Why not just print trillions of dollars and adjust interest rates to fight inflation and deal with the inflation instead of having insane debt. This seems to be the absolute easiest way to pay off the debt. Sure we still pay a price but this could be done so easily. You guys are going to call me crazy but I understand that this is a bad option it just seems like the least bad option to pay off the debt.

Everything basically gets paid for with money that people have put up. Creditors lose out due to inflation. The average American ends up better off. Government can continue to operate.

4/28/2011 6:00:01 PM

except then no one will buy any future US debt if we hyper-inflate the currency. then we can't sustain our gov't spending. BAM, that was easy

4/28/2011 6:13:28 PM

Thats why when we inflate it we go back to having a standard like how we had a gold standard before. Then it is locked in to consistency and confidence is built.

4/28/2011 6:18:46 PM

Isn't this what we're already doing with quantitative easing?

4/28/2011 6:32:57 PM

As soon as the U.S. government drops the pretense that it cares about the value of the currency, people will begin dumping their dollars and treasury holdings, at which point hyperinflation (or abandonment of the currency entirely) becomes inevitable. If what you're suggestion was viable, Zimbabwe would be a great place to live.

4/28/2011 6:55:31 PM

http://en.wikipedia.org/wiki/Modern_Monetary_Theory

4/28/2011 7:18:47 PM

If they do it once and jump to a standard then the people who dump it at the bottom ares imply fools. Worst case scenario we make a brand new currency.

4/28/2011 8:33:16 PM

So you want to be Brazil?

4/28/2011 9:29:51 PM

Wow, a pro printing thread, be very careful what you wish for. The printing is not going to stop, much like a heroin addict the first dose is great, and then you cant function without it. Printing money ends the same way every time. We are a nation who 'earns' 2 spends 3.5 and owes 14 (not including trillions of other off balance sheet liabilities). Repay? not even close. The dollar is getting trashed and the number one holder of us debt is the fed. Currently the fed is buying about 70% of the us debt issued. The game has now reached the point where the fed needed to inject $600 billion to produce the awe inspiring 1.8% Q1 gdp (feds number keep that in mind prob more like .8 % ex inventories). Oil, PM's AG's soar. Right now Pimco run by Bill Gross the largest bond fund in the world 270 billion+ does not own a single t-bill (the is net short). I feel like we are in the fourth inning of this thing, somewhere between falling into the abyss and the first scream on the way down.

If you print money it causes people to be less willing to lend to you and be repaid with dollars worth less. They drop their bid for Tbills, rates rise now it cost more to borrow. in the case of the US who has to borrow 1.5 trillion each year just to fund deficit it becomes a spiral. The fed is buying t bills currently to keep rates low and allow wall street to borrow cheap and pad the books and continue the illusion of solvency. It is like holding a basketball underwater, you can do it but for how long.

The choice was in 2008, the system crashed it was a total meltdown. The insolvent institutions were not allowed to be liquidated instead were proped up and bandaged with fresh federal reserve notes. We never took any pain just delayed it. The massive private holdings of AAA stamped shit was transfered to the public balance sheet. Now is the only way forward is to continue to plug and patch, who is going to fund these huge deficits? Chinas desire for more t-bills is suspect at best, Japan is a radioactive ruble pile, europe has its own solvency issues. Thats the big three bond buyers. Who is left? The Fed.

Our economy has been floated with trillions of dollars of federal reserve games. What do we have to show for it, a weak economy being choked out by rising commodity prices and high unemployment and a central bank who is out of bullets.

Massive changes are comming, they have to. Hopefully it will be washington who fixes it first rather than wait for the world to abandon the dollar, but youd have to be a sleeping for the last 10 years or a total asshole to think that is going to happen.

In summary best case you pay more for imports, your savings are gone, your taxes go way up. Worst case its assault rifle gold and silver time. Go fed.

You dont want to print money even if you are a know it all phd with plenty of academic theroies.


(ps the fed has something like 2.7 trillion of assets on its books that loose value when rates go up, the portfolio looses a billion dollars for every basis point. One tick raise in rates=billion dollars. one point 3.5% to 4.5% equals 100 billion. Rates in the 80's went to 20% without debt 100% of GDP. Rates go to 20 the fed now has a 2 trillion dollar ish looser on its books. Its a neat little AIG style feedback loop)

4/28/2011 10:57:49 PM

Quote :

"If what you're suggestion was viable, Zimbabwe would be a great place to live."

