At least dictators can actually get things done in their country. We just need to find a just and moral dictator.

I realize you're joking, but historically, loose fiscal policy has always been more of a problem in dictatorships or other undemocratic regimes, e.g. most recently Zimbabwe. If anything, the current problem in Western democracies is that fiscal policies are too tight, and/or targeted badly (basically, wealth inequality spinning out of control).
[/quote]
but they do get things done... whether or not those things are good.

Modern Democracies only have existed for about 200 years so who knows maybe the quote is correct but i doubt it.. The reality is technology is what shapes societies and Democracies have advantages when you have a citizenry which is empowered and people are well educated. Different socio-political philosophies compete and dominate at different ages in human history.. Monarchies with their strong centralize hierarchy and clear rules of succession and the citizenry is poorly educated did well in early human history etc.. True Monarchies will almost always be out-competed by Democracies in this age.. Hybrid authoritarian regimes like the Chinese which is a variant of Communism with more liberal property rights and business friendly policies might out compete the Western Democracies.. who knows. During the Cold War there was many who thought the strong centralized command and control economic model might out-compete the free trade capitalistic model of the West.. But it didn't turn out that was instead , the Chinese showed by combining both you might have an even stronger model..

That ofcourse has nothing to do with cutting the deficit.. The US needs to get serious with clamping down on finical reforms to prevent the 3rd Great Crash and get it's budget under control if it's going to make any significant progress..

-ddn

Very few elected officials have the courage to do it. Most are always looking to the next election.



Cutting social programs will need to happen. But what politician would reduce Grandma's social security payments and force her into bankruptcy? What politician will face all the paralyzed or severely injured and tell them they are slashing their SSI checks? For generations politicians have handcuffed the nation into promises that these would be paid. It is clear that the promises will be broken, and it will hurt a lot of people.

Taxes must go up eventually to pay the spending sprees that go back for a few decades. Yet even when they recommend tax increases (or letting tax cuts expire) they'll still try to spin it to sound like they're keeping taxes low for various groups. And they'll still add exemptions and loopholes so people can still get out of paying. A few states have just learned this lesson: Cutting the loopholes and tax breaks gives a huge increase in revenue, but also forces you out of office.

Looking through history shows that the few who do it not only lose their political jobs, but get death threats and occasionally get murdered over it.


Financial reforms are needed, yes. But who is willing to lose their jobs, and potentially lose their life, over it? Congress won't do it unless and until enough people force it on them. You won't see it happen until there is so much pressure that NOT doing it will be more deadly to your career. And the US isn't there yet.

I've said it before and I'll say it again: debt is irrelevant when enumerated in a currency of which you're the monopoly issuer.

Cutting social programs will need to happen.

Why? Are you saying that the US is low on real resources and does not have enough of them to keep up the living standard of retirees? As I see it, the high unemployment is evidence that there are significant amounts of real resources that are simply left idle. The US government can always put these idle resources to work by spending more money.

Taxes must go up eventually to pay the spending sprees that go back for a few decades.
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Why? The US government is not like a household. There is no need to ever pay back the US government debt; after all, this debt is simply the mirror image of private holdings of net financial assets, and as long as private actors like to hold on to this wealth, there is no point in trying to reduce the US debt - in fact, it will likely be counter-productive, because the conflict between private actors wanting to hold treasury bonds and the government wanting to reduce the amount of treasury bonds is likely to cause collateral damage in the economy.

And if, at some point, private actors want to get rid of their treasury bonds, there is still no risk of bankruptcy for the government - after all, it is sovereign in its own currency. But keep in mind that there is no sign of that at the moment, and once it does happen, there is plenty of time to react, should there be a need (while the expiry of treasury bonds itself is totally irrelevant, it might go hand in hand with other changes in private behavior that are less benign).

I've said it before and I'll say it again: debt is irrelevant when enumerated in a currency of which you're the monopoly issuer.

This. I'm happy to see there is somebody else here who gets it

[quote name='Prune' timestamp='1298268387' post='4776925']
I've said it before and I'll say it again: debt is irrelevant when enumerated in a currency of which you're the monopoly issuer.

This. I'm happy to see there is somebody else here who gets it
[/quote]

Until china gets pissed off and goes to war with us.

edit: before someone gets angry and writes a 20 paragraph reply to this, I am not being serious.

[quote name='Prune' timestamp='1298268387' post='4776925']
I've said it before and I'll say it again: debt is irrelevant when enumerated in a currency of which you're the monopoly issuer.

This. I'm happy to see there is somebody else here who gets it
[/quote]


It doesn't work that way.

That mistake has been done by many countries in the world over history. There are stories of wheelbarrows full of money; you are better off leaving the money and stealing the wheelbarrow. Printing more money reduces the value of existing currency and causes inflation.

