# Debt is meaningless



## partdeux (Aug 3, 2011)

I'm not even going to try and quote from this... And before reading it, pad all hard objects, especially those near head level!
http://www.valuewalk.com/2012/03/the-big-bad-national-debt-who-is-afraid/


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## BillS (May 30, 2011)

The only thing I saw that I disagreed with is the idea that we're leaving all this debt to our children and grandchildren. No, we're not. The government will default on all its debt. Either by printing so much money that we get hyperinflation and everyone is paid back in dollars of lesser value. Or there's an outright default. So either way, our children and grandchildren won't be paying for it. In reality, the world our children and grandchildren will be a much more frightening one because of hyperinflation and default than it would be if we were just over our heads in debt.


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## backlash (Nov 11, 2008)

They may not pay in dollars but they will pay in other ways.
Like you said.



> In reality, the world our children and grandchildren will be a much more frightening one because of hyperinflation and default than it would be if we were just over our heads in debt.


I would not bring any children into this world today.


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## Immolatus (Feb 20, 2011)

I cant continue reading his blather, but I will say that at least according to his site, his funds are outperforming the S&P.
I cant resist at least a few quotes.

*"But maybe the government bond traders are just idiots, blindly walking into the coming apocalypse."*
Correct.

*During the last ten years, we paid off $473 TRILLION worth of the U.S. public debt*
So there actually is no debt! Yippee! Were running a huge surplus!
Can someone please explain what he is saying by that chart? It shows debt payments/payoffs in relation to what, exactly?

*What happens when the U.S. government spends in excess of tax receipts (called deficit spending) is it simply creates dollars out of thin air*
Correct again! How he views this as a positive makes me wonder how he passed Macro. I will have to admit as a naive 18 yr old in Macro I asked "Why cant we just print more?"

Kinda hard to continue reading after that.
*That debt can be rolled over infinitely. The result of government deficits today do not imply anything for the future-not lower government spending in the future and not higher taxes in the future*
Sure, assuming of course that there will always be someone willing to 'lend' us money, but since we can just print more, what could go wrong?

*If tomorrow the government printed $30,000 and offered an unemployed person that money to clean a national park for a year, then would that crowd out the private sector? No.*
Of course not! And of course theres no effect on the value of a dollar if you just print a billion dollars for everyone! In fact, why doesnt he advocate that?

*Suppose we had to go to war with some large adversary. Well, with 25 million people looking for work we certainly won't have a problem filling out the ranks of an expanded military or going to a factory to produce more military equipment*
Send the bums to war! WTH. Really?

I cant go on...
*When I point out to them that to reduce the debt would mean the government would raise their taxes and they might be forced to sell their treasuries to satisfy an increased tax obligation, then the light usually goes on that treasuries are an asset for them and not a debt.*
Wait, I dont get it, what happened to just printing more money? Its no burden to anyone except the paper and the printing press? Was there a hiccup in his logic there? If his ideas are correct, why is there ever any unemployment in any money printing nation? Why not just print more and give them a job? Hey, maybe even send them off to war! Why even have taxes in the first place, when unlimited money printing is the answer? Why even ever have to go to war? We'll just buy them off/out?


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## TheAnt (Jun 7, 2011)

backlash said:


> They may not pay in dollars but they will pay in other ways.
> Like you said.
> 
> I would not bring any children into this world today.


I would suggest that anyone with their head on straight bring as many children into this world as possible and raise them good and proper so there is someone to bring sanity and order back into the world.

Kinda on a different thread of thought but Muslims are reproducing at several times the rate of the western cultures. Many of the European cultures do not even have a birth rate high enough to sustain their population. In other words they are dying off faster than kids are being born to replace them.

This world will be VERY different in 50 years! There is so much to be scared of in 50 years its hard to choose which poison to attack first. We are going to need folks who were brought up with some good parenting!


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## partdeux (Aug 3, 2011)

The ability to print money is based on some mutual benefit. As many municipalities are finding out, there is not infinite money available for lending under infinite conditions.

One of the market negative markers is how bullish the investment advisors are... apparently we are at or near a high point right now. Don't get more bullish than this guy 

WRT muslim reproduction, as many middle east nations are discovering, without sufficient food for your "subjects", the people will riot. An interesting theory was presented in the Zietgeist movie series, more so in the first movie, but they all contained the theme. Christianity (or all religions) are based on astrological star positions. The era of Jesus Christ and christianity is coming to an end, with the next religion (muslim?) coming into prime existence. It's an interesting presentation.


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## bahramthered (Mar 10, 2012)

I'm just curious have any of you experts have actually undergone any kind of economics training?


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## Tweto (Nov 26, 2011)

bahramthered said:


> I'm just curious have any of you experts have actually undergone any kind of economics training?


Yes, I have!


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## Immolatus (Feb 20, 2011)

Immolatus has a degree in Economics. He is still an idiot.


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## partdeux (Aug 3, 2011)

Immolatus said:


> Immolatus has a degree in Economics. He is still an idiot.


partdeux has enough financial education to want to sit in the corner and suck his thumb


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## goshengirl (Dec 18, 2010)

bahramthered said:


> I'm just curious have any of you experts have actually undergone any kind of economics training?


