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Truth74

@embarqhsd.net

Not out of money

There's no such thing as being out of money. The US Federal Reserve has more money than you can ever set your eyes on. I don't care what any politician tells you. America is not broke. Don't fall for that crap.
amigo_boy

join:2005-07-22

1 recommendation

Re: Not out of money

said by Truth74 :

There's no such thing as being out of money. The US Federal Reserve has more money than you can ever set your eyes on. I don't care what any politician tells you. America is not broke. Don't fall for that crap.
I agree. If we treat the US as a business, we would measure its debt (13 trillion) as a ratio of its net worth. Household net worth is $52 trillion even in this economic slump. That doesn't count the book value of businesses. Nor the value of national resources (buildings, military equipment, transportation infrastructure, natural resources, public real estate, national parks).

It would be more interesting to see US value depicted as a stock price with a forward-looking price-to-earnings ratio.

It would be better if we carried less operating debt. And, expected more for the taxes we pay. This is like yesterday's topic about Finland. We pay as much or more in taxes (when you consider all taxes paid, such as those paid by a service provider and passed on to us) as other countries, but get much less than other countries in return (because we devote our taxes to helping corporations, negotiating so-called "free trade" agreements, etc.).

The problem isn't so much how much we're spending, it's how we're spending.

BTW: At least half of all government jobs should be back-to-work jobs for welfare and unemployment recipients. Not permanent jobs. They should be a place for someone to get experience for a career change (or downgrade) and move on. Two years and out. A reciprocal "public service" at a very low wage.

The thing that cracks me up is how we're so proud of being Americans. Yet, it seems like we're dumb as rocks the way we aren't very creative (nor demanding) about how American operates. Just angry pitchforkers with no solutions to offer (and pitchforking about things we don't even understand).

Karl Bode
News Guy
join:2000-03-02
kudos:42

Re: Not out of money

The thing that cracks me up is how we're so proud of being Americans. Yet, it seems like we're dumb as rocks the way we aren't very creative (nor demanding) about how American operates.
I feel like you and I could be friends if we met for a beer.
Finger2208

join:2001-04-07
Lindale, TX
said by Truth74 :

There's no such thing as being out of money. The US Federal Reserve has more money than you can ever set your eyes on. I don't care what any politician tells you. America is not broke. Don't fall for that crap.
I take it you failed eco101 if you actually took it. Sure, the Treasury can continue to print money and deposit it in the Federal Reserve. And the effects of this action are to lower the value of the USD (check pre-WW2 Germany).

After reading this thread it is easy to see why what is happening in Greece is soon coming to our own shores. As we continue to borrow money from China, Japan, etc. and continue to print USD to deposit in the Federal Reserve so the FR can buy T-Bonds from the Treasury (sounds like monopoly money) along with China we will continue down the road of eventual bankruptcy. And apparently the bulk of the population are totally clueless as to what is going on and the long lasting effects of such actions.
dhobbs74

join:2003-08-12
Goldsboro, NC

Re: Not out of money

said by Finger2208:

said by Truth74 :

There's no such thing as being out of money. The US Federal Reserve has more money than you can ever set your eyes on. I don't care what any politician tells you. America is not broke. Don't fall for that crap.
I take it you failed eco101 if you actually took it. Sure, the Treasury can continue to print money and deposit it in the Federal Reserve. And the effects of this action are to lower the value of the USD (check pre-WW2 Germany).

After reading this thread it is easy to see why what is happening in Greece is soon coming to our own shores. As we continue to borrow money from China, Japan, etc. and continue to print USD to deposit in the Federal Reserve so the FR can buy T-Bonds from the Treasury (sounds like monopoly money) along with China we will continue down the road of eventual bankruptcy. And apparently the bulk of the population are totally clueless as to what is going on and the long lasting effects of such actions.
Ok so since you know so much about economics how about enlighten everyone when America supossedly are going to be entering Bankruptcy court? Are they filing Chapter 11 or Chapter 13 BWAAHAHAAAAAAA!!
amigo_boy

join:2005-07-22

1 edit

Re: Not out of money

said by dhobbs74:

when America supposedly are going to be entering Bankruptcy court? Are they filing Chapter 11 or Chapter 13
Treasury notes, bills, etc. are the equivalent of corporate-issued stock to capitalize an entity. The interest rates which the Treasury can charge represents the fair-market price of the "corporation" (in this case, the country). Like corporate stock, the value of US "stock" is relative to the value (or lack thereof) that investors see available in other "stock" (countries).

