What is the real reason the US is in so much debt?

[Al68]

People forget the two very very costly wars and the 700 billion bailout that bush made and like to put it on Obama (not saying you are, just happens to be your post that brought this one out, don't worry. :P ).

The fact is: **** happens. We got a couple towers blown up, got into a few wars, then the housing bubble collapsed. A lot of people saw the debt coming, and a lot didn't. I think Obama's viewpoint is about as reasonable as it can get in terms of how much crap we've gotten ourselves into in the last decade.

Wanting to spend even more than Bush is a reasonable viewpoint? I say nay. I say the spending under Bush was very unreasonable, and advocating spending even more is preposterous.

 

[DrClapeyron]

Spending more is the reason. If you think it's a problem then I will tell you that a pound of gold being worth more than a pound of food is foolish!

 

[KingNothing]

I say the spending under Bush was very unreasonable

Here we go again.

 

[Al68]

Spending more is the reason. If you think it's a problem then I will tell you that a pound of gold being worth more than a pound of food is foolish!

The word "foolish" is gibberish in this context, since you're not referring to anyone's choice or decision, unless you are calling God foolish.

A pound of gold is worth more than a pound of food as a result of nature, not human choice.

 

[Office_Shredder]

A pound of gold is worth more than a pound of food as a result of nature, not human choice.

The relative value of goods is entirely a human choice. Especially something like gold over food.

If tomorrow we collectively decided gold wasn't a valuable metal, its price would plummet precipitously

 

[Al68]

The relative value of goods is entirely a human choice. Especially something like gold over food.

If tomorrow we collectively decided gold wasn't a valuable metal, its price would plummet precipitously

Nonsense. We determined, not decided, that gold is valuable. And human determinations of value are necessarily not collective. And collective determinations of price, such as by government price-setting, do not reflect the actual value of a commodity.

Of course we could collectively choose to ignore its value, possibly as a result of some epidemic mental disorder, and its price would plummet, but we were referring to what gold is worth, not necessarily its price. Gold is intrinsically worth more than food, pound for pound, regardless of its price.

 

[KingNothing]

Gold is intrinsically worth more than food, pound for pound, regardless of its price.

I disagree.

 

[Al68]

Gold is intrinsically worth more than food, pound for pound, regardless of its price.

I disagree.

Then let's make a deal. I'll trade you food for gold at a ten to one ratio, all you want.

In fact, I'll even do the same for silver.

 

[Office_Shredder]

When I said it's valuable because we say it is, I mean that it doesn't do anything. Gold doesn't get you to work in the morning, gold doesn't feed you, it doesn't house you, it doesn't help you communicate with other people. Yes, it can be used in electronics but gold is not valued because of any utility that it has, rather it's valued mostly on the basis of being rare.

Similar to how a baseball with Babe Ruth's signature is valued because it's rare - but that's only because we collectively decided that Babe Ruth is a player whose signature is desirable. It's not like god created his signature better than all others

 

[Al68]

When I said it's valuable because we say it is, I mean that it doesn't do anything. Gold doesn't get you to work in the morning, gold doesn't feed you, it doesn't house you, it doesn't help you communicate with other people. Yes, it can be used in electronics but gold is not valued because of any utility that it has, rather it's valued mostly on the basis of being rare.

Rarity is half the equation, but it does have high utility. It's a ductile, malleable, durable metal that does not rust or tarnish, in addition to being a good electrical conductor. Gold has more practical utility for many uses than any other metal. If it were not scarce, it would be used for everything from building materials to car parts to silverware instead of cheaper, inferior materials. It doesn't "do much" because it's too expensive (scarce and valuable) to use, not because it's not useful.

Do you really think humans have valued gold so highly just because it's pretty?

 

[KingNothing]

Then let's make a deal. I'll trade you food for gold at a ten to one ratio, all you want.

Deal, so long as neither of us can ever sell our products after the trade.

 

[Al68]

Deal, so long as neither of us can ever sell our products after the trade.

LOL. Deal. I'll have it made into spoons and forks and toothpicks. How many pounds you want to trade?

 

[KingNothing]

LOL. Deal. I'll have it made into spoons and forks and toothpicks. How many pounds you want to trade?

Just enough to run your stock of food to nothing, then after you starve, I will raid your place and take my gold back. Boom.

 

[Al68]

Just enough to run your stock of food to nothing, then after you starve, I will raid your place and take my gold back. Boom.

LOL. I think it's safe to say I can spare more pounds of food without starving than you can spare pounds of gold. Could be wrong, though.

But going back to the point, comparing food to gold in pounds is silly. Of course the value of food as a whole is greater than the value of gold as a whole, but you have to divide the value of each as a whole by the total number of pounds available of each to get value per pound. In other words, gold as a whole is much less valuable than food, but it's value is just far more concentrated, and takes up less volume and weight than food.

 

[WhoWee]

Well, I guess it's settled then - the US should borrow Gold and re-pay in canned goods (by weight).

