How will the American government pay its debt? (2014, currencies, define)

[rruff]

Originally Posted by ncole1

Sure, and you know what happened when Germany tried that in the early 1920's right?

Actually they started it at the beginning of WW1. They lost the war, and were severely punished economically and financially to keep them from rising to power again. The hyperinflation was essentially imposed from outside and they recovered quickly from it.

When the US is in a similar situation, then we can talk about something similar happening.

The last time we had a Republican president, it's not as though Republicans were trying to increase spending on much of anything - as always they go mainly for tax cuts, not spending increases.

First I never said anything about spending, only deficits. You do realize that a tax cut results in a deficit as surely as spending?

Also, what do you call the two wars if not spending? Was that free?

[Mircea]

Originally Posted by Matthew Libman

Everybody loves to account for the national debt, but no one has ever tallied up the national wealth. The United States has a strong balance sheet. The national debt is an illusion.

That's because "national wealth" (snicker) isn't relevant.

Originally Posted by Adrian71

The Treasury Department could mint a trillion-dollar coin and send it to the Fed to pay off the debt. It actually would work, and it's totally legal to do so.

Trillion dollar coin - Wikipedia, the free encyclopedia

The only reason it hasn't been done is that it would force everyone to acknowledge that our money isn't really money with intrinsic value, but rather a social contrivance, having value only because the government says it does.

Massive fail.

Currency is a medium of exchange that facilitates trade.

At the risk of talking way, way over people's heads, without currency, how would you acquire the goods and services you desire?


You'd have to trade goods and services in exchange for goods and services.



When the plumber comes to your home, you could prostitute your wife or daughter, but what if the plumber has no interest in doing the Nasty with them?

You could give the plumber 12 chickens, but what if the plumber wants two bushels of corn, instead?

See, you --- and everyone else -- would waste a great part of your time trying to find stuff to barter....in order to meet people's needs and desires.

Or, you could just use currency as a medium of exchange.

Contrary to what you believe, the value of the currency is equal to the sum total of the goods and services produced in the State or Market in which the currency is used.

Originally Posted by Costaexpress

Much of this would not be a big problem if the U.S. dollar remains the de facto global currency. However, there have been attempts to gradually replace the U.S. dollar and use a different global currency. Eventually the chinese yuan will probably succeed in becoming the global currency in the next 30 years.

No.

For the rest of this Century, you'll have the Euro, Ruble, Rupee, Joint Chinese/Japanese/Korean currency, and the US Dollar.

Other regional currencies will emerge in the 22nd Century in South America, Africa, SE Asia and SW Asia.

Originally Posted by slowdude222

What happens when other countries stop using the petro dollar?

Originally Posted by rruff

The US will have absolutely no problem at all if/when the US$ ceases to be the "global currency".

Your iPhone, iPod, iPenis and iPad, go down the iToilet.

Originally Posted by rruff

What magic benefits do you think it provides?

The extravagantly exorbitant high Standard of Living and Life-Style you have.

Originally Posted by slowdude222

Do we just continue to assassinate those leaders like we have in the past?

That's going to get real expensive, real fast.

Originally Posted by slowdude222

If the world stop recognizing the worthless Federal Reserve Note, the USA will crumble. Iraq and Lybia were attacked when they threatened to go off the petro dollar, yes?

The central bank is not the problem, and "yes" they were attacked for those reasons.

Originally Posted by rruff

You still don't get it at all. Printing $ doesn't necessarily cause inflation.

Who on this forum would like to know why not?

Originally Posted by rruff

The US will have absolutely no problem at all if/when the US$ ceases to be the "global currency". What magic benefits do you think it provides?

That's the answer.

Monetary Inflation.

You talked in circles and unknowingly answered your own question.



Laughing at the superior intellect....

Mircea

[AmFest]

Originally Posted by Mircea

That's because "national wealth" (snicker) isn't relevant.



Massive fail.

Currency is a medium of exchange that facilitates trade.

At the risk of talking way, way over people's heads, without currency, how would you acquire the goods and services you desire?


You'd have to trade goods and services in exchange for goods and services.



When the plumber comes to your home, you could prostitute your wife or daughter, but what if the plumber has no interest in doing the Nasty with them?

You could give the plumber 12 chickens, but what if the plumber wants two bushels of corn, instead?

See, you --- and everyone else -- would waste a great part of your time trying to find stuff to barter....in order to meet people's needs and desires.

Or, you could just use currency as a medium of exchange.

Contrary to what you believe, the value of the currency is equal to the sum total of the goods and services produced in the State or Market in which the currency is used.




No.

For the rest of this Century, you'll have the Euro, Ruble, Rupee, Joint Chinese/Japanese/Korean currency, and the US Dollar.

Other regional currencies will emerge in the 22nd Century in South America, Africa, SE Asia and SW Asia.






Your iPhone, iPod, iPenis and iPad, go down the iToilet.



