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Tuesday, December 7, 2010

Will Cheney Face Jail Time?


Debate regarding a "danger level" of debt


Economists debate the level of debt relative to GDP that signals a "red line" or dangerous level, or if any such level exists. Economists Kenneth Rogoff and Carmen Reinhart reported in January 2010 that 90% of GDP represents this danger level.[88] Reinhart testified to the U.S. Senate in February 2010, stating:[89]
Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes. Above 90 percent, median growth rates fall one percent, and average growth falls considerably more. In addition, for emerging markets, there appears to be a more stringent threshold for total external debt/GDP; when external debt reaches 60 percent of GDP, annual growth declines by about two percent and for higher levels, growth rates are roughly cut in half. Seldom do countries simply 'grow' their way out of deep debt burdens.
Economist Paul Krugman disputed the existence of a solid debt threshold or danger level, arguing that low growth causes high debt rather than the other way around.[90] He also points out that in Europe, Japan, and the US this has been the case. In the US the only period of debt over 90% of GDP was after World War II when "when real GDP was falling, not because of debt problems, but because wartime mobilization was winding down and Rosie the Riveter was becoming a suburban housewife."[91] Fed Chair Ben Bernanke stated in April 2010:[92]
Neither experience nor economic theory clearly indicates the threshold at which government debt begins to endanger prosperity and economic stability. But given the significant costs and risks associated with a rapidly rising federal debt, our nation should soon put in place a credible plan for reducing deficits to sustainable levels over time.
There is also a second debate regarding whether debt held by the public (a lower amount) or gross debt (a larger amount) is the appropriate measure to use in evaluating the debt burden, measured as a percent of GDP. Krugman argued in May 2010 that the debt held by the public is the right measure to use, while Reinhart has testified to the President's Fiscal Reform Commission that gross debt is the right figure. Certain members of the Commission are focusing on gross debt.[90] The Center on Budget and Policy Priorities (CBPP) cited research by several economists supporting the use of the lower debt held by the public figure as a more accurate measure of the debt burden, disagreeing with these Commission members.[93]
This second debate relates to the economic nature of the intragovernmental debt that represents the difference between the two debt figures. As of April 30, 2010 the public debt was $8.4 trillion (59% GDP) and the gross debt was $12.9 trillion (90% of GDP), using a $14.3 trillion GDP estimate. The difference is the $4.5 trillion intra-governmental debt, mainly represented by the Social Security Trust Fund.[94]
For example, the CBPP argues:[93]
Debt held by the public is important because it reflects the extent to which the government goes into private credit markets to borrow. Such borrowing draws on private national saving and international saving, and therefore competes with investment in the nongovernmental sector (for factories and equipment, research and development, housing, and so forth). Large increases in such borrowing can also push up interest rates and increase the amount of future interest payments the federal government must make to lenders outside of the United States, which reduces Americans’ income. By contrast, intragovernmental debt (the other component of the gross debt) has no such effects because it is simply money the federal government owes (and pays interest on) to itself.
Current projections indicate the lower debt held by the public figure will hit 90% of GDP by 2020.[95]





  • 88   ^ NBER Digest-Growth in a Time of Debt-Reinhart and Rogoff-May 2010




  • 89   ^ Reinhart Testimony to Senate-February 2010




  • 90   ^ a b Paul Krugman-Bad Analysis at the Deficit Commission-The Conscience of a Liberal Blog-May 2010




  • 91   ^ Krugman, Paul (March 12, 2010). "Debt And Transfiguration". The New York Times. http://krugman.blogs.nytimes.com/2010/03/12/debt-and-transfiguration/. 




