Author Topic: If America defaults...  (Read 17819 times)

Baylor3217

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If America defaults...
« on: October 15, 2013, 07:03:37 PM »
First of all, I have no idea how that could happen given that monthly revenues exceed monthly debt obligations by hundreds of %, but lets say it did.

Would that be the greatest buying opportunity in history?

I do t for a minute believe any of this 10/17 Armageddon bs. Same game with the sequester, etc. we are out of money. The common man is easily fooled but all that matters is perception and we have to be smarter than the common man.

So of he she is out liquidating their assets, maybe it presents a huge opportunity for us?

dragoncar

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Re: If America defaults...
« Reply #1 on: October 15, 2013, 07:15:49 PM »
Tough call, because IMO that could really be a game changer.  I'm not sure if you even COULD buy if the financial system is crippled.  I'm interested to hear other replies, but from what I've read basically nobody knows what would happen (i.e., different smart people predict different outcomes)

brewer12345

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Re: If America defaults...
« Reply #2 on: October 15, 2013, 08:37:45 PM »
Nobody knows what would happen.  Lets hope we don't have the opportunity to find out.


Left

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Re: If America defaults...
« Reply #3 on: October 15, 2013, 09:09:02 PM »
not much would happen probably, unless you are on wallstreet

most things that you need, food/house/etc aren't exported to other countries and don't rely heavily on importing them either. the dollar would lose value and things might go up a bit but it wont go up to the point where it becomes unaffordable (hopefully)

if it's to buy stocks, well... maybe buy foreign stocks? by stocks I mean etf/funds whatever and not individual if it isn't your thing

Tetsuya Hondo

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Re: If America defaults...
« Reply #4 on: October 16, 2013, 08:13:05 AM »
First of all, I have no idea how that could happen given that monthly revenues exceed monthly debt obligations by hundreds of %, but lets say it did.

I ask this not to pick a fight but out of a genuine desire to figure this stuff out, but doesn't this assume a lot, which may or may not be true on a given month? Inflows to the Treasury are not held constant and fluctuate month to month, so is it really true to say that we could service our debt each month? And, does this factor in Treasuries that have come due or just debt payments?

Also, perception is reality in the markets. So, if they perceive the US to be a greater risk even if we're able to pay our debt payments, aren't our borrowing costs likely to increase moving forward?

In the post-default scenario where we are still able to service our debt, aren't we still having to stiff someone? Something has to give.

Finally, human nature being what it is, it doesn't always take a lot to spook the herd in the markets. Given the degree of automation to the markets, it sometimes takes little more than a computer glitch. When you factor that into the fact that Treasuries are embedded to such a degree in so many funds around the world, are we playing with fire?

Mr.Macinstache

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Re: If America defaults...
« Reply #5 on: October 16, 2013, 08:39:48 AM »
I would be more worried about Russia and China making moves out of the dollar. When/if the dollar gives, it is not going to be pretty at all.

Luck better Skill

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Re: If America defaults...
« Reply #6 on: October 16, 2013, 09:53:49 AM »
  The dollars day as the world reserve currency was always numbered.  I would not be surprised if that is within a decade.

clarkm04

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Re: If America defaults...
« Reply #7 on: October 16, 2013, 09:56:06 AM »

Sebastian

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Re: If America defaults...
« Reply #8 on: October 16, 2013, 10:01:59 AM »
And this is why I was always skeptical about investing my money in 401Ks and IRAs and stocks in general, but I was told multiple times that if the dollar was ever eradicated that I would have more to worry about than money.

So what gives? For the past 7 months I have been saving/investing over 50% of my money. Now will I just be screwed? I thought the idea was that even if something like this did happen that I could just go investing crazy buying everything at massive discounts.

All the replies so far in this post have left me a little uneasy to say the least.

Mr.Macinstache

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Re: If America defaults...
« Reply #9 on: October 16, 2013, 10:18:52 AM »
I think the US defaulted a LONG time ago.. they are just managing the bankruptcy...to which our fiat currency is coming to the end of its life cycle under these conditions.

  The dollars day as the world reserve currency was always numbered.  I would not be surprised if that is within a decade.

I think we are seeing an acceleration here. The Fed hasn't tapered anything, they are still inflating this bubble and I think we are just on borrowed time.. as to how long is anyone's guess.

Word is that Chase is stopping all wire transfers on some accounts. I am seeing that it will be harder and harder to get access to your funds in order to control an all out run. All of the major banks are partnered with the Fed so wait and see what happens...but my advice has always been not to keep anymore money in your bank than you need to pay bills with.
« Last Edit: October 16, 2013, 10:25:40 AM by Mr.Macinstache »

johnjm22

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Re: If America defaults...
« Reply #10 on: October 16, 2013, 11:06:42 AM »
I'd say there's roughly a 0% chance America has a HARD default.




Eric

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Re: If America defaults...
« Reply #11 on: October 16, 2013, 11:09:51 AM »
Warren Buffett says that we either "increase the debt limit or risk chaos in world financial markets", and I tend to believe him.

http://www.latimes.com/business/money/la-fi-mo-debt-limit-warren-buffett-weapon-mass-destruction-20131016,0,3026596.story

Mr.Macinstache

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Re: If America defaults...
« Reply #12 on: October 16, 2013, 11:42:35 AM »
The Biggest Scam In The History Of Mankind (Debt Ceiling Truth)
http://www.youtube.com/watch?v=iFDe5kUUyT0

Eric

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Re: If America defaults...
« Reply #13 on: October 16, 2013, 12:41:45 PM »
I'm not about to watch a 30min youtube at work, especially one that starts off by telling me that I should be able to "feel something is not right with the world's economy", but the debt ceiling is no scam.  In fact, it was put in place for the purpose to make it easier for the country to borrow money during the WW1.  The US is almost in position to not be able to pay all of its bills on time.  If the US isn't able to borrow more money, it will not be able to pay all of it's bills on time and it will be in default.  This is a fact. 

