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[–] Datawych 1 points 21 points (+22|-1) ago 

We keep throwing bacon in the backyard, then being like "Man, I dunno where all these fuckin' coyotes came from."

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[–] Drain0 [S] 1 points 5 points (+6|-1) ago 

Doesn't explain much, but 1up for the snicker factor.

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[–] piratse 0 points 14 points (+14|-0) ago 

So the debt is owed mostly to US companies/government. Basically the government was like "hey guys do this and we'll totes pay you back with interest!" And since that's a pretty safe bet, businesses were all like "yeah fam, I got you." So we owe a lot of money. But that doesn't mean we don't have money coming in. Imagine it's like your CC bill. You may owe $10,000, but you make the minimum payment on it. So you still have cash for your daily shit.

Now it gets more complicated when you include the federal reserves role, but that's the jist. http://www.businessinsider.com/who-we-owe-federal-debt-to-2013-10

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[–] Drain0 [S] 0 points 5 points (+5|-0) ago 

I understand the national debt (to a degree), I'm just wondering how in the hell we can afford to give out 32 Billion in national aid to countries who's debt is only in the billions, or millions. How does any sane, fiscally responsible person pay just the bare minimum on a debt that is owed and then send out lavish gifts to all it's neighbors?

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[–] piratse 0 points 10 points (+10|-0) ago 

Because they don't give a shit about the debt. It's that simple. They are there for a limited time and they are trying to set their friends and self up for the future. Politics isn't about taking care of the country, it's about how to "legally" get rich. Also they owe that money because those people got them where they are. And the threat of prison or your family being murdered is much more pressing than a countries debt. It's not YOUR debt.

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[–] ZYX321 0 points 0 points (+0|-0) ago 

How does any sane, fiscally responsible person pay just the bare minimum on a debt that is owed and then send out lavish gifts to all it's neighbors?

At that point, your questions ceases to be an ELI5 and becomes a rhetorical one.

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[–] SpottyMatt 0 points 4 points (+4|-0) ago  (edited ago)

Responsibly managed, accumulating debt at favorable interest rates can actually turn into free money. That's the plan - though nothing guarantees it'll work out that way.

You need inflation, which is "the same thing costs more money in the future than it does today," and a good interest rate on your loan... and then it goes like this:

  1. You do a day's worth of work, and get paid $100. This is because today, a day's work is worth $100.
  2. You borrow $100 from someone else, and now you have $200. They ask for 2% interest, and to be paid back in 10 years. This (low interest, long-time-frame) is basically what US Treasury Bonds are.
  3. 10 years pass.
  4. Inflation is 2%-ish annually in the US, sometimes more and sometimes less. After 10 years of 2% inflation, a day's work is not worth $100 anymore, but is now worth $121 dollars.
  5. Your lender asks to be paid back their $100, plus 2% interest over 10 years. That's also $121.
  6. You do a day's work and receive $121, then pay back your lender.

Dumb game, right? Nobody came out ahead or behind, right? Actually, you are a winner, because you got to have an extra $100 for ten years for free. If you were able to invest it at a better than 2% interest rate, you obviously made money there - but maybe you invested it in capital, or used it to open up some opportunity that made your life better. And you didn't have to do any extra work!

Now, if inflation outpaces the interest rate of the loan... the game looks like this:

  1. You do a day's worth of work, and get paid $100. This is because today, a day's work is worth $100.
  2. You borrow $100 from someone else, and now you have $200. They ask for 2% interest, and to be paid back in 10 years. This (low interest, long-time-frame) is basically what US Treasury Bonds are.
  3. 10 years pass.
  4. Inflation is 4% annually, this time. After 10 years of 4% inflation, a day's work is not worth $100 anymore, but is now worth $148 dollars.
  5. Your lender asks to be paid back their $100, plus 2% interest over 10 years. That's $121.
  6. You do a day's work and receive $148, then pay back your lender $121, then keep 27 dollars extra.

You borrowed "a day's worth" of value 10 years ago, and got to hold onto it and use it (invest it, spend it, w/e) for 10 years. Then, when it came time to pay it back, you got to hand over more dollar bills, yes, but dollar bills that equated to less value (even after interest) than your original loan. That's $27 (or about 1/4 day's work, in this example) of profit you got as a result of borrowing money.

