Many people are trying to attract the public's attention to the dangerous size of the National Debt. The trouble is, it doesn’t seem to be working. Congress has a big brouhaha every time it comes to raising the debt ceiling. It eventually gets raised and business and life go on as usual.
The real problem, is the disconnect between the average person and the national debt. The country has always functioned as expected and this debt has never interfered with day to day existence. If interest rates rise, the consumer knows they will pay more for borrowed money. If inflation increases, people are prepared to pay more for groceries. Big deal if Congress raises the debt limit, they’ve been doing it for decades. Many people in Congress have warned that the county could go bankrupt if steps aren’t taken to curb current spending and they have been feeding that “rant” to the public for years. None of the dire predictions has come true, so why even listen to these worry warts? You certainly won’t get elected to Congress promising your constituents a half a loaf of bread, when they expect a seven course meal.
Courtesy USDebtClock.org
The average person has no idea or can even envision the net effects of government insolvency nor do they even care. Their group solution would be; “Do what you did before to keep the government going, only do more of it.” Government Bankruptcy is so far from their real world of football, work and raising a family that it borders on absurdity. People look at government sequestration and the budget cuts, and are really surprised how much gets cut when you try to cut the budget by 80 billion dollars a year. Everyone get indignant when Congress shuts down the parks and monuments for lack of funds. And if lawmakers attempted to cut anyone’s benefits, God help whoever made the attempt.
The Tea Party Republicans are coming to the conclusion, they have nothing to lose by standing firm. If the Hoi Polloi can’t comprehend government Ponzi financing, then let’s take the government down the hard way and end the Mickey Mouse bookkeeping. It’s the Democrats that have the most to lose; the 17 trillion dollars of paper IOU’s (already spent money) could go poof because of a stalemated Congress. Wimpy ain’t going to bum another hamburger for payment later. As with any Ponzi scheme, there won’t be anything left for either party to give away.
A government collapse is similar to taking an airline flight. You wouldn’t get on a plane if you though there would be problems. Many years ago, my dad got caught on a flight that landed in Amsterdam. The airline had gone broke between stops. The pilot had to pass the hat for gas money among the passengers just to get to London. In this example the solution was simple, but it gets a tad more complex when the organization that supports and issues the currency, is insolvent.
The National Debt is like a giant candy store. The kid buying the candy has no concern over how the store owner runs the business. Therein, is where the problem lies.
8 comments:
There's not much we can be sure of except that all fiat currencies end at zero. When might that be? I haven't the first idea.
Sorry, that's not true for the US, at least for now.
1. A trillion dollar coin can be minted by the US treasury to pay off a trillion dollars of debt. More, if needed further into the future.
2. The dollar is still a reserve currency. We can print money, as needed by the world. Don't forget the official currency of some other countries is the US dollar, like Panama, Ecuador and many others. And, is used as the defacto currency by many other nations. Plus, is used in international transactions, like to price oil worldwide.
Further, it is intentionally meant to depreciate over time, so it will not be hoarded and will be used for investment in assets which can appreciate and increase the wealth of people and nations. Plus, also to avoid hoarding and to be spent, to increase the GDP and US revenues....in bot cases that is what is known as the multiplier effect. People buy bottles of beer at a bar, bars create jobs, their income buys beers at other bars, etc, companies are formed to brew, bottle, and distribute beer, jobs being created, etc, etc.
That said, there are a lot of obstructionists in Congress (voted into office by lots of obstructionist Americans) who actually want to crash the US and world economies and therefore trash the dollar. So, could happen.
currencies are relative!!! If you are the one stinks least, you win! whether that is fair or not, who cares, the u.s. owns the world.
if you believe that dollars are risky to hold, sell them and convert it to euros, or maybe gold. but regardless, the other 99% needs currency to buy everyday necessities.
economics is not fair, the economy is both book-smart and street-smart, and finally if you are Tony Soprano, who is going to collect from you?????who?
whatever we owe and whatever happens, this wrestler, the u.s., will end up on top, recognize reality.
Joseph's comment intrigues me, specifically when he mentioned this:
"1. A trillion dollar coin can be minted by the US treasury to pay off a trillion dollars of debt. More, if needed further into the future."
That seems plausible, but would there be unintended consequences if we paid off our debt like this?
A 1 trillion dollar coin ... it would be a debased coin I would think, because how much metal and of what type would you require to make a coin actually worth 1 trillion dollars? Probably we would need to somehow harness a precious metals asteroid into low Earth orbit for that :P
So ... it would actually need to be a debased coin. By that I mean: debased = the coin says 1 trillion dollars on it, but the metal is not worth 1 trillion.
So what then is the difference between making a 1 trillion dollar debased coin, or just making a 1 trillion dollar piece of paper that does the same thing for cheaper?
Maybe the coin thing could fool international players ... and maybe it could fool Americans too, but it is still functionally equivalent to money printing if it is a debased coin.
And in the end, it still increases the money supply.
That could crash the dollar too just as surely as our inept Congresscritters could ... though Congress can indeed crash us faster if they want.
Thoughts?
Hi Anon 1:16
You could mint the trillion dollar coin, but the problem is real. Everyone could quit their jobs and the government could print dollars for all of us, so we could go to the stores and buy stuff. At some point, you run out of things to buy, because nobody is working to produce them.
What would you think of a person or household that behaved like this government? A government that has to print money to pay the interest on its debt? That has to keep raising the debt limit in order to continue to borrow, spend and pay down debt? That never pays principle down? That currently spends 1 trillion more than it takes in annually, and growing? That has a 17 trillion dollar debt that can never be paid back? That is bloated and corrupt and wastes and overspends? Whose main premises are warfare and welfare? Whose GDP and unemployment has not improved after trillions of dollars of stimulus and ineffective monetary and fiscal policies? Whose tax revenues are dropping? Whose being downgraded by rating agencies? Whose partner countries are starting to use gold, and their own currencies for international trade and oil purchase? Whose rule of law is gone (NY criminal banks and multi-national corporations have broken the law and destroyed the US economy and have never been prosecuted)?
You know a person or household with this type of behaviour is not long for this world.
End of story.
@ Joseph Oppenheim said
Krugman, is that you?
Hi AIM
Your right, real people go to jail for pulling that stuff, just ask Bernie Madoff.
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