The National Debt Is Coming Due, Just Like We Told You


#61

GASP BLASPHEMER! APOSTATE! HERETIC!


#62

And it should equal population growth as well as innovation and technological improvement, reflected in higher levels of production. Everything else (I think) is just inflation and pointless, although that inflation is how we pay for our debt and avoid that explosion. It’s a hidden tax. So, yeah, it kind of works – till the fiscal managers really screw up. It just means people cannot buy the things they want. Some bureaucrat decides what they should buy for them – and bureaucrats will pick winners and losers the same way the president is picking them with his trade war.

Gold standard or something else. /shrug. Scarce things should be traded for scarce things not things where the supply is potentially practically infinite, constrained only by the judgement of a few experts.

No.

If you take my dollar and don’t return it’s theft.

The way we use taxes, it’s akin to bringing it back with a tank full of ethanol and scratched paint. And most importantly, doing it against my will.

I don’t view all taxation as theft. Among other examples, when you and yours steal a dollar and hand it to a big corporation in the name of economic development or jobs or to save it from the mistakes it makes in the market, that’s theft.

Literally, for CSB what’s right and wrong is whoever has a majority and says what is right and wrong.

To be fair, CSB really is not in sync with the Democrats or the socialists on economics.

These can change rapidly, especially when predicated on stupid policies and practices that are rewarded instead of punished by government spenders (as in 2008).


#63

I’m not an economic expert, but I’ve been around the block enough to look askance when you tell me this concept is well known and not controversial.

Two letters: VA.

That it is predictable that it will go off doesn’t mean I know when and at what financial point. It’s like predicting the big earthquake in California. That one hasn’t happened yet, either.

It’s government spending we’re talking about. Lack of accountability, lack of responsibility. I would have thought this would be obvious and noncontroversial.

I saw this quoted in your post attributed to me. I didn’t say it, although I commented on it.

Magna-Yeah-That, although I like my analogy better.


#64

You seem to have made a correlation between government spending and US imports. I think the deficit is on the order of $0.8 trillion whereas imports are on the order of $2.3 trillion. So are you suggesting the world is clamoring to buy another $1.5 trillion of treasuries per year, if only we would be gracious enough to sell them?

Wouldn’t countries rather balance their own trade such that their importing as much as they export?

Interest rates are artificial. They follow the prime set by the FED. So any logic about what interest rates should correlate with is pointless.

I’m the one that said that. It sounds silly, but the belief that deficit spending is good sounds even sillier.


#65

Hey @csbrown28, here’s a theory that I heard somewhere, probably from Mike Maloney. What do you think of it?

China continues to buy lots of gold. They apparently buy more per year than gold-producers produce worldwide, which suggests they are not only acquiring more gold, but are increasing their fraction of all the gold in the world. Though they don’t report how much they have.

As this progresses, it will be harder and harder to get other nations to part with any of their gold, so the price will go up. And at some point they could just declare the price of gold is some value, say $50,000/oz, and buy up all that anyone wants to sell.

If they can sustain that (having already depleted most that’s for sale already), they will in fact be in total control of the world price of gold. No one could buy it cheaper if China is willing to pay. And they’ll have a lot more of it than any other nation. So they could then back their yuan with gold and the yuan would suddenly be the most desirable reserve currency in the world.

Plausible?


#66

Fiscal deficit has been between ~$500 billion and ~$800 billion

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You quote imports, but forget that exports bring money back to the US. Thus we need to look at the trade defict, not just imports.

So yes, the world either holds $800 billion a year, they trade it on FOREX for their native currencies or they buy bonds. They don’t correlate perfectly because you also have to factor in borrowing by the US private sector.

Nations like China and India (to a lesser extent) manipulate their currencies by printing their own currency and using it to buy US dollars. This keeps prices low to US consumers, but those nations end up with large US dollar reserves.

The only way they will stop buying US Treasuries is if they either run a neutral balance of trade or a trade deficit. The problem with doing either is that they will need something closer to a consumption-based economy and despite any desire to be like the US, they have a long way to go.

Of course, they are. The “natural” rate of interest in a fiat economy is 0%. The Fed manipulates the rate to increase it above zero.

I’m surprised that we agree on this point. Something we can come back to in the future.

Yes, I know, but FC commented on it and I wanted to comment to his comment…

Deficit spending is no more “good” or “bad” than crouching. I mean, it really depends on the situation. Sometimes yes and others no.

You realize now, after this conversation that the trade deficit represents US dollars that are in the hands of foreign interests in the form of savings and therefore aren’t circulating and that not creating new money to replace them the US economy will run short on dollars, right?


#67

Oh, believe me; I’m not disagreeing with you.


#68

This is a really complicated subject that is often oversimplified. It’s not a topic I believe I can say a few clever words and convince anyone here, so as is often the case, I’ll agree to disagree on this point, however, if you think you have the data to convince me, by all means.

But that’s not really how it works. The government doesn’t add infinite money. as a percentage of GDP the amount of new money created is fairly steady. When you account for increases in productivity and population increase one could argue there isn’t enough money.

Remember that the vast majority of money is created by people and businesses when they take loans.

Good :slight_smile:

Close.

The rules of a game are based on whatever the people that agree to play it say they are. The rules are created in order to maintain order and they create expectations in order to achieve some desired outcome. For games, it’s usually fun, competition etc.