For the country to risk its credit rating, its world standing, its economic growth, and its whole financial picture on some political grandstanding is insane.  Once you screw that up, you don't get it back.  I'm personally flabbergasted by anyone who doesn't think this is a HUGE issue with potentially disastrous consequences.  The fact that some of our politicians are using the risk of default to gain political leverage is just about the most appalling thing I've ever seen.

johnjm22

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Re: If America defaults...
« Reply #14 on: October 16, 2013, 12:57:26 PM »
If the US isn't able to borrow more money, it will not be able to pay all of it's bills on time and it will be in default.  This is a fact.

The US can borrow an infinite amount of dollars.  There will never be a HARD default.

Tetsuya Hondo

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Re: If America defaults...
« Reply #15 on: October 16, 2013, 12:59:07 PM »
I'm not about to watch a 30min youtube at work, especially one that starts off by telling me that I should be able to "feel something is not right with the world's economy"...

I actually tried to give the video the benefit of the doubt and watched the first part, but decided it wasn't worth my time. Talk about laying it on thick. The whole conspiratorial tone to it and the way it tried to make even bonds sound dirty was just too much. Sure enough, after looking into it's creators I realized that it's essentially an infomercial for gold traders.

ivyhedge

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Re: If America defaults...
« Reply #16 on: October 16, 2013, 01:04:52 PM »
If the US isn't able to borrow more money, it will not be able to pay all of it's bills on time and it will be in default.  This is a fact.

The US can borrow an infinite amount of dollars.  There will never be a HARD default.
The government can borrow, yes: but at significantly higher cost than now.


And the U.S. has already defaulted: twice, technically (1814 & 1979).

Mr.Macinstache

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Re: If America defaults...
« Reply #17 on: October 16, 2013, 01:33:56 PM »
I'm not about to watch a 30min youtube at work, especially one that starts off by telling me that I should be able to "feel something is not right with the world's economy", but the debt ceiling is no scam.  In fact, it was put in place for the purpose to make it easier for the country to borrow money during the WW1.  The US is almost in position to not be able to pay all of its bills on time.  If the US isn't able to borrow more money, it will not be able to pay all of it's bills on time and it will be in default.  This is a fact. 

For the country to risk its credit rating, its world standing, its economic growth, and its whole financial picture on some political grandstanding is insane.  Once you screw that up, you don't get it back.  I'm personally flabbergasted by anyone who doesn't think this is a HUGE issue with potentially disastrous consequences.  The fact that some of our politicians are using the risk of default to gain political leverage is just about the most appalling thing I've ever seen.

Our monetary system is not a partisan issue, why do people think that? Now the problems that arise from it, are then politicized - but that's beside the point.

Why don't you watch the whole thing and then tell me if you still think the debt ceiling isn't smoke and mirrors. The point that we even have a "ceiling" is laughable on its own. It's really a distraction from the whole underlying problem. If you want to watch it and discuss it that would be great.


Mr.Macinstache

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Re: If America defaults...
« Reply #18 on: October 16, 2013, 01:41:59 PM »
I'm not about to watch a 30min youtube at work, especially one that starts off by telling me that I should be able to "feel something is not right with the world's economy"...

I actually tried to give the video the benefit of the doubt and watched the first part, but decided it wasn't worth my time. Talk about laying it on thick. The whole conspiratorial tone to it and the way it tried to make even bonds sound dirty was just too much. Sure enough, after looking into it's creators I realized that it's essentially an infomercial for gold traders.

Most people spend more than 30 mins researching a food processor. You think we could spend at least that learning out our monetary system. It lays out the facts of it, no spooky conspiracies theories are suggested to scare anyone. Yes, the people who made it are into precious metals, so what. Don't buy any and don't visit their website. Enough of the distractions...what about our monetary system? Good? Bad? Do you think we will ever pay off 17 Trillion? Who do we owe it to? Who lent it to us and where did it come from?

Luck better Skill

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Re: If America defaults...
« Reply #19 on: October 16, 2013, 01:52:32 PM »
If the US isn't able to borrow more money, it will not be able to pay all of it's bills on time and it will be in default.  This is a fact.

The US can borrow an infinite amount of dollars.  There will never be a HARD default.

  Printing/borrowing trillions will cause inflation or hyper-inflation.  The Federal Government has a spending problem just like consumers.
  Spending more than your credit limit is a problem.  Notice the argument, "we are not raising the debt ceiling so we can spend more money, we are borrowing more to pay what Congress has already spent."  And the spending goes on.  Our current projected budgets by both parties and the Congressional Budget Office calls for more debt with hope to balance the budget in five to twenty years.
  There is grandstanding going on here but the real issue, borrow and spend, is ignored.

Spork

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Re: If America defaults...
« Reply #20 on: October 16, 2013, 02:02:33 PM »
If the US isn't able to borrow more money, it will not be able to pay all of it's bills on time and it will be in default.  This is a fact.