 

[KingNothing]

Well, I guess it's settled then - the US should borrow Gold and re-pay in canned goods (by weight).

Yup. Nothing more to see here, guys. Case closed.

 

[Ryumast3r]

Wanting to spend even more than Bush is a reasonable viewpoint? I say nay. I say the spending under Bush was very unreasonable, and advocating spending even more is preposterous.

Take it into context, one was unreasonable because it didn't need to happen, the other is reasonable because if it hadn't happened, our recession would've become a great depression instead of just a recession.

Spending more in general, no, not reasonable. Spending more to prevent more damage was, imo, very reasonable.

Here we go again.

Yes.

 

[CAC1001]

Take it into context, one was unreasonable because it didn't need to happen, the other is reasonable because if it hadn't happened, our recession would've become a great depression instead of just a recession.

Spending more in general, no, not reasonable. Spending more to prevent more damage was, imo, very reasonable.

If you're talking about spending as in the bailout of the financial system, then yes, but if you mean the stimulus, there is no way to claim that that prevented any great depression. In fact, it may have only lengthened out the current recession we are in.

 

[CAC1001]

Rarity is half the equation, but it does have high utility. It's a ductile, malleable, durable metal that does not rust or tarnish, in addition to being a good electrical conductor. Gold has more practical utility for many uses than any other metal. If it were not scarce, it would be used for everything from building materials to car parts to silverware instead of cheaper, inferior materials. It doesn't "do much" because it's too expensive (scarce and valuable) to use, not because it's not useful.

Do you really think humans have valued gold so highly just because it's pretty?

Those things don't necessarilly make it valuable though. It may be great for electrical conducting and not rust at all, but it is rarely used for any of that because of its scarcity. So for all intents and purposes, it is pretty worthless. There isn't any demand for it for those particular things. It only really has value because humans say it does and because you can make shiny things with it.

It would be akin to if the world had only a tiny amount of petroleum and someone saying, "Petroleum has immense potential to be used in everything from manufacturing to consumer products to energy production. It is one of the most useful substances of all materials on Earth. If it wasn't so scarce, it would be used in almost everything to some degree." Now imagine that despite this, petroleum is valued very highly nonetheless, but is only demanded because it also is great for making shiny things.

If gold was a greyish sludge color, it probably would not be valued very highly at all.

 

[Al68]

Those things don't necessarilly make it valuable though. It may be great for electrical conducting and not rust at all, but it is rarely used for any of that because of its scarcity. So for all intents and purposes, it is pretty worthless. There isn't any demand for it for those particular things. It only really has value because humans say it does and because you can make shiny things with it.

That's putting the effect before the cause. Humans say gold has value because of its value, not vice versa. Humans make shiny things out of it because it's valuable. And value (per unit) is a function of scarcity, so it makes no sense to say it's scarce instead of valuable.

Is the relationship between scarcity and value that hard to understand?

 

[KingNothing]

Al, I don't think everyone carries the same definition of "value" in their head that you do.

 

[Al68]

Al, I don't think everyone carries the same definition of "value" in their head that you do.

I'm referring to value in the economic sense, which includes all value, not just whatever value you or I consider important or justified. And remember, we were referring specifically to value per unit mass, which logically must be a function of scarcity.

A pound of food is just too easy to produce to compare to gold. Easier to produce and plentiful means less valuable. A pound of dirt has virtually zero value, regardless of how important dirt is, because it is plentiful. That's just reality.

 

[BobG]

If gold was a greyish sludge color, it probably would not be valued very highly at all.

If the only way to use gold were to turn into gaseous carbon emissions, it probably wouldn't have the same value, either.

The fact that gold doesn't lose its value when used is important, as well.

Food is only useful for consumption, same as using petroleum for fuel. Worse yet, most food has to be consumed fairly soon or it becomes worthless even for consumption.

A better analogy of an artificially valued object would be diamonds. They're as valuable as flint. Incredibly useful provided one has the skill to cut or break it into useful objects and those objects last for a long time, but there's no way to return it to the potential it had before it was actually used. But both diamonds and flint have a longer lasting value than food.

 

[Vanadium 50]

Is the relationship between scarcity and value that hard to understand?

At best, it's only approximate.

Gold is $50K/kg. Rhenium, which has less than half the abundance and about 2% of the annual production is $6K/kg.

 

[Al68]

At best, it's only approximate.

Gold is $50K/kg. Rhenium, which has less than half the abundance and about 2% of the annual production is $6K/kg.

Sure, scarcity is one factor, not the only factor.

 

[CAC1001]

That's putting the effect before the cause. Humans say gold has value because of its value, not vice versa. Humans make shiny things out of it because it's valuable. And value (per unit) is a function of scarcity, so it makes no sense to say it's scarce instead of valuable.

Is the relationship between scarcity and value that hard to understand?

Humans have been using gold for things for thousands of years, not because it is really valuable, but because it is shiny. It is a shiny thing people like that is scarce. They didn't know about manufacturing or electrical conducting back then.

