Explaining US spending

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Apr 03, 2021, 15:00

In 2008 the debt of the United States excluding inter government obligations was less than 10 trillion dollars. Now it’s over 20 trillion. Who is bearing the cost you ask....why investors. Here’s what’s happened to debt service:


2008 $451 billion


2020 $ 524 billion.


In other words while debt has doubled, interest payments are up less than 20%. The massive decline in the cost of borrowing, the rate paid to the holders of US debt has funded the whole binge. In fact debt service has moved more or less in line with GNP, despite the vast increase in debt.


The same thing is true of the price of oil over the last few years ....a massive drop disguised increased usage.


So with this happy circumstance Democrats, Republicans and now Jolting Joe are happy to spend like  Bulgarian tourists in an airport. But it’s all going to end in tears if and when the interest rates go up to more historical levels.


This drop in rates could have been an opportunity for massive investments in the future....expenditures which had a return, which ensured US leadership for the next 50 years. Instead we have wasted it on a series of pipe dreams that have only locked in social costs for the future, while encouraging large segments of the population to live off hand outs, rather than engage in the dignity of work.


Here endeth today’s lesson on socialism and government folly.

Apr 03, 2021, 15:49

Capital Expenditure on  infrastructure should be funded on a loan bass and that is about the only way to fund same, because it is a future revenue-yielding benefit that can fund itself..

Current expenditure should be funded on a balance budget basis - in other words by the taxpayers should bear the costs,   That is basically how the issue of financial control of Government spending is done.   

As far as I can make out  in the Obama years as President  the deficit went up from circa $8,5 trillion to $19,3 trillion.    That deficit was not incurred  iro infrastructure upgrade, rather ibn funding current expenditure - so it will yield no further income that could off=set loan payment repayment costs.   

Under Trump the system was to cut out clueless current expenditure - and  incur debts to improve defense force equipment with a very small percentage of the costs of the border wall.    However the main problem faced by  Trump in the end was the Chinese virus causing trillions of additional  expenditure.   

Now the Biden administration are going to go on a spending spree that would cause inflation since it is entirely based on money printing - even the so-called  infrastructure bill  have near to zero potential future income that could result in additional income.   

                

Apr 03, 2021, 16:26

Always easier to spend other folks hard earned cash.

Eventually the chickens are going to come home to roost.

The present bunch holding the purse strings are spending like their is no tomorrow without a plan to balance the budget but to simply raise taxes.

Watch for the CRASH.

Mozart, Plum what do you think is going to happen to GOLD and BITCOIN?

Tempted to buy more but nervous at the same time.

Hold or Sell?



Apr 03, 2021, 18:09

Theoretically higher interest rates should make it more expensive to hold gold....but we are still at such low levels it probably has limited impact. The way I view this Arthur gold is just part of a portfolio....I keep it at about 2%. 

Bitcoin is an alternative to stocks I think, but without the operating performance risk. It’s value hinges on the mining process and scarcity not as a an alternative currency. The last 3 years tells you it’s highly volatile and the event that’s going to take it up or down is probably 99% unpredictable.

I have no advice on Bitcoin Arthur, except for me it’s got to grow into a meaningful holding, I won’t put meaningful funds into it.

Apr 03, 2021, 19:00

AJ, I took some of my BC and have done a spread bet across smaller cryptos.

DeFi had a crazy two weeks last year. Went from R11 to R600k in two weeks. Guys are saying to expect more of that type of thing to occur.

As for gold...no idea, not my thing hehe. 

Apr 03, 2021, 20:02

I still hold a few BC that I purchased earlier, sold half the holdings in 2020 and looking to offload the rest but waiting to see what happens with the US budget.

We purchased Kruger Rand's way back in 1982 and the years following even after we settled in Canada, Holding them for the offspring to spend I tell the wife.

But honestly if gold hits $2.5K I will sell privately as Capital Gains is a killer here in Canada.

Thanks guys.


 
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