If the government was a household budget...

[oldtime]

i think many are confusing fiat money with commodity money.

take the household budget

you forgot to include the price of paper and ink

we can create as much money as we need, the only constraint is inflation

there is however another issue, and that is faith in the dollar, more importantly the world's desire to use it as a reserve currency

 

[dtan1e]

if history is any lesson, inflation always lead to total collapse

 

[377OHMS]

Quote from JJacksET4:

Really, tell that to the credit card companies that write off millions of debt each year from consumers who die without a penny to their name.

Also, many consumers file for a thing you may have heard of called "Bankruptcy" - so no "that means they must pay off their debts" is not true.

And you are trying to be all high and mighty on this thread?

I'm telling you what I was taught in 5 semesters of economics at USC (a minor in economics) while getting my engineering degree.

What is your formal education in economics?

You may not like my words but I assure you that they are an accurate representation of what is taught.

 

[clacy]

Quote from 377OHMS:

Didn't you guys take economics at university?

The first thing they teach is that countries are *not* like households or individuals.

Individuals die and that means they must pay off their debts and have some financial conclusion to their lives.

A country is perpetual (well, hopefully) and so the debt doesn't have to be payed off, ever, it must instead be managed so that it does not grow out of proportion to GDP which is why you generally see debt expressed in terms of ratio-to-GDP.

For fucks sake, you guys are posting the "Economics" thread!

So are you suggesting that our debt to GDP ratio is low? I think the ratio you spoke of is getting near dangerous territory.

With that said, we obviously have the advantage of reserve currency, which for the time being, doesn't appear to be in danger in the fiat system.

 

[antitrust]

Quote from oldtime:

i think many are confusing fiat money with commodity money.

take the household budget

you forgot to include the price of paper and ink

we can create as much money as we need, the only constraint is inflation

there is however another issue, and that is faith in the dollar, more importantly the world's desire to use it as a reserve currency

yes, As the issuer of currency the debt is never a problem as long as the debt is in the issuer's own currency. Inflation is a potential problem, but I don't see how turning 1 dollar worth of treasures into 1 dollar (or any amount) is inflationary, as treasury holders can do this anytime and the fed will accommodate. Technically China CB has a interest account (treasuries )at the fed and a checking account. All the fed would do is move money from the interest (savings) account to the non-interest (checking) account. I guess it could cause an emotional reaction in the dollar, becoming a self fulfilled prophesy.


http://www.elitetrader.com/vb/reply.php?s=&action=newreply&postid=3444909


With the exception of Russia ,China and maybe a few others, weaker nations always seem to be "violating human rights" or "harboring terrorists" whenever they try to ditch the dollar. Like Gaddafi's Pan- African currency project

If you're going to monetize the debt best to do it when your guns can still dictate the terms of trade, but that window might be closing

 

[377OHMS]

Quote from clacy:

So are you suggesting that our debt to GDP ratio is low? I think the ratio you spoke of is getting near dangerous territory.

With that said, we obviously have the advantage of reserve currency, which for the time being, doesn't appear to be in danger in the fiat system.

I didn't offer any opinion on the debt to GDP ratio, I just pointed out that it is the relevant measure of the debt of a country.

If you're asking, I think we are at insane levels of debt-to-GDP ratio. I'm a conservative and don't think the debt should be anywhere near 100% of GDP. I think the current administration is beyond irresponsible with spending and I don't think taxes should be increased to solve the problem. I'm also violently opposed to the Fed printing money and keeping rates low as it just sucks the savings away from anyone who has managed to prepare for retirement.