Zimbabwe not being a great place to live has nothing to do with it's inflation, it would be crappy regardless.

4/28/2011 11:36:07 PM

and yet, the hyper-inflation there isn't helping is it? QFT

4/28/2011 11:49:21 PM

Did you just QFT yourself? What a faggot.

Quote :

"and yet, the hyper-inflation there isn't helping is it?"

The warm weather and the zebra population aren't helping either, and they are just as irrelevant.

4/29/2011 1:21:38 AM

If you said that hyperinflation wasn't the only factor making Zimbabwe shitty, you might have a point, but to say hyperinflation has nothing to do with their situation confirms that you're delusional. A stable currency is the foundation of a healthy society.

4/29/2011 11:11:35 AM

A nation can't go on with any kind of decent standard of living without a decently working economy. You can't have a decently working economy without currency.

The actions our government has taken to put people in jail who do something that kind of looks like using a competing currency should clarify its disposition sufficiently. The government has to be behind the currency for it to be anything other than paper - and they've sent the message that they will force people at gunpoint to use their currency. Thus, you can be secure in having savings in the Dollar and investing in companies that are tied to the Dollar.

Granted, the issue that we're talking about is the mess that our federal government created by piling up debt. They were able to pile up all that low-interest debt because they had the power of the currency. So the proposal is to use the currency to get rid of the debt. But no one would have believed in the currency if it had not been tied to the economic condition of the nation in the first place. The economy - and your way of life - is collateral for the investment the rich have in T-bonds. Pretty simple actually.

4/29/2011 11:32:51 AM

Quote :

"You dont want to print money even if you are a know it all phd with plenty of academic theroies."

AFAIK the "academic theroies" (sic) that real "know it all phd" types use also advise against wanton seigniorage leading to extreme monetary inflation.

4/29/2011 11:08:09 PM

The jab was at the great bearded savior and his entire stable of flunkies, not sane academics. His total confidence in his ability to control markets is the scary part. I watched him brag about QE2 (not even finished) on his new tv show. He told me that the inflation i see all around me is "transitory", and that Timmy G"s strong dollar policy will provide a base for the dollar. At the same time revise down all of his previous predictions of unicorns and rainbows. The same guy that said subprime is contained. Plenty of people are furious with the path of Fed. The problem is most of the United States is more concerned with watching the royal wedding on their ipad.

4/30/2011 12:31:10 AM

it's not printing money

it's quantitative easing

totally different set of words there

4/30/2011 1:20:47 AM

Quote :

"but to say hyperinflation has nothing to do with their situation confirms that you're delusional. A stable currency is the foundation of a healthy society."

Challenge accepted.

Two countries. Assume widget's are the only thing anyone can make, and assume that widgets are some value added product. Country A prints money like there is no tomorrow and makes 100 widgets. Country B has a set currency and makes 0 widgets. Who's currency is worth more? Your statement would indicate that country B would be more successful, yet this cannot be true as country A has a GDP >0, while country B has a GDP = 0.

If you don't like theory stuff, then you can check out the current inflation rates:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2092rank.html
and you'll see Niger rated in the top ten and China rated way down at 100 something (ironically right next to Zimbabwe!)

Hyperinflation has longer term effects of economic stability and reduced investing, but not the relationship you are trying to draw. The reason Zimbabwe sucks is because their GDP sucks, the reason China is progressively more awesome is because their GDP is progressively more awesome, inflation has no direct correlation. mrfrog has a pretty good explanation of the indirect relationship between the two.

[Edited on April 30, 2011 at 3:12 AM. Reason : ]

4/30/2011 3:11:30 AM

Challenge failed. You didn't address his point. You made up some stupid example and tried to apply it and failed.

4/30/2011 9:23:05 AM

Good point, I like how you put forth the very convincing argument of "you're wrong".

4/30/2011 11:39:27 AM

Kris your fantasy scenario was flawed from the start. Why would a country that produces nothing have a currency?

Hey guys, we need a medium of exchange for...well, we don't exchange anything because we don't produce anything, but damnit we need a medium anyway...