The extravagantly exorbitant high Standard of Living and Life-Style you have.



That's going to get real expensive, real fast.



The central bank is not the problem, and "yes" they were attacked for those reasons.





Who on this forum would like to know why not?



That's the answer.

Monetary Inflation.

You talked in circles and unknowingly answered your own question.



Laughing at the superior intellect....

Mircea

Actually, I am curious about why increasing the money supply via QE did not cause inflation. Can you offer an explanation or a hint?

[Opin_Yunated]

Originally Posted by AmFest

Actually, I am curious about why increasing the money supply via QE did not cause inflation. Can you offer an explanation or a hint?

Because QE is just a bank bailout that takes place on balance sheets.

(Hint: it's all bull**** and accounting tricks)

[rruff]

Originally Posted by AmFest

Actually, I am curious about why increasing the money supply via QE did not cause inflation. Can you offer an explanation or a hint?

Don't ask Mircea.

https://www.google.com/search?q=why+...utf-8&oe=utf-8

My guess is that the extra reserves needed to find their way into the hands of consumers in order to cause any inflation, and they didn't. They were a bank bailout.

[TheUnknownInvestor]

In short,

They cannot pay off their debts, Due to the current monetary system there is more debt than money.
It is impossible for the US to repay.

The only thing they can do is carry on and create more money and debt ad infinitum.
The alternative is financial collapse and a new financial system where money is not created as debt.

[Opin_Yunated]

Originally Posted by TheUnknownInvestor

In short,

They cannot pay off their debts, Due to the current monetary system there is more debt than money.
It is impossible for the US to repay.

The only thing they can do is carry on and create more money and debt ad infinitum.
The alternative is financial collapse and a new financial system where money is not created as debt.

No, there's not more debt than money.

Debt is money.

[Mircea]

Originally Posted by AmFest

Actually, I am curious about why increasing the money supply via QE did not cause inflation. Can you offer an explanation or a hint?

Sure.

Currency may be fiat, but the US Dollar is not (at least not yet). What is currency? Isn't currency merely a medium of exchange to facilitate trade?

Imagine your life without currency.

You need gasoline to go to work.

You: I'll sweep the floors for 5 gallons of gasoline.
Clerk: Someone already did that.
You: I'll take out the garbage for 5 gallons of gas
Clerk: Someone did that, already.
You: I'll clean the windows and pick up the trash from the grounds.
Clerk: Already done.
You: I'll stock shelves for you.
Clerk: Someone did that, too.
You: I'll scrub the toilets.
Clerk: Someone's beat you to it.

So, what now?

You gonna drive from gas station to gas station looking to trade favors for gasoline? B-b-b-b-b-better call your boss and tell them you'll be late for work (again).

Your boss is probably late too, along with everyone else.

What do you get from pay? Suppose you work at a fastener company. You get 5 bags of 10-penny nails every payday.

Now what?

You gonna waste time running around, "Who needs 10-penny nails?"

I'm sure your local grocer will be ready trade a bag of 10-penny nails for food.....not.

What if you produce nothing? What if you're a chartered accountant? I suppose you could offer to do the books for the grocer a few hours a day in exchange for food. Of course, you wouldn't be the only accountant or book-keeper looking to trade services for food.....yeah, it'd be highly competitive.

So currency...as a medium of exchange that everyone agrees upon using....has great utility, does it not?

Yes, it does.

What can we say about currency then?

Isn't currency merely a substitute for the goods and services that we produce? Yes, it is.

Ideally, you want your currency to equal your GDP.....the goods and services you produce.

We can show this mathematically:

1,458,300,000 GDP Units / 1,458,300,000 Currency Units = 1 GDP/Currency

What if we reduced the amount of Currency Units?

1,458,300,000 GDP Units / 1,000,000,000 Currency Units = 1.458 GDP/Currency

That is Monetary Deflation.

One Currency Unit now buys almost 1.5 GDP Units. Think of it this way: 1 Currency Unit bought 1 gallon of gasoline, but now due to Monetary Deflation, 2 Currency Units buys 3 gallons of gasoline.

We have arrived at one of the most difficult concepts for people to understand.

The gasoline is not worth less, rather the currency is worth more. That makes it appear that the price of gasoline has decreased, when in fact it is the currency that has increased in value.


What if we increased the amount of Currency Units?

1,458,300,000 GDP Units / 2,000,000,000 Currency Units = 0.73 GDP/Currency

That is Monetary Inflation. The Currency is worth less, making it appear that products and serves cost more, when in reality they do not.

It simply requires more currency to acquire the products and services.

1.00 - 0.73 = 0.27 or an annual Monetary Inflation Rate of 27%

Because we are talking aboiut the value of the currency, and not tghe value of the goods and services, the prices of everything will incfrease, with "everything" meaning "every thing" as in every single stinking thing"

Q: Put another way, is there anything in your World that will not increase?
A: No.

What about wages/salaries?

