US Treasury says, US Government is Insolvent

[Makalakumu]

http://www.lewrockwell.com/rozeff/rozeff338.html

[FONT=Times New Roman, Times, serif]The U.S. government is insolvent. Who says so? Timothy F. Geithner, the U.S. Secretary of the Treasury.[/FONT]
[FONT=Times New Roman, Times, serif]
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[FONT=Times New Roman, Times, serif]Geithner sent a letter to Congress on Jan. 6, 2011 asking for the debt limit to be raised. If it is not raised, he warned, the U.S. will default on its debt. In his words:[/FONT]

[FONT=Times New Roman, Times, serif]Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States." [/FONT]
​

[FONT=Times New Roman, Times, serif]He didn’t say that the government will be inconvenienced. He didn’t say that the government would be forced to muddle through by delaying payments, raising taxes, and cutting non-obligatory programs and services. He said the government will default. This means that the government doesn’t have enough cash to pay its obligations to the many and sundry persons to whom it owes cash unless Congress authorizes an issue of even more debt.[/FONT]
[FONT=Times New Roman, Times, serif][/FONT]
[FONT=Times New Roman, Times, serif]After the government issues the new debt, its overall debt will be even higher than before. Unless its obligations that require cash payments are reduced, or unless it finds new sources of revenue, or unless the interest rates that it pays decline, the same situation will surely occur again and occur even faster because its overall debt will have risen. It will run short of cash to pay its obligations.[/FONT]

Thoughts?

 

[Bill Mattocks]

http://www.lewrockwell.com/rozeff/rozeff338.html

Thoughts?

It's nothing new. Happens every couple years.

http://assets.opencrs.com/rpts/RL31967_20100128.pdf

That is not to say it's a good thing. It's not. But it is not a unique situation. The explanation given is correct - if the debt ceiling is not raised, we can't pay our obligations. But that is always the case. We're not in default; but we would be if the debt ceiling is not raised. Congress knows this, so they'll raise the debt ceiling.

And if they didn't? Nothing would happen. None of our debt is secured by physical assets, the Chinese don't move in and start living in the White House.

 

[Bob Hubbard]

Our currency is backed by the 'full faith' of the US Government.

Step 1 - have more faith
Step 2 - print more paper money
Step 3 - economy booms as sales of wheelbarrow shaped wallets increase.

Worked before.

Also, home heating costs will be lowered as a new alternate heating fuel is rediscovered.
and Children will have new building block toys.

 

[Empty Hands]

Our currency is backed by the 'full faith' of the US Government.

Step 1 - have more faith
Step 2 - print more paper money
Step 3 - economy booms as sales of wheelbarrow shaped wallets increase.

Worked before.

The government is obviously not printing money to meet current obligations - the inflation rate stands at 1.1%. We are borrowing, which is a separate problem of course, but you act like it's Germany in the 1920's.

 

[Bob Hubbard]

ok, they can print more then.

Todays word: Hyperinflation.

 

[Bob Hubbard]

US currency is backed by nothing more than the US Government's word.
We know how good that is.

The Fed has a license to legally counterfeit as much as they like, so much so that they send in goon squads whenever their monopoly is challenged.

I regret not investing in Liberty Dollars when I had the liquid paper cash.

The US could default on all it's loans. It just means our credit rating tanks, we get less paper from Chinese, and there's probably mass economic damage.

Maybe it's time for the Government to trim the fat, go lean, run efficiently, and return to a currency backed by something tangible. I mean, this debt they keep running up averages out the a couple hundred grand each I believe. I really hope that's not on my credit score.

 

[Empty Hands]

The Fed has a license to legally counterfeit as much as they like, so much so that they send in goon squads whenever their monopoly is challenged.

This doesn't even make sense. Printing more money is not counterfeiting, and indeed must be done on a regular basis even without monetary expansion to replace worn out bills (which are burned). Private citizens making counterfeit money is indeed a crime, fraud, hardly challenging a monopoly to which the "goon squads" must be sent in (telling language, for the police arresting counterfeiters). It would be the same fraud if someone tried to give you iron pyrite instead of gold in exchange for something.

I get your critiques of government for the most part, but this is veering off into la-la land.

 

[Bob Hubbard]

[FONT=Verdana, Arial, Helvetica, sans-serif][FONT=Georgia, Times New Roman, Times, serif]How To Strangle the Goverment[/FONT]
Don't raise the debt ceiling, says Ron Paul.

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[FONT=Times New Roman, Times, serif]Surely we are facing an emergency debt spiral, as evidenced by the Federal Reserve’s recent commitment to buy another round of Treasury debt. It’s now quite obvious that the U.S. government plans to inflate its way out of debt, and the world is fleeing our dollar in response. Just 7 years ago Congress raised the debt ceiling to $6.4 trillion, which means the federal government had doubled its indebtedness in less than a decade. Annual deficits for 2011 and beyond are projected to be at least $1 trillion. By contrast, the entire federal debt amassed from the founding of our nation until President Reagan took office in 1981 – a period of roughly 200 years – was $1 trillion. So it’s no exaggeration to state that federal debt is growing exponentially. [/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif][FONT=Georgia, Times New Roman, Times, serif]The World Shorts the Dollar[/FONT]
Ron Paul on what that means (and how right they are).


