Counter to "Why Bitcoin is dropping ...buying." AMA format / doomsday debunked

[Elwar]

Do you see Keynes as a God or just below the level of deity status?

[btc_n_economics]

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.

I think this is were it becomes interesting.

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.

Do you see Keynes as a God or just below the level of deity status?

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.

[Elwar]

Do you see Keynes as a God or just below the level of deity status?

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.

That was in response to this:

I work in the financial investment industry

Do you know the concept of bubbles?

Like this one:

[btc_n_economics]

Do you know the concept of bubbles?

Like this one:

https://i.imgur.com/hKrWuKu.png

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.

[twiifm]

Do you see Keynes as a God or just below the level of deity status?

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.

That was in response to this:

I work in the financial investment industry

Do you know the concept of bubbles?

Like this one:

Poor logic buddy.  Debt isn't an asset.  Or perhaps you are claiming that we're close to the point where that debt will start deflating rapidly 

[Elwar]

You assume that the taxpayer can pay the interest on the debt every year. But the interest on the debt has risen to one of the top 6 budget expenses and as it rises we will reach the point where there are not enough taxes to cover the interest plus any sort of other expenses. Debt cannot continue to climb with no detrimental results.

And when the Fed needs to print money to buy US treasury bonds to keep down that interest rate and allow the US to continue to be solvent, they are shifting the burden by devaluing the dollar.

In short burts they can bounce back. Over the long term it leads to inflation.

Sure we have the military which is one of the top 3 budget items, and they can attack countries like Iraq who started talking about going off of the dollar for oil sales. But that just adds to the spending and adds to the problem. And higher taxes do not necessarily result in higher income as people work to shelter their money from those taxes, just look at the failure of the 75% tax in France.

Depending on violence and force to prop up your economy is not the best way forward even if in the short term it seems like it is working. That system always requires more force and more violence before it comes to an end.

[NotLambchop]

...
Depending on violence and force to prop up your economy is not the best way forward even if in the short term it seems like it is working. That system always requires more force and more violence before it comes to an end.

An unfortunate time to point fingers at US economy (DOW-UP, USD-UP).   Bitcoin economy continues to tank amidst unchecked theft & fraud

[twiifm]

You assume that the taxpayer can pay the interest on the debt every year. But the interest on the debt has risen to one of the top 6 budget expenses and as it rises we will reach the point where there are not enough taxes to cover the interest plus any sort of other expenses. Debt cannot continue to climb with no detrimental results.

And when the Fed needs to print money to buy US treasury bonds to keep down that interest rate and allow the US to continue to be solvent, they are shifting the burden by devaluing the dollar.

In short burts they can bounce back. Over the long term it leads to inflation.

Sure we have the military which is one of the top 3 budget items, and they can attack countries like Iraq who started talking about going off of the dollar for oil sales. But that just adds to the spending and adds to the problem. And higher taxes do not necessarily result in higher income as people work to shelter their money from those taxes, just look at the failure of the 75% tax in France.

Depending on violence and force to prop up your economy is not the best way forward even if in the short term it seems like it is working. That system always requires more force and more violence before it comes to an end.

Look up sectoral balances to understand relationship between public vs private deficits and surpluses

[B.A.S.]

As long as oil is priced in USD, the US government can continuing printing dollars to pay for it and to maintain reserve currency status. If the oil agreement folds, the US can continue printing money, but the economy will suffer. This is one of the ways the US became so big so quickly.

The US looks like its suffering from Dutch Disease with its export being currency and not natural resources. Once the currency well dries up, banks will lose some power and the US will begin a multi-decade race to once again ramp up manufacturing (Made in America TM) to try to mitigate the loss. Problem with this will be that because of the eventual USD decoupling, it will be a race to the bottom.

This is where I believe Bitcoin comes in. SDRs under the guidance of the IMF are nothing new; essentially, a world currency basket to hedge currency volatility. Dump all your country's debt into an SDR and well, you know the rest.

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.

