Debate Rounds (5)
2. And what, really, is the harm? Economies often improve even when they are deficit spending, and often contract when they are paying national debt down. While you will hear a lot of alarmist rhetoric about China or other nations owning much US debt, these fears are rarely completed with an actual allegation of what will happen if debts take longer to pay off. It isn't in China's best interest to ruin our economy, nor to attack us for the money. And if they wanted the latter, they'd hardly need to own debt to do that. Some argue inflation will skyrocket as we borrow more, but the dollar has remained amazingly stable against other currencies throughout the spendy Bush years and into Obama's term as President as well.
3. Lastly, people often make the mistake of equating national debt with personal debt. If YOU are in huge amounts of debt, you can be incarcerated, impoverished, or even killed by these poor financial decisions. Nation-states on the other hand are effectively immortal, and they cannot be imprisoned or "kicked out" the way an individual can. While I'm not arguing that debt is GOOD, I do think it is a massive distraction from bigger economic problems, such as the consolidation of more wealth into less hands.
First of all, most of the National debt is not to china it's to the people of the United States, and the way it's normally paid off is with more debt. In essence, the FED simply declares more dollars exist and credit banks with money in order to lend to the treasury to pay of its debt. Since the money is printed, that devalues the dollar and means that lenders are being paid back in dollars that are worth less than what they lent out. So why are they accepting money from the United States government?
Think about the housing bubble... Why were so many investing in that sector? It couldn't have been because housing was so valuable, otherwise there wouldn't have been the drop in prices. It was based on the idea that you could hand it off to someone else and make money off of it. It's the same thing with the dollar. It really isn't all that valuable, it's just easy to hand off to other people because interest rates are so low. Eventually people start maxing out there cards and you run out of other people. With interest rates this low people are able to spend beyond their means, that isn't going to last.
And to your point about the US economy being consumer driven. America is consuming way more than we produce. I think it would help if it was a little less consumer driven.
When you redistribute money to poor people, they, by definition HAVE to spend it to survive. They don't sit on it because they don't have that option. If you reduce the taxes of someone wealthy on the other hand, that's just more money that sits concentrated in that person's hands..it isn't spent or re-invested in the economy in ANY way whatsoever.
2. Why accept any currency? All currency is based on faith in the stability of that currency. Even as the US has wracked up more debt, our currency remains the most popular in the entire world. Are you suggesting that people are going to abruptly stop accepting it? Why would they? How would this benefit them or anyone?
3. The housing bubble is a huge issue, much bigger than we should try to debate here. I will neither concede that point, but I won't take it up either because it would take WAY too much time and space to get into. But to address your basic point that the bubble was propped up by people's enthusiasm, I totally agree. But with housing, there way many mitigating circumstances that would lead to the inflation of value being exposed. What, pray-tell, is going to do the same to the dollar? Again: Why are people going to abruptly stop honoring it as you suggest above?
4. I'm a socialist. I don't want the US to be consumer driven either, but until we're willing to pursue something besides free-market capitalism, it HAS to be consumer-driven, there isn't another mechanism. What do you suggest as an alternative?
What is my solution to our problem of consuming more than we produce? Allowing interest rates to come up in order to incentivize people to save and invest rather than spend. Allow wages to fall in order to make the us more competitive. Also I'd eliminate the capital gains tax.
Now I have some questions for you. Is it capitalism you have a problem with? Or is it chrony capitalism that bothers you? Because I'm pretty sure the wealth distribution gap has grown with the increased role of government that we've seen, not the other way around. And if we want to get into which system has improved the life of the ordinary man I'd have to say, socialism loses pretty hard to captitalism.
How does someone being successful cause others to be less successful?
I'm so sick of people bringing up what other countries do with their currencies. America is the reserve currency of the world, sixty percent of all transactions world wide are made with the dollar. So what are you saying? Because a good portion of the other forty percent of currencies are manipulated, ahhh screw it! Why not the other 60 percent.
Forgive me if I didn't address every point...
Okay, back to the points.
1. I'm not sure how to use the clothing store metaphor because I'm not entirely sure what points you're trying to relate it to. If you hire more people because you've been paid with credit, and then you cease to have customers because they run out of credit to spend, obviously, you lay off some workers, but that still isn't going to help you get new customers. If the idea is that we stop spending money, that's fine, but how does it lead to job growth? I would argue that a government willing to spend money within reason puts money in pockets that can be spent on goods and services, get saved, and eventually be used to start new businesses. A government that is obsessed with debt and retracts and retracts does nothing to help people OR the economy in any way. Austerity measures have yet to pay off for any country that has pursued them.
