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Us Debt Default


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35 members have voted

  1. 1. Your thoughs on US Default?

    • Won't happen. Consequences are too grave.
      24
    • Will happen.
      0
    • Won't happen, but needs to happen. **** the Chinese.
      9
    • Will happen, but shouldn't happen. We comitted to these loans, we must pay them back.
      2


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I'll never get the infatuation with Libertarianism. The answer is always, "The free market will fix it". Well, how? Well, it just will!No, how? How will it fix things?It's the free market! It will fix everything!:facepalm: When people like Ron Paul talk about beliefs, it's very Ayn Randian and comes off like scripture, like it's holier than thou and like Ayn Rand, anyone that criticizes it is not worthy of your attention. Nothing short of "radical" capitalism is even worthy of discussion and the whole house of cards is based on the idea that our nature is selfish, competitive and greedy despite factual evidence from evolutionary psychologists and anthropologists that humans have a dual nature, that the other side of us makes us altruistic, cooperative and charitable. To form a society that espouses those later traits as evil is simply beyond my comprehension.
http://www.amazon.com/Principles-Microecon...4002&sr=8-4I honestly think that you'll love it. A used copy is only like 6 bucks. Also get the macro one by the same guy. The macro one is only 10 bucks.
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I think you're both oversimplifying to try to make the other side look silly.Ron Paul
I didn't read past the first section because I'm at work, and obviously too busy for silly things like that. The suggestion that this default is comparable to others is silly though, and misses the point. In 1934, there were not billions/trillions of off-market, off-balance sheet credit default swaps outstanding..Not that it is even relevant, since the defaults he describes are of a different type, and none involve the US not meeting, in a reasonable way, direct obligations to foreign countries.I think Ron Paul is as right, or more right, than anyone else in this debate. But the more I read from him, the more I think he either i) is reaching too hard for middle america by oversimplifying and ignoring risks or ii) does not understand (or more likely, pretends not to for political reasons), the underlying causes that are the reasons for his rightness.
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Apparently, if Congress fails to figure out a deal, the President has a few arcane, legal options:http://www.cnn.com/2011/OPINION/07/28/balk....html?hpt=hp_t2"Are there other ways for the president to raise money besides borrowing?Sovereign governments such as the United States can print new money. However, there's a statutory limit to the amount of paper currency that can be in circulation at any one time.Ironically, there's no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds."Trillion dollar coins! Problem solved!

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wow, I almost want that to be how this is resolve. a trillion dollar coin? how awesome is that? and think of the heist caper that'll ensue!

