Krugman: Debt is Good

[dgordo]

Oh I love this, and this is going to be fun. Please explain more, with the caveat, that you're going to be in one hell of a debate here soon. Go on.......

did you have a question? the us government is not in default on any debt.

 

[PhantomFlyer]

Which makes it not a problem.

The problem is our ability to pay debt is not unlimited. As debt grows payments grow and that takes away from our ability to borrow more and pay for are other obligations. If you are borrowing to grow something fine but we are borrowing to pay for things we borrowed money to pay for.

Can you tell me what number would be too much debt for you to be comfortable with?

Wait until the Fed starts to finally raise interest rates (they can't keep them artificially deflated forever) and watch the debt boom, not to mention the incredible amount owed in unfunded liabilities. The boomers are starting to retire in large numbers.

 

[dgordo]

Which makes it not a problem.

The problem is our ability to pay debt is not unlimited. As debt grows payments grow and that takes away from our ability to borrow more and pay for are other obligations. If you are borrowing to grow something fine but we are borrowing to pay for things we borrowed money to pay for.

Can you tell me what number would be too much debt for you to be comfortable with?

I cant give you an exact number because its not a number, it is based upon percentages and ability to pay.

 

[theVoicefromtheTomb]

Since you appear to be the smartest guy in the thread is their a level of debt you think is too much? When do you start to worry not about how expensive it is to borrow but about how much?

Two arguments here.

Argument one is debt is good or bad. The answer is it's neither. Dependent on how you use the money you borrow it may be good or bad.

Second argument is we as a country (world) have too much debt and additional debt is bad Please see the answer to argument one.

 

[TexMichFan]

Two arguments here.

Argument one is debt is good or bad. The answer is it's neither. Dependent on how you use the money you borrow it may be good or bad.

Second argument is we as a country (world) have too much debt and additional debt is bad Please see the answer to argument one.

Nice arguments but did not answer the questions. I am looking for a number you think too high. You can do percentages or dollars or even Euros is you want.

 

[TexMichFan]

I cant give you an exact number because its not a number, it is based upon percentages and ability to pay.

We have a huge ability to pay our debt. That money will come out of our ability to pay obligations.

So what is our percentage now and how high of a percentage would you be comfortable with.

 

[Aegon_Targaryen]

did you have a question? the us government is not in default on any debt.

You do realize just saying that, doesn't change the truth of the matter correct? Simply saying that you are able to pay back a debt, doesn't fit the reality of the fact that you cannot. Again, it's a lie, it's unrealistic, it's inevitable.
You can keep letting the Wall Street talking heads fool you, or you can wake up and realize that there is a personal agenda as to why they say this.

Again, I'll ask the question. If debt isn't a problem, then why was the 2008 crisis such a problem?

 

[WORTHYWISH]

Is the OP literally agreeing that debt is a good thing? Is this satire?

 

[dgordo]

You do realize just saying that, doesn't change the truth of the matter correct? Simply saying that you are able to pay back a debt, doesn't fit the reality of the fact that you cannot. Again, it's a lie, it's unrealistic, it's inevitable.
You can keep letting the Wall Street talking heads fool you, or you can wake up and realize that there is a personal agenda as to why they say this.

Again, I'll ask the question. If debt isn't a problem, then why was the 2008 crisis such a problem?

the us can pay back its debt, the us has no overdue debt.

No one is saying debt isn a problem, the question is how much debt is a problem.

 

[dgordo]

We have a huge ability to pay our debt. That money will come out of our ability to pay obligations.

So what is our percentage now and how high of a percentage would you be comfortable with.

i believe current debt to gdp level is around 100%, is that too high? I would say no if we can borrow at a rate lower than what much of the previous debt was borrowed at, which we can.

 

[theVoicefromtheTomb]

You do realize just saying that, doesn't change the truth of the matter correct? Simply saying that you are able to pay back a debt, doesn't fit the reality of the fact that you cannot. Again, it's a lie, it's unrealistic, it's inevitable.
You can keep letting the Wall Street talking heads fool you, or you can wake up and realize that there is a personal agenda as to why they say this.

Again, I'll ask the question. If debt isn't a problem, then why was the 2008 crisis such a problem?

if debt is bad answer this point taken from the article

Rand Paul said something funny the other day. No, really — although of course it wasn’t intentional. On his Twitter accounthe decried the irresponsibility of American fiscal policy, declaring, “The last time the United States was debt free was 1835.”

Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing.

The answer is that debt isn't bad and in fact may be necessary in order for a govt to run. It's the amount of debt you have relative to your ability to repay that matters. Perhaps that is the answer to your 2008 question.

 

[Aegon_Targaryen]

if debt is bad answer this point taken from the article

Rand Paul said something funny the other day. No, really — although of course it wasn’t intentional. On his Twitter accounthe decried the irresponsibility of American fiscal policy, declaring, “The last time the United States was debt free was 1835.”

Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing.

The answer is that debt isn't bad and in fact may be necessary in order for a govt to run. It's the amount of debt you have relative to your ability to repay that matters. Perhaps that is the answer to your 2008 question.

The economy has done good because of our war efforts, economical bullying in the international community,and refusing to pay back debts. It's as simple as that.

 

[Aegon_Targaryen]

if debt is bad answer this point taken from the article

Rand Paul said something funny the other day. No, really — although of course it wasn’t intentional. On his Twitter accounthe decried the irresponsibility of American fiscal policy, declaring, “The last time the United States was debt free was 1835.”

Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing.

The answer is that debt isn't bad and in fact may be necessary in order for a govt to run. It's the amount of debt you have relative to your ability to repay that matters. Perhaps that is the answer to your 2008 question.

Also, do we have the ability to repay? If so, what is the method to doing so? Also, does the increasing debt have a reason for concern?

 

[Pepperman]

i believe current debt to gdp level is around 100%, is that too high? I would say no if we can borrow at a rate lower than what much of the previous debt was borrowed at, which we can.

I'd agree with your conclusion, but would point out that the marginal GDP returned on debt is lower and lower as we go deeper into debt.

 

[theVoicefromtheTomb]

Also, do we have the ability to repay? If so, what is the method to doing so? Also, does the increasing debt have a reason for concern?

At present we can borrow at ridiculously low rates. That is the market saying it thinks we can repay. We pay it from future income streams.

Increasing debt increases risk. At some point if the market feels we have too much debt the rate at which we would have to borrow would increase and our ability to repay the debt would fall. Our potential to default would increase. This is what Krugman fails to point out in his argument.

 

[whatsup12579er]

All of our debt is paid back, we don't have any debt that is over due.

'All our debt is paid back' and 'we don't have any debt that is overdue' is not the same thing. It is either one or the other and I'll give you a hint, all of our debt is not paid back.

We (the USA) have debt. It is not paid back or we wouldn't have to constantly keep raising the debt ceiling. You aren't that dumb are you?

 

[dgordo]

'All our debt is paid back' and 'we don't have any debt that is overdue' is not the same thing. It is either one or the other and I'll give you a hint, all of our debt is not paid back.

We (the USA) have debt. It is not paid back or we wouldn't have to constantly keep raising the debt ceiling. You aren't that dumb are you?

Yes, I am that dumb. I believe we have no outstanding debt.

I was saying all our debt it s paid back when due.

 

[Besthawkfan]

Thanks. People talk about our infrastructure crumbling and it killing the economy. Really? Do trucks/rail/cars/planes refuse to operate because their a pothole in the road? LOL. Infrastructure is every politician's code for handing out pork. There's always a road or bridge that need fixing (even if it doesn't) or a rail line to build that makes no sense, because "free" money from Wash is always a welcome sight in Congressional districts where you can hand out money like it was candy at Halloween, and reward those good donors.

If the locals and states think these roads, etc are in such bad shape then cough up the money to fix them. If they aren't willing to put their own money into the project then it doesn't rank high on the priority list for those most affected, so why shouldn't it be a very low priority for politicians in Wash?

Well, I can't argue with the pork idea. I would like to add that China and others are developing power grids that far exceed our capabilities while we still live with the 1950's technology.

 

[Jan Itor]

Another sensible column by professor Krugman:


Rand Paul said something funny the other day. No, really — although of course it wasn’t intentional. On his Twitter account he decried the irresponsibility of American fiscal policy, declaring, “The last time the United States was debt free was 1835.”

Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing. The British government, by the way, has been in debt for more than three centuries, an era spanning the Industrial Revolution, victory over Napoleon, and more.

But is the point simply that public debt isn’t as bad as legend has it? Or can government debt actually be a good thing?

Believe it or not, many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt.

