2020 and the National Debt

[AzogtheDefiler]

I've heard a little talk around here from time to time about the National Debt with each side blaming the other side for the size of it. I just checked the amount of the debt, and it's going up a million dollars in the time that I was there, and considering that was a few minutes ago. The National Debt as of 12/29/2019 is $23,160,651,000,000.00 as of CST 8:44 pm.

U.S. National Debt Clock : Real Time

How important do you think the National Debt is going to be in the election of 2020? Is that too much money right now? Please add your thoughts below. Voting on this poll ends in 45 days. Thank you.

I selected "unimportant".
We elected a game show host in 2016 and not for his economics.
Good, real Americans are so fed up we have made winning our nation back and destroying the Left our paramount desires..even if that means setting economics aside for some time.

Game show host? You mean reality show?

 

[bendog]

Uh-huh, that's great except for the fact that the debt is continuously rolled over and increased because the Federal Government needs to borrow in order to cover not only it's ever increasing operating deficit but also to cover debt service costs for outstanding debt, so the reality is that there is no "zeroing out" net effect.

And while yes the Federal Reserve does indeed rebate any interest earned on Treasury debt back to the Treasury, everybody else that buys those bonds and earns interest on them DOESN'T so it's not "zeroed" and it ends up as net increase in the money supply requiring the Fed to intensify OMO and other money supply manipulation efforts to stabilize the value of the currency.

Our currency is based on debt a fact that is never mentioned by Federal Reserve Fiat Currency Apologists.

Exactly!

there are reasons not to use the fed to finance deficits. But you and Fox use debt and deficits interchangeably, and they are not interchangeable concepts, and that, plus your inability to comprehend the fed's creation, and removal, of money from the banking system, simply makes any discussion of the fed's actions impossible.

 

[AzogtheDefiler]

Would you consider Steve Forbes a Conservative? Because when he put a bid in on the presidency, I was liking what he was saying.

I don't know enough about him to say.

I'll help you. He is an idiot.

Those who live in glass houses...

 

[NightFox]

Uh-huh, that's great except for the fact that the debt is continuously rolled over and increased because the Federal Government needs to borrow in order to cover not only it's ever increasing operating deficit but also to cover debt service costs for outstanding debt, so the reality is that there is no "zeroing out" net effect.

And while yes the Federal Reserve does indeed rebate any interest earned on Treasury debt back to the Treasury, everybody else that buys those bonds and earns interest on them DOESN'T so it's not "zeroed" and it ends up as net increase in the money supply requiring the Fed to intensify OMO and other money supply manipulation efforts to stabilize the value of the currency.

Our currency is based on debt a fact that is never mentioned by Federal Reserve Fiat Currency Apologists.

Exactly!

But you and Fox use debt and deficits interchangeably, and they are not interchangeable concepts,

Look again, I'm well aware of the difference between the Federal OPERATING DEFICIT and outstanding DEBT.

 

[Natural Citizen]

there are reasons not to use the fed to finance deficits. But you and Fox use debt and deficits interchangeably, and they are not interchangeable concepts, and that, plus your inability to comprehend the fed's creation, and removal, of money from the banking system, simply makes any discussion of the fed's actions impossible.

We understand the difference between money and currency. Your comment here tells me that you do not. Actually, it's people who use those two terms interchangeably who do not comprehend.

It's very simple. The politicians say ''hey, vote for me because I'll make sure that the government provides you with more free stuff than my opponent say's he will. The politicians vote for the country to spend more than its income. Again, this is called deficit spending. The Treasury issues IOU bonds. The banks then buys those IOU bonds with ''currency.'' The Federal Reserve then writes IOU checks and hands them to the banks in exchange for the Treasury's IOU Bonds. Thus ''currency'' is created. What's really happening here is that the Federal Reserve and the Treasury are just swapping IOUs using the banks as middle men and, presto, ''currency'' magically comes into existence. This process repeats over and over and over and over and over again, enriching the banks and indebting the public by raising the national debt. The end result is that there is a build-up of bond at the Federal Reserve and 'currency' at the Treasury. This process is where all paper ''currency'' comes from.

