If There's a Debt Crisis, Why Is Government Debt Golden?

Government debt to GDP is above 100 percent. Even the most austere and devastatingly bare-bones budget plan will not eliminate the deficit until First Contact with the Vulcans. Yet federal government debt is selling at what may be the lowest interest rate in American history.

This is good because it infuriates Paul Krugman, but it's a mystery that budget hawks need to think about:

Why is more U.S government debt a bad thing, when people all over the world are willing to buy it for a measly 1.63 percent? 

That's today's yield on the benchmark 10-year Treasury note, and it's the lowest it's ever been, breaking a record held since February 1946.

In The Wall Street Journal, Cynthia Lin says fear over the European debt crisis is the camel's nose under the tent that broke the camel's back by stepping on a crack that drew the shortest straw, or words to that effect. 

"Concerns earlier this month about Greece’s future in the euro zone spurred a flight into safe-haven Treasurys that got yields near, but never through, record-low levels," Lin writes. "Fears about Spain’s ability to support its banking system seems to be the straw that broke the camel’s back."

In the HuffPost, Mark Gongloff says nannynannybooboo to the sputterings of smartyboots deficit hawks: 

But but but, some will sputter, America is eyeballs-deep in debt that it can never repay. Shouldn't interest rates be moving in the other direction? You know, higher? After all, people who don't pay their debts see their own interest rates skyrocket.

Here's the thing, though: Just about every other credit in the world is in even worse shape than the credit in the U.S. Among major developed sovereign borrowers, only Germany pays less to borrow than the U.S. -- about 1.27 percent for 10 years, at last check... 

In the meantime, the U.S. government will just keep borrowing money hand over fist at super low rates, thanks very much, defying the warnings repeated year after year that inflation and interest rates are going to explode any minute now. In fact, some could even ask why, with rates this low, the government hasn't been borrowing more to help stimulate the economy.

The short answer to that last question is that in the wide world outside the closed system of the Keynesians, government spending does not in fact stimulate the economy. But why isn't it costing more for a hopelessly indebted govenment to borrow money? 

The greenback is not gold everywhere. Two economic backwaters called China and Japan have decided to cut the dollar out of their own currency trades. From International Business Times

The yen-yuan direct trade development is expected to boost commerce and investment between the two economies. It will carry benefits for both.

The move will mark a major step in China's efforts to further internationalize the yuan and gain international recognition for its financial system. In past years, China has carried out numerous currency swaps with other countries, often worth tens of billions of dollars, but those were largely seen as symbolic gestures. Direct yen-yuan trading will mark the first time China has allowed another currency to trade directly with the yuan besides the U.S. dollar.

Back in 2010, while writing about how Bernankeism had become the default economics of every major central bank, I turned the high debt/low interest rate riddle into a zen koan: 

If every currency collapsed at the same time, would that be a push?

That was a simpler time, when you could still explain a successful Treasury auction by claiming the Federal Reserve Bank was acting as a "mystery buyer" for Treasury bonds.

But across-the-board currency devaluation still seems to be the answer. Gongloff says as much in his comments about the sorry state of other countries' credits. Seeking Alpha suggests the same thing, speculating that investors are betting the dollar will win the tallest-midget contest by becoming the last currency to fall. When that day comes, you will be told that inflation is under control, and it will be your patriotic duty to believe it. 

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  • John||

    If am I in financial trouble, why does my credit card still work? Jesus tap dancing Christ these people are fucking stupid. By the time the interest rates go up and you can't borrow anymore, it is too late to fix the problem. The low interest rates just means there might be some chance of avoiding a catastrophe.

  • ||

    This is a question I've thought a lot about. It isn't "why does my credit card still work", it's, "why does the credit card company, when seeing my insane debt-to-income ratio, keep raising my limit with a low interest rate?"

    And that's a legitimate question. Deficit hawks (of which I consider myself one, as I figure most libertarians do) have been warning about this for decades, and it's never really come to anything.

    It's always, "When the day comes...", but I'm beginning to wonder if it ever really will. After all, if people stop lending to us, then it exposes the entire house of cards, and the whole facade collapses. So maybe they will never stop lending to us.

  • Hugh Akston||

    If they do, I just hope I'm well-stocked on popcorn to watch it play out.

  • ||

    Popcorn? Better make sure you have an ample supply of #00 and #4 as well Hugh. Things could get really ugly really fast.

    Oh, and dont touch those guns with your salty, greasy popcorn fingers. Go wash your hands first.

  • ||

    I think it is going to go the other way.

    We know it will bankrupt the government. Why does a bankrupt government necessarily mean a zombie Apocalypse type scenario?

    In fact one would think the government would simply get smaller and shed a bunch of bullshit that it should not be doing in the first place....and i hope by now we all know what happens when the government gets smaller right?

    hint: it rhymes with Economic boom.

  • ||

    Or it rhymes with "the relatively violent collapse of every other empire in history that tried to over-spend and inflate it's way to prosperity".

  • R C Dean||

    Why does a bankrupt government necessarily mean a zombie Apocalypse type scenario?

    Because a bankrupt government gets pretty damn pushy and grabby about seizing your shit, and its minions don't get less corrupt as their paychecks shrink, or don't show up on time.

    Also, because a bankrupt government is one that has wrecked its currency. A wrecked currency is not a recipe for prosperity.

    Bankrupt governments also typically default on their debts. If the US government actually defaults on Treasuries, the economic damage will be vast. Savings, banks, insurance companies, pensions, all pretty much destroyed.

  • ||

    Savings, banks, insurance companies, pensions, all pretty much destroyed.

    ummmm

    To be honest I don't see the problem with that....in fact the whole facade of TARP stimulus and the FEDs shell game were all designed to save particular players in your list. They would have collapsed anyway. and are only held aloft at the expense of the rest of the economy.

    Do you honestly think your well being and standard of living comes from the things you listed above or does it come from PVC pipe, refrigerators, excavators, antibiotics, and standard cargo containers?

  • ||

    "Do you honestly think your well being and standard of living comes from the things you listed above or does it come from PVC pipe, refrigerators, excavators, antibiotics, and standard cargo containers aquaducts, public fountains, plumbing systems, paved roads, and merchant caravans?

    See, the collapse is nothing to fear. The Dark Ages were exactly as good a time to be alive as the 2nd century.

  • ||

    Roman empire had no stable competition....and its fall was really not all that violent compared to its rise.

    How is Canada's dollar doing? My guess it is better then what ever Greece had in the 190 AD.

  • ||

    The fall may not have been as violent as the rise, but that is meaningless in the context of the conversation, which is discussing falls.

    And check out the population charts of Italy before, during, and after. All those people went somewhere. YOU'RE A HOLOCAUSE DENIER!!!

  • ||

    Rome had no context and no way out and literally had barbarians waiting to put out their civilization and killing and dying to keep it from ever rising again.

    The US exists in a global market and has the simple knowledge that cutting spending will save us all.

    People in power right now are desperately trying not to do that cutting...but unlike Rome you can fire poeple in power and replace them non-violently.

    Why do you think the world will choose to collapse into the dark ages before ever trying to cut government spending?

    The notion is preposterous.

