Who's gonna win?

[MSimon]

Wars are the traditional means of writing off bad debts when politics no longer works.

[mvanwink5]

So, are you saying that federal borrowing is what, just rational spending? We can just keep on borrowing 40% of what the govt spends? Bernanke has a Phd so he knows what he is doing? Check out the money supply and ask yourself how long the Fed can keep that up?

[palladin9479]

Typically what is done to clear the books is war or revolution. Sometimes both. You might want to look at the history of the Austrian Corporal in that regard.

Already mentioned it won't happen. It's purely a fantasy. Things need to deteriorate much more then they already are, maybe in another 50 or 60 years but not anytime soon. Also the debt isn't what's hurting, not even close.

There simply isn't enough tax receipts to support a government of an economy this size. To reduce spending you must chose what to cut. Cut social programs are you get rioting in the streets and a short swift boot to the arse, then things go back to the way they were previously. You should already be seeking ways to reduce waste, wasted resources are an embarrassment to all. You can reduce defense spending, in our case we would need a 50%+ cut to spending to be anywhere near significant. That would of course limit our defense options to CONUS only, no more expeditionary surface deployments. That would then lead to aggressive countries like China and Russia filling in the power void and becoming the dominate nations of the world. China / Russia would then dictate world policy and well ... that doesn't look good for anyone, especially the USA. Everything after that is chump change.

Thus our government is left with the only options, to hold international auctions where debt is sold to the lowest bidder (typically China), or borrowing against ourselves, aka "printing money".

[MSimon]

So, are you saying that federal borrowing is what, just rational spending? We can just keep on borrowing 40% of what the govt spends? Bernanke has a Phd so he knows what he is doing? Check out the money supply and ask yourself how long the Fed can keep that up?

I estimate another year. Maybe two.

[mvanwink5]

We will just be going to ruin a little faster with the current set up.

At least he had more than 7th grade math skills and knew what bankruptcy means. Of course he was wasn't good at hoops.

[MSimon]

Typically what is done to clear the books is war or revolution. Sometimes both. You might want to look at the history of the Austrian Corporal in that regard.

Already mentioned it won't happen. It's purely a fantasy. Things need to deteriorate much more then they already are, maybe in another 50 or 60 years but not anytime soon. Also the debt isn't what's hurting, not even close.

There simply isn't enough tax receipts to support a government of an economy this size. To reduce spending you must chose what to cut. Cut social programs are you get rioting in the streets and a short swift boot to the arse, then things go back to the way they were previously. You should already be seeking ways to reduce waste, wasted resources are an embarrassment to all. You can reduce defense spending, in our case we would need a 50%+ cut to spending to be anywhere near significant. That would of course limit our defense options to CONUS only, no more expeditionary surface deployments. That would then lead to aggressive countries like China and Russia filling in the power void and becoming the dominate nations of the world. China / Russia would then dictate world policy and well ... that doesn't look good for anyone, especially the USA. Everything after that is chump change.

Thus our government is left with the only options, to hold international auctions where debt is sold to the lowest bidder (typically China), or borrowing against ourselves, aka "printing money".

We tried cutting the military in the 20s and 30s to solve the problem. It did not take 50 years for the war to start.

Printing money fixes things in a semi rational way. The owners of the debt are made bankrupt. Which they are already.

[mvanwink5]

I estimate another year. Maybe two.

The argument I heard was that the Fed would force a default rather than go for run away inflation.

[palladin9479]

So, are you saying that federal borrowing is what, just rational spending? We can just keep on borrowing 40% of what the govt spends? Bernanke has a Phd so he knows what he is doing? Check out the money supply and ask yourself how long the Fed can keep that up?

Our domestic debt is to ourselves, we hold the notes on our own debt. We could in theory just write it off and make it disappear, of course that would REALLY piss people off, especially private bankers. The smaller of our debt is to foreign entities, you really should go check it out. That debt is non-redeemable and paid yearly from tax receipts prior to discretionary spending. There are several international auctions held every year where the US Treasury sells the debt to whomever bids the lowest interest rates, that has been China lately but previously was Japan and the UK.

Should China decide to not buy anymore US Debt all it would mean is someone else does but at a higher interest rate. If China decides to sell off all it's US debt it would have to sell them for cheaper then they already bought them for (and what someone is offering the US for), thus taking a loss. For a short term it would flood the market with USD causing the exchange rate to go down, it would make foreign products more expensive in the USA but US products cheaper in other countries. It could actually bring back manufacturing to the USA. That would then result in Chinese products being more expensive then US products inside the USA, meaning US consumers would no longer buy Chinese products. Without the US consumer market to drive their economy it would implode and China would suffer a far worse recession / depression then we did.

But please continue with the rhetoric. Scream it louder, stomp your feet harder, turn the TV up higher.

[mvanwink5]

How can debt be sold? What would the currency be? Euro's, Yuan? If printing money is continued at the current accelerated pace we will be back to gold (confiscated like Roosevelt did).

Government is only large because it is large. More begets more. 2 years to get a permit, 2 weeks to erect the skyscraper. One environmental regulator tells you to do one thing, you do it, then another tells you to do the opposite.

Washington D.C. is booming, no one can afford to buy a house there. It is a good thing the R's aren't having to move in.

