FED and Banks

[StarDust9182]

We won't run out since we have the printing press. So, I am too dumb to understand: Why borrow?

Why don't we just print enough to pay off all our debts instead of having the Feb buy up our bonds using money they created out of thin air anyway. This way we save interest payment which is eating up a larger and larger % of our Federal budget and the way things are going one of these days the interests will be bigger than the Federal budget.

Well, you can see I do not understand economics.

Please help me understand.

Well you got me on the logic. We borrow to print money. Borrowing increases future interest owing (which is money again AKA exponential growth) so we can never print enough to pay off the debt since every print session increases that debt. Next month we owe the debt plus the interest on the new debt we borrowed. Mathematically, I don't understand this.

 

[StarDust9182]

We can print as much as we need, the only constraint being inflation.

Respectfully.

What is your particular definition of inflation please?

A printing press doesn't borrow. It's just the photocopy method which is illegal in 50 states I think. Even the Fed doesn't try this stunt - although Japan gave it a darn good try. So the printing press (helicopter drop) is nonsense as we have seen in 8 years of misdirection. It hasn't worked.

While we can certainly photocopy almost infinitely, we can't borrow infinitely. To borrow from inside the country, we need somebody working first with savings (something to borrow). Yet the Fed hates savers I have heard. Odd math indeed.

 

[StarDust9182]

you , me and everybody else. That is the thing, we can't get any inflation no matter how hard we try, yet everything you and I buy are getting more expensive and if I had job I wouldn't have gotten a raise for a while, or at least not one that outpaces inflation because there is no inflation.

In the 1970s printing created inflation but it doesn't now apparently. What has changed?

 

[StarDust9182]

We have a new entrant in the contest.

In 1966 He said this:
"... In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. ..... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Reference: http://www.constitution.org/mon/greenspan_gold.htm

No gold standard - Check
No safe store of value - Check
No way to protect savings - Check

Today he says:

"
"....We have a global problem of a shortage in productivity growth and it's not only the United States but it's pretty much around the world, and it's being caused by the fact that populations everywhere in the Western world are aging, and we're not committing enough of our resources to fund that. We should be running federal surpluses right now not deficits. This is something we could have anticipated twenty five years ago and in fact we did, but nobody's done anything about it. This is the crisis which has come upon us...."
"
( Such a shame the fellow 25 years ago didn't read the report about precisely this issue. It dealt with - what does it mean for a government to go bankrupt, can a government go bankrupt and is the government bankrupt as I recall. Ask the CBO for a copy - unless it got shredded accidently or lost.)

http://www.zerohedge.com/news/2016-05-31/alan-greenspan-were-running-state-disaster

With respect to Maxwell, a mathematician might say: The divergence of the Federal money vector field is zero. (Just a hypothesis since I am not good at economics.) In simple terms, one can't get more water out of a bucket, than one puts in.

Has a new way been found to protect savings from confiscation through inflation through the miracle of entitlement magic (which apparently can diverge enormously from truth and zero due to media magic and the power of denial)? Once again it is the people's fault for aging. Seriously now, who could have predicted that?

Most troubling of all to me is the sudden need for everyone involved to shift the blame. Re-read Liar's poker again about the turkey stuffing.

 

[viktor_k67]

We can print as much as we need, the only constraint being inflation.

If the Government starts printing $$$ to pay off national debt, inflation would go up.

1. value of bonds will go down
2. Then investors will not want to hold bonds because their value is falling.
3. Then it will be difficult for the Government to sell bonds to finance the debt.
4. Then the Government will have to pay higher interest to attract investors - more debt.
5.Then when inflation gets out of hand, nobody will trust the government and the government will not be able to borrow anything at all.

Printing money could create more harm than to solve debt problem...

Going to a grossery store...

 

[eurusdzn]

Food,rent,medical and education prices increase beyond reported inflation.
Trinkets and trash from low wage countries like flat screen tv's do not increase.
Wages are flat. Last years easy comsumer credit has decreased todays and
Tommorrows demand requiring still easier credit and lower prices. A loop.

The US isrecently spinning trailers and glorified sheds as tiny houses.
Years to come storage pods and possibly fortified cardboard boxes will
Be cool as well. OK...too far?

 

[ironchef]

If the Government starts printing $$$ to pay off national debt, inflation would go up.

1. value of bonds will go down
2. Then investors will not want to hold bonds because their value is falling.
3. Then it will be difficult for the Government to sell bonds to finance the debt.
4. Then the Government will have to pay higher interest to attract investors - more debt.
5.Then when inflation gets out of hand, nobody will trust the government and the government will not be able to borrow anything at all.

Printing money could create more harm than to solve debt problem...

Going to a grossery store...

But there will be no bonds. The US government prints enough paper money to buy back all the USG bonds! So, going forward, no debt, a clean start!

Am I making any sense? I guess not.

 

[Gotcha]

The secret is to inflate in little bits, steal from the people in small chunks that they don't notice it too much. The trouble is when it happens too quickly, or doesn't happen at all, as we see now with people/companies hording it and not spending it. Funnily enough, the inflation is there, it just doesn't show up in the creative accounting they use, and at the same time, people also aren't spending what little money they have. So in essence, the way its supposed to work is getting screwed from 2 different angles. I do believe that a time will come when they can no longer control the delicate balance of all their policies and who knows what will happen then.

 

[Steve Ladd]

In the 1970s printing created inflation but it doesn't now apparently. What has changed?

Money is created two ways: 1) the Fed prints it, and 2) fractional-reserve banks loan it into existence (credit money). Focus on #2. Credit money puffs up during the up-swing of the business cycle. Then it contracts during the down swing because everybody deleverages. There's plenty of money in the higher echelons of the system but it isn't turning over. Each dollar gets re-spent fewer times per year (velocity is down). Credit money shrinks. That's deflationary. Meanwhile the Fed prints. That's inflationary. The actual inflation rate (which is higher than the reported rate) is the sum of the two.

 

[ETcallhome]

In the 1970s printing created inflation but it doesn't now apparently. What has changed?

The simplest way I know to explain printing money is, You need money, I go down to my basement and print up all you need. When you pay me back I take that money and throw it in the furnace.