USA Debt Repayable

[Schrankwand]

Why do so many people find it hard to accept that things are fine?

The one and only reason "things are fine" is because the US dollar is still ( for now) the world reserve currency.
But that fact is changing slowly but surely. How long can the US pull this off? Could be a year, 5 , maybe even 10.
But after that the US is doomed to sink out of their world power status.

The dollar will be a world reserve currency until something better, that is acceptable to central bankers, comes along.  Same for sterling and the yen and perhaps the euro.  And there really isn't any fiat currency around with better fundamentals than the dollar.

Reminds me how someone wanted to change the valuation of oil from Dollar to Euro and got executed by his own people after an invasion

[myrkul]

Why do so many people find it hard to accept that things are fine?

The one and only reason "things are fine" is because the US dollar is still ( for now) the world reserve currency.
But that fact is changing slowly but surely. How long can the US pull this off? Could be a year, 5 , maybe even 10.
But after that the US is doomed to sink out of their world power status.

The dollar will be a world reserve currency until something better, that is acceptable to central bankers, comes along.  Same for sterling and the yen and perhaps the euro.  And there really isn't any fiat currency around with better fundamentals than the dollar.

Reminds me how someone wanted to change the valuation of oil from Dollar to Euro and got executed by his own people after an invasion

Yup. "Fundamentals" of the dollar: The most powerful military in the world (and the will to use it).

[WhatsUpFreak]

I thought this would be interesting and maybe could place the USA national debt into perspective.

USA National Debt / USA population

$17 trillion / 314 million = $54140.12

Meaning each American would have to pay $54140.12 to pay off the national debt. Obviously, impossible.

Inflation or default are the only ways to repay it.

[sangaman]

All US federal "debt" can be trivially repaid, even the entirety of it right now. The United States has an infinite supply of US dollars.

Theoretically. They could, did they want to go the way of Zimbabwe, Wiemar Germany, and so many others, just lean on that "0" key until the "debt" is gone.

There's lots of reasons why they don't do that, though.

Outstanding treasury bonds have already had their inflationary effect, converting them to dollars would mostly just affect interest rates. We'd see greater inflation with excessive deficit spending.

[AMuppInTime]

This ties into political ideology also. "Wealth" requires at least the illusion of privilege. The good news is that your average American Middle Class person today lives better than any king of a few generations ago ever did.

Think about it. Here's just s short list of things that the secular new Princes of The Empire that The Fed built get to enjoy today at all ranges of the social and class(less) strata. Most every  Proletariat (via free vote-Democrat EBT virtual money) and the rising two-car divorced with children Bourgeoisie wanna-be have:

Air-conditioned/heated "castles", court-jesters (the talking heads on CNN, ABC, CBS et-al of the MSM politburo) and entertainment on-demand (HDTV with hundreds of channels of pump-up-your-hormone with feel-good pleasure/excitement [testosterone/endomorphins aka "endogenous morphine"/adrenaline]),  legions of available contracepting-females for easy buddy-sex-partners (bitcoin-wenches ),  mobility options (horseless carriages ranging from eco-fraud-electric to high-performance-gas-guzzlers), passenger-jets and cruise ships [with options for cattle-class to pretend-to class], weekend gladiator games in the football and sports stadiums, travel-adventures to exotic-places (that all have the same ubiquitous same Western Empire style franchises and strip-malls [once you have cleared the TSA Obergruppenführers]), pick-your-own-religion de-jur from the smorgasbord of Franchise Religious offings that are "close enough for government work (and We Trust in God too)" , communication (Snail-mail, Internet, Phone, smartphone, ever new hand gestures and emoticons [secure or not]) etc. etc. etc.

So this means that those who set up the structure "that is", whoever they really are , NEED BILLIONS of schmucks willing to trade their mortal lives to sharecrop on the plantations and give back a vig to the enabling and designated "rulers" who claim rights to the the arbitrary geo-political boundaries that said schmucks reside in (whether its the USA, Russia, China or virtual-land). They NEED servants and they need to have a down-line to sell to in order to have a master-slave relationship. There's an inherent co-dependency and if you're smart enough and good enough they invite you higher up into the food chain to your own indifference level depending on how much control and leverage over you that you give them and how much you are willing to sell one's soul (that fewer these days even believe exists so are indifferent to - spurning the notion of Pascal's Wager that there's might be a DEBT owed to the Creator come post-death-cashout).

