US Government Debt

[jackorchuck]

When will the US Govt reach the point where it can no longer borrow money to prop up the US Budget or when will the US get a Government that can manage the economy without borrowing.

[patience]

I don't see the political will to make the hard choices we need. The big money is all behind the status quo, engineered to steal everything in the country and leave it a nation of serfs. I think it will have to crash and burn of its' own volition before we see any meaningful change and improvement.

All currencies now are pure fiat--only paper with no real value. The financial system depends on continually adding more debt to pay interest on the EXISTING debt. That will hit the wall eventually. for an understanding of how this works, see the link below to Chris Martenson's "Crash Course" on how money really works. Money = Debt. Strange, but true. If the debts are paid, there is no money!

www.youtube.com/playlist?list=PL7E8A774DA8435EEB

Yes, it is long. But it is the best there is to learn how it works.

[jackorchuck]

Patience
Thank you for replying to this thread.
The US dollar or rather US Treasury Bonds are the base upon which the world financial markets operate. During the Last Raising the Debt Limit debate, China's commy President announced that perhaps it was time to replace the US Dollar as the dominant world currency. I am not an economist thank god, but basic arithmatic tells us that sooner or later the US wont be able to service its debt. I hope this does not occur and that common sense will prevail.

[papaof2]

The Fed's notes from the end-of-October meeting were published today and the market took a hit. It seems they are thinking about slowing or stopping the $85 billion a month of buying up Treasury Bonds.

Why do people get excited when bonds that have little value are no longer being bought with freshly printed bills (I won't call them money) that have even less value?

Every dollar the Fed prints to buy up bonds dilutes the value of the dollars already in circulation.

There's probably no one in Washington DC with the guts to introduce metal-backed-currency legislation and there certainly aren't enough gutsy people to make it happen...

Wonder what my grandfather's gold ring is worth?

Sent from my IdeaTabA2109A using proboards

[jackorchuck]

papaof2
Thank you for your input, you are 100% correct in what you say. The US is sitting on a huge gold reserve, gold back currencies make good sense. Printing more and more paper money makes no sense to those of us who have common sense.

[kaijafon]

Some think there is no gold left and that it was shipped to China to pay off some of the debt we owe them.

[steve]

I always get into trouble for airing my political views but, what the hey? I haven't posted here in what seems like ages...

* Switching to a gold-based currency would be very bad for the economy. A nation wants a currency that reflects the nation's value; Gold has a GLOBAL value that is independent of a nation's economic status. You want a currency that reflects the value of your nation so that your nation can better handle the various economic pressures that it faces: When the economy goes bad, the currency loses value; When the economy is great, the currency gains value.

Think of a store for a moment - When a store wants to increase sales, it lowers the price of the items in the store, making the items in the store more attractive to be purchased. When there is great demand (so much so that it outstrips supply) for items in the store, the store raises prices to maximize their profit margin.

A gold-based economy can not perform this vital function; The currency can not go low enough in bad times to attract new investors and it further aggravates any economic downturns that may occur.

If you want a practical example of why gold is a bad currency, look at the current situation with Greece. Greece is a part of the European Union, which uses the Euro as it's currency. The Euro does not rise or fall with Greece's economic fortunes but rather on a broad geographical area. In this case, the Euro is acting like "gold" in that the Euro is high but Greece needs a depreciated currency to attract investors; It is like a store that desperately needs sales but all of it's merchandise is still at normal retail prices because it can't lower the prices of it's items. This is why they need to be bailed out; The money that a sale would generate has to come from somewhere else.

China is in the exact opposite situation; They keep their currency artificially low which generates abundant sales but depletes their supply faster then they can regenerate it. The result is that many in their populace become creative in investing in alternate materials other then money to obtain value, such as real estate (this is one of the primary reasons why China has so many "ghost cities"). The problem, though, is that real estate is a poor substitute for a nation's currency and does not reflect the nation's true economic status.

Anyway, that's why having a rare-metal-based economy is bad.