2.4 trillion.</p>
<p>Overall, it’s bad, but I wouldn’t start shopping for real estate in Argentina quite yet.</p>
<p>How are we going to afford the interest payments though?</p>
<p>The best financial results in the last 100 years have been when Congress is controlled by one party and the Presidency is controlled by the other. When either the Dems or GOP is in complete control they spend money like drunken sailors on shore leave.</p>
<p>Vote Ron Paul! He offers solutions on this very issue.</p>
<p><a href=“http://www.youtube.com/watch?v=dNvoaGfwZcc[/url]”>http://www.youtube.com/watch?v=dNvoaGfwZcc</a></p>
<p><a href=“http://video.google.com/videoplay?docid=3330187011438423016&hl=en[/url]”>http://video.google.com/videoplay?docid=3330187011438423016&hl=en</a></p>
<p>Depends on many factors. The solution will take many many years and with the cooperation of a lot of countries and people. </p>
<p>In the 70’s Nixon faced this problem from the Vietnam war. He did two things, 1)He took the US off the gold standard and thereby let the dollar float against other currencies; and 2) printed more dollars to pay the current debt and thereby, causing inflation which dogged the US for another 3 administrations. Nixon (Republican) did not raise taxes.</p>
<p>first, economics is not my strong suit…I have been also talking to spouse, friends on this topic. The US may want to learn from the Japanese as to what provisions need to be made to deal with the debt/and emerging baby boomer retirement quandry. I understand Japan is one generation ahead on us, and they had and continue to have financial hardships because of the small number of working tax payers vs retirees. No easy solutions, but gives us an opportunity to be creative!</p>
<p>Given the rumor that China holds most of our debt, it’s actually close U.S. allies that hold a significant percentage of our debt in their foreign reserves.</p>
<p>Japan: $585.6 billion
United Kingdom: $244.0 billion (in August 2006, this number was 54.6)
… not a close U.S. ally, but Luxembourg?: $63.9 billion
The Republic of China (Taiwan): $52.2 billion (vs. China’s $400.2 billion)
Korea: $48.9 billion
Germany: $44.8 billion
Canada: $24.9 billion</p>
<p>Rest of the numbers: <a href=“http://www.treas.gov/tic/mfh.txt[/url]”>http://www.treas.gov/tic/mfh.txt</a></p>
<p>By the by, we also own part of their public debt. Foreign reserves and all that. If our debt were to be, say, cashed in by these very foreign countries, we’d see a major devaluation of the dollar.</p>
<p>washdad, Dem’s in control spending like crazy? What’s your explaination of Bush then?</p>
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<p>These instruments are not demand notes. They can’t “cash” them. All they can do is hold them to maturity or sell them to a third party. They could dump them at a loss which would devalue the dollar and increase lending costs for the US government, but at the same time this would cause the holder of the Treasury instruments a huge loss of capital. No one is that stupid. It’s in their interest to protect the value of the their investments.</p>
<p>Owing someone a LOT of money gives you power. It’s the poor schmoo who can’t pay their $5,000 credit card bill that gets in trouble. Foreign holders of US debt are just as constrained in their actions as the Treasury might be in creating money to support the current US spending spree.</p>
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<p>If I wasn’t clear before: Dem Congress + Dem President = bad, GOP Congress + GOP President = bad, Dem Congress + GOP President = good, GOP Congress + Dem President = good.</p>
<p>The Democrats have had a majority in the House for 2-1/2 years and a bare majority in the Senate for less than one year. As far as war spending, what exactly has the Democratic majority in the House done to reduce it? Where is the tax increase they said they wanted? So far, they are acting against history and their own rhetoric.</p>
<p>(My original comment about contrary-party rule was meant to be humorous, but contain a grain of truth. It’s not really a consistent theory of political activity.)</p>
<p>Washdad, I referred to the “cashing in” of foreign reserves to simplify the argument, I did not draw the analogy between foreign reserves and demand notes. Plus, what I described was a worst-case scenario, at which point, people would be that stupid. Worst case scenarios typically imply lack of rationality and reason in decision-making. (Or as our President would call it, decidering.)</p>
<p>I agree with your statements about an opposition party in the legislature to check the party in the White House. It’s fiscally terrific, but terrible for national progress. By the way, your thinking is a bit dubious: any reduction in spending must be approved by the President, who we obviously know will veto it. The Republicans won’t for the veto override (obviously, they have to maintain their image of fiscal conservatism… not). And then where are we with this?</p>
<p>And even if the House/Senate did pass a binding joint resolution (that does not require the President’s signature) to withdraw funding (by withdrawing support for the war), the Bush Administration simply needs to issue an executive statement saying that they are going to ignore the Congressional resolution and continue to follow the appropriations legislation signed for FY 07-08, as well as the Defense Authorization Act for that particular year. Appropriations legislation for FY 08 is already pending, and any attempt to amend the legislation to withdraw funding for the war will be vociferously opposed by the Republicans. If we decide to get into a protracted legal battle over Congressional checks on Presidential power, the time it takes to get a Supreme Court ruling… Bush’ll be out of office and in Crawford, clearing weeds on his ranch.</p>
<p>And, I might be wrong, but both the Senate and the House have retained their majorities for 10 months. How do you figure 2.5 years? (Or was it 2 half years, which is 12 months?)</p>
<p>Think Rome.</p>