Yes. But that doesn't mean we'll all agree with each other.


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## Padre (Oct 7, 2011)

Immolatus said:


> *During the last ten years, we paid off $473 TRILLION worth of the U.S. public debt*
> So there actually is no debt! Yippee! Were running a huge surplus!
> Can someone please explain what he is saying by that chart? It shows debt payments/payoffs in relation to what, exactly?


He is saying correctly that we paid off 473 Trillion by borrowing 484 trillion, and somehow he thinks this is sustainable?

I used to work for the Federal government in the apparatus created by the 1974 Budget Act. I knew I needed to leave DC, when a man with a doctorate in Economics explained to me how the government could never have too much debt. That's the mentality they have in Washington. Its the same logic of this article, the mentality of "too big to fail." These people actually think that investors will let the government continue pay off debt with borrowed money.

The result will eventually be default, and with it anger, because we will take down the whole global economic system with us. Our children will pay, they will pay with hunger and toil, the insolvency of currencies, the inability to get credit, and most likely violence and perhaps even war.


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## partdeux (Aug 3, 2011)

Padre said:


> These people actually think that investors will let the government continue pay off debt with borrowed money.


Pay close attention to the flow of money. Federal reserve is owned by the the big banks. Big banks buy US Treasuries. When more money is needed, Fed monetizes debt aka hyper inflation. They don't need investors, because they are the investors.


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## Padre (Oct 7, 2011)

partdeux said:


> Pay close attention to the flow of money. Federal reserve is owned by the the big banks. Big banks buy US Treasuries. When more money is needed, Fed monetizes debt aka hyper inflation. They don't need investors, because they are the investors.


Not true. While US banks, funds, and citizens may own a large portion of US debt $4.5 trillion or about a third is owned by foreign entities, including a full 8% by China, it might not seem like a lot, but when we are talking about a 15 trillion dollar debt even 1 percent is a lot of money, and whats even more important is the perception this money creates (since the valuation of our currency is based on fiat based completely on perception). We DO NEED these investors, because their willingness to invest, more than anything else, maintains the perception that our money is desirable and has value. If we continue to pay back by borrowing their will come a day when these foreign investors are no longer going to be willing to invest, when that happens sure the Fed can play the little shell game they like to pay, but the gig will be up.


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## partdeux (Aug 3, 2011)

Padre,

Don't forget about the US Federal Reserve backstopping the foreign central banks. I began to understand when I saw a chart of who owned which countries debts, and even more importantly how that debt is considered a full 100% secure asset.

If I loan you $100 and carry your debt as $100 value, and you buy my note at $100, would you say we are both financially secure? What happens when you go all around the world and the country's all loan each other money, based on the solid assets of all the other country's assets? One must really follow the flow of money around the globe. I've come to the conclusion is a crazy convoluted high risk system dependent on the US Federal Reserve (once again a private bank owned entity) keeping this thing alive. When a company is experiencing serious financial issues, they will always depend on flow of money to "hopefully" keep them floating until things turn around. US is printing money on steroids right now, and if the US goes down, it will take the entire global economy with it.


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## Diego2112 (Aug 18, 2010)

That article... 

It scared me sh*tless, mate. I'm not going to lie. 

Since when is it shiny to just PRINT "dollars out of air?" Last I checked (and I could be wrong in my thinking on what's BACKING our money, but the PRINCIPAL of the mater remains the same), our dollar is backed by Gold. Gold has a value with it. If we print out more dollars than we have a value of gold, then our money loses value. Our money loses value, inflation goes way up. Pretty soon, our TOILET paper (of which I have 2-3 LARGE rubbermaid bins in my attic FULL of) will be worth more.

A perfect example of why this does not work (bear with me, please):

Saturday night, my uncle, myself, and five others played a game of revolving dealer blackjack. We all had a set number of chips, and as the dealer, we would have to pay out of OUR chips to those who won, in accordance with the standard rules of Vegas blackjack. Two deals, rotate. Two deals, rotate. 

Now, this presents a problem if the dealer's not doing so very well. We quickly learned that we could be WIPED OUT in those two deals, if we had to pay out to six different people in one go.

The solution? INFLATE THE GAME WITH EXTRA CHIPS.

If you got wiped out as the DEALER, then you got to hit up the "Bank" for extra chips. You could come back up to starting levels. This still did not work, as it created more chips on the table than we had money to pay with at the end of the night, meaning people got pretty mad. 

We ended up calling off all bets, and deciding that we had f***ed up royal.

But it makes for a GREAT object lesson!


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## Padre (Oct 7, 2011)

partdeux said:


> US is printing money on steroids right now, and if the US goes down, it will take the entire global economy with it.


I think we might be agreeing with each other without knowing it.... :sssh:

I completely agree from our side if the US goes down we take everyone else with us. But from the other side of the equation, there are those who are investors, yes many of them are themselves dependant on US debt, in fact anyone who has their wealth highly leveraged in US debt is invested in our money not failing. But the fact of the matter remains that if the US dollar starts inflating at a rate greater than the interest on our debt even those who are up to their neck in manure might still try to bow out.


