The US is off the gold standard. This has converted the national debt into the assets of the people. - Politics Forum.org | PoFo

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Everything from personal credit card debt to government borrowing debt.

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#15186735
The US has a "fully" fiat currency. This includes --- the US issues the dollar; it floats the dollar on the international currentcy market, and so, is not obbliged to intervene to support the dollar; and it has no debts in any other foreign currency.
1] Therefore the US can always pay the interest and the principal on all US bonds.
2] The damage to the world's economy and the US's economy would always be much worse if the US defaulted on its bonds; than if it just minted a $1T coin and gave it to the Fed. to top-up its account balance, so it can send out checks or pay the bonds that have come due.
3] It is the American rich (who currently CONTROL the US Gov.) who would suffer the most if the US defaulted on the bonds that the American rich themselves hold.

Therefore, the US "national debt" is no longer a debt at all.

When the US went off the gold standard all the US bonds became interest bearing assets of the American people, foreigners, US corps., incurance comp., and banks, etc.

This is because the US can, whenever it wants, just create dollars (out of thin air) to pay off the bonds or to pay the interest. And, the American rich will not block this, because they hold the bonds and would lose $billions$ or $trillions$ if the US defaulted.

All these statements are self-evident facts. Any MS economists that denys them based on an economic theory that uses proofs based on assuming things that are self-evidently false --- are gaslighting you.

I'm saying all this in a new thread, because I want the lurkers to see this claim in the thread title.
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#15190661
What would happen if the US decided to pay off all its bonds over just 1 year?

I'm no expert, but these are my thoughts.
1] The US could change a few laws and do this. It would write a check to each of the bondholders and instruct the Fed. Res. to cash the check.
2] This would flood the US and the world with US dollars in bank accounts.
3] The ex-bondholders would scramble to find a way to earn interest or money with these dollars.
4] Right away, they would just open savings accounts at many banks.
5] Now would banks want these accounts?
. . . I don't think so. Whatever the low interest rate on these accounts is, it is still a net loss for the banks. The banks can't lend more money than borrowers want to borrow. Banks can already always lend money to *every* borrower who the bank thinks will repay the loan. So, maybe the banks will refuse to open these accounts or even accept deposits to existing accounts.
6] So, what will the ex-bondholders do? If they are smart they will not invest in real estate or stocks, because adding $25T to the supply of cash will make bubbles in all these markets. And, all bubbles will burst. Meaning many will loose their money.
. . . Many will not be smart and so they will invest in real estate and stocks. This will raise the prices of real estate and stocks, cause bubbles, and etc.
. . . IMHO, this will be a disaster for the world. Revolutions will sweep the world as the mass of the world's people find they can't get money to eat or a place to live.
#15191054
Another thought that undermines the idea that your grandchildren will suffer because of the borrowing we do now.

. . . Forty years ago Reagan began the new normal where the US Gov. deficit spends like crazy. I can say this because it took from 1837 until 1981 (144 years) before the debt reached $1T. This is an average of $6.94 B/yr. Since 1981 the debt has been increased by about $650 B a year on average. This is $0.65 T/yr.. If I did the math right, this is a 9366% increase in the average yearly deficit, or the average debt increase after 1981 has bee 93.66 times more than before 1981.
. . . Therefore, there are some people now who have grandchildren who are having to "pay" on the debt incurred by Reagan in 1982. So, grandchildren are already "suffering" to make the payments on the debt.

Now, I ask you, do you seem to be suffering much while the payments are being made? I don't suffer at all, do you?
Well, I suppose that some can truly feel that because of the Senators like Manchin, who are afraid to increase the debt, the US Gov. is being kept from spending to help them. However, this is not necessary, Manchin is wrong to resist spending. And besides, he is likely just using that as an excuse to stop spending that he doesn't want for other reasons. And besides, it isn't that taxes are too high, it is that spending is too low.

So, I claim that right now the grandchildren are not suffering to make the payments on the debt.
Why is this? It is because the payments are made 100% with newly borrowed money.
Is it possible for the rich of the world** to not be willing to buy new bonds at a reasonable interest rate?
. . . Yes, it is. However, the damage to the US's and the world's economy from selling the bonds directly to the Fed. Res. is about 1/10 the damage that would occur if the US defaulted on the payments. So, IMO, the US will always just sell the bonds directly to the Fed. or just create dollars without selling the bonds at all, IF this becomes necessary.
. . . Is there damage to the economy from either of those 2 choices? It is possible, but not certain. There are just 3 possible effects or outcomes.
1] There is little or no effect. [In Japan now, over 46% of all Japanese bonds outstanding are held by the Bank of Japan. This seems to have no effect on Japan.]
2] There could be some inflation. To fight this the Gov. can cut spending or raise taxes. Now you may think either of these 2 things is going to make someone suffer. This not true, because think about this analogy.
. . . Your boss gives you a raise, you work there for 10 years and one day he calls you to the office and tells you he needs to cut your pay by 1/2 of what the raise was. Would you rather that he never gave you the raise? Or, would you rather he gave you the raise and had to take 1/2 of it back 10 years later. Truly, this is like the Gov. spending now that increases everyone's income for the next 10 years, and then having to reduce the spending to control inflation but not by that all much. You just need to make sure that you, personally, get your share of the increased incomes before the super rich suck the money into their bank accounts.
3] The dollar could loose value on the international money market. This would have 2 effects.
. . . a] It would increase exports because our stuff would be cheaper for the rest of the world. This would increase the incomes of some in the US.
. . . b] It would make the stuff you buy from the rest of the world cost you more. But again, you have been earning more for years before this happened (if it happens at all) so over all you are still better off. Also, the increased incomes of those in the exporting industries off-sets the increased costs for everyone to some extent. Frankly, I'm not expert enough to know how much. Is it a little, or is it a huge amount?
. . . However, the IMF and the World Bank call for 3rd world nations to export more than they import to payback their loans. How can it be terrible for the US to import less and export more?

