USA and Canada can't go bankrupt - nor can the UK.

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If you buy a treasury bill and it matures and you cash it in what happens? They credit your bank account with the money. You can't demand gold instead of the money like you could in days of yore, and thus the treasuries had to have lots of gold on hand and could run out. They just credit you the money and that's that. If the country promised to give you gold if you demanded it, that country could go bankrupt but if not, it cannot.

What about China not buying US treasuries? What else can they do with the U.S. dollars they get in return for the stuff that ends up on Wal-Mart shelves? U.S. dollars are what they must receive by law for that stuff. They buy these things because they have little choice and get U.S. dollars when they mature. China will keep doing this as long as the U.S. is the huge consumer market that it is. If the U.S. decides to significantly shrink that market through austerity measures, then China may decide it's not worth it and not sell to the U.S. so much and therefore will buy far fewer U.S. treasuries. China is already taking steps to grow its domestic market and if the Americans shrink theirs as some people want, then things will change there. U.S. if it's smart would keep its market as big as possible.

Canada and the U.S. have the same system so the same principles apply in both cases. People should stop listening to doomsday prophets and accept that things aren't as bad as is being suggested out there and that their proposed cures are far worse than this fictitious disease.

Umm... ok?

That still does not mean that there isn't massive bond-risk or even that countries won't default on debt. I mean, yes, a country can engage in hyper-inflationary acts to pay off debt, but this would still indicate that their bonds are risky and frankly, a smart country would sooner default on debt than cause a hyper-inflationary spiral as those sorts of spirals are very very terrible.

I am not saying that there aren't doomsday prophets and frankly, I doubt that the US is going to default on debt or go bankrupt or anything like that, but *really* they can. Governments do not have unlimited amounts of purchasing power, and purchasing power is more important than a printing press.

I think xenon13 could find himself a position with the Zimbabwe ministry of finance...

The only way a sovereign government can default on a bond under the fiat monetary system is if the machinery of government is broken and it doesn't pay or if it chooses to default. It chooses not to credit people's accounts when bonds mature. That is the only way.

Zimbabwe's problem was the contraction of its productive capacity. It spent a decade suffering damage under IMF tutelage, then they reversed course and seized farms that produced tobacco for export, and this triggered financial sanctions by the major powers. These factors helped cause a supply contraction. The Weimar Republic, one of the deficit terrorists' favourite examples, was the result of the French grabbing the most productive part of Germany and production ceasing there whilst the workers continued to be paid to prevent them from starving to death. In Yugoslavia, it lost almost all of its trade relationships overnight and was simultaneously subject to trade sanctions. This took place after an orgy of liquidations under the Ante Markovic premiership, all of which served to cause a large contraction in supply. This idea that printing money causes hyperinflation is a false one not supported by facts.

The focus of efforts should be on preventing a contraction of supply. One way to do this is to keep the internal market healthy. A massive round of austerity will lead to liquidations across the board and a contraction of supply. Austerity is far more likely to cause hyperinflation than is printing money.

Printing new money is essentially stealing money for your citizens. It decreases it's value and is essentially a backdoor tax. If our money was actually based on something like gold and not make believe our country couldn't go on needless overseas adventurism or endlessly expand. At least that's how I understand it.

When the government spends money, money is created. When it collects taxes and other fees, money is destroyed. If insufficient money is created to maintain aggregate demand, the result is that supply is diminished, unemployment increases and so does poverty. If deficit spending and the resulting money creation is necessary to maintain aggregate demand, then it must be done or else the result is wasteful idling of productive capacity and wasteful unemployment.

During the recent economic crisis, the big threat has been deflation as people are snowed under an unsustainable debt overhead. Their money is not spent in the economy, instead it serves to "deleverage" and thus this causes a decrease in aggregate demand. Such is deflationary. When deflation happens, the so-called value of money increases and debts become heavier. This is what's been happening in Ireland, where they do not have a fiat monetary system and have chosen austerity and promoting emigration over sensible economics.

If there are deflationary pressures, creating money is a way to counteract such pressures. It's not stealing. There's definitely a problem when the state chooses to give all the new money to bankers and the super-rich as they've been doing disproportionately.

If governments decide to not create money and this causes unemployment, then the government is directly responsible for that unemployment and the many problems it causes. Unfortunately, as we are in the neoliberal era where mass unemployment is considered to be an acceptable policy tool, governments are not held properly accountable for this as this is considered to be part of the natural state of things thanks to unremitting neoliberal propaganda that never ceases in its intensity.

Mass unemployment isn't so bad, so long as the unemployed continue to receive government or church handouts, or other forms of charity.

Do we need to point out Greece's case mister panda? <.< I doubt Britain's ego could suffer the comparison.

Sure, point out Greece.

The fact of the matter is that most people with jobs aren't doing anything useful anyway. And, the higher the pay, the more useless they are.

Actually, in terms of an economy as a whole the people with jobs are also the consumers. They collect money from work and distribute it among other businesses. The higher paid they are, the higher tech items they will buy. The lower paid they are the more basic necessities versus luxury items purchased.

Greece doesn't have a sovereign currency so it can go bankrupt. It's like the state of California that has similar problems and unlike banks that get money no strings attached places like Greece can only get help if it immiserates its people - bankers with huge salaries can still get multimillion bonuses on top of that. The euro was invented during the neoliberal age so it reflects its bias in favour of deflation, austerity for the masses and concentration of wealth at the top.

The obsession with Greece shows what the elite's game is. Ireland did things the neoliberal austerity way and that its economy has shrunk by over 20% should be a big story but it is not. That it has made its debt problem worse has also gone unnoticed. That it now is telling its young people to leave. No, they can't broadcast such things, it will send the wrong message that tough medicine for the masses is in fact a bad idea, and we can't have that can we.

Last edited by xenon13 on 24 Apr 2010, 11:47 am, edited 1 time in total.

From churches? Ha! What a joke. That sounds like Dickensian squalour to me. That is murder for aggregate demand which means a great depression and a permanently lower standard of living for most of the population.

Well, take a look at what very well paid employees were doing at the Securities and Exchange Commission:

http://www.msnbc.msn.com/id/36725550/ns ... d_economy/

We would have been much better off if these SEC employees, and the bankers they were supposedly regulating, were simply among the jobless masses, waiting for church handouts.

People somehow "earning" $222,418 (per year[?]) for sitting on their tushes is disgraceful enough. However, having jobless masses is at least a production inefficiency even if it is considered intrinsically better to receive handouts rather than work.

For society as a whole, it would have been a whole lot better off to have such people living on government or church handouts, rather than pretending to work for $200,000 per year. Same for the bankers. The bankers were indeed working, but working at robbing the country blind.

Indeed, to produce everything that we need to live, you only need a small proportion of the population working. Everyone else is simply thieving anyway.

Keeping it brief.

Just because the nations of the world use "fiat currency" (currency backed by nothing but faith and credit), doesn't mean it has no "value."

You can't cash a T-bill for gold, but you can take the cash to a gold broker and BUY real gold at the going rate per ounce....converting worthless paper for real substance. Well, at least for as long as it's legal to do that.

Be very afraid if they ever make the buying and selling of precious metal illegal absent some government clearinghouse. The reason it's not regulated is to benefit the ultra wealthy that deal almost exclusively in gold.