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 aren’t owned by Americans.
Just wait until martial law is declared where the real financial consolidation begins.
I think I disagree, although we might just be talking past each other. I’m 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, there’s a little less than $20 trillion in this kind of national debt, roughly 105% of GDP.
That doesn’t 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 ‘made up’ 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 aren’t 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 – 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).
There’s a bit of ambiguity on the words “make money” here, so I will address both meanings, and you can ignore or address either response as you choose.
If it is “make money” meaning “to earn or be paid”, 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 can’t 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 “make money” meaning “to print (or create digitally), i.e. to expand the money supply”, 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 I’m doing my best to address the truck-load of related (and, don’t get me wrong, quite good) comments. I’ve addressed some of the Fed points above, if there are additional points on that topic that undermine what I’ve been saying that I’ve missed, can you point them out?
To the impossibility of paying back our debts, I don’t 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 don’t want to keep borrowing, but if we think we’ll continue producing more value per dollar than our creditors are demanding in interest, we don’t have to do that.
Our trade deficit similarly is not a major problem. We’ve had it for decades, many of those decades extremely prosperous for the US. There’s 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 “actually” here. A house is “actually” worth whatever someone will pay for it (assuming they are reasonably well informed and rational and etc. etc. – suffice it to say that “willing to pay” is a bit loaded). You make a similar point when you say that “value is a function of utility”: value is what something is worth to someone, so the real price is what someone’s willing to pay.
So you have a couple that paid what they thought a house is worth, and no one agrees with them. They’ve invested their money poorly. What’s the issue this scenario is meant to address?
Keep paying our debts? Hell, keep borrowing while the money’s cheap. As I said, we could probably create a sizable sovereign wealth fund and pay down our existing debt with the returns.
What’s the rush to default? That would be disasterous, we’d 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.
Carleas:
QE was successful? 
Well, depends on who you ask. If you’re 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. That’s 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?!
You’re 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 let’s say, making trade agreements where we promise to buy all of China’s 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.
World war is more likely than a global financial debt jubilee.
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 can’t pay it off. Gold is merely a hedge against an oncoming global economic disastrous calamity. That’s 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.
Those ledgers would only be erased through warfare. Exploitation, it’s what humans are good at all over the world.
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.
You think there is gold in Fort Knox still? There are rumors that the United States might of sold it all a long time ago.
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.
Isn’t 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.
Nooo we must have more big government spending and debt! What would the Obozos and Clontins of the world do without it? Maybe get real jobs?
Noooooooooooooooooooooooooooo
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??
Liberal leftism 101.
Keynesian economics, it takes more debt to eventually get out of debt. 2+2=3
Haha. More like 1-1=2
Other rumors go that since 1989 China has been accumulating all the gold. Perhaps the ‘grand theft state’ 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.
Looking more into it, it turns out that real interest rates are negative, i.e. we save money by taking on debt. Interest rates are so low that cash loses value due to inflation faster than we accumulate interest. That won’t always be the case, of course, but it is also significant.
What are you comparing against? If QE pulled us out of the recession, it was absolutely successful. If it stabilized housing prices, increased employment, secured pensions, it was good for “main street”.
When you say it wasn’t successful, do you mean we’d be better off without it? Do you agree that the economy has recovered from the worst part of the recession? Do you think it would have recovered more without QE? Would the economy be stronger if the government had let a dozen of the largest companies in the US just go belly up. and let even more homes go underwater?
Source? What numbers are you using for this? Are you assuming a constant rate of growth in government spending? Borrowing? Inflation? Payoff? Show your work.
Forgive me if I overestimated the significance of supporting the gold standard to your position, but I read this claim to be that it was wrong to get rid of the gold standard, which implies that you believe it would be better to still have a gold standard. I picked on that because it’s pretty easy to show the flaws in the gold standard, so if your position also requires (either as a premise or as a consequence) the gold standard, rejecting the gold standard would be the easiest way to address it.
“Actually” means “fair” market value, what most people would pay for the house, realistically. Do you remember the 2008 housing market crash?
[youtube]https://www.youtube.com/watch?v=MesrrYyuoa4[/youtube]
The prices of houses, $600,000 were shit. During the last 30 years, contractors around the country were building “McMansions” with huge square footage, in places, towns, and areas that could not afford them. The mortgages made for these houses were never intended to be paid off, because the banking system was being rewarded and paid with fees for setting it all up. That $600,000 house was worth half its value, $300,000, or less. In many cases the houses are worth nothing at all. Because nobody can afford them.
Because nobody can afford them.
And why can’t anybody afford them, whether they are $600,000 or $300,000 ? Because the u.s. middle class disappeared, and is currently being replaced still, with minimum wage, part-time jobs, with no raises, no benefits, and no health insurance.
I’ve been reading articles this last year about the job market. Some articles say “there’s too many jobs and not enough workers”. But then you look into the details. Employers have unrealistic standards, shit wages, and practically demand that average people revolve their entire lives around a shit job with shit wage. Of course people won’t take the job, or, won’t hold it for very long. Turn-over is a problem for both employers and employees. Most companies are stupid in this regard. And jobs in large cities are categorically different than jobs in small towns or out in the country. Therefore many of the sweeping generalizations do not apply, except a few.
The rich have gotten wealthier, gutting the middle class, by digging into such markets as “the housing market” and its 2008 crash, or the tech market and “the tech bubble” in 2000.
The only hope most Americans have, then, is hyper-inflation to reset all debts. And if that happened, massive system failures would occur, as again, the rich and top 1% would be the first ones to transfer all their wealth to a different currency than the u.s. dollar. And if the u.s. dollar collapsed, the country would be rolled back a century, all “progress” gone and evaporated over night.
Fake wealth, propped up on the fake value of a dollar. Again, what is the real value? What if the real value of the u.s. dollar is 50% of what people trade it? What if nobody wants u.s. dollars? What if the u.s. dollar is not worth kindling your fire place? There are answers to these questions. Do foreign banks, countries, and people want u.s. dollars? With China, the answer is ‘No’. China demands interest payments on their loans to the u.s. to be paid for with gold. Real currency, real value. Something more substantial. Chinese then gain double on their loan, by demanding representation of value.
With gold, things are clearer. It becomes obvious who is inside and outside “the system”, the markets, the governments, and the banks.
Most or all other problems in the u.s. including this “shuffling” of people migrating between u.s. states.
When the economy down-turns, people quit moving and migrating. And they begin investing in their own families and kin. Because at least then, people know where their money and investments are going, rather into corporations, into banks, or into the government.