  • 92   ^ Speech before the National Commission on Fiscal Responsibility and Reform-April 2010




  • 93   ^ a b Center on Budget and Policy Priorities-Recommendation That President’s Fiscal Commission Focus on Gross Debt Is Misguided-May 2010




  • 94   ^ Treasury Direct-Monthly Statement of Public Debt of the United States




  • 95   ^ The Fiscal Times-Alarming Gross Debt Sparks Fiscal Commission Debate-May 27, 2010
  • United States Debt ceiling

    The National Debt Clock in late 2009

    The Second Liberty Bond Act of 1917 established a statutory limit on federal debt.[96] Congress had previously approved each debt issuance separately. The debt limit provided the U.S. Treasury with more leeway in the administration of debt, allowing for modern management techniques in government finance.
    The U.S. Treasury Department now conducts more than 200 sales of debt by auction every year. The Treasury has been granted authority by Congress to issue such debt as was needed to fund government operations as long as the total debt (excepting some small special classes) does not exceed a stated ceiling.
    The most recent increase in the U.S. debt ceiling to $14.3 trillion by H.J.Res. 45 was signed into law on February 12, 2010.[97]

    Date Debt Ceiling Change in Debt Ceiling
    June 25, 1940 $49,000,000,000 [98]
    February 19, 1941 $65,000,000,000 $16,000,000,000
    March 28, 1942 $125,000,000,000 $60,000,000,000
    April 11, 1943 $210,000,000,000 $85,000,000,000
    June 9, 1944 $260,000,000,000 $50,000,000,000
    April 3, 1945 $300,000,000,000 $40,000,000,000
    June 26, 1946 $275,000,000,000 -$25,000,000,000
    August 28, 1954 $281,000,000,000 $6,000,000,000
    July 9, 1956 $275,000,000,000 -$6,000,000,000
    February 26, 1958 $280,000,000,000 $5,000,000,000
    September 2, 1958 $288,000,000,000 $8,000,000,000
    June 30, 1959 $295,000,000,000 $7,000,000,000
    June 30, 1960 $293,000,000,000 -$2,000,000,000
    June 30, 1961 $298,000,000,000 [99] $5,000,000,000
    July 1, 1962 $308,000,000,000 $10,000,000,000
    March 31, 1963 $305,000,000,000 -$3,000,000,000
    June 25, 1963 $300,000,000,000 -$5,000,000,000
    June 30, 1963 $307,000,000,000 $7,000,000,000
    August 31, 1963 $309,000,000,000 $2,000,000,000
    November 26, 1963 $315,000,000,000 $6,000,000,000
    June 29, 1964 $324,000,000,000 $9,000,000,000
    June 24, 1965 $328,000,000,000 $4,000,000,000
    June 24, 1966 $330,000,000,000 $2,000,000,000
    March 2, 1967 $336,000,000,000 $6,000,000,000
    June 30, 1967 $358,000,000,000 $22,000,000,000
    June 1, 1968 $365,000,000,000 $7,000,000,000
    April 7, 1969 $377,000,000,000 $12,000,000,000
    June 30, 1970 $395,000,000,000 $18,000,000,000
    March 17, 1971 $430,000,000,000 $35,000,000,000
    March 15, 1972 $450,000,000,000 [100] $20,000,000,000
    October 27, 1972 $465,000,000,000 $15,000,000,000
    June 30, 1974 $495,000,000,000 $30,000,000,000
    February 19, 1975 $577,000,000,000 $82,000,000,000
    November 14, 1975 $595,000,000,000 $18,000,000,000
    March 15, 1976 $627,000,000,000 $32,000,000,000
    June 30, 1976 $636,000,000,000 $9,000,000,000
    September 30, 1976 $682,000,000,000 $46,000,000,000
    April 1, 1977 $700,000,000,000 $18,000,000,000
    October 4, 1977 $752,000,000,000 $52,000,000,000
    August 3, 1978 $798,000,000,000 $46,000,000,000
    April 2, 1979 $830,000,000,000 $32,000,000,000
    September 29, 1979 $879,000,000,000 [101] $49,000,000,000
    June 28, 1980 $925,000,000,000 $46,000,000,000
    December 19, 1980 $935,000,000,000 $10,000,000,000
    February 7, 1981 $985,000,000,000 $50,000,000,000
    September 30, 1981 $1,079,000,000,000 $94,000,000,000
    June 28, 1982 $1,143,000,000,000 $64,000,000,000
    September 30, 1982 $1,290,200,000,000 $147,200,000,000
    May 26, 1983 $1,389,000,000,000 $98,800,000,000
    November 21, 1983 $1,490,000,000,000 $101,000,000,000
    May 25, 1984 $1,520,000,000,000 $30,000,000,000
    June 6, 1984 $1,573,000,000,000 $53,000,000,000
    October 13, 1984 $1,823,000,000,000 $250,000,000,000
    November 14, 1985 $1,903,800,000,000 $80,800,000,000
    December 12, 1985 $2,078,700,000,000 $174,900,000,000
    August 21, 1986 $2,111,000,000,000 $32,300,000,000
    October 21, 1986 $2,300,000,000,000 $189,000,000,000
    May 15, 1987 $2,320,000,000,000 [102] $20,000,000,000
    August 10, 1987 $2,352,000,000,000 $32,000,000,000
    September 29, 1987 $2,800,000,000,000 $448,000,000,000
    August 7, 1989 $2,870,000,000,000 $70,000,000,000
    November 8, 1989 $3,122,700,000,000 $252,700,000,000
    August 9, 1990 $3,195,000,000,000 $72,300,000,000
    October 28, 1990 $3,230,000,000,000 $35,000,000,000
    November 5, 1990 $4,145,000,000,000 $915,000,000,000
    April 6, 1993 $4,370,000,000,000 $225,000,000,000
    August 10, 1993 $4,900,000,000,000 $530,000,000,000
    March 29, 1996 $5,500,000,000,000 $600,000,000,000
    August 5, 1997 $5,950,000,000,000 $450,000,000,000
    June 11, 2002 $6,400,000,000,000 [103] $450,000,000,000
    May 27, 2003 $7,384,000,000,000 [104] $984,000,000,000
    November 16, 2004 $8,184,000,000,000 [105] $800,000,000,000
    March 20, 2006 $8,965,000,000,000 [106] $781,000,000,000
    September 29, 2007 $9,815,000,000,000 [107] $850,000,000,000
    June 5, 2008 $10,615,000,000,000 [108] $800,000,000,000
    October 3, 2008 $11,315,000,000,000 [109] $700,000,000,000
    February 17, 2009 $12,104,000,000,000 [110] $789,000,000,000
    December 24, 2009 $12,394,000,000,000 [111] $290,000,000,000
    February 12, 2010 $14,294,000,000,000 [112] $1,900,000,000,000