The Federal Reserve and the government incorrectly call it ''base money'' because they don't know the difference between ''money'' and ''currency.'' It's correctly called ''base currency'' because it is not ''money.'' It is ''currency.''

''Money'' has to be a store of value and maintain its purchasing power over long periods of time. But the base currency that is piling up as a consequence of the process which I've explained is nothing more than a receipt for a claim check on an IOU bond. So it's really nothing but a supply of numbers.

I assure you that any discussion of the Fed's actions is not only possible, it can be very simple.

 

[Natural Citizen]

You would have to look at the last time the budget was balanced to find how a compromise works. There will never be another compromise while Trump is potus, and McConnell said in 2017 he wasn't doing entitlement reform while Trump was potus.

Would Biden support a compromise? Probably. Could the gop do that even if Trump and McConnell were defeated? I dunno. At one time McConnell would have compromised. I'm not sure anymore.

The market will naturally decide. Not the government. And not the Fed. The government and the Fed cannot control the future. They can only control the printing press.

The Fed is already demonstrating that it is losing the ability to control the cost of currency, if we're paying attention. It's what all of these recent overnight bailouts are about. They're creating billions in currency and passing off a steady flow to those banks now. The Fed was caught completely off-guard.

 

[Natural Citizen]

If enough people ever figured all this out, they might wonder why the hell we even need money. Considering where/how money is created, (punching a few digits on a computer) it's really not even needed. The concept of an RBE (Resource Based Economy), because of what we're taught growing up, seems like Marxism. People don't understand how a burger flipper could own the same car as a brain surgeon. Don't get me wrong, even for someone who understands how unimportant money actually is, I can see the jealousy it would create. The propaganda would lead people to think that there would be no brain surgeons, if brain surgeons couldn't get more than the burger flipper. But that's what money does. It's how it was designed.

How silly is it, for the human race, top of the food chain, about the only species that has the ability to reason and communicate on such an advance level, can't see why an RBE has 1,000 more benefits, than our monetary system.

If you have a minute, this is a little something I've thought about over the years, that has to do with an RBE:

In south America, there's a man who collects sap from rubber trees. He uses a steal bore to drill into the tree. A plastic bucket to collect it. Puts it on a truck that has steal, plastics, copper, rubber and all sorts of other things to make it go. It's brought to a collection facility, then onto a rubber plant (probably in China or the USA) where rubber is manufactured. It's then shipped to a place where they they make tires. (or what ever else is needed) Then the tires are shipped to a warehouse, then onto the retail store where they're installed on your car.

Now, think about all the things (buckets, bores, ships, planes, buildings, workers, staff, paper, computers etc etc) that goes into all that. Especially the people. Take the bucket for example. Made from some sort of poly. Which takes oil drillers to extract. And all the things that were built by even more people just to drill for the oil.

Hundreds of millions of people went in to just getting the sap from the tree. Hundreds of millions more to get the sap from the rubber tree to your car.

The point is, I suppose, is that in some form or fashion, we all need each other. Either directly or indirectly. The question is, why to we still charge each other. It's my opinion, that money is just the middle man.

It took me a couple of years of asking myself, "What is the down side to an RBE," and then solving the problems that an RBE would create.

One of the biggest ones was "Why would anyone work, if there was no money?" Once it clicks in your head, the answers start coming easy. And at the end of the day, as I said before, the pro's outweigh the con's, 1000 fold.

Note to add: The answer to the question about can be found by understanding one thing: Money doesn't buy anything. Our labor does. We exchange our labor for money. Because there has to be a monetary profit involved, then we and those who employ us have to have some agreement as to how much our labor is worth. And so, with an EVC (Employment Verification Card (that proves we're employed), no one can decide for us, what our labor is worth.