    Note: yes we have our metaphorical barbarians as well. Like Sierra Club....but unlike real barbarians they do not live in the blood and shit and dirt. Yes both want everyone else to live in blood and shit and dirt but unlike real barbarians an average environmentalist does not want to live in it himself.

  • ||

    You're putting your faith in the rationality of voters? Forgive me if I'm unimpressed.

    And yes, I do actually believe that a large (larger than you think) number of people would rather watch the world burn than give up their gov't checks. Shitfire, the fucking dumbass Greeks are about to elect radical socialists to fix their economic troubles!

  • R C Dean||

    Josh, when those companies go down, they take people's savings and the capital markets with them. Your material goods are produced by companies using capital they will no longer have and staying open by selling to people who will no longer be able to buy.

  • Paul.||

    Because a bankrupt government gets pretty damn pushy and grabby about seizing your shit, and its minions don't get less corrupt as their paychecks shrink, or don't show up on time.

    This pretty much sums it up.

    Government doesn't suddenly "see the light" when their house of cards collapses. Remember, they're entrenched people in power. They're used to being entrenched, and they don't give up entrenched easily, otherwise they wouldn't be called "entrenched".

    When the powerful see their prosperity shrink, they'll simply take it from you by direct force, instead of the indirect force we have now.

    Look to California as your guide to how government reacts to a collapsing fiscal house of cards.

  • ||

    We are still a democracy. And all indicators point at this time to bad economy = statists and their policies fault.

    Or do you think if the economy dips again Obama is going to get a bump in the polls?

    Would Gary Johnson's go up or down with bad economic news? Ron Paul's?

    What do polls right now say about deficits? On government spending? On the economy?

  • Brandon||

    What rhymes with economic?

  • ||

    economic boom rhymes with economic boom

  • Hugh Akston||

    It also rhymes with DOOOOOOOOOOOOOM.

    Who says librul artz majors don't know anything about economics?

  • ||

    I read through all the comments here and no one noted that it isnt just government employee's paychecks that would stop coming.....consider what it is going to be like when the welfare spigot it turned off.

    I have always thought that the primary reason for writing welfare checks in the first place was to keep a large segment of the population from resorting to violent crime. When that stops coming the whole country will break out in riots.

    There are 41 #4 pellets in a 12ga 3" shotshell niobiumstudio. 5.56x45 is pretty effective, but a 12 is some pretty fearsome backup. Acquire yourself a Saiga 12 and half a dozen ten-shot mags.......Midway USA sells the Remington 3" #4 buck in bulk.

  • niobiumstudio||

    #00 and #4? I prefer 5.56x45mm - why ever let them get close enough to put desert plate sized holes in them? Sure, it'd be more amusing, but you risk getting blood all over that popcorn.

  • Invisible Finger||

    why does the credit card company, when seeing my insane debt-to-income ratio, keep raising my limit with a low interest rate?

    Because the banks issuing credit are too big to fail. Uncle Bernank will just print to make them whole and the purchasing power of your cash will decrease. But you weren't using cash anyway!

    IOW, increasing moral hazard is the policy of the US Govt.

  • Restoras||

    This post might be enough to get shrike to register.

  • fish||

    Summon the StackMonster?

  • Palin's Buttplug||

    Since I read his blog shrike would say that this is evidence of long term deflation just as falling commodity and real estate prices are now.

    All prices are falling. The Paultards and Beck fans have been proven fools once again.

  • ||

    Not bad, but you left out several "christ fag" references and you didn't assume that everyone who disagrees with you is a Rush Limbaugh fan.

  • Palin's Buttplug||

    Damn, I cannot even post incognito here. I lost which e-mail address I signed on with.

    "shrike" may be a victim of e-mail Hell.

  • R C Dean||

    Deflation is a synonym for defaulted debt. Which is what the Paultards have been warning us about. And which we are going to experience, and won't enjoy in the short run.

    Inflation is excess money supply. Which we are experiencing, and aren't enjoying. Yes, you can have both - consumables Increase in price, while assets decrease. You have to spend more, but you have less to spend.

  • Paul.||

    This post might be enough to get shrike to register.

    He's busy trying to change his position on Facebook to 'short'.

  • Old Mexican||

    "Here's the thing, though: Just about every other credit in the world is in even worse shape than the credit in the U.S."


    Here's the thing though: You're a fool.

    Just because there happens to be someone more of an imbecile than you, it does not mean you're not standing neck-deep in the shit.

    Mal de muchos, consuelo de tontos

    Evil for many is comfort for fools.

  • ||

    Low interest or high interest spending hurts the economy:

    http://www.cato-at-liberty.org.....ic-growth/

  • Juice||

    Would this be considered "crowding out" because I've been assured by many economists that this doesn't happen.

  • Drake||

    I've been assured that it does happen by numerous economists.

  • Aresen||

    The fact that every other woman looks like Nancy Pelosi, doesn't make Michelle Obama look gorgeous.

  • Hugh Akston||

    Actually it does. Beauty is entirely relative to the available alternatives. Credit risk is the same way. If Barack Obama and Mark Zuckerberg are the only ones left at last call, the one with the house that's been there for over a century looks a whole lot better by comparison.

  • Paul.||

    Beauty is entirely relative to the available alternatives.

    Like how women everywhere else look really beautiful after you've been in England.

  • Lost_In_Translation||

    The US can still pay the interest on the debt and no congresscritter is seriously talking about defaulting, so the world views that as credit worthy. It only becomes a problem when the interest approaches the US Treasury income, because who wants to buy a bond that is immediately paying someone else. Its a pyramid scheme still in its infancy despite massive numbers.

  • niobiumstudio||

    We got a little while - we are at a little under $500 billion/year in interest payments and take in $2-2.5 trillion a year in tax revenue.

  • Pi Guy||

    Ah. So the gov's turning a... *pulls off socks for full computational powers* ... 300-400% profit. Cool.

    Oh. Except for other trillions in non-interest expenditure paymouts.

  • niobiumstudio||

    http://en.wikipedia.org/wiki/U.....ral_budget - first time I EVER got legitimately pissed off reading Wikipedia. I warn you, if you can click from link to link in Wikipedia for hours on end, and you are doing that now, don't click on the link - it'll end your fun.

  • Lost_In_Translation||

    accumulation of debt above income does not negate the ability to service the debt.

    but when you do reach a point where you cannot service the debt, things unravel extremely quickly.

  • ||

    Yet federal government debt is selling at what may be the lowest interest rate in American history.

    So the US government sets the interest rate then buys the debt with other debt....

    Anyone who thinks this is a sign of a strong dollar is an idiot.

    This is the prodigy of a shell game raped by a ponzi scheme and we are all simply waiting for the abortion.

  • Brandon||

    Progeny?

  • ||

    Progeny can refer to: A genetic descendant or offspring;

  • Randian||

    One has to wonder why you said "prodigy" then :)

  • Aresen||

    bastard progeny

  • Trespassers W||

    So the US government sets the interest rate

    What? The government sets what interest rate? They may set the coupon on ten-year bonds, but they don't set the yield. They may choose to sell bonds at 2% (or whatever) but it doesn't mean they're getting face value for them.

  • R C Dean||

    This is not a mystery. There are two dynamics at work:

    (1) The US Dollar (and Treasuries)is the least ugly puppy at the pound. Every one else's is worse, so there is demand for ours. That doesn't mean ours is good, necessarily.

