Guys.. you cannot go to jail for failure to pay taxes.. we don't have debtor's prison here like they did in Europe hundreds of years ago lol

If you don't lie, file taxes but cannot or do not pay, then you will not go to jail.  They can garnish wages and what not but you cannot go to jail.  This is a fact, not something that can be argued.

I'm going out of town for about 10 days but will checkin on thread once I get back!

I think I get what you are saying here.  Sure, most of the time things are priced in USD.  Like EuroDolalr or YenDollar or whatever.  But people can just as easily talk about the EuroYen instead of the DollarYen when quoting prices.  This new country that just prints $ would see its FX decline in relation to all currencies, not just the USD.  Even BTC is quoted in dollars often but can also be quoted in EUR or whatever.  The reason that the USD is in control, as you say, is because well if I work in Indonesia or whatever and someone wants to pay me, I would much rather trust the USA than Vietnam or whatever so I would much rather you paid me in USD.  That's just because that country has good things going for it, there is nothing wrong with being preferred currency if that is the case.

I just don't agree that "we" set the price of these other things you reference.  The USD is not set by any one party.  Sure, the Fed has a lot of control over it because they control short-term interest rates, but there are so many other global factors that affect the value of the dollar that it is difficult for me to accept that our government controls it.  And even if they do - I just don't think it matters.  It only matters if you are doing business with the US, in which case other countries WANT our FX to be weaker so that they can sell us more stuff!  But in the long run it is inflation that affects the strength of a currency and this government has done a good job of keeping that in check.

Creating money out of nothing IS a good thing if that money is being used to invest in productive assets.  If a country prints its way into a fortune and has no economy, it is worthless.  But if a country prints a fortune and create unlimited, no-pollution portable power source or something crazy, that currency will be worth a lot.  It just depends.  And I think in this case the USD is doing well - they have the best tech industry, the best healthcare industry and a slew of other things going for them.  Sure, it could change tomorrow but that is speculation.  And having that argument is much different than saying the USD will be worth $0 in 100 years because it's much harder to think it through and say I think the US won't be competitive because of X or Y.  Those points can be argued but saying that it's screwed, well that's just an opinion.

There's nothing wrong with creating money out of nothing, in and of itself.  I would rather a country can create money - which most in the world CAN since almost NO ONE is on the gold standard - and then backup that money by output, taxation, etc.  That is what fiat is.  Look at the last 50 years since we went off the gold standard - the world is 100x better off you cannot argue this fact.  You would rather we trade bits of gold and limit credit expansion?  Please.  Instead you have BTC which is backed by nothing, but is in a limited supply.  So what?  Who CARES that you cannot make more.  That does NOT mean that the value will be supported lol.  It just means there can't be more.

I don't think you are understanding this whole reserve thing.  If you are saying they don't exist, how can they buy oil with them.  The point about QE that you make, about how money isn't real and how it is buying oil I just don't understand it.  Loans are created when banks lend, that is new money.  Going out and buying oil has nothing to do with QE or reserves.. the banks, if they buy oil, could have sold their US Treasurys and bought oil with that, so the fact that QE happened has nothing to do with it.  If you read my posts which explain that QE was an asset swap of one type of money for another, there is no change that happened.  Look, if you are talking about how the USD is not going to be reserve status anymore we are missing one major step - them losing that status.  You have to convince central banks around the world to dump their dollars when the USD has been very strong and stable.  And I have argued over and over that it is stable and will likely continue to be stable.  Talking about losing status, or how inflation is coming is too far ahead.  There is no inflation right now, that is the problem.  QE did not create it.  The Fed can't create it.  So let's move past this point you are trying to make which is that somehow inflation is being created because that's not how it works.

