PDA

View Full Version : Federal debt reduction causes depressions?



Soflasnapper
12-02-2011, 06:56 PM
Many people might be surprised to learn that on several occasions, the debt of the federal government was significantly reduced, and up to nearly eliminated.

This goes against stereotype, whereby government is always bloated, always growing its debt, and always f-ing up, but it happens to be true, however that has happened.

What is perhaps more shocking than that data is that in every case where the federal government has reduced national debt, a depression has developed.

1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.

1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.

1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.

1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.

1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.

1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

Note, these figures came from a Bloomberg website commenter from today. I have not independently checked them, but remember the general theme from prior reading in the past.

Not to forget that sometimes correlation does not indicate causation, is there any reason to think the one causes the other?

Well, yes, because in our fractional reserve banking system, debt is money, so reducing the federal debt would have the effect of reducing the money supply, broadly defined.

And reducing the money supply, or even more mildly, increasing the costs of borrowing by jacking up interest rates, which thereby reduces borrowing (anything costing more will be less bought), is the classic way to induce a recession or depression.

Note also, back in these days the preferred term was 'panic.' So you'll not find these economic downturns called depressions, necessarily, but 'panics' were tantamount to depressions.

cushioncrawler
12-02-2011, 07:21 PM
I am thinking that debt reduktion duznt allways havta correlate with depression.
But were they depressions??? -- probly mostly just bankruns.
Probly very short lived -- probly eezyly came good by themselves.

But makes me think -- what if the usofa had (woz sitting on) a giant surplus, ie for many many years, ie up to today -- would it be likely that bizness woz booming today????

Or -- would it be likely that the usofa woz in depression today????

Will we one day see Congress argueing about surplus reduktion.
mac.

cushioncrawler
12-02-2011, 07:29 PM
Many people might be surprised to learn that the usofa haz been in a recession or a depression on many many occasions -- and that thems years outnumber the other years.

But truth be known a proper analysis would show that the usofa haz never been out of recession.
mac.

Soflasnapper
12-02-2011, 07:34 PM
That's the corollary thesis.

That if the federal government runs much of a surplus (which it has to, to retire debt on a net basis), THAT causes the depression, by taking too much from the economy and its productive factors, to a static holding by the government.

A sobering rebuke to the 'pay off the national debt' and 'reduce the deficit to zero' advocates, who simply do not know what they are asking for (as an end result).

Very basic macroeconomic 101 equations imply exactly this.

And here's another history lesson: what the Reagan tax rate cuts were designed to prevent was huge surpluses to the federal government, which were in prospect had the prior tax regime been kept in effect. For among other reasons, the lack of inflation-adjustment to the tax brackets created so-called 'bracket creep,' in which people who were barely keeping up with the then-high inflation (or weren't keeping up with the inflation) nonetheless kept getting higher and higher tax rates.

Reagan's indexing of the brackets to inflation was one of the most sensible parts of his program, which I supported, although the estimate of the cost to the government this caused was (at that time) about $45 billion a year lost revenue.

As for the rest of his program, it apparently overshot the mark, and while true, it did prevent massive accumulations of surpluses to the federal government, given the monetary and fiscal policies of the day, it created about as much in deficits and additional debt as it was supposed to prevent in governmental surpluses.

LWW
12-03-2011, 03:49 AM
Next up from the statists ... weight loss causes obesity.

LWW
12-03-2011, 04:39 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.

1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.

1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.

1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.

1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.

1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.</div></div>

Your depression on 1819 actually began in 1815, and between 1811 and 1816 US debt rose from $48,005,587.76 to $127,334,933.74 ... an increase of 265%. It was preceded by a recession in 1812. It was brought about by massive inflation from gubmint money printing. It ended in 1921 followinf a 29% reduction in debt.

Debt did fall between 1880 and 1893, but that did not cause a recession. What did was the state's intervention in the economy which led to overbuilding of railroad lines. This led to a collapse of the Reading Railroad ... which led to other railroads cutting back rail laying ... which led to a precipitous fall in the iron and steel industries ... which led to flight of Euro investors ... which led to a run on gold.
The depression of 1857 had zero to do with debt and was caused by the collapse of the Ohio Life Insurance and Trust Company, which caused Euro capital to flrr the country.

