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National debt:game

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chad7405
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Post: #1
Cool  National debt:game

In this game, how much debt is too much before citizens start getting upset? I've heard 200-300% from a couple people, I was hoping Sheep or Helsworth or someone familiar with the specific numbers could tell me the max Debt:GDP ratio before people get uneasy. thumbdown

11.12.2013 23:19
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TyPin
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Post: #2
RE: National debt:game

300%

11.12.2013 23:34
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TheLastShah
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Post: #3
RE: National debt:game

Watch out. This rule (200-300%) is bidirectional - so it is not only negative debts but also positive debts Wink (Actually this sucks, but it effectively prevents exploiting power-states)


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12.12.2013 00:22
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Helsworth
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Post: #4
RE: National debt:game

Indeed. At 300% debt to GDP ratio, things are pretty much over for the regent - unless he/she has stored many action points to do reforms such as: liberalism or anarcho capitalism and privatized healthcare.

Of course, the populace being turned off by that debt figure is purely an arbitrary decision of the game matrix. In real life, if you'd live in an economy that's working at full employment, with virtually no crime, shadow economy, or corruption. With more than adequate infrastructure, health services, standard of education, human rights and equality of opportunity... one wouldn't give a crap about the public debt (public debt owed in the country's own currency).

Here's what Thomas Edison had to say about bonds and currency. Though the guy treated his employees badly, the man actually understood money.

In December 1921, the American industrialist Henry Ford and the inventor Thomas Edison visited the Muscle Shoals nitrate and water power projects near Florence, Alabama. They used the opportunity to articulate at length upon their alternative money theories, which were published in 2 reports which appeared in The New York Times on December 4, 1921 and December 6, 1921.

Here, the reporter is quoting Edison:

Quote:
“That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.

“Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost.

“But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good. The difference between the bond and the bill is that the bond lets the money brokers collect twice the amount of the bond and an additional 20 per cent, whereas the currency pays nobody but those who directly contribute to Muscle Shoals in some useful way.

” … if the Government issues currency, it provides itself with enough money to increase the national wealth at Muscles Shoals without disturbing the business of the rest of the country. And in doing this it increases its income without adding a penny to its debt.

“It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people. If the currency issued by the Government were no good, then the bonds issued would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious values of gold.

“Look at it another way. If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper. Why? Because the government is behind them, but who is behind the Government? The people. Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency on Muscle Shoals, instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?”


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This post was last modified: 12.12.2013 10:46 by Helsworth.

12.12.2013 00:27
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chad7405
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Post: #5
RE: National debt:game

TheLastShah Wrote:
Watch out. This rule (200-300%) is bidirectional - so it is not only negative debts but also positive debts Wink (Actually this sucks, but it effectively prevents exploiting power-states)

I knew it works both ways, but i wanted a definitive number (as in 300%) so thanks for confirmation everyone! Prayi27x25

12.12.2013 00:51
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chad7405
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Post: #6
RE: National debt:game

While we're on the topic of the economy: why is my capital shrinking even though i have more investment+imports than exports? I thought capital was Imports of capital+investment in new capital-Exportation of capital out of country. Correct me if my math is wrong and/or why my capital is shrinking... also what is the benefit of capital in ARS anyway?

12.12.2013 02:02
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TheLastShah
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Post: #7
RE: National debt:game

@Helsworth: Nice excursus Smile Daumenhoch


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This post was last modified: 12.12.2013 02:14 by TheLastShah.

12.12.2013 02:14
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Helsworth
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Post: #8
RE: National debt:game

Most of the times, a decline in capital comes from either the effects of certain reforms (like freeland, or bankreform I, or planned economy etc) or task options.
I think these task consequences contributed to that shortfall.
numerous prominents leave the country to indulge in cocaine elsewhere
chad7405 imposes penalty taxes on enterprises at will.
Former CEOs file complaints with international agencies after the nationalization of power companies.


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This post was last modified: 12.12.2013 12:05 by Helsworth.

12.12.2013 11:25
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chad7405
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Post: #9
RE: National debt:game

Helsworth Wrote:
Most of the times, a decline in capital comes from either the effects of certain reforms (like freeland, or bankreform I, or planned economy etc) or task options.
I think these task consequences contributed to that shortfall.
numerous prominents leave the country to indulge in cocaine elsewhere
chad7405 imposes penalty taxes on enterprises at will.
Former CEOs file complaints with international agencies after the nationalization of power companies.

Last question on debt: Is it purchased by federal reserve/central bank? Public bonds if afforded by populace? Does the interest go to(or come from) domestic or foreign hands? That would make a lot more sense to know where the money goes and comes from

12.12.2013 23:56
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Helsworth
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Post: #10
RE: National debt:game

chad7405 Wrote:
Last question on debt: Is it purchased by federal reserve/central bank? Public bonds if afforded by populace? Does the interest go to(or come from) domestic or foreign hands? That would make a lot more sense to know where the money goes and comes from

The game does not give us such information specifically. But given that many regents run huge trade surpluses over the course of many decades, they pile up massive amounts of savings in foreign currency. Even so, if their debt to GDP ratio reaches 300% and above, they're still gonna be in trouble. Evidently, in such circumstance, the government is issuing debt in its currency. In such situation there is no question of sovereign default. Sovereign default is an oxymoron. Alas, the game does not follow this rule. And it also does not respect the sectoral balance equation. As for the interest rate, the higher the debt goes, that will put upward pressure on the rate. In this respect the simulation is not realistic.


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13.12.2013 10:16
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