4/30/2011 11:59:42 AM

Kris, as history shows, people will use any medium of exchange their circumstance prescribes. To be a medium of exchange, an item much be scarce. As such, in your fake scenario, it seems to me both country A and B will use Country B's currency, just as 1990s Cuba used the Dollar and Zimbabwe uses the Euro, so the 100 widgets country A produces will be priced and traded in country B's currency and country A's currency will be worthless.

Sometimes citizens of a country have difficulty doing this, as they have no means of acquiring foreign currency for their own internal exchanges, such as in parts of Africa where any foreign currency in the country is immediately used to buy imports, but that is no problem in your scenario, since it seems country A is the only one producing anything. As such, the people of country A want a stable currency, country B wants widgets, so they will trade and both benefit.

4/30/2011 12:16:13 PM

People are fine with hyperinflation when it occurs in the stock, housing, energy, and other asset markets.

4/30/2011 12:16:18 PM

Quote :

"Kris your fantasy scenario was flawed from the start. Why would a country that produces nothing have a currency?"

I chose zero so I wouldn't have to quantify the amount of inflation, but if you don't like theory (and I know you in particular have an aversion to it), I posted real world examples that illustrate the same point.

Quote :

"As such, the people of country A want a stable currency, country B wants widgets, so they will trade and both benefit."

That is not true. Why would country A want country B's currency, it is worthless. For example China has a very large inflation rate while Niger has had an extremely low one. Why would China want Niger's currency?

[Edited on April 30, 2011 at 12:21 PM. Reason : ]

4/30/2011 12:16:44 PM

stop brutalizing the English language. 10% per year is not "Very large inflation", try zimbabwe's 1,000,000% per year. More importantly, such real-world examples suffer circumstances you did not include in the thought experiment, such as a police force imprisoning people for using foreign money, such as in China and Cuba.

And the people of country A want country B's currency as a store of value. If the currency is worthless, as you say, then you cannot claim the currency is a "set currency". You set the rules of the thought experiment by saying it was a stable store of value. You can't now call it worthless.

4/30/2011 12:29:37 PM

Check the link I just posted, both Zimbabwe and china's inflation were 5% last year. I said china's was "very large" as the context of the thread implied that Zimbabwe's inflation was "very large".

Quote :

"If the currency is worthless, as you say, then you cannot claim the currency is a "set currency"."

It is a set stable currency, remaining stably worthless, just like Niger's. We literally have the very example you are describing working out in the real world right now.

4/30/2011 12:38:17 PM

I described nothing, it was your thought experiment.

And I have apparently not kept up with current events. I purchased a zimbabwe one trillion note over a year ago, inflation was over a million percent per year at that time. Glad to see Zimbabwe has figured out how to turn off their printing presses.

As such, you answered your own question: why would one country want to import another country's currency when they have the same inflation rate? Answer, they wouldn't. But that was not your thought experiment. It is a lie to call a worthless currency a stable currency.

4/30/2011 1:03:19 PM

Sounds like Country B needs some handouts since they aren't working.

[Edited on April 30, 2011 at 1:12 PM. Reason : lkj]

4/30/2011 1:12:46 PM

Quote :

"As such, you answered your own question: why would one country want to import another country's currency when they have the same inflation rate?"

Reread what I said. Niger has a very low inflation rate, China has a significantly higher inflation rate. China has no interest in Niger's currency.

4/30/2011 1:28:07 PM

So you are saying Niger is paying for Chinese imports in yuan only?

4/30/2011 1:46:39 PM

I imagine they pay in gold and Forex reserves. I doubt china has any interest in WA CFA francs, but they might.

4/30/2011 2:57:23 PM

So in other words you know that China has no interest in their currency but you don't actually know?

Actually, lets follow the progression...this is how a typical dicussion with Kris goes
1)

Quote :

"China has no interest in Niger's currency."

2)

Quote :

"I doubt china has any interest in WA CFA francs,"

3)

Quote :

"but they might."

I think you're flat out wrong, I suspect it's Niger that doesn't want anything to do with the yuan.


[Edited on April 30, 2011 at 4:44 PM. Reason : .]

4/30/2011 4:37:10 PM

didn't you know? Kris knows everything about anything@

4/30/2011 7:16:00 PM

In the widget world can you eat your Ipad? Also could someone explain how housing is still in a downward spiral yet anything priced in dollars ( energy , ags, stocks and pm) is ripping up. Is it the banks have to park all this cash the fed has given them, and they wont touch the housing sector?