The US can borrow an infinite amount of dollars.  There will never be a HARD default.
The government can borrow, yes: but at significantly higher cost than now.


And the U.S. has already defaulted: twice, technically (1814 & 1979).

I'm not aware of what happened in 1814, but there is also 1779, 1782, 1862 & 1934...

yolfer

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Re: If America defaults...
« Reply #21 on: October 16, 2013, 02:07:04 PM »
I found this article on the Debt Ceiling to be really informative: http://www.joshuakennon.com/the-debt-ceiling-101-an-explanation-for-the-average-person/

The relevant part, about what would happen:

Quote
If any group in Congress is ever successful at causing a default (meaning the Treasury isn’t able to pay its bills when they are due), and investors lose faith in the ability or willingness of the Federal Government to honor its obligations, there is a very good chance that:
* The deficit will skyrocket
* The national debt will explode
* Widespread panic and unemployment will result
* The economy would go off a cliff

But read the whole thing. It starts pretty remedially (with a Civics 101 lesson) but builds up to interesting stuff by the end.

beltim

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Re: If America defaults...
« Reply #22 on: October 16, 2013, 02:13:39 PM »
That is a very low information video.  Here's an older, much better, much faster explanation without the unnecessary fear-mongo ring used to attempt to increase demand for gold and silver:
http://m.youtube.com/watch?v=_Er69b4HMl8&desktop_uri=%2Fwatch%3Fv%3D_Er69b4HMl8

Mr.Macinstache

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Re: If America defaults...
« Reply #23 on: October 16, 2013, 02:14:11 PM »
I found this article on the Debt Ceiling to be really informative: http://www.joshuakennon.com/the-debt-ceiling-101-an-explanation-for-the-average-person/

The relevant part, about what would happen:

Quote
If any group in Congress is ever successful at causing a default (meaning the Treasury isn’t able to pay its bills when they are due), and investors lose faith in the ability or willingness of the Federal Government to honor its obligations, there is a very good chance that:
* The deficit will skyrocket
* The national debt will explode
* Widespread panic and unemployment will result
* The economy would go off a cliff

But read the whole thing. It starts pretty remedially (with a Civics 101 lesson) but builds up to interesting stuff by the end.

Very good chance? I would say a 100% chance, because we are already there.

It doesn't take a "default" for creditors to loose faith. They can already see the writing on the wall and are positioning themselves out of the dollar, slowly but surely.

Eric

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Re: If America defaults...
« Reply #24 on: October 16, 2013, 02:20:20 PM »
Why don't you watch the whole thing and then tell me if you still think the debt ceiling isn't smoke and mirrors. The point that we even have a "ceiling" is laughable on its own. It's really a distraction from the whole underlying problem. If you want to watch it and discuss it that would be great.

I agree that having a ceiling is laughable.  It should definitely be abolished.  However, I'm still not watching your sensationalized conspiratorial video.
« Last Edit: October 16, 2013, 02:22:18 PM by Eric »

reginna

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Re: If America defaults...
« Reply #25 on: October 16, 2013, 02:21:25 PM »
It's o.k. We're saved!!!!

mulescent

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Re: If America defaults...
« Reply #26 on: October 16, 2013, 02:29:15 PM »
If the US isn't able to borrow more money, it will not be able to pay all of it's bills on time and it will be in default.  This is a fact.

The US can borrow an infinite amount of dollars.  There will never be a HARD default.

  Printing/borrowing trillions will cause inflation or hyper-inflation.  The Federal Government has a spending problem just like consumers.
  Spending more than your credit limit is a problem.  Notice the argument, "we are not raising the debt ceiling so we can spend more money, we are borrowing more to pay what Congress has already spent."  And the spending goes on.  Our current projected budgets by both parties and the Congressional Budget Office calls for more debt with hope to balance the budget in five to twenty years.
  There is grandstanding going on here but the real issue, borrow and spend, is ignored.

I have to say that I strongly disagree with the notion that we can use common-sense ideas drawn from our experiences as consumers/individuals to analyze what's going on with the government. First, the government controls the currency in which it is issuing debt.  This power means that government debt is totally unlike consumer debt.  Additionally, the government controls (to some degree) inflation, which is a powerful tool for erasing debt.  Finally, governments have the power to levy taxes, which individuals most certainly do not.  Thus, government debt is in no way like consumer debt.  Government spending is, likewise, not similar to individual consumption.  Government services (by in large) facilitate our economy by educating and protecting citizens, and by providing critical infrastructure.  The "spending problem" trope makes it sound like the government is out there splurging on plasma TVs and fancy cars - they are not.  We want to make these analogies to simplify what is a very complex issue, but the fact is they don't make any sense.

I agree that excessive borrowing is a problem, and we must find a way to contain it.  Most of the problem arises not from out-of-control spending but out-of-control tax cuts.  There was not a deficit problem before the massive tax cuts of the early 00's, and simply restoring these taxes would go a long way towards solving the problem.  Adjustments to Social Security and Medicare are also going to be necessary, given the massive demographic shift we are enduring.

Eric

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Re: If America defaults...
« Reply #27 on: October 16, 2013, 02:32:39 PM »
It's o.k. We're saved!!!!

Hooray!  Our self imposed crisis has been averted for 3 months until the next self imposed crisis!

