Debt Limit For Dummies

At least there is a happy ending. Thank God for children....and children's children so we can kick that can down the road.

It is all the more satisfying to see the White House direct federal agencies to make sure the budget impacts are as bad as they said they would be. Count on negative impacts to be especially focused on Red States.

Anyone else ready for a third party?

How burdensome is our accruing debt due to the Great Depression/New Deal, "Big Wars"?

Well, in 1913 the tax rate for today's equivalent of $463,000 was 1%.

You want to go back in time despite your Oracle's advice not to look back? Let's go back to 1913 with a top Federal Tax Bracket of 7%. Clearly, since debt "doesn't matter" - Then why is the imbecile in the White House so intent to punish success with higher taxes?

Doesn't make any sense to raise taxes if the debt is no problem, does it?
No cuts, no new taxes, just raise the debt limit and spend away. Great plan the Dems have....spend like an NBA player in a strip club.

pdls's , Do you not recall that we are spending 6 trillion dollars in 4 years ? Do you
not understand ? We are 16.7 trillion in debt , the 16.4 stated above was 2 months
ago !!! think about what I just wrote . Buffet was quoted above saying we were
further in after the war compared to GDP !!! Please show us in numbers what the
GDP was after the war compared to debt ? Then show us in numbers the GDP
compared to our debt now ? I await to be taught .

norte back when the USA WAS taxed at thast rate we were not growing . Do you
remember why Johnsen and kennedy asked for reductions to the taxes ? Then the
reductions came and our economies flourished several times over ? Please answer
those questions before you use that stupid comment again !

Saying that the debt doesn't matter defeats the argument for higher taxes just as well as it defeats the argument to cut spending. You can't have it both ways.

Only a simpleton would use a 2 minute fluff piece on Warren Buffett as proof that Obama's failed policies are actually working. Buffett talked more about his McDonalds menu choices and his gas guzzling Caddy than how Obama is spending away our future. How about a follow up question on how he benefitted directly from the obstruction of the Keystone pipeline and how he is pulling the strings on Obama's policies to his economic gain. The old codger is as wily and money grubbing as ever.

"The old codger is as wily and money grubbing as ever."
Those darn capitalists.

norte , so according to the dow we do not have a recession right ? We do not have
money problems right ? We do not have a problem with sequester right ? Like you
said above "You can not have it both ways " !!! Now did you answer my questions yet
? As for buffet he is an old fool that casn make money doing the wrong thing !
Remember his 17% comment on taxes ? I do but he did not inform you of all that he
pays for !!! Think man think !!!

So since the dow is so high and we are doing so well we can give people back some
of their taxes right ? lol.. Why not we are doing great !!!! lol...

""The old codger is as wily and money grubbing as ever."
Those darn capitalists. - MGarber

I give Buffett and Obama credit. Buffett is playing Obama very well to his economic benefit and Obama is using Buffett to advance his political agenda. Typically those types of 'quid pro quo' relationships are frowned upon between corporations and public officials but Obama is given a pass on this illegal activity for some reason.

"So since the dow is so high and we are doing so well we can give people back some
of their taxes right ? lol.. Why not we are doing great !!!! lol... "

A record market with high unemployment should be proof that supply side economics does not work. Especially since the market has been great for as long as unemployment has been high.

Do you even understand how the dow is associated with the economics carl ? You do
realize that last comment you made is very short sighted ? Since you say we are
doing great , lets look at the euro or china and get our fill of how great they are
doing ? I have yet to see the GDP to debt ratio that was commented on earlier !!!

Picture: THINKSTOCK
THE problem with debt is that it has to be repaid; another problem is that debt costs
money.

In the past few financial years, the finance minister has been budgeting for a fairly
large fiscal deficit.

During the 2007-08 financial year, a surplus of R18.3bn, equal to 0.9% of gross
domestic product (GDP), was achieved. However, the good times just wouldn’t last,
and since 2007, state revenue took a huge knock when the international financial
crisis also forced the South African economy into a recession.

Since then, state revenue did improve somewhat but remains below its peak of 27%
of GDP in 2008. State expenditure, however, did not follow a similar trend, with the
resulting deficits; now budgeted for R182bn or 5.2% of GDP for the next financial
year.