    (2) The Fed has been intentionally and overtly, as a matter of policy, manipulating the market for Treasuries, clearing auctions with freshly printed BennyBux in order to keep those rates dead low. Over the last year or so, something like 60% or more of Treasuries have been bought by the Fed.

  • Torontonian||

    The first explanation makes more sense, becaues it also aligns with the bond yields we're seeing in Germany and Switzerland, where the central banks are most certainly not buying their own bonds.

    (In fact, the SNB is printing Francs to buy Euros in an attempt to peg the exchange rate, but their bonds are still being issued at negative rates... yes you read that right... investors are paying the government of Switzerland to borrow money from them.

    It's good to be the prettiest horse in the glue factory... for a while.

  • Paul.||

    So what you're saying, is it's a bunch of men living in a burlap sack, trading hats for a living.

  • Palin's Buttplug||

    The Fed pre-announces its T-buys. The Paultards have no explanation for the sanctity of the US Dollar so therefore concoct stories like yours.

  • Paul.||

    Shrike! How we've missed you!

  • ||

    He even links to Soros.org.

    Gotta give Tim Cavanaugh the credit for summoning good ol Shrike out of registration hell.

  • Paul.||

    Someone had to do it. And given his new handle, it proves he's still strangely obsessed with conservatives who hold no office, can sway no policy and are largely forgotten.

    Sarah Palin should send Shrike flowers for keeping her name alive.

  • Ken Shultz||

    The thing with interest rates and inflation is, it always looks good and peachy right up until the moment we fall over the edge of the cliff.

    Just because we don't know where the cliff is, exactly, doesn't mean it's not coming. The edge of the cliff is coming!

    Have you seen how much ObamaCare costs? Do you know much we're gonna have to shell out in Social Security checks and Medicare over the next 20 years? Do you know how much discretionary income we're gonna have to tax away to cover all those expenses?

    The edge of the cliff is coming. And if we don't do something about it before inflation kicks us in the nuts? It'll already be too late.

    What the hell kinda logic is that, where you say, "I know I'm gonna kicked in the nuts if I keep doing the stupid thing I'm doing, but I've decided to keep doing it anyway. I'll deal with the consequences after disaster, when I'm rolling around on the ground"?

  • ||

    Here's the thing Ken, I completely agree with your post, but we look like dumbasses because we've been saying, "The edge of the cliff is coming!" ever since the 80s (at least that I've been alive), and so far, no cliff. So eventually people just stop paying attention. Boy who cries wolf, and all that. We need to get serious about figuring out approx. where the fuck this cliff edge is. I believe Lost_In_Translation's post up above is a good place to start.

  • Adam330||

    There were people that called the dot com bubble burst in 1999, and turned out to be a bit early. There were others calling the housing market bubble in 2004. Doesn't mean they weren't focused on the right warning signs.

    Those denying there is an issue are essentially arguing that past performance is a guarantee of future returns. Which we all know if wrong because the SEC makes all public companies tell us so.

  • ||

    A couple of points. Several of the people who famously "called" those things were "calling" for collapses of various sorts for years. Broken clocks.

    Secondly, a massive, systemic failure of the entire US economy should be a hell of a lot easier to see and forcast than more individual sector problems such as the dotcom and housing busts, and yet here we are...broken clocks. Oh I'm sure it'll happen someday, but if I'm constantly wrong by decades, why the hell should anybody listen to me? We're no better than the doomsday pastors who always get their biblical math "wrong".

  • Pro Libertate||

    Even with all of the bullshit, we still have a tremendously large and powerful economy. It's managed to survive despite decades of government parasitism. While predicting when the host will die is difficult, the continued attacks on its health will eventually lead to sickness and, after a while, death. One can only hope we won't let it go that far.

  • ChrisO||

    It seems to me that the "cliff" doesn't arrive on a linear time scale. Every dollar in interest payments is a dollar that doesn't go towards budget items, which then requires an additional dollar of borrowing, which drives up the interest payments at an even faster rate. In the absence of budget cuts, we could arrive at the Greece situation surprisingly quickly.

  • Ken Shultz||

    We did some budget cutting in the mid-'90s. We had the Asian contagion save us in the '90s, too, much like the Euro is making us a safe haven. We had some tax cuts; we slashed capital gains taxes. We did a lot of pro-growth things--and we shut the government down amid a budget fight back when Gingrich was the speaker. We deregulated.

    We did some really smart, pro-growth things over that time period you're talking bout--but we're not doing any of those things now. In fact, we're doing exactly the opposite of what we should be doing.

    The cliff has always been there, and the cliff will always be there. We can and have hit the brakes on occasion. Right now, we've got the accelerator to the floor. If we got a reprieve because the Euro scared the bejesus out of everybody, then that's hardly a reason no to think there's a cliff there waiting for us.

  • ||

    But that's exactly what I'm saying. We were going full-tilt at various other times, but something always came along and "put on the brakes" as you put it. So we can be accused of being no better than broken clocks, if/when something bad does eventually happen.

  • Ken Shultz||

    There's a serious flaw in that logic somewhere.

    For one, we did experience double digit inflation when I was a little kid back in the '70s/'80s--it was a result of pursuing the same sort of budgets and policies we're pursuing today. So, we haven't always avoided the cliff. We've been over it before.

    I thought we learned something from that!

    Secondly... I took a gun safety course with this woman as my fellow student one time; she kept pointing her weapon at me, the instructor, herself... She didn't know whether it was loaded half the time. Sometimes it was.

    Just because she didn't accidentally shoot me, the instructor or herself, that doesn't mean that if she keeps engaging in that stupid and dangerous behavior? That she isn't eventually gonna hurt somebody.

    If we keep doing what we're doing, we're going over the cliff. What we're doing is what sends economies over the cliff. Just becasue we've managed to avoid that in the recent past--by rejecting the same policies we're pursuing today--doesn't mean continuing to pursue those polices today won't eventually send us over the cliff.

  • Ken Shultz||

    There's an essential conceit in what some of the tax and spend liberals say.

    It's like they think that capitalism is so robust and so resilient that they can beat it like a rented mule, and it'll still keep humming along.

    I'll admit that capitalism can be incredibly resilient. But as the governments of Greece and Italy have shown, it can be broken.

    We don't ever want to see double-digit inflation again. That totally sucked.

  • ||

    Here's the thing though: you say we've already been over the cliff, back when we had terrible inflation/stagflation (when unfortunately I was but a wee lad and not paying attention to such things).

    So a lot of responses would be: that's it? That's the cliff? That's nothing. We've been there, done that. We'll just deal with it when the time comes, like we did before.

    I'm talking total systemic collapse. That cliff.

  • Ken Shultz||

    In 1979, the inflation rate was 11.3%; in 1980, it was 13.5%; in 1981, it was 10.3%.

    If you think home ownership is tough to achieve now? You should have seen it when the inflation rate alone was 13.5%. Servicing your car loan was painful.

    God forbid anybody actually just left their savings sit in the bank.

    Do you realize how hard it is to service a business loan when the inflation rate alone is 13.5%?

    How reluctant a business owner is to hire when he knows he's gonna have to give all of his employees at least a 10% raise every year--just to keep them at the same salary?