I know that may sound crazy. After all, we’ve spent much of the past five or six years in a state of fiscal panic, with all the Very Serious People declaring that we must slash deficits and reduce debt now now now or we’ll turn into Greece, Greece I tell you.

But the power of the deficit scolds was always a triumph of ideology over evidence, and a growing number of genuinely serious people — most recently Narayana Kocherlakota, the departing president of the Minneapolis Fed — are making the case that we need more, not less, government debt.

Why?

One answer is that issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation.

Beyond that, those very low interest rates are telling us something about what markets want. I’ve already mentioned that having at least some government debt outstanding helps the economy function better. How so? The answer, according to M.I.T.’s Ricardo Caballero and others, is that the debt of stable, reliable governments provides “safe assets” that help investors manage risks, make transactions easier and avoid a destructive scramble for cash.

Now, in principle the private sector can also create safe assets, such as deposits in banks that are universally perceived as sound. In the years before the 2008 financial crisis Wall Street claimed to have invented whole new classes of safe assets by slicing and dicing cash flows from subprime mortgages and other sources.

But all of that supposedly brilliant financial engineering turned out to be a con job: When the housing bubble burst, all that AAA-rated paper turned into sludge. So investors scurried back into the haven provided by the debt of the United States and a few other major economies. In the process they drove interest rates on that debt way down.

And those low interest rates, Mr. Kocherlakota declares, are a problem. When interest rates on government debt are very low even when the economy is strong, there’s not much room to cut them when the economy is weak, making it much harder to fight recessions. There may also be consequences for financial stability: Very low returns on safe assets may push investors into too much risk-taking — or for that matter encourage another round of destructive Wall Street hocus-pocus.

What can be done? Simply raising interest rates, as some financial types keep demanding (with an eye on their own bottom lines), would undermine our still-fragile recovery. What we need are policies that would permit higher rates in good times without causing a slump. And one such policy, Mr. Kocherlakota argues, would be targeting a higher level of debt.

In other words, the great debt panic that warped the U.S. political scene from 2010 to 2012, and still dominates economic discussion in Britain and the eurozone, was even more wrongheaded than those of us in the anti-austerity camp realized.

Not only were governments that listened to the fiscal scolds kicking the economy when it was down, prolonging the slump; not only were they slashing public investment at the very moment bond investors were practically pleading with them to spend more; they may have been setting us up for future crises.

And the ironic thing is that these foolish policies, and all the human suffering they created, were sold with appeals to prudence and fiscal responsibility.

http://www.nytimes.com/2015/08/21/opinion/paul-krugman-debt-is-good-for-the-economy.html?ref=opinion

Admit it, you want to have his baby.

 

[Jan Itor]

A very strong case can be made that when your borrowing costs are 2% that you should borrow more.

But what happens when those rates go up? And you still find yourself in need of borrowing money to pay the bills?

 

[Jan Itor]

Yes, I am that dumb. I believe we have no outstanding debt.

I was saying all our debt it s paid back when due.

Like far too many people in this world, we are making the minimum payment on our debt as it comes due. Basically, we're paying off the interest and continuing to borrow. Thus continuing to grow the debt. And when the interest rates finally do increase, are we going to be able to afford to continue to borrow in order to pay are obligations (not just our debt)?

 

[cigaretteman]

At present we can borrow at ridiculously low rates. That is the market saying it thinks we can repay. We pay it from future income streams.

Increasing debt increases risk. At some point if the market feels we have too much debt the rate at which we would have to borrow would increase and our ability to repay the debt would fall. Our potential to default would increase. This is what Krugman fails to point out in his argument.

And, of course, that point is nowhere close to where we are now. In fact, for some time, other countries have been effectively paying us to borrow their money.

 

[bladel]

Wait, wait...Let me give you my opinion why Nobel-winning PhD economists are stupid!

God I love the Internet.

 

[whatsup12579er]

Yes, I am that dumb. I believe we have no outstanding debt.

I was saying all our debt it s paid back when due.

Just because we are current with our payments doesn't mean we don't have outstanding debt. Outstanding debt expresses a dollar amount to be paid before a liability is closed. You're saying the USA has no liabilities?

I make a house payment to the bank every month but I am still in debt to the bank until the note is paid in full.

 

[Jan Itor]

Wait, wait...Let me give you my opinion why Nobel-winning PhD economists are stupid!

God I love the Internet.