Luck better Skill

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Re: If America defaults...
« Reply #28 on: October 16, 2013, 02:41:59 PM »
  Government debt is different but has enough in common to consumer debt.  The government has more options that a consumer.  At some point taxes/revenue must balance with spending.
  Government controls the currency but not faith in the currency.  It has some effect on inflation, again it does not control it. 
  So I agree you are correct is saying taxes must go up, SS benefits must be adjust to current demographics, etc.  If we do not then government control gets weaker. 

Spork

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Re: If America defaults...
« Reply #29 on: October 16, 2013, 02:44:21 PM »
I agree that excessive borrowing is a problem, and we must find a way to contain it.  Most of the problem arises not from out-of-control spending but out-of-control tax cuts.  There was not a deficit problem before the massive tax cuts of the early 00's, and simply restoring these taxes would go a long way towards solving the problem.  Adjustments to Social Security and Medicare are also going to be necessary, given the massive demographic shift we are enduring.

It's both spending and taxing.  They both have to be addressed, especially until we dig out.  And we have to get out of the mentality of "tax THEM".  Taxing the rich is a political move.  There aren't many of them to vote politicians out.  But the downside is: there aren't many of them.  You have to hit the middle class masses to make a difference.  And (IMO) you need to hit them hard enough that they know the costs of the spending they're requesting.  If people are willing to pay more (and get more) then you have a real debate.   But it seems like we have a left side that wants more services and a right side that wants less taxes... and my math skills can't make that work.

To me, compromise doesn't mean "more spending and less taxes".  It means "less spending and more taxes."  Unfortunately, the latter definition does not earn more votes in November.

dragoncar

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Re: If America defaults...
« Reply #30 on: October 16, 2013, 02:56:43 PM »
  Government debt is different but has enough in common to consumer debt.  The government has more options that a consumer.  At some point taxes/revenue must balance with spending.
  Government controls the currency but not faith in the currency.  It has some effect on inflation, again it does not control it. 
  So I agree you are correct is saying taxes must go up, SS benefits must be adjust to current demographics, etc.  If we do not then government control gets weaker.

This is not true as long as we have excess production capacity. 

Look at inflation over the past 100 years.  The dollar has lost 95% of value and we have borrowed trillions.  Nevertheless, our standard of living is much higher.

True, hyperinflation is bad, but that only happens when production cannot increase to meet demand.

Edit: we definitely have excess capacity now.. Look at unemployment levels.

Also, printing is just another type of tax-- it devalues the dollar but can be thought of as a wealth tax.  In this sense, the budget is still "balanced."
« Last Edit: October 16, 2013, 02:59:02 PM by dragoncar »

Mr.Macinstache

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Re: If America defaults...
« Reply #31 on: October 16, 2013, 02:57:02 PM »
Why don't you watch the whole thing and then tell me if you still think the debt ceiling isn't smoke and mirrors. The point that we even have a "ceiling" is laughable on its own. It's really a distraction from the whole underlying problem. If you want to watch it and discuss it that would be great.

I agree that having a ceiling is laughable.  It should definitely be abolished.  However, I'm still not watching your sensationalized conspiratorial video.

Haha. Ok, suit yourself. Print to infinity, no one benefits, everyone wins.

nawhite

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Re: If America defaults...
« Reply #32 on: October 16, 2013, 03:02:57 PM »
  Government debt is different but has enough in common to consumer debt.  The government has more options that a consumer.  At some point taxes/revenue must balance with spending.
  Government controls the currency but not faith in the currency.  It has some effect on inflation, again it does not control it. 
  So I agree you are correct is saying taxes must go up, SS benefits must be adjust to current demographics, etc.  If we do not then government control gets weaker. 

I love thinking about Government debt the same as consumer debt. I like to use the following example to shut up people who think that we shouldn't be running a deficit right now.

Currently the government can borrow money at around 0.5% to 1% (even long term). Currently inflation is somewhere between 1% and 3% depending on how you count it. If a consumer could get a mortgage for 0.5% when inflation was 1%, the consumer should get as much debt as the banks will allow! For a consumer, eventually the banks will stop giving such good rates when their debt to income ratios get bad enough. The same will happen as the US Debt to GDP ratio increases. Eventually, investors will require the government pay a higher interest rate for its debt than inflation, at which point, the government should think very carefully about how much debt it should take on. But right now, math says the government should take on as much debt as investors will allow.

Mr.Macinstache

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Re: If America defaults...
« Reply #33 on: October 16, 2013, 03:05:09 PM »
  Government debt is different but has enough in common to consumer debt.  The government has more options that a consumer.  At some point taxes/revenue must balance with spending.
  Government controls the currency but not faith in the currency.  It has some effect on inflation, again it does not control it. 
  So I agree you are correct is saying taxes must go up, SS benefits must be adjust to current demographics, etc.  If we do not then government control gets weaker.

This is not true as long as we have excess production capacity. 

Look at inflation over the past 100 years.  The dollar has lost 95% of value and we have borrowed trillions.  Nevertheless, our standard of living is much higher.

True, hyperinflation is bad, but that only happens when production cannot increase to meet demand.

Edit: we definitely have excess capacity now.. Look at unemployment levels.

Also, printing is just another type of tax-- it devalues the dollar but can be thought of as a wealth tax.  In this sense, the budget is still "balanced."

Our standard of living is higher because our production, technology and some semblance of capitalism has been allowed to exist, not because private banks created (and loaned to us) trillions out of thin air, in the form of currency, which we are charged interest on.

