If you remember, in 2011, democrats and republicans fought bitterly on the subject of raising the debt limit. Eventually, a higher debt limit was agreed upon. The same thing occurred in early 2013 (January), which, after causing some damage to the reputation of Congress, ended with a raised debt limit. We are quickly approaching the moment where the debt ceiling will have to be raised again, and it could again be used as a weapon to try to forward either party's agenda (ie. one party will refuse to raise the debt limit unless there are spending cuts). This is unfortunate, because it vilifies the concept of governmental debt, an idea which has been used successfully for many years to keep goodwill between countries. Government debt actually helps the world stay at peace. If I loaned my friend $20, I would be loathe to fight him, lest he refuse to pay me back. This concept works on a global scale as well. We owe a large amount of money to China, which means that it is in China's best interests to not go to war with us. The concept of government debt also ensures that every country values the financial stability and prosperity of foreign countries, which leads to a healthier global economy. As citizens, we also should not be very fearful of the massive amount of debt our government owes, because in the worst case scenario (something that is unlikely to occur) the federal reserve could simply print the amount of money necessary to pay off our debts (which would lead to a degree of inflation). Another fact that you rarely hear about through the media is that the US is owed a large sum of money by other countries. A treasury survey "measured the value of U.S. holdings of foreign securities at year-end 2010 of approximately $6.8 trillion"1., which lends credence to the idea that countries borrow money from each other and then turn and loan it to someone else, meaning that the net debt of many countries is lower than it would seem. In summary, governmental debt has a positive effect on the world.
1. http://www.treasury.gov/press-center/press-releases/pages/tg1285.ASPX
Kenneth, I really like your post because it puts the idea of national debt that we discussed in class this week in modern context, while also explaining why Hamilton knew national debt was a positive thing in the first place. I understand the point you make about debt leading to a more stable world, and I think Hamilton had that idea in mind as well. However, I am wondering if there is an example in history of when debt owed to another country led to a severe conflict, military or otherwise.
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ReplyDeleteI like the points that you make about debt creating and sustaining peace; the example you provided, "If I loaned..." was unprecedented. Another point to mention, however, would be the limits of debt; there has to be a certain point at which debt is no longer beneficial. Personally, I believe that America would be in a precarious position if we owed too much money to any competing superpower, China being one of them. At some point our economic system would collapse if we were dependent on China, for example, and a result China would seize the opportunity to take our place as the world's dominant superpower.
The idea that Hamilton knew national debt was a good thing seems plausible as @Maya states, but I have to agree with her position that too much debt leads to conflict. I researched it a bit and found that one of the leading causes of the French Revolution was national debt; the French tax system was broken and as result the debt was not getting paid off.
I really like this post. I think that it provides great insight into what it really happening other than what we hear on the news, that the US has ALOT of debt. Knowing that we are also owed money, not just owing money is good to know, and it really backs up the idea of debt creating peace. I think its crazy that an idea thought up many year ago by Hamilton can still be so effectively seen in the world today. Do you think this will always be the case? Or will the debt in one country eventually racks up too much and another country is fed up and does go to war any ways, even if it against their best interest. However, I think that if debt piles up so much, that is just more money owed to that country. But, what, if the one country does borrow too much, can the other country just stop loaning, what will happen then?
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