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The Politics and Economics Of a U.S. Default
With federal spending in the United States rising to record levels in nominal terms, not to mention as a percentage of GDP, there's a growing amount of commentary suggesting that the U.S. government is bankrupt, and that it will eventually default on its growing debt. Although federal debt has not reached post-World War II levels, unfunded future liabilities that some suggest are in the $100 trillion range have analysts on edge.
In their 2009 book This Time is Different, economists Carmen Reinhart and Ken Rogoff note that defaults are most likely when the debt/GDP ratio (not including unfunded liabilities) rises above 100%. The fact that we have yet to breach 100% has given optimists comfort, along with the fact that the cost of capital for the U.S. Treasury remains low. Mind you, Reinhart and Rogoff add that both Mexico and Argentina have defaulted when their debt/GDP ratios were in the 50% range. At the very least that tells us we're already in the danger zone.
One argument that supports optimism concerning our budget deficits has to do with the historical fact that the U.S. has never defaulted. The problem here is that default as it's traditionally understood is too narrowly defined. If calculated on a currency-value adjusted basis, Washington has short-changed its creditors before and it continues to do so. That has serious economic consequences, because capital flows away from economies where it is penalized rather than rewarded.
If default is thought of in traditional terms whereby investors are simply given a haircut on monies owed, default is less scary, less economically harmful, and internationally commonplace. In such circumstances the currency can remain sound and the damage to lending is not spread to those who are funding the growth of the private economy. As it applies to the United States, there's therefore an argument that an honest default would be better than what we are doing by stealth.
A brief history of defaults. The late Citibank chairman Walter Wriston is famous for saying "Countries don't go bust." His comment in the '80s and now engendered for him a lot of ridicule but, if looked at realistically, what he said was correct.
Indeed, it's rare that a country runs out of resources altogether, and that's no surprise considering the power of taxation that all governments possess. The greater truth is that governments short on funds have produced sophisticated cost/benefit analyses of potential defaults and have historically figured out how to pay back less than what is owed.
As Reinhart and Rogoff note, "most defaults end up being partial, not complete." Indeed, they found that in most cases, "partial repayment is significant and not a token."
Some might believe that militarily powerful countries are most able to secure monies lent to others, but even this is a mistake. As logic would tell us, there's a strong incentive for countries to make good on a large portion of what they owe given their desire to avoid being shut out of capital markets altogether.
Not surprisingly, war considerations have historically served as a strong incentive among countries not to stiff their creditors. Specifically, Reinhart and Rogoff cite England's move to a gold standard in the aftermath of the Glorious Revolution as significantly facilitating frequent accession to the debt markets to fund war with France.
So while serial defaults make the marshaling of war mobilization resources difficult, and as such not a good strategy, wars themselves have often signaled a looming default of another kind through the simple means of devaluation. To Gustav Cassel, devaluation was the only way for governments to pay for wars not supported by taxpayers, and he went on to note that governments in need of a greater share of resources during times of war used devaluation as a tool to make them less accessible to the average individual.
Looking at defaults globally, Greece has spent more than half its years since 1800 in arrears to creditors, Argentina has defaulted three times since 1980 alone, and Venezuela has defaulted ten times since 1830. As Reinhart and Rogoff put it in their book, "repeated sovereign default is the norm throughout every region of the world, including Asia and Europe."
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Sovereign versus domestic default. It is here that things get a little more interesting. While debt is surely debt, there is most assuredly a distinction between monies owed by a country to its citizens and those which are owed to foreign creditors. To put it simply, governments are far more comfortable defaulting domestically than they are internationally, where global capital markets are a major constraint.
Evidence supporting the above claim is provided by Reinhart and Rogoff. While they're not clear about their definition of inflation, in their research they found that inflation rates amid external defaults average 33 percent, while during internal battles with debt, the number spikes to 170 percent. Most notably, but not very surprisingly, they find that external defaults are highly correlative with banking crises.
This also explains why defaults on external debt are such big news. Banking crises are the frequent result of defaults, when countries fail to make good on monies owed to foreign creditors, and that increases the likelihood of "contagion" related to banks in possession of the debt.
Specifically, Rogoff and Reinhart point to the 1994 Mexican "Tesebono" crisis as one that would have gone largely unreported had it not been for global exposure to Mexican debt. Turning to Argentina, though its government defaulted in 1982, 1989 and 2001, the '89 default did not merit international mention because it was the country's citizens - as opposed to foreign banks - that suffered the haircut.
