"J. Clarke" wrote:

In article ,
says...

"J. Clarke" wrote:

In article ,
says...

"J. Clarke" wrote:

In article , cayoung61
says...

Might help with the economic depression, too?

Not necessarily. The New Deal worked mostly because while just about
everybody in the country was broke, the government was solvent. This
time the government's as broke as the rest of us.

Not true. The ratio of federal govt debt to
private debt was the same in 2008 as it was
at the beginning of the great depression.

http://static.seekingalpha.com/uploa...hael-Clark.png

What does the ratio of federal government debt to private debt have to
do with the government being broke?

Nothing at all. The govt is not broke


One can be broke without owing
money. In fact if one is broke it is generally difficult to obtain a
loan.

The govt has no difficulty getting loans.



In 1930 the federal Debt was 16 billion dollars on a Federal income of 4
billion and the government showed a surplus of 730 million.

In 2011 the federal debt was 14 trillion dollars on a Federal income of
2 trillion and the government showed a deficit of more than 1 trillion.

The government took in and spent 3.6 trillion last year.
And the govt owes private investors about 9 trillion.



Or by another measure, in 1935 the federal debt was about 40 percent of
GDP, having risen to that level from about 20 percent in 1930. In 2011
the federal debt was nearly 60 percent of GDP, up from about 35 percent
in 2005. The only time the federal debt was higher was during WWII.

And when the federal debt went higher
what followed was increased economic growth.


If you don't think that the government owing 70 percent of the entire
country's income and having to borrow half as much as it brings in to
pay the interest on the existing debt means that the government is
broke

The govt is not broke and the federal debt will continue to
go much higher.

If Congress tries to balance the budget the current private
debt situation will create a depression worse than the 1930's
depression. And with any depression the federal debt will
grow faster and higher.
IOW, the effort to curtail federal debt will backfire and will
cause a huge fall in GDP which will make the private sector even
less able to handle its debt which is already unmanageable.

If Congress tries to balance the budget the phrase
"debt-deflation" will become household word for
a large portion of the private sector.


"Each dollar of debt still unpaid becomes a bigger dollar,
and if the over-indebtedness with which we started was great
enough, the liquidation of debts cannot keep up with the fall
of prices which it causes. In that case, the liquidation
defeats itself. While it diminishes the number of dollars
owed, it may not do so as fast, as it increases the value of
each dollar owed. Then, the very effort of individuals to
lessen their burden of debts increases it, because of the mass
effect of the stampede to liquidate in swelling each dollar
owed."
-Irving Fisher,
The Debt Deflation Theory of Great Depressions, 1933.
http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf

OK, Brainiac, go find someone fool enough to loan you an amount that has
you paying a third of your income in interest and see how you like it.

Interest payments by the federal govt are lower than
they have been for decades. When Reagan was president
federal interest pay outs were over 3% of GDP. Today they
are about half that.