04-06-2003, 02:05 AM
Paying down the debt isn't that static.
My econ is rustier than it should be, and I don't have my sources with me but here are a few things to keep in mind. I will try to find some of the stuff this is based on and clarify some points, especially what happened when the Clinton admin actually started to reduce the debt instead of just maintaining it by not paying out the interest on it.
But this is a basic summary from one of my econ professors, who provided must of the source on it, but not all.
Most of the US debt is to itself, I can't speak on other countries, but this changes things. How do we owe the money to ourselves, well through bonds. These treasury bonds are traded on the market, albiet in a slightly different fashion. So, the US government starts to buy back these bonds (the only way to get rid of the debt to ourselves) and what happens? Well, pretty much whatever happens when a lot of stocks and bonds get bought on the market, they price starts to go up. What does that do? It starts to make the debt even larger. This actually happened when we were running such nice surpluses (some of which was simply caused by the markets being so happy joy joy do to the tech bubble that was bound to burst) and they started to actually pay the debt down.
I don't have the model for how to handle this, but I will try to dig it up. You can pay the debt down, but because of the nature of what the debt is (again at least in the US) the more you pay it down, the more it costs to pay it down, and it can actually be increased by paying it down.
Just something to consider. This is also a factor as to why economist say that it isn't such a bad thing to have a debt, at least of the nature of the US debt. In the case of the US with such strong world currency it becomes even less of an issue, but I am even fuzzier on the details and would need to review stuff. I finished my econ minor 2 years ago, and haven't used most of it since then so a lot of the details left me, though I did keep some of the big picture.
Hopefully I can find some of the details on this and get this post edited to include them.
My econ is rustier than it should be, and I don't have my sources with me but here are a few things to keep in mind. I will try to find some of the stuff this is based on and clarify some points, especially what happened when the Clinton admin actually started to reduce the debt instead of just maintaining it by not paying out the interest on it.
But this is a basic summary from one of my econ professors, who provided must of the source on it, but not all.
Most of the US debt is to itself, I can't speak on other countries, but this changes things. How do we owe the money to ourselves, well through bonds. These treasury bonds are traded on the market, albiet in a slightly different fashion. So, the US government starts to buy back these bonds (the only way to get rid of the debt to ourselves) and what happens? Well, pretty much whatever happens when a lot of stocks and bonds get bought on the market, they price starts to go up. What does that do? It starts to make the debt even larger. This actually happened when we were running such nice surpluses (some of which was simply caused by the markets being so happy joy joy do to the tech bubble that was bound to burst) and they started to actually pay the debt down.
I don't have the model for how to handle this, but I will try to dig it up. You can pay the debt down, but because of the nature of what the debt is (again at least in the US) the more you pay it down, the more it costs to pay it down, and it can actually be increased by paying it down.
Just something to consider. This is also a factor as to why economist say that it isn't such a bad thing to have a debt, at least of the nature of the US debt. In the case of the US with such strong world currency it becomes even less of an issue, but I am even fuzzier on the details and would need to review stuff. I finished my econ minor 2 years ago, and haven't used most of it since then so a lot of the details left me, though I did keep some of the big picture.
Hopefully I can find some of the details on this and get this post edited to include them.
---
It's all just zeroes and ones and duct tape in the end.
It's all just zeroes and ones and duct tape in the end.