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WHAT’S WRONG WITH DEBT?

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  • Tue, Nov 18, 2008 - 06:50pm

    #1

    joe bender

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    WHAT’S WRONG WITH DEBT?

as most of you are aware we had a public showing of the crash course here in ar.

after watching chapters 1-12 and 15 one woman asked "well what really are the consequences of having too much debt. is it really such a bad thing and how will it affect me?"

i tried to explain to her some of the reasons our current level and growing level of debt was a big problem but she did not get it.

so i ask you all if you can give your reasons why it is a bad idea. maybe she will get at least one of them.

please keep it simple as she has a tough time with it obviously

 

  • Tue, Nov 18, 2008 - 07:18pm

    #2
    TimesAwasting

    TimesAwasting

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    Re: WHAT’S WRONG WITH DEBT?

Excessive "public" debt has great adverse affects on all of us.

A larger potion of our tax dollars goes to supporting just the interest on our debt, instead of where is might be more useful, like rebuilding our infrastructure. Less debt would give US more choices…like maybe creating a more sustainable and greener energy future.

Or how about this one. What if we had no debt? Would we then need an "income tax"?

What a revolutionary idea… you keep all the money you earn! I’m certain the USA could survive on a national sales tax alone if we "the people" would just collectively decide that are gov’t is doing "way too many things".

  • Tue, Nov 18, 2008 - 08:25pm

    #3

    Lemonyellowschwin

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    Re: WHAT’S WRONG WITH DEBT?

I used to wonder this too, then I came to this very simple conclusion:

With regard to United States Government debt, understand first that a huge part of it is owed to foreigners.  Understanding that, the answer for why it is so bad is this:  Either, (1) it must be paid off; or (2) it must be defaulted on.  Either has very serious consequences.  Paying it off means that we and our children and our grandchildren have to work our fannies off to generate the tax revenue that goes to pay off debt to the exclusion of the long list of other things we should be doing with the money.  It’s the same as if an individual were in debt.  He/she ends up treading water instead of going places in life.  That is the best case scenario.  Defaulting on the debt (either through an actual default or printing the money to pay it off) means the dollar goes in the toilet and we get hyperinflation and economic calamity of the highest order.

With regard to all other debt — personal, corporate and municipal — the macro answer for why it is so bad is that it keeps us from paying down the national debt.

Personally, I see the United States Government debt as sort of a gigantic black hole.  Everything can be dealt with and papered over so long as the United States Governement can keep going deeper and deeper into debt.  Unless something highly unexpected happens (like the economy spontaneously recovers on its own) I would think that the debt will simply continue to accellerate.  When that can’t happen anymore . . . . then the gig is up in a blaze of smoke.

  • Tue, Nov 18, 2008 - 10:06pm

    #4

    Damnthematrix

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    Re: WHAT’S WRONG WITH DEBT?

I don’t know why Americans seem so hung up on Government debts.  Debts are debts, and they are ALL bad.  WHY?  Simple…..  it works like this:

You borrow.  The money does not exist.  Money is created out of thin air, comes out the Bank Manager’s pen when he signs you a check.  IF you borrow to (say) build ahouse, then the wealth represented by the loan exists in the form your house.  IF, however, you borrow to buy gas with your credit card, which totally disappears forever when you’ve drained the tank, then that wealth is gone.  Forever.  Even if you borrow to buy a car, that car is eventually worthless, and the wealth here also disappears.

WORSE, the money to pay off the INTEREST on your borrowing (or the state’s) does not exist either.  Where does it come from?  ECONOMIC GROWTH.  Build more houses, make more cars, more airplanes, more…. and more..  and more…. using ENERGY no less.  Energy sources which are now fast disappearing, or at the very least peaking in supply meaning demand can no longer be met.

With less energy available, economic growth MUST falter.

With faltering economic growth, the interest on all the debts cannot be repaid.

Bankruptcy

The Party’s Over.

This, BTW, is why we have this overwhelming mantra of ECONOMIC GROWTH at any cost.  The Powers That Be know no other way, it’s like a religion.

I thought the Crash Course explains this very well.  Maybe you need to watch it more than once, because I know that when you are first confronted with the idiocy of the Matrix we live in, it just doesn’t compute….. how could ANYONE come up with such a stoopid system? 

