Investing in the Market: What to Do After a Bad Day

[russ_watters]

Point noted. The US public debt just isn't owned by US citizens, it is also owned by foreign entities. Foreign entities own almost 50% of the US's national debt in the forms of bonds and other securities. Most of the debt held by foreign entities are owned by foreign central banks. Why has the WTO warned the US about its fiscal policies?? It is well known that large budget deficits increase inflation and inflation is detrimental to the value of bonds. Budget deficits also lower the value of the dollar and since many countries peg their currencies to the dollar, the effects of US budget deficits are felt all over the world.

Sooooo the world community is upset that the US has too much debt, because so much is owned by the world community? Anyone else see the irony here...?

 

[russ_watters]

Russ, what you and gravenworld think is irrelevant to the actual facts. The fact is the USA is not the biggest economy in the world by far. That assertion is the bases of his argument isn't it?

No, it isn't. This discussion is about public debt. Each member of the EU has its own.

 

[gravenewworld]

Russ, what you and gravenworld think is irrelevant to the actual facts.

The CIA world factbook is an excellent source for information, you should read through it before labeling it as biased since it might not agree with what you believe. I worked in reference for 5 years at my university's library so I definitely know how to look for credible information. The US is listed as 1 in the IMF, World Bank, and CIA tables by country. The EU is separated from everyone else, because like RUSS said the EU isn't fully integrated.

The fact is the USA is not the biggest economy in the world by far. That assertion is the bases of his argument isn't it?

Uhhh no. You are making a huge mountain out of a molehill. The crux of my argument is the fact that a $13 trillion dollar per year economy (the US) will have a profound impact on the world economies when it is running up deficits every year in excess of 200-400 billion dollars. I don't know why you insist on getting sidetracked on minute differences in statistics from different organizations. Here is the link for the CIA world factbook

https://www.cia.gov/cia/publications/factbook/

it is one that should be bookmarked.
Maybe I shouldn't have used the word entity, but instead country. My mistake, I apologize. Would that calm you down? I am not here to argue about semantics, but economics.

 

[Anttech]

The US is listed as 1 in the IMF, World Bank, and CIA tables by country. The EU is separated from everyone else, because like RUSS said the EU isn't fully integrated.

The EU isn't fully integrated? Per tell what do you and Russ mean by that? We have a common policy, free movement of people, free job market, common currency (in the most). If you want to argue about what is and what isn't the EU, let's start another thread.

Maybe I shouldn't have used the word entity, but instead country. My mistake, I apologize. Would that calm you down? I am not here to argue about semantics, but economics.

Im calm

You are making a huge mountain out of a molehill. The crux of my argument is the fact that a $13 trillion dollar per year economy (the US) will have a profound impact on the world economies when it is running up deficits every year in excess of 200-400 billion dollars

Dont disagree with that, but same could be said of the EU.

 

[Anttech]

No, it isn't. This discussion is about public debt. Each member of the EU has its own.

Yes and when you add those up you get the EU debt, bit like your States

 

[gravenewworld]

Sooooo the world community is upset that the US has too much debt, because so much is owned by the world community? Anyone else see the irony here...?

Credit card banks don't like it when their customers run up huge tabs that they won't be able to pay off. The US will always be able to pay off its debt but too much debt is no good. If the US borrows money from a country like britain in the form of say a $50 bond what good will that bond be to Britain in the future if it is only worth $49.50 in real terms because of inflation? It is pretty much undisputed that large deficits increase inflation over the long run which will take a chunk out of the values of US securities owned by other countries. Also, not being fiscally responsible makes it harder to sell US debt to other countries because the value of the dollar falls when large deficits are accrued by the government and also because of the fact that the US's reputation as being an economically stable country is tarnished.

 

[russ_watters]

The EU isn't fully integrated? Per tell what do you and Russ mean by that?

Germany (for example) has its own national budget, not set by the EU. Heck, that's why it is still possible to find the national debt of European countries! They still have their own! "Integrated" on this issue would mean that the EU had one budget, one GDP, and one public debt.

To be "integrated" in the fashion we are talking about, the EU would need to be a real federal government. It would have to do all those things that the countries now do for themselves like providing healthcare and welfare, the military, etc. and it would need to collect the taxes needed to do those things. That's what countries spend their money on and that's where the debt comes from.

