Happy New Year, everyone!
Good riddance to 2011 and all the disasters it brought. And yet I suspect sometime a few years from now, we'll be looking back on this year as having been a "good" year, all things considered...
I saw this very short and entertaining video on YouTube (came by way of CCPetersMD). I think this is a really great way to get people thinking more seriously about our national debt problems, and why just this is enough to guarantee major societal shifts and drastic changes coming down the pipeline. Watching this gave me a renewed sense of vigor, to want to spread the message and prepare.
Link to above YouTube video:
This video is very misleading because it uses the principles which are relics of the gold standard (abandoned in 1934 & 1971) to make its nonsensical point. Here's what's happening in the Modern World of Monetary Transactions which turns Bernanke, Geithner and Econ wags into snivelling cowards.
We've been brainwashed to believe that the Federal Government needs to manage its finances like a family or a business. This is unmitigated crappola. Just think about it. No family or business can issue our national currency. Only the Feds (Treasury in conjunction with the Federal Reserve)can do that. That means the Feds can pay for whatever they need because it is the sole issuer, its the currency monopolist and controls the quantity of money in this society. It also means that before it can tax it must spend. It's not the other way around.
If a business or a family had that power there would be no need for customers or jobs or borrowing.
What today's pundits, economists, experts, elected officials, and the general public, labor under are rules that were abandoned 40 years ago...the now dead gold standard. Balanced budgets, deficits, debt ceilings, trade deficit, too much borrowing, cut spending, etc. these no longer apply in a sovereign currency nation. moslereconomics.com...Tab to the link "The Seven Deadly Innocent Frauds of Economic Policy."
In effect the Feds can spend as much as they need, while guarding against inflation. If inflation rears its ugly mug th Feds can cut their spending or cut our spending by levying a consumption tax. But as the sole currency issuer the Fed doesn't levy taxes to raise revenue. There is no agreement of what inflation actually is. But what the problem is, when inflation is high enough where it becomes a political problem, those are our political limits. The limits to spending, nominal spending, are political. They're not numerical.
As for deficits and debt...a deficit in the government sector means that there is exactly the same amount of savings in the non-government sector. Its an accounting identity and has nothing to do with Keynesian or Austrian theory.
So the little video you watched is grossly misleading. There is no way we can pass today's debt to our grandchildren. Just like there was no way for our grandparents to pass their debt to us. As long as we don't default by choice and we pay debt service on our obligationst we're good. We can't go broke because we are the currency monopolists in America.
No, we have been brain washed into allowing "the STATE" to create money out of nothing and then FORCE us to use it. All modern monetary systems are based upon force and deception with the end goal of transfering purchasing power from the people to the oligarchs.
As people wake up to this fact they are slowly losing faith in a faith based system? How/why should the average person save when they are offered effectively zero interest, inflation eats away at anything they are stupid enough to try and save, while certain well connected persons/entities/institutions can continue unhindered merely by increasing our childrens future debt obligations. If you are trying to say that this debt is not real because the government can just create the money to pay it off, then I think you may be confusing obligations with underlying goods. As future obligations are being created far faster than any real underlying wealth, it seems to me that some day in the future society is going to have the equivalent of a bank run on real stuff and most of these obligations are going to go poof!
This is what I find so truly insane about tools like Krugman. In one had he argues that debt does not matter because demand is so low that we must overspend until we make up for the missing demand. On the other hand it is clear to everyone with an IQ above room temperature that this debt cannot be repaid in any honest way which means that a default will occur one way or another. I can understand why splineless politicians will put this off as long as possible but I don't understand why academics don't realize that the longer fixing this problem is delayed, the greater the threat to the whole system the final day of reckoning will be.
Pay our debt service? Sounds like you advocate becoming a debt serf. Who will be our master then?
I also hear that Wile E. Coyote only falls if he is stupid enough to look down.
Yes, that's true. We are debt slaves given the current monetary arrangement. My fundamental point is that we have a monetary system that can be used to prime aggregate demand without incurring additional debt. By maintaing the canard that we need to tax to reduce deficits or pay for goods and services only exaccerbates our national situation.
The question is what monetary system works to ensure individual choice in the acquistion and disposal of legal tender? There are no effective systems where the STATE does not control national currency. I think the trick is to have a representative STATE where populist objectives and goals become the basis for the distribution of debt free currency. Nothing other than greed compels the current system to issue currency as debt bearing notes.
We've done debt-free currency before, successfully. The first time was with the Continental. Then the Crown despaired of its success since it did not include interest paymens to its bankst or the need to purchase speciesfrom the Crown. London began its counterfeiting of billions of Continentals devaluing them. Inflation was not the result of fiat paper issue. The CC limited issue to a bit less than 250 million. It was the quadrupling by counterfeit that caused the phrase "Not Worth A Continental." Nonetheless, it is a certainty that without the Continental we would have lost that conflict with the Crown.
Then in 1862 Col. Taylor advises Lincoln to issue Greenbacks, which Lincoln initally opposed, but shortly endorsed rather than pay Eastern Bankers their outrageous "vig." Greenbacks circulated as legal tender until 1971. These miracles of monetary and fiscal policy won the War and reignited the American Industrial Revolution and Westward Expansion.
There is no doubt in my mind that we need a Populist Revolt to Rebalance, Reform our monetary system.
Species is not the answer. Even Milton Friedman argued that while a gold standard might be ideal in theory, it doesn’t work in practice.) And that is generally the eventual conclusion of most attempts to tie a domestic currency to some sort of fixed exchange rate standard (whether gold or foreign currency): it works until it collapses
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Stories and Predictions of the Future. The more detailed, the better.
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