Ha. That's a good point. True wealth is your time. Which we trade away hour by hour, day by day, week by week, year by year, for numbers that somebody printed on pieces of paper and punched into bank computers. We are what gives the 'currency' its value. As it is, the Federal Reserve's collection wing, the IRS, thinks it owns us, owns 100% of the fruits of our labor and believes that it alone sets the terms for which we may keep a certain percentage.

 

[bendog]

Uh-huh, that's great except for the fact that the debt is continuously rolled over and increased because the Federal Government needs to borrow in order to cover not only it's ever increasing operating deficit but also to cover debt service costs for outstanding debt, so the reality is that there is no "zeroing out" net effect.

And while yes the Federal Reserve does indeed rebate any interest earned on Treasury debt back to the Treasury, everybody else that buys those bonds and earns interest on them DOESN'T so it's not "zeroed" and it ends up as net increase in the money supply requiring the Fed to intensify OMO and other money supply manipulation efforts to stabilize the value of the currency.

Our currency is based on debt a fact that is never mentioned by Federal Reserve Fiat Currency Apologists.

Exactly!

But you and Fox use debt and deficits interchangeably, and they are not interchangeable concepts,

Look again, I'm well aware of the difference between the Federal OPERATING DEFICIT and outstanding DEBT.

Yes, but Natl Citizens response that you responded to positively does not. Part of what G5000 attempted to explain was that the Fed does not expand the dollar supply like the Treasury can do. The Fed simply "credits" a dollar to a lending institution, or places debt on it's own balance sheet. When the Treasury redeems a bond owned by the Fed, the amount of the bond is removed from the balance sheet, and that amount of "money" simply goes … poof. It no longer exists. When G5000 posted "zero's out," that's what he referred to. Conversely, when the Treasury redeems a bond owed by a person or govt, the person or govt actually gets money that it then either reinvests somewhere or holds on to.

Natl Citizens understanding is pretty much the same of the old youtube video by Alan Greenspan explaining how the central banks created deflation leading to the great depression by not reinvesting their gold hordes in debt to stimulate growth. That video is still out there, or was a couple of years ago. Dated graphics but extremely clear explanation.

There is danger in the Fed financing the deficits. But the size of the debt is not one of them.

 

[NightFox]

Uh-huh, that's great except for the fact that the debt is continuously rolled over and increased because the Federal Government needs to borrow in order to cover not only it's ever increasing operating deficit but also to cover debt service costs for outstanding debt, so the reality is that there is no "zeroing out" net effect.

And while yes the Federal Reserve does indeed rebate any interest earned on Treasury debt back to the Treasury, everybody else that buys those bonds and earns interest on them DOESN'T so it's not "zeroed" and it ends up as net increase in the money supply requiring the Fed to intensify OMO and other money supply manipulation efforts to stabilize the value of the currency.

Our currency is based on debt a fact that is never mentioned by Federal Reserve Fiat Currency Apologists.

Exactly!

But you and Fox use debt and deficits interchangeably, and they are not interchangeable concepts,

Look again, I'm well aware of the difference between the Federal OPERATING DEFICIT and outstanding DEBT.

Yes, but Natl Citizens response that you responded to positively does not. Part of what G5000 attempted to explain was that the Fed does not expand the dollar supply like the Treasury can do. The Fed simply "credits" a dollar to a lending institution, or places debt on it's own balance sheet. When the Treasury redeems a bond owned by the Fed, the amount of the bond is removed from the balance sheet, and that amount of "money" simply goes … poof. It no longer exists. When G5000 posted "zero's out," that's what he referred to. Conversely, when the Treasury redeems a bond owed by a person or govt, the person or govt actually gets money that it then either reinvests somewhere or holds on to.

Ummm.. yeah my response is EXACTLY WHAT I WROTE not what the voices in your head are telling you it was based on some convuluted theory regarding its relationship to what some other poster wrote but thanks for demonstrating what a lame attempt to put words into someone's mouth looks like in practice.

