We all know our national debt is is some bazillion, jillion trillion dollars and our politians talk about a "tax surplus."

My 2 questions. Who do we owe this debt to? And what is the collateral for this debt?

I am really curious of the answers this diverse group of free thinkers will be offerering.

-- Laura (gsend@hotmail.com), February 15, 2001

Answers

The national debt is owned to individuals, businesses, foreigners and foreign countries. (Remember back when OPEC cut back supply and raised prices - mid-70s - what did they do with their excess profits? They bought U.S. treasury notes, which the U.S. had to issue since their cost of operation when up.)

When the U.S. goverment needs money (e.g., running a deficite) they issue government bonds (e.g., U.S. Savings Bonds) or Treasury Notes. On the first, the interest rate is set. On the second, large amounts would be auctioned off to those offering to take the lowest interest rate.

While not backed by collateral, other than the good word of the U.S. government, they are considered to be basically the safest investment in the world. Government bonds are often in the portfolio of retirees even if they might get a better return elsewhere, because they know, come hell or high water, they are going to get their interest payments. It is used as a safe harbor by investors. When the stock market gets nervous, huge chunks of money go into government bonds. When they are ready to get back into the market, they are sold on the open market.

Even if the national debt was paid off, would the government still have to borrow money? Yes, because they can run into periods in which there is not sufficient cash on hand (revenue) to meet immediate expenses. Same thing as saying, loan me $20 until payday and I'll pay you $22 back.

Because of their safe harbor aspect, most economists say it would not be a good idea to completely pay off the national debt, but to pay down a sizeable portion of it. This avoids having to raise additional revenues for the interest payments.

-- Ken S. in WC TN (scharabo@aol.com), February 15, 2001.

Potentially there is NO National Debt. How d'ya like that one? Ever consider the government, on all levels, county on up, might actually be keeping two sets of books? Look on any search engine for the entire phrase "Comprehensive Annual Financial Report" and see what you find. I am not saying this the definite truth, but...?

-- Doreen (animalwaitress@excite.com), February 15, 2001.

Sorry, I forgot to say that the debt is owed to the IMF, and the World Bank; your land, your car and everything you own is security for the National Debt.

-- Doreen (animalwaitress@excite.com), February 15, 2001.

Our national debt is 2 things. 1. The issuance of bonds to whoever buys them (individuals, companies, other nations, etc). 2. The money we borrow from the "Federal Reserve", which is actually a privately owned bank. When the US government does not have sufficient tax money to cover its costs it goes to the Federal Reserve and gets a "loan" from them. So Federal Reserve prints the dollars, loans them the money, and charges interest. Basically, we pay the federal reserve back money collected from taxes, plus interest, because the US Congress gave them the right to print money back in 1914. We could, of course, print our own money but then the bankers wouldn't make any money.

The surplus is the amount over our budgeted US spending. This surplus includes social security and medicare taxes paid. So, there really isn't any surplus as it includes the social security and medicare monies thats owed all of us who paid for it, for our retirement. What is owed for our retirement is NOT included in the national debt.

Scarey isn't it.

-- Stacia in OK (oneclassycowgirl@aol.com), February 15, 2001.

Golly, looks like I need to go back to school. I could have sworn the U.S. government doesn't borrow money from either the IMF or World Bank. It gives them money, at the direction on Congress, which they then loaned out to improvished nations at very low interest rates, which are seldom, if ever, paid back. Sort of like a world welfare program. And golly, I could have sworn the Federal Reserve is not a privately held banking system, but rather an independent government agency, much like the Post Office. If it were privately held, could the President/Congress replace their Chairman every so often at their discretion, as is the case? Their predominant purpose is to loan banks money overnight so they can cover short term shortages of cash (big buck transfers are by wire). Their impact on the economy is hugh since they set the interest rate on those loans, which affects what others pay for loans. And golly, I could have sworn the Federal Reserve doesn't print or coin money, the U.S. Treasury does, even if they are called Federal Reserve Notes, since they are distributed to banks through that system. Look at a Social Security or a tax refund check. Is it a check from the Department of Treasury or the Federal Reserve? And golly, I really thought it was the Treasury Department which issued government bonds and sold t-bills to pay for government expenses. I guess I have just dumbed down over the years.

-- Ken S. in WC TN (scharabo@aol.com), February 15, 2001.

Ken, maybe you should check into the Federal Reserve and their notes some more. Then check who the members are, then check out all of their alignments in world banking. Your faith in the government is a kind of amusing and endearing trait, albeit delusional, in my opinion.') We haven't had real money backed by hard currency in so long it's silly. Remember last year when England sold all of their gold? Why do you think they did that? Who do you think owns it now? The IMF and the World Bank own virtually all the other banks we "trust". Call up your congressman and ask what the collateral is for all of this debt....see if he even knows. Let a smile be your umbrella!!! I'll just watch now.

-- Doreen (animalwaitress@excite.com), February 15, 2001.

I guess I'm naive, being just an old farm boy. Just prefer seeing the glass as half-full. Golly, haven't heard anything about the Tri- Lateral Commission in years. Whatever happened to this sinister organization? Also haven't heard anything (legimite, mainstread reporting) on a One World Government in quite a while. Politics and economics are like religion - one believes what one wants to believe.

-- Ken S. in WC TN (scharabo@aol.com), February 15, 2001.

There was a program on public radio a while back. A caller called in and put a personal perspective on the national debt. It went like this.

