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When the dollar was backed by gold, you could exchange your dollars for a set amount of gold at a given time. Since 1971, OPEC's oil can only be had with dollars. The bottom line is, oil became more important than Gold. You can't have an economy without oil, and it's a natural resource just like gold. So, in effect, the dollar is convertable to oil. If you can agree the dollar was backed by gold, how can you not see how the dollar is now backed by oil? It's the same story.
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debt witch is beyond of what you can pay is bad! very bad!
Of course. I'm a CPA so I understand traditional finance which is true for you, I, and businesses. However, the Federal Reserve and U.s government is not a traditional agreement. The entire system is meant to deceive. They do not play by the same rules as the rest of us.
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just look at Greece!!
Greece does not have the ability to pay its debts in a currency they have complete control over. The Euro is also not THE largest reserve currency.
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U.S. military forces countries to accept the dollars, ridiculous!!!!
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That general rule has held fast throughout the ages. When gold was used, and the rules protected honest commerce, productive nations thrived. Whenever wealthy nations — those with powerful armies and gold — strived only for empire and easy fortunes to support welfare at home, those nations failed.
Today the principles are the same, but the process is quite different. Gold no longer is the currency of the realm; paper is. The truth now is: “He who prints the money makes the rules” — at least for the time being. Although gold is not used, the goals are the same: compel foreign countries to produce and subsidize the country with military superiority and control over the monetary printing presses.
Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation's people — just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare
The pressure at home to inflate the currency comes from the corporate welfare recipients, as well as those who demand handouts as compensation for their needs and perceived injuries by others. In both cases personal responsibility for one's actions is rejected
When paper money is rejected, or when gold runs out, wealth and political stability are lost. The country then must go from living beyond its means to living beneath its means, until the economic and political systems adjust to the new rules — rules no longer written by those who ran the now defunct printing press.
Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it — not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for dollar hegemony to spread.
Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence “backed” the dollar with oil. In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement among those who resented our influence in the region. The arrangement gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as dollar influence flourished.
In the short run, the issuer of a fiat reserve currency can accrue great economic benefits. In the long run, it poses a threat to the country issuing the world currency. In this case that's the United States. As long as foreign countries take our dollars in return for real goods, we come out ahead. This is a benefit many in Congress fail to recognize, as they bash China for maintaining a positive trade balance with us. But this leads to a loss of manufacturing jobs to overseas markets, as we become more dependent on others and less self-sufficient. Foreign countries accumulate our dollars due to their high savings rates, and graciously loan them back to us at low interest rates to finance our excessive consumption.
It sounds like a great deal for everyone, except the time will come when our dollars — due to their depreciation — will be received less enthusiastically or even be rejected by foreign countries. That could create a whole new ballgame and force us to pay a price for living beyond our means and our production. The shift in sentiment regarding the dollar has already started, but the worst is yet to come.
For the most part the true victims aren't aware of how they pay the bills. The license to create money out of thin air allows the bills to be paid through price inflation. American citizens, as well as average citizens of Japan, China, and other countries suffer from price inflation, which represents the “tax” that pays the bills for our military adventures. That is, until the fraud is discovered, and the foreign producers decide not to take dollars nor hold them very long in payment for their goods. Everything possible is done to prevent the fraud of the monetary system from being exposed to the masses who suffer from it. If oil markets replace dollars with Euros, it would in time curtail our ability to continue to print, without restraint, the world's reserve currency
It is an unbelievable benefit to us to import valuable goods and export depreciating dollars. The exporting countries have become addicted to our purchases for their economic growth. This dependency makes them allies in continuing the fraud, and their participation keeps the dollar's value artificially high. If this system were workable long term, American citizens would never have to work again. We too could enjoy “bread and circuses” just as the Romans did, but their gold finally ran out and the inability of Rome to continue to plunder conquered nations brought an end to her empire.
The same thing will happen to us if we don't change our ways. Though we don't occupy foreign countries to directly plunder, we nevertheless have spread our troops across 130 nations of the world. Our intense effort to spread our power in the oil-rich Middle East is not a coincidence. But unlike the old days, we don't declare direct ownership of the natural resources — we just insist that we can buy what we want and pay for it with our paper money. Any country that challenges our authority does so at great risk
I often hear people around here say "we need to pay it back" or "it's out of control". In the Federal Reserve System, debt is money. If all debt was paid, there would be no money. The national debt cannot be paid, because the money to pay the interest is not created.
I also hear people say the U.s dollar is just paper backed by nothing. This is not true. The U.s Dollar is backed by the value of OPEC's oil reserves. Their oil is sold exclusively in U.s dollars which creates demand and gives it backing from a resource far more important in the modern world than gold. You need dollars to buy OPEC oil.