Banks do lose money when people default on debt.. they lose all the money they gave to the person.  And banks do fail, thousands of times.  Getting things moving again with government intervention is the only way to prevent a depression.  You say that all the money created since 1776 has been debt but that is not true and I'm saying it again you are not understanding or reading what I am writing - money is only CREATED or truly put into circulation by the US TREASURY they are the only ones who can create physical money.  But that is not the only thing that money is.  Money is also money in checking accounts and savings accounts, which is created by other borrowing and lending and so on.  The important thing is that there IS a ton of money out that that is BEYOND the debt.  Household assets in the US are about $80 TRILLION with liabilities of like $12 trillion, so there is WEALTH there.  Tons of it.  Not just that came out of debt.  What I think you are getting at is that all wealth is backed by the full faith and power of the US Government, which is true - the cash and wealth is not backed by anything like gold.  But look at what happened to stock markets and economic activity after we left the gold standard - it took off like a rocket.  That system is antiquated.  And if you are saying that that guarantee is worth nothing, I think you are wrong and I have talked about the things that protect the value of the dollar ad naseum in here.

1 - Dude the US did not get it's economy wrecked by having reserve status, that is nonsense and contradicts the other comments you made about how somehow they can buy things with money that doesn't exist it is false.
2 - The Eurozone has problems that cannot be fixed unless there is a union which the Germans oppose - that is a problem.  Greece was bailed out and they like 3 times and they need to be bailed out again.  The euro was created to facilitate trade, not to unite Europe in some political way.  I don't really know what you are arguing I said that Europe has a lot of problems and they clearly do, just look at their currency strength or lack thereof.
3 - Devaluing IS good.  What does it mean when you say you sell more but you make less on an economic scale?  That is not a real thing.  I don't care about GB I'm talking about the US which does NOT borrow in other currencies, because you were saying that somehow devaluation of the dollar would be disasterous.
4 - I hear that, but again that was entirely my point and I am not sure why we are arguing.
5 - This is wrong on so many levels.  Yo usay that it is shooting out of control but corporate profits are at all time highs.  Nothing of what you said is actually happening.  Can't make debt payments - are you serious?  They ARE doing so comfortably.  If this was true our interest rates would be 50%!  They are like 3% - this is simply false and misleading at best.  Economic status has nothing to do with debt ratios.. tax rates are based on how much money you make and that has nothing to do with what you said in the rest of your paragraph.

I can't tell if you really believe that all the stuff you are saying is true or not.  But let me assume that you do believe it.  You are talking about things like economic scale which is not a thing, you are saying that somehow banks are buying oil without real money, that China would happily accept BTC but then that they don't want to take BTC because well it means $ leaving their economy, and that is just to pick on a couple points.  Most of what I have said is based on facts, and the fact that you think I have not substantiated anything with facts speaks to how unhinged from reality you are.

No disrespect but it doesn't sound like you are reading my posts or if you do read them you then just quickly move onto the next manic point you may have and ignore the facts about how banks, the economy and real world work so that you can fit everything into your picture of the world.  This is not good for you.

Debt is an asset to people that hold it.  If you have bonds in your 401k you are holding the debt of companies and governments but it is an asset to you.  Removing all US debt would be devastating and will not happen.

Interest expense as a % of total government outlays has actually been coming down and is currently very low!  Since interest rates are so low our interest expense is low - there is not this problem of things spiraling out of control.  Plus, like I said, the US Treasury can issue shorter maturity debt or debt with low coupons indefinitely so we can actually control the interest expense further if we wanted to - I repeat we can issue currency if we needed to pay interest and would never go bankrupt like this!  The Fed printing (creating reserves, which is not putting money into the economy directly, it nets to $0) has not devalued the USD - it is in fact in multi-year highs.  Dollar's value is based on inflation, among other things, and that is very LOW right now.  So please don't make these assumptions, just follow the facts.

The US cannot just spend those reserves on things like oil.. they literally sit on the bank's balance sheet as an accounting journal entry.  They cannot use it to buy oil or anything else.  You see, the dollars never make it to the economy UNLESS they are borrowed by people.  The only way you can say QE is inflationary is if you think banks DID NOT HAVE ENOUGH RESERVES TO LEND BEFORE and this "new" QE money allows them to lend and that causes inflation.  BUT, critically, the banks NEVER had a problem with having reserves before!  In fact, banks don't actually need reserves to lend - they lend FIRST then create the reserves as an offset on their books!  This is so important.  If you understand that you understand that QE is just an asset for asset swap which nets to 0 - swap reserves for US Treasurys - cash for cash - a checking account for a savings account!!  So many people got this wrong since 2009, please understand how important it is.