  • Wed, Nov 19, 2008 - 12:00am

    #5
    barrt

    barrt

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    Re: WHAT’S WRONG WITH DEBT?

 

"Debt has to be paid back…. and we all owe more than we can repay, baby"

that might do it joe?

  • Wed, Nov 19, 2008 - 03:44am

    #6

    Damnthematrix

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    Re: WHAT’S WRONG WITH DEBT?

[quote=barrt]

"Debt has to be paid back…. and we all owe more than we can repay, baby"

that might do it joe?

[/quote]

But Barrt… it’s much worse than that…. the debts can NEVER be repaid. We no longer have the resources to grow the economy enough, EVEN if we wanted to. THEN, if we somehow managed this, the economy would have grown, with debt, EXPONENTIALLY, meaning we would then need maybe twice as much more growth, all unsustainable…

You DID do the whole crash course, right? Sometimes I think posters here haven’t REALLY taken the time to run the whole crash course (yeah I know it’s really long) otherwise you would know that humanity’s greatest weakness is its inability to understand the exponential function……

https://www.peakprosperity.com/crashcourse/chapter-3-exponential-growth GO ON. Do it AGAIN!

  • Wed, Nov 19, 2008 - 03:54am

    #7

    Lemonyellowschwin

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    Re: WHAT’S WRONG WITH DEBT?

What Damnthematrix just said.

  • Wed, Nov 19, 2008 - 01:36pm

    #8
    barrt

    barrt

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    Re: WHAT’S WRONG WITH DEBT?

that was meant as a bit of fun gentlemen

ok to make my silly little joke a bit more fiscally sound, how about

"Debt has to be paid back…. and we all owe more than we can repay, baby, ever!"

do i pass this time guys? please dont make me do the course again and go to the bottom of the class 🙁

  • Wed, Nov 19, 2008 - 03:20pm

    #9
    Aura

    Aura

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    Re: WHAT’S WRONG WITH DEBT?

[quote=joe2baba]

please keep it simple as she has a tough time with it obviously

[/quote]

LOL! If this poor woman actually came to read this, her eyes would glaze over at most of your answers!

[quote=barrt]

"Debt has to be paid back…. and we all owe more than we can repay, baby"

[/quote]

For this woman, this is probably much more understandable, even if it is way too simple an explanation. I would suggest the following explanation, as one I gave my 9 & 11 year old kids.

When you borrow money, you eventually have to pay it back. When you pay it back, you always pay more than you borrowed (interest). If you borrow more than you can pay back, you lose whatever you have that is most valuable–but you don’t get to choose what you lose when people come asking for their money back. To keep that from happening, you start cutting back on the things you can choose to do without.

The same is true of the government. When they owe more than they can pay, they will start cutting back on what they consider less important. For the government, that means no animal control, no new roads, no new water/sewer systems, etc. Except that the government needs these things to make money. Without these things, people lose job. No jobs means no tax money going to the government. That means the government has LESS money to pay back what they borrow.

So that brings us to the really big question. What happens when someone has borrowed so much that it is impossible to pay it back? You lose what is most valuable. For a person, it could mean they lose their house, their car…or their business. If they lose their business, they no longer have a job and whoever was working for them doesn’t have a job, either.

For the government, it’s like losing a business. The people who were working for the government no longer have jobs. This means everyone taking care of roads (de-icing in the winter, taking care of the traffic lights, etc.), police, judges, food stamps, WIC, Medicare/Medicaid, social security, prisons, etc. no longer have jobs. These things will no longer get done, or someone else besides the government will have to pay for it. Who will pay for it? Private individuals? Private companies? Another government? Right now, the U.S. is "in debt" to China more than any other country. How would you like China running your local police station?

Now, do you see why debt is bad?

I realize that this explanation is too simplified and not even entirely accurate, but you would not explain all the nuances of national debt to a 9-year-old and expect them to understand, and I believe this woman needs this level of an explanation. If she then has a desire and capability of understanding more, then you could elaborate…very slowly, of course.

  • Sat, Nov 22, 2008 - 09:23pm

    #10

    KKPSTEIN

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    Re: WHAT’S WRONG WITH DEBT?

"…the borrower is a slave to the lender" (Proverbs 22:7)  Debt creates slavery.  Debt also cancels out all savings.  You can’t have both.  If you have debt, you have no savings.  People don’t realize how vulnerable they become in an economic downturn with no savings. 

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