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Why the U.S. Need Not Fear a Sovereign Debt Crisis: Unlike Greece, It Is Actually Sovereign

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  • Thu, Jul 29, 2010 - 01:49pm

    #21
    Peak Prosperity Admin

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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

Farmer Brown,

Do you understand that money is destroyed when the principle part of a loan is repaid?

  • Thu, Jul 29, 2010 - 02:04pm

    #22
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=Johnny Oxygen]

Thomas Hedin posted this interview with Byron Dale a few days ago.

https://www.peakprosperity.com/forum/them-be-fighting-words/42463

Byron talks about this at length. Its worth the listen.

[/quote]

I finally got around to listening to this.  If you have heard Byron speak before, it covers mostly the same ground. I do think he has a reasonably good understanding of our current system and for that reason alone he is probably worth listening too.  However he did say a couple of things that I considered pretty outrageous. 

At around 27:30 he makes the following statement.

The continental congress, even after they issued the continental currency, they also chartered a bank so they could create money to help fund the war.  Everybody says those continentals got worthless because it was too many of them got printed, well obviously there was not enough of them printed, because they still had to charter a bank to get some more money to finish the war.

Huh?

Another statement that shocked me was at 14:15.

I am not even sure state banks need much reserves.  That, I have never been able to get anybody to…, nobody seems to know the answer to that question or if they do, they will not share the answer with me because I have yet to be able to find out how exactly state banks work their reserves or if the need them.

If this is true, how can you propose a solution like the MTA without knowing how state banks reserve requirements work?

The final thing that bothers me is more his general attitude toward government in the later part of the podcast.  He does admit that government is not innocent in our current problems but wants to put most of the blame on the bankers.  I think his reasoning is that with the current corrupt system, the banks can always buy off the politicians which is basically true.  However his solution is to cut the middle man and effectively give this power directly to those that were corrupted when they only had indirect access to this power.  I just don’t understand how this can end in anything but tyranny.

Being from Chicago, where you have single party rule and 3 of the past 8 governors guilty of felonies , I can not even imagine the level of corruption between governments, unions, contractors,… that such as system would create.

  • Thu, Jul 29, 2010 - 02:55pm

    #23
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

What a waste of time. When will I ever learn?

Since this is about the fortieth thread pushing the debt-free money hypothesis, maybe all future threads on this topic should be banished to the basement (to borrow from V) until the currency inflation/hyperinflation issue can be addressed satisfactorily. I’m not holding my breath, however.

  • Thu, Jul 29, 2010 - 03:19pm

    #24
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=JAG]

What a waste of time. When will I ever learn?

Since this is about the fortieth thread pushing the debt-free money hypothesis, maybe all future threads on this topic should be banished to the basement (to borrow from V) until the currency inflation/hyperinflation issue can be addressed satisfactorily. I’m not holding my breath, however.

[/quote]

LoL

Yep. Time will tell

  • Thu, Jul 29, 2010 - 03:19pm

    #25
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=DrKrbyLuv]

JAG wrote:

How does the physical printing of debt-free money (currency inflation) with no means to extinguish it not lead to hyperinflation down the road, especially if growth in the economy and growth in the money supply diverge for some unknown reason or circumstance?

Hello JAG,

I’ll take a stab at answering this question.  First, Ellen Brown wrote in her article:

“So long as workers are out of work and resources are sitting idle, as they are today, money can be added to the money supply without driving prices up. Price inflation results when “demand” (money) increases faster than “supply” (goods and services). If the new money is used to create new goods and services, prices will remain stable. That is where “quantitative easing” has gone astray today: the money has not been directed into creating goods, services and jobs but has been steered into the coffers of the banks, cleaning up their balance sheets and providing them with cheap credit that they have not deigned to pass on to the productive economy.”

[/quote]

The point is that workers are out of work now because there is excess capacity. Unfortunately, the “productive” economy has been decimated and our present economy is one that is adapted to debt-based money and mal-adapted to a more simple process. I think it is disingenuous for sovereign money advocates to say that we can make the transition without any negative economic consequences, but I agree that the idea is a good one for local economies in the future.

  • Thu, Jul 29, 2010 - 03:19pm

    #26
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=Thomas Hedin]

Farmer Brown,

Do you understand that money is destroyed when the principle part of a loan is repaid?

[/quote]

Yep, sure do.  Next question?

  • Thu, Jul 29, 2010 - 03:34pm

    #27
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

 

Thomas Hedin wrote:

 

Farmer Brown,

Do you understand that money is destroyed when the principle part of a loan is repaid?

 

 

Yep, sure do.  Next question?

By the way, debt being larger than the money supply in no way precludes payment of 100% of the debt with that money supply.

Then if you really do understand that the money is destroyed when a the principle part of the loan is repair then why would you ever say what you said earlier?  It’s absolutely impossible to borrow yourself out of debt.

  • Thu, Jul 29, 2010 - 03:37pm

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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=Thomas Hedin]

I want to address your fears of price inflation.

Can you please correct me if I’m wrong but the only two reasons businesses raise their prices is costs and projected future earnings correct?

[/quote]

Yes, if demand for their products rises faster than supply, prices will rise. If a bunch of people suddenly wake up with a lot of money and no debt, and they fear that prices are going to rise in the future, then they will spend the money on whatever hard assets they can buy and prices will spiral out of control.

  • Thu, Jul 29, 2010 - 03:46pm

    #29
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

ashvnip,

Are you agreeing with me or disagreeing with me?  I’m not talking about selling stuff at auction where the people can bid up the prices, I’m talking about manufacturing a product.  We’ll get into selling later ok?  You’re getting a couple steps ahead of the conversation on me.

  • Thu, Jul 29, 2010 - 03:50pm

    #30
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=Thomas Hedin]

 

Thomas Hedin wrote:

 

Farmer Brown,

Do you understand that money is destroyed when the principle part of a loan is repaid?

 

 

Yep, sure do.  Next question?

By the way, debt being larger than the money supply in no way precludes payment of 100% of the debt with that money supply.

Then if you really do understand that the money is destroyed when a the principle part of the loan is repair then why would you ever say what you said earlier?  It’s absolutely impossible to borrow yourself out of debt.

[/quote]

Thomas,

You really need to read Keen.  There is a good discussion here:

https://www.peakprosperity.com/forum/interest-payment-not-problem/41544?page=1

I do  have a question for you: 

If all bank-initiated debt created a corresponding amount of money, and vice-versa (which I believe we both agree with), then the amount of debt and the money stock should always be equal.  Even if, as your side claims, more debt has to be created to pay off existing loans, then according to your own logic, an equal amount of money would also be created in the same moment the additional debt was created. 

If our money stock is less than our debt, by any amount, then your claim that all money is debt can only be true if not all debt is money.  If not all debt is money, then where did it come from?  If you can explain that, then you will have uncovered the real reason for the exponential growth of our debt.

 

 

 

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