I agree, the US doesn't need oil to be priced in USD to print money. I never said that. What I was alluding to was because oil happens to be dominated in USD, the US (aka the Fed-a private entity) can print money that is never disseminated into the economy (i.e. lended to banks as you've said above). What this allows the US to do is simultaneously buy oil with money that is non-inflationary on the US economy, purchase a commodity and sell it back to its economy at deflationary prices for a profit. Essentially, on the books it looks like the US economy is booming with all the capital coming in (cheap gas prices mean more spending, traveling; generally linked to improved economic conditions), but in reality, the money never existed and is being injected into the economy from an outside way to mitigate economic inflation on the home front due to the printing of USD. The commodity oil is like fake money. It is a vehicle to control economic factors based upon what the commodity is denominated in primarily (currently USD). The US is the best house on a bad block right now.

Secondly, printing of money alone does not cause inflation (again I did not say this). When the real value of the economic output is mismatched with the amount of dollars circulating, this is how printing excess money (QE) becomes a problem. Without having the output to back up the QE, the US experiences inflation. If the US doesn't have the goods to support the high exchange value of the USD in the world economy, you get inflation. The only reason we have QE in the first place is because an economy that wants to grow fast and beyond its means (the US since forever) has to do it somehow

Step 1: you tell everyone your country has a ton of money by printing it
Step 2: Get them to buy your stuff/invest in you with 'real money'
Step 3: Economic boom town - profit
Step 4: Continue the process until every one is entirely dependent on your country for its economic value based on their currency that they won't let you fail
 
The US isn't ramping up manufacturing in response to some event. What I was talking about was bringing our manufacturing back to US soil and beginning to increase our world stake in the export market. Right now, all we export is dollars. You will see a return to American made products and a reinvestment in corporations housed in the the US. What this will do it allow us to export more products, decrease our reliance on QE and strengthen our hold on the world market. If we let go of being the reserve currency (we will eventually), we have to be a frontrunner in something otherwise the US stands to lose a hold on the world.

The debt in the US doesn't matter, it never has. In the 40s/early 50s, we actually volunteered as a country more or less to be the world reserve post WWII (see Bretton Woods Conference) since we had lots of economic resources and much power.

The volatility of Bitcoin right now is purely because of lack of no clear authoritative governance (as posters below say: a military). Eventually, if Bitcoin becomes a real thing, governments with lots of power and money and military will assume their slot in this, set up shop and push their economies in new ways using this technology.

[Elwar]

...
Depending on violence and force to prop up your economy is not the best way forward even if in the short term it seems like it is working. That system always requires more force and more violence before it comes to an end.

An unfortunate time to point fingers at US economy (DOW-UP, USD-UP).   Bitcoin economy continues to tank amidst unchecked theft & fraud

Whoever stole Bitstamp's coins are UP in bitcoins.

Theft tends to yield good revenue. This is what the US economy relies on. The better their military at keeping those taxpayers in line, the better the economy.

[NotLambchop]

...
Depending on violence and force to prop up your economy is not the best way forward even if in the short term it seems like it is working. That system always requires more force and more violence before it comes to an end.

An unfortunate time to point fingers at US economy (DOW-UP, USD-UP).   Bitcoin economy continues to tank amidst unchecked theft & fraud

Whoever stole Bitstamp's coins are UP in bitcoins.

Theft tends to yield good revenue. This is what the US economy relies on. The better their military at keeping those taxpayers in line, the better the economy.

The unfortunate thing is Bitcoin has no military (or any enforcement mechanisms) to deal with theft.  As always, Bitcoin parasites run to the nanny state to deal with teh bad hax0rs.
Regardless, thieves profiting != good for economy, that's bitcointalk logic.

[sgbett]

Poor logic buddy.  Debt isn't an asset.  Or perhaps you are claiming that we're close to the point where that debt will start deflating rapidly  

Oh boy. Where do I start!?

1. Depends which side you are on.
2. What is "global deleveraging" if not the rapid deflation of debt.

Specifically:

Fisher's formulation
In Fisher's formulation of debt deflation, when the debt bubble bursts the following sequence of events occurs:

Assuming, accordingly, that, at some point in time, a state of over-indebtedness exists, this will tend to lead to liquidation, through the alarm either of debtors or creditors or both. Then we may deduce the following chain of consequences in nine links:

Debt liquidation leads to distress selling and to
Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of deposits and of their velocity, precipitated by distress selling, causes
A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be
A still greater fall in the net worths of business, precipitating bankruptcies and
A like fall in profits, which in a "capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make
A reduction in output, in trade and in employment of labor. These losses, bankruptcies and unemployment, lead to
pessimism and loss of confidence, which in turn lead to
Hoarding and slowing down still more the velocity of circulation.
The above eight changes cause
Complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest.
—(Fisher 1933)

[B.A.S.]