I explained why the "zero'd out" theory DOESN'T WORK in practice, what don't you understand?

Natl Citizens understanding is pretty much the same of the old youtube video by Alan Greenspan explaining how the central banks created deflation leading to the great depression by not reinvesting their gold hordes in debt to stimulate growth. That video is still out there, or was a couple of years ago. Dated graphics but extremely clear explanation.

There is danger in the Fed financing the deficits. But the size of the debt is not one of them.

LOL, what? Are you sure you're reading THIS thread and not some imaginary thread that you dreamed up last night?

 

[g5000]

Jackson asked who we owed the money to, and I wonder if it was just a matter of printing more money to float around, or if debt was actually owned by banks or foreigners, which might make a difference if it is.

To pay for deficit spending the Treasury borrows currency by issuing a bond. A bond is an IOU. It's a piece of paper with numbers printed on it that says loan me a trillion dollars today and I promise that over a ten year period I will pay you back that trillion dollars. Plus interest.

But...Treasury bonds happen to be our national debt. The Treasury then holds a bond auction. And the world's largest banks show up and compete to buy part of our national debt and make a profit on it by earning interest.

Through a shell game called open market operations, the banks get to sell some of those bonds to the Federal Reserve, at a profit. How does the Federal Reserve pay the bonds? The Federal Reserve opens its 'checkbook' and writes bad, bogus, counterfeit checks that should bounce because they're drawn on an account that always has nothing in it. Here the Federal Reserve is committing fraud.

To steal a quote from the Boston Federal Reserve's ''Putting it Simply", they say that ''When you or I write a check, there must be sufficient funds in our account to cover the check, but when the Federal Reserve writes a check, there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.”

Then we pay tax to the IRS who then turns it over to theTreasury so the Treasury can pay the principal plus the interest on those bonds that were purchased from banks by the Federal Reserve with a check that was drawn on an account that had nothing in it.

Of course, the Federal Reserve is not Federal. It has stock holders. There is no federal agency that has stock holders. Now, what is a stock holder? A share of stock represents a share of ownership in a corporation. So, the stock holders are the owners of the corporation. Therefore, the Federal Reserve is a private corporation with owners. For reference, you may check their site. It specifically states that the stock holders receive an annual dividend of not more than 6%. Now, we know that the stock in the Federal Reserve was originally issued to the largest banks in the United States. With mergers and acquisitions through the years, you can't actually trace who owns the stock in the Federal Reserve. That's a very closely guarded secret. The best guess would be that they are those primary dealers. The banks that get to make a profit by selling part of our national debt, those bonds, to the Federal Reserve who buys them with a check that is drawn from an account with nothing in it. Then we pay tax to pay the principal and the interest on those bonds so that the Federal Reserve can pay the banks not more than a 6% dividend. This is purposely complex.

You left out some very important facts which I invariably see people who hate the Fed make, which tells me you are all listening to the same manufacturer of bullshit.

First, the money which the Fed created to buy Treasury bonds is destroyed when the Treasury pays back the money for those bonds. So that is zeroed out. It is quite deliberate that this fact is never mentioned by End the Fed propagandists, only the money creation part is.

Second, the interest payments the Fed receives on the bonds is returned to the Treasury. So that, too, is zeroed out.

Uh-huh, that's great except for the fact that the debt is continuously rolled over and increased because the Federal Government needs to borrow in order to cover not only it's ever increasing operating deficit but also to cover debt service costs for outstanding debt, so the reality is that there is no "zeroing out" net effect.

And while yes the Federal Reserve does indeed rebate any interest earned on Treasury debt back to the Treasury, everybody else that buys those bonds and earns interest on them DOESN'T so it's not "zeroed" and it ends up as net increase in the money supply requiring the Fed to intensify OMO and other money supply manipulation efforts to stabilize the value of the currency.

Our currency is based on debt a fact that is never mentioned by Federal Reserve Fiat Currency Apologists.