  • 96   ^ P.L. 65-43, 40 Stat. 288, enacted September 24, 1917. Currently codified as amended as 31 U.S.C. § 3101.










  • 97   ^ Obama signs debt limit-paygo bill into law










  • 98   ^ http://www.the-privateer.com/usdebt/40-60.html










  • 99   ^ http://www.the-privateer.com/usdebt/61-71.html










  • 100 ^ http://www.the-privateer.com/usdebt/71-79.html










  • 101 ^ http://www.the-privateer.com/usdebt/79-86.html










  • 102 ^ http://www.the-privateer.com/usdebt/87-97.html










  • 103 ^ The Debt Limit: History and Recent Increases










  • 104 ^ http://www.govtrack.us/congress/bill.xpd?bill=hj108-51










  • 105 ^ The Debt Limit: History and Recent Increases










  • 106 ^ http://usliberals.about.com/b/2006/03/17/republicans-raise-us-debt-ceiling-to-9-trillion-caused-by-iraq-war-and-tax-breaks-for-the-rich.htm










  • 107 ^ http://www.govtrack.us/congress/bill.xpd?bill=hj110-43










  • 108 ^ http://www.govtrack.us/congress/bill.xpd?bill=hj110-92










  • 10^ Report to the Secretary of the Treasury










  • 110 ^ http://www.concordcoalition.org/issue-briefs/2009/0813/understanding-federal-debt-limit










  • 111 ^ http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR04314:










  • 112 ^ http://www.govtrack.us/congress/bill.xpd?bill=hj111-45
  • Foreign ownership of Our Debt



    Map of countries by foreign currency reserves and gold minus external debt based on 2009 data from CIA Factbook


