Friday, February 5, 2010

National Debt

I came across a link to a short primer on our national debt. Well worth your time.

The bottom line: all the money in existence isn't enough to pay off our national debt. In other words, we are owned, lock, stock and barrel.

Denninger provides another dose of reality to the mix.

They say don't panic when bank runs start. I say be first in line.


  1. Hey Don..., you probably already read this from TJFXH over at Ian's...,


    "The government should act with a purpose rather than arbitrarily. In a fiat system such as now exists, a monetarily sovereign government is not financially constrained in currency issuance and doesn’t need to “fund” its disbursements with taxes or “finance” its deficits with borrowing, unlike currency users, like households, firms and states in the US (and countries in the EU)."

    I think the MMT as he is espousing might have some merit. What's to keep the government from saying, "Hey..., we just sold a trillion dollars of timber (or oil leases, drilling rights, whatever) and using that fictional revenue? It's not like we have to pay that back to anybody (like when we sell T-bonds). The only problem would be the possibility of causing inflation if too much of that money is skimmed off by corporate entities (banksters and insurance companies). If we had ethical folks running the show it could work..., but therein lays the problem.

    We certainly can't return to an economy based on building houses that can't be sold without the mortgage shenanigans of the past..., and present. Building a million houses a year at $250,000 apiece through the first half of this decade was something like $250 billion a year that was pumped through the economy. And you only have to look at the unemployment numbers to realize how mnay jobs building all those houses made. There isn't any kind of "green technology" or "infrastructure investment" that is going to replace that kind of money or that many jobs.

    My brother and I have been saying, "This deficit spending can't go on" since Reagan nearly quadrupled the debt & defecit. But they have..., they just keep adding some zeros..., and now some more.

    But just the same..., I have been in line at the bank pretty regularly of late. I figure that cash under the mattress is safer than in the bank..., and damn near earning me as much interest too.

  2. Hey Don,

    TJFXH posted this link over at Ian's.

    Wray explains it better than I did..., but I think I got the basic premise right.

    "I also argued that there is no "piper-paying" due date on which government needs to repay its debts, hence, no financial imperative to ever run a budget surplus (or even a balanced budget). Further, even if the government were to try to run surpluses to repay debt, that would (based on historical experience) throw the economy into a depression that would only increase budget deficits. Empirically, budget deficits are correlated with growth; budget surpluses precede depressions. Based solely on the historical record, only a fool would recommend budget surpluses as a policy goal. Yes, that implies that Robert Rubin and Pete Peterson advocate foolish policy."

    And Wray contends that the only reason we are funneling money to Wall Street instead of straight to economy is so Wall Street can skim the profit off all that money.

    "But the Wall Street rescue operation never had, and never will have, anything to do with saving the economy, dealing with retiring baby-boomers, or indeed with resolving any real world problems. It is all about stoking the flow of cash from Wall Street to Democrats."

    "Lest anyone think that I am advocating a bigger government, I want to make clear that I am actually arguing for less government intervention into the economy. The market wants to eliminate the biggest financial institutions. I think the market is correct. It wants to get rid of the riskiest financial instruments, such as credit default swaps and securitization. The market is correct on that score. The market would eliminate bonuses for Wall Street traders and CEOs—only Bernanke and Geithner stand in the way, providing government bail-outs that fund the outrageous rewards paid to the crooks and fools that created the crisis. The market would wipe out the mortgage debts of underwater homeowners—it is only the inducements provided by government that keep the mortgage servicers and first and second lien vampires afloat so that they can suck some more blood. And no rational market would have developed private employer-based pension plans or use of employment-related insurance as the dominant method of providing healthcare services. Both of these anomalies were created by partnerships of Government and Wall Street acting against the interests of the vast majority of Americans. I believe that we can have decent and rationalized retirements, health care, and jobs programs without increasing the size of government."

    It seems to me that we are already a "socialist" society now..., we just won't admit it..., and we continue to filter money through the private sector..., for their profit so we don't have to admit it.