# Insanity



## Padre (Oct 7, 2011)

Here is a little glimpse inside the mind of your typical statist lunatic! Sadly its not the first time I have heard this, I heard the same argument from a REPUBLICAN economist over 10 years ago. Shortly thereafter I left government service, I value my sanity!



> While saying the federal deficit does indeed need to be curtailed, Mr. Bloomberg argued the United States could owe "an infinite amount of money" and there is no specific amount that would cause the country to default.
> 
> "We are spending money we don't have," Mr. Bloomberg explained.
> 
> ...


The problem with this argument is that as time goes by and the debt gets larger and larger, the people getting paid off, with minimal interest, have to pay in more and more, eventually they get the idea that perhaps one day they won't get paid off, because its a ponzi scheme, that's when they ever so quietly try to get out, eventually setting off a run and collapse. Preparation for this correction includes buying precious metals, including ammo, and stock up food.


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## Bobbb (Jan 7, 2012)

First, welcome back.

Now to the meat of the problem. I see this mindset at my place of employment. It usually infects smart people. There is a spectrum effect in terms of how this thinking is distributed.

-Dumb people buy into stupid positions because they can be convinced of anything. 
-Average people reject stupid positions because they intuitively sense the stupidity but they can't lay out the logic of their rejection.
-Smart people can accept stupid positions because they use their smarts to convince themselves of what they want to be true.
-Really smart people reject the stupid positions of smart people because they can invalidate the faulty reasoning trotted out by the smart people's rationalization.

Bloomberg is a smart person but not a really smart person. He's shoveling this crap because he WANTS it to be true.


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## Padre (Oct 7, 2011)

I was never gone, for a few weeks I was travelling to DC and out of the country, and have been over worked for a while ...so I have just been lurking.

The strategy behind it perhaps makes sense a certain logical sense in a game where there is a winner and looser, but no real import, but in real life no one wins! Its cold war style MAD, mutually assured destruction, without balance: every year one side drops a single solitary nuke on the other, a nuke that is progressively bigger, hoping that the other side will "forgive" that transgression because they are afraid of MAD.


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## db2469 (Jun 11, 2012)

I wonder how long the Fed will be able to keep interest rates on that debt artificially low? When they go up is when we'll have a problem!


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## Immolatus (Feb 20, 2011)

100% correct, db.



> It's the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem.


While this is obviously correct, since we have the largest military noone can touch us physically but they could sure cut us off at the knees.
This statement is broadcasting to the world (China, specifically?) that the debt is their problem, not ours, and daring them to do something about it. Methinks one day, they will.


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## CrackbottomLouis (May 20, 2012)

Our problems will really start when we dont cut and then Iran follows through with their threat to stop trading their oil in American dollars with China and Russia follwing suit. We are about to see a serious restructuring of the world pecking order. Inflation here we come.

And welcome back Padre.


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## Bobbb (Jan 7, 2012)

CrackbottomLouis said:


> Our problems will really start when we dont cut and then Iran follows through with their threat to stop trading their oil in American dollars with China and Russia follwing suit. We are about to see a serious restructuring of the world pecking order. Inflation here we come.
> 
> And welcome back Padre.


This was, perhaps, a more viable threat a decade ago when the Euro seemed to be solid, but nowadays the question is what other currency would be acceptable.

If Russians pay in rubles and Chinese pay in yuán, then the Iranians can only capture the value of the transaction by buying something from Russia with their rubles or from the Chinese with their yuán.

The US dollar ain't all that anymore but compared to the alternatives at present it's the best game in town.


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## Padre (Oct 7, 2011)

Bobbb said:


> This was, perhaps, a more viable threat a decade ago when the Euro seemed to be solid, but nowadays the question is what other currency would be acceptable.
> 
> If Russians pay in rubles and Chinese pay in yuán, then the Iranians can only capture the value of the transaction by buying something from Russia with their rubles or from the Chinese with their yuán.
> 
> The US dollar ain't all that anymore but compared to the alternatives at present it's the best game in town.


