MONEY MATTERS

In 2011 America had some technical recovery but unemployment continued. But people are not concerned by this they are always talking about budget deficit. This shows how the politicians are not aware of the sufferings of the ordinary man. Politicians rely on the reports of the economic experts who are utterly wrong in their views. They portray America as a large family with a high debt and they feel the country will have a hard pay in repaying the debts. They are wrong in this issue as families have to repay their debts whereas Governments don’t repay their debts; they just have to make sure that their debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became irrelevant as the U.S. economy grew.

When a family borrows money they owe it to someone else whereas the U.S. Government debt is to a large extent, money we owe to ourselves. During the World War II the debt was owned by the tax payers, the people who bought savings bonds. So the debt didn’t make post-war America poorer. The debt didn’t prevent the people from experiencing rise in income and living standards. Even now it is the same to a certain extent. Foreigners hold large claims on the United States but every dollar’s worth of foreign claims on America is matched by 89 cents worth of U.S. claims on foreigners. As foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors.

Governments that are ready to impose higher taxes when the situation arises have been able to live with higher levels of debt. For example, Britain had a debt exceeding 100% of GDP for 81 of the past 170 years. Debt matters but we need to do more to get out of unemployment.

Filed under: Uncategorized by SAJ