That might hold water if Obama hadn't been awarded the Nobel Peace Prize. Seriously?

 

[bladel]

That might hold water if Obama hadn't been awarded the Nobel Peace Prize. Seriously?

Krugman won for Economics. How many have you won?

 

[Aegon_Targaryen]

Yes, I am that dumb. I believe we have no outstanding debt.

I was saying all our debt it s paid back when due.

Which is a sneaky and misleading statement.

 

[Aegon_Targaryen]

Krugman won for Economics. How many have you won?

Obama won for Peace. How many drone bombings did he sign off on? How many women and children lost their lives?

 

[Aegon_Targaryen]

Krugman won for Economics. How many have you won?

Oh also, the intentional and very telling side step on your part is typical of you. Throw a punch, run away, repeat.

 

[bladel]

Oh also, the intentional and very telling side step on your part is typical of you. Throw a punch, run away, repeat.

Ok, here's the real punch:
On the Internet, everyone believes they are entitled to their opinion. But accolades and credentials only apply when an expert says things they already believe.

I don't come to your job and tell you how to change a tire or unclog a toilet, why do you think you are at all qualified to criticize Krugman?

 

[Aegon_Targaryen]

Ok, here's the real punch:
On the Internet, everyone believes they are entitled to their opinion. But accolades and credentials only apply when an expert says things we agree on.

I don't come to your job and tell you how to change a tire or unclog a toilet, why do you think you are at all qualified to criticize Krugman?

Well if you came to my job, i'd be telling you what to do, unless you just happen to somehow take over the company. I'd probably start you off at helpdesk, until you proved your mettle. Depending on your your interview went, we may pursue a higher position for you. Just don't try and BS during the technical questions, because we will sniff you out quick. Especially when we throw in the lab exercises.

To answer your question, because his backing of Keynesian economics and him denying its failures is all you need to know. He didn't see the mortgage crisis coming, yet someone whom he debated with did. So should he hand the award over to that guy? He has all these ideas and blogs, and writings and such, but when has he ever actually applied any of it?

 

[WORTHYWISH]

Welcome to:

 

[dgordo]

Just because we are current with our payments doesn't mean we don't have outstanding debt. Outstanding debt expresses a dollar amount to be paid before a liability is closed. You're saying the USA has no liabilities?.

Jesus no. I guess sarcasm of that first statement was missed. I'm not saying that at all. I know we have outstanding debt. I'm saying we pay off all our debt when it is due.

 

[dgordo]

OMG! People are literally arguing that debt is a good thing.

Welcome to:

OMG! No one is saying debt is always good.

 

[dgordo]

Like far too many people in this world, we are making the minimum payment on our debt as it comes due. Basically, we're paying off the interest and continuing to borrow. Thus continuing to grow the debt. And when the interest rates finally do increase, are we going to be able to afford to continue to borrow in order to pay are obligations (not just our debt)?

By law the U.S. Government can only pay the minimum due. I'm sure the treasury would love to issue more cheap debt to retire the bonds sold 20 years ago. Unfortunately they have to wait for them to mature.

 

[Besthawkfan]

Krugman won for Economics. How many have you won?

If you say what you are supposed to say they give you an award. The tricky part for him was putting himself in a position for it to matter.

 

[Aegon_Targaryen]

By law the U.S. Government can only pay the minimum due. I'm sure the treasury would love to issue more cheap debt to retire the bonds sold 20 years ago. Unfortunately they have to wait for them to mature.

The treasury only

If you say what you are supposed to say they give you an award. The tricky part for him was putting himself in a position for it to matter.

Exactly like Obama he got it for what he says, not for what he actually does.

 

[Jan Itor]

Krugman won for Economics. How many have you won?

Missed the point, didn't you. How did Obama get one? Translation, the validity of these awards are tainted.

 

[Jan Itor]

Ok, here's the real punch:
On the Internet, everyone believes they are entitled to their opinion. But accolades and credentials only apply when an expert says things they already believe.

I don't come to your job and tell you how to change a tire or unclog a toilet, why do you think you are at all qualified to criticize Krugman?

For the same reason we can criticize Obama for drone strikes and killing civilians. By your logic, we should not be able to criticize him because he was awarded the Nobel Peace Prize. Real punch? I think not.

 

[WORTHYWISH]

I just. I just can't believe how dumb some people are. Holy ****ing christ balls on a stick!