The discussion was about what the Fed does and what happens to the money it creates and destroys, and the interest it receives and gives back.

My "zero out" statements, in that context, are one hundred percent accurate. The money created by the Fed is destroyed, and the interest it receives on the debt is given back to the Treasury.

I was not talking about the interest paid to other creditors, and neither was Natural Citizen in his post. That is not germaine to the subject of money creation and destruction.

 

[Natural Citizen]

Oh, btw. We're gonna need to properly define inflation. It used to mean, and still does, really, the creation of new currency. Inflating the currency. Technically speaking, the surplus of currency and credit.

For some reason today people define inflation as the rise in prices of products. Well, that's just one consequence of inflation. A consequence of the creation of new currency. Duh.

They've taken the focus of the discussion away from the cause and now only focus on effect.

It's kind of funny when they tell that tale about the Fed existing in order to fight inflation when they are, in fact, the cause of it.

And now they can even lie about the the effect of inflation on the standard of living because they now use Chained CPI to measure it. I almost wanna say it's another topic, but really it isn't another topic at all.

 

[g5000]

Oh, btw. We're gonna need to properly define inflation. It used to mean, and still does, really, the creatio of new currency. Inflating the currency. Technically speaking, the surplus of currency and credit/debt.

For some reason today people define inflation as the rise in prices of products. Well, that's just a consequence of inflation. A consequence of the creation of new currency. Duh.

They've taken the focus of the discussion away from the cause and now only focus on effect.

It's kind of funny whe nthey tell that tale about the Fed existing in order to fight inflation whe nthey are, in fact ,the cause of it.

I have always focused the subject of inflation around the velocity of money. I went into some detail in my topic about the Fed's doomsday bond bubble machine.

If the Treasury printed ten trillion dollars and then buried it in the ground, that new currency would have no effect on inflation.

But if that ten trillion dollars was pumped into circulation, and started moving around the economy, it would have a tremendous impact on inflation.

The velocity of money is the key to inflation.

"Helicopter Ben" wanted to throw money into the economy to get it moving around. That was his whole premise behind quantitative easing.

 

[g5000]

Uh-huh, that's great except for the fact that the debt is continuously rolled over and increased because the Federal Government needs to borrow in order to cover not only it's ever increasing operating deficit but also to cover debt service costs for outstanding debt, so the reality is that there is no "zeroing out" net effect.

And while yes the Federal Reserve does indeed rebate any interest earned on Treasury debt back to the Treasury, everybody else that buys those bonds and earns interest on them DOESN'T so it's not "zeroed" and it ends up as net increase in the money supply requiring the Fed to intensify OMO and other money supply manipulation efforts to stabilize the value of the currency.

Our currency is based on debt a fact that is never mentioned by Federal Reserve Fiat Currency Apologists.

Exactly!

But you and Fox use debt and deficits interchangeably, and they are not interchangeable concepts,

Look again, I'm well aware of the difference between the Federal OPERATING DEFICIT and outstanding DEBT.

Yes, but Natl Citizens response that you responded to positively does not. Part of what G5000 attempted to explain was that the Fed does not expand the dollar supply like the Treasury can do. The Fed simply "credits" a dollar to a lending institution, or places debt on it's own balance sheet. When the Treasury redeems a bond owned by the Fed, the amount of the bond is removed from the balance sheet, and that amount of "money" simply goes … poof. It no longer exists. When G5000 posted "zero's out," that's what he referred to. Conversely, when the Treasury redeems a bond owed by a person or govt, the person or govt actually gets money that it then either reinvests somewhere or holds on to.

Ummm.. yeah my response is EXACTLY WHAT I WROTE not what the voices in your head are telling you it was based on some convuluted theory regarding its relationship to what some other poster wrote but thanks for demonstrating what a lame attempt to put words into someone's mouth looks like in practice.

Actually, bendog did a pretty good job explaining what I meant.

