Why Conservatives, Libertarians, and Republicans are so confused about our Debt

Not desperate at all. You are the one bringing up Nazi Germany and Iran. Can't help that kind of paranoia. Your statistical sample is incredibly small. We live in the information age, governments ability to abuse people is growing smaller. In historical context we are as spoiled as it gets. Our big problems are embarrassing when compared to history. Look how up in arms people are because of the Obamacare website. That's how spoiled we are. You have just accepted your place in the cult and there is no turning back. You are doomed.

I'm not going to challenge you on whether our government is corrupt or not. That's an ideological argument. I'm talking about our monetary system. It's obvious that you have problems that aren't healthy... and won't be able to debate our monetary system without going off on these weird anti-government tangents. You are more than represented on this site though!! You should be able to make many friends! Lot's of nut jobs here.

 

Our growth is horrible. That's what happens when you cut government spending and fire public sector employees. And there is no positive outlook to our economy in the near future with the Republicans in charge of the House.

It's funny because China is opening up and taking our old approach to the economy. Massive infrastructure spending, big government, etc. But, they also have 700 million more people than us. It's no surprise that they will eventually take over in terms of gdp.

They are growing like most undeveloped countries have grown in the past. It isn't anything special. They'll probably be growing at a high rate for a while as they finally join the 20th century. But fear not, it will be half a century to longer before they reach our standard of living.

 

Small? You call most governments in the history of mankind small? What's you definition of big? Precognition to know how governments of the future conduct themselves?

I didn't challenge you to prove whether the US Government was corrupt. I asked you to prove that my assertion that the historical trend of the nature of human government justifies significant restraints on its powers. If you are correct, then your assertion that we can trust the government to spend our money in ways that they say will benefit us is by extension correct. Because that is the heart of why we have different ways of approaching economic policy: you trust the US government, and I do not. If you can prove we should trust the government, then your economic argument is also correct.

If you really are correct, you should be able to prove this without an ad hominem, which you use in virtually every post.

Like I said. PROVE ME WRONG.

 

You couldn't actually be more wrong about China...

 

Dispondent may have a valid point. Countries do not want to trade oil in dollars and Iran has setup a market to do just that. Iraq was trying the same thing in wanting to buy and sell oil in Euros (and then we went to war...imagine that). China has setup agreements to trade billions between the Yuan and Euro central banks without using dollars. I have read snippets in the news that China wants to play a larger role in global currency management, ultimately wanting the Yuan to be the next global currency as problems with the dollar and political pressures grow.

In my opinion the biggest threat would be a run on our banks. If people decide one day they don't trust the system and want their dollars out of it, that's the most rapid way to the bottom. But I read an article lately that the Fed feels the banks need more reserves to be held and I cannot recall why other than "stress test" reactions. Interestingly, reserves are being pumped up monthly by QE and then the Fed says they need more reserves. So QE funded the very reserves that are now required and all the banks had to do was leave their accounts open (/sarcasm) to more credits...interesting to me. Maybe I'm off base, but holding more in reserves makes little sense unless there is fear demands could later come to liquidate a larger number of assets than normal.

 

And who audits them? They are not controlled by the government in any way other than political appointments and nobody has insight into the operations of the Federal Reserve on the side of the government. I'm at work so I can't give you the link, but look up the YouTube video of questioning of the Inspector General of the Fed regarding off balance sheet transactions by the fed ($9T) that cannot be accounted for. She stumbles, fumbles and deflects, ultimately answering that even she has no access to all the information. And she's the IG of the Fed! So to think Congress has any real power over it, other than the ability to change federal law and disband or absorb the Fed, is incorrect.

http://www.federalreserve.gov/pubs/frseries/frseri.htm

Ultimately we can't see M3 any longer (not reported since 2007 I think), we can't even get meeting minutes of the secretive meetings (because of claims it would not be in our economic or national security interests). So we're in the dark and testimony of the fed chairman is usually sketchy and elusive.

 

Right, because people protesting a website has anything to do with the topic of government abuse of power. OK, what about the NSA, Mr. Government Cannot Abuse Power? What about the fact the the government literally knows who you call and where they are all the time? What about them reading your emails? I suppose since we haven't built a gulag yet, it doesn't matter, because we aren't yet the eeevil empire.