It's also backed by the U.s military, who forces countries to accept it, and they must accept it if they want to export to the largest market in the world.
Please read and understand this before you continue to say things that are not true. Stop blaming left or right. It's the same story.
I agree that we should all know more about government debt and how this is completely different from private debt, but you don't seem to know what you're talking about either.
I often hear people around here say "we need to pay it back" or "it's out of control". In the Federal Reserve System, debt is money. If all debt was paid, there would be no money. The national debt cannot be paid, because the money to pay the interest is not created.
I also hear people say the U.s dollar is just paper backed by nothing. This is not true. The U.s Dollar is backed by the value of OPEC's oil reserves. Their oil is sold exclusively in U.s dollars which creates demand and gives it backing from a resource far more important in the modern world than gold. You need dollars to buy OPEC oil.
It's also backed by the U.s military, who forces countries to accept it, and they must accept it if they want to export to the largest market in the world.
Please read and understand this before you continue to say things that are not true. Stop blaming left or right. It's the same story.
Explain why runaway debt has caused problems to countries like Argentina and Greece and why the USA is magically immune from any consequences of the same.
Last edited by CaseyB; 01-29-2012 at 11:23 AM..
Reason: rude
Or if no amount of debt matters -- why doesn't the government just add a few more trillion in debt and give us all a million dollars? Wouldn't that solve a lot of problems?
We should cut the debt deficit, not end the national debt.
Hell the founding fathers sought out countries to increase US debt after our founding. It made us a more stable nation.
The truth is we should lower our debt increases to an amount that is on proportion to our GDP growth rate. If GDP is growing at 2.6%, then thats what we should increase our national debt by.
I hope you didn't go to college. If so demand your money back.
Explain why runaway debt has caused problems to countries like Argentina and Greece and why the USA is magically immune from any consequences of the same.
We aren't immune entirely. The system is kept somewhat in check. However, we are not the same an Argentina or Greece. NOt even close. Compare the demand for the dollar vs demand for argentinas currency on world markets...there isn't even a comparison.
The dollar is the standard that other currencies float against. So, in effect, when we devalue the U.s dollar by massive spending, it allows the Europeans or the Japanese to do the same. They never let us float down too much because it starts to effect their economy and its exports. So, they devalue and keep the proportions in check. It's basically a scheme that involves all western countries central banks to steal from the smaller, poorer countries.
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It would seem that the OP might want to take his own advice....
Look at any debt graph since 1971. The U.s runs budget and trade deficits by design.
The truth is we should lower our debt increases to an amount that is on proportion to our GDP growth rate. If GDP is growing at 2.6%, then thats what we should increase our national debt by.
True. You can grow debt forever if you grow your ability to service that debt. IE we borrow cheap money and expand the economy.
THe problem starts when debt to GDP gets too high. Then again, the U.s isn't even at debt to gdp of 100%. Japan is over 300% and the Yen is fine. The U.s can borrow a hell a lot more money before debt to gdp became too big of an issue.
Or if no amount of debt matters -- why doesn't the government just add a few more trillion in debt and give us all a million dollars? Wouldn't that solve a lot of problems?
This wouldn't solve anything, nor did I ever claim it would.
Way to argue to the extreme of some point that I never made.
Learning "how debt works" from The Economic Collapse Blog is like learning the truths about the world from the guy raving on the street corner that sleeps under a bridge. Posting that place as a "reference" doesn't show knowledge, education, intelligence, or cleverness...it simply shows a severe level of derangement. I know I have already stated this way too many times.
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Originally Posted by subsound
The guy who runs it is a completely insane fundamentalist loon with diarrhea of the brain that erupts with such violence that he needs 4 web****es to capture all the volume (The Economic Collapse Blog, End of the American Dream, The Most Important News and What The Bible Says About...). He is a raging biblical literalist who believes Jesus is about to come down physically and start his thousand year reign over Earth, right after he screws the economy up and exterminates the non believers.
He's been raging since 2007, which makes it really funny since he "predicts" the end of times in about every 3-6 months about 2-3 times a week in his dribbling. It doesn't seem to faze him one bit he's been wrong hundreds, if not thousands, of times (since he likes vast bullet pointed lists).
It certainly doesn't seem to stop the idiotic followers that seem to fall over themselves to believe whatever dribbling he makes about the end times, while ignoring the long history of being plain wrong. The only thing that posting that as a source shows is that that the person who read it has no experience or knowledge of the subject at hand, is very fearful, and is so lacking in critical thinking skills they believe some one that is not only so idiotic that they don't realize their own incompetence...they think they are a genius on the subject.
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