4/30/2011 8:42:45 PM

actually, nobody will touch the housing sector due to just how much the federal gov't has fucked with it. TARP was the absolute worst idea imaginable, because no one could put a price on he risk associated with the mortgages. All we did was take those mortgages and make them even harder to price. And we consolidated some failed companies into even bigger companies, even though the problem we were trying to fix was "too big to fail". Ergo, in order to fix "too big to fail," we made even bigger fucking companies. All the while, we have not given any one any incentive to figure out what the hell the mortgages are worth.

had we actually let the banks fail, they would have been forced to sell their bad assets, which would have at least put a fucking price on them and started the actual markets working again. Instead, we just put all of that off, letting the bad assets continue to rot and fester.

4/30/2011 9:00:22 PM

BUT WE HAD TO SAVE THE ENTIRE FINANCIAL SYSTEM BRO

4/30/2011 9:04:53 PM

You mean do everything we can to make sure the banking cartel survives, but just the ones we like.

4/30/2011 9:22:59 PM

I mean, yeah. The problem is that this is being sold to the people as something that is needed. If people would learn about this whole debt fueled system that funnels untold amounts of wealth to bankers that contribute absolutely nothing of value to society, they'd be pissed. Obviously, TPTB are doing whatever they can to keep the wealth reallocation going.

To me, monetary policy should be the biggest tent there is. No regular person should want the current system to persist. Whoever controls the currency controls our way of life; no one should have that much power. And yet, it's still considered a "fringe" issue. Only nutty gold bugs care about monetary policy, right? It's being ignored almost entirely by the left, and most of the right. This should be an area where progressives, libertarians, conservatives, and political vagrants can all agree: when private banks can create money at the push of a button, we're being robbed.

4/30/2011 9:40:11 PM

No private bank can create money at the push of a button. They can borrow from the Federal Reserve at silly low rates, they can load shitty assets on to the feds balance sheet in exchange for freshly printed t bills, but they cant make money at the push of a button, only the fed cam make money. The amount of government intervention in all levels of the financial markets is the main problem. A system where private losses are the transfred to the public balance sheet, but gains are private is broken. It is washingtons unwillingness to address issues instead kicking the can further down the road. The federal reserve system creates a group of banks with advantages by design. The public is blind to it and have no idea how fragile the current economy is and how close we are to the abyss. I came on here to slam the fed and see if anyone would give me any sort of hope the Chairman Timmy G and Obama aren't jumping on the gas as we are hurling to the cliff. Ps I am in the gold silver assault rifle camp and feeling kinda good about it now.

4/30/2011 10:05:30 PM

Quote :

"So in other words you know that China has no interest in their currency but you don't actually know?"

Sorry you didn't understand my sarcasm, but no, China has no serious interest in Niger's currency, they may have an interest in their natural resources, but I know for sure that they have no serious interest in their currency.

Quote :

"I think you're flat out wrong"

Prove it.

Quote :

"I suspect it's Niger that doesn't want anything to do with the yuan."

I can guarantee you that isn't true, Niger would take anything given to them.

Quote :

"nobody will touch the housing sector due to just how much the federal gov't has fucked with it"

http://www.google.com//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1304234827695&chddm=98532&chls=IntervalBasedLine&q=INDEXDJX:REIT&

20% growth, not bad, someone is touching it.

[Edited on May 1, 2011 at 3:30 AM. Reason : ]

5/1/2011 3:30:07 AM

http://www.cimunlive.org/content/position-paper-niger-group-77-ministerial-level-meeting-2010-g-77-0

Quote :

" Niger does not wish to be paid with the Renminbi for its oil."

5/1/2011 7:56:01 AM

Quote :

"I can guarantee you that isn't true, Niger would take anything given to them. "

I would suspect that would have more to do with the Nigerians having access to open competitive international currency markets while the Chinese do not and are forced by law to take a huge loss on all government run currency exchanges.

5/1/2011 9:07:21 AM

^^

Quote :

"Niger will graciously accept aid of any currency"

Quote :

"I would suspect that would have more to do with the Nigerians having access to open competitive international currency markets while the Chinese do not and are forced by law to take a huge loss on all government run currency exchanges."