US debt did not fall by 27% between 1867 and 1873 as you claim, although it did fall by 16%.

That being said, the problems arose long before that and this depression was preceded by the recession of 1860-61, the recession of 1865-67 and the recession of 1869-1870. Following the 1857 US debt driven debacle, US debt again rose ... this time from $28,699,831.85 in 1857 to $2,234,482,993.20 at the start of the 1873 depression. That was roughly a 7,000% increase!

Yes debt fell from 1920 to 1930. What yo deceitfully leave out is that between 1915 and 1919 US debt rose from $3,058,136,873.16 to $27,390,970,113.12 ... a 795% jump. This caused the depression of 1920-21, the recession of 1923-24, and the recession of 1926-27 and helped cause the great depression of 1929-1933.

FDR expanded US debt from $22,538,672,560.15 in 1933 to $48,961,443,535.71 before the start of WWII. This briefly masked the economic devastation, but brought us the second wave of the great depression lasting from 1937 to WWII.

In closing, it is painfully obvious that your house of cards argument was built from a pack of lies ... the only remaining question being whether you were devious enough to invent them, or if they were spoon fed to you?

<span style='font-size: 11pt'>OH DEAR! (http://en.wikipedia.org/wiki/Us_recessions)</span>

<span style='font-size: 14pt'>OH MY! (http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo1.htm)</span>
<span style='font-size: 17pt'>LEAPING LIZARDS! (http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo2.htm)</span>

<span style='font-size: 20pt'>GREAT LENIN'S GHOST! (http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo3.htm)</span>

Next myth please?

cushioncrawler
12-03-2011, 05:33 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">US debt did not fall by 27% between 1867 and 1873 as you claim, although it did fall by 16%.
That being said, the problems arose long before that and this depression was preceded by the recession of 1860-61, the recession of 1865-67 and the recession of 1869-1870. Following the 1857 US debt driven debacle, US debt again rose ... this time from $28,699,831.85 in 1857 to $2,234,482,993.20 at the start of the 1873 depression. That was roughly a 7,000% increase!</div></div>Dubb -- This iz hard to swallow.
Nowadays a 7,000% inkreec would leed to civil war.
mac.

LWW
12-03-2011, 07:13 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: cushioncrawler</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">US debt did not fall by 27% between 1867 and 1873 as you claim, although it did fall by 16%.
That being said, the problems arose long before that and this depression was preceded by the recession of 1860-61, the recession of 1865-67 and the recession of 1869-1870. Following the 1857 US debt driven debacle, US debt again rose ... this time from $28,699,831.85 in 1857 to $2,234,482,993.20 at the start of the 1873 depression. That was roughly a 7,000% increase!</div></div>Dubb -- This iz hard to swallow.
Nowadays a 7,000% inkreec would leed to civil war.
mac.
</div></div>

In large part, it did.

Between 1857 and the start of the US Civil War the US debt more than tripled.

The reason being that congress, controlled by southern demokrooks, kept reducing tariffs ... then the main source of federal income.

This made economic growth for the slave based southern economy which needed to import nearly everything other than agriculture items.

It also hammered the industrial north which was harmed by cheap imported goods ... sound familiar?

The new congress elected in 1860 raised tariffs, effective immediately in 1861, which led to southern members of congress to resign.

Looking in the rear view mirror ... this was probably the point at which war became inevitable.

OH MY GOODNESS! (http://www.jstor.org/pss/1840850)

SOFA CRINGES ... EL DUB DUB HAS ACTUAL FACTS! (http://en.wikipedia.org/wiki/Us_civil_war)

Gayle in MD
12-03-2011, 10:02 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">That's the corollary thesis.

That if the federal government runs much of a surplus (which it has to, to retire debt on a net basis), THAT causes the depression, by taking too much from the economy and its productive factors, to a static holding by the government.

A sobering rebuke to the 'pay off the national debt' and 'reduce the deficit to zero' advocates, who simply do not know what they are asking for (as an end result).