    Think about what it would mean if the federal government, instead of paying under 2% interest--had to pay almost 16% interest on 10-year treasuries like they did in 1981.

    Spain is being driven to its knees by being forced to pay less than 7% interest.

    The last time inflation was over 5% was in 1982. You may have brought up a good point about how people's memories are short and how they don't remember how bad it was in a truly inflationary environment.

    But if you're arguing that a double digit inflation rate isn't really that bad, you're goin' way out on a limb.

  • ||

    I remember having to move a lot back then, because my parents couldn't keep the house they'd bought (at some retarded note rate), inflation being bad, and gas being expensive.

    But no, it isn't that bad in context. Zimbabwe was bad. Argentina was bad. Weimar Germany was bad. That's the cliff I'm talking about. Not some pain and malaise. When we talk about economic collapse and inflation, those examples are what come to people's minds, and to the masses, as long as it isn't as bad as those occasions, then it's bearable.

  • Ken Shultz||

    But no, it isn't that bad in context. Zimbabwe was bad. Argentina was bad. Weimar Germany was bad. That's the cliff I'm talking about.

    The economic efficiency things Reagan and others did? The things Paul Volcker did? The free trade from which we've all profited. Those things and others pulled us back from the brink.

    But things can get really, really bad before they get so bad as Zimbabwe, Argentina or the Weimar Republic. Saying three years of double-digit inflation isn't so bad becasue it's not as bad as the Weimar Republic is like saying having both your legs broken isn't really that bad--because a gun shot to the head is much worse.

    There's a whole world of awful you can go through before you get so bad that you're Zimbabwe, Argentina or the Weimar Republic. The whole idea is to avoid that stuff before it happens.

    We may never get as far down the road of hyper-inflation as you're talking about, i.e., but the scenery going down that road gets really ugly--long before you get so far down the road as Argentina or Zimbabwe.

    You think this last recession was bad? I'd rather go through that all over again than have three years of double-digit inflation.

  • Bill||

    We did get a reprieve with the end of cold war and budget cuts.

    But we have had a series of bubbles and banking crises and bailouts since the 80's A whole series of small cliffs resulting in stock market dives caused by gov't policy. I was not able to start investing until 1998 and my stocks/bonds/REITS are barely keeping pace with inflation over 14 years.

  • Ken Shultz||

    The SP 500 has still almost doubled from where it was 15 years ago, and over that period of time, inflation has been mild.

    If you're pickin' individual stocks and trying to play them over the long term, I highly recommend mastering the covered call. ...especially if you're holding REITs.

  • ||

    *shrugs* To each his own. You think a few years of double-digit inflation is really horrible; I say people went through it before and don't really care. Nobody talks about it outside of economics conversations; it's not like a random dude at the bar will comment about how bad things used to be. If it isn't a complete collapse, then it's bearable, and that means nothing will ever change. You can't rally people with cries of, "Watch out, or we'll have a few years of moderate pain, just like we successfully went through before!" That's the weakest sauce.

    If it's anything other than Weimar bad, which is about the level of alarm deficit hawks have been sounding, then people will just think we're chicken littles...and they would be right. A few years of pain is worth it to most people as long as they can keep their social security. If we're not talking something close to total collapse, much much worse than it was in the late 70s, then we might as well just give up now, because people will go through that again with a smile on their face before they give up Uncle Sugar.

  • Ken Shultz||

    Greece isn't Weimer Republic bad!

    Out of curiosity, is Greece bad enough off that you'd want to avoid something like that?

    You know there's this thing called "reality". Inflation really is bad--whether people remember how bad or not. If the deficit hawks are trying to save ignorant people from going through that pain despite their ignorance, that's hardly a knock on the budget hawks.

    Furthermore, as I believe I said up yonder, if there's a crisis, we will balance our budget--just like Greece will balance its budget. The only question is whether we'll do it on our own terms by doing it voluntarily now or whether, like Greece, we'll make the cuts the market inflicts on us--without any discretion in the matter.

    If the U.S. goes credit unworthy like Greece, there isn't anyone with pockets deep enough to bail us out. There wouldn't be enough available money floating around in the world to bail us out if we defaulted.

    We would be subject to whatever the credit markets were wiling to give us, and if they wouldn't give us any rate we could afford unless we slashed our budget, then we'd slash it pretty much indiscriminately--or suffer hyperinflation.

    The whole point is to avoid that scenario. What budget hawks are really trying to do, whether they realize it or not, is trying to avoid the market ultimately dictating our budget to us--like it's doing to Greece now.

    There isn't any more discretionary spending in Greece.

    http://tinyurl.com/6szzlk7

  • Ken Shultz||

    Incidentally, there's something peculiar about arguing that we shouldn't worry about the budget becasue interest rates are so low--amid a world wide recession.

    The way some people are talking about it, they make world wide recessions sound like a good thing. If Europe goes over the cliff, we will feel it here in the U.S., too.

    One great way to work against recessionary forces is to slash taxes. Dealing with both an out of control budget and a recession is a shitty position to be in, and when the world's economy finally comes back? How are they gonna feel if oil goes back up to $150 a barrel again--from what, $87 a barrel today?

    I'd say the cliff has several aspects. One of them is interest rates and inflation spiking. Interest rates spiking, that's the cliff Spain, Greece, Italy, et. al. are dealing with today. That's when you can't afford to finance your deficit with borrowing anymore.

    Another aspect of the cliff is the inability to cut taxes when cutting taxes to stimulate growth is absolutely necessary. The floundering European countries are dealing with that right now, too.

  • 0x90||

    It is not possible to calculate that date, because it ultimately depends on the rate of increase of productivity in general. The state represents a variable parasitic loss on total production; where a man is capable of no excess production, no state can exist. To the degree that he is, the state is able to demand of him a portion of his excess, since his standard of living is not affected in real terms -- he surrenders not what he has or had, but only what he could have had, and didn't.

    For so long as productivity is on the rise, you should expect states to exhibit growth patterns roughly commensurate with its growth rate. If or when that rate plateaus, we will have come to a point which involves an interesting question: does a state of a given size possess the will to curtail itself, or does its inertia propel it into general disfavor with the people? It clearly possesses a self-preservational motive; the question is one of reaction time.

    Which is not to say that this question doesn't apply all the time, but with rising productivity, there is a lot of wiggle room. The point being, to predict the point at which this the state fails is to engage in predicting something which is inherently unpredictable.

  • ||

    Then we need to stop making predictions, because it just makes us look like dumbasses. Like I said, frankly, most libertarian gold-bug economists come across as nothing more than doomsday preachers who have to constantly adjust their Judgement Day.

  • Voros McCracken||

    My concern is that considering the ridiculous technology advances that have occurred since 1990 (virtually none of which was a result of government spending), under a well functioning economy our collective standard of living could have exploded.

    Staving off collapse isn't much of an achievement when the base state might be unprecedented economic growth to make the industrial revolution look like a blip.

  • ||

    Come on guys! We should be the ones leading the lemmings off of the cliff! USA! USA! USA!

  • Mo' $parky||

    Pre-Godwinning your own thread is bad form Tim. BAD. FORM.