"Since you say we are doing great ,"

I never said "we" are doing great. The working class is being being dried on the vine while the fat cats are feasting. Those at the top demand more and more while those at the bottom hope to survive to next payday.

The Fed is printing $85 billion A MONTH...and flooding the market. That is the biggest reason the market is looking "great", thus creating a bubble that appears eerily similar to the housing "boom"....which ended up being the sound we all heard when it was over. I wouldn't invest a single dime right now, that's for sure.

In depth: Budget 2013
News, views and analysis of Finance Minister Pravin Gordhan's 2013 budget
Full budget speech
PDF: Download your own copy of Gordhan's budget speech
The fiscal deficit is the amount of extra debt that the minister borrows to balance the
books of the state and is added to the existing debt pile.
But deficits are not necessarily a problem. If the state borrows less relative to the
size of the economy than the rate at which the economy expands, then the debt-to-
GDP ratio will fall. That means that, although the state’s debt may increase in
nominal terms every time the minister runs a deficit, it does not mean that the
state’s debt as a percentage of GDP will necessarily increase.
But that is not the case in Wednesday’s budget and the previous three budgets,
where the deficit-to-GDP ratio was higher than GDP growth. In the budget, the
deficit is budgeted at 5.2%, which is higher than the expected GDP growth of 2.7%.
The result is that the debt-to-GDP ratio is expected to be more than 40% by the end
of 2013-14. In nominal terms, debt is expected to reach R1,357bn in the coming
financial year, from only R478bn, or 23% of GDP, in 2008. This is a nominal increase
of more than 100% in just six years.

That brings us to the next debt problem: the cost of servicing it. From 1994 to 2005,
the percentage of total state expenditure that was consumed by the cost of debt
varied from a high of 17.1% in 1996 to a low of 10.8% in 2005.
During the same period, the yield on 10-year government bonds ("interest" on debt)
varied between 16.8% and 7.6%. But this "interest rate" on state debt started to fall
only when it became clear that state debt relative to GDP was on a solid downward
trajectory.Additionally, since 2006, the average cost of debt came down markedly
because of other factors, such as better credit ratings, but also because the cost of
capital was intentionally kept low by the world’s central banks. So, despite the state’s
recent rising debt burden, the cost of debt (interest mostly) is expected to consume
only 10% of total state expenditure in the coming fiscal year.
Herein lies the potential danger. Although interest rates are likely to remain low for
quite some time, the day will eventually arrive when central banks will start
tightening monetary policy again. Further, even if central banks keep short-term
interest rates low, longer-term interest rates (which affect most of the state’s debt)
can still increase when inflation accelerates or if there is another credit downgrade.
The last time state debt relative to GDP was in the mid-40% range, 10-year bonds
were trading at between 14% and 17%, which is double the current level.
Therefore, should the cost of capital increase to the previous levels when debt was
at similar levels relative to GDP, the interest component can increase dangerously
rapidly.

“I would be happy to share - "The Secrets of the Temple."”

Are you referring in any way to the book written by William Greider?

I have it on my shelf but haven’t read it yet, is there a part I should pay particular attention to?

At a 10-year bond rate of about 7.5%, the servicing cost of "new" debt will be about
R10bn in the first year. At a yield of 15%, this will double and add additional debt
equal to about 0.3%. In subsequent years, this cost will keep on increasing as old
"cheap" debt is replaced with new expensive debt (in some instances even "old" debt
costs will go up — instruments such as the inflation-linked bonds are an example).
Depending on various factors, South Africa’s state debt levels can potentially
approach 50% of GDP in a matter of three years, in a worst-case scenario.
The state is not facing a debt trap and we still have time to reverse the present
trends that will eventually lead us into financial difficulties. But the danger remains
that the combination of high deficits, low growth and a sudden increase in the cost of
debt can turn a deteriorating picture into a nightmare sooner than expected. It’s
better to be safe than sorry.
• Roodt is chief economist at The Efficient Group.

Now do you understand ? Or should we now talk about our deficet ?

Why don't you just provide the link to the site that you are getting this from WFB instead of copying and pasting the entire article to Hemmer's blog.