Impact of National Debt

Here is a good composite Post (read all the links) concurring with the current sentiment of ignoring Deficits with no consideration of establishing a balanced Budget. There are a great number of reasons why such a policy is Short-sighted and flawed. The lead element, though the next is more important, consists of the loss of the solvency of the Dollar where foreign investment in U.S. Government debt will begin to dry up because of the poor Repayment schedule for such Debt; which will be proclaimed to be nonexistent under this policy. Interest rates on the Debt will escalate to entice the funds for the construction of vastly more Debt. The real point of impact here is not foreign governments diversifying their Holdings of Dollar debt into other Currencies, but in the diversification of their Trade dealings to expand to a wide spectrum throughout the world; enabling themselves to cut the United States from the loop, if Trade Dollars slip out of the major Currencies of Exchange in Value.

Foreign purchase of Dollar Debt will facilitate the decline of American domestic Manufacturing, as foreign Wages remain lower in relation to American Wages, through the propping mechanism of hiding the real loss of Value of the Dollar. It is like the Dream of young American Workers, who wish to borrow Debt to live at the Standard of their parents, for the 20-30 years it will take to reach their parents’ Age, with Debt accumulation and Interest throughout the entire Period; somehow expecting they will have the wealth of the parents by this maturity. One cannot live, or build capital assets, working on the Margin between Debt Service and Wages;unless there exists a definite schedule of Debt reduction. This is true for entire Economies, as well as individual Participants in that economy.

One of most destructive elements of Debt accumulation has been the need to resort to Inflation to expand the differential between Debt Service and Living Costs. Debt Holders, plus even a number of Economists, believe this Inflation is beneficial and finances economic growth. It simply does not! Any rate of Inflation assures that the future Costs of Production are not fully funded by the previous finance of Production through Product Sales. The higher the rate of Inflation, the higher levels of Costs which are not actually paid by this Purchase. Studies have not been conducted in this economic area, but I believe Inflation settles in Profit Margins to the greatest degree in an Economy; this means most Inflation settles in artificial declared Profits, as the Costs of Production must be paid with real Value exchange through escalating Pricing of Resources of Production. I may be an old Fush-budget as Some have claimed, but Inflation is definitely not a Savior for individual Debtor or Economy. lgl