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## partdeux (Aug 3, 2011)

Padre said:


> I think we might be agreeing with each other without knowing it.... :sssh:
> 
> I completely agree from our side if the US goes down we take everyone else with us. But from the other side of the equation, there are those who are investors, yes many of them are themselves dependant on US debt, in fact anyone who has their wealth highly leveraged in US debt is invested in our money not failing. But the fact of the matter remains that if the US dollar starts inflating at a rate greater than the interest on our debt even those who are up to their neck in manure might still try to bow out.


Federal reserve loans the money out to the US govt at (IRC) 6% interest. Govt sells bonds that pay approximately 3%, and then turns around to loan the money to the banks at approximately 0%. It's this crazy circular spin on the money that makes the banks that own the federal reserve money.


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## Immolatus (Feb 20, 2011)

Diego2112 said:


> Last I checked (and I could be wrong in my thinking on what's BACKING our money, but the PRINCIPAL of the mater remains the same), our dollar is backed by Gold


The dollar is backed by nothing, and hasnt been since Nixon took us off the gold standard. The principal of the matter does indeed remain the same. The dollar is only worth 'something' (like a candy bar, or a widget) because you (we) believe it is. While theoretically this is true for anything, even gold/silver, civilization has accepted shiny metals as a medium of exchange (money) for thousands of years.



partdeux said:


> Federal reserve loans the money out to the US govt at (IRC) 6% interest. Govt sells bonds that pay approximately 3%


Please forgive my ignorance, but where does the 6% come from? Isnt the rate the Fed gets the same as a tbill at whatever the posted rate is (3%?)
What have I missed?


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## partdeux (Aug 3, 2011)

Immolatus said:


> Please forgive my ignorance, but where does the 6% come from? Isnt the rate the Fed gets the same as a tbill at whatever the posted rate is (3%?)
> What have I missed?


Federal Reserve loans money to the central bank at 6% (which I believe is a fixed rate). Central bank sells bonds at 3ish%. Banks borrow money at 0% to buy those bonds at 3%. It's the craziest convoluted scheme ever created. And to tie it full circle, the banks own the Federal Reserve.

I saw a really good article on ZeroHedge a few months ago explaining this whole process.


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## partdeux (Aug 3, 2011)

This isn't the article I was looking for, but it covers most of what I was posting
http://www.chrismartenson.com/blog/shell-game-how-federal-reserve-monetizing-debt/25806

Still missing the relationship between the fed and the central bank


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## VUnder (Sep 1, 2011)

It seems that the "experts" here would be doing a lot better job than the educated fools that are running things presently.


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## partdeux (Aug 3, 2011)

VUnder said:


> It seems that the "experts" here would be doing a lot better job than the educated fools that are running things presently.


I believe, or hope anyway, that most of them really know what's going on... but they are painted into a corner with no out.


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## cabinetman (Apr 14, 2012)

I am NOT an economist nor investment pro but I do like staying at Quality Inns. I have, unfortunately, done a lot of reading about our current economic situation and have come to this conclusion:

The ONLY way we can continue to print money is if the dollar remains the 'reserve currency' to the world. The day that ends, the printing presses end because we'll have to rely on what we can produce to underwrite what our dollar is worth not only to us but to the rest of the world. That's why our government is keeping a tight reign on that benefit. The Russians and Chinese would love to knock the dollar out of reserve status and put in some other more stable currency or even make one up similar to the Euro that they and Europe can trade in, the US be damned. 

I know this is simplistic but it gets to the crux of the situation. When the Brits had the reserve currency in Sterling and lost it, their economy plummeted. We took it over from them. Since our economy is not doing so well and other countries are gaining on us (China in particular) there's a lot of pressure to remove the dollar and install somthing in its place. That's when our economy will plummet, just like the Brits did. 

Rome


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## BillM (Dec 29, 2010)

The authors whole argument translates to someone saying , how can I be broke, I still have all these credit cards?


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## VUnder (Sep 1, 2011)

We are giving our economy to China, just handing the keys to them and signing the title over. All this scrap everybody is rounding up is going straight to China. One guy here just got back from there, said he saw a pile of processed scrap metal that was as big as any mountain he had ever seen and it was 10 miles long. That was just what he saw at one port, just at one of the several ports where ships un load. DOD is selling them brass. Doesn't seem smart to be selling tank steel and bullet brass to somebody that we owe so much money to. Then if we need it, will there be enough here for us? Sure, we can grow enough cotton to keep printing money, but will we have enough steel to support a major conflict?

We are floating along only because for now we are the reserve currency. If that ever stops, like if we leave the Middle East, the dollar will be dropped. I have been over there, and Chinese are all over the ME. We are in the ME to provide stability to Saudi Arabia, their use of the dollar to trade oil is the only reason it is the world reserve currency.


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## pawpaw (Dec 21, 2011)

All I know is... When I have money, it's on paper.
When I'm broke, it's in cash.


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