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What makes you think that it can't be funded? Do you still think they don't print the money? Still think we don't allow banks to print money? I can find that from Mosler to Mises, yet only the general public cannot be convinced.
Martin Armstrong: It's not just the Euro zone. The entire idea that you can borrow perpetually year after year and never pay anything back and that, somehow, that's less inflationary than if you just print money is absolutely insane. In the U.S., if we had just printed the money, the national debt would only be 40% as much as it is today. We're both creating currency and also paying interest on it.
Yeah why don't we just print the money instead of print the money and pay people even more in interest?Nice gig for a bank especially when they took the bailout money and collected more interest. Seem like interest bearing money is a huge giveaway to me. What have I been called for agreeing with a "fascinating" guest at Mises?
HRN: Fractional reserve banking systems are inherently inflationary.
Martin Armstrong: Well, it's really a leveraging system. You're increasing the money supply by taking the same money and lending it out several times, so if I deposit $100 and the bank lends you $100 we both think we have $100 but there's only one $100 deposit. Take the mortgage market where the Federal Reserve created trillions by buying mortgage backed securities (MBS). The mortgage market contracted by maybe $5 trillion from the top. So, you have deleveraging at the same time. If the Federal Reserve created $3 trillion when there was no deflation then that would be inflationary, but, in this type of system, every time you get a decline in the economy it's deflation and deleveraging. In a deflation, everyone wants cash so asset values fall. The cash is only a small fraction of the total asset value at the peak. If Bill Gates sold all his Microsoft stock at once it wouldn't be worth as much as it is on paper. It's a yin and yang between leverage and deflation.
HRN: What's the difference between leveraging deposits to loan out $10 for every $1 on deposit and creating money out of thin air?
Martin Armstrong: The current banking system that we have in the world today is really a fraud. You used to pay the bank as a storage facility to store your money but they began lending it out to make more money. They figured out a long time ago that they only needed to keep 6% or 10% of deposits. When the economy goes down it's a kind of a run on the bank. But the real problem is that they borrow short term on demand deposits and lend long term to make the spreads. When a crisis comes, their assets are tied up for ten or twenty or thirty years but they've got short term demand saying 'give me my money now'. So the system doesn't really work on a perpetual basis.
Now if you want to talk about what we a funding well , lots of dust that settles into more ground rents and more bank credit. When debt deflation looms, public debt time or a catastrophic depression. The dirt is the same.
When will you or anyone realize the FIRE sector is the government on top of the government? Never is my guess until you try to eat that dirt that creates a huge number of total debt.
It's mathematically impossible to sustain the current system without a little bank holiday or a crash of some sort. Agree or disagree?
Not mathematically impossible at all. Its perpetual debt by design. Congress created the FED and the FED balance sheet is limitless( or perhaps the banking system created Congress which created the FED? ). Inflating it too fast could cause political and economic instability, but there is no math problem. Between taxes and the Fed recycling interest to the Treasury where would it end? They print money and collect it by force. They know the rich will hoard it and if they didn't , it would be handled.
The problem is a geo political one which is outside the loop, but they are caught in the Triffin trap as well. US debt is the global money supply. Sovereign debt is money and the more powerful the sovereign, the more impossible it is to keep it from becoming money even without official sanction. Did anyone in Little Italy not want to have the debt of the Corleone family? Not a liquid asset? Wake up and smell the sovereign debt money.
However in a closed government debt tax system it could and would go on forever. Get over your sovereign debt liquidity paradox problem and it all becomes clear.
I use the 2013 deficit of $845 billion and the 2009 deficit of $1.3 trillion.
Notice that I didn't say "Obama cut deficit by 35%." Just as I and others have been saying for years, the deficit during the Great Recession isn't due to any particular action of the President and he shouldn't get credit when those automatic areas reverse.
Most of the increase in spending since the Great Recession started is due to “automatic stabilizers” as the CBO calls them. These are items like unemployment benefits and SNAP, that increase when the economy is weak. They aren't due to any action by a sitting president.
From the CBO:
The CBO estimates that in fiscal 2013 automatic stabilizers will amount to $422 billion, which is half of a est. $845 billion deficit.
Rewrite that thread title to say "Fifth Year In A Row, Of Largest Deficits In Nation's History"
This is sort of like celebrating "Husband Beats Wife Eight Times A Day Instead Of Ten"
Not mathematically impossible at all. Its perpetual debt by design. Congress created the FED and the FED balance sheet is limitless( or perhaps the banking system created Congress which created the FED? ). Inflating it too fast could cause political and economic instability, but there is no math problem. Between taxes and the Fed recycling interest to the Treasury where would it end? They print money and collect it by force. They know the rich will hoard it and if they didn't , it would be handled.
The problem is a geo political one which is outside the loop, but they are caught in the Triffin trap as well. US debt is the global money supply. Sovereign debt is money and the more powerful the sovereign, the more impossible it is to keep it from becoming money even without official sanction. Did anyone in Little Italy not want to have the debt of the Corleone family? Not a liquid asset? Wake up and smell the sovereign debt money.
However in a closed government debt tax system it could and would go on forever. Get over your sovereign debt liquidity paradox problem and it all becomes clear.
Or until the rest of world stops buying our debt because we print money like Zimbabwe, and they drop the US dollar as the world's currency.
Bush was a liberal? It only seems that way because you are so right-wing you risk going over the horizon.
Wasn't it the GOP Congress that passed Medicare Part D and paid for it with borrowed money?
You also forget that Clinton raised taxes and the government did not reduce spending. Spending increased by 1% per year. So, without those tax increase, that the GOP said would cause a recession, there wouldn't have been a Clinton surplus. Then, Bush cut taxes and the deficits returned. It's really simple.
The Bush tax cuts did not cause a deficit. Just the opposite. Bush passed two tax cuts, in 2001 and 2003. From 2004-2007, government revenue was $785 billion, the largest 4-year growth in history.
Overspending causes a deficit, not tax cuts. Clinton raised taxes which hurt many small businesses.
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