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wow, I almost want that to be how this is resolve. a trillion dollar coin? how awesome is that? and think of the heist caper that'll ensue!
Paging cast of Ocean's 11...
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No one espouses them as evil. Charity, altruism and cooperation are fine in their natural form, but that doesn't extend to their being codified as a 'well intentioned laws'. It's no longer 'charity' when its a mandate. I don't expect you to pony up your earnings to pay for my view of how the world 'should be', don't demand the same of me. Ron Paul is bang-on when it comes to our economic problem, as are most Austrians. I agree that the free-market dogmatists are usually retards, but this is one area where they're spot on the money.How will the free markets fix this?They will do so by restoring a sustainable and natural equilibrium to our economy, as they always do. The free market ecosystem just doesn't allow certain things to occur- a lot of those 'things' are the root of our current economic troubles. Our current M.O. is totally unsustainable and based on a debt/inflation shell game. It is not free-market driven and if allowed to continue, will result in our total economic collapse. It's already significantly depreciating our standard of living, as we ship unimaginable sums of wealth to China in the form of debt interest, leaving very little left to take care of ourselves here. Have our wars contributed to this? Yes, a bit, but not nearly as bad as the shrieking leftists would have you believe.chart_bowyer1-23-06%20cost%20of%20war.gif350px-US_Federal_Debt_as_Percent_of_GDP_by_President.jpg
Good post,and I wish I had the time and inclination to address everything I'd like but I'll touch on a few points (andthen likely go back and edit alot since we apparently share that gene.
No one espouses them as evil.
I was simply refering to the usual rhetoric that seems to accompany typical Libertarian speeches and rants, "I swear--by my life and my love of it--that I will never live for the sake of another man, nor ask any man to live for mine". Que ominous music. Anything that detracts from their opinion, which is radical capitalism,is portrayed as evil, but on this we apparently agree they can be dogmatic umm, mentally challenged people.
Charity, altruism and cooperation are fine in their natural form, but that doesn't extend to their being codified as a 'well intentioned laws'. It's no longer 'charity' when its a mandate. I don't expect you to pony up your earnings to pay for my view of how the world 'should be', don't demand the same of me.
Liberalism is a method, conservatism is a belief. If we can agree as a democracy to have programs that not only benefit the less fortunate, but make us a better country economically and socially, and those laws don't violate the constitution or lead to an economic collapse, then I see no problem with them. There might be some like you who don't agree, but this is why we have a democracy in the first place. (And the first one of you who point out it's a Republic is gong to make me come through the computer and go zombie on your ass.)
How will the free markets fix this?They will do so by restoring a sustainable and natural equilibrium to our economy, as they always do. The free market ecosystem just doesn't allow certain things to occur- a lot of those 'things' are the root of our current economic troubles.
I am a conservative-economic, liberal. I believe in free markets as much as anyone. I also think I can make a pretty strong case right now why we should institute tarrifs to influence the free market to be more in line with what our free trade policies intended. Letting the free market continue to kick our ass until such a time as the country is full retrograde Somalia isn't what I would call a successful "sustainable and natural equilibrium".
Our current M.O. is totally unsustainable and based on a debt/inflation shell game. It is not free-market driven and if allowed to continue, will result in our total economic collapse. It's already significantly depreciating our standard of living, as we ship unimaginable sums of wealth to China in the form of debt interest, leaving very little left to take care of ourselves here. Have our wars contributed to this? Yes, a bit, but not nearly as bad as the shrieking leftists would have you believe.
Being unsustainable is a belief that goes under the assumption that it can't be fixed. I think it can be fixed. I am at odds with your graphs as I think they downplay the cost of the recent wars, and I don't dissagree on the Chinese debt either, but again, I see them as correctable.
http://www.amazon.com/Principles-Microecon...4002&sr=8-4I honestly think that you'll love it. A used copy is only like 6 bucks. Also get the macro one by the same guy. The macro one is only 10 bucks.
I honestly think you are being a snit. I had macro and micro economics before you were born ya' litttle snot. :Looking for Hot Wheel track to use as a swatch to smack against your ass: Oh wait, I fogot, I'll go back in a bit and address the Austrian economic thingy.
wow, I almost want that to be how this is resolve. a trillion dollar coin? how awesome is that? and think of the heist caper that'll ensue!
Wouldn't that be cool. Dateline December 2013-Two bumbling robbers got away with $237 after breaking into the treasury after eluding the most sophisticated alarm systems known to man only to realize how much those damn coins are heavier than shit.
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why doesn't the hilarious comedian ron paul just marry gold and silver alreadydude must jack it 3-4 times/day whilst standing amidst a sea of bars and coins etchow much would the anarcho-capitalist nut jobs bid on ebay for some officially jizzed-on-by-ron-paul 2011 silver coins iyo