  • db||

    Investors in government bonds seem to think that there is a zero sum market in risk, and therefore, if European countries' sovereign debt is risky, that others' is somehow safer. I think the big realization that has yet to hit is that debt issued by governments that are profligate spenders is risky all the way around. The unsustainable policies will not result in holders of US debt winning over holders of Euro debr. It will result in massive losses to holders of any debt issued by irresponsible sovereigns.

  • DRM||

    No, they don't think others' are somehow safer. They simply recognize that the best available asset is the best available asset.

    If all sovereign debt is risky, so is every other asset, because all the other assets are located under the guns of the sovereigns. Gold sounds wonderful . . . right up to the moment it's confiscated with the government paying $35/oz. in paper. Which you'll remember, is what actually happened last time (1933) the US government defaulted on its debt.

  • Torontonian||

    Gold, bitches.

  • ||

    I want to buy a couple hundred bucks worth of silver quarters at or near melt value.

    No idea where I can get em though.

    The internet only offers single coins for sale it seems and after shipping and handling I would end up paying double.

  • db||

    Bullion direct has circulated 90% silver currency in bags but it is at a slight premium above Ag market value, like any coin.

  • ||

    These $10 face value bags of silver U.S. coins are inspected by Bullion Direct, Inc. There is approximately 7.15 oz of silver per $10 face value bag.

    approximately...

    hmm

  • db||

    They're circulated coins so there's bound to be wear and tarnish/corrosion. That'll drop the weight by a bit.

  • Palin's Buttplug||

    That would be foolish since melt value is at today's silver bulk price. Wait for the price to fall to $12/oz.

  • ||

    why is it going to fall to $12/oz?

  • Paul.||

    Because people will be using it to make bullets.

  • ||

    Wouldn't that raise the price?

  • Paul.||

    Only because the dollar will be so strong that silver (and gold) will be essentially the value of lead.

  • Spiny Norman||

    Are they expecting werewolves?

  • Brett L||

    Go to your local coin shop. You will probably pay a 10% premium and sell at the a 10% discount, but that's the price of doing business.

  • Torontonian||

    This could help, but you might need to buy closer to a couple of thousand dollars worth.

    http://bullion.nwtmint.com/silver_bags.php

  • Palin's Buttplug||

    Gold will be the last commodity to crash due to the cult following it.

  • ||

    So the gold cult is more secure then US currency cult?

  • Hugh Akston||

    The difference between a cult and a religion is the size of the congregation.

  • Aresen||

    And who is running the games in the colusseum.

  • ||

    The difference between a cult and a religion is the size of the congregation.

    I always thought it was tax exempt status.

  • Palin's Buttplug||

    Nice.

  • Torontonian||

    In the last crisis, gold and mining stocks were the first assets to recover, having bottomed in October 2008, while the broader stock market continued to decline until March 2009.

    By March 2009, the gold mining index had already risen more than 100% from its October low.

    Chart.

  • Aresen||

    Basically, the situation now is that there are no good moves:

    Unless you get runaway inflation (30%+), there are no good assets to hold.

    Real estate and stocks tend to go down in market crashes.

    Long term bonds are terrible bets with even mild inflation.

    Commodities - including gold - have historically declined in real terms over the long term.

    The prime benefit of cash is that it is liquid and the position can be changed on very short notice.

    As the least-worst currency, the US dollar is the safest haven at this time. It helps that the US is also the country least likely to freeze bank accounts if there is a panic.

  • ||

    Basically, the situation now is that there are no good moves

    Cut spending. Best move there is. It would have worked 10 years ago and 5 years ago and will work 5 or 10 years from now as well.

  • Hugh Akston||

    Wait, by "cut spending", do you mean cut the rate of spending growth, or cut spending on some programs in order to increase spending on other programs?

  • ||

    If we spent the same amount we spent last year each year for the next 10 years we would probably be "OK".

    But yeah when I wrote cut spending I meant spend less then we did previously.

  • Hugh Akston||

    I'm afraid there's no dictionary in the greater Washington DC metropolitan area with that definition of "spending cut." Sorry.

  • Paul.||

    What about the Scrabble Dictionary?

  • Aresen||

    Yes, of course.

    But I was referring to the perspective of the individual investor. And this will remain true until there is a Team Red or Team Blue President Congress who is honest enough to admit there is a serious problem.

  • Aresen||

    ...President and Congress...

  • ||

    But I was referring to the perspective of the individual investor.

    Which will make you better off next year and the following years:

    Investing in any combination of the list above or getting candidates elected who will cut spending?

    In relation to everyone else you could probably "get ahead" but being the last guy to drown is not a winning proposition.

    Without even looking at "communitarian benefits" as an individual you are better off to spend your money on political campaigns.

  • CE||

    The best bet right now is to spend almost all of your money partying like it's 1999. Then save a little to buy a cheap farm somewhere you can live on when the economy and the society collapse.

  • GILMORE||

    federal government debt is selling at what may be the lowest interest rate in American history.... but it's a mystery

    Not really. When the second largest markets for debt in the world start looking like they're unsustainable *in the near term*, money will flee to anything that provides at least some security and liquidity. People are yanking their cash out of various EU banks and loading into treasuries and Bunds. The big problem with China as an option is that they're net lenders, and do not really participate in the developed world open currency market. They are also, as a closed-economic system, unfit for being included in such a system. So... the money comes racing to treasuries as a source of protection.

    Bad news for the gold bugs - this trend is not changing anytime soon, and the consequence is going to be a strengthening dollar... which will drive down commodity prices like gold, oil, et al.

    The other bad news is that is provides carte blanche to the US to continue its idiotic policies.

    Not sure what the good news is. Bueller?

  • Palin's Buttplug||

    Agree. China's USD peg will have a whipsaw effect when it unravels. Uncle Buck is king for decades as the Euro flails as well.

  • Paul.||

    Bad news for the gold bugs - this trend is not changing anytime soon, and the consequence is going to be a strengthening dollar... which will drive down commodity prices like gold, oil, et al.

    Everyone keeps talking about gas/oil prices getting lower. Even saw a couple of articles on it.

    If gas prices get any lower, I'm going to go broke.

    Fact: I paid more at the pump this week than I did last week, and more at the pump last week than the week before. I keep hearing about falling gas prices.

    Is there anyone in any area seeing any anecdotal drop in gas prices?

  • Paul.||

    Jesus tapdancing christ. I started creating comparitive charts of major cities around the country... gas prices are falling through the floor everywhere except Seattle, where they're going up sharply. What. The. Fuck.

  • ||

    They are up in eastern Washington as well..

    Probability the whole state.

    My guess is that we have some stupid law that makes us use some idiotic type of gasoline that no one else uses so refineries are charging us a premium...

    Plus we have some of the highest gas taxes in the county.

  • Paul.||

    I just did some quick research. The whole west coast is up because of a refinery failure in Blaine. Below I linked a heat map of gas prices-- there isn't a color red enough to show how high the prices are on the west coast.

  • GILMORE||

    Fact: I paid more at the pump this week than I did last week

    Gas prices have not a whole lot to do with monthly spot prices for oil. The issue is refinery capacity and cost and transportation in any given country/region/state. With oil between $80 and $100 per barrel, there's a pretty low correlation to monthly gas price changes. Gas prices go up because of a variety of reasons mostly unrelated to the basic commodity prices.