2. Can you tell me a very concrete event that will lead to a lack of good faith in the US? You need to actually give me a catalyst or a scenario which leads to this lack of faith...and then you have to tell me what happens as a result of that event or scenario. Do people abruptly stop accepting our money anywhere? Does it gradually depreciate in value? When? What amount of debt will trigger this reaction?
3. How does someone being successful cause others to be less successful? I didn't say that it did. What I said was that successful individuals or ventures have the potential to keep money out of economic circulation by hoarding it. The government spending money tends to allow funds to circulate to the bottom rungs of the economy and gradually work their way back up. Money that is hoarded at the top MIGHT be re-invested n business or spent domestically, but often it sits in vast accounts in the Cayman islands or other tax havens for decades, thus effectively keeping it out of the hands of all but the one who hoards it. To posit a counter-question: How does someone rich simply holding onto money and having more money help the economy?
4. My point about American currency being popular is that it sort of proves debt isn't hurting us. Your ENTIRE argument is that debt will cause other countries (or our own citizens) to lose faith in our currency and that this will somehow destroy the dollar's value. But your argument is sorely wounded by the fact that debt doesn't seem to be impacting people's faith in the dollar or its use here or abroad.
Now a specific event.... That's a tricky one but I'll do my best to be as specific as possible....
When you print money it devalues the dollar, Keynesians won't even debate you on that. Therefore when you're paying off debt with printed money you're paying back lenders in money that was worth less than what was lent out. They'd be losing money if it weren't for the fact that its so easy to lend the money out and make more money with interest. But what do people need to borrow money? A means to pay it back, most likely a job. And when the phony wealth evaporates, like I talked about before, people start losing their jobs as a result of businesses over expanding. That's going to greatly reduce the demand to borrow and at that point it becomes to risky to lend to the us government. Their good faith and credit won't be adequate in backing the dollar because that credit will have dried up. And then comes the hyper inflationary correction in the market.
Now to your point about the rich hoarding money...
Of course wealth distribution is an issue, but your solution is the problem, and that is a more concentrated form of government. But if you go back to late 19th century to about 1890 when the United States passed Britain as the wealthiest nation, that was when the poor man had the easiest time improving his life. If you exclude the newly immigrated, at that time the income gap was much smaller. But of course the man who just sailed from Italy with nothing but the clothes on his back is going to be poor compared to the man who's been living here longer and has had time to establish himself. At that time the federal government spent about 3 percent of GDP, now it's over 20 percent and the income gap is huge. I'm gonna be provocative here and say correlation equals causation in this case and I'd love to hear your thoughts on this.
Yes the dollar is stable now but eventually we're going to be held accountable for the trillions we've borrowed and spent. Devaluation doesn't happen over night, just like when the FED is forced to remove dollars from circulation it won't regain value over night and we'll be in the midst of a crisis.
A: People with no jobs need clothing so they go to the clothing store and buy a bunch of a clothes on credit. Then they go home and go waaa I'm in debt, fail to pay it off, and ultimately the clothes are repossessed, and they are unable to return to spend more money at the clothing store. This, I would argue, is the consequence you are alluding to.
B: People with no jobs need clothing so they can go to interviews in something nice and get one. They go to the clothing store, buy a bunch of clothes on credit, then they go to their job interviews, get good jobs, and are able to both pay off their debt AND ultimately but MORE clothes. The fact that credit was the mechanism initially used to make the purchases doesn't actually have much effect afterwards.
Now, I would say that scenario B is slightly more what I'm getting at, but NEITHER of these scenarios is really apt because unlike a clothing store OR a jobless person, a nation-state doesn't have to suffer any of these consequences. It isn't going to get "closed down" or not having customers. It isn't going to have things repossessed or get sent to jail. There isn't a consequence. We'll get to this more later on as I respond to the rest of your argument.
2. Printing money (i.e., borrowing it, because we do back it before we print it with SOMETHING, even if it is an IOU from another country) does indeed devalue currency, you're right that there's no debate on that. But by how much? It's a pretty basic supply-and-demand fact that the greater a supply of something (money) the less it is worth, yet there is no specific devaluation in play. And weirdly enough, expressed as a percentage, the more money overall there is in circulation, the impact that we suffer from printing more because the proportion gets so small. Think of it like this (I'm gonna use very small numbers here) : Back when there was only 10 dollars in the whole US, printing another ten without any backing effectively cut the value of the currency in half, it's true. Now that we have, let's say, 100,000 dollars in play, printing another 100 while it may sound like a lot, is only devaluing the rest of that 100,000 by less than a tenth of a percent. Add to that the fact that currencies value IS now somewhat faith-based and the impact of individual printing runs is extremely minute.
