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 - 03:58pm

    #31
    Peak Prosperity Admin

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

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

Until time and interest kick in on borrowed money.  Then the debt grows but not the money supply.

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?

Basicaly we agree here except I don’t claim that all debt is money but all money only goes into circulation as a debt to someone.

All money is debt but not all debt is money because once time and interest kick in on borrowed money (the only kind in this system) the debt grows but not the money supply.  This is why we have an approximate money supply of 8 trillion and a total debt of around 60 trillion.

I’ve wrote keen a simple question that I couldn’t find an answer to on his website.  I’m awaiting his response.

  • Thu, Jul 29, 2010 - 04:10pm

    #32
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=Thomas Hedin]

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

Until time and interest kick in on borrowed money.  Then the debt grows but not the money supply.

[/quote]

Ah yes, I forgot that you believe that interest payments go under a banker’s mattress never to re-enter the economy again.  So basically, your theory rests upon the erroneous assumption that interest payments on loans dissapear upon payment and therefore a net decrease in money compared to debt results due to time and interest kicking in.  Why do you believe this?  What do you think happens to interest payments?  Clearly you cannot believe it extinguishes money, since you’ve already stated only principal payments extinguish money. 

So you must believe something else happens to interest payment money which results in it forever and inextricably being unavailable to the economy again. Someone should inform GS, JPM, WF, C, BAC, and the thousands of other banks in the world and all their tens of thousands of shareholders of this development posthaste.

Please explain whatever it is you believe happens to this money.

  • Thu, Jul 29, 2010 - 04:15pm

    #33
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

goes211 wrote:

What I don’t see is how any equilibrium is reached in a system that creates money and spends it on infrastructure.  Without some sort of negative feedback on too much money creation, the system will surely become unstable and eventually fail.  This is doubly certain when we have a government that is already spending us into oblivion using debt based money.  Can you imagine what their actions would be like if they felt their was no costs to their actions?  If you think we are using a lot resources now, wait until this happens.  It would be a disaster of truly historic proportions.

Good observations. Both the usury and non-usury currencies can be over produced. No system is immune from corruption or apathy.

But if you look at the results from each type of issuance the non-usury is more appealling. Usury issuance leads to more and more debt, huge boom and bust cycles and can lead to the destruction of wealth that is based on perceived value.

Non-usury issuance that is production based is meted out as needed and leaves you with tangable asset or service that you are using immediately. in other words it sets the pace for need and use rather than speculation. It also encourages production because there is no interest for business to figure into the equation or fear of interest rate fluctuations.

So what is the negative feed back loop for usury? Well I think we all know that. What is the negative feedback loop for non-usury? I suppose a state could issue currency for 10 bridges when one will do or build a 30 billion dollar statue of Colonel Sanders or manufacter buses with square wheels but even in those situations you would at least be left with some material tangable wealth even if it is to be recycled. With usury you run the risk of being left with debt that has an uncertain future in regards to its true value.

I think the negative feedback for non-usury would be a lack of return. Lets say you build 12 laundromats in one square block. Just because you had the money to do so doesn’t mean that they will all be succesful. At some point  probably only one would survive. In the instance of building 10 bridges the same applies. Once the expenditure for maintenance ramps up on the 9 that aren’t really used much then their viabillity would be called into question. In short a free market would be the negative feed back. Without having to hop onto the debt train and create more debt just to keep going business’s and individuals would be more discerning about where they put there money because a lot of the gaming aspect would be removed.

  • Thu, Jul 29, 2010 - 04:48pm

    #34
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=Farmer Brown]

Please explain whatever it is you believe happens to this money.

[/quote]

Based on what I have seen, he won’t. He’ll ask another “simple” question or refer you to some Byron Dale teaching or production.

I’d love it if he proved me wrong. Might actually get somewhere with this repetitive diatribe if he really understood what you are getting at, and approaches it with an open mind, not simply regurgitating his (Byron’s)  position.

  • Thu, Jul 29, 2010 - 04:52pm

    #35
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

Boy, talk about cognitive dissonance.  In one day I come across two articles that not only have opposite themes, but also aren’t even close in basic numbers.

http://financialsense.com/contributors/michael-pento/dont-lose-sleep-over-deflation

<!–

–>

Don’t Lose Sleep over Deflation

Submitted by Michael Pento on Wed, 28 Jul 2010

[quote]

Looking at today’s situation, just because we have a few months of sequential declines in CPI and PPI doesn’t mean that deflation has become a secular trend. Year-over-year (YOY) growth in the M2 money supply is 2%; therefore, since the money supply is still growing, we are experiencing inflation rather than deflation.

