@moonbus saidSort of but the debt is in the form of bonds that people/corporations/nations have bought, that were loans to the US gov.
If this accounting trick between the treasury and the Fed does not affect the open market price of gold , how is this different from simply declaring the debt to have been paid off with imaginary bitcoins?
If the Fed in the first place had not charged interest on the money they were asked to create and put into circulation, then maybe the Gov would not have needed to sell that many bonds. But American debt (bonds) have been sold and creditors would not be impressed if the US defaulted on their repayments. America could trigger a war this way. Countries A, B and C, you're never getting your money back and if you dont like it we can fight over it. I'm sure this has happened historically and we know how history likes repeating itself.
@Metal-Brain saidIgnorance is bliss, ain't it?
How do you revalue gold to 20K? First establish it is possible.
@kmax87 saidYou sorta threw me with this line......Not charge interest? Unheard of.
Sort of but the debt is in the form of bonds that people/corporations/nations have bought, that were loans to the US gov.
If the Fed in the first place had not charged interest on the money they were asked to create and put into circulation, then maybe the Gov would not have needed to sell that many bonds. But American debt (bonds) have been sold and creditors would not be i ...[text shortened]... ght over it. I'm sure this has happened historically and we know how history likes repeating itself.
If the Fed in the first place had not charged interest on the money they were asked to create and put into circulation,
@AverageJoe1 saidTreasury orders the Fed to print a billion dollars. The printing cost is negligible, but the Fed charges Treasury a billion dollars usually in the form of bonds that Treasury now owes the Fed. Its not Fiat currency that is the intrinsic problem. Gold backed currencies can also flounder if when money is created (out of thin air) , really just 1 followed by 9 zeros credited to your account, you owe the bank for the privilege. At other times in history (Lincoln's greenbacks for instance) debt to the value of the currency printed was not a feature of Lincoln's greenbacks. Look up tally sticks and other forms of fiat currency that worked well for many different cultures over time. But the Fed is an issuer of debt currency. Debt is a function of money being put into circulation. The more money printed the bigger the mountain of debt. You cannot pay off the national debt. Ever. Because you cannot hoover up all the money out there because its in other people's pockets. So you would have to print more money to pay off the current debt, which creates even more debt. Think of a hamster wheel....
You sorta threw me with this line......Not charge interest? Unheard of.
If the Fed in the first place had not charged interest on the money they were asked to create and put into circulation,
@kmax87 saidSame with a mortgage or a personal loan from the bank. The bank just types numbers into your account, and you having signed an agreement to pay an establishment fee and a monthly service fee and a schedule of payments, the bank creates your loan out of the ether. Its only your ficus score and the bank assessing your risk to repay that gets you the money. But your loan is created. It does not come from any pool of savings. And generally you pay back double to what you borrow, sometimes even more if you take the least repayment schedule.
Treasury orders the Fed to print a billion dollars. The printing cost is negligible, but the Fed charges Treasury a billion dollars usually in the form of bonds that Treasury now owes the Fed. Its not Fiat currency that is the intrinsic problem. Gold backed currencies can also flounder if when money is created (out of thin air) , really just 1 followed by 9 zeros credited to y ...[text shortened]... t more money to pay off the current debt, which creates even more debt. Think of a hamster wheel....
@kmax87 saidI appreciate threads and post of this Nature, don’t get me wrong, but it would be better to make them more practical, which is one reason I use simple analogies.
Same with a mortgage or a personal loan from the bank. The bank just types numbers into your account, and you having signed an agreement to pay an establishment fee and a monthly service fee and a schedule of payments, the bank creates your loan out of the ether. Its only your ficus score and the bank assessing your risk to repay that gets you the money. But your loan is creat ...[text shortened]... ou pay back double to what you borrow, sometimes even more if you take the least repayment schedule.
This specific post is an example, you say the loan to a borrower “goes not come from a pool of savings’. But, the borrower gets real money, maybe even in cash, puts it in a briefcase and walks across street to a realtors office and buys a house that is 2 blocks away. The seller of the house gets the money from the briefcase and uses it to apply to his own investments of life. He may loan it to someone else… And they will use it to buy a house. And the world turns. But there is cash out there, that came out of that bank!!
So you’re saying that the loan is created., that it was created out of ether. What then is your definition of of “loan’?
@wildgrass said1950's America was a great place. Top marginal tax rate was 91%. Some commentators would tell you that the effective tax rate of the 1% was close to what they pay today but the 50s to 80s can also be described as the great compression, where there income inequality was not a thing. After the 80s and Reagan's "Government is the problem" mantra, taxes started to fall and income inequality increased to the point where now, it would be political suicide to propose higher taxes and greater fiscal responsibility. Political parties talk up a storm of fiscal responsibility but they only pay lip service to the concept.
Hw about less spending and higher taxes? Won't that also fix this?
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@kmax87 saidAfter the 80s was the 90s? Clinton ran and won on fiscal responsibility and made a big deal out of balancing the budget through tax increases and cuts to military spending.
1950's America was a great place. Top marginal tax rate was 91%. Some commentators would tell you that the effective tax rate of the 1% was close to what they pay today but the 50s to 80s can also be described as the great compression, where there income inequality was not a thing. After the 80s and Reagan's "Government is the problem" mantra, taxes started to fall and income ...[text shortened]... tical parties talk up a storm of fiscal responsibility but they only pay lip service to the concept.
In other words, it is not political suicide. Maybe they would see decreased campaign contributions, but the 1% is a pretty small voting bloc by definition.
@wildgrass saidWhile 1% may be a small percentage, they still number 3 million people and in a country where voting is not compulsory they can be quite influential in the political process, through donations and political action.
After the 80s was the 90s? Clinton ran and won on fiscal responsibility and made a big deal out of balancing the budget through tax increases and cuts to military spending.
In other words, it is not political suicide. Maybe they would see decreased campaign contributions, but the 1% is a pretty small voting bloc by definition.
Clinton ran a responsible budget increasing taxes for the wealthy and cutting spending, but this happened in his last term. He was also the leader of a growing economy and he deregulated the financial system which you could argue propelled America into recession territory when followed by Bush. In fact after 12 years of Raegan and Bush Snr, Clinton was a brief respite because Bush Jr, Obama, Trump and Biden account for 24 yrs of tax reduction, which has written trillions off government revenue.
While it was not political suicide for Bill he led people there after his first term, and had the charisma and leadership skills to get it done.
But after 24 yrs of steady tax reduction, I'm not so sure people at large will embrace the "increased taxes are a benefit for all" message.
MB is right (yes, I know, it surprised me too).
You can't just "re-price" gold. You can overpay for it, sure. But then the markets will reprice it at market value based on supply and demand once your round of overpaying is over.
It would also be impossible to regulate the price of a commodity by fiat when the commodity is trades all over the world, unless the governments of the other countries cooperated.
Even if, by some weird sequence of events, the world decided to cooperate, gold would soon be marginalized as a wealth measuring tool by the odd quirk preventing its price from floating, and it would become irrelevant as an economic indicator.
Possibly this would be possible in an authoritarian regime where the government controls the economy. But in such case, it would be unnecessary, as there are more direct measures to manipulate the economy.