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Author Topic: How long do you think we have?  (Read 4389 times)
Behemot (OP)
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September 08, 2013, 01:52:59 AM
 #1

I've just accidentally run into the counter again at http://www.verejnydluh.cz/. Our current debt is ~1,84 trilion CZK (over 90 bilion USD). Budget for this year was 1,18 trilion. That means, probably next year the debt will rise to 2-year budget.

Of course, everything is fine here, nobody worries. I give it decade max, whaddaya think?

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September 08, 2013, 05:13:21 AM
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I've just accidentally run into the counter again at http://www.verejnydluh.cz/. Our current debt is ~1,84 trilion CZK (over 90 bilion USD). Budget for this year was 1,18 trilion. That means, probably next year the debt will rise to 2-year budget.

Of course, everything is fine here, nobody worries. I give it decade max, whaddaya think?

They'll hit some limit then just stop updating.

That's what the U.S. Treasury has done.  The national debt has been stuck at its $16.7T limit since the end of May.  Everyone knows the debt has been growing since, they just have taken "extraordinary" measures:
 - http://www.cnsnews.com/news/article/100-days-treasury-has-kept-debt-frozen-16699396000000

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Behemot (OP)
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September 08, 2013, 02:17:15 PM
 #3

This is non-government activity, based on regular national bank updates every 3 months. Even if they stopped releasing the news, we know how much they borrow each year, we +- know the interests so it can go on, even though probably not as accurately.

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September 09, 2013, 03:33:21 AM
 #4

What is the consequence of central banks writing off the government debt (debt forgiven)?

You can't write off the debt that is hold by foreign investors, but you can write off the debt that is hold by central banks, but will that action hurt anyone?


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September 09, 2013, 03:58:28 AM
 #5

What is the consequence of central banks writing off the government debt (debt forgiven)?

You can't write off the debt that is hold by foreign investors, but you can write off the debt that is hold by central banks, but will that action hurt anyone?
It'd have similar effects to a default. Central banks must remain solvent, so tons of money must be printed in order to forgive the debt. This would eliminate all confidence in the currency and government. The foreign debt wouldn't be written off in such a case, but eroded in value to the point where it may's well have been.
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September 09, 2013, 04:11:54 AM
 #6

But all the people who must use the currency by law will suffer the consequences.

Anyway, most of this regime's debt is held by private institution or individuals as they are issuing small bonds for people last couple years. I even heard some bonds (not neccessarily those for the individuals) have due date of 105 years. Now who is THAT stupid to believe this regime will be anywhere arround in 100 years? That makes me laugh so hard Cheesy Cheesy Cheesy

Carlton Banks
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September 10, 2013, 03:15:20 PM
 #7

Now who is THAT stupid to believe this regime will be anywhere arround in 100 years? That makes me laugh so hard Cheesy Cheesy Cheesy

It's because we have a persistent civilization. Persistent idiocracy would be more accurate.

Vires in numeris
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September 10, 2013, 05:58:14 PM
 #8

What is the consequence of central banks writing off the government debt (debt forgiven)?

You can't write off the debt that is hold by foreign investors, but you can write off the debt that is hold by central banks, but will that action hurt anyone?
It'd have similar effects to a default. Central banks must remain solvent, so tons of money must be printed in order to forgive the debt. This would eliminate all confidence in the currency and government. The foreign debt wouldn't be written off in such a case, but eroded in value to the point where it may's well have been.

Central bank is always net plus since they create money and lend those money out (the ownership of those money belongs to FED directly after being created)

If the central bank is really controlled by the government, like some people believe, then they have no problem to destroy the bond they purchased from government, means that they just freely give those printed money to government without asking anything for return

Currently FED are buying 40 billion dollar worth of bonds from government each month(with newly created money). If they just destroy those bonds, then government will get 40 billion dollar free money to spend each month. I don't see any problem with this. Of course there will be a loss from central bank's balance sheet (now they have liabilities without corresponding asset), but since they are the money creator, they don't lose anything

On the other hand, if government get free money to spend, they will spend a lot and create lots of jobs

Actually this practice was done 300 years ago by John Law. He first printed out lots of fiat money and use those money to raise the stock price of mississipi company, and then used those stocks to buy back lots of government bonds and then destroied those bonds, thus helped the government to eliminate the national debt

His faliure is caused by the fact that he printed too much money to raise the stock price of mississipi company, and he could not provide enough gold backing those fiat, thus resulted in a bankrun. But today, FED don't need gold to back the fiat

Behemot (OP)
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September 10, 2013, 06:03:12 PM
 #9

Man are you insane? Sure you can print as much money as you want but such money does not even have the value the of paper and ink they are made of. Have a look at Zimbabwe, that's most recent event of how incredibly stupid your idea is and how it ends.

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September 10, 2013, 06:13:38 PM
 #10

...If they just destroy those bonds, then government will get 40 billion dollar free money to spend each month. I don't see any problem with this. ...


Umm... There will be massive inflation. It's a zero sum game. You don't *really* think that printing more paper bills actually generates more wealth (ie, better living standards) for humanity, do you? You just get more money chasing the same goods/services, so people start to competitively bid up prices for things and the overall price level rises. In theory, that has no effect on anything; people would make more money and spend exactly the same amount more money. In practice, it triggers massive friction in the form of ever rising prices (because people fear prices for goods they buy will rise, thus they preemptively raise the prices of the goods they sell, etc...), to the point where it's difficult for business to function because the price level is moving too fast.