    The US debt in the hands of foreign governments was 25% of the total in 2007,[19] virtually double the 1988 figure of 13%.[20] Despite the declining willingness of foreign investors to continue investing in US dollar denominated instruments as the US dollar fell in 2007,[21] the U.S. Treasury statistics indicate that, at the end of 2006, non-US citizens and institutions held 44% of federal debt held by the public.[22] About 66% of that 44% was held by the central banks of other countries, in particular the central banks of Japan and China. In May 2009, the US owed China $772 billion.[23]
    In total, lenders from Japan and China held 44% of the foreign-owned debt.[24] This exposure to potential financial or political risk should foreign banks stop buying Treasury securities or start selling them heavily was addressed in a recent report issued by the Bank of International Settlements, which stated, "'Foreign investors in U.S. dollar assets have seen big losses measured in dollars, and still bigger ones measured in their own currency. While unlikely, indeed highly improbable for public sector investors, a sudden rush for the exits cannot be ruled out completely."[25]
    On May 20, 2007, Kuwait discontinued pegging its currency exclusively to the dollar, preferring to use the dollar in a basket of currencies.[26] Syria made a similar announcement on June 4, 2007.[27] In September 2009 China, India and Russia said they were interested in buying IMF gold to diversify their dollar-denominated securities.[28] However, in July 2010 China's State Administration of Foreign Exchange "ruled out the option of dumping its vast holdings of US Treasury securities" and said gold "cannot become a main channel for investing our foreign exchange reserves" because the market for gold is too small and prices are too volatile.[29]
    The following is a list of the Foreign Owners of U.S. Treasury Securities as listed by the U.S. Treasury:[24]
    Leading Foreign owners of US Treasury Securities (July 2010)
    Nation/Territory billions of dollars percentage
    People's Republic of China (mainland) 846.7 20.8
    Japan 821.0 20.2
    United Kingdom 374.3 9.2
    Oil exporters1 223.8 5.5
    Caribbean Banking Centers2 150.7 3.7
    Brazil 162.2 4.0
    Hong Kong (Special Administrative Region) 135.2 3.3
    Russia 130.9 3.2
    Republic of China (Taiwan) 130.5 3.2
    Grand Total 4065.8 100
    1Saudi Arabia, Venezuela, Libya, Iran, Iraq, the United Arab Emirates, Bahrain, Kuwait, Oman, Qatar, Ecuador, Indonesia, Algeria, Gabon, and Nigeria
    2Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, British Virgin Islands and Panama








  • 19   ^ Just who owns the U.S. national debt? - Answer desk - MSNBC.com








  • 20   ^ Amadeo, Kimberly. "The U.S. Debt and How It Got So Big". About.com. http://useconomy.about.com/od/fiscalpolicy/p/US_Debt.htm. Retrieved 2007-07-07.








  • 21   ^ ParaPundit: Foreign Investment In US Declines With Dollar Decline








  • 22   ^ Analytical Perspectives of the FY 2008 Budget








  • 23   ^ "Retired Military Personnel". Patrick Air Force Base, Florida: The Intercom (publication of the Military Officers Association of Cape Canaveral). June 2009. pp. 4.








  • 24   ^ a b Major Foreign holders of U.S. Treasury Securities (2008), U.S. Treasury Department.








  • 25   ^ BIS says global downturn could be 'deeper and more protracted' than expected - Forbes.com








  • 26   ^ Kuwait pegs dinar to basket of currencies - Forbes.com








  • 27   ^ "Bloomberg.com: Worldwide". http://www.bloomberg.com/apps/news?pid=20601087&sid=ahGpyu4D9xBk&refer=worldwide. Retrieved 2007-11-04.








  • 28   ^ The Associated Press. "IMF takes up gold sales to expand lending". http://www.google.com/hostednews/ap/article/ALeqM5gnGzlhHF6ANMbHrkPv0CNDKo5lJAD9APUM1G0. Retrieved 2009-09-19.








  • 29   ^ "China won't dump US Treasuries or pile into gold". China Daily eClips. 2010-07-18. http://www.cdeclips.com/en/business/fullstory.html?id=47499#. Retrieved 2010-07-18.
  • China holds more U.S. debt than indicated

     This was written back in March , so the numbers are constantly changing.  The following three articles are From Wikipedia, the free encyclopedia   'United States public debt'


    **FILE** U.S. Treasury Secretary Timothy Geithner (left) hosts a meeting of the U.S.-China Strategic and Economic Dialogue with China's Vice Premier Wang Qishan in July at the Treasury Department in Washington. **FILE** U.S. Treasury Secretary Timothy Geithner (left) hosts a meeting of the U.S.-China Strategic and Economic Dialogue with China's Vice Premier Wang Qishan in July at the Treasury Department in Washington.



