Trump: U.S. will never default 'because you print the money'

[JohnfrmClevelan]

I've explain this in other topics.

US Government doesn't have control over what the public calls "Dollars". They are actually Federal Reserve Notes. The Federal Reserve Bank(s) control the supply and issue all of the currency in the form of what is currently the "dollar". That means the US Government can't print money to pay debt, it has to ISSUE debt to get money (it's account credited at the Fed).

Here is the catch, many will never understand or are too ignorant to understand, for the US Government (as it's states in the Constitution) to take control of printing and controlling the money supply, it would have to technically default as it's changing the terms of the agreement on Bonds and other Obligations from Federal Reserve Note to a new US dollar. Then there is also a question on how the Government will value the new US dollar against a Federal Reserve Note. If that exchange rate is crap like US Government saying a Federal Reserve Note is only worth 70% of the new US dollar, that again would be a default on it's obligation. So having the US Government being the issuer of a currency doesn't change the fact $18t is owed in Federal Reserve Notes and that debt can't be retired without technically defaulting in a new currency issuer.

Oh and inflation is a form of default as well.

Your concentration on "technical" defaults doesn't change the gist of what we are saying. We can keep the laws that we have, and the government can continue to create assets out of thin air, and they can continue to spend. Or, we can change some laws, and the government can take a slightly different route, but still create assets out of thin air, and they can continue to spend.

Your contention that we might value FRNs at some discounted rate is about as realistic as any other voluntary default. There is no good reason to believe that we would ever do that, so why even bring it up, unless you are running out of valid arguments? The same goes for your inflation argument. Nobody is planning on any massive devaluation. Realistically, default isn't in our future, and I am not interested in unrealistic arguments.

 

[JohnfrmClevelan]

They did though, about 20% since 2006. Have wages and economic growth kept up?

Wages have not kept up, because the demand for labor is low. Growth has, though.

2% annual inflation isn't anything I would blame on too many dollars floating around. Prices go up (and down) for a lot of reasons. For instance, your time frame includes wars in the Middle East, when the price of oil spiked up like crazy, making everything more expensive.

 

[JohnfrmClevelan]

Yeah. What was the price of beef in 2006? And now? Gas in 2006 then now? Eggs in 2006 then now? Health care insurance in 2006 then now? We have debilitating inflation in the US, folks, even though the federal government is positing an almost non-existent inflationary rate.

To jonny5's point: Wages haven't perceptively gone up to coincide with the increase of the printing of moola by the government. Economic growth hasn't perceptively gone up to reflect the increase of printing of moola by the government. In essence while wages and economic growth stayed the same, economic growth and wages HAVE DECLINED over that period of increased printing of moola by the government.

Why don't you explain to all of us exactly how this increased printing of moola by the government caused both price inflation and wage deflation?

 

[cabse5]

You do realize that since 2007, between the Fed and the federal government that over $12 trillion (with a 't') has been simply created to try and stimulate the economy (through deficits, QE's and toxic asset purchases)? And this was all at record low interest rates. And still the economy is stagnant and there is zero proof that had the government not done anything and just let the economy fix itself that the economy would not be far better off by now.

There have been recessions/depressions every 6-8 years in American history and almost every one of them ended just fine with the government doing little or nothing to intervene. If that policy worked so well for hundreds of years...why change it now?

I think your question is rhetorical, but to those who may not know, it's so politicians can be reelected.

 

[ludin]

It is quite simply a fact that the us government can only voluntarily default.

no it can default. just because you think you can just print money doesn't mean your creditors have to
accept the worthless trash and more than likely they won't.

 

[ludin]

Your concentration on "technical" defaults doesn't change the gist of what we are saying. We can keep the laws that we have, and the government can continue to create assets out of thin air, and they can continue to spend. Or, we can change some laws, and the government can take a slightly different route, but still create assets out of thin air, and they can continue to spend.

