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DomoArigato
Participant[quote=SD Realtor]
Perhaps you can show us successful historical references where your scheme actually was successful.
[/quote]
Uhhh … the U.S.? What do you think QE2 was? The Federal Reserve effectively printed money and used that money to buy U.S. debt. Yes, presumably the U.S. Government has to pay interest on that debt to the Federal Reserve, but the Fed returns all its profits to the Treasury, so that debt was effectively monetized. There was concern at the time that QE2 would cause inflation to spike, but the core inflation rate has remained below 3%.
The only difference between what I proposed in the first post and what the Fed already has done is that the Fed and the U.S. Government would officially announce that the Treasury bills that the Fed bought via QE2 would be retired and thus the deficit would officially go down by that much ($1.5 trillion?).
However, officially announcing that the QE2 debt is being retired is just semantics. So long as the Fed holds that debt, it is effectively retired.
I just find it interesting that I propose what amounts to a semantic difference in what was already done via QE2 and suddenly everybody and their brother goes hysterical and starts throwing out big words like ‘Zimbabwe’.
It just goes to show that the hysteria over the deficit is way overblown. The government should be focused on fixing unemployment and the large child poverty rate (20+%) instead of focusing on the deficit.
Participant[quote=sreeb]
How much debt do you intend to monetize and how much inflation do you expect to get?
[/quote]Maybe just start off with monetizing 2% of the debt to see what happens? You predict that interest rates would go up, but everyone thought interest rates would go up when the U.S. was downgraded by S&P, but interest rates actually went down.
Personally, I don’t believe that the U.S.’s current debt is anything to be worried about. If anything, the U.S. should be borrowing more while rates are low. My preferred solution would be to raise taxes and cut the defense budget. However, the U.S. Government shouldn’t be reducing spending during a recession, so the money saved from the defense budget cuts should go towards strengthening the social safety net.
I was only proposing monetization of the debt to those that believe in invisible bond vigilantes.
Participant[quote=sreeb]
Yes, it is true that poor government policy destroyed the Zimbabwe economy (just as poor government policy is destroying ours) and damage to the economy preceded hyperinflation. [/quote]Anyone who compares the U.S. to Zimbabwe, Portugal, Italy, Ireland, Greece, and/or Spain is an idiot.
Participant[quote=walterwhite]
Is there any other endgame?[/quote]Raising taxes and cutting the defense budget would easily solve the budget issue. But like you said, that’s unamerican.
ParticipantDo any of the believers in the Inflation Boogeyman care to make a prediction on when core inflation will rise above 5%? Or even better, on the event that would cause such a rise in inflation?
Keep in mind that Ron Paul has been predicting inflationary doom-and-gloom through his newsletters since 1992 and that many economists have been predicting doom-and-gloom for Japan (which has twice the debt-to-GDP ratio as the U.S.) since the mid ’90s.
Participant[quote=SD Realtor]Not enough of us oldtimers on this site who experienced what life was like is the lat 70s and early 80s.
It pretty much sucked.[/quote]
Yes, life is so much better today with core inflation below 3% and U6 at 16%. Yesterday’s problems are not necessarily today’s problems.
ParticipantThe Treasury prints money and then sells it the Fed at manufacturing cost.
How much would it cost the Treasury to print a $1.6 trillion bill? About 3 cents? So the Treasury prints a $1.6 trillion bill and instead of selling it to the Fed for 3 cents, it trades that $1.6 trillion dollar bill for the $1.6 trillion in debt that the Fed owns. That debt is then retired.
Instantly, the federal debt goes down by 10%. What’s the downside? If the U.S. has a ‘debt crisis’, isn’t this the easiest way to solve it?
Participant[quote=briansd1][quote=DomoArigato]QIf having a large debt-to-GDP ratio is certain to lead to doom, why shouldn’t the Federal Reserve just buy the U.S. debt and retire it?
[/quote]Technically, the Fed would own the debt, but the government would still owe the money.
