Hi!
One more puzzel to breifly explain/resolve:

"Since we just owe the federal debt to ourselves, as long as we have economic
growth, it poses no burden on society."

Thanks,
Pearl

Dear Pearl:

You asked for an resolution of this puzzling statement: "Since we just
owe the federal debt to ourselves, as long as we have economic growth,
it poses no burden on society."

The Federal Debt represents the sum amount of money that the Federal
Government owes us, the people (both as individuals and as companies.)
These are usually in the form of bonds.

The statement says that "as long as we have economic growth, it poses
no burden on society." If the Federal Government owes and continues to
owe us money, how can this be a good thing?

The key is the "economic growth" requirement. Let's pretend that
you're the Federal Government, and that you have borrowed $500 from
your parents (the people.) And let's assume further that you decide to
invest the $500 in your parent's business (our economy). Now, as long
as your parent's business (the economy) continues to grow, the debt
poses no burden either to you (the Government) or your parents (the
people). This is what the statement is trying to say.

There is an website by Steve Conover supporting this point of view,
but of course there are dissenting opinions. I have included links on
both points of view below, on the additional links.

Additional information:

    GrowthDebt.com, a website by Steve Conoversupporting the "harmless
debt" point of view:
    http://web2.iadfw.net/scsr/
 
    A BusinessWeek article against this point of view:
    http://www.businessweek.com/1996/44/b349949.htm


Search Strategy:

    Federal Debt Burden Society 
    ://www.google.com/search?num=100&hl=en&safe=off&q=+federal+debt+burden+on+society

    Gederal Debt
    ://www.google.com/search?num=100&hl=en&safe=off&q=+federal+debt+

    Dmoz Directory: National Debt Issues
    http://dmoz.org/Society/Issues/Economic/National_Debt/

I hope this has answeres your question. If you need any
clarifications, I would be more than happy to assist you further! =)

Best Regards,
blader-ga

I have to disagree with the responder. Federal (US) debt is actually a
good thing, to some degree. As with most things, it is best when
practiced in moderation. As a matter of policy, we should try to make
sure that government debt is reasonable given estimated tax revenues.
However, we should not try to eliminate government debt any more than
we should try to eliminate home mortgages. Both have very significant
economic benefits.

US debt provides a number of benefits to our economy. First, it allows
the Treasury to borrow from the public in order to issue state money.
That $10 bill in your pocket is borrowed against assets owned by other
people and corporations. Back in the 19th century, when money was
backed by actual gold reserves, the "value" of money fluctuated with
the availability (and therefore price) of gold. During this period in
history the gold market was an absolute nightmare and money markets
were just as bad. The cash in your wallet could become worthless
almost overnight. Today, the government might buy corporate stock
instead, but then you and I would have to compete with government
buyers for shares of stock. That would probably be bad for the market.
These days, the Treasury issues money backed by assets loaned to it by
you and me.

This may seem like a shell game but insofar as US tax revenues will
exceed the amount of interest and principle due on the debt that its
really not a problem. I suspect this is where the "as long as we have
economic growth" caveat in your question is meaningful.

An additional benefit of government debt is that it provides the world
with a highly liquid and very low risk investment vehicle. Bonds can
turn over in 30 or 60 days, which means you can have your cash back
very quickly. They don't generate that much interest (just a few
percent) but since they are backed by the US tax revenues you are
virtually garaunteed never to experience a default. In comparison, you
might get twice as much interest on home mortgages but would
experience a 10% default rate.

Hope this was helpful.

It also should be pointed out that not all the federal debt is owed
"to ourselves." A portion of it is held by foreign investors.