Leading Debt to GDP Figures

[Martinghoul]

Quote from Misthos:
What is more important in your view, a nation's printing press (if they have one) or their gold reserves per capita?

I think you know my opinion. Curious as to yours.

Neither, in my view..

Fundamentally, what's most important is the govt bond mkt's perception of the long-term viability of the nation's economy. That's why Ireland has held up relatively well, compared to Spain and Portugal. That said, at the moment the mkt is mostly worried about liquidity issues, rather than long-term solvency, i.e. the ability of sovereigns to refinance. Important thing to note is that a nation that has a printing press and a CB that is willing to turn it on, can never be brought down by liquidity issues. Therefore, a printing press buys you time to get your fiscal situation in order. That's exactly why gilts have held up relatively well.

As to gold, at the moment the mkt isn't really concerned with end-of-the-world type of scenarios, where it's every nation and its gold for themselves. Furthermore, I think if we get there, god forbid, we'll be looking at firepower per capita, rather than gold reserves.

 

[Misthos]

Quote from Martinghoul:

Neither, in my view..

Fundamentally, what's most important is the govt bond mkt's perception of the long-term viability of the nation's economy. That's why Ireland has held up relatively well, compared to Spain and Portugal. That said, at the moment the mkt is mostly worried about liquidity issues, rather than long-term solvency, i.e. the ability of sovereigns to refinance. Important thing to note is that a nation that has a printing press and a CB that is willing to turn it on, can never be brought down by liquidity issues. Therefore, a printing press buys you time to get your fiscal situation in order. That's exactly why gilts have held up relatively well.

As to gold, at the moment the mkt isn't really concerned with end-of-the-world type of scenarios, where it's every nation and its gold for themselves. Furthermore, I think if we get there, god forbid, we'll be looking at firepower per capita, rather than gold reserves.

Interesting response. You reframed my question.

You also state "Therefore, a printing press buys you time to get your fiscal situation in order. " Here I partly disagree - yes the printing press buys one time... but it won't get your fiscal situation in order- it will further destroy your fiscal situation - at a later date. The ultimate destruction is being delayed and magnified at the same time. Gilts have held up reasonably well, because it is not their turn to get knocked down yet. The locusts (bond vigilantes) focus and ravage one field at a time. The Gilt is in their path.

As for gold's use being indicative of "end-of-the-world type of scenarios." I disagree again. Gold is becoming once again a respected financial instrument - a store of value. Slowly but surely it will once again recliam its international role. It will not necessarily need the end of world scenario to achieve this. But yes, it will feel like the end of the world for some nations/people. But the world, as a whole, moves on.

At the end of the day, as the participants of the global economy grow in numbers, and resource extraction fails to keep up with that growth, the current paper debt-based monetary system that distorts wealth and allows some to disproportianately overconsume without producing commensurately will fade away. It's a process that is occurring right now.

The world will need a system that better manages and measures the exchange of production for consumption. In the end, that will contribute to peace. The current system that you support is the system that will create an end of the world scenario... not gold. You have it backwards.

 

[palenimbus]

I think you need to look at NET external debt rather than GROSS..

 

[Martinghoul]

Quote from Misthos:
Interesting response. You reframed my question.

You also state "Therefore, a printing press buys you time to get your fiscal situation in order. " Here I partly disagree - yes the printing press buys one time... but it won't get your fiscal situation in order- it will further destroy your fiscal situation - at a later date. The ultimate destruction is being delayed and magnified at the same time. Gilts have held up reasonably well, because it is not their turn to get knocked down yet. The locusts (bond vigilantes) focus and ravage one field at a time. The Gilt is in their path.

You misunderstand me, Misthos. I never said that the printing press can actually make a difference to a nation's fiscal situation. It can buy you time, but the state of the nation's finances is up to that nation's citizens/govts. If the UK follows the Irish example, rather than the Greek one, and the British populace accepts a lower standard of living for a while, the flexibility offered by the printing press is a good thing. If the printing press is used, but nothing is done on the fiscal front, I agree that it will just lead to more tears down the road. That's exactly why the bond mkt is giving gilts the benefit of doubt so far.

As for gold's use being indicative of "end-of-the-world type of scenarios." I disagree again. Gold is becoming once again a respected financial instrument - a store of value. Slowly but surely it will once again recliam its international role. It will not necessarily need the end of world scenario to achieve this. But yes, it will feel like the end of the world for some nations/people. But the world, as a whole, moves on.

Well, you know my view on gold, right (and, as I have mentioned before, I own some)? It's useful as a store of value not on its own merits - and it has very few - but rather as a best practical alternative to paper assets. Moreover, yet again I fail to see how gold is really different to fiat money.

At the end of the day, as the participants of the global economy grow in numbers, and resource extraction fails to keep up with that growth, the current paper debt-based monetary system that distorts wealth and allows some to disproportianately overconsume without producing commensurately will fade away. It's a process that is occurring right now.

You know my view on this, too. I don't think the current predicament has anything to do with resources and paper money. There's nothing that, inherently, makes paper money worse than gold money or seashell money. It has everything to do with demographic shifts. But that's an entirely different discussion.

The world will need a system that better manages and measures the exchange of production for consumption. In the end, that will contribute to peace. The current system that you support is the system that will create an end of the world scenario... not gold. You have it backwards.

I disagree, but we're straying off-topic here. Let's have another thread where we can discuss this point. I would like to hear specific reasons for why the current system is bad and gold will make it better.

 

[lrm21]

Debt to GDP for countries with their own currencies who hold debt in their own currency means absolutely nothing

Also the most tired metaphor is the nation as an individual who borrows from
a credit card after losing his job

countries live for ever, can never be unemployed and can create money out of thin air, and their most productive years are ahead by default due to population growth not withstanding shock events

deficits and debt are only a problem as it relates to inflation and taxes

when America had zero debt it was no more a panacea then when it had 150% of GDP

if you read accounts since the founding of the republic men on justified principle have railed against deficits and debts

But you would be a poor man If that concern drove your investing decesions.