  • CE||

    The good news is that the US government's debt burden is unsustainable, and will lead to a financial catastrophe. Oh wait, that's not good news.

  • Alan Vanneman||

    Keep predicting inflation, Tim! You're bound to be right some time! But you better have it engraved on your tombstone, just in case, because, you know, in the long run we are all dead.

  • Palin's Buttplug||

    Tim is below the Mendoza line for economists at about a .003 average. Peter Schiff is still jealous though.

  • Aresen||

    If you think there is no inflation, then you haven't been buying groceries.

  • Hugh Akston||

    That's one of the many advantages of coprophagy.

  • ||

    or gasoline.

  • Palin's Buttplug||

    Quit buying small portions. Whole milk is $1.99/gal at Aldi's near me vs $4/gal in 2008. Most food prices are falling. Energy is falling here in the USA for all raw material inputs.

  • Paul.||

  • ||

    Mother fucker!!

    Now i know it was that idiotic law that made us use California standards for gasoline.

    Gregoire sucks ass!!!

  • Paul.||

    And that.

  • Randian||

    Quit buying small portions. Whole milk is $1.99/gal at Aldi's near me vs $4/gal in 2008. Most food prices are falling. Energy is falling here in the USA for all raw material inputs.

    ooh, the plural of anecdote is certainly *data*!

  • Randian||

    Oh Alan, as if your ratio of right/wrong is anything to brag about.

  • CE||

    Treasury debt is considered a safe bet because American taxpayers are the most docile and compliant on Earth. They may complain a little, but they mostly pay their taxes.

  • Kapt Blasto||

    CE:

    You know why they complain?

    Because the "Founding Fathers" figured out a LONG TIME AGO....

    that people will BREATHE FIRE AND BRIMSTONE WORSE THAN DRAGONS, when they see the GOVERNMENT spend anything, because they only see it as TAXES taken out of their pockets...

    But when it comes to UNCERTAINTY, or FEAR in the Marketplace...

    they'll come running like flies to S#!T to get that "SAFETY from UNCERTAINTY" in the form of that BOND...that guarantees them that "Double your money, in X time, plus YIELDS, ALL TAX FREE"

    and when they plunk their money down for THAT...they don't raise a WHIMPER where that money gets taken to spend...

    Now do they?

  • Kapt Blasto||

    Ok... here I am among some of the most *wisest* commenters on the internet...

    Does any of you REALLY want to get rid of the National Debt?

    And, yes, I mean...REALLY WANT TO DO IT?

    Ok...do this:

    Take your Government Bonds or your Treausry Certificates back to the issuing Treasury, and perform THIS MANUVER:

    take out a "reciprocal" loan...

    That's right, I said a "reciprocal" loan...where the bond or cert you purchased or acquired was the FIRST LOAN you made to GOVERNMENT...NOW, what you're doing is making Government LOAN BACK TO YOU...

    and what you're going to do...is...

    instead of MAKING GOVERNMENT come to YOU to "pay down" your little portion of the National Debt...

    You're going to GOVERNMENT to use the BONDS you're holding, as DOWNPAYMENT on the "reciprocal" loan.

    (Continued....)

  • Kapt Blasto||

    Here's what you're going to be loaning for...

    A COD, that's FIVE TIMES BIGGER than all the yet-to-be-fufilled promises that you're holding in that Bond.

    And it's held, either DIRECTLY on account at the Federal Reserve, where it's sandwiched in between THE Fed's Held Treasury Certificates, and all the notes above them...

    ...so that you can take advantage of all the INTEREST coming back to YOU, instead of all those TREASURY CERTIFICATES. (What you're doing is replacing the "floor")

    Or...allow it to be held "SEGMENTIZED", with the FED as "trustee," across ALL THE MEMBER BANKS (don't forget Credit Card Companies!) Where, not only you could get the same thing (Interest,) BUT, you stand to take advantage of all those "overnight" loans, that Banks do with each other!

    PLUS...with the terms placed inside what would be the LOAN CONTRACT, you take the option of retaining the ability to SELL SHARES, in the Marketplace, of that CLAIM TO that COD, held either way...

  • Kapt Blasto||

    (continued, from previous)

    Now, I know that many of you will scratch your head, and ask, "Well, doesn't that mean WE HAVE TO PAY? It IS A LOAN, you know"

    Work out the terms so that Principal and interest gets "paid" like this...

    All you have to do, is NOT DRAW UPON THE COD BULK yourself, and allow a withholding of maybe, 25% of the interest return...

    And you don't pay a CENT MORE, out of pocket to keep this loan "Current, and in good standing"

  • Kapt Blasto||

    (continued, from previous)

    And what's left to do, is use the BONDS or Certs you have, that contain the yet-to-be fulfilled promises...as DOWNPAYMENT ON THE LOAN.

    So, once Treasury recives them this way...they can RETIRE THE BONDS, LEGALLY...

    ...because they HAVE HONORED THE OBLIGATION you purchased, instead of OVER TIME, per the terms on the face of the Bond or the Cert, they honor them ALL AT ONCE!

    Now, I hear SOME of you scratch your head again, and say to me

    "But, but...the TERMS OF TIME are PART OF THE DEBT that we're holding! Isn't that PART OF THE VALIDITY of the DEBT, that cannot be questioned, per the 14th Ammendment, Section 4?"

    Hmph! Let me ask you this: What turns an empty travel passport into one that gains entry into a country?

    an INK STAMPING, right?

    and what turns a Congressional Bill that is NOT LAW...into LAW?

    the President's INKED SIGNATURE authorizing it to become LAW, right?!

    So...what the He|| is stopping you from letting the GOV'T turn your TIME-BEARED Bond...into a NON-TIME-BEARED/quasi-Treasury Certificate?

    A simple Gov't authorized INK STAMPING by the proper authorities...namely, TREASURY!

    Jeez, people...can't you THINK????
    (continued!)

  • Kapt Blasto||

    (continued, from previous)

    Now...

    What you're doing with this manuver, all of you holding bond or cert...

    is turn a 15 trillion dollar DEBT, that you have to cover in UNGODLY TAXES taken out of your pockets...

    into a 75-80 Trillion dollar WORLDWIDE WEALTH POOL, where the BANKS will be working for YOU, rather than what many fear, is the other way around, now!

    And what you're ALSO WILL BE DOING...

    ...is freeing up all the revenue, that right now, is set aside, and all the revenue that they WILL TAKE OUT OF YOU, that IS ALREADY SCHEDULED to be set aside out of Congressional General Fund,

    to pay interest on the DEBT...

    ...to pay for the services and the programs that we all say we all need, even if we NEVER say that in public on a forum!

    (continued...)

  • Kapt Blasto||

    Oh! Did I foreget to mention something....

    Where does it say that you MUST deposit it into JUST ONE CENTRAL BANK SYSTEM with its currency?

    You could split up the COD, to be held at MULTIPLE CENTRAL BANK SYSTEMS, ALONG WITH THEIR MEMBER BANKS, and their currencies...

    so that you could take advantage of THEIR ECONOMIC engines, along with yours!

    And you thought ONLY GEORGE SOROS could be the Ultimate HEDGE FUND TRADER? HAH!