^this.

This is so wrong.  Please read all my posts here and you will see all you questions addressed.  We don't need oil to be priced in dollars for people to buy our debt.. they do that because we trade with them and they want to hold safe investments.  The US does not need permission to "print" anything, our Fed has the Congressional right to do that all their own.  We don't need permission.

1 - no professional investor or businessman trusts data that comes out of China.  They make up numbers and hide problems.  Of course they are a huge economy that will continue to grow, the issue is that people do not trust their government to put all their cash in CNY.  Their legal system is nowhere near the USA, which is why China is nowhere near ready to be reserve status.
2 - Europe - lol - dude they've been saying that every year for the last half decade!  Those are just projections!  Greece is ready to leave and the structural problems that Europe has cannot be fixed without full fiscal and monetary integration of their banking system - something the Germans are wildly opposed to.
3 - Britain's currency being devalued is good for their economy.. they can sell more of their goods.  It is only bad for people who want to take vacations, because they have to spend more.  That is anything but a collapse.
4 - Dude, China was one of the first to ban BTC transactions..
5 - You are speculating, wildly.  Interest expense is down as a % of total government outlays because rates have fallen.  And again, the way our country works we can use the Treasury and primary dealers to buy US debt - we don't need outside forces to do this.  You are saying that people will pay fewer taxes in the future - why?  The US economy collapses?  I think not.  Because interest expense will be high?  No - we can control this by issuing shorter debt maturities, and besides rates have been PLUNGING for the last 30 years, so that part of your argument is also false.
6 - Dude having best legal system is what makes people want to do business with us and supports reserve currency status, which you seem to think is so important.  That is why I mentioned it.
7 - I'm not sure what this is referencing.
And BAS please understand that when I read your comments it is very clear you do not know what you are talking about so don't tell me I am a bank teller.  If you are delusional enough to not see that what I am saying is based on FACTS and what you are saying is based on speculation, things you read online and general surfacy BS then please, move on.  Quoting things like European estimates is just obviously clear that you are naive about many topics.  Every economist every Wall Street analyst 99% of the time predicts things to get better and follow a trend.  If you look at what actually happens and how often they are right, you will see that stuff like that is not worth a lick.  We all know the world is more global than the US, I'm trying to address everything that I can and I am not implying that the world is not connected globally.

1 - it has largely benefited the world because businesses can borrow for less and money has flowed into emerging markets to move their economies forward.  Honestly, it is so difficult to say if that was because of QE or because of things that would have happened without QE anyway.  Even the Fed does not know and cannot quantify QE impact.  Could just be low inflation doing all this like causing low rates.  Overall, it is good for growth to have low rates.  Of course, there are potential issues that come up.. most notably money flows into riskier assets.  Like oil and gas drilling that only works at $100 oil.. and now we will see defaults in that space.
2 - Yes, there are many shale, deepwater and oil sands companies that were able to borrow at very low rates and that increased supply of oil, which started this decline.  By the way - low gas prices are great for consumers worldwide and this should be seen as a VICTORY for the people of the world.  Just bad for companies and certain governments.  More generally, oil prices and interest rates move in the same direction a lot of the time because if you have low inflation caused by low oil prices you get lower bond yields, because you don't need to be worried about higher prices coming up in teh future which makes the value of the interest you are receiving less lucrative.  Low inflation = low yields = low oil prices.

I meant that a lot of the data that comes out of their government is fabricated.  Of course it is a real country with real output.. just look at where all your clothes and electronics come from.  I was talking about whether or not they would be qualified to be a reserve currency, please do not take my quotes out of context.
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PS I like talking to you guys and this has been surprisingly civil (mostly) so far.  Of course I have views that can be challenged but I am trying to keep opinion out of it and reference how things work so you can all make your own decisions.  That is why I stress the Treasury, Fed and FX concepts so much, cheers.