Your contention that we might value FRNs at some discounted rate is about as realistic as any other voluntary default. There is no good reason to believe that we would ever do that, so why even bring it up, unless you are running out of valid arguments? The same goes for your inflation argument. Nobody is planning on any massive devaluation. Realistically, default isn't in our future, and I am not interested in unrealistic arguments.

the laws of inflation and currency devaluation say otherwise.
that is why we don't do it now and why any other government
that has tried has ended in failure.

 

[cabse5]

Why don't you explain to all of us exactly how this increased printing of moola by the government caused both price inflation and wage deflation?

Price inflation is caused by more dollars in the money stream caused by increased printing of money. More dollars are vying for the same products causing an, in essence, 'bidding up' of the price of an object.

Wage deflation is caused by more dollars in the money stream caused by increased printing of money which raise the price of objects. When the price of objects raise and wages stay the same, the purchase power of wages lowers and consequently wages are lowered.

 

[JohnfrmClevelan]

no it can default. just because you think you can just print money doesn't mean your creditors have to
accept the worthless trash and more than likely they won't.

And what do you think our "creditors" are going to do? Drag the U.S. into some sort of international bankruptcy court?

They hold bonds. They are entitled to dollars according to the terms of the bond, and they get dollars according to the terms of the bond. They can't force the U.S. into default, period. Accept the facts already. Just because you can't seem to wrap your head around how sovereign governments finance themselves does not mean that it's wrong.

 

[JohnfrmClevelan]

the laws of inflation and currency devaluation say otherwise.
that is why we don't do it now and why any other government
that has tried has ended in failure.

And what are these "laws" of inflation and currency devaluation? Lay some equations on us.

 

[cabse5]

no it can default. just because you think you can just print money doesn't mean your creditors have to
accept the worthless trash and more than likely they won't.

Think Italy or Puerto Rico.

 

[JohnfrmClevelan]

Price inflation is caused by more dollars in the money stream. More dollars are vying for the same products causing an, in essence, 'bidding up' of the price of an object.

Except you seem to have skipped over the part where these new dollars ELICIT NEW PRODUCTION. New production that would not otherwise be produced. So it is NOT a case of more dollars vying for the same products.

Wage deflation is caused by more dollars in the money stream caused by increased printing of money which raise the price of objects. When the price of objects raise and wages stay the same, the purchase power of wages lowers and consequently wages are lowered.

Labor is an object, just like anything else. Why isn't the cost of labor going up, too? More dollars chasing the same amount of labor, right?

 

[David_N]

no it can default. just because you think you can just print money doesn't mean your creditors have to
accept the worthless trash and more than likely they won't.

Huh? How do you think we've been getting money to bond holders?

 

[JohnfrmClevelan]

Think Italy or Puerto Rico.

Neither Italy nor Puerto Rico can create their own currency as they see fit. Both have to actually borrow. Big difference.

 

[ludin]

Your concentration on "technical" defaults doesn't change the gist of what we are saying. We can keep the laws that we have, and the government can continue to create assets out of thin air, and they can continue to spend. Or, we can change some laws, and the government can take a slightly different route, but still create assets out of thin air, and they can continue to spend.

Your contention that we might value FRNs at some discounted rate is about as realistic as any other voluntary default. There is no good reason to believe that we would ever do that, so why even bring it up, unless you are running out of valid arguments? The same goes for your inflation argument. Nobody is planning on any massive devaluation. Realistically, default isn't in our future, and I am not interested in unrealistic arguments.

the laws of inflation and currency devaluation say otherwise.
that is why we don't do it now and why any other government
that has tried has ended in failure.

 

[cabse5]

Except you seem to have skipped over the part where these new dollars ELICIT NEW PRODUCTION. New production that would not otherwise be produced. So it is NOT a case of more dollars vying for the same products.



Labor is an object, just like anything else. Why isn't the cost of labor going up, too? More dollars chasing the same amount of labor, right?

You need to elaborate on your first response.