    You worried about FRACTIONAL RESERVE? Maybe want to turn it into a FULL RESERVE?

    Well...that held bond you're holding is the KEY...and your TREASURY IS THE LOCK!

    Why not unlock the REVOLUTION?

    Without RAISING YOUR TAXES....

    WITHOUT SLASHING YOUR PROGRAMS...

    WITHOUT letting YOUR central banks take the fall for the money getting "watered-down" because GOVERNMENT has to keep honoring your DEBTS?

    It all comes down to you!

    What do you have to lose, folks...except your National DEBT?

    START THINKING ABOUT IT!!! NOW!!!

    Sincerely,

    KAPT BLASTO

  • Spoonman.||

    [[[CAPS]]]!!!

  • ||

    TL;DR

  • db||

    Wow, there's some real nutcases (new ones) posting here.

  • Kapt Blasto||

    Oh! Did I foreget to mention something....

    Where does it say that you MUST deposit it into JUST ONE CENTRAL BANK SYSTEM with its currency?

    You could split up the COD, to be held at MULTIPLE CENTRAL BANK SYSTEMS, ALONG WITH THEIR MEMBER BANKS, and their currencies...

    so that you could take advantage of THEIR ECONOMIC engines, along with yours!

    And you thought ONLY GEORGE SOROS could be the Ultimate HEDGE FUND TRADER? HAH!

    You worried about FRACTIONAL RESERVE? Maybe want to turn it into a FULL RESERVE?

    Well...that held bond you're holding is the KEY...and your TREASURY IS THE LOCK!

    Why not unlock the REVOLUTION?

    Without RAISING YOUR TAXES....

    WITHOUT SLASHING YOUR PROGRAMS...

    WITHOUT letting YOUR central banks take the fall for the money getting "watered-down" because GOVERNMENT has to keep honoring your DEBTS?

    It all comes down to you!

    What do you have to lose, folks...except your National DEBT?

    START THINKING ABOUT IT!!! NOW!!!

    Sincerely,

    KAPT BLASTO

  • Sevo||

    Kapt Blasto|5.30.12 @ 7:35PM|#
    "Where does it say that you MUST deposit it into JUST ONE CENTRAL BANK SYSTEM with its currency?

    You could split up the COD, to be held at MULTIPLE CENTRAL BANK SYSTEMS, ALONG WITH THEIR MEMBER BANKS, and their currencies..."

    So this is a sort of a hedge, where you buy Greek bonds and US bonds and hope one of them does OK?
    Is that what you're proposing?

  • Kapt Blasto||

    In a way, Sevo, yes....

    But here's the whole idea when it comes to buying FOREIGN DEBT

    You want to have it so that, when you're buying up Bonds that appear to have YOUR FLAG and FACEVALUE on it...

    ...what you're actually doing is buying up ALL THE OTHER GUYS indebtedness, all at once.

    That way you're not buying up YOUR OWN DEBT, much along the same lines of the old outgoing drug kingpin, in the movie "Scarface," telling Tony Montana, some advice that, unfortunately He didn't take...and we should be NOW:

    "Don't get high, on your own supply!"

  • Kapt Blasto||

    Let me see if I can make this a little clearer for you, though, taking the examples from MUNI BONDS, and seeing if that would help matters for you:

    If you're a NEW YORK YANKEE Fan...and you're buying up BOSTON DEBT...well, you know you're other buddy, who is also a Yankee Fan, would say to you, "YOU'RE CRAZY, DUDE! that money is going to the RED SOX"

    But actually YOU'RE NOT CRAZY AT ALL...

    Because it's BOSTON having to TAX their PEOPLE (and raise up the TICKET PRICES at FENWAY)

    ...and it's not NEW YORK taxing YOU (raising up prices at YANKEE STADIUM [which at this juncture, is ALREADY TOO HIGH, right?])

    That's what a SMART YANKEE FAN does (who is also a SMART MUNI BOND BUYER)

    Because the BOSTON FANS, will want to go where their money will bring them the most bang for their buck, right?

    And guess where, theoretically, they can come and plunk their money down?

    New York! because of the supposedly LOWER TICKET PRICES...

  • Kapt Blasto||

    Now: Using THAT analogy...we go to where I'm talking about: Having OUR Government not have their citizens "getting high on their own supply"

    We have a TON of countries wanting "Foreign aid" from us, correct?

    Well, what exactly stops OUR Treasury from giving THEM that "foreign aid" in the form of a LOAN?

    And THEN, what stops our Treasury from selling that indebtedness to You, Me and back to the Rest of the World, in the form of OUR BONDS, with Our DOLLAR VALUE (not theirs) attached to it?

    Because instead of OUR OWN DEBT (that we have to TAX OURSELVES to honor the holders) they have to TAX THEMSELVES...to pay themselves back TAX FREE...

    what we're doing, here, is REVERSING the "Foreign held" Bond problem, and turning on its head!

    And in THAT way, WE become the "foreign holders" of THEIR indebtedness...as well as forcing THEM to buy it up in OUR DOLLAR PRICES...

    I mean, THEY HAVE World Bank and BIS to change it back into THEIR Currencies (for a fee, that THEY BE PAYING [not US],right?)

    Think about it, for a minute, before responding....

  • Kapt Blasto||

    (oh, and Sevo, let me make an addendum here, before I break off again...)

    Having the OTHER GUY'S Central Bank Systems, working for you, rather than you getting TAXED to work for THEIR HOLDERS of your Bonds...also is a "reciprocal" process...because it works along the same lines, as what you're doing with the "reciprocal" loan with YOUR Government, to retire the part of the DEBT, that YOU'RE holding...

    follow?

  • Kapt Blasto||

    and here's what's more:

    If you wanted to "lower" YOUR money supply for whatever reason...you put more of your COD's in THEIR Banks, to let THEIR Systems, pay you back interest...or THEIR SYSTEMS tax THEIR PEOPLE to make good on paying YOU, over here!

    Reciprocal! Because Now...THEIR MONEY comes HERE to purchase up whatever product or service, to take it back OVER THERE, for usage/consumption...

    But you'll make it worth their while to use/consume it OVER HERE, before they can take it OVER THERE...

    Follow?

  • Kapt Blasto||

    If you wanted to "raise" your money supply...you make THEIR COD's come over to YOUR BANKING SYSTEMS...

    so that the process goes in reverse, especially if you wanted to suppliment economic activity that promises to get you MORE INTEREST over THERE...that you bring back HERE to spend...

    See...it balances all out!

  • Kapt Blasto||

    Hey, db....

    If you think what I am posting is nuttier than a squirrel's turd...

    The NUTTIEST thing of all in the face of all the CRAP that passes as ECONOMIC THOUGHT and REASON...

    is the TRUTH.

    Isn't it?

  • Hugh Akston||

    Needs moar [BRACKETS]

  • Kapt Blasto||

    *moar* WHAT?

  • Randian||

    Wow, I love when the crazy comes out. Do you have a link for a NON CAPITALIZED description of this 'reciprocal loan' process you are talking about? I would love to read up on it.

  • Kapt Blasto||

    Oh and Randian, as Well as Ken Shultz:

    It's nice that you read my message, and all...and I'm so glad that you believe I'm NUTS...but it's only showing ME, and the rest of the comment Readers a simple truth...

