r2i forum

blrblr;150675Desi,

The point of my posting that article was not inflation. Its about what drives prosperity. In fact, it just occurred to me that you already subscribe to the idea that savings & investments drives prosperity!

If you didn't you would be advocating borrowing and spending - not be a vocal advocate for savings & investments on this forum!! If that is the path to prosperity for an individual, then it is the same path for a group or a country!

One example I am personally familiar with: the "cradle of innovation" - the silicon valley. If you see any VC fund, some of the largest investors are entrepreneurs who have already made it - that is productivity yielding savings, driving further investment, providing future capital for more products. Silicon Valley is probably the only reason, I am not betting on a dollar crash! :)[/quote]

While in general, I make an argument that a country should be run like a prudent household, there is a time and place for borrowing. If I can borrow, start a business with it and put 15 of my family members to work and then make money at it by servicing the loan with income generated, then borrowing makes sense. Read my posts where members ask if they should pay off their mortgage loans.

On the other hand, I look at Japan where while the country has gone from low to high to low infrastructure spending, the country has primarily been a country of savers and a large measure of their success emanated from international consumption and not domestic.

I do not buy the notion that govt should reduce spending in the time of a national crisis. The economic engine needs fuel else, it will stall, if it hasn't already.

The article you posted talks about not being able to get rich by spending more. That premise is flawed. The aim of the govt is not to collect wealth and if it was all they have to do is cut out majority of spending and raise taxes. The job of the govt is national growth and welfare.

The spending by govt spurs productivity and income. Yes, govt spending creates deficits and deficits have to be paid and taxpayer income will pay that as it does in any country.

blrblr;151100Agreed. Borrowing certainly has its place.

But what happens if your business is losing money year on year? And your only game plan is to roll over your loan and to borrow to repay the interest?
[/quote]There are key differences between a country and a business. To a large extent, the greater problem is not of budget deficit but of trade deficit. Budget deficits that cannot be financed by the income growth in the coming years can have an impact on devaluing the currency.

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"......Each year since 1969, Congress has spent more money than its income. The Treasury Department has to borrow money to meet Congress's appropriations..." - http://www.federalbudget.com/

[/quote]The above statement is non factual in my view. The way some of these sites you subscribe to calculate deficits misses the operation of social security system and medicare.

We had budget surpluses during year 2000, 1999 etc.

Here at the link below, you can calculate that the national debt actually went down due to surpluses from Jan 1, 2000 to Jan 1, 2001.

http://www.treasurydirect.gov/NP/NPGateway

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As to how things stand, add the 4T that will be added in the next several months, the SS dues, the T's coming due (and will be rolled over) and interest on those? An entire generation might have to work to pay it off.
[/quote] Yes, things are grim, but if we govt does not keep this afloat with spending, we will regret it a lot more.

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Here's another angle to the problem. Banks have a leverage of 1:10. If you deposit $X, they can lend upto 10x (fractional lending). Now, the $600B thats been pushed by Fed into the banks (which is again sitting with the Fed!) when it does get lent out, will create $6 Trillion in credit?
[/quote] What do your suggest that banks do not lend out the money they receive in deposits? If they do lend out, then, voil we have a fractional lending system.

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I am sure you'd agree that printing/creating paper money never made anyone prosperous....
[/quote] can you provide a credible link that says that govt is printing money to finance the current mess?

blrblr;151105"........The U.S. Treasury released the annual Financial Statements of the United States Government for fiscal year 2007........... GAAP-based deficit exceeds $4.0 trillion............. If the government were to raise taxes so as to seize 100% of all wages, salaries and corporate profits, it still would be showing an annual deficit using GAAP accounting on a consistent basis..........."[/quote]

Can you post that financial statement?

John Williams who you are quoting, his education was wasted on him.