[/FONT][FONT=Verdana, Arial, Helvetica, sans-serif][FONT=Georgia, Times New Roman, Times, serif]The Death of the Dollar[/FONT]
Ron Paul on the threat from the Fed.
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[FONT=Times New Roman, Times, serif]Official core inflation for the US is only 1.14%, but that excludes such crucial day-to-day goods as food and energy. Real inflation certainly is higher, maybe much higher. John Williams of Shadow Government Statistics calculates true inflation at a whopping 8.48%! But manipulated inflation statistics give the government cover when they again deny seniors a cost-of-living increase in their social security checks. They also serve to convince the public that further expansion of the money supply will boost the economy without causing any real pain, which has essentially been the core argument of Greenspan-Bernanke fed policy for the last 20 years.[/FONT]

Basically, the Fed controls this, the Fed is the one doing the damage, and the problem will only continue to worsen the longer they keep acting like idiots. I'm summarizing, but the path we're on leads to the destinations I notated, and that was poopooed.

 

[Bill Mattocks]

Maybe it's time for the Government to trim the fat, go lean, run efficiently, and return to a currency backed by something tangible. I mean, this debt they keep running up averages out the a couple hundred grand each I believe. I really hope that's not on my credit score.

http://www.brillig.com/debt_clock/

[FONT=verdana,arial,helvetica]The estimated population of the United States is 309,827,119
so each citizen's share of this debt is $45,267.76.[/FONT]

http://en.wikipedia.org/wiki/United_States_public_debt

 

[Bob Hubbard]

This doesn't even make sense. Printing more money is not counterfeiting, and indeed must be done on a regular basis even without monetary expansion to replace worn out bills (which are burned). Private citizens making counterfeit money is indeed a crime, fraud, hardly challenging a monopoly to which the "goon squads" must be sent in (telling language, for the police arresting counterfeiters). It would be the same fraud if someone tried to give you iron pyrite instead of gold in exchange for something.

I get your critiques of government for the most part, but this is veering off into la-la land.

The explanation of this is a long one.
Short version:
Only the Federal Reserve can print money.
The Federal Reserve is a private corporation, not a government agency.

The Liberty Dollar, Phoenix Dollars, Ithaca Hours, and digital gold currency are all alternate currencies, the first 2 backed by hard metal. Liberty Dollars are no longer available due to ongoing legal action by the US.

Me, I'm looking at switching to accepting .999 silver.


As to the Debt, I'd like to see an Itemized Tax Bill. It's never been done. Lets see where Congress is spending our money.

Politicians Are Free to Spend Foolishly (p. 53)

Perpetual government debt…essentially relies on forced labor. Citizens are forced to work to pay taxes to pay off the principal and interest on the national debt. Not only are today’s citizens turned into tax serfs by a large national debt, but so are future generations, who are of course politically defenseless.

Hamilton’s Curse: How Jefferson’s Archenemy Betrayed the American Revolution—and What It Means for Americans Today by Dr. Thomas J. DiLorenzo

Politicians Love Inflation (pp. 73–74)

Government control of the money supply amounts to legalized counterfeiting. The ability to print paper money is even more a politician’s dream than the ability to incur government debt, for no direct taxation is involved in the government’s efforts to secure resources from the public. It all seems painless to the taxpayers—as long as they remain ignorant about the effects of inflation.
Politicians benefit from inflation by spending billions of dollars on various constituent groups and effectively buying votes (and campaign contributions). These individuals and groups may benefit from inflation because of their political connections, but as prices rise, year in and year out, most of society loses. This is especially true of anyone whose income is relatively fixed, such as people on salaries that may not keep up with inflation, retired people, and anyone holding cash assets. To all of these people, inflation is a hidden tax.
​

 

[Scott T]

I have only one benchmark for how well the US dollar is doing.

For the last little while the Canadian dollar has been worth more, and according to the analysts that won't be changing soon..

Oops.

 

[Rich Parsons]

http://www.lewrockwell.com/rozeff/rozeff338.html

The U.S. government is insolvent. Who says so? Timothy F. Geithner, the U.S. Secretary of the Treasury.


Geithner sent a letter to Congress on Jan. 6, 2011 asking for the debt limit to be raised. If it is not raised, he warned, the U.S. will default on its debt. In his words:

[FONT=Times New Roman, Times, serif]Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States." [/FONT]
​

[FONT=Times New Roman, Times, serif]He didn’t say that the government will be inconvenienced. He didn’t say that the government would be forced to muddle through by delaying payments, raising taxes, and cutting non-obligatory programs and services. He said the government will default. This means that the government doesn’t have enough cash to pay its obligations to the many and sundry persons to whom it owes cash unless Congress authorizes an issue of even more debt.[/FONT]

[FONT=Times New Roman, Times, serif]After the government issues the new debt, its overall debt will be even higher than before. Unless its obligations that require cash payments are reduced, or unless it finds new sources of revenue, or unless the interest rates that it pays decline, the same situation will surely occur again and occur even faster because its overall debt will have risen. It will run short of cash to pay its obligations.[/FONT]

Thoughts?