A few months ago a big scene was made about how the US Treasury had to pay a (slightly) higher interest rate to attract buyers (to monetize the US debt) than some businesses like General Electric. Those corporations are nowhere near "going broke." The fact that the US reached the level of those corporations (only briefly), indicates we're pretty far from such likelihood.

Anyway, if the US ever became insolvent, you'd see it in the auction of Treasuries. We would have to pay huge interest rates (as a "risk premium") to attract investors to capitalize our "corporation" (with less "book value").

That's highly unlikely because other countries have a vested interest in our continued solvency. Either because we protect them (Arab Gulf states), or we consume their products (China, Chile). In that case, they have a huge incentive (despite the occasional protests which China makes) to continue buying more "stock" as a "trading partner." And, to take a write down (as a devaluation of its capital investment, or renegotiation of interest payments).

Things would have to be *very* bad globally for the US to go bankrupt. And, the worse it becomes, the more everyone looks to the US to lead the recovery. That's a lot like the hypothetical landscaper in my previous post who has more luxury and financial latitude than his peers.
amigo_boy

join:2005-07-22

3 edits
said by Finger2208:

Sure, the Treasury can continue to print money and deposit it in the Federal Reserve. And the effects of this action are to lower the value of the USD (check pre-WW2 Germany).
German hyperinflation (1919-1923) was more complicated than you depict. It was the result of Germany abandoning its gold standard. That was a result of Germany being forced by the newly-formed League of Nations to pay war reparations at the end of WWI, depleting Germany's gold reserves.

Germany's abandonment of that gold standard was also a natural conclusion to other nations being forced to leave theirs in preparation for war. An inflexible metal currency is only practical when your major trading partners' currencies are based upon something similar.

It was that near total depletion of Germany's gold reserves coupled with the disruptive effect of changing currencies overnight which contributed to the reasons for inflationary price pressures (paper printing in the face of a credit crisis; at a time when the nation had lost an enormous part of its collective wealth leading naturally to currency debasement.).

The real irony here is: those who argue the point you did usually advocate a return to a gold standard. But, it is the inflexibility of a gold standard which always results in a society leaving it (to prepare for war, or pay war reparations). Changing currency like that is much more disruptive than the negatives associated with ongoing fluctuations in currency policy.

Also, the value of a currency is not directly related to the monetary supply. For example, the supply of USD grew enormously late 2008. But, it's value relative to other currencies rose due to the "flight to safety" effect among foreign investors. The USD, even with emergency monetary policies (something that would not have been available with a metal currency) looked more attractive than other currencies, thus creating demand and increasing its value.

The same thing is happening right now as the Euro monetary union is fracturing. Just months ago people thought the Euro could replace the USD as a worldwide currency. Now it's existence is doubted. Creating yet more demand for the USD.

I'm not arguing for reckless deficit spending. But, just as an individual makes calculations relative to his peers, there's nothing wrong with using the worldwide demand for the USD to jumpstart the economy and gain an edge upon other nations.

For example, when the credit crunch occurred late 2008, if you were more flush with cash than your peers (or, had a better credit rating) it was a terrific time to pick up bargains (cheap Harleys, work trucks, etc.). If you were a landscaper, that would have been a perfect time to increase your capacity to handle jobs (when the jobs come back) while your competition struggled through the shortage of jobs.

At a macro level, that is what fiat currency allows a society to do. An inflexible metal currency doesn't. It leads to absurdities, such as Ireland during the potato famine shipping potatoes to England for gold -- as its people starved.

Can faulty policy be applied to fiat currency? Yes. Does a policy-based currency create different winners and losers than a metal currency? Yes.

But, it's generally better (over the long term) than being inevitably forced off metal to policy-based as a matter of self preservation.