Congressman Stark (Calif., Dem) on his particular economic theories:
http://www.youtube.com/watch?v=UjbPZAMked0&feature=player_embeddedhttp://www.youtube.com/watch?v=UjbPZAMked0&feature=player_embedded
Note that Congressman Stark is worried that what he is saying may not be true. Stark tries to use the old if you don’t have a PHD then you don’t know something? I suggest that Jan ask not about who pays off the debts but who is buying this debt? It is simple logic even for a PHD that as individuals, communities and countries accumulate debt that their ability to pay the debts gets less and less. The only difference with a country with a central bank is that they can pay off the debts with something that is progressively less valuable. So the question is when will buyers of debt stop or cut back, and when they do who will buy it.
You watch Peter Schiff videos, don’t you?
Did you hear what he said at the end? “Get the F##K out or I’ll throw you out the window!”
I think Rothbard’s “The Anatomy of the State” comes to mind now.
I just wondered what the thinking could be based on:
- that if the government has a lot of debt, it must be borrowing it from its people, which means the country is rich (since a lot of people can lend this money to the government, doesn’t make sense if the creditors are foreigners or the money borrowed is created out of thin air though)
- if a government has a lot debt, it means the country has a lot of assets, since it it able to take on so much debt
- any other “logical” grounds
- taken out of the blue with no “logical” thinking – however flawed – at all
I’m not saying what the Congressman said makes sense. I’m just interested in what could make someone say such a thing.
Any thoughts?
Government deficit = government bonds = more savings. This is the supposed line of thinking.
The thing about debt is it’s not the size, it’s how you use it. Government debt that is ultimately never to be repaid(or done so by debauchery of the currency) is a more efficient way for government to transfer real wealth from bondholders, especially those of illiquid assets. If the debt is used to finance profitable commercial activity, then functionally it’s no different to a private business taking loans, since it;s productive as evaluated by consumers.
More often than not though, government projects make losses however, diminishing the capital they were supplied, putting resources to less good use than they would have been(the broken window fallacy!). If the burden of repudiating the debt is then passed on to taxpayers through increased taxation, nothing more is achieved than a redistribution of resources from the productive class of society to the government’s bondholders. Which is also the reason why no one would ever tolerate these taxes coming directly from the bondholders only(assuming no foreign bondholders).