Saturday, March 21, 2009

Where does the money come from?

We get the money by selling debt in the form of securities like bonds That is how most of the United States operates from the city, state and national level. If you think about it I am sure you have voted on a bond in an election, it would be a Proposition on your ballot.
I remember government bonds being very popular when I was a kid, people would give them as gifts when someone had a baby. They are considered risk free since the government can do about anything to pay them when they are mature.

The national debt is divided into two categories, internal debt and external debt. Internal is held by Americans or American companies and the external is held by foreign countries or companies.

The amount of national debt in the hands of foreign countries is approx 25% right now mostly held by China and Japan. Should we be worried? If the value of the dollar continues a decline and our economy can't seem to recover...then yes. Not because they are going to demand their money back instantly, but because they will stop buying our debt. It is critical to have that option, even if we don't need/want to use it.

As of 3/19/09 our national debt was 11,039,686,130,898.10. Now what do we do about it? Lowering it is critical to the long term health of our economy.

Since 1970, the U.S. Federal Government has run deficits for all but four years (1998-2001) contributing to a total debt listed above. President Clinton was responsible for the four years of surplus, how did he do it? He instituted very conservative fiscal policies that no one really liked. Not one single Republican voted for his budget when he first took office. It involved removing tax cuts instituted by Reagan and Bush and raising taxes on the most wealthy. And it was called the longest period of peace and prosperity of any modern President.

So as we look at the options on the table now, don't be shortsighted. Don't forget the policy of the past and what the results were. Don't forget that in order to achieve stability and surplus again you might not like the administrations tightening of the belt.

And on a side note. For all of those complaining about this administrations actions, I have yet to see a counter proposal. There is alot of complaining going on but no one coming up with alternative solutions. That is a problem.

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