Very basic macroeconomic 101 equations imply exactly this.

And here's another history lesson: what the Reagan tax rate cuts were designed to prevent was huge surpluses to the federal government, which were in prospect had the prior tax regime been kept in effect. For among other reasons, the lack of inflation-adjustment to the tax brackets created so-called 'bracket creep,' in which people who were barely keeping up with the then-high inflation (or weren't keeping up with the inflation) nonetheless kept getting higher and higher tax rates.

Reagan's indexing of the brackets to inflation was one of the most sensible parts of his program, which I supported, although the estimate of the cost to the government this caused was (at that time) about $45 billion a year lost revenue.

As for the rest of his program, it apparently overshot the mark, and while true, it did prevent massive accumulations of surpluses to the federal government, given the monetary and fiscal policies of the day, it created about as much in deficits and additional debt as it was supposed to prevent in governmental surpluses.



</div></div>

IOW, it failed? Reaganomics FAILED.

Bush's Ownership society, FAILED.

Do you think Bernake should be fired?

Here is an interesting article.....I'd like your take on it.
IMO, nothing that happened long ago in our economic past, relates to the circumstances of today, which, IMO&lt; are completely different, given the global changes, and the shadow market, which is more corrupt than ever before.

Given the top CEO's have enjoyed a 300% higher increase of wealth, (the latest figures) while everyone else is losing the economic battle, how the hell can Republicans block the payroll tax cut for the Middle Class, and continue to suggest that the top one percent, pay their fair share of income taxes?

http://crooksandliars.com/richard-rj-eskow/greatest-hoax-history-money-fed-b

G.

Soflasnapper
12-03-2011, 10:07 AM
I already said I wasn't vouching for the numbers, and stated my source (a post in comments on Bloomberg).

Dates off, math off, creates doubt, but there are sound dates and sound math for exactly this claim when modified.

But speaking of math off, you do not know how to state increases.

In particular, when you start with a figure for the debt, that is 100% of the number, and if the debt later achieves 265% of the original figure, the INCREASE is 165%, not 265%

You always make this error, and therefore enjoy considerable deserved doubt whenever you try to show your work in arithmetic calculation. You seem innumerate.

Here's one example you may recognize:

between 1811 and 1816 US debt rose from $48,005,587.76 to $127,334,933.74 ... an increase of 265%.

No, that's incorrect. The approx. $79 million increase is not 265% of $48 million, but 165% of that figure. The increase then is 165%, attaining a final figure that is 265% of the original starting point, by adding a 165% increase to the original 100%.

This innumeracy infects all your numbers, which all are overstated for this reason.

sack316
12-03-2011, 10:12 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">Many people might be surprised to learn that on several occasions, the debt of the federal government was significantly reduced, and up to nearly eliminated.

This goes against stereotype, whereby government is always bloated, always growing its debt, and always f-ing up, but it happens to be true, however that has happened.

What is perhaps more shocking than that data is that in every case where the federal government has reduced national debt, a depression has developed.

1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.

1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.

1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.

1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.

1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.

1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

Note, these figures came from a Bloomberg website commenter from today. I have not independently checked them, but remember the general theme from prior reading in the past.

Not to forget that sometimes correlation does not indicate causation, is there any reason to think the one causes the other?

Well, yes, because in our fractional reserve banking system, debt is money, so reducing the federal debt would have the effect of reducing the money supply, broadly defined.

And reducing the money supply, or even more mildly, increasing the costs of borrowing by jacking up interest rates, which thereby reduces borrowing (anything costing more will be less bought), is the classic way to induce a recession or depression.

Note also, back in these days the preferred term was 'panic.' So you'll not find these economic downturns called depressions, necessarily, but 'panics' were tantamount to depressions.
</div></div>

So Bush with his blank check congress and unnecessary wars was saving us from a depression? Coolio! /forums/images/%%GRAEMLIN_URL%%/wink.gif

But seriously, I think as with all things it comes down to some form of balance. Obviously we could go to one extreme and eliminate the national debt by cutting all government spending out completely... but of course we'd fall into chaos. Or the other extreme, and spend spend spend spend spend spend spend spend spend spend... and well we've seen what further problems an unchecked and unsustainable debt situation can cause both here and abroad.