>>>>GOLD<<<<


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## CrackbottomLouis (May 20, 2012)

Bobbb said:


> This was, perhaps, a more viable threat a decade ago when the Euro seemed to be solid, but nowadays the question is what other currency would be acceptable.
> 
> If Russians pay in rubles and Chinese pay in yuán, then the Iranians can only capture the value of the transaction by buying something from Russia with their rubles or from the Chinese with their yuán.
> 
> ...


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## Bobbb (Jan 7, 2012)

CrackbottomLouis said:


> Good point but if all three start trading with a different standard besides the US dollar a lot of the world may follow suit. China produces a lot of goods and both russia and china are huge oil markets. There is also a lot of antiamerican sentiment out there that may flock to new trade arrangements. This certainly isnt my area of expertise but seems feasible and dangerous to our standard of living. I really hope I am incorrect.


The Russian economy is about the same size as Canada's. Most of Russia's economy centers on natural gas exports and minerals and commodities. No one is buying Russian-made LCD TV screens or pharmaceuticals or electronic gadgets and such. Military equipment and raw materials is basically it.

So, when the Iranians sell to Russia they can use the rubles they get to buy Russian natural gas, Russian tanks, and Russian iron/aluminum. Not much to chose from.

The problem with China is that they manage their currency instead of allowing the market to determine it's value. The problem for holders of the yuán is that the currency you hold has a value determined by Chinese authorities. The yuán isn't a viable medium of exchange in international markets. It might one day achieve that status, but not today.

It's quite possible that these one-off deals could be struck but they'd be of little consequence, just like you and your dentist striking a barter deal doesn't really have much consequence for the general public. When you strike such a deal you and your dentist are trading the ability to exchange value via a medium that is widely accepted, the dollar, and you're restricting your exchange to just what the two of you conclude is fair and you can't expand beyond that, despite barter exchanges (which cost money.)

When the Iranians get US dollars they can sell those dollars to the Germans, who can then use them for their purposes while the Iranians get the benefit of some German goods, just like when you give your dentist some cash for his work he can then take that cash and use it to have the oil on his car changed out.

Whichever countries are the first to conduct these bilateral trades in their domestic currencies are going to have to pay a price which reflects their loss of flexibility. Will it be worth it to them? That's hard to say but the cost to them is real.


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## CrackbottomLouis (May 20, 2012)

Bobbb said:


> The Russian economy is about the same size as Canada's. Most of Russia's economy centers on natural gas exports and minerals and commodities. No one is buying Russian-made LCD TV screens or pharmaceuticals or electronic gadgets and such. Military equipment and raw materials is basically it.
> 
> So, when the Iranians sell to Russia they can use the rubles they get to buy Russian natural gas, Russian tanks, and Russian iron/aluminum. Not much to chose from.
> 
> ...


Ok. That seems pretty reasonable. Guess I dont have to worry as much about that. Let me ask another. You said the US dollar is the the best thing going right now as far as a medium of exchange. With the dollar in trouble like it is do you think the chinese will eventually allow the yuan to be market driven or will another medium of exchange (like precious metals as padre suggested) become feasible as the dollar declines? (Please dont think less of me if these are stupid questions. Really not my area here  )


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## Bobbb (Jan 7, 2012)

CrackbottomLouis said:


> You said the US dollar is the the best thing going right now as far as a medium of exchange. With the dollar in trouble like it is do you think the chinese will eventually allow the yuan to be market driven or will another medium of exchange (like precious metals as padre suggested) become feasible as the dollar declines? (Please dont think less of me if these are stupid questions. Really not my area here  )


The way I'm interpreting your question is that the system of international trade and how societies and economies function is pretty solid and when change comes it will come as a tinkering at the edges, such as changing the medium of exchange, and that the model will continue forward under these new rules.

I'm a ground-up kind of guy, by which I mean I start with first principles and work up the chain of logic. The first principle that I think is important here is wealth creation. Most of the world, including China and the West, have a number of interlinked problems dealing with wealth creation and wealth distribution (note that distribution is different from redistribution.) This is evidenced by the fact that most of the West is living beyond it's means. We're not generating enough wealth in society to afford everyone the lifestyles that they desire. This results in borrowing money in order to fund current consumption.

For the West, I believe that the system is unsustainable. For China, they're in a mad rush to get rich before they get old (their one-child policy is going to result in huge senior care expenses) and it doesn't look, at this time, like they're going to meet that goal, which means that their system also looks unsustainable.

