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Question by JJ: What does our trillion deficit have to do with the stock market?
Is there any relation between our huge deficit and whether the market goes up or down? How can the market go up on a long-term basis if we are trillions in debt?

Best answer:

Answer by betmoneyonit2
Government debt has precious little effect on private enterprise. Aside from tax, credit, and monetary policies and conditions that is.

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  1. nothing.

    However, tack on $ 700 billion (2008 bank “toxic mortgage” bail out), plus the FED’s and Treasury’s $ 2 trillion to $ 3 trillion in separate (bank, mortgage, other asset) guarantees plus $ 5 Trillion Fannie Mae/ Freddie Mac (FNM/FRE) mortgage guarantees are a lot of guarantees.

    The risk is in part that could nearly double our national debt if there were massive defaults. And guess who will pay for that?

    As if the economic risks and massive increase in US debt wasn’t enough, the socialist Demo’s now want to tack on another $ 150 Billion “stimulus.”

    Why don’t the socialists just give us all a billion dollars each and deal with hyper inflation immediately. Then the public will learn why socialism won’t work in America.

    Posted: 10-12-2008 (keep this date in mind. refer back to this post in about 10-15 years.)

  2. a lot cause it can depreciate the currency if the credit rating goes down. the united state’s credit card is almost maxed out.

  3. Theoretically its not suppose to. Deficits tend to raise long term interest rates. That makes it more expensive to do business. And it lowers risk premiums. Why invest in the market if you arent going to be compensated for the risk. Just invest in risk free government bonds. But investors do. The S&P 500 almost tripled between 1980-1990 when deficits were increasing and quadrupled between 1990-200 when deficits were decreasing. Nixon lowered the deficit and the markets went down in 1973-75. And the GDP grows at about an average 3 percent no matter the deficit. There are many variables including what the deficit is spent on.

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