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why doesn't the hilarious comedian ron paul just marry gold and silver alreadydude must jack it 3-4 times/day whilst standing amidst a sea of bars and coins etchow much would the anarcho-capitalist nut jobs bid on ebay for some officially jizzed-on-by-ron-paul 2011 silver coins iyo
LOL - It's going to be $5,000 and ounce by next year, so add some RP jizz, $5,200 easy.Can you answer the printing money question we had from up above?
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I was simply refering to the usual rhetoric that seems to accompany typical Libertarian speeches and rants, "I swear--by my life and my love of it--that I will never live for the sake of another man, nor ask any man to live for mine". Que ominous music. Anything that detracts from their opinion, which is radical capitalism,is portrayed as evil, but on this we apparently agree they can be dogmatic umm, mentally challenged people.
I believe that is an Ayn Rand quote, right? She hated Libertarians, and called herself an objectivist. But the quote suffers from context. It doesn't mean we shouldn't help others, it means we should commit them to it through legal means. It's fine if I give money to the homeless shelter, but if you have me jailed for not doing it, even though my own family is hungry, there is something wrong with your system.
Liberalism is a method, conservatism is a belief. If we can agree as a democracy to have programs that not only benefit the less fortunate, but make us a better country economically and socially, and those laws don't violate the constitution or lead to an economic collapse, then I see no problem with them. There might be some like you who don't agree, but this is why we have a democracy in the first place. (And the first one of you who point out it's a Republic is gong to make me come through the computer and go zombie on your ass.)
We are a republic first, democracy second. There is a reason for that -- the two wolves and a sheep voting on dinner thing.
I am a conservative-economic, liberal. I believe in free markets as much as anyone. I also think I can make a pretty strong case right now why we should institute tarrifs to influence the free market to be more in line with what our free trade policies intended. Letting the free market continue to kick our ass until such a time as the country is full retrograde Somalia isn't what I would call a successful "sustainable and natural equilibrium".
You must not remember the '84 Ford Escort if you think protectionism is a good thing. Oh, and Somalia is an example of mob rule -- he who can beat the others by force wins. That's the exact opposite of free markets, and much, much closer to the sort of mob rule that takes $800 BILLION dollars from hard-working people to give to lobbyists and unions.
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I honestly think you are being a snit. I had macro and micro economics before you were born ya' litttle snot. :Looking for Hot Wheel track to use as a swatch to smack against your ass: Oh wait, I fogot, I'll go back in a bit and address the Austrian economic thingy.
I wasn't trying to come across as snitty. I really do think you would enjoy them. Plus, economics has become clearer to understand since you took them in 1843.
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why doesn't the hilarious comedian ron paul just marry gold and silver alreadydude must jack it 3-4 times/day whilst standing amidst a sea of bars and coins etchow much would the anarcho-capitalist nut jobs bid on ebay for some officially jizzed-on-by-ron-paul 2011 silver coins iyo
Maybe I have you confused with someone else (To me, FCP is like 4 or 5 posters, with everyone else being categorized into a gray, non-descript mass) , but aren't you a bond trader?(If) So, you basically make your living (and presumably, a very nice living) in the fiat paper chase?
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Hmmm. I would like to hear from MK on this, now I am actually not sure. But I know the Federal Reserve hold a huge amount of liquid capital for overnight loans to banks. The also use it to increase and decrease the money supply, but I have never heard that they can just all of the sudden type in "1,000,000,000,000" into a ledger and now they have that much more money.
Typically, this is correct, but the Fed does have its own balance sheet, of course, which they've obviously expanded a great deal in a response to the credit crisis, and how they've done this is actually fairly complicated and boring unless you're into wonky monetary policy stuff. Typically they buy or sell assets using reserve deposits which are like credits to accounts which banks hold with the Fed. Before all the shit went down, the Fed's portfolio was ~$800b in Treasury securities. When stuff went nuts and the entire system started to violently de-leverage, the Bernank sought to provide a large amount of short-term loans to financial institutions in order to prevent the whole thing from seizing up (which was imminent post-Lehman). Typically, he'd do this by creating new reserve deposits, but that would've ballooned the money supply rapidly, and he didn't want to do that. He essentially 'sterilized' the loans by selling off the Fed's treasury portfolio as they took on new short-term loans so the money supply didn't change but the amount of loans did. So that $800b obviously didn't go all that far which prompted them to implement the supplementary financing program through Treasury wherein Treasury auctions securities directly to the public and then leaves the proceeds in an account at the Fed, which has the net effect on the balance sheet as if the Fed had sold the securities themselves out of their portfolio, allowing the sterilization of a lot more in loans without ballooning the money supply. So now banks are just sitting on those reserves (not turning them into cash) and the Fed can and will reabsorb those reserves back in with sales of Treasuries. So the Fed has been very creative in finding ways to effectively type $1x into the ledger and in theory they could step in and delay a default with a number of methods, but they won't do that. There's no reason Congress can't do what they've done dozens of times before.
Maybe I have you confused with someone else (To me, FCP is like 4 or 5 posters, with everyone else being categorized into a gray, non-descript mass) , but aren't you a bond trader?(If) So, you basically make your living (and presumably, a very nice living) in the fiat paper chase?
Nah, I'm just some dumb young kid who hangs out in Wrigleyville.Well, I mean, sure fiat currency has a great history obv but pegging to a gold standard or something similar would be instantly disastrous. Do we want to have that discussion?
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OK that's pretty much what I figured.I would love to hear your thought on if we tried to re-implement the gold standard or something like it.I also want your thought on current gold prices, because I think they are absurd and that it's a fools market, which we have talked about before.