If the rules by which societies are run, and the economies associated with those societies, are built on a foundation of quicksand, then projecting into the future and expecting the system to continue on with only minor tinkering required is going to be a projection which doesn't come to fruition. Now I could be wrong and completely misreading the stability of the societal foundations of the West and of China but I think I can make a more convincing case for unsustainability than proponents can for sustainability (and I'm not talking about environmentalism here.)


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## CrackbottomLouis (May 20, 2012)

Bobbb said:


> The way I'm interpreting your question is that the system of international trade and how societies and economies function is pretty solid and when change comes it will come as a tinkering at the edges, such as changing the medium of exchange, and that the model will continue forward under these new rules.
> 
> I'm a ground-up kind of guy, by which I mean I start with first principles and work up the chain of logic. The first principle that I think is important here is wealth creation. Most of the world, including China and the West, have a number of interlinked problems dealing with wealth creation and wealth distribution (note that distribution is different from redistribution.) This is evidenced by the fact that most of the West is living beyond it's means. We're not generating enough wealth in society to afford everyone the lifestyles that they desire. This results in borrowing money in order to fund current consumption.
> 
> ...


Makes sense. I really cant see this lasting on any front. Really wish there was a way to dismantle the fractional reserve banking system on a world scale, prevent monopolies, start a local made/grown buying craze, institute a mandatory live below our means government, and reset all debt at zero without destroying everything or infringing on liberty and free trade. Guess ill keep prepping and wait for it to crash.


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## invision (Aug 14, 2012)

Well what might seem logical doesn't always happen, especially in the world of finance... You ask most asset managers and they believe that the dollar SHOULD be removed as the standard for oil purchases, since we are slowly becoming less of a buyer of oil, compared to say China. If you look at the data over the last 5 years, china has increase usage while US has declined... That is their thoughts... If that does happen, the new currency of standard will also replace gold on the international market... Yes, china takes strict guidelines and rules in regards to controlling their value, keeping it (IMO) artificially devalued... If it was not self-governed, I would "think or guess" that the yuan would have already replaced USD on oil... Their significant problem is we are their largest importer, so without us, China would lose a lot of income. IMO also, this is what is keeping china holding and buying our debt... How much longer will they? No clue, but they have already started complaining about our lack of control in spending...


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## Immolatus (Feb 20, 2011)

CrackbottomLouis said:


> You said the US dollar is the the best thing going right now as far as a medium of exchange. With the dollar in trouble like it is do you think the chinese will eventually allow the yuan to be market driven or will another medium of exchange (like precious metals as padre suggested) become feasible as the dollar declines?


The USD is the 'best' cause its the best of a bad bunch. Internationally people trust the Chinese less than they trust us.
They prolly wont allow the value of the yuan to change until either: they are ready, whatever that may mean, or something bad happens here. Then they'll unpeg the yuan, or interoduce some gold backed currency, which is the subject of much speculation given they are hoarding a lot of gold, through production and importation.



invision said:


> Well what might seem logical doesn't always happen, especially in the world of finance... You ask most asset managers and they believe that the dollar SHOULD be removed as the standard for oil purchases, since we are slowly becoming less of a buyer of oil, compared to say China. If you look at the data over the last 5 years, china has increase usage while US has declined... That is their thoughts... If that does happen, the new currency of standard will also replace gold on the international market... Yes, china takes strict guidelines and rules in regards to controlling their value, keeping it (IMO) artificially devalued... If it was not self-governed, I would "think or guess" that the yuan would have already replaced USD on oil... Their significant problem is we are their largest importer, so without us, China would lose a lot of income. IMO also, this is what is keeping china holding and buying our debt... How much longer will they? No clue, but they have already started complaining about our lack of control in spending...


China holds/buys our debt cause if they didnt, the US would crumble and we owe them a lot of money.
And if China (and/or any other large economy) started trading another currency for oil on a large enough scale, its game over for us.


