I have been hearing this phrase get tossed around since I was a kid. It seems like a political buzz word that no one understands in detail, like the rich and all their tax breaks exploiting the poor. Can someone offer me a real explanation of what the national debt really is? My loose understanding is it is in relation to the risk free government bonds, T-bills, and municipal debt put out by our government entity. The debt comes due and the government had to pay it and they did. But now, it seems as if rather than paying the debt, they are either encouraging the borrower to roll it over into another bond or the government is simply printing/releasing more funds into circulation to pay it thereby depreciating our currency. Please bear with me, I don’t get it and wish for some more insight. What is the worst case scenario with the national debt? Due to the level it is as, pushing equality with GDP, what will happen? Is it realistic to think the national deb will ever get paid in full?
http://www.pbs.org/wgbh/pages/frontline/tentrillion/view/ I started watching this as well to take a study break and do some laundry.
Whenever the US gov does not have enough revenue (taxes) to fund its operations (SS, Medicare, Medicaid, defense, interest on national debt, etc.) it sells treasury bonds in the open market to make up the difference. The balance that is not met between revenue and expenditures is the deficit; the accumulations of deficits year after year is the national debt.
it is the driving source of our country…sadly
Sadly, debt is the driving force of most Western economies and, indirectly, the driving force of most developing economies as they require American consumption, dollars, and US debt investments to grow economcally and to store money.
my comment was in reference to comparing versus ourselves historically. Just becuase other western economies have frivolous social spending that adds to the deficits does not mean it is the most optimal fiscal policy.
I agree.
normally i hate quoting wiki, but last week when i was doing some light reading. THe wikipedia page on the US national Debt is pretty comprehensive of the breakdown of it. And nice pretty graphs everywhere too. http://en.wikipedia.org/wiki/United_States_public_debt
In a TVM problem national debt would be your year zero CF, so negative $11T CF, and then your annual projected deficit (difference between tax revenue and spending, interest, etc) would be your annual CFs. I think the politicians should talk about NPV instead. Leveraging up the country seems fine to me, if you are expecting huge positive NPV in the future from that leverage, but if not you gotta wonder WTF is the plan.