So Congress has the power to coin money, but delegated (Constitutionally they aren't allowed to delegate their authority) to the private Federal Reserve 100 years ago. They create dollars out of thin air and charge interest on it. Not a bad gig if you can get it. Subsequent inflation has devalued the dollar 95%. If we had not gone on the Federal Reserve system this country would be prosperous beyond what we could imagine. Instead we are 17 trillion in the hole. Do people think that will ever decrease? Fractional reserve banking is debt based system, there is no way out of that unless you cast it all off as illegitimate like Iceland recently did.
« Last Edit: October 16, 2013, 03:18:51 PM by Mr.Macinstache »

dragoncar

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Re: If America defaults...
« Reply #34 on: October 16, 2013, 04:25:10 PM »
  Government debt is different but has enough in common to consumer debt.  The government has more options that a consumer.  At some point taxes/revenue must balance with spending.
  Government controls the currency but not faith in the currency.  It has some effect on inflation, again it does not control it. 
  So I agree you are correct is saying taxes must go up, SS benefits must be adjust to current demographics, etc.  If we do not then government control gets weaker.

This is not true as long as we have excess production capacity. 

Look at inflation over the past 100 years.  The dollar has lost 95% of value and we have borrowed trillions.  Nevertheless, our standard of living is much higher.

True, hyperinflation is bad, but that only happens when production cannot increase to meet demand.

Edit: we definitely have excess capacity now.. Look at unemployment levels.

Also, printing is just another type of tax-- it devalues the dollar but can be thought of as a wealth tax.  In this sense, the budget is still "balanced."

Our standard of living is higher because our production, technology and some semblance of capitalism has been allowed to exist, not because private banks created (and loaned to us) trillions out of thin air, in the form of currency, which we are charged interest on.

So Congress has the power to coin money, but delegated (Constitutionally they aren't allowed to delegate their authority) to the private Federal Reserve 100 years ago. They create dollars out of thin air and charge interest on it. Not a bad gig if you can get it. Subsequent inflation has devalued the dollar 95%. If we had not gone on the Federal Reserve system this country would be prosperous beyond what we could imagine. Instead we are 17 trillion in the hole. Do people think that will ever decrease? Fractional reserve banking is debt based system, there is no way out of that unless you cast it all off as illegitimate like Iceland recently did.

We disagree about whether we are better off with deficit spending, but either way the 95% devaluation over the last hundred years hasn't been anything close to catastrophic.

Historically, budget surpluses come right before recessions.

DunkCityFan

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Re: If America defaults...
« Reply #35 on: October 16, 2013, 04:48:10 PM »
Nobody knows what would happen.  Lets hope we don't have the opportunity to find out.

Not true. Marx said that "All that is solid melts into air." He knew. Contemporary capitalists call this "creative destruction." The fact is we know that many people will be hurt and a small group of capitalists will benefit, while the larger group who have inadvertently (read: stupidly) created this crisis, along with those they duped, will be hurt in the name of the progress of capitalist efficiency.


xocotl

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Re: If America defaults...
« Reply #36 on: October 16, 2013, 05:44:13 PM »
Our standard of living is higher because our production, technology and some semblance of capitalism has been allowed to exist, not because private banks created (and loaned to us) trillions out of thin air, in the form of currency, which we are charged interest on.

So Congress has the power to coin money, but delegated (Constitutionally they aren't allowed to delegate their authority) to the private Federal Reserve 100 years ago. They create dollars out of thin air and charge interest on it. Not a bad gig if you can get it. Subsequent inflation has devalued the dollar 95%. If we had not gone on the Federal Reserve system this country would be prosperous beyond what we could imagine. Instead we are 17 trillion in the hole. Do people think that will ever decrease? Fractional reserve banking is debt based system, there is no way out of that unless you cast it all off as illegitimate like Iceland recently did.

Wrong. Only the US Mint and Bureau of Printing and Engraving, under the Department of the Treasury has authority to coin money. They then deposit coins/bills at the Federal Reserve in the Treasury's account.

The Federal Reserve has the power to arbitrarily grant people money in their account at the Fed, but not to create physical currency, despite what the video you posted claims. I.e. they can expand the MB money supply but not the M0 money supply.

If you don't like fractional reserve banking or fiat currency, then by all means try to conduct all of your transactions in gold. I understand how these things work and will continue to use fiat currency. Fractional reserve banking is really not a conspiracy.

Tetsuya Hondo

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Re: If America defaults...
« Reply #37 on: October 16, 2013, 06:10:30 PM »
Most people spend more than 30 mins researching a food processor. You think we could spend at least that learning out our monetary system. It lays out the facts of it, no spooky conspiracies theories are suggested to scare anyone. Yes, the people who made it are into precious metals, so what. Don't buy any and don't visit their website. Enough of the distractions...what about our monetary system? Good? Bad? Do you think we will ever pay off 17 Trillion? Who do we owe it to? Who lent it to us and where did it come from?

If I watched every video or read every article in every link someone posts online, I would never get anything done. I gave it 10 minutes more than it deserved. It has all the BS components of typical propaganda with the sensationalized account of the rather mundane workings of the Fed and Treasury, the hyperbolic rhetoric ("the biggest scam in the history of mankind" - really?), the promise to let the chosen viewer in on a secret that has somehow escaped everyone outside of the fringes of the internet, etc. On the other hand, I will spend at least 30 mins researching an appliance as that's worth my time.