Also causal, years ending in 3, 7, or 9 tend to be depression or panic years /forums/images/%%GRAEMLIN_URL%%/wink.gif

Interesting post, as usual sofla. I kid on some of my replies, of course. But you're really one of the best posters on here. Always informative, friendly, and willing to discuss with an open mind on topic.

Sack

cushioncrawler
12-03-2011, 03:26 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: sack316</div><div class="ubbcode-body">....But seriously, I think as with all things it comes down to some form of balance. Obviously we could go to one extreme and eliminate the national debt by cutting all government spending out completely... but of course we'd fall into chaos. Or the other extreme, and spend spend spend spend spend spend spend spend spend spend... and well we've seen what further problems an unchecked and unsustainable debt situation can cause both here and abroad......Sack </div></div>Sack -- No.
No, the usofa karnt spend spend spend spend spend spend spend -- it taint possible.

Mackenomix 101.
It iz impossible to spend too much.
When u hav full employment u hav reeched the limit of spending.

If mac were king there would be no limit on the deficit -- koz, there would be no need -- koz, there iz allways a limit on the deficit -- full employment.
The only way u kood spend more than the limit iz to hav inflation (ie wage rizes - eezyly stopped) and to hav inkreeced imports (eezyly stopped).
mac.

cushioncrawler
12-03-2011, 03:29 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">.....But speaking of math off, you do not know how to state increases. In particular, when you start with a figure for the debt, that is 100% of the number, and if the debt later achieves 265% of the original figure, the INCREASE is 165%, not 265%...</div></div>U see it all the time.
mac.

sack316
12-03-2011, 10:36 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: cushioncrawler</div><div class="ubbcode-body">Sack -- No.
No, the usofa karnt spend spend spend spend spend spend spend -- it taint possible.

Mackenomix 101.
It iz impossible to spend too much.
When u hav full employment u hav reeched the limit of spending.

If mac were king there would be no limit on the deficit -- koz, there would be no need -- koz, there iz allways a limit on the deficit -- full employment.
The only way u kood spend more than the limit iz to hav inflation (ie wage rizes - eezyly stopped) and to hav inkreeced imports (eezyly stopped).
mac. </div></div>

In Mac's land there could be no government employees. No military. No public schools. No highway construction. No garbage pickup. Etc.

Well, actually you could to a point... up to and including the moment where your limit (full employment) is reached. But those poor folks who did draw their checks from working for gov't could not collect retirement or have continued benefits when their career is done.

And we shall hope population numbers remain stagnant... that would really throw the Mac-o-nomic system into trouble!

But yes, for that one brief moment where there is that desired balance in all factors, it would be a perfect system. Which, I must admit, in and of itself accomplishes more than any other system ever has /forums/images/%%GRAEMLIN_URL%%/wink.gif

Sack

cushioncrawler
12-04-2011, 01:28 AM
Sack -- I wouldnt say a balance in all factors.
The gov would continue to do anything it thinx it shood do.
There would be full employment.
All retirees would be funded ok.

Zero population growth would be good -- but i would do much better -- population shrinkage.
Everyone would thusly be doubly much better off -- financially i mean. Plus of course flora and fauna would be better off.
mac.

Qtec
12-04-2011, 01:56 AM
The Q is, is just he ignorant or being deliberately dishonest?

Q

LWW
12-04-2011, 04:04 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">The Q is, is just he ignorant or being deliberately dishonest?

Q </div></div>

Let that one live.

Qtec
12-04-2011, 06:06 AM
Its one of the two. Either way, you come out bad. LOL

Q

Gayle in MD
12-04-2011, 06:11 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">The Q is, is just he ignorant or being deliberately dishonest?

Q </div></div>

Both!

Same is true of Eg.

phonesystems
12-04-2011, 11:33 PM
People do suffer from depression when they go banckrupt!!!

cushioncrawler
12-05-2011, 01:34 AM
Banks do suffer from bankruptcy when they go depression.
mac.