    Despite recent government reports that China's holdings of U.S. Treasury debt declined during the second half of last year, the Asian economic giant almost certainly owns far more Treasury securities than official statistics indicate.
    After peaking at $801.5 billion, China's holdings of U.S. Treasury securities declined to $755.4 billion at the year's end, dropping the communist power into the position of second-largest holder of Treasury debt after Japan's $768.8 billion, official government data reveal.
    But these numbers don't tell the whole story.
    "The U.S. Treasury data almost certainly understate Chinese holdings of our government debt because [the U.S. figures] do not reveal the ultimate country of ownership when [debt] instruments are held through an intermediary in another jurisdiction," Simon Johnson, an economics professor at the Massachusetts Institute of Technology, told the U.S.-China Economic and Security Review Commission, a bipartisan forum established by Congress in 2000 to monitor the security implications of the U.S. economic relationship with China.
    Mr. Johnson told the commission last week that "a great deal" of last year's $170 billion increase in Treasury holdings by the United Kingdom "may be due to China placing offshore dollars in London-based banks" and then using the funds to purchase Treasury debt.
    Mr. Johnson, a former chief economist for the International Monetary Fund, estimated that China owns about $1 trillion in U.S. Treasury securities, or nearly half the $2.37 trillion stock of Treasury debt held by "foreign official" owners.
    The amount of U.S. debt held by China is even higher than that, said Eswar Prasad, an economist at Cornell University.
    Under the widely held assumption that 70 percent of China's $2.4 trillion in foreign exchange reserves is invested in dollar-denominated bonds, Mr. Prasad told the commission that China probably holds about $1.7 trillion in U.S. government debt.