Sure I do.  I know that tulips were a bubble, along with many other things.  I also know that for a bubble to exist market prices have to reach a level where they cannot deliver the expected results.  If you are saying that US debt is in a bubble, I would point you to my other posts and suggest that you have not read them.  It is not a bubble as long as they can pay the interest expense on their debt ie deliver the PROMISED payments.  The US can never not pay on its debt obligations.  Period.  The rest of the WORLD disagrees with you that is why UST rates are at multi-decade lows.  If you understand that the US Treasury can CONTROL the interest rate they pay on debt by issuing only 1 year UST or that the FED can target 1% as the 30yr UST rate then you see that paying interest on debt can never sink a country that can issue its own currency and has no foreign-denominated debt.  It is not something that you can argue it is a fact about how our financial system works.

I'm not going to get bogged down by the misleading chart you posted for 2 reasons.  1)  you are ignoring output and the value of assets that the country has.  Having a lot of debt does not matter if you are using that debt to produce more, which the US has been.  There are also hidden assets like oil, gold, etc that don't show up there.  It is extremely misleading and offensive to people reading this to post a chart of debt increasing because 1)  it ignores that the US economy is much better off than it was 40 years ago and 2) you are assuming this false notion that debt somehow has to get paid down one day.  It does NOT.  If you paid down all the USTs in the world, think about how much savings people would lose!  Everyone who holds UST today collects interest from that debt - it is an ASSET for people.  No way no how will it ever disappear from the planet nor does it have to!  We pay our obligations, issue debt to produce more and life goes on because we can TAX that new output which was created by the debt.

Lastly, your chart has an entire gray area which is not based on fact, it is just scribbles saying that somehow, something happens that makes it all go bad.  There are no facts there there is nothing but a guess.  I'm just going to ignore the fact that the implications of your chart and notes would be that debt gets somehow paid down and that is a good thing or a "crash"... the notes you have apply to business and product cycles, not government debt.

I can post a chart of the SP500 that goes straight up at a 45 degree angle like your chart - is that a bad thing too?  The chart is meaningless, please don't insult the intelligence of the people on these boards and try to scare them with something that misleading.

Agree that it becomes interesting.  But not in the way that most people think it does.  So, let's hear it let's hear the scenario that is based on facts today that would lead to one of those things falling apart.  And then try to tell yourself that you are doing anything but trying to wildly predict the future in opposition of hundreds of years of precedence, the rule of law and the will of 300 million + people.  We're not soothsayers or wizards who can make predictions about the future.  Sure, anything can happen tomorrow.  A comet could be discovered that is going to hit us.  But consider this - in that case we are all screwed no matter what - this is for all doomsday scenarios.  If you are trying to predict something less severe just realize that you are really reaching.  Being protected from negative risks is one thing, but selling your home to bet that the world is ending or whatever is something else altogether.


I don't know what you are talking about.  Please address one of the points I made directly so that I can reply instead of posting vague, too-cool-to-elaborate-comments.

The US does not need oil to be priced in USD to "print money".  This is a fundamental misunderstanding of the way our monetary system works.  It is not something that can be argued because it is a fact like 1+1=2.  The Federal Reserve can create reserves out of thin air.  This is what people call "printing money".  But it is not actually money printed into our economy as you say.  The banks have to lend in order for new money to be created outside of the federal reserve system.  Banks only lend if qualified borrowers want to borrow.  This is why we have not had inflation despite the Fed "printing" trillions of dollars over the last few years.  The reserve simply sit on the banks balance sheets, there is no mechanism to turn them into cash besides market forces like demand.

Why would the US not be trying to ramp up manufacturing now, and instead waiting for some event?  They are manufacturing more today.  Every individual company tries to maximize profits, there is not one God of USA that says hey, we should all do manufacturing real good now.  It's thousands of companies that work independently in the economy to make a buck.

I'm afraid I do not know the rest.  What I do know is that you are talking about getting rid of volatility with BTC which is down 70% in a year.  That makes no sense.  Look at a chart of the USD over the last ten years and compare it to BTC - which would you rather hold your $ in if you are looking for stability and not wild speculation?  You have ideas about FX and the USD but they are not based on facts and are non sequitur.