Now, imagine if you did this every year for 10 years. At the beginning of the 10th year, you'd have (100 + 4% inflation) * 10 dollars of debt - $1,248 or so. And you'd be looking to take out another $100 loan, and people would be like "Really bro? You're $1200 in debt and you want to borrow more money!?" You'd smile and be like "heck yes."

And for the final trick... Imagine if step #6 wasn't "You do a day's work.." but instead "You borrow $121 from someone else and pay back the first person." As long as you have favorable interest rates, favorable rates of inflation, and people willing to lend to you, you can now borrow as much as you want indefinitely, because every time you borrow money you actually profit, and every time you need to pay a loan back you just borrow the amount necessary, which is OK because that is going to make even more profit for you in the future.

Of course, if you're wrong about what inflation's going to look like over the course of your loan, you'll lose money instead.

And that is why

  1. People buy & sell & trade debt
  2. The federal reserve tries to manage interest rates (well, one reason of many)
  3. The US Gov't keeps borrowing money
  4. The US "national debt" will probably never go away or down as long as the US exists (Financially-conservative periods of time will be marked by a decrease in the rate of growth of the debt - but it is a money-losing proposition to pay it off early and it already is being paid off on time)

Now, ordinary folks like us can't do this because

  1. We don't have people willing to lend to us at interest rates that are so close to the inflation rates that the profit could go either way.
  2. We don't have people willing to lend us the sheer quantity of dollars necessary to repeat this cycle more than a few times.

But the US gov't does have those things.

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[–] Drain0 [S] 0 points 2 points (+2|-0) ago 

First off, thank you for the time you put into your response.

Now, I understand that 2% is just an example you're using here, but typically interest rates can range from 6-24% depending on various factors. My question is this, if foreign aid is seen as a grant as opposed to a loan, what justification is there to send countries 16% in assets when we are so far behind in debt? Based on your example it would be like making $100, asking for another $100 and then turning around and giving $16 of it to Bob down the street so he can buy smokes and beer knowing full well he'll need more money next time because he's not working and has no incentive to work because of all the free money he gets.

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[–] SpottyMatt 0 points 2 points (+2|-0) ago  (edited ago)

If things go according to plan, every dollar you borrow is profit

So, spend money on anything that might even tangentially benefit you, because every loan is profit.

So, I borrow $100 and I'm going to make money off it, yay. But I want to make even more money, so I want to borrow another $100, and you ask me "what do you need it for?"

I answer

I wanna make money off you, sucker, 'cause when I pay it back I'm not gonna be paying even close to the value of the dollars you give me today.

Well, you're not going to lend that $100, are you?

But what if instead, I answer

Bob's in a hard spot right now and could really benefit from a load lifted off his shoulders - I'm going to buy him some beer and smokes. He'll totally have my back (and yours!) in a barfight if we ever need it. Plus, I hear he's got a pretty sweet fishing spot on his land that he'll probably let us use.

Well, now that sounds downright reasonable. And I'll pay you back with interest? And maybe we all end up feeling good about it, too. In this example, I am the US Gov't, you're the American people, and Bob's a foreign country.

Again, normal people don't have the financial opportunity to operate this way, and we're taught/conditioned to believe that carrying debt is bad for us, because it is. But the US gov't can and does have the ability to play this game, and debt is not the same kind of liability to the US gov't as it is to individuals.

Notes

knowing full well he'll need more money next time because he's not working and has no incentive to work because of all the free money he gets.

Yes, entitlements risk creating dependents, which are at best indolent or at worst effectively enslaved. That's a separate social issue around what to do with the money you have. But if you want to convince people to keep lending you money, claiming to need to support a swath of dependent individuals might be the pity / urgency needed to convince people to keep lending to you to keep the cycle of free money going.

interest rates can range from 6-24% depending on various factors.