     That would include the more than $400 billion in debt issued by U.S. government agencies, such as Fannie Mae and Freddie Mac, whose obligations are liabilities of the U.S. government, Mr. Prasad said.
    Derek Scissors, a China scholar at the Heritage Foundation, described as "unusable" the official U.S. government data on foreign holdings of Treasury debt.
    China's mercantilist policies generate "by far the world's largest balance of payment surpluses" and contributed to China's $453 billion increase in foreign exchange reserves last year — surpluses that "are too large to put anywhere other than the United States. No other country has financial markets capable of absorbing them," Mr. Scissors said.
    But the economists at last week's hearing disagreed about how much leverage China's creditor status commands over the U.S.
    Maj. Gen. Luo Yuan told China's state-run Outlook Weekly magazine last month, shortly after the U.S. detailed new arms sales to Taiwan, that China's "retaliation should not be restricted to merely military matters" but also should be "covering politics, military affairs, diplomacy and economics."
    "We could sanction them using economic means, such as dumping some U.S. government bonds," Gen. Luo said.
    Michael Wessel, a member of the U.S.-China commission, began the hearing by noting that China, whose economy expanded by 10.7 percent during 2009, "emerged from the global recession stronger than ever, expecting its status as America's banker to convey new political power."
    "The United States government, with its fiscal and monetary tools constrained by the recession, cannot easily extricate itself from its growing financial dependence on China," he said.
    Leverage, however, works both ways, Mr. Wessel suggested, when he quoted oil magnate J. Paul Getty. "If you owe the bank $100, that's your problem," Getty famously said. "If you owe the bank $100 million, that's the bank's problem."
    Mr. Johnson also downplayed China's leverage.
    "There is a perception that China's large dollar holdings confer upon that country some economic or political power vis-a-vis the United States," said Mr. Johnson, citing the view that Chinese reserves prevent the United States from pressuring China to increase the value of its currency, the yuan, also known as the renminbi. "This view is incorrect and completely misunderstands the situation."
    Daniel Drezner, a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University, compared today's financial situation between China and the U.S. to the Cold War nuclear situation between the Soviet Union and the U.S.
    He argued that the "balance of terror," which was connected with the nuclear policy of mutually assured destruction adopted by both adversaries, proved to be "a source of stability."
    Mr. Drezner approvingly cited the analogy of Lawrence H. Summers, President Obama's chief economic adviser, who earlier coined the phrase "the balance of financial terror" to describe the U.S.-China financial relationship. Such a scary balance, Mr. Drezner told the commission, is "a source of stability and a source of anxiety."
    Economists generally agree that the yuan is 25 percent to 40 percent undervalued, in large part because Chinese authorities instruct the central bank to purchase massive amounts of dollars in order to peg the yuan's value to the dollar at a level much lower than it otherwise would be, Mr. Johnson said.
    A bipartisan coalition in Congress wants the Treasury Department to label China a currency manipulator in its next report, due April 15. Such a designation would require the Treasury Department to begin negotiations with China to let its currency rise in value and reduce the massive U.S. trade deficit with China, which has exceeded $200 billion for each of the past five years.
    Under legislation proposed in Congress, currency manipulation would be designated as an unfair trade subsidy and would let U.S. companies seek import duties on Chinese goods.
    "China is obviously a currency manipulator and should be so labeled by the U.S. Treasury," Mr. Johnson said.
    Mr. Johnson called Chinese threats to dump dollar-denominated assets a "paper tiger" and "at worst a bluff and at best a way to help the U.S. with a depreciation of the dollar."
    Mr. Scissors agreed. "Until the Chinese government is willing to break its dependence on the dollar — which there is not the slightest indication it is willing to do — [China] is compelled to buy American bonds and lacks the flexibility to wield any influence," he said.
    Mr. Johnson said the current U.S. economic situation ensures that a substantial downward movement in the dollar "would have no noticeable effect on inflation and therefore would not force the Federal Reserve to increase interest rates."
    Mr. Prasad, however, noted that the damage to the two countries' economies would not be equal.
    "Any Chinese threat to move aggressively out of Treasuries is a reasonably credible threat as the short-term costs to the Chinese of such an action are not likely to be large," he said.
    Moreover, even though China's share of the financing of the soaring U.S. budget deficit has declined over time, its actions still could affect U.S. interest rates, Mr. Prasad said.
    "Its actions could serve as a trigger around which nervous market sentiments could coalesce," Mr. Prasad said. "Given that there are no clear prospects of reining in exploding deficits and debt in the U.S.," he added, "changes in availability of deficit financing at the margin can have potentially large consequences."
    Mr. Scissors estimated that U.S. interest rates would rise at most three percentage points.
    However, with U.S. national debt set to exceed $14 trillion before the end of the year, a three-percentage-point increase in interest rates would raise the annual cost of paying interest on that debt by more than $400 billion.
    The commission was told that U.S. policymakers also need to consider the geopolitical and national security implications of operating a fiscal policy that depends on China and other foreign creditors, who collectively hold 50 percent of U.S. publicly held debt.
    Clyde Prestowitz, president of the Economic Strategy Institute, recalled for the commission Britain's experience with the United States in 1956 after Britain joined France and Israel in seizing the Suez Canal after Egypt's nationalization of the waterway.
    "President Eisenhower was furious over the seizure of Suez and informed the Brits that America would ruin the pound sterling if Britain did not withdraw," Mr. Prestowitz said. "And that was the end of the seizure.
    "Now, America is not Britain and China is not America," Mr. Prestowitz said. "But if that is how your friends can treat you when you owe them, it is not difficult to imagine that less-friendly states could be quite difficult in certain circumstances."


     1 Comment


     New User 50bf0 says:
    3 months, 1 week ago

    American is not broke. China does not own the U.S. The Federal Reserve Bank is who owes the Chinese. The Federal Reserve Bank is a PRIVATE entity, which we TRUE American's have been trying to get rid of for decades. The Federal Reserve Bank can claim Bankruptcy anytime they want, and they probably will soon, as the Banking System will soon be ALLOWED to fail, as it should be. Then the ONLY thing America will need to do is start manufacturing OUR own products again, then "Happy Days Are here again!" We have the advantage because we have Natural Resources, which China does not. It's really so simple, it's stupid! K.I.S.S. America it's ALL GOOD!