And of course it matters that they're gold hucksters as it speaks directly to their credibility in this matter. They're not experts, they haven't stumbled on some dark secret, they're just selling shit.

As for the monetary system, yeah, I'm fine with it. It's not perfect, but it's better than tying our economy to a shiny rock. And, it's not as if we and everyone else didn't try that before and have to abandon it. It didn't prevent the regular booms and bust cycles prior going off the gold standard, just as our pre-Fed days were not exactly peaches and cream either. Hell, we actually had a pretty good run between the Great Depression and the Great Recession. We had some of the biggest economic expansions in our nation's history, made all the more impressive by the fact that we were no longer being fueled on cheap and abundant land to grab (sorry Indians).

And as for the debt. Yeah, we can pay it off. We just need to learn to be reasonable people and compromise with a mix of revenue generation and entitlements and spending cuts. We were getting there in the 90s until we blew it all on war and tax cuts. Another economic boom can help make a lot of hay towards paying down the debt if we can just pull our heads out of our derriers. Our problems have more to do with politics and just being general dumbasses than the Fed.

I really don't mean for this to sound as pugnacious as I'm sure it's coming off as, but I just have such a low tolerance for conspiratorial stuff. It's so freaking easy to make anything complicated sound like a conspiracy.

brewer12345

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Re: If America defaults...
« Reply #38 on: October 16, 2013, 07:42:29 PM »
Nobody knows what would happen.  Lets hope we don't have the opportunity to find out.

Not true. Marx said that "All that is solid melts into air." He knew. Contemporary capitalists call this "creative destruction." The fact is we know that many people will be hurt and a small group of capitalists will benefit, while the larger group who have inadvertently (read: stupidly) created this crisis, along with those they duped, will be hurt in the name of the progress of capitalist efficiency.

What.  The.  Fuck?

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Re: If America defaults...
« Reply #39 on: October 16, 2013, 10:15:46 PM »
  Government debt is different but has enough in common to consumer debt.  The government has more options that a consumer.  At some point taxes/revenue must balance with spending.
  Government controls the currency but not faith in the currency.  It has some effect on inflation, again it does not control it. 
  So I agree you are correct is saying taxes must go up, SS benefits must be adjust to current demographics, etc.  If we do not then government control gets weaker. 

I love thinking about Government debt the same as consumer debt. I like to use the following example to shut up people who think that we shouldn't be running a deficit right now.

Currently the government can borrow money at around 0.5% to 1% (even long term). Currently inflation is somewhere between 1% and 3% depending on how you count it. If a consumer could get a mortgage for 0.5% when inflation was 1%, the consumer should get as much debt as the banks will allow! For a consumer, eventually the banks will stop giving such good rates when their debt to income ratios get bad enough. The same will happen as the US Debt to GDP ratio increases. Eventually, investors will require the government pay a higher interest rate for its debt than inflation, at which point, the government should think very carefully about how much debt it should take on. But right now, math says the government should take on as much debt as investors will allow.

  The problem with your example is the government is not borrowing and investing the money.  It is being spent.  We are tapping out our reserves and emergency funds.  Then when a real crisis occurs the USA will no longer have any credit options.  We may dodge any event/crisis from happening, but not a good bet.
  This reminds me of realtors talking about how great a mortgage is, you get to deduct the interest from your taxes.  Yes but no mortgage payment is even better.
 

DunkCityFan

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Re: If America defaults...
« Reply #40 on: October 17, 2013, 06:07:11 AM »
Nobody knows what would happen.  Lets hope we don't have the opportunity to find out.

Not true. Marx said that "All that is solid melts into air." He knew. Contemporary capitalists call this "creative destruction." The fact is we know that many people will be hurt and a small group of capitalists will benefit, while the larger group who have inadvertently (read: stupidly) created this crisis, along with those they duped, will be hurt in the name of the progress of capitalist efficiency.

What.  The.  Fuck?

The contemporary shutdown and impending defaults are all products of exchanges that Marx would call the means of bourgeois production which we can no longer control. What we are witnessing in Washington is simply what Marx predicted and saw happen in many "markets."

Honestly, I thought this board would have read some Marx as part of MM philosophy entails not making a personal "bubble" for oneself. Here's Marx on this for those who may or obviously haven't read him:



"A similar movement is going on before our own eyes. Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule. It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. "

http://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm

Eric

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Re: If America defaults...
« Reply #41 on: October 17, 2013, 07:44:42 AM »
The problem with your example is the government is not borrowing and investing the money.  It is being spent.  We are tapping out our reserves and emergency funds.  Then when a real crisis occurs the USA will no longer have any credit options.  We may dodge any event/crisis from happening, but not a good bet.

I'm not sure I see the distinction.  What would the government invest in?  People, infrastructure, military, etc.  How would it invest?  By spending money.

Mr.Macinstache

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Re: If America defaults...
« Reply #42 on: October 17, 2013, 07:48:00 AM »
Our standard of living is higher because our production, technology and some semblance of capitalism has been allowed to exist, not because private banks created (and loaned to us) trillions out of thin air, in the form of currency, which we are charged interest on.

So Congress has the power to coin money, but delegated (Constitutionally they aren't allowed to delegate their authority) to the private Federal Reserve 100 years ago. They create dollars out of thin air and charge interest on it. Not a bad gig if you can get it. Subsequent inflation has devalued the dollar 95%. If we had not gone on the Federal Reserve system this country would be prosperous beyond what we could imagine. Instead we are 17 trillion in the hole. Do people think that will ever decrease? Fractional reserve banking is debt based system, there is no way out of that unless you cast it all off as illegitimate like Iceland recently did.