One billion $ is a thousand million

For the sake of easy figuring the population of the USA is approx 250 million.(I know its a little more but so what)

For every Billion $ of debt then each person owes $4.

A trillion $ is a thousand billion

For each trillion $ of debt each person owes $4000.

The current debt is approx 5.7 trillion $

5.7 x 4000= $22,800/person in the household This is just the principal of the debt. I don't recall off-hand how much the interest is but its one of the largest budget items in the national budget, second only I think to defense.

Thats why I'd like to see the budget surplus ALL go to paying down the debt. Its a huge monkey on our collective backs and the sooner we get rid of it the sooner we can have a real tax cut that doesn't prolong the debt servicing.

-- john leake (natlivent@pcpros.net), February 15, 2001.

Good News, that national dept is owed to me!!!Well a little bit anyway. We have our IRAs in good old us govt bond funds. From a taxpayers point of view I think the national dept is a disgrace.Thanks to good old Reagan who somehow managed to turn his theory of smaller govt and trickle down theory into the biggest national debt on record.Now before that debt is even paid off we're going to do another reagan type tax cut to stimulate the economy. Now thats not how I run my finances. I wonder if the geniuses ever thought that paying off the national dept, thus lowering competition for borrowed money,thus lowering interest rates, might just stimulate the economy. Ever think what a 5 or 6 % home loan might do for the economy. Best move we ever made was eliminating debt from our lives. It took some sacrifice but is sure worth it in the long run. Of course that might delay that instant gratification that america is so used to.

-- jz (oz49us@yahoo.com), February 16, 2001.

Reagan's increased national debt, as approved by Congress, came at a time when the government wasn't running a surplus. What it eventually did was to bankrupt, not the U.S., but the Soviet economy. Reagan used part of the increasing national debt on defense programs, particular Star Wars. In order to try to keep up, the Soviets had to put a disproportional amount of their national budget into defense, until finally everything fell apart. It was economics, not politics, which ended the cold war.

There are two basic branches of economists. Monetarist (sp?) and Fiscialist.

Although some will claim, with some logic, there is only one monetarist, and he is Alan Greenspan, their belief is the economy is best adjusted through the prime rate. In times of economic slowdown, you lower interest rates. In times of runaway inflation, you increase increase rates. The impact is almost immediate.

Fiscalist believe the economy is best adjusted through fiscal policy, such as a tax cut or increasing or decreasing federal spending. However, here, the impact may not be felt for several years. Paying down the national debt would also be a fiscal policy.

These economic branches somewhat work at cross purposes. Somewhat like my having two cow calf pairs in a separate paddock. One I'd like to slim down (paying down the national debt) while the other I'm trying to fatten up (lowering the prime rate).

Look at a first time $80,000 house buyer who used all of their available resources for a $5,000 down payment. When they move in they have basically only portable resources (vehicles, clothing, furniture, etc.), yet are technically $75,000 in debt, yet, on paper, they own an $80,000 asset.

Someone in an earlier post mentioned government agencies running two sets of book, which is true. One set is the fiscal budget of revenue versus expenses. The other is basically a business-type balance sheet where assets are compared to liabilities, with the difference being net worth. What is the net worth of the U.S. goverment when assets are compared to their liabilities (social security, medicare, the national debt, etc.)? What is the market value of the literally millions and millions acres of land owned by the federal government? What is the market value of all of the equipment, inventory and bases used by the Department of Defense? What is the market value of National Airport in Washington, DC since it would sell as prime, and I mean, prime real estate? What is the fair market value of all of the building and monuments owned by the federal government in Washington, DC? What is the market value of all of the radio frequencies controlled by the FCC? Maybe selling the Capital Building may be difficult, but I would expect there to be active bidding on The White House. What is the market value of the national parks in they were put up for bidding? I strongly suspect on a balance sheet the federal government would be in pretty good condition, which is why a gold standard to back up its money no longer makes sense. When you buy bonds you are basically giving the U.S. government a signiture loan.

-- Ken S. in WC TN (scharabo@aol.com), February 16, 2001.

Ken, your last post is pretty close to reality.

Why don't ya'll take a peek at this article then come back and tell me what you think.

http://www.whatreallyhappened.com/ARTICLE2/doodoo.html

-- Laura (gsend@hotmail.com), February 16, 2001.

The full faith and credit of the people of the united states, is what guarantees the debts of the U.S. will be paid. Full faith and credit=everything that I own or will ever own, and all that I can ever hope to borrow. That is what it has been agreed that I will (do) have at risk. I did not do the agreeing, but some politician did. So if I can not hope to ever escape from this debt, then am I not a SLAVE? It seems that way to me.

-- Ed Copp (OH) (edcopp@yahoo.com), February 16, 2001.

Laura, Good article! (whatreallyhappened.com article...) whew! Makes me want to buy more precious metals. Their price, incidently, is being pressured lower today. two fifty something for gold, four fifty some for silver. Makes you think, when you read that part about the elevator guy having some kind of inside track... it's like using your intuition to play blackjack versus counting card values to play blackjack. Everybody likes to think they've got some kind of inside track, or that THEY have a SYSTEM, but in reality, it takes real time, and real work to succeed in investments. I guess that's why Solomon indicated we would do well to diversify. Anyway thanks for the link.

-- Action Dude (theactiondude@yahoo.com), February 17, 2001.

If you want to know about this country's money, get the book "The Creature from Jekyll Island" by G. Edward Griffin. It will really open you eyes about the national debt and the Federal Reserve.

Mary

-- Mary in East TN (barnwood@preferred.com), February 17, 2001.