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When Having the US Debt Paid Off Was a Problem
Hugh Pickens writes "NPR reports that not so long ago, the prospect of a debt-free U.S. was seen as a real possibility with the potential to upset the global financial system. As recently as 2000, the U.S. was running a budget surplus, taking in more than it was spending every year — and economists were projecting that the entire national debt could be paid off by 2012. So the government commissioned a secret report outlining the possible harmful consequences of retiring the debt completely. For one thing, paying off the national debt would mean the end of Treasury bonds, a pillar of the global economy. Treasury securities are crucially important to the world financial system in a number of ways: banks buy them as low-risk assets, the Fed uses them for executing monetary policy, and mortgage interest rates vary based on Treasury rates. 'It was a huge issue ... for not just the U.S. economy, but the global economy,' says Diane Lim Rogers, an economist in the Clinton administration. In the end, Jason Seligman, the economist who wrote most of the report titled 'Life After Debt (PDF),' concluded it was a good idea to pay down the debt — but not to pay it off entirely. 'There's such a thing as too much debt,' says Seligman. 'But also such a thing, perhaps, as too little.'"
It also did not include actualizing the social security debt or some of the other debts / trickery that was used to create the supposed surplus. It's explained here:
http://www.craigsteiner.us/articles/16
You can verify it here (U.S. Treasury site):
http://www.treasurydirect.gov/NP/NPGateway
Enter 09/30/1997 through 10/01/2001 for range and look at 9/30 for each year.
In the 1950's each $1 borrowed produced approx 95 cents of GDP. By 2008 that had dropped to 12 cents. At the moment it's -45 cents. For every $1 borrowed the USA errodes 45 cents of it's wealth. If USA fed spending continues at it's current pace? It will take 20% of the rest of the worlds GDP to fund that spending by 2020. Europe is toast. They're about to go to the Chinese for funding. That will come will strings I'm not sure the West is ready for. There will be no money left for the USA to use by 2020. The rest of the west will have used it. Meanwhile the USA's industrial productivity is dropping year by year. Those "organise anywhere" people are getting what they want. A dismantling of capitalism. I'm not sure they're gonna like like it. Industrial productivity is the only way out. But that's not going to happen while you have the Fed funding and subsidising projects that will lift energy and industrial input costs. HHHmmm, I wonder what sort of reaction an economic dictator will get when they tell the USA how to run their country in return for continued support? I, for one, am not looking forward to all this unravelling.
Yes, that is the Federal Reserve's notion of money and the one they prefer because they control that money. That's why keeping the US Dollar as the unit of international exchange is so important. Prior to this, the notion of wealth was collecting and maintaining what ultimately traces back to physical resources.
So now, "money" is generated by having someone "owe" you something. This is in a very literal sense a means by which the entire world is enslaved.... to the 0.0001%. I know it sounds all conspiracy theorist-like, but think on it.
The stuff you earn and save is actually a form of debt and its ultimate value is determined by the central party who owns the debt. If the Federal Reserve were to blink out of existence, ALL of my money becomes worthless and my savings becomes zero.
Sorry, here is where you can watch it online, now, free:
http://www.youtube.com/watch?v=Dc3sKwwAaCU
or
http://video.google.com/videoplay?docid=-2550156453790090544
He also released a followup video a few years later:
http://www.youtube.com/watch?v=rCu3fpg83TY
http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms
Let's look at one figure, the percentage change in the national debt. Take the two terms (Regan, Bush) before Clinton, and the two terms after him (Bush). Negative numbers are decreases, positive increases.
The last time a Republican president decreased the National debt was Richard Nixon in his first term in 1973, +3.0%. This was over 9 presidential terms ago, over 36 years.
So when Republicans try and trash Clinton's economic record, they always quote misleading figures. Also known as lying.
Why is Snark Required?
That analogy itself is messed up. You made an assumption that money was based purely on work. But if you want to follow the history of money that way, you have to realize that at one point money was traded for commodity.
Let's imagine that money is a measurement of favor. I lug you some rocks, then I will be entitled to some kind of favor from you tomorrow. Maybe you'd give me a feast with a whole chicken. But I wasn't in the mood for a chicken that time, so I decided to put off receiving favor from you. After two years, I expect to still be entitled to that feast of whole chicken. But with inflation, for some reason you'd only give me half of the chicken, because you claim that my favor has devalued over time. What gives?
Democracy is for the people; you only vote once per season and we'll do the rest of the work for you don't have to.
Very well written.
Most people think the way a bank works is they take money from depositors and lend it out and make money on the difference. Even if that were true it would be creating money because if the person saves money in a demand account (savings or checking) where they have access to it any time they want and the bank lends it out they have created money. Say I put $1000 in savings. My account shows I have $1000. Say the bank lends out $900 of it (Assuming there is a 10% reserve requirement which isn't even true anymore). There is now $1900 in the economy. It gets worse because when that person pays someone that $900 it goes into their bank and that bank can create $810. Now there is $2710 in the economy. This keeps going until there is $10,000. So the banks create $9,000 of money from that first $1000.
The key to this whole thing is letting banks lend out demand money. If we made this illegal the whole situation would change. Banks would only be allowed to lend out time deposits which are things like CD's where you give up access to the money for a certain time. This would prevent the bank from creating money because they could only lend out money that you don't have access to.
This could be accomplished without causing massive deflation by slowly raising reserve requirements.
The main reason deflation is bad is because today people have adjusted their lives based on debt and inflation. With deflation your wage goes down and you have problems paying off debts. But once transitioned to system where debt isn't money people do much better. You don't have to put your money at risk because you can just save it in a vault and it won't lose value. This I believe is why we have the current system. The powerful bankers and politicians like inflation because it allows them to spend money they don't have to tax to get. Also inflation forces you into the financial system so that your savings have a hope of maintaining purchasing power.
To think about deflation you have to look at the technology industry. This industry is growing so fast in productivity that it is still deflationary. Do people ever rush out to by a TV because they think it will be more expensive next year? Some people like the latest and greatest but most people wait for products to drop until they are in their price range. This is deflation. I bought an Apple II GS in 1998 with monitor and printer for somethings like $1500. This is like $3000 today. My kids have toys that are about $20 that are as powerful as it. I just bought a printer, copier, scanner, fax for $40. This is massive price deflation and it benefits the consumer.
I love Jesus, except for his foreign policy.