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Is america bankrupt as a country?
- Thread starter brokenmarkets
- Start date
Quote from endsongs:
This is only true if all of the debt is denominated in USD. If at some point in the future, new debt is denominated in another currency or asset, the US of course, can't print it's way out of the debt.
Few people on this site seem to know that Germany's WW1 reparation debt was not in German currency but in goldmarks. So, Germany had to pay this debt back in gold. So, the hyperinflation only hurt the German people as banks would only except gold backed currency for debt repayment.
Only when/if America is forced to pay for items in precious metals or another currency does anyone in US need to worry.
Interesting point.
Quote from Larson:
I know what bankruptcy is. Did you look up Weimar Germany? US is heading the hyperinflation route. Default, bankruptcy, etc. whatever you call it the result is the same. Spending has to be brought under control, or the consequences are dire. You are dwelling on the" balance sheet". The problem lies on the "income statement".
Spending was far more "out of control" during the Civil War and during WWII. The current round may (emphasis on may; I haven't done the work to know for sure) only be as bad as what happened under Reagan during another severe recession.
Regardless, there is precisely zero evidence of such spending leading to any sort of hyperinflation in the US.
You, I'm sure, didn't check on what happened to the velocity and supply of money during the recently demised crisis. Velocity fell sharply even as the supply rose rapidly. The result was no inflationary impulse was felt.
To repeat: there is no statistically significant relationship between the overall supply of money (M3) and inflation. That's why the Fed stopped tracking it, and they were right as far as that went. I'd still like them to track it just because it's a nice to know sort of thing, but it's useless as far as monetary policy goes.
Weimar Germany is a different case altogether, as someone else already pointed out.
By the way (since I know none of you will bother) here's the real reason the deficit went up:
Tax bills in 2009 at lowest level since 1950
Like I said, the only thing it has to do with is the current recession/stagnation.
Tax bills in 2009 at lowest level since 1950
Like I said, the only thing it has to do with is the current recession/stagnation.
Quote from trefoil:
Spending was far more "out of control" during the Civil War and during WWII. The current round may (emphasis on may; I haven't done the work to know for sure) only be as bad as what happened under Reagan during another severe recession.
Regardless, there is precisely zero evidence of such spending leading to any sort of hyperinflation in the US.
You, I'm sure, didn't check on what happened to the velocity and supply of money during the recently demised crisis. Velocity fell sharply even as the supply rose rapidly. The result was no inflationary impulse was felt.
To repeat: there is no statistically significant relationship between the overall supply of money (M3) and inflation. That's why the Fed stopped tracking it, and they were right as far as that went. I'd still like them to track it just because it's a nice to know sort of thing, but it's useless as far as monetary policy goes.
Weimar Germany is a different case altogether, as someone else already pointed out.
when the velocity of the money goes up all that underlying increase in the money will cause hyperinflation. it is complete nonsense to say there is no connection between money supply and inflation. it is a simple equation that change in money supply supply x velocity = price change.
Quote from zdreg:
when the velocity of the money goes up all that underlying increase in the money will cause hyperinflation. it is complete nonsense to say there is no connection between money supply and inflation. it is a simple equation that change in money supply supply x velocity = price change.
Velocity is a function of how much the money out there is really needed. That's a function of economic activity.
Economic activity does not depend on money supply; it depends solely on confidence.
Precisely no one is thinking about money supply, either in good or bad times. If people want money badly enough (they're confident), and banks think they're solvent enough (this varies: in good times, solvency is a fig leaf; in bad times, you practically need to have an underground vault of gold before you can get your hands on any additional money. In other words, the banks need to have confidence as well) banks will create money for them, regardless of what the Fed does. In bad times, banks will sit on their hands no matter what the Fed does.
Human beings and how they feel drive this: if confidence is in the toilet, velocity will be low, and money supply will have only a very limited effect.
Like I said: money supply shot up during the crisis. All that did was cover for all the deleveraging. Do you see any hyperinflation from all that money creation? If you're honest, you know what the answer is.
No, but that's because velocity is low, because banks don't trust anybody. They just sit on their money, regardless of how much the FED feeds them (which is Bernanke's big mistake in judgement of course). If trust is restored and all the money comes into circulation, THEN you'll get your inflation.Quote from trefoil:
Like I said: money supply shot up during the crisis. All that did was cover for all the deleveraging. Do you see any hyperinflation from all that money creation? [/B]
On another note: I personally think goldprice by itself is a much better indication of inflation than the CPI.