4 ms·

I'd go as far as to say that a zero debt situation is worrisome. It'd mean that we don't have anything (such as infrastructure) that we'd like to spend money on

by minot 12y ago

I'd go as far as to say that a zero debt situation is worrisome. It'd mean that we don't have anything (such as infrastructure) that we'd like to spend money on... It'd mean that the situation is bleak for everyone.

bunderbunder 12y ago
It wouldn't mean that; the gov't could always just plunk down cash on things like infrastructure development. If the cash on hand isn't available, then run a budget surplus in order to save up money. But there are arguments to be made that, assuming a healthy economy, it's better to borrow and spend than it is to save and spend for anything that's worth the money.
- logfromblammo 12y ago
  Except you can't assume a healthy economy if no one has any savings to spend. In a healthy economy, people save their surplus in expansions and spend it in recessions, or for larger purchases. Interest on debt means that the return on investment for projects financed by debt must be positive even after the interest payments, or the debt cannot be paid off. What I often see is that municipalities will do something stupid, like pay for a new, oversized sewage treatment plant, using bonds, and then the very optimistic growth in the sewer system does not occur, and people end up paying $500/month water bills for a plant running at 10% of capacity. You can't borrow if no one has anything to lend.
  - judk 12y ago
    You can always borrow people's labor. That's all fiat money is. Print some money, give it out, borrow it, pay idle people to work. This only fails if everyone is already working but failing to save, because they are only generating subsistence value from their labor.
- judk 12y ago
  You are mistakenly believing that money exists like wool or oil or lumber or stone. It doesn't. Money is imaginary. It is simply an IOU to be exchanged for labor or services. It is subject to inflation if a society amasses too much, unlike durable goods which can be stockpiled until you have enough.
tempestn 12y ago
Agreed. Zero debt really doesn't make sense as a goal, and this British bond repayment illustrates the case that if all goes well, inflation eventually reduces a constant debt to irrelevance. (Although it may take a few centuries.) That said, of course debt reduction still certainly has value, as there is obviously such a thing as too much debt.
- jacques_chester 12y ago
  Debt for capital spending has a different character from debt for recurrent spending.

by minot 12y ago

bunderbunder 12y ago

It wouldn't mean that; the gov't could always just plunk down cash on things like infrastructure development. If the cash on hand isn't available, then run a budget surplus in order to save up money. But there are arguments to be made that, assuming a healthy economy, it's better to borrow and spend than it is to save and spend for anything that's worth the money.

logfromblammo 12y ago
Except you can't assume a healthy economy if no one has any savings to spend. In a healthy economy, people save their surplus in expansions and spend it in recessions, or for larger purchases. Interest on debt means that the return on investment for projects financed by debt must be positive even after the interest payments, or the debt cannot be paid off. What I often see is that municipalities will do something stupid, like pay for a new, oversized sewage treatment plant, using bonds, and then the very optimistic growth in the sewer system does not occur, and people end up paying $500/month water bills for a plant running at 10% of capacity. You can't borrow if no one has anything to lend.
- judk 12y ago
  You can always borrow people's labor. That's all fiat money is. Print some money, give it out, borrow it, pay idle people to work. This only fails if everyone is already working but failing to save, because they are only generating subsistence value from their labor.
judk 12y ago
You are mistakenly believing that money exists like wool or oil or lumber or stone. It doesn't. Money is imaginary. It is simply an IOU to be exchanged for labor or services. It is subject to inflation if a society amasses too much, unlike durable goods which can be stockpiled until you have enough.

tempestn 12y ago

Agreed. Zero debt really doesn't make sense as a goal, and this British bond repayment illustrates the case that if all goes well, inflation eventually reduces a constant debt to irrelevance. (Although it may take a few centuries.) That said, of course debt reduction still certainly has value, as there is obviously such a thing as too much debt.

jacques_chester 12y ago
Debt for capital spending has a different character from debt for recurrent spending.