Wrong. Only the US Mint and Bureau of Printing and Engraving, under the Department of the Treasury has authority to coin money. They then deposit coins/bills at the Federal Reserve in the Treasury's account.

The Federal Reserve has the power to arbitrarily grant people money in their account at the Fed, but not to create physical currency, despite what the video you posted claims. I.e. they can expand the MB money supply but not the M0 money supply.

If you don't like fractional reserve banking or fiat currency, then by all means try to conduct all of your transactions in gold. I understand how these things work and will continue to use fiat currency. Fractional reserve banking is really not a conspiracy.


We trade Federal Reserve Notes. It's a fact that our currency is loaned to us, at interest, by a private central bank - who has the authority to fix interest rates, among other things. The Fed reports on itself, there is no true comprehensive audit. I'm sure it's all legit though, nothing to see there.

Mr.Macinstache

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Re: If America defaults...
« Reply #43 on: October 17, 2013, 07:55:22 AM »
Most people spend more than 30 mins researching a food processor. You think we could spend at least that learning out our monetary system. It lays out the facts of it, no spooky conspiracies theories are suggested to scare anyone. Yes, the people who made it are into precious metals, so what. Don't buy any and don't visit their website. Enough of the distractions...what about our monetary system? Good? Bad? Do you think we will ever pay off 17 Trillion? Who do we owe it to? Who lent it to us and where did it come from?

If I watched every video or read every article in every link someone posts online, I would never get anything done. I gave it 10 minutes more than it deserved. It has all the BS components of typical propaganda with the sensationalized account of the rather mundane workings of the Fed and Treasury, the hyperbolic rhetoric ("the biggest scam in the history of mankind" - really?), the promise to let the chosen viewer in on a secret that has somehow escaped everyone outside of the fringes of the internet, etc. On the other hand, I will spend at least 30 mins researching an appliance as that's worth my time.

And of course it matters that they're gold hucksters as it speaks directly to their credibility in this matter. They're not experts, they haven't stumbled on some dark secret, they're just selling shit.

As for the monetary system, yeah, I'm fine with it. It's not perfect, but it's better than tying our economy to a shiny rock. And, it's not as if we and everyone else didn't try that before and have to abandon it. It didn't prevent the regular booms and bust cycles prior going off the gold standard, just as our pre-Fed days were not exactly peaches and cream either. Hell, we actually had a pretty good run between the Great Depression and the Great Recession. We had some of the biggest economic expansions in our nation's history, made all the more impressive by the fact that we were no longer being fueled on cheap and abundant land to grab (sorry Indians).

And as for the debt. Yeah, we can pay it off. We just need to learn to be reasonable people and compromise with a mix of revenue generation and entitlements and spending cuts. We were getting there in the 90s until we blew it all on war and tax cuts. Another economic boom can help make a lot of hay towards paying down the debt if we can just pull our heads out of our derriers. Our problems have more to do with politics and just being general dumbasses than the Fed.

I really don't mean for this to sound as pugnacious as I'm sure it's coming off as, but I just have such a low tolerance for conspiratorial stuff. It's so freaking easy to make anything complicated sound like a conspiracy.

Can we agree that debt is slavery, correct? WHO do you think we (as Americans) owe the majority of that 17 trillion too?

brewer12345

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Re: If America defaults...
« Reply #44 on: October 17, 2013, 08:45:19 AM »
Nobody knows what would happen.  Lets hope we don't have the opportunity to find out.

Not true. Marx said that "All that is solid melts into air." He knew. Contemporary capitalists call this "creative destruction." The fact is we know that many people will be hurt and a small group of capitalists will benefit, while the larger group who have inadvertently (read: stupidly) created this crisis, along with those they duped, will be hurt in the name of the progress of capitalist efficiency.

What.  The.  Fuck?

The contemporary shutdown and impending defaults are all products of exchanges that Marx would call the means of bourgeois production which we can no longer control. What we are witnessing in Washington is simply what Marx predicted and saw happen in many "markets."

Honestly, I thought this board would have read some Marx as part of MM philosophy entails not making a personal "bubble" for oneself. Here's Marx on this for those who may or obviously haven't read him:



"A similar movement is going on before our own eyes. Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule. It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. "

http://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm

I willtry again: Whiskey Tango Foxtrot?

Tetsuya Hondo

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Re: If America defaults...
« Reply #45 on: October 17, 2013, 08:49:34 AM »
Can we agree that debt is slavery, correct? WHO do you think we (as Americans) owe the majority of that 17 trillion too?

I'm afraid not. Slavery is slavery. Saying debt is slavery is an affront to every human being that has ever been held in bondage, whipped, beaten, starved, had their families split up and sold off in front of them, and killed at the whims of their masters. That's slavery.

Debt in itself is not bad. Debt makes it possible to do a lot of things that would otherwise be very difficult to fund. Hell, debt fueled the Renaissance. Personally, debt allowed me to buy a nice house without waiting a couple of decades and to pay for an education I otherwise would not have been able to afford at the time (which put me on a completely different earning plane than I could have hoped to be on before).

Debt in the form of our national debt is a hindrance and should be addressed, but we need to address it in a rational way. If you're looking for common ground, I think we can both agree that we need to address it and it should be smaller.