 

[g5000]

You left out some very important facts which I invariably see people who hate the Fed make, which tells me you are all listening to the same manufacturer of bullshit.

First, the money which the Fed creates to buy Treasury bonds is destroyed when the Treasury pays back the money for those bonds. So that money is zeroed out. It is quite deliberate that this fact is never mentioned by End the Fed propagandists, only the money creation part is.

Second, the interest payments the Fed receives on the bonds is returned to the Treasury. So that, too, is zeroed out.

No, I've explained that part a few times around here, too. I just didn't do it this time because it wasn't the question that was asked.

If you borrow the very first dollar in existence and you promise to pay it back plus another dollar's worth of interest, where do you get the second dollar to pay the interest?

The answer is that you have to borrow that dollar into existence and promise to pay it back with interest as well. So, now there are 2 dollars in existence, but you now owe 4. And so on, and so on, and so on, and so on. It keeps happening over and over and over again. The result is that there is never enough currency to pay the debt. There is always more debt in the system than there is currency in existence to pay the debt. Therefore the entire system is impossible. It is finite. It will come to an end one day.

What would happen if the public stopped borrowing and going deeper into debt? Are your house and car payments going to stop? No. They're not. There is a payment due every month on the principal plus the interest on every dollar in existence and those payments do not stop. If we stop borrowing, then no new currency is created to replace the currency that we used to make those payments. Whether you're making a payment on a loan or paying a tax to make a payment on a Treasury bond, the portion of the payment that goes to pay off the principal extinguishes that portion of the debt. BUT...the debt also extinguishes the currency. When currency and debt meet, they destroy each other. If we just pay off the principal only, all of the loans and Treasury bonds that exist, the entire 'currency' supply vanishes. So, if we don't go deeper into debt every year, the whole thing goes into a deflationary collapse under the weight of those payments.

People always talk about balancing the budget, bringing down the debt, and living within our means. But they don't understand that this is deflationary. It is impossible to do under our current monetary system without collapsing the entire economy. This is why any talk of a debt ceiling is not only ridiculous, it's delusional. The system is designed to require ever-increasing levels of debt just to continue. And that's why politicians will always kick the can down the road and raise the so-called debt ceiling over and over again until the whole system finally collapses under its own weight. Only reason it hasn't yet is very simple. They don't want it hapening on their watch.

It is common sense that paying off all this debt would be deflationary.

It is also inevitable. There will have to be a reset sooner or later.

Unless there is some massive economic growth somehow.

.

 

[NightFox]

Jackson asked who we owed the money to, and I wonder if it was just a matter of printing more money to float around, or if debt was actually owned by banks or foreigners, which might make a difference if it is.

To pay for deficit spending the Treasury borrows currency by issuing a bond. A bond is an IOU. It's a piece of paper with numbers printed on it that says loan me a trillion dollars today and I promise that over a ten year period I will pay you back that trillion dollars. Plus interest.

But...Treasury bonds happen to be our national debt. The Treasury then holds a bond auction. And the world's largest banks show up and compete to buy part of our national debt and make a profit on it by earning interest.

Through a shell game called open market operations, the banks get to sell some of those bonds to the Federal Reserve, at a profit. How does the Federal Reserve pay the bonds? The Federal Reserve opens its 'checkbook' and writes bad, bogus, counterfeit checks that should bounce because they're drawn on an account that always has nothing in it. Here the Federal Reserve is committing fraud.

To steal a quote from the Boston Federal Reserve's ''Putting it Simply", they say that ''When you or I write a check, there must be sufficient funds in our account to cover the check, but when the Federal Reserve writes a check, there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.”

Then we pay tax to the IRS who then turns it over to theTreasury so the Treasury can pay the principal plus the interest on those bonds that were purchased from banks by the Federal Reserve with a check that was drawn on an account that had nothing in it.