The cost of labor goes accordingly to the intersection of the graph of the supply of the cost at which labor will provide its labor and the demand at which businesses will pay for labor. A higher cost demanded by labor, for example. will skew the intersection of the labor supply and business demand curves causing businesses to demand a lower amount of the labor at that price. Consequently, if businesses demand more labor, the intersection of the cost of labor curve by labor and demand for labor curve by businesses will skew to a higher intersection price for labor that businesses are willing to pay. Note: the federal government doesn't have any such inclination of preferred or disallowed price intersections of the supply and demand curves of individuals or companies. Politicians have a demand curve that coincides with the politics of the issue.

The prices of items is the intersection of the prices of items suppliers at each price are willing to supply curve and the demand of items at each price that demanders are willing to buy curve. If people have more dollars to spend, this will skew the intersection of the curves to allow a higher demand for higher prices by consumers causing prices to inflate.
Econ. 101.

 

[pdog]

How do you mean? Try.

You don't think I could keep refi'ing my house forever? Do I ever need to pay back the loan? Am I not borrowing with impunity?

 

[joG]

You don't think I could keep refi'ing my house forever? Do I ever need to pay back the loan? Am I not borrowing with impunity?

Ah. That is how you meant. I thought maybe you meant a perpetual loan. Most banks won't do that for you. Rolling over the loan gives you a double risk. The bank could decide against renewal and the rate could be much higher, when you wanted to extend. In principal this latter is at the present relative debt level the greatest danger we as citizens run with the US debt should growth resume at a high level sometime in the future. This is not the only danger in the case of a country, where a run on the currency can do real harm.

 

[ludin]

And what do you think our "creditors" are going to do? Drag the U.S. into some sort of international bankruptcy court?

They hold bonds. They are entitled to dollars according to the terms of the bond, and they get dollars according to the terms of the bond. They can't force the U.S. into default, period. Accept the facts already. Just because you can't seem to wrap your head around how sovereign governments finance themselves does not mean that it's wrong.

nope they will say that the payment is not in good faith and that the US is purposely devaluing the currency.
they expect that those dollars they are getting are worth something not toilet paper.

they don't have to except printed money. they could easily say you need to borrow more money at a higher interest rate to pay us with.
just because you can't wrap your head around the fact you can't print money willy nilly
is what is more amazing.

that is why NO ONE does this. it is why the fed goes to great lengths to control the money supply.

 

[ludin]

And what are these "laws" of inflation and currency devaluation? Lay some equations on us.

the more money you have without the need for that money means that the value of your currency goes down.
it means that your currency is worth less than what you started. that means higher prices for everyone.

a massive supply of US dollars in the system devalues the currency making it worth less. which frankly pisses off
the people you borrowed money from.

 

[ludin]

Huh? How do you think we've been getting money to bond holders?

see that is different. we are selling a product. we are not just printing money for no reason.
we are actually borrowing that money we are printing.

you don't seem to understand the process.

 

[cabse5]

no it can default. just because you think you can just print money doesn't mean your creditors have to
accept the worthless trash and more than likely they won't.

Think Italy or Puerto Rico.

Neither Italy nor Puerto Rico can create their own currency as they see fit. Both have to actually borrow. Big difference.

Italy has the Euro, yes. My point is: Italy has extended its own IOUs (the same as any promissory note from any country including the US) which every country deemed worthless.

Any IOU, America's dollar or otherwise, can become worthless even with extensive printing of money. Think Germany between WWI and WWII. Some African countries.

 

[Cyrylek]

This isn't economics, this is policy. The government has the ability to print money, that isn't and shouldn't be arguable.

Yep:

 

[Critter7r]

Yeah, we see how well that worked out for Zimbabwe...

Yeah, because the US is almost exactly like a south African country the size of Texas with 15 million residents that gained its independence in 1980.

 

[David_N]

Yep:

View attachment 67201179

This'll be the 50th time I've addressed this nonsense about hyperinflation. Zimbabwe destroyed their supply and ran out producers. Demand exceeded supply, and that caused hyperinflation. They would've been screwed either way.

 

[David_N]

Yeah, because the US is almost exactly like a south African country the size of Texas with 15 million residents that gained its independence in 1980.

We don't face a supply problem either. And we have plenty of potential output.