The reason why our High Debt + Inflation doesn't scare me

So Glenn Beck is right about two things.... but I noticed he doesn't tell you the reasons behind it either. Which makes _my_ head feel like it's going to explode ;-)

The reason we are creating such hyper-inflation is to devalue the amount of debt we actually owe.

We owe it in dollars, so if we pump tons of dollars into the system, it removes value from those who own the loan... China.

Now it's not our children who have to pay for this, it's us. Our children will be earning hyperinflated money, we are still earning 2008 money, if we're earning money at all. We will suffer the pain now, and our children will get a dose of cold water perhaps. But when they begin to earn money, hyper-inflation will have already taken hold.

reply to post by HunkaHunka


The problem with that thesis is that the Currency exchanges will show you that the dollar is still quite strong.

The stronger the USD, the more DEFLATION we have, not Inflation and definitely not hyper-inflation.

reply to post by redhatty


Oh I agree with you there. , but we keep pumping out more money.... at some point the market becomes flooded.

reply to post by HunkaHunka


The other problem with that though too is that if China even starts to see the US go into a hyper inflation spiral they will dump our debt really fast.

Although it does make sense what you propose though.

Originally posted by redhatty
reply to post by HunkaHunka

 

The problem with that thesis is that the Currency exchanges will show you that the dollar is still quite strong.

The stronger the USD, the more DEFLATION we have, not Inflation and definitely not hyper-inflation.

The proof is in the pudding Redhatty. TECHNICALLY the US dollar should be worth less than printing paper right now, but thanks to the bs behind the scenes its value is holding when in truth its value ISNT real.

If I have an apple and I am selling them for 5$ each, then I have a million apples I sell them at 2$ each, then I have 20 billion apples over night and I still sell them for 2$ each?

Somethings wrong with the picture obviously.

The dollar is simply being propped up to delay the inevitable ROCK BOTTOM that it HAS to hit - sooner or later.

reply to post by king9072


Economics is a complex study. International economics even more so.

Due to this agreement entitled Breton-Woods, the USD is the standard reserve currency throughout the world.

Should for some reason the BW agreement be breached or dissolved, then we would end up in a hyper-inflationary situation, immediately.

As long as there is a demand for the dollar, we are still safe. Regardless of whether it is fiat money or not.

slightly off topic, but trying to head things off at the pass here...

As long as we live in a world that requires CREDIT and/or uses fractional reserve banking we will always have fiat money - no matter what the value of that said money is pegged to - it will still be fiat.

In a credit and fractional reserve banking using world there will never be enough of any commodity that a currency is pegged to to allow a complete conversion demand on that currency.

typo

[edit on 2/19/09 by redhatty]

Here is the thing...what makes people so sure that ...they would just drop the US currency? .....If it is in such high circulation and demand those other countries use it as often as we do......I see no ends to the gain of the dollar. Even if they wanted to boost their own currency, with so many US dollars in circulation, and in every country around the world; China with so many treasuries, why would they all of a sudden drop the US dollar? It may fall somewhat but I do not see an inevitable crash.

Your assumption is also that our debt holders like China and Japan and Middle Eastern countries will just sit idley by and let the US give it to them hard and rough.

If these debt holders feel like the US is trying ot pull a fast one over them they can just in a matter of days off load their debt and cause a crash. What then? declare war on them for not letting us rape them?


What the printing of dollars will do to normal people is lower the standard of living. Remember the market was strong as was oil up until the fall season when it all plummeted. Same exact thing could happen with the dollar then everything is more expensive and wages are lower.

reply to post by HunkaHunka


We are not just "printing money" .. we say we need X amount of dollars, hold a Treasury Auction, and hope enough investors fund the programs.

The Gov can afford massive debt because the exodus from the Markets into Treasuries..

So no, your theory is essentially wrong.. it's debt with interest owned, and our Children won't pay for it, but eventually somewhere down the line I fear our future generations will finally feel the collapse of our system, if it is not us ourselves.

Originally posted by Rockpuck
reply to post by HunkaHunka

 

We are not just "printing money" .. we say we need X amount of dollars, hold a Treasury Auction, and hope enough investors fund the programs.

The Gov can afford massive debt because the exodus from the Markets into Treasuries..