Rogoff and Reinhart found that the creation of the IMF has coincided with "more frequent episodes of sovereign default," and this seems logical due to the IMF's role in making government profligacy somewhat less painful. According to their calculations, investors are compensated for this growing risk with risk premiums "sometimes exceeding 5 or 10 percent per annum."
Of possible interest to those who follow gold, Reinhart and Rogoff found that there was relative banking calm from the 1940s to 1970s. This is hardly surprising when we consider the generally stable money values that prevailed during the years of Bretton Woods. The authors note that banking crises have increased since 1970, but oddly point to a "reduction and removal of barriers to investment inside and outside a country"as the likely culprit.
Perhaps not stressed enough there is Cassel's view that the public tenaciously holds to the belief that a "krona is a krona," and by extension, "a dollar is a dollar," despite the fact that a change in the relationship of currency values to gold is very significant. Global money since 1971 has possessed nothing in the way of intrinsic backing.
That in mind, it should in no way shock us that banking crises have grown in number. Devaluation of money is as much a default as any other, and it has significantly changed the value of debt securities on the balance sheets of banks the world over, with consequences that were surely negative.
Looking at the decline in the value of the dollar versus gold alone since 2001, not only did it promote a flight to hard assets least vulnerable to currency debasement such as housing, but it arguably debased the debt instruments held by banks which enabled the rush to invest in housing. Interest rates on home loans were then (and remain now) low, but the dollar's decline and the resulting crisis among financial institutions is not easy to ignore.
The U.S. has never defaulted? Reinhart and Rogoff observe that the U.S., Canada, New Zealand and Australia have never defaulted in the traditional sense, but they admit that at least the U.S. has defaulted in the form of currency devaluation. Specifically, they mention the abrogation of the gold clause in 1933, which meant that debt paid to American creditors (from 1928 to 1946 the US had no external debt) was repaid in paper currency rather than gold.
But if 1933 can be counted as a default episode, then it's easy to argue that the U.S. has been giving investors haircuts ever since, especially beginning in 1971. During that time the value of the dollar in terms of gold has collapsed from the $35 Bretton Woods fix, all the way to recent lows beyond $1,300/ounce.
So while the U.S. Treasury has never reduced the dollar amount of what it owes to creditors foreign or domestic since 1933, even partially, it has most certainly debased the dollar value of what it owes. To put it in simple terms, the U.S. has been a serial defaulter ever since President Nixon severed the dollar's link to gold in 1971. The French called it our "exorbitant privilege" to issue what remains the world's currency, and if gold is telling a realistic tale, we've used this privilege to stiff creditors.
Not only did gold-defined money eliminate inflation, but it also kept governments honest. And while the dollar remains the dollar, in gold terms the greenback has changed profoundly in this decade alone. Using gold as the benchmark, the default that some say looms has long been underway, particularly in the '70s and the decade just passed.
What's so scary about a US default? The answer is easy if we expand the definition of debt default to include currency devaluation. In that sense, default is problematic because all entrepreneurial activity and all jobs are the direct result of savings meant to fund them.
If Treasury continues to reduce the real value of its debt by allowing it to fall, then we all suffer for limited capital moving into unproductive, hard assets least vulnerable to devaluation. Our ability to find work with innovative companies is compromised if money is debased such that investors go on strike. As savers we also suffer from currency devaluation thanks to debasement reducing the value of the funds of which we've chosen to delay consumption. Inflation is a tax, and when Treasury policy errs in favor of currency depreciation, its defaults are paid for by us, the savers.
But assuming a more traditional default, it bears asking if this wouldn't be a very good thing. Milton Friedman is famous for arguing that government spending itself is the truest tax as governments vacuum up limited capital to fund their profligacy. So if the U.S. Treasury were to default, it would be the federal govenment, not the average American, that would suffer the consequences.
To see why, we might consider Cupertino, CA based technology firm Oracle. Though Oracle is based in a state with nosebleed levels of debt, it would be naïve to think that if California were to default that Oracle's cost of capital would rise. More realistically, the California government's reduced attractiveness as a place to invest money would redound to the credit of a blue-chip firm such as Oracle, along with any other company known to treat well capital that is entrusted to it.