Of course, the Federal Reserve is not Federal. It has stock holders. There is no federal agency that has stock holders. Now, what is a stock holder? A share of stock represents a share of ownership in a corporation. So, the stock holders are the owners of the corporation. Therefore, the Federal Reserve is a private corporation with owners. For reference, you may check their site. It specifically states that the stock holders receive an annual dividend of not more than 6%. Now, we know that the stock in the Federal Reserve was originally issued to the largest banks in the United States. With mergers and acquisitions through the years, you can't actually trace who owns the stock in the Federal Reserve. That's a very closely guarded secret. The best guess would be that they are those primary dealers. The banks that get to make a profit by selling part of our national debt, those bonds, to the Federal Reserve who buys them with a check that is drawn from an account with nothing in it. Then we pay tax to pay the principal and the interest on those bonds so that the Federal Reserve can pay the banks not more than a 6% dividend. This is purposely complex.

You left out some very important facts which I invariably see people who hate the Fed make, which tells me you are all listening to the same manufacturer of bullshit.

First, the money which the Fed created to buy Treasury bonds is destroyed when the Treasury pays back the money for those bonds. So that is zeroed out. It is quite deliberate that this fact is never mentioned by End the Fed propagandists, only the money creation part is.

Second, the interest payments the Fed receives on the bonds is returned to the Treasury. So that, too, is zeroed out.

Uh-huh, that's great except for the fact that the debt is continuously rolled over and increased because the Federal Government needs to borrow in order to cover not only it's ever increasing operating deficit but also to cover debt service costs for outstanding debt, so the reality is that there is no "zeroing out" net effect.

And while yes the Federal Reserve does indeed rebate any interest earned on Treasury debt back to the Treasury, everybody else that buys those bonds and earns interest on them DOESN'T so it's not "zeroed" and it ends up as net increase in the money supply requiring the Fed to intensify OMO and other money supply manipulation efforts to stabilize the value of the currency.

Our currency is based on debt a fact that is never mentioned by Federal Reserve Fiat Currency Apologists.

The discussion was about what the Fed does and what happens to the money it creates and destroys, and the interest it receives and gives back.

My "zero out" statements, in that context, are one hundred percent accurate.

... and as I explained completely irrelevant to what really happens with respect to the relationship of the modern system of public debt monetization and the money supply.

There is no net "zero out", there is only the age old practice of currency debasement to finance public expenditures without the political risk of raising taxes dressed up in a new set of clothes.

On the bright side; we don't have to go through all the bother of replacing silver with base metals in our currency like the Imperial Romans did.

 

[g5000]

Jackson asked who we owed the money to, and I wonder if it was just a matter of printing more money to float around, or if debt was actually owned by banks or foreigners, which might make a difference if it is.

To pay for deficit spending the Treasury borrows currency by issuing a bond. A bond is an IOU. It's a piece of paper with numbers printed on it that says loan me a trillion dollars today and I promise that over a ten year period I will pay you back that trillion dollars. Plus interest.

But...Treasury bonds happen to be our national debt. The Treasury then holds a bond auction. And the world's largest banks show up and compete to buy part of our national debt and make a profit on it by earning interest.

Through a shell game called open market operations, the banks get to sell some of those bonds to the Federal Reserve, at a profit. How does the Federal Reserve pay the bonds? The Federal Reserve opens its 'checkbook' and writes bad, bogus, counterfeit checks that should bounce because they're drawn on an account that always has nothing in it. Here the Federal Reserve is committing fraud.

To steal a quote from the Boston Federal Reserve's ''Putting it Simply", they say that ''When you or I write a check, there must be sufficient funds in our account to cover the check, but when the Federal Reserve writes a check, there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.”

Then we pay tax to the IRS who then turns it over to theTreasury so the Treasury can pay the principal plus the interest on those bonds that were purchased from banks by the Federal Reserve with a check that was drawn on an account that had nothing in it.