I would submit that you even realize this on some level, because when you try to grope at how the actual doomsday situation you fear would look, you don't really come up with much. You list no tipping point as to WHEN businesses will stop borrowing or people will find it risky to lend to the US, you just say it will happen. I would further submit that you CAN'T name such a point because it doesn't exist.
3. My solution DOESN'T concentrate wealth in government. I stated very clearly that money which gets taxed by the government ends up re-circulating back into the economy, often more quickly then money which ends up concentrated in less hands.
You've bound yourself up in a nasty trap on this one. Is the problem that government is hoarding our money or spending it too readily? Which is it? It can't be both.
And finally, read your own words, "Eventually we're going to be held accountable". When? I repeat: Nation-states are immortal entities, they can wait out any consequence that exists purely as an abstraction. Nothing is more abstract than money. I look forward to your concluding arguments.
Your second scenario is a little unrealistic, but I'll do my best to deal with it. The problem with your argument is that you're saying debt equals getting a job. Basically, yeah that person went into debt to buy that suit for his interview, but ultimately that suit got him the job, so what's the big deal? But would it really be the suit that got him the job? Not even close. And everyone know creditors are much less likely to lend money to a person with no job in the first place. And the clothing example is just one specific example, you could apply it to basically every area of the private economy, so I'm going to switch it from a clothing to a grocery store an apply the sitiuation you've created to it in order to show you how little sense your argument makes. It'd be like saying its not a big deal that I went into debt to buy chocolate cake when i had no means to pay it back because soon after I got a job interview. I knew that my interviewer liked chocolate cake and I gave him a piece, so he gave me the job. How often is debt for the sake of consumption, not production actually going to get you a job? Almost never. So your argument self destructs.
I'm glad we both agree that the more that is printed the more it's devalued. But the money isn't devalued the second it's printed, it takes time to mature and for its true value to be realized by the general public. For example, the stimulus package was all created through printed money. Non one that who accepted stimulus money realized the money they got was worth less, it takes time. What I'm saying is that we haven't had time to realize the true value of our currency because of factors, such as low interest rates that are keeping the demand for the dollar artificially high, and so we have the government bubble. But like I've stated very clearly, those interest rates can only mask a sick economy for so long.
And I don't think I can get to the level of specificity you're asking for because, well, I'm not psychic. I can't give you the specific lender and its specific location that's going to be the first to decide its too risky to lend to the United States government. But when it happens, like every other economic catastrophe, it's going to be a chain reaction and spread.
And you really haven't trapped me into the corner like you think you have because once again you've based your argument on complete fallacy. I'm not saying you're suggesting wealth be concentrated in government because politicians are so great and they deserve to be rich. When I said more concentrated i was talking about concentrated power. The power to determine where wealth is to be distributed, which in turn destroys the wealth before it was even ever created. I'm saying the best way to deal with income inequality is to disperse that power throughout the economy.The reason the government spent 3
Percent of GDP at that time wasn't because they were hoarding it, there was just a lot less money being taken in because for example there was no income tax. You want an America where things are determined to be valuable based on the fact that an elite few decided it was in the best interest of society. Well I would say society doesn't have interests, individuals do and therefore the best way to determine worth is determining how it benefits people in their own private capacity without the use of coercion.
I really wish you would stop avoiding the inevitable because if the government can just indefinitely print money and borrow it too, why not just give everyone in the United States a million dollars? You've just solved the problem of world hunger. But of course we can't do that because there would be consequences. They inflated the dot com bubble, that burst so try created the real estate bubble. Now that that burst we're in the government bubble, this is the final bubble, there's nowhere to hide after this.
I'm disappointed you get the last word because I'm sure you'll bring up another point that I would love to discuss. But this was a fun debate and you were a worthy challenger and you really got me thinking. Thank you :)
1. Con has introduced many new topics and examples for what are essentially the same point "If we don't get a handle on our debt it's gonna be bad." I would submit that Con has done nothing to make these fears concrete for the reader.
2. Con has not provided connecting points that illustrate exactly HOW putting a stop to US deficit spending will equate new jobs.
3. Con has not properly refuted the premise that money which ends up in government is ultimately re-circulated through-out the economy.
4. Pro has demonstrated how deficit spending, as a stop-gap temporary measure, can in fact stimulate the economy and eventually result in the funds necessary to pay that debt back.
5. Pro has illustrated the lack of harm that really comes from deficit spending despite the fear-mongering about it.
6. Pro appreciates this debate and would like to extend thanks to Con for taking the time to engage in the conversation. Looking forward to more.
1 votes has been placed for this debate.
Vote Placed by calculatedr1sk 3 years ago
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Reasons for voting decision: RFD in comments.
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