Big Picture Thinking

[Chaerophon]

I think that the "it's better to let the debt go" arguments are based on an optimistically flawed model generated by people who *think* they are clever.

Just thought I'd chime in with the logistical basis of the argument for not paying down the debt load. Currently, the Canadian national debt stands at approximately 600 Billion dollars. With the government committed to "zero inflation" the inflation rate is actually holding stable somewhere around the 2% area (due in part to the inevitiabilities of unemployment due to frictional unemployment, unions, minimum wage laws and incentive wages). Now, using the 'rule of 70', we can see that in a matter of 35 years (70 / 2% inflation) the debt load will fall to a relative value of one half of that of the total, e.g. 300 Billion dollars. Under the same plan, and assuming that the Canadian government is using a realistic total of approximately 2 Billion dollars, per year, of their surplus to pay down the debt, in thirty-five years, we will arrive at a nominal debt of just 530 Billion dollars, but a real debt load of only 265 Billion. This would seem to be a sizable amount if it weren't for the fact that we currently pay somewhere in the neighbourhood of 45 Billion real dollars per year in interest on the national debt, a value that is and, in fact, will remain greater in real value than is the difference in the debt after 35 years of debt reduction. Granted, the interest payments will fall marginally with the gradual reduction of the debt; however, I think that it can be safely argued that in the long run, the capital growth and the aversion of deficit spending on necessary social support can better suplement the economy's financial interests due to the multiplicatory effects of the capitalist system than would the marginal (in terms of total reduction) reduction in the expense of interest rate payments.