As for who owns it. I didn't think this was some secret. It's a mix of foreign and domestic bond holders (including me!). About 50% is foreign (China, Japan, UK, Taiwan, Brazil being among some of the largest holders).

Luck better Skill

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Re: If America defaults...
« Reply #46 on: October 17, 2013, 08:59:09 AM »
Can we agree that debt is slavery, correct? WHO do you think we (as Americans) owe the majority of that 17 trillion too?

Debt in itself is not bad.

Debt in the form of our national debt is a hindrance and should be addressed, but we need to address it in a rational way. If you're looking for common ground, I think we can both agree that we need to address it and it should be smaller.


  I reduced your reply, we agree debt itself is not good or bad.  Lots of common ground here. 
  Perhaps the best way to look at the national debt is how the Government deals with it.  Like an interest only loan.  We only pay the interest, not actually paying off the principle. 
  So when people talk about the low 1% rate or the comparison to GDP it is not the critical factor.  When the apple cart is upset the Nation will be like lots of homeowners going, "I not sure can make my payment!"

dragoncar

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Re: If America defaults...
« Reply #47 on: October 17, 2013, 10:13:27 AM »
Can we agree that debt is slavery, correct? WHO do you think we (as Americans) owe the majority of that 17 trillion too?

I'm afraid not. Slavery is slavery. Saying debt is slavery is an affront to every human being that has ever been held in bondage, whipped, beaten, starved, had their families split up and sold off in front of them, and killed at the whims of their masters. That's slavery.

Debt in itself is not bad. Debt makes it possible to do a lot of things that would otherwise be very difficult to fund. Hell, debt fueled the Renaissance. Personally, debt allowed me to buy a nice house without waiting a couple of decades and to pay for an education I otherwise would not have been able to afford at the time (which put me on a completely different earning plane than I could have hoped to be on before).

Debt in the form of our national debt is a hindrance and should be addressed, but we need to address it in a rational way. If you're looking for common ground, I think we can both agree that we need to address it and it should be smaller.

As for who owns it. I didn't think this was some secret. It's a mix of foreign and domestic bond holders (including me!). About 50% is foreign (China, Japan, UK, Taiwan, Brazil being among some of the largest holders).

It's not 50%.  More like 27%.  The vast majority is held by US entities.

mulescent

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Re: If America defaults...
« Reply #48 on: October 17, 2013, 11:15:02 AM »
Quote

  The problem with your example is the government is not borrowing and investing the money.  It is being spent.  We are tapping out our reserves and emergency funds.  Then when a real crisis occurs the USA will no longer have any credit options.  We may dodge any event/crisis from happening, but not a good bet.
  This reminds me of realtors talking about how great a mortgage is, you get to deduct the interest from your taxes.  Yes but no mortgage payment is even better.
 

Interesting discussion - thanks!  A couple of things to consider:

1)  The money is being invested in research, defense infrastructure, educating citizens, and keeping people healthy.  Unlike a typical individual, very little of what the government spends is on "consumption."

2)  We cannot ever tap out our reserves or emergency funds, at least as long as the rest of the world has faith in us.  Because we have a fiat currency, and because that currency is the world reserve currency, we will never run out of money.  That is, unless we go so wild with debt or manage our affairs so badly that people will no longer lend to us.  From my perspective, it is the litany of Congressional crises and our lack of a reasonable long-term plan for dealing with our demographic issues that puts us in danger.  Our levels of debt (and deficit, after the sequester and tax hikes) are pretty sustainable.

3)  "No mortgage payment," would be a very bad thing in our case.  Significant amounts of US dollar denominated debt held by foreign powers creates a powerful incentive for cooperation.  The relationship between the US and China is clearly much better for the fact that we rely on them and they rely on us - part of that is the significant US debt that China holds.  Erase all our debts and it would be much easier for the world to kick the US dollar to the curb.

Mr.Macinstache

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Re: If America defaults...
« Reply #49 on: October 17, 2013, 11:34:27 AM »
Can we agree that debt is slavery, correct? WHO do you think we (as Americans) owe the majority of that 17 trillion too?

I'm afraid not. Slavery is slavery. Saying debt is slavery is an affront to every human being that has ever been held in bondage, whipped, beaten, starved, had their families split up and sold off in front of them, and killed at the whims of their masters. That's slavery.

Debt in itself is not bad. Debt makes it possible to do a lot of things that would otherwise be very difficult to fund. Hell, debt fueled the Renaissance. Personally, debt allowed me to buy a nice house without waiting a couple of decades and to pay for an education I otherwise would not have been able to afford at the time (which put me on a completely different earning plane than I could have hoped to be on before).

Debt in the form of our national debt is a hindrance and should be addressed, but we need to address it in a rational way. If you're looking for common ground, I think we can both agree that we need to address it and it should be smaller.

As for who owns it. I didn't think this was some secret. It's a mix of foreign and domestic bond holders (including me!). About 50% is foreign (China, Japan, UK, Taiwan, Brazil being among some of the largest holders).

Like said, its more like 25% is foreign, the rest we (the US) owes to central banking, like the Fed.

Yes debt is a tool, but you didn't take out a $4,500,000 mortgage on a 32k salary. You could never pay that back! You would be enslaved to that debt the rest of your life.

People get all hot and bothered about the evils of Wall St, but then are totally kosher with a private central bank. It makes 0 sense. People are totally ignorant to what the central banking is, what they do and how they enslave and screw over countries instead of helping them.