Why does the US borrow so much money?
The US cannot run out of money, we have a fiat currency. Investing in US bonds is one of the safest investments around and our money is backed up by our industrial, agricultural, and scientific output (all of which are immense). I mention this because money is a construct that represents real value. A dollar has no real value, but the time a person spent to cook a burger for you does, just like the grains in the bun have actual value. As long as we keep generating value we will have the money. So far, there is no sign that the US will stop being an economic powerhouse. And, currently, debt is cheap, so cheap that it doesn't always make sense not to borrow.Think about it, if you take out a loan with an interest rate below inflation and invest it in stocks that perform at the average, you will have just made yourself a profit. When the US spends money it is an investment, so as long as the overall ROI is positive (or even neutral), it causes no harm.
USA Debt.... To whom do we owe money too?
We are approaching 20 Trillion in debt obligations and I am assuming we owe most of this to other countries. Would it not make sense to pay our loans with the foreign aid money we already give to other countries. They are still getting their money, but its dressed differently.
How does war generate money?
Entropy gave you a good answer but I will add a bit of explanation. Many Americans believe that war has an economic benefit because the result of World Wars 1 and 2 were to seemingly end our great depression and advance the United States to a short golden age. What many fail to realize is that we became dominant because we emerged from the wars with an intact infrastructure and industrial base. Short explanation is the rest of the world generally bombed theirs to rubble. Our chief competitors before the wars were Europeans and they devastated themselves. Much of the profit we made after the wars was spent to rebuild Europe and Asia. We did that largely to prevent a World War 3. So the reality is that war didn't make us great. Being lucky enough to avoid getting overly damaged in war when no one else managed to do the same, that left us on top when the smoke cleared. We also started out with a huge advantage of ample resources and oceans on two sides separating us from enemies. If there had never been two world wars, the whole world including us would likely be better off today.
Need quick finance answer to this question.?
A firm is planning on paying its first dividend of $2 in three years. After that dividends are expected to grow at 6% per year indefinitely. The stock's required return is 14%. What is the intrinsic value of a share today? A. $25.00 B. $16.87 C. $19.24 D. $20.99 Please show me how to solve it if possible. Thank you
If you could amend the Constitution by adding, changing, or deleting anything, what would you amend?
I would make the following changes: 1. Make English the official language. 2. Make it illegal for all kinds of theocracy. 3. Reduce death row to one year for federal criminals of very harsh crimes. After this one year appeal process, execute them. 4. No federal income tax. Just have a flat tax on all luxuary items. 5. Governement owned and control of the central banks (Federal Reserve). 6. Remove the UN from US soil. 7. Eliminate all foriegn aid. 8. Never let foriegn governments borrow money from the US governemnt. 9. Mandatory population control to bring the USA to 180 million people and keep it there.
Fiscal and Monetary Policy?
Fiscal and monetary policy are used to stimulate the demand side of the economy. However, there is a limit to far these policies can keep the economy growing and the effectiveness in stimulating a declining economy. Monetary policy is controlled by a central bank who set interest rates for which banks can borrow at from the central bank. When interest rates decline, the cost of borrowing from the central bank is lower so banks are more willing to lend money out to consumers and businesses. This extra money causes a combination of inflation and higher output. The problem is this, if the interest rate is near 0 then interest rates can not be made lower to stimulate demand. Fiscal policy is controlled by the government by changing tax rates and spending policy. The idea is that government can give more money to consumers and business by decreasing taxes and increase spending. However, the government can not keep spending more money than it receives by taxes indefinitely. At some point the government has to cut spending. So, the government can not keep protecting an economy, it can only support the economy when it is in a bad state, such as a recession. A recession appears about once every 10 years. So for these years, governments should protect the economy and in the other years increase taxation so that over the economic cycle the budget is balanced. This is the basics of Keynesian economics. Finally the success of monetary and fiscal policy is limited by the people who control them. In the last 10 years there is little evidence to suggest that the FED and US government knew how to manage an economy. Monetary policy should manage the economy so that it is not over stimulated (Greenspan and the FED failed on this count). Government should only intervene by making sure that tax revenues remain high (Bush failed, he cut taxes after the downturn when the economy was growing) and only act to stimulate the economy when the economy is in recession (Bush was too slow and waited till after banks went bust before he did anything). When the economy is in recession the government needs to act quickly and with policies that will have the most benefit (Obama failed to pass through adequate policies and the scale of spending was to small).