I can understand gold being valuable because there is high demand for it with very limited supply, sure, but I do not believe it has high demand because you could use it in automobiles, electronics, and so forth, as it is just too limited in supply for this. I think it is valued highly due to people just wanting it because it is gold and it is limited in supply. People value it highly because you can make shiny stuff with it. It is far too limited in supply to be valued highly as something to use in manufacturing or electronics because you can use alternatives easily in place of it.

It would only be valued highly for manufacturing and electronics if it was the only thing that could be used for those things.

 

[Al68]

People value it highly because you can make shiny stuff with it. It is far too limited in supply to be valued highly as something to use in manufacturing or electronics because you can use alternatives easily in place of it.

Part of it also is that gold is malleable, durable, corrosion resistant, and very dense, all which make it very useful for it's primary historical use: money. Gold's density and scarcity make it the ultimate store of value.

But this is one debate that was over long before it started: a pound of gold is more valuable than a pound of food in an objective sense, ie in the sense in which the particular reasons for its value are irrelevant.

 

[CAC1001]

Part of it also is that gold is malleable, durable, corrosion resistant, and very dense, all which make it very useful for it's primary historical use: money. Gold's density and scarcity make it the ultimate store of value.

Many things have been used as money historically. Money itself doesn't need any inherent value. Money is just what we use as a medium of exchange to exchange all the goods and services produced in society.

 

[Al68]

Many things have been used as money historically. Money itself doesn't need any inherent value. Money is just what we use as a medium of exchange to exchange all the goods and services produced in society.

Yes, but unlike fiat or representative money, gold is a store of value. Not sure what your point is here, but paper fiat currency clearly does not serve the same purpose that gold or silver money does (did).

It does not store inherent value.

 

[Vanadium 50]

Neither does gold and silver. If gold and silver both stored "inherent value", the ratio of gold to silver prices should be constant. In fact, over the last 40 years or so, this ratio has varied by a factor of ~6. Even if you ignore the silver bubble in 79-80, it's still a factor of 5.

 

[WhoWee]

Actually, If the US could borrow in Gold - I wouldn't mind the printing presses running 24/7 (as much).

 

[Al68]

Neither does gold and silver. If gold and silver both stored "inherent value", the ratio of gold to silver prices should be constant.

That's simply not true. Inherent value doesn't mean fixed or constant value. Of course the ratio between them, and other valuable commodities, varies, depending on supply and demand.

"Good store of value" just means that the commodity is compact, durable, and doesn't rust or degrade over time. It doesn't mean the value is constant relative to any other commodity.

But you bring up a good point in that the U.S. government initially tried to artificially "fix" the ratio between gold and silver at 15:1 by fiat, ie a bimetallic gold/silver standard for the dollar. (A silver dollar had 3/4 as much silver as a $20 gold coin had gold). When the actual gold/silver value ratio increased above the ratio fixed by law, silver coins started trading at a discount to gold coins relative to their marked value. They were inherently worth their metal content, and it was metal content, not a fixed value or buying power, that was guaranteed by the U.S. Mint. (I don't think I have to tell you what the penalty was for any officers of the mint who debased coinage).

 

[mugaliens]

The question is: "What is the real reason the US is in so much debt?"

How's this for an answer: We spent more than we had to spend. "The National Debt has continued to increase an average of
$4.03 billion per day since September 28, 2007." That's $13 a day for every man, woman, and child. Put other ways, that's $390 per month. Can you cover that debt? I can't. How about $4,745 every year?

http://www.brillig.com/debt_clock/" ...

With that, I could buy a replacement used car every year.

 

[turbo]

Debt is money borrowed against current or past expenditures. There is nothing mysterious about it. If our government can only raise capital through taxation, then it must raise taxes OR reduce expenditures to reduce debt.

Do we have to keep shoveling money to energy companies? Do we have to keep paying huge agri-businesses to keep growing corn to turn into over-priced ethanol to mix with our gasoline? Do we have to pay GE and other huge companies to export jobs overseas? Our system of government is designed (by perversion and not original intent) to do these destructive things (and many others) because people with a lot of money have bought off our elected officials and judiciary.

 

[mugaliens]

Debt is money borrowed against current or past expenditures. There is nothing mysterious about it. If our government can only raise capital through taxation, then it must raise taxes OR reduce expenditures to reduce debt.

Do we have to keep shoveling money to energy companies? Do we have to keep paying huge agri-businesses to keep growing corn to turn into over-priced ethanol to mix with our gasoline? Do we have to pay GE and other huge companies to export jobs overseas? Our system of government is designed (by perversion and not original intent) to do these destructive things (and many others) because people with a lot of money have bought off our elected officials and judiciary.

Exactly. SCOTUS didn't help in the least when it granted corporations the same access to lawmakers as the Constitution grants to citizens. I sincerely believe that move was diametrically opposed to the intent of our Founding Fathers, as well as to the vast majority of U.S. citizens.

Capitalism is good in many respects, but it has it's dark side, and that dark side must be kept in check lest it strike deeper into the heel of our democratic Republic.