Right and wrong, good and bad are similar to the rules of a game. They are terms we use relative to some goal or desire we wish to achieve. Freedom, liberty, happiness, if you value these ideals, there are actions that help promote them and those that restrict them. Right and wrong are terms that can only be used once we define what we want AND we convince others of the values of those ideas.

The point is, we have to CHOOSE what it is we value and convince others that our ideas are worth valuing.

The majority defines what is right and wrong, but that doesn’t mean that I believe that what the majority believes is right or wrong. I can hold values contrary to the majority. My job at the point is to try to convince a majority of people why what I believe is right and why the currently held idea is wrong.

So yes, the majority decides what to call “right” and “wrong”, but that doesn’t make the ideas right or wrong.

Not to belabor the point, but let me try an example.

Think of something in the past that was accepted but that today (you’d agree) is unacceptable or dangerous.

Society accepted whatever it is you thought of, so it wasn’t wrong in the eyes of society, but today it is.

Does that mean it wasn’t wrong then? Of course, it was, but we lacked the understanding to have an intelligent debate in society about (whatever you thought of) so that rights and wrongs can be changed based on reality.

I can’t disagree with that, but the devil is in the details :wink:


#69

I don’t think so.

Nope, won’t happen, at least if China remains an export-based economy.

Think about why the world holds so many US dollars (remember it’s reportedly about $10t dollars).

Do you think that people believe that US dollars will appreciate? No, of course not, everyone knows that US dollars depreciate in value. So why do so many nations of the world hold so many US dollars?

Is it because so many countries trade oil in the US dollar?

Sort of, but the rationale is backward (and it’s not just about oil). People don’t value the dollar because oil producers trade oil in dollars, producers trade oil in US dollars because so many nations hold them.

So why do nations hold so many US dollars?

Because so many nations are willing to sell US consumers goods and services and take dollars in trade. The fact that so many nations hold dollars means there is a HUGE global supply of them. It makes it easy for nations to trade dollars to each other as they each know the value of the currency they trade between them

The other reality is that a nation like China (and many other nations that trade with the US) export their productivity and import their own currency. That means in the net they are taking more of their own currency from the world then they are adding to it. The result in China’s case (assuming they remain a large net exporter) is that there simply aren’t enough Yuan held by enough nations in order to make it a currency that nations can trade in.

See I think you think that the usefulness of a reserve currency is that it maintains it’s value. In reality, reserve currencies are currencies that are easy for nations to trade in.

Now to be clear, all currencies can be held in reserve, it’s just that the US dollar is the most predominant one.

If the US were to run a neutral balance of trade, the value of the dollar as a reserve currency would plummet because the supply of dollars to the rest of the world would decline.

If I were to speculate on why nations like China and Russia (who if I’m not mistaken has bought more gold than China) is that diversification means that the US government cannot punish those nations by manipulating the value of the dollar, nor can it freeze US dollar accounts (remember that all China’s reserves technically reside here in the US).

Also, keep in mind that all the gold in the world, currently, has a value of $7.5 trillion. There is $10 trillion in US dollar reserve accounts and even if the price of gold does increase, supply IMO will always be an issue.

Having said that, if nations of the world trade internationally in gold, everyone will have an incentive to run a a neutral balance of trade otherwise the net importer of G&S will be functionally exporting their gold (which as I’m sure you know is extremely finite).

The problem with global balanced trade IMO is that nation’s trade because there are some things they are more efficient at producing and things they are not, thus, trade benefits both nations. If your balance of trade is always even then effiecentcies are potentially lost. There is business that might want to get done but is constrained by the need to balance trade.


#70

I don’t know if your numbers are correct. But if they are, they’re probably at today’s gold price of $1224/oz. In the presented scenario, China would declare the price of gold and be able to enforce it by buying and selling all that anyone wants at their price.

So if they enforce $50,000/oz, there will be $306 trillion of gold in the world.

You may have accurately described the model of currency in the world as it’s seen today. (Not done analyzing.) But that may not be the best model for prosperity.

Having a relatively unchanging standard of measure of wealth would be a good thing. The kilogram, second and meter are defined in terms of fundamental properties of the universe. Wealth is important too. Why do we let the fundamental unit of its measure float like a leaf in the wind? It’s madness.


#71

So let me ask you this question, so what?

I mean, if China cornered the market on oil I’d be worried, but really, who cares if the Chinese drive the cost to $100k/oz…?

I don’t need gold. Sure there are some necessary manufacturing applications, but I suspect there are substitutes that will work, even if they are inferior.

Again, you seem to think that the power of a currency is based on its appreciation value. The value of the dollar is extrinsic, it’s based on the real productivity that people create and sell for dollars. The dollar itself does not have to have intrinsic value or be worth more over time in order to be useful as currency. There is nothing inherently wrong with a currency worth less over time.

Sure $1 is worth 95% less today than it was in 1913. Today people make 6600% more of those dollars than they did in 1913. Add to that the vast numbers of things that can be bought today that weren’t available in 1913.

Are we better off with lots more dollars even if they are worth less? Of course.


#72

No, the Chinese are in massive debt, and it keeps getting worse, because they don’t want their economy to collapse from this massive ghost-city bubble of theirs.

The Yuan is hardly trusted by resident Chinese, much less foreigners.


#73

Failed the True Libertarian test in a single question :thinking:


#74

I don’t follow.