NO THE DEBT CAN'T BE PAID. They will continue to inflate it away and let the natural mortality retire the old debt as people age and die off and keep progressing it on the youth. THE BIG PROBLEM is that the demographics are busted. The West at large is aborting its youth and being outbirthed by its ideological enemies all at the same time it is mortgaging ever more of the future on the backs of the youth yet unborn (and why the sudden rush by the ideological leaders to embrace non-traditional religions such as Islam to cover their bets and to import massive numbers of foreign "out of status" immigrants to replace or dillute the existing governed subjects here in America).

From a pure risk-reward analysis - the youth ALWAYS rebel once they figure out they are the stuckee's and all they have to look forward to is inheriting a lot of "wealth" that is under the perpetual assault of inflation from the prior generations to spend in a context that was ordained to bear the brunt of it all. And this too is another reason why "they" want to keep the population of the youth diminished to keep it below the critical mass of ideological flash point. At any rate, there are other uncontrollable external risks as well - natural "acts of god", disease (the cost of promiscuity in using one's own sex hormones to keep everyone on the reservation and sharecropping), generalized APATHY (no more response to Gov's glass-trinkets), and of course just insane rulers who start unsanctioned herd-thinning wars for ideological reasons (e.g. ref. the 100s of millions slaughtered in the last century by the atheist-Marxist ideologues Pol Pot, Stalin, Mayo).

There's two kinds of treasure folks - that treasure with fluctuating value (that always trends DOWN to increase entropy) that is tradeable and fungible for tangible things here and now in time-and-space;  and that other treasure who many are betting-on-the-come on the other side of Pascal's Wager beyond time-and-space who see the opportunity for a wide open pot with absolutely zero downside (status quo) if they're wrong.

The other mitigating thing here is that every other country is now in the same game. No one can really profit by the world's federal reserve currency getting taken out. In essence the USA is in a position to extort the rest of the world to do pretty much anything it wants "or else". Everyone should want to help the USA. The really bad news is there's NOT ENOUGH AVAILABLE FREE FIAT CURRENCY on the planet to PURCHASE US DEBT nor enough printing bandwidth to even print the currency fast enough to BUY BACK our own bonds to MONETIZE our own debt with the circular debts of promissory notes. It's comical when you think about it. And those in control are as incompetent as you and I or worse...  

Choose your bets and your treasures wisely,

I greatly appreciated this - thank you.

[sangaman]

I thought this would be interesting and maybe could place the USA national debt into perspective.

USA National Debt / USA population

$17 trillion / 314 million = $54140.12

Meaning each American would have to pay $54140.12 to pay off the national debt. Obviously, impossible.

Inflation or default are the only ways to repay it.

The federal govt could just stop issuing treasury bonds, then there would be no "debt" in the sense you're using it. There's something illogical about an entity borrowing something that it has an unlimited supply of. Or it can just keep this debt around since there's clearly a demand for USD and US treasury bonds.

I highly recommend this book, which is very relevant to this discussion, particularly part 1 starting on page 13:

http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

[WhatsUpFreak]

Or it can just keep this debt around since there's clearly a demand for USD and US treasury bonds.

This is the part I do not understand. If I am another country, why would I ever purchase US bonds? Obviously economists throughout the world involved in the sales/purchasing of bonds know that US bonds are worthless to a point. Why aren't they demanding that the US pay in the form of a commodity? Food, gold silver, fresh water, BTC???

If someone can give me an article to help understand this I would appreciate it. I am new to the subject of economics.

[farfiman]

Or it can just keep this debt around since there's clearly a demand for USD and US treasury bonds.

This is the part I do not understand. If I am another country, why would I ever purchase US bonds? Obviously economists throughout the world involved in the sales/purchasing of bonds know that US bonds are worthless to a point. Why aren't they demanding that the US pay in the form of a commodity? Food, gold silver, fresh water, BTC???

If someone can give me an article to help understand this I would appreciate it. I am new to the subject of economics.

My educated guess would be that they know that  if they don't the whole thing collapses. Something like throwing good money after bad. Maybe there is some expectation they EVENTUALLY something will be worked out.

Or maybe they are all in on it and will have the last laugh went it collapses and the "elites" have all the wealth.

[Hawker]

Or it can just keep this debt around since there's clearly a demand for USD and US treasury bonds.

This is the part I do not understand. If I am another country, why would I ever purchase US bonds? Obviously economists throughout the world involved in the sales/purchasing of bonds know that US bonds are worthless to a point. Why aren't they demanding that the US pay in the form of a commodity? Food, gold silver, fresh water, BTC???

