A lot of major US land and landmarks, including real estate, have already been sold to foreigners as a means of paying down debts. Look it up sometime, which major US landmarks and pieces of land and real estate arenât owned by Americans.
I think I disagree, although we might just be talking past each other. Iâm mostly talking about national debt here, i.e. money owed by the federal government in the form of payouts on treasury securities. Such debt is paid down on an ongoing basis, even as new debt is created as we continue to sell treasury securities. As I understand it, thereâs a little less than $20 trillion in this kind of national debt, roughly 105% of GDP.
That doesnât include personal debt, i.e. debt held by individuals. Personal debt may increase as a result of QE, but not directly: it increases because lower interest rates encourage more borrowing. QE as I understand it is mostly about injecting credit into the market, which lowers interest rates and allows people to borrow. QE functions like the stranger in the parable, injecting âmade upâ money that keeps the economy moving and thus boosts production. It is my understanding that QE is considered successful, but that may just be looking at the wrong time horizon. But in the near term it benefits people by lowering interest on their mortgages, making it easier to start a business, decreasing the cost of goods and services, etc. The arenât getting cash, but they are getting value.
That the parable depends on the $100 coming back to the hotel is part of its utility. As you point out, if any link in the chain broke, the stranger would be out $100. Therefore, the stranger took on risk â the liquidity he injected was not free. This again shows that liquidity has value, because there is a price associated with it (here, in the form of risk).
Thereâs a bit of ambiguity on the words âmake moneyâ here, so I will address both meanings, and you can ignore or address either response as you choose.
If it is âmake moneyâ meaning âto earn or be paidâ, I read you to be talking about bankers who are getting paid without producing anything of value. In that case, I would argue they are producing value: they are producing financial instruments that distribute liquidity provide to them by the Fed down to individuals, businesses, and investors. Since access to liquidity is valuable, and the Fed canât just hand out digital money to flesh-and-blood individuals, the banks provide the valuable service of distributing that liquidity, and in exchange they get a cut.
If it is âmake moneyâ meaning âto print (or create digitally), i.e. to expand the money supplyâ, then I would say that it is not irrational to create new money without creating new value. It is a form of tax, which decreases the value of all the existing money, and puts it in the hands of whoever is making the money.
Those are a tangent to a tangent, since this thread is about a school exchange program, but Iâm doing my best to address the truck-load of related (and, donât get me wrong, quite good) comments. Iâve addressed some of the Fed points above, if there are additional points on that topic that undermine what Iâve been saying that Iâve missed, can you point them out?
To the impossibility of paying back our debts, I donât see where this comes from. Our interest on government debt is about 1%, and our tax receipts are about 15% of GDP. We are making ongoing payment on the debt. We could raise taxes or decrease spending if we donât want to keep borrowing, but if we think weâll continue producing more value per dollar than our creditors are demanding in interest, we donât have to do that.
Our trade deficit similarly is not a major problem. Weâve had it for decades, many of those decades extremely prosperous for the US. Thereâs some talk of a bubble in the price of the dollar, but that seems speculative, and if you want to fix the trade deficit a dollar crash would be a good thing.
I object to the use of the word âactuallyâ here. A house is âactuallyâ worth whatever someone will pay for it (assuming they are reasonably well informed and rational and etc. etc. â suffice it to say that âwilling to payâ is a bit loaded). You make a similar point when you say that âvalue is a function of utilityâ: value is what something is worth to someone, so the real price is what someoneâs willing to pay.
So you have a couple that paid what they thought a house is worth, and no one agrees with them. Theyâve invested their money poorly. Whatâs the issue this scenario is meant to address?
Keep paying our debts? Hell, keep borrowing while the moneyâs cheap. As I said, we could probably create a sizable sovereign wealth fund and pay down our existing debt with the returns.
Whatâs the rush to default? That would be disasterous, weâd piss off everyone, wreck the value of our money and property and companies, lose all liquidity. And gain nothing.
Arminius, the gold standard is a nonsensical policy. Gold has no more intrinsic value than a dollar bill.
QE was successful? Well, depends on who you ask. If youâre a bank or large corporation that enriched themselves through the program, yes it was very quite successful. For the rest of the impoverished main street working classes or people not so much.
Borrow money? Yeah, this has been done the last 75 years. Basically the debt owed now there is no way to pay back or off in the next three hundred years into the future. Thatâs how much money is owed at this point. (Financial debt constantly added daily.) Researchers have done public articles on this for many years now. So basically any lender of money at this point to the United States knows that the money will never be paid back. They would practically be giving the money away for free. This is your solution, really?!
Youâre right, it would be disastrous to go through a sovereign national default but simply there is no way around it as it is unavoidable and inevitable. The debt party is over and will come to a quick end soon enough.
The real problem is that we are not actually paying off our debts as much as we are undermining our own country by letâs say, making trade agreements where we promise to buy all of Chinaâs crap products rather than supporting our own products and shipping them out in fair trade deals in exchange for more time to pay back our loans, but we have no real way to pay that all back. WW3 is the only way to wipe all the slates clean unless all the countries simultaneously forgive all owed debts to one another.
Why are you so slightly off-topic? You shirk my arguments. I was not talking about the positive or negative aspects of the gold standard here. I was talking about debts, and debts are bad, evil, especially in the long run. So debts are the nonsensical policy, regardless whether the gold standard is a nonsensical policy too or not.
Here are my posts of this thread again, so that you can read them (again):
Nothing can be found there about positive or negative aspects of the gold standard. I did not say anything about it.
So you are slightly off-topic. You shirk my arguments.
Your debt jubilee is not what I am referring to when I say all international countries erase their ledgers that hold other countries in debt. As to how to best stimulate economies, I have no ideas until some major government reforms/laws occur.
There really is no way to go back on the gold standard because of all the financial debt accumulated. All the gold in the world canât pay it off. Gold is merely a hedge against an oncoming global economic disastrous calamity. Thatâs about it. There will not be any functional gold standard in our lifetime. You either own precious metals as a hedge or you own none.
And even those that have precious metals there is still no guarantee of financial security for various reasons.
If rumors are true that the US has over 100 trillion dollars worth of gold, then we could easily pay off the debt. But flooding trillions of dollars of gold into the world economy would also depress the price of gold, so it would have to be done in stages.
And someone took all that gold Gaddafi had accumulated for his pan-African gold dinar, either France or the US probably. There is plenty of gold in existence to pay off the debt, but that was never the intention anyway. The debt is supposed to drown the west, those who know about the gold and could actually sell some of it have no interest in ever paying off the debt.
No indictment here, just a consideration of costs/logistics. To me the most salient point about the proposal is its potential for a healthier, more robust society.
Isnât it only more likely that a stable and healthy economy follows from there?
We should avoid debt. But there is also a great deal of human wealth we should take care not to squander.
Obviously government spending = good and debt is never a problem, not one bit. We can have infinite debt just keep the big gubment welfare checks running! Keep printing the economy into prosperity! How dare you suggest we might even question gubment spending being perfect and sacrosanct??
Other rumors go that since 1989 China has been accumulating all the gold. Perhaps the âgrand theft stateâ concerning Lybia was a way to compensate that. But these are rumors that are frustratingly unverifiable.
Cryptocurrencies came onto the market at the same time wthat these China gold rumors were at their peak.