At present, the U.S. economy surely suffers from the eagerness of federal and state governments to run up all manner of debt for activities that in no way stimulate real economic growth. So if a federal default makes it more difficult for Treasury to raise money in the capital markets, that money would have to go somewhere. It's easy to argue that it would find more productive uses outside Washington.
For supporting evidence we need only look to the global economy in the aftermath of World War II. According to Reinhart and Rogoff, the years after the war were the greatest era for default in modern world history, with countries representing 40% of world GDP either in default or rescheduling debt.
Yet the economies of formerly war-ravaged countries such as Japan, Germany and France grew with great gusto in the post-war years. Assuming another period of capital market skepticism when it comes to government debt, much the same could occur again.
Conclusion. For as long as there have existed deep capital markets able to fund the needs of governments, there have been defaults on the debt raised by governments. During that time, investors have been compensated to varying degrees for the risks they've taken.
Sadly, inflation in the post-Bretton Woods era has given governments another way to reduce their debts, and savers around the world have suffered, not to mention entrepreneurs and those eager to work for them. It should be stressed that devaluation is merely a more subtle form of default, and the U.S. has used it with great vigor over the last four decades.
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In contrast, government default in the traditional sense is not something we should fear. Governments can only spend what they've taxed or borrowed from the private sector first, so while default would surely singe investors reliant on steady income paid for on the backs of taxpayers, it would serve as a boost to the private economy thanks to investors starving the government in favor of growth-enhancing initiatives in the private sector.
At this point U.S. politicians have shown no spending discipline no matter the party in power. In that case, if market discipline proves the only cure for the spending disease, then we should embrace a U.S. debt default without reservation.
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John Tamny is editor of RealClearMarkets and Forbes Opinions, a senior economic adviser to H.C. Wainwright Economics, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He can be reached at jtamny@realclearmarkets.com.
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Conspiring to undermine the US Treasury in time of war is an act of treason, and treason is punishable by death. There will be nooses and firing squads prepared for the enemy within who want to attack and default the US Treasury. This is the same conspiracy as Pete Dominici tried back in the 1990s, but he escaped unpunished because nothing came of it. Successfully attacking the US Treasury will result in the instant death of Social Security and Medicare, and will bankrupt the world economic system and lead to WWIII.
Conspirators like these will drive the American people to desperation and the acceptance of an extremely radical government when they strip the people of everything in the name of obscene speculative profits. The enemy within are talking their book because they plan to have insider information on the default and will short the nation into ruin for personal gain.
in terms of economic crime, but of course...in terms of the banality of Evil..the normalcy, eventually the 'normative' aspect....nice to hear "The enemy within are talking their book because they plan to have insider information..."
...when you get near death, old age, cancer...etc...THEN find ONE known 'deserving' target...bring him/her/it with you to neverneverland
...a kind of 'rewarding system' that could be institutionalized into Suicide Clubs...could be thrilling Final Activity...Suicide Hunting Social Clubs...with chapters in every state
...thats right, you are right....the Public Knows...so what! BUT, club members 'could make a difference..., bring meaning to their life..' an untapped group...
Balance? Have little, if any debt. Have some land on which to grow some food. Have a few good guns with some great ammo. Have some gold. Have some silver. Have some dollars. Have a job. Have an exit plan.
1fortheroad:
Thanks so much for your comments.
I will read those 2 Supreme Court cases you cited, and also will look at the web sites you provided.
This seems to be amazing information!
Does anyone have any thoughts on Intragovernmental Holdings, the debt the Treasury owes to the various trust funds, the majority owed to Social Security and Medicare.
Economists tend to discount this debt, for how serious would a person be if his left hand borrowed money from his right hand, about paying it back?
Don Levit
Not sure it matters. Read Thanatos comment above.
Moving deck chairs around on the Titanic?
Another #uckin idiot economist trying to sell their wares and investment news letter. Why don't you just go on CNBC and do Mandy or one of the hand full of stooges they have parading around daily.
The United States of America is not Zimbabwe or Argentina. How much global debt was denominated in Zim or Arg currency?
Let a full scale default of the USD occur and you'll just see how much global debt is denominated in USD. That won't be a dump... it will be an apocalyptic tsunami.
Sometimes a little common sense needs to be applied to too much thinking.