If someone can give me an article to help understand this I would appreciate it. I am new to the subject of economics.

If you are another country, say Taiwan, and you have huge amounts of dollars from your export industries, you can't just stuff them under the mattress, you have to invest them.  And once you go over a billion dollars per month, its hard to find places to invest them.  The big countries are among the few places you can put the money and be sure of getting it back in 10 or 30 years.

As such, countries like the US, UK and Japan are guaranteed that they will have massive amounts of credit available provided they don't do anything stupid.  Thats why they are all able to borrow money for less than their inflation rates.  Investors who want zero risk are paying the countries to take the loans because there really is nowhere else to put the money.

[farfiman]

If you are another country, say Taiwan, and you have huge amounts of dollars from your export industries, you can't just stuff them under the mattress, you have to invest them.  And once you go over a billion dollars per month, its hard to find places to invest them.  The big countries are among the few places you can put the money and be sure hope of getting it back in 10 or 30 years.

As such, countries like the US, UK and Japan are guaranteed that they will have massive amounts of credit available provided they don't do anything stupid.  Thats why they are all able to borrow money for less than their inflation rates.  Investors who want zero risk are paying the countries to take the loans because there really is nowhere else to put the money.

Good explanaton as well although I would change the bolded. I have heard  somewhere that  German bonds have even 0 interest ( or minus) and still they are bought.

[sangaman]

Or it can just keep this debt around since there's clearly a demand for USD and US treasury bonds.

This is the part I do not understand. If I am another country, why would I ever purchase US bonds? Obviously economists throughout the world involved in the sales/purchasing of bonds know that US bonds are worthless to a point. Why aren't they demanding that the US pay in the form of a commodity? Food, gold silver, fresh water, BTC???

If someone can give me an article to help understand this I would appreciate it. I am new to the subject of economics.

I don't really have an article on hand (although the link I posted above is a great read) but there's demand for treasury bonds the same reason there's demand for USD. Treasury bonds are basically as good as cash, they rarely ever lose much (nominal) value, you can easily convert them to cash by selling them, and when they mature you're guaranteed to get face value. It's the safest thing you can do with cash (safer than savings accounts which are subject to bank failures for deposits beyond FDIC limits) and it pays some interest. It's also worth noting that plenty of treasury bonds are held domestically.

Perhaps the real question should be, why do so many people want USD? All treasury bonds are is USD that pays a little bit of interest...

It's interesting that you ask why foreign countries often demand USD treasury bonds instead of commodities or real goods/services. The USA runs a trade deficit with countries like China year after year. China sends us tons of clothes, electronics, appliances, etc... and in exchange we send back a lot of USD which our federal govt has an infinite supply of. If China turns around and buys treasury bonds with their USD, the only "debt" that we owe them is more USD - there's still no obligation to deliver any real goods.

It sounds like a great deal for the USA, we shell out credits for USD (the same way an airline hands out miles for its frequent flyer program) and in return we get real goods and services. However, the Chinese go out of their way to keep the trade deficit going while Americans bitch and moan that the trade deficit is "stealing" our jobs. Where's the logic in that?

[sangaman]

Or it can just keep this debt around since there's clearly a demand for USD and US treasury bonds.

This is the part I do not understand. If I am another country, why would I ever purchase US bonds? Obviously economists throughout the world involved in the sales/purchasing of bonds know that US bonds are worthless to a point. Why aren't they demanding that the US pay in the form of a commodity? Food, gold silver, fresh water, BTC???

If someone can give me an article to help understand this I would appreciate it. I am new to the subject of economics.

If you are another country, say Taiwan, and you have huge amounts of dollars from your export industries, you can't just stuff them under the mattress, you have to invest them.  And once you go over a billion dollars per month, its hard to find places to invest them.  The big countries are among the few places you can put the money and be sure of getting it back in 10 or 30 years.

As such, countries like the US, UK and Japan are guaranteed that they will have massive amounts of credit available provided they don't do anything stupid.  Thats why they are all able to borrow money for less than their inflation rates.  Investors who want zero risk are paying the countries to take the loans because there really is nowhere else to put the money.

Yeah this is pretty accurate, and it doesn't just apply to Taiwan or other countries. It also applies to 65 year olds with lots of savings entering retirement, trust funds or endowments with lots of cash, etc... If you have a lot of USD that you want to spend later, it's safest/easiest and pays some interest to put it in treasury bonds.

