National debt...

[iago]

I'm just wondering, what is the eventual outcome of a country having a huge dept?  Like the USA, for example, (apparently) has a debt of approximately $8,837,000,000,000 [source].  From what I understand, your budget causes something like a $250,000,000 debt each year, if I'm not mistaken.  So the USA is going way further into debt each year:
revenues: $2.119 trillion
expenditures: $2.466 trillion


Canada, on the other hand, is $600,700,000,000 in debt.  That's still a huge number.  However, we are slowly paying off the debt by spending less than we earn:
revenues: $159.6 billion
expenditures: $152.6 billion
source (apparently, according to that site, Canada is a "illicit producer of cannabis for the domestic drug market and export to US" -- but that's neither here nor there)


Anyway, my point is: why is Canada bothering to work itself out of debt?  The billions of dollars that it is over by could be put into important programs like healthcare and our military.  We get made fun of for having a small military, but at the same time we're working our way out of debt. 

My question is, why?  What effect does being in debt have on a country?  Who do you actually owe those 8 trillian dollars to?

Hope that makes sense..

[MyndFyre]

My question is, why?  What effect does being in debt have on a country?  Who do you actually owe those 8 trillian dollars to?

I'm not an economist, so I can't address the effect debt has on a country (I believe it generally causes inflation and in turn higher interest rates, because the currency is being borrowed against itself), but in general the 8 trillion is owed to ourselves.  Very frequently debt is borrowed against future gross -- you can see how this works when a local municipal government get a bond.  The city borrows a bond from a special kind of bank (I can't remember what this is called), at a low interest rate (just a bit higher than the Federal Reserve offers loans), and then over the lifetime of the bond the city pays off some measure of principal and interest.  Bonds typically last between 15 and 30 years, and state and local laws regulate how they are paid over that time.  (This is at least how municipal bonds work in my area).

When it comes to national debt, the United States, being a sovereign country, doesn't have a "bank" to borrow from, so it borrows from itself.  Federal debt functions similarly to a loan, but since we could (theoretically) pay off our loan in four years (if we cut ALL government spending), government agencies typically feel less pressure to do it.

I'm trying to think of what the effect would be of forgiving the national debt short of a short burst of inflation, but I can't really think of any.  If we assume that all governments are perpetual then the national debt is irrelevant.  (I'm not advocating having a national debt -- I wish the moron lawmakers in the US would stop candy-assing to special interest groups and stop funding things that detract from our national sovereignty like the UN, but the point is still there).  The result of the government being collapsed would be the economic collapse of the population as well, but that's been true ever since the world took itself off the gold standard anyway.

[iago]

I'm not an economist

Nor am I, that's what I asked this. 

So based on what you said, the "balanced budget" that my government advocates is pretty much pointless.  Kind of sad then, really.  But maybe one day Canada will have no debt.  If we end up with a surplus, maybe they'll give it directly back to the people.  That's what the Province of Alberta does, they mail out cheques for a few hundred dollars to everybody in the province once in awhile. 

[Adron]

As far as I know, you do have to pay interest based on your national debt as well? So if interest goes up, you will have a bigger budget deficit next year, and until you start paying it off, it will keep escalating...

I am not sure how your national debt works, but here, parts are made up of people putting in their life savings, and other parts are borrowed from foreign countries. To "forgive the national debt" seems impossible. To simply produce more money until you have paid it off would be possible, but would probably crash your economy rather badly.

[Hostile]

Also keep in mind, no matter how much we get in "debt", almost every country in the world owes us money.

If you're not sure how it works, an easy source is to visit the CIA world fact book at http://www.cia.gov/cia/publications/factbook/geos/us.html#econ . I don't completely know how much of a gap we're really losing over the world economy, but I know it isn't as bad as people say it is. Though, it's necessary for people to do that in order to keep it that way. http://www.cia.gov/cia/publications/factbook/rankorder/2001rank.html seems like a better comparison to me. Personally, I only see China as the only other power in the world that's really gaining ground. Japan, India and Germany are big, sure, but even increases won't be making them the world's new super power anytime soon.

PS: Canada is only safe until we run out of trees, iago. Then we're taking over! ^.^

[iago]

PS: Canada is only safe until we run out of trees, iago. Then we're taking over! ^.^

I'm not sure about trees, since trees can be regrown in a reasonable time. 

Now oil, on the other hand, your country *might* feel justified in going to war over.  Might!

[Hostile]

Oh, it'll happen. You'll see.

[MyndFyre]

Oh, it'll happen. You'll see.

But in the end you'll thank us!

[topaz]

Also keep in mind, no matter how much we get in "debt", almost every country in the world owes us money.

If you're not sure how it works, an easy source is to visit the CIA world fact book at http://www.cia.gov/cia/publications/factbook/geos/us.html#econ . I don't completely know how much of a gap we're really losing over the world economy, but I know it isn't as bad as people say it is. Though, it's necessary for people to do that in order to keep it that way. http://www.cia.gov/cia/publications/factbook/rankorder/2001rank.html seems like a better comparison to me. Personally, I only see China as the only other power in the world that's really gaining ground. Japan, India and Germany are big, sure, but even increases won't be making them the world's new super power anytime soon.

PS: Canada is only safe until we run out of trees, iago. Then we're taking over! ^.^

That might be because they prefer to be an economic power rather than a nuclear weapons power?

[MyndFyre]

That might be because they prefer to be an economic power rather than a nuclear weapons power?

Canada doesn't exactly strike me as an economic power either....

In fact, they have trees..... and tree-people.

[Rule]

That might be because they prefer to be an economic power rather than a nuclear weapons power?

Canada doesn't exactly strike me as an economic power either....

In fact, they have trees..... and tree-people.

Do a little more research before you make a post like that.  Not only is Canada probably the only country with enough natural resources and the right population to be completely self sufficient, it has the second largest oil reserves in the world (second only to Saudi Arabia), and is the US' largest trading partner.

[MyndFyre]

Do a little more research before you make a post like that.  Not only is Canada probably the only country with enough natural resources and the right population to be completely self sufficient, it has the second largest oil reserves in the world (second only to Saudi Arabia), and is the US' largest trading partner.

(It was a joke..... much like Hostile's joke about us moving in to take over.)

[iago]

Do a little more research before you make a post like that.  Not only is Canada probably the only country with enough natural resources and the right population to be completely self sufficient, it has the second largest oil reserves in the world (second only to Saudi Arabia), and is the US' largest trading partner.

(It was a joke..... much like Hostile's joke about us moving in to take over.)

it may be a joke, but Canadians find it pretty annoying when Americans flaunt their ignorance about our country.  Joke or not, it furthers a fairly un-true stereotype. 

[MyndFyre]

it may be a joke, but Canadians find it pretty annoying when Americans flaunt their ignorance about our country.  Joke or not, it furthers a fairly un-true stereotype. 

Most white Americans also happen to find it annoying when we're told that we killed all the Indians and enslaved all the black people, even though pretty much all of us these days didn't do any of that and for many of us our ancestors didn't do it either. 

You know what we do?  We get over it.

[Joe[x86]]

Do a little more research before you make a post like that.  Not only is Canada probably the only country with enough natural resources and the right population to be completely self sufficient, it has the second largest oil reserves in the world (second only to Saudi Arabia), and is the US' largest trading partner.

(It was a joke..... much like Hostile's joke about us moving in to take over.)

it may be a joke, but Canadians find it pretty annoying when Americans flaunt their ignorance about our country.  Joke or not, it furthers a fairly un-true stereotype. 

We get annoyed when you say eh (I've gotten over it, clearly) and aboot, but you still do it! =p