The Fed and the Federal Government are not exactly the same.
The Fed would need to pay a premium to buy up all the debt and that might cause the Fed to incur huge losses.[/quote]
By ‘retire’ the debt, I meant that the Fed would just print whatever money they need to buy the debt. The Fed wouldn’t incur any losses because they would be buying the debt with money that they had printed.
Participantmarkmax33,
You may continue to respond to my comments if you must, but be advised that I will no longer be seeing your responses.
Participant[quote=Fearful]
It is strange to hear someone being blase about rising prices. If the value of the dollar falls, imports become more expensive. Imports include food. When food prices rise, people complain loudly.
[/quote]I would like to see the Government implement programs that would allow for any hungry person in America to be able to buy food. This may increase the deficit, but I would rather the U.S. take on more debt than allow people within its borders to starve.
How about you? Are you in favor of strengthening the social safety net?
Participant[quote=paranoid]If you want to becom another zimbabwe, go for it.[/quote]
Hyperinflation in Zimbabwe was due to destruction of productive capacity, not due to monetization of existing debt:
Hyperinflation in Zimbabwe began shortly after destruction of productive capacity in Zimbabwe’s civil war and confiscation of white-owned farmland. Food output capacity fell 45%, manufacturing output 29% in 2005, 26% in 2006 and 28% in 2007, and unemployment rose to 80%.
http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
It’s important to understand differences in economic situations so that you aren’t so easily fooled.
ParticipantSo we’d get some inflation which would cause the value of any remaining debt to go down, further alleviating any ‘debt crisis’. Additionally, the value of the dollar would likely go down, no? This would increase the competitiveness of American exports and likely lead to higher employment.
What are the bad things that would happen, if any? Would we just be trading fear of invisible bond vigilantes with fear of the inflation boogeyman? Maybe the only thing we have to fear is fear itself?
November 14, 2011 at 6:05 AM in reply to: CA Revenue comes in 6.5% lower than expected (and some common sense solutions) #732884Participant[quote=AN]
I don’t think there are that many out there who are against objecting to fraud on Wall Street.Having 401k most likely mean you’re working for the 1%. Isn’t objecting to the 1%, then turn around and work for that 1%, which make that 1% richer, make you a hypocrite? Especially if you choose to work for that 1% because you’re making more $ working for that 1% than working for the people?[/quote]
You can’t do nuance, can you? Is a parking ticket the same in your mind as a murder conviction? Are you seriously trying to make the argument that people shouldn’t be protesting against criminals on Wall Street just because they have jobs and 401(k)s?
For me to exhibit the same level of hypocrisy that EconProf is exhibiting, I’d have to tell other people to drop out of their 401(k)s while keeping mine. That’s not what I’m doing or saying.
I guess in your mind, no one should ever go to jail because we’ve all at least jaywalked or violated some other minor law right? If jaywalkers don’t go to jail then why should someone who embezzles $10 billion be made to go to jail? Why should a rapist or murderer have to go to jail if a jaywalker is not put in jail?
Hitler would have loved to have people like you in Nazi Germany. As soon as he took power, you would have proclaimed loudly and often that any statements against Hitler by those with jobs were hypocritical because any job would at least tangentially benefit Hitler in some way.
One of the things that separates the U.S. from Communist China is that there is a strong culture of protesting against the crimes of those who have money and power in the U.S.A. If you want to live in a society where seldom a discouraging word is spoken against those with money and power I suggest that you move to Communist China.
November 13, 2011 at 6:37 PM in reply to: CA Revenue comes in 6.5% lower than expected (and some common sense solutions) #732862Participant[quote=AN] I don’t know if anyone that’s righteous enough to give up free money. [/quote]
That’s probably because you only hang out with right-wingers. The right-wing has somehow come to equate greed with patriotism.
The liberals that I hang out with give generously of their time and money to causes they believe in. Liberals believe in old-fashioned patriotism which involves sacrificing for one’s country.
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