The US Gov't will not be borrowing money at anywhere near 24%. Even 6% is a lot - because the game doesn't work if the rates are way higher than inflation. Look at the January 2017 interest rates on US Treasury Securities - the highest interest rate on the page is not even 8%, and bonds top out under 5%. This is not the only way the US Gov't can borrow money, nor is the treasury the only gov't institution that borrows money, but it is one of the main ways that one of the main components borrows, and gives insight into the kind of interest rates that the gov't pays.

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[–] 8299397? 0 points 3 points (+3|-0) ago 

Most of the 20T is owed to the federal reserve.. Federal reserve has no armies, no tanks, ships, or missiles. All it takes is someone with enough balls to tell them to get fucked. Of course that won't happen until every other country catches on and we can't keep the game going any longer. Doesn't matter if we owe them 20T or 900T they have no way to collect, All they can do is devalue the money. So we just need to change money into something they can't devalue like time...

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[–] Drain0 [S] 0 points 3 points (+3|-0) ago 

Well isn't the federal reserve a non government entity allowed to control our funding and interest rates? Shouldn't we check to make sure they're handling our funds correctly?

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[–] tippyc 0 points 3 points (+3|-0) ago 

easy, because the money is fake.

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[–] Drain0 [S] 0 points 1 points (+1|-0) ago  (edited ago)

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[–] tippyc 0 points 1 points (+1|-0) ago 

gold has nothing to do with dollars

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[–] Datawych 0 points 1 points (+1|-0) ago 

Wouldn't the smart thing to do be to audit the federal reserve?

Yes, but in order to do that we'll have to smash through all the entrenched faggotry that (((they))) put in place specifically to make sure that doesn't happen.

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[–] Sosacms 0 points 1 points (+1|-0) ago 

By indefinitely raising the debt ceiling.

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[–] 8300570? 0 points 1 points (+1|-0) ago 

We can spend more money than we take in because the government sells these things called "bonds". The government says "if you give us some money, we will pay you back at the end of this period of time, plus this much more".

As for why we'd give aid to countries that don't have debt, think of it like this: sometimes, parents will give money to their kids to help. The kids have no debt and usually the parents have lots, but the kids don't have much income so they can't get debt of their own, so if they don't have enough money they can't just borrow it, they have to go without. Likewise, these countries would probably love to borrow a bunch of money, but they can't pay it back, so nobody will lend to them.

Whether it's right or not is another question altogether. Parents usually aid kids with the idea that a certain objective will be reached: they'll be better off later. I'd guess that most foreign aid is also spent in pursuit of some objective. Few things in life are free.

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[–] Drain0 [S] 0 points 0 points (+0|-0) ago 

But what happens when your kid turns into a 40 year old NEET living in your basement with no prior work history because you've just been floating him by all his life and not holding him accountable for his actions?

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[–] 8300893? 0 points 0 points (+0|-0) ago 

If you're worried that he'll go out on his own and make a fortune by going into business with that asshole Stu from Accounting who hates your guts, then mission accomplished.

That's where it's another question altogether whether doing so is the right choice or not.

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[–] Goathole 0 points 1 points (+1|-0) ago 

cuz umm, um we gits back like tens times that amount cuz of capitalism and selling other stuff too'm.

Or so that's what I have been told for the past 20 years. (((It's a lie)))

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[–] Drain0 [S] 0 points 1 points (+1|-0) ago 

If we had higher than a 1.8% GDP gain vs the 100% debt we've accumulated in the past 8 years alone it might be feasible.

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[–] Goathole 0 points 2 points (+2|-0) ago 

I once naively told a liberal that all the US government has to do is to direct their finances the same way that I/We Americans do. Balance your checkbook, curb spending and limit debt.

I was told, hurpety durpety derp, da US economy doesn't work like dat. eets more complicated.

Uh huh, it's more complicated and 2+2=5. Yes, economics is waaay more complicated than that. You've got like assets and shit and then like debts and shit and then you got projected income vs. projected costs and shit.........Wayyy more complicated than my household. No way I could just add six zeros to my income and debts and it be the same thing, uh uh. Government debt is totally different.

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[–] 8300818? 0 points 0 points (+0|-0) ago 

To be fair, what do you think the GDP would have done has the government not intervened?

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