As for the Historical Record, it doesn't support you. Most governments in history are despotisms of one kind or another. Hammurabi wasn't elected, nor was Saul, Democracy wasn't even invented until the Greek city states, and even there, it didn't last particularly long. Then you have the example of Rome, which started life as a Republic and ended up as an Empire with a powerless Senate. Democracies have a fairly short shelf-life, historically speaking. Monarchies and despotisms can last for hundreds of years, democracies don't last that long, the longest lasting democracy is Great Britian which has only been democratic for 400 some years.

Curruption is at the very heart of monetary policy though. If the country is inflating its currency to prop up industry (AKA Quantitative Easing) or literally choosing which companies to support (Solyndra for example) or awarding contracts based on either connections or ethnic composition of the company(Affirmative Action), they're not going to be fiscally sound for long. Crony capitalism is a major problem in the US, though probably not as bad as other regions of the planet. It affects markets, it affects how companies bid for government contracts (for example, many construction companies have a board made up of minorities, not necessarily because they're good at the business at hand, but because it's hard for a non-minority-owned construction company to get a government contract), others, again in local government become big donors so they get favorable zoning changes and fat government contracts. Curruption is why the ACA website was doomed from the beginning -- they didn't go for the best website builders available, they went for the one that successfully managed to be politically correct enough and jump through enough political hoops to get the patronage.

 

You have absolutely zero proof of this.

I can prove you wrong. In 2012, 62% of all global transactions were made in U.S. dollars. The next closest currency was the Euro, at 23%. To say that the U.S. dollar is losing prominence is blatantly wrong.

As for Spiritus Libertartis, your hatred of government is unhealthy. You hate government so much you can't even understand the basic economic principle. The dollar is a U.S. loan document. That's it. There is nothing else to it. A U.S. dollar means the U.S. government has given you a dollar. You are so blinded by your hatred of government you fail to realize that the U.S. government can never be bankrput. During the shutdown.. did the Capitol building shutdown? LOLOL.

I don't get how people just can't understand this. The U.S. government owing money is irrelevant to its ability to issue more. It can owe $100 trillion, collect $0 from taxes, and still issue money. They are completely unrelated.

Why don't all of you do some reading on the meaning of reserve currency. The arguments in this thread are horrible.

 

Reading the entire OP....this is great news! I am now left to wonder since inflation isn't an issue... why do we need to collect tax revenues at all? Why doesn't the government just give a million dollars to each of its citizens?

 

The only constraint to sovereign issued currency is inflation. Inflation must be tamed so that it can float competitively on the market. Taxes are the biggest deflationary measure. By taxing you, the government insures it doesn't have to give everyone $1 million.

As of right now, we are averaging 2% inflation over the last 5 years. This is borderline deflationary, as it is lower than the historical average (3-4%). The Obama administration is being bribed and blackmailed (cough sequester) into passing austerity level spending cuts rather than spend money into our limping economy. Austerity cuts spending, thus cuts growth.

There are plenty of other measures to reduce inflation. Interest rates (currently at historical lows!!!) are usually the second method. Coincidence? LOL. By cutting spending and interest rates, the Republican controlled House is succeeding in constraining our economic growth. Governments normally spend more and keep the interest rates higher. Wake up people!!

 

My post is being facetious, and is directed specifically at the claim in the OP that inflation is not an operational reality and thus not relevant to the discussion. From your words in this post, clearly you too realize that is a preposterous claim. One cannot credibly call for serious discussion about whether the fed can expand the money supply ad infinitum without consequence, and then forbid anyone from discussing inflation. Inflation IS the constraint to expanding the money supply. You and I know it, but apparently the author of the OP does not. We may just as well say...

Lets discuss the wisdom of cigarette smoking, but dont even give me this garbage about cancer...
Lets discuss the wisdom of using heroin, but dont give me this crap about addiction.
Lets discuss laying out in the sun covered in vegetable oil, but dont give me your fantasy about sunburns.
Lets discuss eating 50 doughnuts a day, but dont give me this nonsense about putting on weight.

 

Libya was also going to drop the dollar in use its own currency. Aside from that the BRICS all have their own agreements in which they will conduct trade in their own currencies. Now that China is Saudi Arabia's largest customer they have even more opportunities to push their currency, and Saudi Arabia is the linchpin to the petrodollar. Should that happen all the debt the US accumulated will matter...

 

Nope, it won't. There has to be a major world shift for that to happen. The U.S. debt is extremely inelastic. Until countries forsee a non-U.S. economy as a safer place to park their savings, they will continue to purchase U.S. debt. It is probably the safest investment to make now because it has a proven track record. Almost 2/3 of all global transactions in the WORLD use U.S. dollars. The U.S. has to completely crash and burn for it to change.