    Amidst all the CRAP that's passing for KNOWLEDGE, here...

    Truth just SHINES like a DIAMOND in the ROUGH.

    And the Crap slingers don't like it...because it shines better than the CRAP they sling does.

    ...I'm just saying, guys...

    Now, to answer your question about a "reciprocal" loan:

    Let's say YOU are the TREASURY, who just issued, upon orders from Congress, ANOTHER ROUND of BONDS,

    that eventually, when they get sold,

    You have to see Congress cut off part of their next Revenue Take to go honor, as well as drive up TAXES onto consumers at their points of income,

    as well as to producers operating in the jurisdiction, who pass on that TAX COST down the line, where it snowballs onto the end consumers,

    where the principle there becomes, the more you tax...the more the prices get higher, the weaker the money comes in relation...okay?

    It's a vicious circle, there.
    (continued)

  • Kapt Blasto||

    now, Randian, let me continue on this with you, before I exactly define "reciprocal" for you, because I need you to see this, in order to understand what I'm doing....

    the way we have monetary creation in this country...from Article 1, Sec8, Cls 5, being the base for the Coinage Act to build from, to, the Federal Reserve act...has ALWAYS been the same in this regard, as opposed to anything else you noticed:

    That in order for any NEW MONEY to come into the system to be circulating:

    Government MUST interact with an OTHER to create the money, and THEN, that OTHER must be the one to be FIRST DISTRIBUTOR of that money.

    It's a "check and balance" measure put up upon Government, so that any NON-INVOLVED THIRD PARTY, recieving that money for exchange of any good or service they provide, can be assured of TWO THINGS: (1) that the money recieved was NOT DEBAUCHED by the GOVERNMENT, nor the OTHER....and (2) that the money held is a piece of LAW, that can be used anywhere in the jurisdiction for payment of services or goods recieved.

    It's that simple.

    (continued)

  • Kapt Blasto||

    Now, Randian, with that in mind, let's get to the "reciprocal" loan process:

    The bondholder, considering taking out a RECIPROCAL loan, from the Treasury, realizes A FEW THINGS:

    (1) that according to the Constitution...HE (or She, maybe) IS PART of GOVERNMENT, whether he (or she) likes it or not, because of TAX PAYING, and because he's(or she's) a Citizen...he (or She) is GOVERNMENT's BOSS. The ones Working there applying the LAW upon him (or her) are SERVANTS.

    (2) That the longer the BOND or CERT is held in his(or her) hand, the longer the SERVANTS have to TAX him (or her, at points of income) to turn around and PAY him (or her) now, as CERT or BONDHOLDER, TAX FREE...

    (3) He (or she) stands as the OTHER, that made the FIRST interaction with Government...when they took purchase of the BOND or CERT.

    (4) that in order to LOWER HIS TAXES, (and get the debt off his back, that he holds a part of) HE HAS TO MAKE A SECOND INTERACTION with GOVERNMENT....

    ..."reciprocating" the process...

    (cont'd)

  • Kapt Blasto||

    Try imagining it this way, Randian...

    Take your two hands, and pretend you're doing the "spider doing
    push-ups on a mirror" trick...

    Now, Take one of your hands, and flip it over in relation to the other one, so that the pinky of the one hand, is on the thumb of the other, and vice-versa.

    Now, with one pinky/thumb joining...PIVOT IT...and bring it around, so that where your other pinky/thumb joining separated, they meet up again...and now, make THAT the pivot...so that the original pinky/thumb joining that was pivoting before, and now separates, can join up again!

    One pivots....then the OTHER pivots...then one pivots again, then the other...

    Spider climbs up the Wall...

    And you have a simple way of getting rid of THE DEBT!

  • Kapt Blasto||

    Now...There's MORE to the processes I'm outlining, than what I am putting here.

    But it's like the process of getting a HEAVY OBJECT like a Washing machine, that has no Wheels on it, to MOVE in a certain direction....

    You tilt and swivel the Machine on ONE FOOT...then you tilt and swivel the machine on the OPPOSITE foot!

    and you get it to go in the direction you want the machine to go...

  • Spiny Norman||

    I like him better than Hercule. He's more shouty.

  • Ken Shultz||

    It's like when my SPEAKERS start going OUT.

    Or rather, it's like when the COMMERCIALS on TELEVISION are so much louder than the program I'm watching--but the COMMERCIALS show up SEVERAL TIMES a sentence!

    P.S. !!!

  • Rrabbit||

    There is a misinterpretation here, the thought that Spain's interest rate at 6.5% is high. It is not. That is still a medium interest rate, only marginally above the long term average for countries such as Germany and the US, and actually lower than what some European countries (including Spain) typically had to pay before the Euro.

    For example, in December 1992, Spain had to pay 12.6%.
    http://www.ecb.int/pub/pdf/annrep/ar1994en.pdf (Table 3).

  • Trespassers W||

    What the hell does the long-term average interest rate have to do with anything?

  • Ken Shultz||

    6.5% is high if Spain can't afford to make its interest payments at that rate and can't afford to tax the people of Spain any more than they are already taxed.

  • Invisible Finger||

    and actually lower than what some European countries (including Spain) typically had to pay before the Euro.

    So right after the euro started, Spain had really low rates? Sorta like the US now? Then Spain's rates shot up when the market realized Spain's no economy has had NO structural improvements and the lower rates were really never justified?

  • shamalam||

    The reason US debt pays so little interest is because everybody is fleeing the Euro. US debt is seen as a safe haven. Simple supply and demand.

  • Trespassers W||

    Kind of like if your boat sinks and this is the closest island.

    http://atlasobscura.com/place/.....ada-grande

    Where the fuck else are you going to swim to?

  • 0x90||

    Candy Apple Island?

  • ||

    This is true. But you would hope that of the other 6.7 billion peeps in the world, a significant portion would realize that they could do quite well with a currency that is tied to something tangible as opposed to the whims of the .gov. That's when the US is screwed.

  • Sevo||

    "If There's a Debt Crisis, Why Is Government Debt Golden?"

    Probably mentioned up-thread; busy today.
    Make that "US Government Debt.." and the answer is easy. All major currency it fiat currency. The dollar is simply the best mouse in the horse show.
    Better /= good.

  • sweeterjan||

    the meantime, the U.S. government will just keep borrowing money hand over fist at super low rates, thanks very much, defying the warnings repeated year after year that http://www.lunettesporto.com/l.....c-3_7.html inflation and interest rates are going to explode any minute now. In fact, some could even ask why, with rates this low, the government hasn't been borrowing more to help stimulate the economy.

  • Sevo||

    ..."defying the warnings repeated year after year that inflation and interest rates are going to explode any minute now"...

    Problem is, for all those warnings, it ain't happened.

  • Ken Shultz||

    It didn't happen to Spain or Greece for a long time either, though.

  • Canman||

    James Dale Davidson said it best. "There are always those who will tell you that the obvious is untrue and that the inevitable will never happen."

  • Invisible Finger||

    Why is more U.S government debt a bad thing, when people all over the world are willing to buy it for a measly 1.63 percent?

    Because it makes government bigger.

  • ||

    GDP rules everything around me, GREAM, get the money, dolla dolla bill ya'll.

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