[mvanwink5]

That is the problem, the Fed is having to step in because no one will buy.

We borrow from ourselves.... so we are collectivists now? What rubbish.

[mvanwink5]

I don't own a TV. And if you want to see what the end game looks like ask a Greek. And I thought I was foolish for talking about a depression.

[palladin9479]

Typically what is done to clear the books is war or revolution. Sometimes both. You might want to look at the history of the Austrian Corporal in that regard.

Already mentioned it won't happen. It's purely a fantasy. Things need to deteriorate much more then they already are, maybe in another 50 or 60 years but not anytime soon. Also the debt isn't what's hurting, not even close.

There simply isn't enough tax receipts to support a government of an economy this size. To reduce spending you must chose what to cut. Cut social programs are you get rioting in the streets and a short swift boot to the arse, then things go back to the way they were previously. You should already be seeking ways to reduce waste, wasted resources are an embarrassment to all. You can reduce defense spending, in our case we would need a 50%+ cut to spending to be anywhere near significant. That would of course limit our defense options to CONUS only, no more expeditionary surface deployments. That would then lead to aggressive countries like China and Russia filling in the power void and becoming the dominate nations of the world. China / Russia would then dictate world policy and well ... that doesn't look good for anyone, especially the USA. Everything after that is chump change.

Thus our government is left with the only options, to hold international auctions where debt is sold to the lowest bidder (typically China), or borrowing against ourselves, aka "printing money".

We tried cutting the military in the 20s and 30s to solve the problem. It did not take 50 years for the war to start.

Printing money fixes things in a semi rational way. The owners of the debt are made bankrupt. Which they are already.

I agree that cutting Defense spending is colossally stupid. Of all the things to cut it should be the last. Most of it comes gets put back into the economy (federal law states that DoD must procure from US companies in the interests of national security). Soldiers, GS / WGS and Defense Contractors are all paid money that they spend on the economy. Money spent on bases is put back into the local economy in the form of services and good rendered. And ultimately money spent on defense is money saved from avoiding future large wars. Iraq / Afghanistan were disgraces and should never of been the money drains they were.

Which is why I said we need to raise revenue from those who benefit the most.

For example I'll use the most valuable company in the world, Apple. 36.8bn USD from sales outside the USA. On those sales it has paid 713 million USD in tax to the treasury, or 1.9%. US Corporate profit tax rate is 35%. Previous year Apple paid 2.5% tax rate. Currently has 82.6bn USD in cash kept in tax havens that it keeps out to avoid having to pay tax on it. This is not the only company to do this, they all do. Small business's can't do this, they don't have the legal offices nor the capital to open fake shell companies in Ireland to transfer their profits to. Thus small business's are forced to pay the entire tax.

That is the BS I'm talking about. Just like those seven figure earners have various methods to hide their income and lower their tax obligations, so do large companies. I'm after removing those tax loopholes, save havens and other methods to disguise and shift tax burden. Companies are making record profits yet their still not hiring, so as is plainly obvious supply side economics don't work. You must grow the demand, and in order to do that you must give money to the consumers themselves. Any money give to a consumer is then spent on supplies and works it's way back up.

That is why I'm not against social programs targeted at consumers. Whatever money is given to them (from taxes) is then spent into the economy and makes its way back to the tax coffers via corporate profits. It's only when money is siphoned off from the system that issues start to manifest. When less and less of the spent money is making it's way back to the top then you know someone in the path is taking a cut and hiding it away. It's not too hard to look around and see who those people / entities (since corporations are now people too apparently).

[palladin9479]

How can debt be sold? What would the currency be? Euro's, Yuan? If printing money is continued at the current accelerated pace we will be back to gold (confiscated like Roosevelt did).

Government is only large because it is large. More begets more. 2 years to get a permit, 2 weeks to erect the skyscraper. One environmental regulator tells you to do one thing, you do it, then another tells you to do the opposite.

Washington D.C. is booming, no one can afford to buy a house there. It is a good thing the R's aren't having to move in.

Again shows you have no idea how currency works at a federal level.

US Treasure holds an auction, people / states compete by bidding at ever lower interest rates. The lowest buys the debt at that rate. The currency is in USD. Where that country gets that currency from doesn't matter.

Now your brain should be thinking ... if the Chinese government is profiting from US consumers and thus acquiring all these USD. Is it then selling those USD back to the US government at a percentage rate?

[mvanwink5]

Also the debt isn't what's hurting, not even close.

At this time... What happened to Greece was rating downgrades caused that cost to skyrocket. Rating down grades have already begun for us. By the time it gets to the land of Greece, it is too late.

To avoid the downgrades the borrowing of +trillion/year has to be stopped and reversed. That is what happens when reasonable debt is exceeded. Then what will you do? That is the whole point. Smaller government, now. But that is not what we are doing and have been doing especially these last 4 years. What is the chance that Mr. Hoops will do that? Zero.

[MSimon]

If you make too much effort to raise revenue capital goes on strike. The very problem we are having now.

War is the only answer - unless the people are willing to suffer.

In other words suffer willingly one way. Suffer unwillingly in another. Choose. In my estimation the choice was made on 6 Nov 2012.