FYI, other countries issuing their own free floating currency doesn't hurt the U.S. in any way. It will only hurt if they stop accepting U.S. dollars in transactions.

 

Do you not understand how petrodollars work?

 

They ARE controlled by the government....they exist at the pleasure of the government via the federal reserve act of 1914

 

I know who created them and when. My point is the federal government in no way controls Fed decisions, nor can they. They can only ask about them, often without answers or barely with ambiguity.

 

The federal government tells the Fed Reserve exactly what to do. The Federal Reserve is there for accounting purposes. Congress makes the budget... -_-

 

That's the silliest post I've ever seen about the Federal Reserve. The federal government has no prerogative to tell the federal reserve what to do. That's why the Fed operates independently with only slight government oversight.

What does the congressional budget have to do with the federal reserve? The fed is in charge of monetary policy, including setting interest rates, they are the lender of last resort, they control the money supply, etc. The two (budgets and monetary policy) are not related in terms of what the fed does.

Are you sure you understand what the federal reserve is and what a central bank's functions are? The Fed is not an accounting agency by any stretch of the imagination and it feels like we're talking about 2 different topics.

Source: http://www.federalreserve.gov/faqs/about_12594.htm

 

You can take it whatever way you want, but that statement in no way rebuts mine one iota.

 

Nope,the federal reserve serves at the discretion of congress

 

You have it backwards. When a bank creates debt (i.e. funds a loan) it makes "money" if what you count as money includes deposits at banks. That is because the bank can lend (cash or "base") money it has without decreasing the amount of deposits it has. That lent money is then deposited into another (or the same) bank, which increases the overall amount of deposits. And, when you include deposits in the definition of money (as common broader measures do) then you get an increase in the money supply.

It works the in the opposite way too.

 

The Fed is not like any other "private" corporation. It is a governmental entity. The fact it has shareholders is used to control banks, not the other way around.

What "actual disaster"?

Good Lord. You actually want our Congress to be in direct control of the money supply? Those yahoos can't even pass a freaking law to keep the government running. It's bad enough how they (*)(*)(*)(*) up fiscal policy; giving them the same opportunity with our monetary policy would be an "actual" disaster.

- - - Updated - - -

Obama doesn't control monetary policy. But don't let facts get in the way of your rants bashing him.

 

LOL, I like the way you added Bush1 and Clinton together to make is seem like Clinton ran up more debt, when he was by far the most fiscally responsible president we've had in the last 50 years.

Wouldn't it make more sense to put Bush1 with Reagan, since the former was the latter's protege?

- - - Updated - - -

Contrary to the last three Republican presidents, Obama has improved the budget situation he inherited.

But don't let facts get in the way of your Obama bashing rants.

 

Of course they do. They're created and permitted to operate by the congress. I don't dispute that. But they do not receive guidance from the congress and monetary policy is not controlled in any way by congress. Permission to operate and control of operations are two completely different things in this case, and it was done intentionally that way rather than by some error or omission. The right to control money was handed over to the Federal Reserve in 1913 with the passage of the Federal Reserve Act. I'm not sure why we're debating what's factual and clearly laid out in the law.

Case in point, Ron Paul regularly argues that Congress is not privy to the inner workings of the Fed. He has argued for full audit and it has fallen on deaf ears. Fed chairmen have argued successfully, so far, that their operations are secret from both congress and the public in the interest of keeping the money supply apolitical and in the interest of national security. Even the inspector general of the federal reserve is only allowed access to certain portions of the Fed. That's clear evidence that congress does not control it, nor that it can audit it without changing existing laws. Congress purposely, whether they realized it or not, built a system that excluded them and handed over control. Only through new legislation can they change it, but they do have the constitutional right to do just that at any time they choose and I personally believe they should. So we agree on establishment of it and its charter to operate being at the request of congress, but control of its operations is completely outside the control of congress without new legislation.

A big eye opener for how it was created (the Fed) and what led to the act can be found through Google searches for Jeckyll Island. That's where the meetings took place by the players who designed it, and the names Aldrich, Warburg, Morgan, Davidson, Andrew and others will help identify who those players were.

http://www.jekyllislandhistory.com/federalreserve.shtml

 

Given the richest 1% have over the past 30 years doubled their take of the nation's income (from 10% to 20%) and the nation's wealth (from 20% to 40%) and are still paying historically very low tax rates (their investment tax rate still maxes out at only 20%) we certainly can increase tax revenues significantly by increasing taxes on the richest.