TD's Rule #1
“No fear. No distractions. The ability to let that which does not matter truly slide.”
-- The Banking system is insolvent and we are headed towards default or hyperinflation. Everything else is just noise.
TD's Rule #2
“I say never be complete, I say stop being perfect, I say let’s evolve, let the chips fall where they may.”
-- Let's drop the pretense that we have a "Working" financial system and get on with building one that does meet our needs.
TD's Rule #3
“It’s only after we’ve lost everything that we’re free to do anything.”
-- Means we are going to have to default or hypinf before anyone is going to do anything meaningful... So quit hoping for it.
TD's Rule #4
“You’re not your job. You’re not how much money you have in the bank. You’re not the car you drive. You’re not the contents of your wallet. You’re not your fucking khakis.”
-- Ben and Co. Would have done well by this advice. Too late for them. How about you?
TD's Rule #5
“People do it everyday, they talk to themselves… they see themselves as they’d like to be, they don’t have the courage you have, to just run with it.”
-- Act on what you believe is right... All these cats moving out of the US (snif) are praticing this tenet. They are putting ACTION to thought... I don't agree with them, but I have to respect anyone who does what they think is the right thing. So many people don't even think at all!
TD's Rule #6
“Sticking feathers up your butt does not make you a chicken.”
-- Printing money does not make you rich.
TD's Rule #6
“This is your life, and it’s ending one minute at a time.”
-- What are you going to do about it?
Great post.
Rule #5. 99% wont make it and come back with no fanfare.They will find that locals can do ANY job they can faster, cheaper ,better.Unless sucking off the govt. tit all programming is going to india, manuf china, minerals to countries without libtards.
The amonnt of crap left by big talking expats just in little Costa Rica is legend amoung the locals. When the SHTF here , its gonna suck elsewhere ,UNLESS you are loaded,dont care , or the 1%,or running from the lawgreedy ex.
Your Will Was Probated
It may come as a surprise to realize that your Will was probated the day you were born. Yes, it is true. The very day you were born by accident into the United States is the day you died to the Law of the Republic./78 In other words, by operation of law, you were born into the corporate municipal legislative democracy of Washington, D.C..
It is presumed that everyone born into this country since 1933 has wanted to be a part of the public policy of the municipal corporation of the District of Columbia. This is because the public trust was established by public policy when the gold was removed as a standard in payment of debt. Up until the gold was removed, less than 51% of the population was involved as beneficiaries of the 14th Amendment trust. The moment the gold standard was removed, more than 51% of the population automatically became members of the trust. This meant the private municipal trust could be moved into the public sector to become public policy because the amount of the population volunteering for the benefits indicated a public desire. In addition, the trust was confirmed by the U.S. (S)upreme (C)ourt decision of Erie Railroad v. Tompkins in 1938 saying "there is no general federal common law." In other words, it is now presumed that everyone is a 14th Amendment "person" as implied by law and so silence on the part of the citizen is his consent to be treated as a "constructive trustee" and as primarily being a United States citizen.
Despite the suspension of the fixed gold standard, the path to liberty for the individual lies in the state court of probate because the general common law of the soil still lies in the state courts.
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation./79 There is no safe store of value. If there were, the government would have to make its holdings illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other goods, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and the government created bank credit would be worthless as a claim on goods. The financial policy of the welfare state [14th Amendment trust] requires that there be no way for the owners of wealth [property] to protect themselves."/80 [Bracket information added]
http://freedom-school.com/history/usa.html#probated
Governments can only spend what they've taxed or borrowed from the private sector first,
Shirley, you can't be serious? You write as if there is some limit to what can be borrowed from the putatively private sector Fed.
Certainly Zimbabwe is a recent counter-factual to this statement.
The need to believe that "all is well" is so pervasive throughout the American psyche that one is simply unable to explain the depth of perile. Does a man have the right to choose slavery?
The empiracle evidence that the USG is bankrupt is offset by the reality that it continues to function. In the absence of the Rule of Law, people revert to a willingness to preserve the idea of peace and stability above the reality of chaos and starvation. Man must be governed, they reason.
Pharoah likes the system, because he gets all the girls, never works, food always on the table, sets the rules, and builds cool buildings in his own honor.
The priests like the system, because they enjoy most of the same benefits through the hierachy of the establishment.