Poor logic buddy.  Debt isn't an asset.  Or perhaps you are claiming that we're close to the point where that debt will start deflating rapidly  

Oh boy. Where do I start!?

1. Depends which side you are on.
2. What is "global deleveraging" if not the rapid deflation of debt.

Specifically:

Fisher's formulation
In Fisher's formulation of debt deflation, when the debt bubble bursts the following sequence of events occurs:

Assuming, accordingly, that, at some point in time, a state of over-indebtedness exists, this will tend to lead to liquidation, through the alarm either of debtors or creditors or both. Then we may deduce the following chain of consequences in nine links:

Debt liquidation leads to distress selling and to
Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of deposits and of their velocity, precipitated by distress selling, causes
A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be
A still greater fall in the net worths of business, precipitating bankruptcies and
A like fall in profits, which in a "capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make
A reduction in output, in trade and in employment of labor. These losses, bankruptcies and unemployment, lead to
pessimism and loss of confidence, which in turn lead to
Hoarding and slowing down still more the velocity of circulation.
The above eight changes cause
Complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest.
—(Fisher 1933)

Ah, man you couldn't have said it better. Increased taxation can only cover indebtedness so long. If you poke the bear (the public) too much, they are going to get angry. Debt is a great asset for the financial industry in generating massive profits on the backs of "investers". Debt is awful for the public at large. The Fed can churn out as much cash as it desires, but ultimately the people have to pay for it. I just recently read that GB is finally paying off its WWI debt... my ass, they are just refinancing it.  Your point exactly sir. Kudos.

[Elwar]

Regardless, thieves profiting != good for economy, that's bitcointalk logic.

If you want to see if people believe in the ability of the US to tax steal, look at the USD at ten year highs

It is not me who believes that theft is the best way toward a good economy.

[NotLambchop]

...US to tax steal, ...

Taxation is no more theft than Bitcoin is child pornography
Your friends, the other paranoid lunatics libers claiming that it is doesn't make it so.

[Elwar]

...US to tax steal, ...

Taxation is no more theft than Bitcoin is child pornography

Closing your eyes and covering your ears saying that the forced taking of money is not theft all you want. Because it is an ancient tradition, society allows it without thought. Like they did with slavery and war.

[Ovum]

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.

So? We've got people here who believe in perpetual motion machines; that the world is being controlled by Jews, lizards, and/or Jewish lizards; that aliens walk among us; that humans can survive without food; and IPU knows what other nonsense. The Speculation forum in particular attracts many people who don't understand how financials markets work or even basic economics for that matter. These people are immune to basic logic, and I doubt you'll be able to convince them of anything, though you're of course welcome to try.

I didn't even bother reading the thread you're referring to, as the whole premise is ridiculous on its face and really not worth responding to at all.

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.

If you think that'll help.

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.

I can't speak for the rest of the forum, but I don't think any of those things, except perhaps for the implosion of the dollar. Though I don't think it's going to happen anytime soon, of course, or that it'll be so sudden that nothing can be done about it when it happens.

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.

This is Economics 101. Tell us something we don't already know.

Where did they said that? Is there a thread. I thought about it one day and found some articles.
edit: sorry the off-topic

[NotLambchop]

...US to tax steal, ...

Taxation is no more theft than Bitcoin is child pornography

Closing your eyes and covering your ears saying that the forced taking of money is not theft all you want. Because it is an ancient tradition, society allows it without thought. Like they did with slavery and war.

When your landlord expects you to pay rent, do you call that theft?  If you don't want to pay taxes, GTFO & go and live under the sea or on the Moon.  Stop trying to freeload.

[Ultros]

Well technically tax isn't theft, but extortion.

[Elwar]

When your landlord expects you to pay rent, do you call that theft?  If you don't want to pay taxes, GTFO & go and live under the sea or on the Moon.  Stop trying to freeload.

My landlord does not rob me and then grant me the privilege of living in my apartment.

As for me, I did GTFO.

No matter how you cut it, whatever goodies the government gives away, how much they spend on protection, free TVs, free health care...whatever, they take my money without my permission.

You can't talk about what the government provides until you address the part where they steal from people.

Theft is theft is theft, it doesn't change because of what happens afterwards.