So no, your theory is essentially wrong.. it's debt with interest owned, and our Children won't pay for it, but eventually somewhere down the line I fear our future generations will finally feel the collapse of our system, if it is not us ourselves.

hahaha bringing a child into the world this moment is the most senseless thing I think anyone could do. WE WILL pay for the life that our fathers had. There's no doubt about that. We are on the brink right now. We're the people on the titanic RIGHT BEFORE it splits in half and sinks.

Yes, you're right in realizing that this debt isn't scary in the same way of trying to escape the impossible (perhaps like falling into a black hole)


The truth of the matter is that while we are being told that our nation is facing bankruptcy, we all know instinctively that this premise is absurd. In no way are we truly bankrupt. If anything, we are wealthier now more than ever.

Here's why:

Infrastructure: We have more roads, bridges, schools, and social institutions now than ever. These things are the circulatory system of the body, the organism that is the United States.

Knowledge: Our universities, research laboratories, books, computers, and levels of education (brainpower) are still high, and the total collective measure of it all is at the highest and most powerful point in history.

Talent and labor: 300 million people. Need I say more?

Resources: We have a great deal of oil, land, minerals, shoreline, and trees. These alone constitute a great deal of wealth. If someone outside our borders believes they can take ownership of it, just take your lessons from history. Occupiers and conquerors seldom enjoy the spoils of war for long. And a war with the real and numerous patriots of this nation would be a futile effort at best.


So the long and short of it is a ruse. It is our money and banking system which is LYING to us, telling us that the wealth of this nation (which we created!) belongs to those who have created nothing. They're getting away with some of it, for now. But people are waking up.

By whatever means this debt will be repudiated will not matter. The truth is that you cannot get blood from a turnip. You cannot repay 40 trillion dollars of debt when you only have 8 trillion in money. One way or another, the mathematics of the situation require it to work out against the will of the creditors, no matter what bizarre demands they may make. What we're seeing right now are the death throes of a doomed system.

Hold on to a liferaft, these seas may get rough.

First thing I must state is that ANY currency system can come under financial attack, this is the nature of macroeconomics.

The biggest problem with currency, regardless of monetary system, is what *is* value. For an interesting read hit up the wikipedia article below.

en.wikipedia.org...(economics)


The question is, WHY does our currency maintain value, despite printing craploads of dollars?


1. The dollar has a long and overall very stable history compared to other currencies. The brand US DOLLAR is right up their with Nike in *value*. Just like how Nike prints a their logos on shirts made by slave labor for .50 cents a pop and sells them for $20.00 each, the US dollar does the same thing.

2. Various international commodities are priced in dollars. Most countries selling oil take dollars, etc. To buy oil, you must convert your currency to dollars, THEN buy the oil. This maintains demand for dollars.

3. Natural resources, running up a truckload of debt is no biggie if your debt is a fraction of the overall value of your iron, steel, trees, wheat, oil etc. The sheer physical size of the US with its massive resources helps guarantee payment on any US monies. Even with collapse their is a LOT of value in this country. Running up a million dollars in debt is no biggie for an individual with a 500 million dollar home. Our relative value gives us a LONG line of credit, no country has as extensive of natural resources as us outside maybe Russia or China.

4. Attractive debt instruments. Stocks, treasury bonds and everything in between. The US uses interest rates balanced against unemployment to control inflation. When unemployment gets to low you risk deflation, when too high you risk inflation. You can lower the number of transactions by increasing unemployment by increasing interest rates which causes more defaults etc., thus indirectly controlling inflation/deflation through unemployment. By controlling the lending rate the US has been able to offer attractive, stable returns over the long term. Additionally, foreign countries have bought up large shares of US businesses since the late 70's/early 80's, this makes it in the interest of countries such as Japan and China to help maintain stability in the US as our loss, would be their loss.

*note* Our system CAN NOT function with full employment, the unemployed also help drive up the value of your currency.

These are just a few general bits of information, I'm sure others will ad more.

*note* Like the directness of your answer Rockpuck better than mine!

Originally posted by HunkaHunka

The reason we are creating such hyper-inflation is to devalue the amount of debt we actually owe.

You think that's a secret?? Everybody knows that. It's what govts have always done when they get massively in debt. Just expand the money supply.