Of course, the Federal Reserve is not Federal. It has stock holders. There is no federal agency that has stock holders. Now, what is a stock holder? A share of stock represents a share of ownership in a corporation. So, the stock holders are the owners of the corporation. Therefore, the Federal Reserve is a private corporation with owners. For reference, you may check their site. It specifically states that the stock holders receive an annual dividend of not more than 6%. Now, we know that the stock in the Federal Reserve was originally issued to the largest banks in the United States. With mergers and acquisitions through the years, you can't actually trace who owns the stock in the Federal Reserve. That's a very closely guarded secret. The best guess would be that they are those primary dealers. The banks that get to make a profit by selling part of our national debt, those bonds, to the Federal Reserve who buys them with a check that is drawn from an account with nothing in it. Then we pay tax to pay the principal and the interest on those bonds so that the Federal Reserve can pay the banks not more than a 6% dividend. This is purposely complex.

You left out some very important facts which I invariably see people who hate the Fed make, which tells me you are all listening to the same manufacturer of bullshit.

First, the money which the Fed created to buy Treasury bonds is destroyed when the Treasury pays back the money for those bonds. So that is zeroed out. It is quite deliberate that this fact is never mentioned by End the Fed propagandists, only the money creation part is.

Second, the interest payments the Fed receives on the bonds is returned to the Treasury. So that, too, is zeroed out.

Uh-huh, that's great except for the fact that the debt is continuously rolled over and increased because the Federal Government needs to borrow in order to cover not only it's ever increasing operating deficit but also to cover debt service costs for outstanding debt, so the reality is that there is no "zeroing out" net effect.

And while yes the Federal Reserve does indeed rebate any interest earned on Treasury debt back to the Treasury, everybody else that buys those bonds and earns interest on them DOESN'T so it's not "zeroed" and it ends up as net increase in the money supply requiring the Fed to intensify OMO and other money supply manipulation efforts to stabilize the value of the currency.

Our currency is based on debt a fact that is never mentioned by Federal Reserve Fiat Currency Apologists.

The discussion was about what the Fed does and what happens to the money it creates and destroys, and the interest it receives and gives back.

My "zero out" statements, in that context, are one hundred percent accurate.

... and as I explained completely irrelevant to what really happens with respect to the relationship of the modern system of public debt monetization and the money supply.

There is no net "zero out", there is only the age old practice of currency debasement to finance public expenditures without the political risk of raising taxes dressed up in a new set of clothes.

On the bright side; we don't have to go through all the bother of replacing silver with base metals in our currency like the Imperial Romans did.

Well I made it pretty clear earlier that of the six ways of paying down debt, it is inevitable our government will always choose inflation (external devaluation).

But so is every debtor nation attempting the same. It's a race to the bottom.

 

[g5000]

As I have explained literally thousands of times on this forum, it would be very simple to balance the federal budget. Just ban tax expenditures.

Our politicians do not have the courage to do this, though. But it would be the best way.

That, and increase the Social Security and Medicare eligibility age to 70, and index it to 9 percent of the population going forward.

 

[Natural Citizen]

Actually, bendog did a pretty good job explaining what I meant.

There will always be differences of opinion. I enjoy the lively debate, personally. Especially threads like these where they're kept rather civil. It beats getting into meaningless quarrels elsewhere all over the board about meaningless things. It's at least refreshing that people do still think abut this stuff. I'm a free markets guy myself. I patently oppose central economic planning by a central bank. Inflationism. Deficit finance. Economic interventionism. Etc.

Anyway. I've got work to do. I've been on here too long this afternoon as it is.

 

[ElmerMudd]

To whom is the bulk of the national debt to be repaid?

A large portion of the debt is owed to China. That is not a bad thing. They cannot afford to see the US destroyed because we owe them so much money.

 

[kyzr]

To whom is the bulk of the national debt to be repaid?

A large portion of the debt is owed to China. That is not a bad thing. They cannot afford to see the US destroyed because we owe them so much money.

If the US Debt bubble sinks the US dollar, and the Yuan becomes the global currency, how much would that be worth to China?