Yes and when you add those up you get the EU debt, bit like your States

No, not at all like our states. The US's "national debt" is not the sum of the individual state debts. The EU is not a country [yet].

 

[russ_watters]

Credit card banks don't like it when their customers run up huge tabs that they won't be able to pay off. The US will always be able to pay off its debt but too much debt is no good. If the US borrows money from a country like britain in the form of say a $50 bond what good will that bond be to Britain in the future if it is only worth $49.50 in real terms because of inflation? It is pretty much undisputed that large deficits increase inflation over the long run which will take a chunk out of the values of US securities owned by other countries. Also, not being fiscally responsible makes it harder to sell US debt to other countries because the value of the dollar falls when large deficits are accrued by the government and also because of the fact that the US's reputation as being an economically stable country is tarnished.

So who is being more fiscally irresponsible, the US for selling that $50 bond, which pushes inflation or the UK for buying it?!

 

[Astronuc]

Comptroller General David Walker felt this week's U.S. market plummet was a call to attention for the country, and that maybe we shouldn't always depend on foreign investors to bail us out.

. . . .

I don't think that we should read too much into what happened in one given day or one given week of the market. But I do think that we have to recognize reality. And it's time that we start making tough choices in order to mitigate the risk and to hopefully avoid a larger crisis from ocurring in the future.

http://marketplace.publicradio.org/shows/2007/03/02/PM200703021.html

Some folks are concerned about the mounting debt in the US - both public and private.

 

[Anttech]

Germany (for example) has its own national budget, not set by the EU. Heck, that's why it is still possible to find the national debt of European countries! They still have their own! "Integrated" on this issue would mean that the EU had one budget, one GDP, and one public debt.

So does every nation in europe, BUT it is controlled by brussels to a degree.
Question: Do you think the UK a country?

To be "integrated" in the fashion we are talking about, the EU would need to be a real federal government.

we do have a centralised governmental body, the commission.

It would have to do all those things that the countries now do for themselves like providing healthcare and welfare, the military, etc. and it would need to collect the taxes needed to do those things. That's what countries spend their money on and that's where the debt comes from.

You really don't understand the EU do you? What has healthcare, and military got to do with the common market and economy? Anyway, we do have a centralised military task force, and we have frame works, which control the standards of health care.

No, not at all like our states. The US's "national debt" is not the sum of the individual state debts. The EU is not a country [yet].

It never will be a country, that's not the purpose of the EU.

 

[BobG]

Germany (for example) has its own national budget, not set by the EU. Heck, that's why it is still possible to find the national debt of European countries! They still have their own! "Integrated" on this issue would mean that the EU had one budget, one GDP, and one public debt.

To be "integrated" in the fashion we are talking about, the EU would need to be a real federal government. It would have to do all those things that the countries now do for themselves like providing healthcare and welfare, the military, etc. and it would need to collect the taxes needed to do those things. That's what countries spend their money on and that's where the debt comes from. No, not at all like our states. The US's "national debt" is not the sum of the individual state debts. The EU is not a country [yet].

I have to agree that healthcare and military shouldn't be tossed into the mix. Those are integrated into the US central government today, but if that's part of the definition then the US wasn't a real federal government until sometime in the 1800's at the earliest (and probably not really an integrated federal government until FDR).

Of course, that suggests that one shouldn't be too certain about the following quote:

It never will be a country, that's not the purpose of the EU.

The difference between the EU economy and the economies of individual countries is kind of a fuzzy line.

Of course, either way, it's kind of irrelevant (but interesting) to the point of the post that initiated the discussion about the EU.

 

[russ_watters]

You really don't understand the EU do you? What has healthcare, and military got to do with the common market and economy?

The issue I disagreed with gravenworld on was government debt. Those services are the source of the debt.

I understand the EU's function just fine.

I have to agree that healthcare and military shouldn't be tossed into the mix. Those are integrated into the US central government today, but if that's part of the definition then the US wasn't a real federal government until sometime in the 1800's at the earliest (and probably not really an integrated federal government until FDR).