My conclusion is that our grandchildren will *not* suffer to make payments on the debt, ever.
This means that a reasonable amount of deficit spending now will give the US benefits like improving the infrastructure and winning the fight on ACC, AND will increase the incomes of the working class as a whole, which, in tern, will let the rich sell them more stuff or services. It is a win-win-win.

. . . Note: I didn't say the US can deficit spend $10 T/yr. I said a reasonable amount of deficit spending is fine, even necessary to fight ACC.

. ** . Note: the US doesn't borrow from China. OK, how can I say this? Obviously, we are.
It is because you need to look at the entire transaction. The full transaction is ---
1] China makes a thing.
2] China exports it to the US and gets dollars for it.
3] Someone in the US looses dollars to buy the thing, the dollars went to China.
4] China uses the dollars to buy a US bond.
We don't need China to buy our bonds. We can let China do whatever it chooses to do with the dollars.
If the thing China does with its dollars is damaging to the US, this damage has nothing to do with the debt or bond sales. It is caused by the US giving dollars to China to buy its things. In fact, for China to buy our bonds keeps China from hurting the US with the dollars.

It is instructive to think about this. If dollars are replaced with gold then the transaction becomes --
1] China makes a thing.
2] China exports it to the US and gets gold for it.
3] Someone in the US looses gold to buy the thing, the gold went to China.
Now, I think that everyone can see that the US can't keep sending its gold to China to buy things.
Why does everyone think it is OK to keep sending dollars to China to buy things? Maybe because we can make more dollars quite easily, and can't make new gold at all.
How does the US make new dollars? It does it with deficit spending. This is why I keep claiming that the Gov. needs to deficit spend to replace dollars inside the US economy that are used to buy things from overseas.
#15192706
If you-all can accept that the US "national debt" is no longer a 'debt, then what is it?
And, what should it be called? Also, should all it's holders be paid the same rate of interest?

I will use the word 'gift' because functionally that is what it is.

I'm not a great wordsmith.
I suggest that the "so-called deficit" be called "America's annual gift to Americans". [=AGA ?]
I suggest that the "so-called national debt" be called "America's total gift to Americans and the World". [=ToGAW ?]

You might think that the larger the annual gift the better. Well, this is one way that gift is a better word, because it is true that larger gifts are better. However, there are constraints and limits.
. . . This is just like gifts to your children. If they are too big, they spoil the child. Like, Bill Gates giving has children each $100M/year (year after year) is going to be bad for them.
. . . In this case, the limit is the 'inflation constraint'. As long as inflation is not happening, the size of the gift is fine.
As for the ToGAW, there may be some limit. However, right now in this time of crisis there are reasons why we should spend up to the inflation constraint limit each year. There reasons include spending on ---
. 1] Deferred maintenance of our infrastructure.
. 2] Deferred spending to fight ACC, aka AGW.
. 3] Other things on Biden's agenda.
OTOH, I'm the only one suggesting that rationing of carbon usage (in a WWII like way) should be used to fairly spread the pain of fighting ACC.

IMHO, there should be 2 different rates of interest paid on the ATGTA&W.
1] Most American people and corps (incl. banks) should not get over 0.1%/year.
2] Certain US corps and all foreign people and nations should get somewhere around 1.5%/year.
. . a] The US corps include pension plans and insurance comp., because they need to have risk free assets that earn good returns. Most corps can swing in the wind, they need to invest in America, in Green Tech for example. They don't need free money from the US Gov. They already get the benefit of the yearly gifts that add to their profits eventually. They don't need more.
. . b] The foreigners should get this also, because I want them to hold it and not use it to hurt America in some way. For example, buying a lot of real estate in America and pricing Americans out to the market.
. . . . These numbers are just to show you my thinking. Experts can suggest better numbers.
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#15192982
I wrote: OTOH, I'm the only one suggesting that rationing of carbon usage (in a WWII like way) should be used to fairly spread the pain of fighting ACC.

I'll elaborate.

It is not fair for the working poor to suffer 100 times as much as those who are well off because the make 100 times or 100 times more.
All market based solution like a carbon tax without a UBI will have this effect. And even with a ubi it is still not going to be fair, IMO.
"Making predictions is risky, especially about the future."

It is especially unfair because it is the well off who have burned the most carbon in the last 30 years.

Rationing lets the political system determine how much pain each class of people will suffer as a result of winning the fight against ACC.

My suggested system has 3 classes by income. The middle one gets twice the carbon to burn as the lowest if they pay a lot for it, and the highest gets 3 times what the lowest gets if they pay much more than a lot for it. This seems fair to me. It may not be politically possible but it would be easier than all being equal.
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