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## invision (Aug 14, 2012)

Immolatus said:


> The USD is the 'best' cause its the best of a bad bunch. Internationally people trust the Chinese less than they trust us.
> They prolly wont allow the value of the yuan to change until either: they are ready, whatever that may mean, or something bad happens here. Then they'll unpeg the yuan, or interoduce some gold backed currency, which is the subject of much speculation given they are hoarding a lot of gold, through production and importation.
> 
> China holds/buys our debt cause if they didnt, the US would crumble and we owe them a lot of money.
> And if China (and/or any other large economy) started trading another currency for oil on a large enough scale, its game over for us.


Now if you take the buying and importing of gold.... With the fact that there is a ton of talk in the market of moving the usd off oil... To me it sounds like the Chinese are prepping for the future when it happens... Timeframe they will get to set... Not us.


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## BillS (May 30, 2011)

db2469 said:


> I wonder how long the Fed will be able to keep interest rates on that debt artificially low? When they go up is when we'll have a problem!


I think they can do it for quite awhile because they can print whatever money they need. As lenders get sick of lending the government money at 2% the Fed can just create the money. The problem is more what happens to the dollar with all the money printing. The dollar will become more and more vulnerable to sudden drops in its value and the willingness of other countries to accept it.

I could see China issuing a gold-backed currency and a number of the countries of the world trading in gold. It's easier than you think. You don't need ten trillion dollars in gold to have all trade based in gold. All you need is enough gold coming in to match what's leaving the country. Kind of like how you can have a $52,000 a year income but only see $1,000 a week at a time.


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## BillS (May 30, 2011)

Padre said:


> Here is a little glimpse inside the mind of your typical statist lunatic! Sadly its not the first time I have heard this, I heard the same argument from a REPUBLICAN economist over 10 years ago. Shortly thereafter I left government service, I value my sanity!
> 
> The problem with this argument is that as time goes by and the debt gets larger and larger, the people getting paid off, with minimal interest, have to pay in more and more, eventually they get the idea that perhaps one day they won't get paid off, because its a ponzi scheme, that's when they ever so quietly try to get out, eventually setting off a run and collapse. Preparation for this correction includes buying precious metals, including ammo, and stock up food.


It used to be that Republicans WANTED to cut spending but then it changed to where the Democrats could shut them up by asking them where they would cut spending.

The other change is that a lot of people went from caring about how much debt there was to caring more about the debt to GDP ratio.


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## BillS (May 30, 2011)

Bobbb said:


> This was, perhaps, a more viable threat a decade ago when the Euro seemed to be solid, but nowadays the question is what other currency would be acceptable.
> 
> If Russians pay in rubles and Chinese pay in yuán, then the Iranians can only capture the value of the transaction by buying something from Russia with their rubles or from the Chinese with their yuán.
> 
> The US dollar ain't all that anymore but compared to the alternatives at present it's the best game in town.


Check this out:

http://theeconomiccollapseblog.com/...could-constitute-an-embryo-of-global-currency

Shocking New IMF Report: The U.S. Dollar Needs To Be Replaced As The World Reserve Currency And SDRs "Could Constitute An Embryo Of Global Currency"
By Michael, on February 11th, 2011

The IMF is trying to move the world away from the U.S. dollar and towards a global currency once again. In a new report entitled "Enhancing International Monetary Stability-A Role for the SDR", the IMF details the "problems" with having the U.S. dollar as the reserve currency of the globe and the IMF discusses the potential for a larger role for SDRs (Special Drawing Rights). But the IMF certainly does not view SDRs as the "final solution" to global currency problems. Rather, the IMF considers SDRs to be a transitional phase between what we have now and a new world currency. In this newly published report, the IMF makes this point very clearly: "In the even longer run, if there were political willingness to do so, these securities could constitute an embryo of global currency." Yes, you read that correctly. The SDR is supposed to be "an embryo" from which a global currency will one day develop. So what about the U.S. dollar and other national currencies? Well, they would just end up fading away.

CNN clearly understands what the IMF is trying to accomplish with this new report. The following is how CNN's recent story about the new IMF report begins....

"The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world's reserve currency."

That is exactly what the IMF intends to do.

They intend to have SDRs replace the U.S. dollar as the world reserve currency.

So exactly what are SDRs?

Well, "SDR" is short for Special Drawing Rights. It is a synthetic currency unit that is made up of a basket of currencies. SDRs have actually been around for many years, but now they are being heavily promoted as an alternative to the dollar.