Just in the past few years Zimbabwe was the latest victim of that stupid logic. They are the first nation to issue a hundred-trillion-dollar bill. They had to abandon their currency when their inflation rate reached a half-billion-percent inflation (really!) in a month due to printing massive amounts of currency.

[quote name='Prefect' timestamp='1298274207' post='4776951']
[quote name='Prune' timestamp='1298268387' post='4776925']
I've said it before and I'll say it again: debt is irrelevant when enumerated in a currency of which you're the monopoly issuer.

This. I'm happy to see there is somebody else here who gets it
[/quote]


It doesn't work that way.

That mistake has been done by many countries in the world over history. There are stories of wheelbarrows full of money; you are better off leaving the money and stealing the wheelbarrow. Printing more money reduces the value of existing currency and causes inflation.

Just in the past few years Zimbabwe was the latest victim of that stupid logic. They are the first nation to issue a hundred-trillion-dollar bill. They had to abandon their currency when their inflation rate reached a half-billion-percent inflation (really!) in a month due to printing massive amounts of currency.
[/quote]
Well, Prune left out the second part of the equation. Debt in your own sovereign currency really is irrelevant. Aggregate demand vs. the real economy, on the other hand, is important.

The Zimbabwe government has always paid back all debt that they had issued in their own currency. I think this is an important fact that is worth putting in bold to everybody who brings Zimbabwe into debt-related discussions. The problem of Zimbabwe was that the government had taken up US$-denominated debt, and then continued to let the real economy go to waste. Once the economy had gone to waste and their exports collapsed, this reduced the amount of US$ flowing into Zimbabwe - but the US$-denominated debt to the IMF remained the same. Instead of defaulting on that debt, which would have been the sane thing to do, the Zimbabwe government tried to "fix" the situation by printing ZWD (later ZWN) to buy US$.

The fact that this failed has nothing to do with debt in their own currency (I highly doubt that they even issued ZWN-denominated debt at all). It has everything to do with the fact that their attempts to buy US$ went beyond what the country as a whole could reasonably expect to obtain in US$, based on their real capacity for exports. Naturally, the value of the ZWN dropped relative to the US$ as a result. Then combine this with the fact that Zimbabwe, which had previously been an exporter of foodstuff, had started to import food because of the severe mismanagement of their real economy. The drop of ZWN vs. US$ made imports more expensive, causing domestic inflation.

The mistake that those many governments in the history of the world have done is that when their real economy was at or beyond full capacity, they were unwilling to face that fact and tried to spend their way out of it, beyond the capacity of their real economy to expand. Inflation resulted as a simple matter of supply and demand.

The US economy, on the other hand, is far from full capacity, and its government is currently making the opposite mistake. Any type of fear that government spending is going to cause inflation in the current situation in the US is totally misguided.

The main lesson from all this is that you should really look at the real economy and supply vs. demand to understand most cases of inflation, especially the famous historical examples of hyperinflation. You only need to look at Japan to see what I mean - something that the deficit terrorists always conveniently forget when they shout about the debt.

[quote name='Prefect' timestamp='1298274207' post='4776951']
[quote name='Prune' timestamp='1298268387' post='4776925']
I've said it before and I'll say it again: debt is irrelevant when enumerated in a currency of which you're the monopoly issuer.

This. I'm happy to see there is somebody else here who gets it
[/quote]

Until china gets pissed off and goes to war with us.

edit: before someone gets angry and writes a 20 paragraph reply to this, I am not being serious.
[/quote]
No need for a 20 paragraph reply, because one does the job. If you really are really strictly concerned about the debt, then China going to war with the US is the best thing that could happen: In that case, the US can legitimately declare all Chinese held US$-assets to be invalid (or at least freeze them), and thus "relieve" itself of all that debt. Of course, that's an absurd position, but then again, being concerned about the debt without concern for what goes on in the real world is absurd in the first place.

It just occurred to me that after what I wrote about Zimbabwe, looking at China might actually be quite enlightening. The Chinese government is doing the same thing that the Zimbabwe government did: they are printing staggering amounts of Yuan to buy US$. This causes the Yuan to drop in value vs. the US$, just like in ZWN vs. US$. The difference, of course, is that the Chinese do this with an eye towards the real economy, and so their printing Yuans does not exceed what their real economy can generate in US$ via real exports.

To be more precise, the Chinese use a fixed-price, variable-quantity policy to prevent inflation: They buy US$ at a fixed price as long as people are willing to offer US$ for that price. By setting this price ceiling, they get price stability, at least as far as the exchange rate is concerned.

Incidentally, this fixed-price, variable-quantity idea is much the same philosophy as what is behind the Job Guarantee.