It's actually not a problem at all.  Those countries have their own agendas and reasons for doing deals which are political in nature.  China and Russia doing deals on the side means nothing when the rest of the world is not following suit.  If you want to see if people believe in the ability of the US to tax, look at the USD at ten year highs, look at US Treasury yields approaching multi-decade lows.. your assertion that people are losing faith is based on no facts, you are ignoring all the evidence to the contrary.  Let's just say you are right and the US loses it's status.. who is it going to go to?  China with their fabricated economy that no one has faith in?  Or Europe which is teetering on collapse?  There is no one else.  Full stop.  Period.  Besides even if it does happen, that is not a kiss of death.  Great Britain was just fine after they lost reserve status, their economy did not collapse and the world kept spinning.  I'll tell you one thing, it sure as heck won't be Russia or Brazil or China accepting BTC for their goods and services.

Let's step back and ignore what the market is telling you and also put aside our theories for a second and think:  why on Earth would the US all of a sudden not be able to tax its citizens and pay interest on its debt?  That is the fundamental question.  We have a powerful military to protect us, we have one of the best economies in the world and we have the best legal system in the world.  There are no rational or logical reasons to think that the US is on the decline or the dollar is doomed or anything close to that.  And looking at interest rates and FX strength you can see the world does agree with that statement.

Not really. The USD demand has little to do with oil and more to do with products we export and buy. If you sell oil in usd, the person you bought it from sells usd and you buy usd, so the net is zero demand for usd. The country USA doesn't control oil supply except for oil we make in USA but even that is controlled by thousands of individual firms. So it doesn't help usd demand and is not controlled by the US. If anything marginal supply is controlled by opec, which the US is not a part of.

I'm not familiar with any countries that this happened to? Countries are free to transact in any fx they like. They choose the USD because of reasons posted in my previous post. Mainly, it's stable and widely accepted.

Judging by your name I assume you fall into the "inflation is just around the corner and hyper-inflation is just around that corner so USD is worth nothing" crowd.  Amirite?

Surprisingly logical replies so far (except for the person claiming something insane about me silencing people).


Curious to hear why you think that is?  The truth is that a local currency is almost always dependent on inflation to keep its value - that is why people would not accept UST at a low rate, they will want higher rates to justify the higher inflation - and the US does NOT have an inflation problem, nor does most of the developed world.  In fact, it is quite the opposite.  This is probably the most important issue here that people are saying will happen - a hyper-inflationary spiral which kills the USD.  I think we should talk more about this because it is pretty important!

As long as the rest of the world believes that our government can tax citizens and pay interest on its debt, the international community will have a demand for dollars.  Demand for dollars is not only buying and selling of goods - most of the time it is transfer of US Treasurys, which act as cash equivalents.  So if people think they will get paid back on their UST, they will have no problem dealing with the US and holding our debt.  And this payments, we agree, will always be made.

In the past countries "blow up their FX" because their economy relies too much on one product - like oil and Russia or agriculture and Argentina in the mid 1900s or Venezuela today - or rely too much on foreign capital flows to operate - like many countries during the Asian Currency Crisis of 1997/1998.  The US does not have this problem.  If you think the USD will collapse, I assume you think that many many other countries will have gone down first, since the USD is the most stable, liquid and widely accepted form of payment in the world (again payments are usually in UST, not dollars for candy bars, on aggregate).

Hi everyone.

I see the spreading of a lot of misinformation in the thread referenced above and in these forums - info that is either based on incorrect premises or a misunderstanding about how the financial system works in the United States.  I work in the financial investment industry and want to clear things up so that people do not scare you into buying into their own agenda.  So what I want to do is debunk some of these misconceptions with facts, not opinions or theories, about how our financial system works in the United States.

So please, ask me anything or tell me why you think the US is "going bankrupt" or the Federal Reserve "prints money" or fiat is dead or petrodollar or the implosion of the dollar, and I will respond.  To start things out I can start by saying that the United States is not bankrupt or anything close to it.  A nation which can print its own currency, tax output and has no foreign-denominated debt can never go bankrupt.  The national debt will never be paid down nor does it need to be and this is not a problem.  The government could issue only very short government debt and essentially controls the interest it pays on its own debt, if it were to ever become a problem.

Anyhow, let's hear your doomsday scenarios!