Can you post some evidence of this, I'd like to read it.

5/1/2011 12:21:33 PM

^ the claims sound like more of personal speculation based on fundamentals. True, I think we'll all agree that technically almost no one cares what currency they're paid in, as long as it's a major currency, and as long as they have access to currency markets.

The reason is that the premium for changing the denomination of currency in the real markets of the world for large transactions and for big players is probably like 0.00001%. Currency traders see to it that there isn't the slightest differential in prices that they could make money off of with 100x leverage. But because of their hard work, the meaning of one currency vs. another is largely irrelevant.

Times where this is not true:
- Long term holdings, or holdings for any significant time, you're taking a bet on how the currency moves
- Taxes may be treated differently depending on the denomination of the transaction

I think that the concerns about global currency stability are mostly with large holdings and government debt. The role (and need) of currency as a medium for a transaction is significantly diminished in the modern global economy.

There's also some small argument for the idea of liquid holdings. Basically, capital you have that can be used for payment on a dime. You should all be familiar with the idea that a large fraction of equity out there is EXTREMELY difficult to value. Money is not, or at least that's the idea. Right now, companies like Apple sit around with $60 billion in cash "equivalents" because they can probably put them to use as payment in a matter of hours or minutes - which is good for sniping the next VC with the idea of the century.

But this is kind of stupid idea. We don't need currency to have a liquid vehicle for transactions. A broad based ETF or billions invested in gold or oil for crying out loud could sold in large volumes with no real problems.

5/1/2011 3:33:57 PM

Quote :

"I can guarantee you that isn't true, Niger would take anything given to them."

You're getting worse every day, man. While you apparently think the Nigerian people are barbaric fools, they know when they're getting the bad end of the deal. See, with this arrangement where China's currency is pegged to ours, China picks up a lot of our inflation. The reason is very simple: they're trading a fairly stable currency for dollars, which are steadily going down in purchasing power.

Quote :

"No private bank can create money at the push of a button. They can borrow from the Federal Reserve at silly low rates, they can load shitty assets on to the feds balance sheet in exchange for freshly printed t bills, but they cant make money at the push of a button, only the fed cam make money. The amount of government intervention in all levels of the financial markets is the main problem. A system where private losses are the transfred to the public balance sheet, but gains are private is broken. It is washingtons unwillingness to address issues instead kicking the can further down the road. The federal reserve system creates a group of banks with advantages by design. The public is blind to it and have no idea how fragile the current economy is and how close we are to the abyss. I came on here to slam the fed and see if anyone would give me any sort of hope the Chairman Timmy G and Obama aren't jumping on the gas as we are hurling to the cliff. Ps I am in the gold silver assault rifle camp and feeling kinda good about it now. "

It's not just the discount window that I'm talking about. Private banks can create money because we have a fractional reserve system. I'm sure you're familiar with it, but it basically makes it so banks only have to have a set percentage of their reserves in actual cash. Thus, a private bank can give out a loan and charge you interest on something that they don't even have. The Federal Reserve is the root of the problem, yes, but the whole banking cartel (as you put it) is in on the game, too.

[Edited on May 1, 2011 at 4:20 PM. Reason : ]

5/1/2011 4:17:33 PM

Quote :

"While you apparently think the Nigerian people are barbaric fools"

I never said such a thing, I said they are poor, which they are.

Quote :

"China picks up a lot of our inflation."

China generates their own, I've already posted this link, but obviously you didn't read it before just spouting bullshit.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2092rank.html
You'll notice China has an inflation rate 4 times our own.

5/1/2011 4:37:41 PM

Sure, let me google that for you.

Quote :

"Have passport in hand when converting currency in China. The official currency exchange form in China requires the teller to see visitor's passports and record the identification number. Some banks may make a photo copy of the passport as well. Fill in the currency exchange sheet, place it, the passport and dollars in the teller window and wait."

5/1/2011 5:09:15 PM

That's not really what I asked for. I'll have you know the only reason I asked was due to the fact that my own search came up with unsatisfactory results. Either you have a better search term than me, your own resource that cannot easily be found through google, or you're just plain making it up. I'm only trying to figure out which of these it is.

5/1/2011 5:12:25 PM