$this->bbcode_second_pass_quote('', 'N')o, I understand the system very well. In 2003 alone, the foreign reserves held by Asian central banks grew by a third to $1.9 trillion—$1 of every $4 the U.S. government owes alone. America has to attract approximately $1.7 billion a day from foreign lenders and investors to finance this debt. Many people fear that such immense U.S. wealth in foreign hands could boomerang if, for example, the assets are unloaded abruptly in a deliberate attempt to destroy the American economy. 80% of our debt comes from foreign investors, or the central banks. $3.7 trillion owed as of last look, all expected to be paid back. They are US held securities.
Where are you getting your fiqures?
PeakOil is You
Economic growth with declining energy?
by nero » Mon 13 Sep 2004, 00:59:41
Hey your figures here are proving my point for me. My point being that the amount of the federal debt held by the american central bank
is only a fraction of the overall federal debt. (The foreign central banks are the same as private individuals and expect ot be paid back as you correctly point out) I was trying to point out to you a problem with your proposed solution for fixing the mechanics of the monetary system. You are now starting to talk about the imbalances of the international monetary system which is really another (related) subject. I mostly agree with you on this subject so there isn't much to say there
$this->bbcode_second_pass_quote('', 'S')o, what do you about this higher cost of capital ? It’s a cost that cannot be offset by Federal Reserve rate policy. We find ourselves with a $500 billion dollar yearly deficit, a $600 billion dollar trade deficit, the lowest interest rates in 45 years, coupled with a huge tax cut, and the economy sputters along, no real growth. No problem for you?
Yes I find it quite an intractable problem, especially since it means I find it very hard to find a safe place to park money. We are on common ground there.
$this->bbcode_second_pass_quote('', 'A')gain, you avoid stating what you would do to fix it? Nothing, everything is fine? If that is your answer, then this exchange is over as far as I am concerned.
I DO think there is nothing wrong with the current mechanism of how money is created. Your talk about the problem being the fact that money is debt based hasn't been convincing, in part as I have been attempting to point out to you because there is very little difference between your solution and what is currently occuring. I don't know if you have understood this or not.
With respect to what I would do to fix the problem, thats a very large question. Obviously being only a private citizen there is little I can do, but now if I was the "American government" I feel there is really only one thing that can be done immediately. Raise taxes on the rich to reduce the deficit. A second long term project would be to modify the current global economy to prohibit corporate entities from owning other corporate entities (especially across borders). I think multinational corporations are evil. They reduce the incentive to innovate by allowing a company to shop for the lowest cost work force, lowest cost tax regime and lowest cost labor and environmental standards.
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nero - Heavy Crude
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by nero » Mon 13 Sep 2004, 01:40:54
Monte since dollars can be acquired on the open foreign exchange market, there is no real need for a particular country to have a trade surplus with america to acquire dollars. Even if we look at it as a simplified three party system of China, Suadi Arabia and America there is no need for China and SA to have a large trade surplus with america. China and SA could trade exclusively with each other in dollars while ignoring the americans. In this hypothetical case the americans don't have a current trade deficit (imports and exports = zero) and the chinese and saudis trade between themselves with dollars they initially acquired many years ago. Now if the amount of trade increases then the amount of US dollars in circulation between China and Saudi Arabia has to increase and so America gets some free imports by selling some more dollars into international circulation.
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nero - Heavy Crude
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by MonteQuest » Mon 13 Sep 2004, 01:45:11
$this->bbcode_second_pass_quote('nero', ' ')
Hey your figures here are proving my point for me. My point being that the amount of the federal debt held by the american central bank
is only a fraction of the overall federal debt. .
Hey your figures here are proving my point for me. My point being that the amount of the federal debt held by the american central bank
is only a fraction of the overall federal debt. .
Ah, central bank to you was the FED! Ok, yes the FED debt is a non-starter.
$this->bbcode_second_pass_quote('', 'I') DO think there is nothing wrong with the current mechanism of how money is created. Your talk about the problem being the fact that money is debt based hasn't been convincing, in part as I have been attempting to point out to you because there is very little difference between your solution and what is currently occuring. I don't know if you have understood this or not.
Yes, I do. Here's where my issue with it comes into play:
$this->bbcode_second_pass_quote('', 'F')rom the time of the Bretton Woods monetary conference in 1944, until 1968, when French President Charles deGaulle requested of President Lyndon Johnson that the paper dollars he held be converted to gold, the dollar was premier, as it had plenty of gold backing it, or so everyone thought. It was President deGaulle who very astutely realized that America was monetizing their debt to finance the Vietnam War and he wanted his dollars in gold before the gold window was closed. By the time he converted in June of that year, our gold reserves had dwindled from $30B in 1944 to less than $10.5B. It was, however, President Richard M. Nixon who closed the gold window on August 13, 1971, thus changing the nature of the world monetary system forever and perhaps signaling the "countdown to a world currency."
The world's monetary system was transformed from accountability, based on the amount of gold a given country had in its treasury and the amount of paper currency it was printing, to no accountability other than the good opinion of the other countries around the world. This set the stage for the eventual evolution (now currently taking place) of all the world currencies into one. When America went off gold, the rest of the world followed, so that by 1973, with the exception of Switzerland, all of the world was trading in paper.
For America, the results of divorcing gold from the dollar resulted in instant double-digit inflation. Although many would have liked to blame our hyperinflation on the oil shortages, which also occurred at that time, the fact is that America had devaluated its currency (which had been convertible to gold) and now our gold reserves had been depleted by more than sixty-five percent, with no conversion to gold. The only virtue people could see in the American dollar was their faith in those managing the country's finances. That faith, just like good bank credit, was based on prudent management of finances. The American economy appears to be buckling as a result of historically high federal and trade deficits, rising interest rates, large tax burdens and bad financial judgment.
$this->bbcode_second_pass_quote('', 'I') DO think there is nothing wrong with the current mechanism of how money is created. Your talk about the problem being the fact that money is debt based hasn't been convincing, in part as I have been attempting to point out to you because there is very little difference between your solution and what is currently occuring. I don't know if you have understood this or not.
With the creation of the FED in 1913, the means to loan enormous sums to the government, a method to repay the debt (income tax), and an escape from taxation for the wealthy, (foundations), all that remained was an excuse to borrow money. History has shown us that nothing drives a government more deeply into debt than major war and the bankers concerned saw to that.
Like I said, a little debt is even necessary, but what do you do when the debt reaches this point? In the real world, you declare bankruptcy. How about no govt tax on income, but a flat tax at the point of sale? This would get the rich out from under the foundations. What if money was created and spent into the economy based upon the economic productivity? Or spent for infrastructure with no usury attached?
$this->bbcode_second_pass_quote('', 'I') think multinational corporations are evil. They reduce the incentive to innovate by allowing a company to shop for the lowest cost work force, lowest cost tax regime and lowest cost labor and environmental standards.