The workers like the system because of the symbiotic relationship that provides a place to live, food on the table, in exchange for the obligations of labor.
What makes this social structure function without fail is the prevailing reality that most people are intellectually lazy. They posses no more desire to live than to steal from and murder their neighbor, to take all that he has, with the gumption of government.
The devaluation of the US Dollar will undoubtedly continue as the will to survive excersized by the oligarchy continues to extract a pound of flesh to satisfy debts. Eventually, all tyrannies fail, as will the Federal Reserve System.
In order to avoid default, the Fed will pursue a futile game of monetization that creates hyperinflation; bringing massive starvation and suffering to the entire globe. This Highlander effect, in which there can be only one king of the world, seeks to accomodate the PDs along with the currency regime that has managed to stay in power.
Those who have power, seek to retain it.
Those without power, seek to gain it.
In the words of the Sith Lord, "Join us, or die!"
There are way too many words in this article. Let me help: bonds are illegitimate contracts made by bondholders and governments to enslave third-party living and unborn people. Government bonds should be defaulted on immediately.
There are too many words in your comment, too. For example thus,
Simple: Government sucks
Paineful: Society is produced by our wants, government by our wickedness
Titular: Our Enemy, The State
excellent! very well and fine post. so, how far are we from this 50% mark? the govt and economy are a mess. fools want to mess it up further.
http://covert2.wordpress.com
From a speech in Congress in The Bankruptcy of the United States Congressional Record, March 17, 1993, Vol. 33, page H-1303, Speaker Representative James Trafficant Jr. (Ohio) addressing the House states:
“...It is an established fact that the United States Federal Government has been dissolved by the Emergency Banking Act, March 9, 1933, 48 Stat. 1, Public Law 89-719; declared by President Roosevelt, being bankrupt and insolvent. H.J.R. 192, 73rd Congress m session June 5, 1933 - Joint Resolution To Suspend The Gold Standard and Abrogate The Gold Clause dissolved the Sovereign Authority of the United States and the official capacities of all United States Governmental Offices, Officers, and Departments and is further evidence that the United States Federal Government exists today in name only.
The receivers of the United States Bankruptcy are the International Bankers, via the United Nations, the World Bank and the International Monetary Fund. All United States Offices, Officials, and Departments are now operating within a de facto status in name only under Emergency War Powers. With the Constitutional Republican form of Government now dissolved, the receivers of the Bankruptcy have adopted a new form of government for the United States. This new form of government is known as a Democracy, being an established Socialist/Communist order under a new governor for America. This act was instituted and established by transferring and/or placing the Office of the Secretary of Treasury to that of the Governor of the International Monetary Fund. Public Law 94-564, page 8, Section H.R. 13955 reads in part: “The U.S. Secretary of Treasury receives no compensation for representing the United States...
Prior to 1913, most Americans owned clear, allodial title to property, free and clear of any liens of mortgages until the Federal Reserve Act (1913) “Hypothecated” all property within the Federal United States to the Board of Governors of the Federal Reserve, in which the Trustees (stockholders) held legal title. The U.S. Citizen (tenant, franchisee) was registered as a “beneficiary” of the trust via his/her birth certificate. In 1933, the Federal United States hypothecated all of the present and future properties, assets, and labor of their “subjects,” the 14th Amendment U.S. Citizen to the Federal Reserve System. In return, the Federal Reserve System agreed to extend the federal United States Corporation all of the credit “money substitute” it needed.
Like any debtor, the Federal United States government had to assign collateral and security to their creditors as a condition of the loan. Since the Federal United States didn’t have any assets, they assigned the private property of their “economic slaves,” the U.S. Citizens, as collateral against the federal debt. They also pledged the unincorporated federal territories, national parks, forests, birth certificates, and nonprofit organizations as collateral against the federal debt. All has already been transferred as payment to the international bankers.
http://republicoftheunitedstates.org/node/5
Thats some good stuff. I had a problem trying to comprehend that issue for quite a while.
It is clearer now then before. But perhaps you could answer by what authority did they have to "Like any debtor, the Federal United States government had to assign collateral and security to their creditors as a condition of the loan. Since the Federal United States didn’t have any assets, they assigned the private property of their “economic slaves,” the U.S. Citizens, as collateral against the federal debt. They also pledged the unincorporated federal territories, national parks, forests, birth certificates, and nonprofit organizations as collateral against the federal debt"
And if they didn't have at least a portion of the assignment rights then the act was? wait for it Unconstitutional.
verbal masturbation. blah blah blah
You, sir, are a cretin.