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Nah, I'm just some dumb young kid who hangs out in Wrigleyville.Well, I mean, sure fiat currency has a great history obv but pegging to a gold standard or something similar would be instantly disastrous. Do we want to have that discussion?
So as with other currency arrangements, there can be floating against a market gold price. The ECB already does this. It has not been the cause of disaster in the Euro area. Whatever disasters take place there are not due to this floating of monetary gold to the market price. That feature of the euro is what makes it attractive to outside interests. It is not a gold standard, yet is an official process that mark their gold reserves to market prices. A gold standard is clearly not desirable, nor would it be pragmatic for different reasons. The idea for the globalised world is for gold to play the referent role for fiat currencies.
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So as with other currency arrangements, there can be floating against a market gold price. The ECB already does this. It has not been the cause of disaster in the Euro area. Whatever disasters take place there are not due to this floating of monetary gold to the market price. That feature of the euro is what makes it attractive to outside interests. It is not a gold standard, yet is an official process that mark their gold reserves to market prices. A gold standard is clearly not desirable, nor would it be pragmatic for different reasons. The idea for the globalised world is for gold to play the referent role for fiat currencies.
Is it bad that I'm currently singing your username to the tune of Black Hole Sun in my head?
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I will have trouble tracking down the exact numbers, but it went something like this:Total inflation for the 100 years or so we were on the gold standard: -5% or so ($1.00 was worth $1.05 100 years later)Total inflation for the years since fiat currency: 95% ($1.00 is worth about $0.05)That's pretty terrible. A small amount of predictable, regular inflation is harmless. What the Fed does is not harmless, and we would've been way better off on the gold standard.Going back to it probably won't happen, we're more likely to be on a de facto BitCoin standard (or something equivalent). If the Fed continues to intentionally devalue our money, people will bypass the system.