Considering that evidence of inflation abounds, the Federal Reserve has pulled off a good trick by convincing Americans that we are about to “suffer” through a protracted period of deflation. Why have we been so easily duped? In the past ten years, the monetary base has grown from $600 billion to $2 trillion. This expansion has accompanied a rise in the price of gold from below $300/oz at the beginning of the decade to around $1,200/oz today. The price of gold is the best arbiter for a currency’s purchasing power. Therefore, gold is still telling us that inflation is eroding the value of our dollar.[/quote]

And from the Ellen Brown article that led off this thread:

[quote]

Hyperinflation: A Bogus Threat Today

Proposals to solve government budget crises by simply issuing the necessary funds, whether as currency or as bonds, invariably meet with dire warnings that the result will be hyperinflation. But before an economy can be threatened with hyperinflation, it has to pass through simple inflation; and today the world is struggling with deflation. The U.S. money supply has been shrinking at an unprecedented rate. In a May 26 article in The Financial Times titled “US Money Supply Plunges at 1930s Pace as Obama Eyes Fresh Stimulus,” Ambrose Evans-Pritchard observed:

“The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of institutional money market funds fell at a 37pc rate, the sharpest drop ever.”[/quote]

I assume “monetary base” and “stock of money” are different measures, but I have no idea what the differences are.  And, of course, the two authors are trying to convince us of two different and diametrically opposed economic futures.  Can someone reconcile these views?

Doug

  • Thu, Jul 29, 2010 - 04:53pm

    #36
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=flo]

[quote=Farmer Brown]

Please explain whatever it is you believe happens to this money.

[/quote]

Based on what I have seen, he won’t. He’ll ask another “simple” question or refer you to some Byron Dale teaching or production.

I’d love it if he proved me wrong. Might actually get somewhere with this repetitive diatribe if he really understood what you are getting at, and approaches it with an open mind, not simply regurgitating his (Byron’s)  position.

[/quote]

 

ugh. Does it always have to devolve into personal attacks? C’mon guys be civil.

  • Thu, Jul 29, 2010 - 05:02pm

    #37
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=Thomas Hedin]

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.

[/quote]

I’m not sure if I’m agreeing with you, because I’m not really sure what your argument is. I was under the impression that you believed inflation was not a concern if we simply started printing money to erase debt. I was saying that it should be a concern because more money chasing the same amount of goods/services leads to higher prices, and that this process can spiral out of control if enough money is printed. If we are talking about a relatively free market, then the manufacturers don’t have much of a choice in pricing their products – either raise prices or go out of business.

  • Thu, Jul 29, 2010 - 05:08pm

    #38
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=Doug]

I assume “monetary base” and “stock of money” are different measures, but I have no idea what the differences are.  And, of course, the two authors are trying to convince us of two different and diametrically opposed economic futures.  Can someone reconcile these views?

Doug

[/quote]

Monetary base refers to the money printed by the federal reserve and made available to private banks, while I assume the “stock of money” referred to by Ellen Brown is the total amount of money in the economy, which of course includes private debt. So even as the former has been jacked up precipitously in the last 1.5 years, the former continues to decline as the private sector delevers and banks refuse to lend to consumers at affordable rates. I think inflationists are right in their long-term view that the dollar and other currencies have been consistently devalued and will eventually be worthless, but wrong in their short-term view that debt deflation is not the major economic trend right now.

  • Thu, Jul 29, 2010 - 05:16pm

    #39
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

Thanks Ashvinp.  Would the “stock of money” be equivalent to the old M3 that is no longer tracked?  Or, is that yet another measure?

Doug

  • Thu, Jul 29, 2010 - 05:44pm

    #40
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    Re: Why the U.S. Need Not Fear a Sovereign Debt Crisis: …

[quote=Doug]

Thanks Ashvinp.  Would the “stock of money” be equivalent to the old M3 that is no longer tracked?  Or, is that yet another measure?

Doug

[/quote]

Yes, I believe she is referring to M3 money supply, although I thought it was more than $14T, but I’m pretty sure it is the only money supply measure that is currently contracting.

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