A big component of a healthy economy is low friction, and inflation/deflation just add lots of unnecessary friction.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
CurbsideProphet
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September 10, 2013, 09:16:22 PM
 #11

What is the consequence of central banks writing off the government debt (debt forgiven)?

You can't write off the debt that is hold by foreign investors, but you can write off the debt that is hold by central banks, but will that action hurt anyone?



You can write off any debt you want but it will be considered a default.  It could have systemic effects particularly due to the amount of derivatives in the market now like credit default swaps.

1ProphetnvP8ju2SxxRvVvyzCtTXDgLPJV
johnyj
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September 11, 2013, 12:01:49 AM
 #12

What is the consequence of central banks writing off the government debt (debt forgiven)?

You can't write off the debt that is hold by foreign investors, but you can write off the debt that is hold by central banks, but will that action hurt anyone?



You can write off any debt you want but it will be considered a default.  It could have systemic effects particularly due to the amount of derivatives in the market now like credit default swaps.

For normal people who purchase the bond from government, the debt forgiven is the same as default. But for the money creator it is different, since they don't work to create money, it is just some numbers on their balance sheet

Behemot (OP)
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September 11, 2013, 12:10:45 AM
 #13

Money does not get created from ass, it is NOT how it works. You socialists should finally learn that, other people do not want to pay for your robbery and spending spree.

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September 11, 2013, 12:11:23 AM
 #14

Man are you insane? Sure you can print as much money as you want but such money does not even have the value the of paper and ink they are made of. Have a look at Zimbabwe, that's most recent event of how incredibly stupid your idea is and how it ends.

Printing one million dollar or one trillion dollar have totally different effect on inflation. All the currencies destroied by severe inflation had a super speed of money supply increase, like 10 fold in one month. Weimar public added 10 zero for its money supply in just one year



However, Fed has created 4 times more money since 2008 and there is barely any significant inflation. Notice that during the same period, the US GDP just increased a couple of percent per year. So, inflation will not be out of control if the money supply do not increase at a crazy speed


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September 11, 2013, 12:31:02 AM
 #15

People in foreign countries where "freedom" was exported by US agents or US military paid the price. Germany did not have that luxury until…well, Hitler came in and exported his version of freedom. You know the rest…

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September 11, 2013, 12:31:52 AM
 #16

...If they just destroy those bonds, then government will get 40 billion dollar free money to spend each month. I don't see any problem with this. ...

Umm... There will be massive inflation. It's a zero sum game. You don't *really* think that printing more paper bills actually generates more wealth (ie, better living standards) for humanity, do you? You just get more money chasing the same goods/services, so people start to competitively bid up prices for things and the overall price level rises. In theory, that has no effect on anything; people would make more money and spend exactly the same amount more money. In practice, it triggers massive friction in the form of ever rising prices (because people fear prices for goods they buy will rise, thus they preemptively raise the prices of the goods they sell, etc...), to the point where it's difficult for business to function because the price level is moving too fast.


Because of money's universal equivalence property, money itself IS wealth. Are you sure that when you lost money, you did not lose any wealth? Economy books always say that money is not wealth, but how come the wealth was destroyed in financial crisis while none of the houses/cars/goods/services were destroyed?

And there is cantillon effect, those who first receive the newly created money have to spend it to cause inflation. If he carefully select his spending target (or even move them oversea), the real inflation on the end of the chain might take years to happen, or not happen at all. The result is that more and more money accumulated at the top of the chain, creating huge gap between rich people and poor people


Behemot (OP)
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September 11, 2013, 12:36:03 AM
 #17

Money only is an universal vehicle, device or tool, does not matter how you want to name it, to exchange different types of goods. Money on its own is no wealth at all because if people loose trust in one type of money, it is useless. Money only has value if it is backed by some real wealth, or if people believe in it. And trust in USD falls down the whole time, that's why the "trust" must be exported by force.

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September 11, 2013, 12:57:52 AM
 #18

Eurostat releases reports for governments debts and deficits.

http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-22072013-AP/EN/2-22072013-AP-EN.PDF

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-22042013-AP/EN/2-22042013-AP-EN.PDF

Those numbers are extremely bad. Very hard to imagine how it could go on for more than 5 years without some kind of defaults or money creation by the ECB. Either way, both are bullish for bitcoin!

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September 11, 2013, 01:02:19 AM
 #19

The Fed buying bonds is probably a trick to avoid printing money directly to cover the government deficit. They don't even buy them directly, but via the banks. And they don't really pay the money to the banks, because the payment is deposited directly in the Fed. This is the creation point. The money is created by the fed at the touch of the button, but appears as deposits from the commercial banks. But now the banks have deposits, which is reserve capital, which give them the ability to lend. Nobody can see through that.
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September 11, 2013, 03:06:09 AM
 #20

Money only is an universal vehicle, device or tool, does not matter how you want to name it, to exchange different types of goods. Money on its own is no wealth at all because if people loose trust in one type of money, it is useless. Money only has value if it is backed by some real wealth, or if people believe in it. And trust in USD falls down the whole time, that's why the "trust" must be exported by force.

Some kind of need (security for example) can not be satisfied by goods/services, they need lots of money to satisfy. Economy books usually say that today's saving is for tomorrow's spending, but in reality many people die with lots of money left for his children, and banking families typically accumlate more and more money for each generation

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