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I will have trouble tracking down the exact numbers, but it went something like this:Total inflation for the 100 years or so we were on the gold standard: -5% or so ($1.00 was worth $1.05 100 years later)Total inflation for the years since fiat currency: 95% ($1.00 is worth about $0.05)That's pretty terrible. A small amount of predictable, regular inflation is harmless. What the Fed does is not harmless, and we would've been way better off on the gold standard.Going back to it probably won't happen, we're more likely to be on a de facto BitCoin standard (or something equivalent). If the Fed continues to intentionally devalue our money, people will bypass the system.
You really actually believe that going back to the gold standard would be a good thing.Holy CrapThe Gold Standard while keeping inflation low causes far worse problems. Moderate inflation is not a big deal. Here's a nice little article that I found that explains things pretty well.http://www.j-bradford-delong.net/Politics/...ldstandard.html
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You really actually believe that going back to the gold standard would be a good thing.Holy CrapThe Gold Standard while keeping inflation low causes far worse problems. Moderate inflation is not a big deal. Here's a nice little article that I found that explains things pretty well.http://www.j-bradford-delong.net/Politics/...ldstandard.html
Much LOLs:
If the U.S. and a substantial number of other industrial economies adopted a gold standard, the U.S. would lose the ability to tune its economic policies to fit domestic conditions.
Ah yes, because the central planners have done so well for the last decade, and in the 70s. That was some fine economic tuning there.Seriously, that one was just a joke, right?If only we had omniscient central planners, and they were benevolent and immune to political pressure, fiat currency would work fine.It's happened for stretches, but the 1970s and the 2000's show the damage of what really happens.
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You really actually believe that going back to the gold standard would be a good thing.Holy CrapThe Gold Standard while keeping inflation low causes far worse problems. Moderate inflation is not a big deal. Here's a nice little article that I found that explains things pretty well.http://www.j-bradford-delong.net/Politics/...ldstandard.html
Oh, and I should say, I'm not necessarily saying to go back to the gold standard. I think a better solution is to allow competing private currencies, so you could use AmeriBucks or VisaDollars if the Fed kept making our money worthless with QE1....QE26 or whatever they think they will stop at now. The private currencies could be contractually tied to whatever store of value individuals wanted.So competing hard value currencies >> gold standard >> fiat currency.The problem is that the value of our money is intentionally devalued for political purposes, as will definitely happen in the coming years. Politicians will not have the nerve to balance the budget, so they will do it through inflating their way out of it. Fiat currency just allows political cowardice to harm the country's economic health.
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Much LOLs:Ah yes, because the central planners have done so well for the last decade, and in the 70s. That was some fine economic tuning there.Seriously, that one was just a joke, right?If only we had omniscient central planners, and they were benevolent and immune to political pressure, fiat currency would work fine.It's happened for stretches, but the 1970s and the 2000's show the damage of what really happens.
http://www.econlib.org/library/Enc/GoldStandard.htmlThis one is a little more technical but I think you can understand it.
Performance of the Gold Standard As mentioned, the great virtue of the gold standard was that it assured long-term price stability. Compare the aforementioned average annual inflation rate of 0.1 percent between 1880 and 1914 with the average of 4.1 percent between 1946 and 2003. (The reason for excluding the period from 1914 to 1946 is that it was neither a period of the classical gold standard nor a period during which governments understood how to manage monetary policy.)But because economies under the gold standard were so vulnerable to real and monetary shocks, prices were highly unstable in the short run. A measure of short-term price instability is the coefficient of variation—the ratio of the standard deviation of annual percentage changes in the price level to the average annual percentage change. The higher the coefficient of variation, the greater the short-term instability. For the United States between 1879 and 1913, the coefficient was 17.0, which is quite high. Between 1946 and 1990 it was only 0.88. In the most volatile decade of the gold standard, 1894-1904, the mean inflation rate was 0.36 and the standard deviation was 2.1, which gives a coefficient of variation of 5.8; in the most volatile decade of the more recent period, 1946-1956, the mean inflation rate was 4.0, the standard deviation was 5.7, and the coefficient of variation was 1.42.Moreover, because the gold standard gives government very little discretion to use monetary policy, economies on the gold standard are less able to avoid or offset either monetary or real shocks. Real output, therefore, is more variable under the gold standard. The coefficient of variation for real output was 3.5 between 1879 and 1913, and only 0.4 between 1946 and 2003. Not coincidentally, since the government could not have discretion over monetary policy, unemployment was higher during the gold standard years. It averaged 6.8 percent in the United States between 1879 and 1913, and 5.9 percent between 1946 and 2003.Finally, any consideration of the pros and cons of the gold standard must include a large negative: the resource cost of producing gold. Milton Friedman estimated the cost of maintaining a full gold coin standard for the United States in 1960 to be more than 2.5 percent of GNP. In 2005, this cost would have been about $300 billion.Conclusion Although the last vestiges of the gold standard disappeared in 1971, its appeal is still strong. Those who oppose giving discretionary powers to the central bank are attracted by the simplicity of its basic rule. Others view it as an effective anchor for the world price level. Still others look back longingly to the fixity of exchange rates. Despite its appeal, however, many of the conditions that made the gold standard so successful vanished in 1914. In particular, the importance that governments attach to full employment means that they are unlikely to make maintaining the gold standard link and its corollary, long-run price stability, the primary goal of economic policy.
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Those make a little more sense, but.....

But because economies under the gold standard were so vulnerable to real and monetary shocks, prices were highly unstable in the short run.
Basically, they are saying that long term, predictable devaluation of our money is better than short term price instability but long-term stability. I don't see how. The people who are most affected by that particular short term risk are those who can most afford it and most understand it. Long term inflation harms everyone, especially those who can least afford it and are least able to protect themselves from it.Having said that, I believe even Milton Friedman said that predictable, low inflation rates of around 1% is better than occasional bouts of deflation. The problem with that is it requires omniscient central planners -- something the world seems to have a shortage of. Instead, we end up with occasional spikes of inflation and deflation, which is even worse.
Finally, any consideration of the pros and cons of the gold standard must include a large negative: the resource cost of producing gold. Milton Friedman estimated the cost of maintaining a full gold coin standard for the United States in 1960 to be more than 2.5 percent of GNP. In 2005, this cost would have been about $300 billion.
I don't think this is really a huge factor. If the money supply is managed properly, the net inflow and outflow should average zero over time, so no new production is necessary. You just need the small amounts necessary for short-term trading.But as I said, I'd rather see private companies produce currency tied to actual stores of value, and their efficiency at that would be a factor in the value of their currency and therefore people's likelihood of using that currency.
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