Gayle in MD
12-05-2011, 12:32 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: phonesystems</div><div class="ubbcode-body">People do suffer from depression when they go banckrupt!!! </div></div>

I'm sure they do, and I feel sorry for anyone who does have to declare bankruptsey.

I have never had to suffer such consequences, but then, I have been very lucky in my life, unlike many others, many of whom were exploited by crooks.

G.

"Ronald Reagan proved that deficits don't matter"
Dickhead Cheneycrook

Soflasnapper
12-05-2011, 01:37 PM
From the likely original source, one professor, Frederick Taylor (then-professor of Public Administration at George Washington University), who wrote the following in the Washington Spectator, 1996:

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> In "Do Balanced Budgets Cause Depressions?" (The
Washington Spectator, 22:1, January 1, 1996, pp.2-3),
Frederick C. Thayer refers to "the consistently
startling historical record. ... The following
paragraphs include all the basic data:

"1817-21: In a period of five consecutive years, the
national debt was reduced by 29%, to $90 million. the
first acknowledged major depression began in 1819.

"1823-36: In a period of 14 consecutive years, the
national debt was reduced by 99.7%, to $38,000, a
virtual wipeout. This didn't help either. A major
depression began in 1837.

"1852-57: In a period of six consecutive years, the
national debt was reduced by 59%, to $28.7 million. A
major depression began in 1857.

"1867-73: In a period of seven consecutive years, the
national debt was reduced by 27%, to $2.2 million. A
major depression began in 1873.

"1880-93: In a period of 14 consecutive years, the
national debt was reduced by 57%, to $1 billion. A
major depression began in 1893.

"1920-30: In a period of 11 years, the national debt
was reduced by 36%, to $16.2 billion. The sixth real
depression --the Great Depression--began in 1929.</div></div>

Apparently, your reply was in error when stating the depression of 1819 began in 1815, and it surely ended a little bit before 1921, as you wrote, probably a typo meaning 1821, surely!

Please describe the 'state intervention in the economy' that led to overbuilding railroad lines. That was the private sector in a classic boom/bust cycle, wasn't it? Admitting the truth is good for your soul my friend!

As for your overheated claim that I made 'an argument' 'out of a pack of lies,' no, neither is true. Everything I said is true, and I really let the facts speak for themselves, originally, making no argument at all, but simply listing these repeated coincidences, which the original author calls the 'consistently startling historical record.'

It is both the historical record, and consistent, and therefore startling, all true, even if there is some explanation.

As for leaving things out, that would be you, leaving out the various wars that caused the accumulation of debt, typically.

And of course, in the most blatant example, after Andrew Jackson paid off debt and got the Bank of the US ended, the bankers directly bragged about the depression they caused the country, in retribution, and as also another way to get the country back in debt, of course.

How can the bankers earn their interest? Either cause great borrowing for outright war, or preparation for war, or cause great borrowing from depression of the economy. Fairly simple concept.

cushioncrawler
12-05-2011, 03:01 PM
All in all banx uzually do very very well out of most depressions.
It iznt hard to find articles about this stuff -- in theze articles u will find that banx = jews and jews = banx.
mac.

LWW
12-05-2011, 03:59 PM
And there we have it, the left's old standby ... the Jews.

cushioncrawler
12-05-2011, 06:03 PM
Bank + depressions + foreclosures = rich jews.

I havnt got anything gainst jews -- except their Godma -- but thats the way things were dunn back then.
Wouldnt happen nowadays i am sure.

I must find that original old article i had from the usofa bout this sort of stuff, ironikally written in about early 1929 i think.
mac.

I might find it while i am digging around in my heap of leftover plyski and lumberski while i am building my DIY-ply-nesting-sectionable-outrigger-pole'puntski.
In a week or two this lil' pole'**** will be poling hiz pole'puntski around the local lake and catching 3lb rainbows with hiz 7m fishing pole. This iz gonna be a great summer.

The puntski will look a lil'bit not'muchski like this kayakski.
http://i1035.photobucket.com/albums/a432/cushioncrawler/punt/sp-9-s.jpg