Defaulting! That's why we have Fiscal Policy. You don't just frikken' default, you manage the process. Like Don Jaun, you maximize the screw! You get yer frikken' rox off.
A key distinction to be made here is between unfunded liabilities and contingent liabilities. Unfunded liabilities such as pensions and health care are almost always long term obligations that are inevitably trimmed back as part of austerity measures. In contrast, contingent liabilities such as deposit insurance are far more dangerous in that they spike at the worst possible moment.
Ireland is a case in point: five years ago government debt/GDP was ~25%, the country was running a fiscal surplus, and life was good. Fast forward to today where the Irish banks sinking beneath the waves leads the country to surrender its sovereignty to the EU/IMF/et al.
Thus the threat to the American republic is not from fear grannies who demand their medications and social security, but rather from the credit-fueled financial/industrial complex that includes the banks, FNM/FRE, et al.
"contingent liabilities such as deposit insurance are far more dangerous"
Yeah, because nothing's more important than bailing out failed private casino businesses that commited too much bailment fraud.
Just to clarify, Irish debt problems are not a result of Government profligacy, but rather because of the nationlization of the debts/responsibilities of the Irish banks. Something similar has and will continue to happen here in the US.
It may not be b/c of "govt. profligacy" ,but b/c of govt. stupidity. That is spending the tax payers money (or at least pledging it) so their bank buddies could party on.
The govt was never forced by law to bail out or at least guarantee the banks.
"not a result of Government profligacy, but rather because of the nationlization of the debts/responsibilities of the Irish banks"
So you're saying the Irish government is rather frugal, except when it's fascist and wasting buttloads of other people's money on bailing out failed private businesses?
Screw ammo...anybody carrying nukes as part of their private arsenal...lmao
I dont like the comparision of debt levels to WWII. Everyone likes to say its not as bad as WWII. So what! WWII was different. It was total war, winner take all, looser loose everything. Who cares about deficits when you are in a corner. But now? come on. Today's deficits are due to waste, corruption, and pork. We are hardly in a corner.
IMO, completely correct. When you are at war, or accustomed to the sacrifices made in war, expectations are less. We are coming into a modern age where robots and power machinery are increasingly taking over the manual labor. The solution will be in a reduction of expectations for the less well educated or less productive members of the population.
In the 30's period, into which I have some insight because I started life in 1935, and in the 40's because we were were at war, nonsense wasn't really tolerated the way it is in today's kinder, gentler world. Children are no longer allowed to fall out of trees that they climbed in a natural drive to exercise. They have no need to create objects of play. U.S. domestic toy market of $21.6B(According to the Toy Industry Association). Communities were local based largely need for service support with personal preference with educational differences respected and tolerated. People were less isolated from the real world of others. To a certain extent todays communities are becoming collections of attitude and preference formed around means of communication and entertainment interest and economic affiliation.
The way out will have to include making an education real. For young children that means experiences in the real world with exercise of the body as well as reading, writing and particularly arithmetic. Concepts of addition, subtraction(negative addition), multiplication and division are mental tools right up through tensor analysis.
The kind of reasoning that must go away is illustrated by this abstract of a "learned" paper by a person iwith a PhD in an American Uinversity education faculty.
"ABSTRACT"
"This study analyzed varying factors affecting college studen't graduation intentions. To predict intention, an Elaborated Theory of Planned Behavior model was used to study the effects of attitude, normative, normative communication, and perceived control beliefs while accounting for past classroom experiences with university faculty and administrators. While further analysis must be conducted to test the elaborated model, regression analysis revealed that perceived control and prior classroom experiences were significant predictors of graduation intentions. Future efforts to increase graduation rates should focus on positive classroom experiences and building academic skills that in turn affects student's perceived control over graduation."
Parents, do you know where your children are?
It seems to me that the big problem with comparing present debt levels with WWII, and concluding "we're still ok" is that at the end of WWII a lot of the industrialised world's productive capacity had been wiped out. The US couldn't help but make out like a bandit in the reconstruction.
Whereas now, it's OUR industrial capacity that's been mostly wiped out. How are we going to repay the debt this time?