Of course, I think holding fiat is pretty crappy in general, whether they're in cash or treasury bonds, and I think bitcoin is the answer to that. I can understand why other countries with shakier currencies would rather hold USD than their local currency - the lesser of two crappy situations - but bitcoin would make more sense as the global reserve currency.

If you are another country, say Taiwan, and you have huge amounts of dollars from your export industries, you can't just stuff them under the mattress, you have to invest them.  And once you go over a billion dollars per month, its hard to find places to invest them.  The big countries are among the few places you can put the money and be sure hope of getting it back in 10 or 30 years.

As such, countries like the US, UK and Japan are guaranteed that they will have massive amounts of credit available provided they don't do anything stupid.  Thats why they are all able to borrow money for less than their inflation rates.  Investors who want zero risk are paying the countries to take the loans because there really is nowhere else to put the money.

Good explanaton as well although I would change the bolded. I have heard  somewhere that  German bonds have even 0 interest ( or minus) and still they are bought.

Are those inflation-adjusted bonds perhaps? I know that inflation-adjusted treasury bonds in the USA often have negative returns, although they're still always nominally positive.

[Hawker]

...snip...

Are those inflation-adjusted bonds perhaps? I know that inflation-adjusted treasury bonds in the USA often have negative returns, although they're still always nominally positive.

No.  If you want the security that lending to Germany, the UK, US or any of the big economies with their own currency, you have to accept that part of the principal will be lost to inflation.

[sangaman]

...snip...

Are those inflation-adjusted bonds perhaps? I know that inflation-adjusted treasury bonds in the USA often have negative returns, although they're still always nominally positive.

No.  If you want the security that lending to Germany, the UK, US or any of the big economies with their own currency, you have to accept that part of the principal will be lost to inflation.

Yes, the real value of investments in t-bonds generally goes down but the nominal value always goes up, at least in the US.

[Ekaros]

I never undestood why there can't be just banks that take a fee to hold your currency. No lending, just store it as bits or cash...

Ofc this kind of bank would be at risk with goverments, but so are bonds...

[Hawker]

I never undestood why there can't be just banks that take a fee to hold your currency. No lending, just store it as bits or cash...

Ofc this kind of bank would be at risk with goverments, but so are bonds...

There are.  Its called a safety deposit box.

[farfiman]

I never undestood why there can't be just banks that take a fee to hold your currency. No lending, just store it as bits or cash...

Ofc this kind of bank would be at risk with goverments, but so are bonds...

There are.  Its called a safety deposit box.

not always safe as you think:

http://www.dailymail.co.uk/news/article-1362561/Bank-gangsters-Police-open-7k-safety-deposit-boxes-discover-50m.html

[crumbcake]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  China isn't going to repossess Texas, unless it wants war, and it doesn't want war [yadda yadda yadda].  The mere act of trying to call in the loan would likely negatively impact both Chinese & US economies, in other words benefit neither China or US.  So the debt of a behemoth like US is nothing like my debt, it can't be modeled on debt people like me understand.  ("China" here is just a standin for "foreign creditor," not as provocation to Chinese people on this forum.)
If i look at it from a (probably very broken or at least skewed) perspective, it seems that US national debt is a good thing.  If China wishes to continue commerce with US and expects to be repaid without needless drama like full-on war, it's in China's best interest to see US economy thrive, amirite?  More, if US was indebted to a potential aggressor (I think i'll have to reach back to USSR to not sound foolish), that aggressor would be *less* likely to attack if US was in its debt.  (if you were a thief, would you steal from the a man who's in your debt, thereby assuring that he won't repay you, or from a man who has no financial obligations to you?  Assuming you are a thief & all other things are equal.)  I know my logic's flawed, but where  And if someone explains this to me, there are layers upon layers of things i don't get.  Turtles all the way down.

[myrkul]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

[crumbcake]

US national debt is something i don't understand no matter how i think about it.
First, while it's debt, i can't see it in the same sense as i see *my* debt.  If i default on my mortgage, my house will be taken away.  Bad thing.  If US defaults on its loans,  What happens?  

China (or any other nation with enough of our debt) dumps the dollar en masse, the economy tanks, and we're all boiling shoes - or each other - to eat.

Why would China want to do that?  It'll lose a valuable trading partner & the money it is owed, plus risk what's politely called "armed conflict"?  They crazy?

Edit:  If you have bought into a pyramid scheme, and you're guided by greed alone (euphemism: "invisible hand"), would you yell "scam" & out the perpetrator, or keep quiet for a chance to get out with your $$$?