What part of "No" do people not understand?

..or..

What part of "everything" do people not understand?

Yes, your wages will increase with Monetary Inflation at the rate of inflation. What sucks is that there is a lag time of several months up to a year. During that time period, you get soaked and take a loss until your wages catch up. You never get that very last increase, so in the end, you lose your shirt practically (meaning you end up with a net loss instead of breaking even).

That brings us to this boneheaded comment:

Originally Posted by Opin_Yunated

Correct, because debt IS money. If the U.S. debt sheet were to revert to $0, there would be no dollars in existence.

Everyone can now see how wrong that is.

So long as you are producing goods and services, you have US Dollars in existence --or whatever currency you're using in existence.


Let's look at specific examples. The figure I used was the GDP for Texas. Suppose Texas was its own independent State, like Zimbabwe:

1,458,300,000 GDP Units / 2,000,000,000 Currency Units = 0.73 GDP/Currency


That's it.

But let's assume the excess currency was generated through government debt, and let's assume that Texas sold $500 Million as treasury securities in the form of bills, notes and bonds.

(1,458,000,000 GDP Units + 500,000,000)/ 2,000,000,000 Texas Pesos = 0.979 or 98% or an annual Monetary Inflation Rate of 2%.

That's pretty damn good.

What happens if the Texas Peso was one the global reserve currencies and also a global currency in trade?

That increases the amount of Pesos that may be in circulation.



The reason the US fights so hard to maintain the supremacy of the US Dollar is how it would effect your economy ---- in a manner most negative, well, totally negative, if it were not the de facto global reserve and trade currencies.

For every barrel of oil; every cubic meter of natural gas; every ton of coal, iron, bauxite, lead, copper, tin, titanium, chromium, bismuth, gold, silver, platinum, nickel and such; every ton of phosphorous, salt, calcium, and other minerals; and every ton of corn, wheat, barley, sorghum, rice, sugar, chocolate, coffee, soy, cotton, flaxen etc etc etc that is sold in US Dollars, it is just as though those items were MADE IN USA.

So, when looking at the US, you're looking at this

GDP + all foreign US Dollar denominated global trade transactions = US Dollars.

10-09-2011, 05:12 PM

Originally Posted by Mircea

That would be the intermediate-future. I figure (as the way things stand now) that the global economy can absorb somewhere between $9 TRILLION and $12 TRILLION before Real Inflation starts exceeding 10%.

Now, there are things that could change, for example, how this Euro-thing plays out and if there are any changes in burses for commodities like oil.

So you're looking at about 2022-2023 when you start getting beat to death with Real Inflation

08-05-2012, 01:39 PM

Originally Posted by Mircea

For countries whose currencies are internationally traded, meaning BIS (Bank of International Settlements) accepts it or recognizes it, we use a Co-efficient of Absorption to determine how much currency a system can handle. For countries whose currency is not traded, it's a simple matter of GDP vs Money Supply. For all other counties, the system is the country itself -- but not the US whose currency is international -- so the "system" is global.

I suppose it would be easier for me to say that for the US, GDP vs Money Supply isn't relevant, rather what is relevant is GDP vs Money Supply factoring in Global Demand for US Dollars.

One thing you'll notice is that oil prices parallel QE. As oil prices rise, you can add more US Dollars.

In any event, QE was what, ~$4.5 TRILLION? Since 2008, right? That's not very much in the grand scheme of things. roughly 750 Billion per year.


In a Closed System:

$17.6T (GDP) / $17.6T (M2) + 750 Billion QE =

$17.6T (GDP) / $18.35 = 0.959 or roughly 5% annual Monetary Inflation Rate

What you have is closer to:

GDP + foreign USD transactions / M2 + M3 + QE = Monetary Rate

Granted, the US stopped publishing M3, but there are a host of other sources and you can get the figures in a roundabout sort of way.


Anyway, I've always held that hyper-Monetary Inflation is not an issue for the reasons stated, and won't become an issue for another 10 years.

Hope that helps...

Mircea

[Opin_Yunated]

Originally Posted by Mircea

Currency may be fiat, but the US Dollar is not (at least not yet). What is currency? Isn't currency merely a medium of exchange to facilitate trade?

No, the U.S. dollar is a fiat currency.

Originally Posted by Mircea

Everyone can now see how wrong that is.

So long as you are producing goods and services, you have US Dollars in existence --or whatever currency you're using in existence.

Nope. The U.S. can issue U.S. dollars regardless of if goods and services are produced. In fact, that is exactly what inflates the currency.

Originally Posted by Mircea

Anyway, I've always held that hyper-Monetary Inflation is not an issue for the reasons stated, and won't become an issue for another 10 years.

Hyper monetary inflation is not an issue because we don't print in extreme excess of production. Our economy is so large that scenario is virtually impossible.

[kinkytoes]

Originally Posted by ncole1

By keeping real interest rates negative for quite a long time, in all likelihood.

lol ding