You're missing the point: healthcare wasn't provided by the states before the federal government. That's the point here. The relevant services - whatever they are - are provided by the federal government, which is why we pay the lions' share of our taxes to the federal goverenment and are concerned about our federal government's debt.

In Europe, there is no comparable "EU debt", as Anttech claimed:

Yes and when you add those up you get the EU debt, bit like your States

Fine - if such a thing exists, show me where I can read about the concept.

It is a rediculous notion, what you are suggesting: when Germany takes on debt, it issues bonds that say "Germany" on them, not "EU". Germany decides how many to sell and when (if!) to pay them back. If Germany were to have a problem and need to isue more bonds, Germany would get hit by a big inflation spike. That spike would ripple through the world, but it would mostly just hurt Germany. If Germany decides to increase its military spending, it raises taxes to do so - it doesn't go to the EU for the money.

That is the point about a country's debt affecting the world community. All the decisions and primary effects are internal. The severity of any external effects depends on the relative size of the economy in question.

 

[Anttech]

The issue I disagreed with gravenworld on was government debt. Those services are the source of the debt.

Which is controlled by brussels, through a series of non-optional frameworks.

I understand the EU's function just fine.

If you did, you certainly wouldn't say this:
"The EU is not a country [yet]."

You didnt answer my question either:

Do you think the UK is a country?

 

[russ_watters]

Sorry, I was pulled away from my post and did a late edit...

Anttech, make a point. Don't ask rhetorical questions or make meaningless and derogatory 'if you understood, you wouldn't say...' statements. Tell me where I am wrong and why and support your arguments. If you want to claim that the EU is a country, define "country", tell me how the EU fits that description, and provide a reference.

I can't provide a reference for a negative except to show you links where the EU is not described as a country, but members are referred to both as "states" and "countries". Ie: http://en.wikipedia.org/wiki/European_Union

 

[Anttech]

Sorry, I was pulled away from my post and did a late edit...

Anttech, make a point. Don't ask rhetorical questions or make meaningless and derogatory 'if you understood, you wouldn't say...' statements. Tell me where I am wrong and why and support your arguments. If you want to claim that the EU is a country, define "country", tell me how the EU fits that description, and provide a reference.

I can't provide a reference for a negative except to show you links where the EU is not described as a country, but members are referred to both as "states" and "countries". Ie: http://en.wikipedia.org/wiki/European_Union

Russ, I wasnt claiming the EU is a country. I never asked a rhetorical question, and didnt make any meaningless of derogatory statements. If you take offense to my saying that you don't know much about the makeup of the EU, then sorry. Although I do recall you admitting that much a while back.

The question, Is the UK a country, is perhaps a leading question, because the answer would move me onto solidifing the point I already made, that the EU can be looked at as 1 economy, and your assertion of non-integration is false.

The UK is not a country its 2 countries and 1 principality. All of which form an economic Union. Scotland and Wales both have autonomy on there tax systems to some extent, Scotland also has its own Law's and schooling structure, and funds these through taxation of Scottish nationals. The makeup of the UNION Is not so dissimilar to that of the EU. The EU is 27 nations, that are all economically tied, by a framework which is debated and forged in Brussels. Each member states taxes how it pleases as long as it sticks to the rules, and ensures inflation, debt etc are all within EU guidelines. Money from richer countries flows to poorer, and people can move freely between all countries without hindrance.

Now is it as integrated as the States in America? No, but the integration is enough to be looked at as ONE economy.

As for the EU becoming a country, that won't happen, the EU isn't about centralising government and decrease the member states governing power. It is, in summary, about leveraging a larger consumer base, increasing Economic clought, ensuring we don't all kill each other again. In th short term its about bettering Poorer economies in Europe, and in the long term increasing Europes World Influence etc etc

 

[Anttech]

In fact from your Link (thanks)

The EU is now the largest political and economic entity on the European continent, with around 493 million people and an official GDP of €10.5 ($13.7) trillion.[2] The Union is a customs union and a developing single market, [3] with a common trade policy. [4] It has its own currency, the euro - already adopted by 13 member states. The Union has a Common Agricultural Policy, a Common Fisheries Policy, and a regional Policy to assist poorer regions. It has initiated a limited Common Foreign and Security Policy, and a limited joint policy on crime.
http://en.wikipedia.org/wiki/European_Union