The following is how Wikipedia defines SDRs....

Special Drawing Rights (SDRs) are international foreign exchange reserve assets. Allocated to nations by the International Monetary Fund (IMF), a SDR represents a claim to foreign currencies for which it may be exchanged in times of need.

The SDR is a hybrid. SDRs are part U.S. dollar, part euro, part yen and part British pound. In particular, the following is how each SDR currently breaks down....

U.S. Dollar: 41.9%

Euro: 37.4%

Yen: 9.4%

British Pound: 11.3%

Now there are calls for other national currencies to be included in the basket.

Russian President Dmitry Medvedev has publicly called for the national currencies of Brazil, Russia, India and China to be included in the SDR.

In January, the Obama administration said that it fully supports the eventual inclusion of the yuan in the SDR.

So yes, it looks like we are definitely moving in the direction of the SDR becoming a true global currency.

But is this a good idea?

Globalist organizations such as the IMF say that having a true global currency would facilitate world trade, it would make currency wars less likely, it would stabilize the global economy and it would make the rest of the globe less reliant on what is going on in the United States.

In fact, there is a lot of discussion in international financial circles that oil should be traded in SDRs rather than in U.S. dollars.

In a recent interview, IMF Deputy Managing Director Naoyuki Shinohara even suggested that the IMF may actually consider issuing bonds that are denominated in SDRs. Apparently the goal would be to promote the use of the new "currency".

But once again, it is important to remember that the IMF does not see SDRs lasting forever either. Rather, the IMF considers the SDR to be an "embryo" from which a true global currency could emerge.

An IMF paper entitled "Reserve Accumulation and International Monetary Stability" that was published last year even proposed that a future global currency be called the "Bancor" and that a future global central bank could be put in charge of issuing it....

"A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing."

In fact, at one point the IMF report from last year specifically compares the proposed global central bank to the Federal Reserve....

"The global central bank could serve as a lender of last resort, providing needed systemic liquidity in the event of adverse shocks and more automatically than at present. Such liquidity was provided in the most recent crisis mainly by the U.S. Federal Reserve, which however may not always provide such liquidity."

Yes, unfortunately this is what the IMF really has in mind for all of us. A one-world economic system with a one-world currency and a one-world central bank.

Is that what we really need?

A "global Federal Reserve" that dominates the currency and the economy of the entire planet?

At least with the U.S. Federal Reserve there is hope that someday the American people can convince Congress to shut it down.

A "global Federal Reserve" would not answer to anyone. Individual nations could attempt to pull out, but then they would potentially be isolated from the rest of the globe and potentially cut off from world trade.

That may sound very far-fetched now, but that is the direction we are headed.

And shifting away from the U.S. dollar as the reserve currency of the world would be disastrous for the U.S. economy.

Right now the fact that the U.S. dollar is the primary reserve currency of the world is one of the only things holding it up. If you took that support away the U.S. dollar could end up collapsing quite quickly.

Let us hope that the American people wake up and start insisting that we want no part in a global currency. If we ever allow a world currency to start replacing the U.S. dollar to a large extent, we will lose a great deal of our economic sovereignty. Not that we haven't lost most of it already, but at least if we are still using our own national currency there is a greater chance that we can reclaim it.

What the IMF is proposing right now may seem very innocent, but the long-term consequences of going down the road they want to put us on could potentially be absolutely catastrophic.

The American people need to send a very clear message to their representatives in Washington D.C.....

#1 We do not want a one-world economy.

#2 We do not want a one-world currency.

#3 We do not want a one-world central bank.

- See more at: http://theeconomiccollapseblog.com/...mbryo-of-global-currency#sthash.TDuiC2x7.dpuf


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## Bobbb (Jan 7, 2012)

1.) Organizations put out lots of reports. The Republicans put out a report a few months back about radically reducing the generous copyright legislation in place right now. After that report had been public for a few weeks they fired the author. 

2.) Statists love to work for statist organizations so we see them in government all the time.

3.) This plan looks to be just like the Euro but writ large. The problems with the Euro are an eye-opener to the statist dreamers. A currency which works for Germany and the Netherlands completely destroys economies like Greece and Spain which are structured differently. A global currency would have this effect on steroids.


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