In the 1980's I did some research in high school. A lot of the debt is interest owed on debt. Not all but a lot.

Where did this debt come from and how did it get out of hand.

The US lent monies to other countries and then they defaulted on those loans, but the US was responsible and kept those monies on our books to avoid inflation.

This goes back to loans made to France, who then had a change of government (* the usual way of defaulting *), where they claim all old debts are not valid and no longer a record for the "NEW" government.

So the question is, what would happen if the US did this?

Would the Chinese and other investors into our debt be hurt?
Would that cause negative political issues?
Would it cause negative economic issues?

Not being an economist, but knowing some, I have asked these discussions over time and the answers change based upon politics and the current state of the economy. With a more of a world economy now, I wonder if these issues would be greater or less?

 

[Makalakumu]

The government is obviously not printing money to meet current obligations - the inflation rate stands at 1.1%. We are borrowing, which is a separate problem of course, but you act like it's Germany in the 1920's.

The government is borrowing to meet it's obligations and money is being printed. Every dollar borrowed is a new dollar created. Anyway, that's a long explanation.

About this 1.1% inflation rate. How are you counting that up? Have you looked at commodities lately?

 

[5-0 Kenpo]

What makes me sad about this is that if you listen to the debate, it's not really about what is in the best interest of the people, but what is necessary for the government to function in spite of regardless of effect on the people.

 

[K-man]

In the 1980's I did some research in high school. A lot of the debt is interest owed on debt. Not all but a lot.

Where did this debt come from and how did it get out of hand.

The US lent monies to other countries and then they defaulted on those loans, but the US was responsible and kept those monies on our books to avoid inflation.

This goes back to loans made to France, who then had a change of government (* the usual way of defaulting *), where they claim all old debts are not valid and no longer a record for the "NEW" government.

So the question is, what would happen if the US did this?

Would the Chinese and other investors into our debt be hurt?
Would that cause negative political issues?
Would it cause negative economic issues?

Not being an economist, but knowing some, I have asked these discussions over time and the answers change based upon politics and the current state of the economy. With a more of a world economy now, I wonder if these issues would be greater or less?

France .. America's new best friend! Is this called 'paying for the favour'?

Now, if America were to default the entire Western economies would be stuffed and there would be a billion or so really angry Chinese. Most contracts are written in US dollars. The $US has devalued by about 40% in the past 2 years. Even the little Aussie battler ($A) is worth as much.

The United States public debt is in excess of $13 trillion and continues to grow at a rate of about $5.48 billion each day by direct calculation between Jan 31,2010 and August 31,2010. and Total public and private debt was $50.2 trillion at the end of the first quarter of 2010, or 3.5 times GDP. Domestic financial assets totaled $131 trillion and domestic financial liabilities totaled $106 trillion.

If the US were to default, the world banks that hold the rest of the world's cash reserves and back the loans would lose the money and could not remain solvent. The banking system is out the door and commerce goes back to barter just like Zimbabwe!

The sun would still rise but it would be a totally different world.

 

[K-man]

Her's an interesting article on defaulting economies.

The Politics and Economics Of a U.S. Debt Default.

http://www.valueexpectations.com/blogs/politics-and-economics-us-debt-default12022010

Insites into the US handling of its debt.

With federal spending in the United States rising to record levels in nominal terms, not to mention as a percentage of GDP, there's a growing amount of commentary suggesting that the U.S. government is bankrupt, and that it will eventually default on its growing debt. Although federal debt has not reached post-World War II levels, unfunded future liabilities that some suggest are in the $100 trillion range have analysts on edge.

and ...

The U.S. has never defaulted? Reinhart and Rogoff observe that the U.S., Canada, New Zealand and Australia have never defaulted in the traditional sense, but they admit that at least the U.S. has defaulted in the form of currency devaluation. Specifically, they mention the abrogation of the gold clause in 1933, which meant that debt paid to American creditors (from 1928 to 1946 the US had no external debt) was repaid in paper currency rather than gold.

If anyone believes you can just keep the presses running, it's a fairytale!

 

[Makalakumu]

What makes me sad about this is that if you listen to the debate, it's not really about what is in the best interest of the people, but what is necessary for the government to function in spite of regardless of effect on the people.

I'm a little sick of guns and butter. Problem is that I think we're going to choke on it. Butter to make as fat and dependent. Guns (as in the government's guns) to tell us what to do and take every last cent.

I feel like I'm riding in a runaway train. At one time I felt that if a "good" person could grab the controls and slow this thing down and get us on the right track, we'd be okay. Now, we need to smash the controls, because the cliff is right there and every "good" man that rises up, just drives us faster toward it.

Ten years ago, I considered myself a gun toting Liberal. Now, I'm a Libertarian by necessity.