Topic: Is American Debt default really possible?? - page 3. (Read 3434 times)

The USA will not "default" as long as they can just print more money. There is no reason to. That in itself it a type of default, but it is not recognized in the same respect. Make no mistake about it, the USA cannot repay the debt that has been accrued.

The US can default on its $14 trillion public debt, but then it'll have trouble paying it's future $56 trillion obligations (social security, medicare, etc).

BTW, the US population (including children and elderly) is about 300 million. Do you think US debt and obligations will ever be repayed? At what point will markets realize the inflationary risk on their 0% interest bonds is a shady deal? The roulette wheel keeps spinning because it's the only game in town.

The US can never default. FRN's are not money. They are a promise to pay money. No one ever even attempts to collect so how can there ever be a default until people redeem their FRN's for lawful money?

U.S. v. Thomas 319 F.3d 640

No, because M3 collapsed 110%. The Fed's monetary inflation countered unprecedented deflation. The reserves parked at the Fed are keeping the banks solvent, yet they are only hanging on by a thread. In addition to buying back toxic debt from banks at nearly 0% interest, the Fed also bought UST driving yields down. When interest rates go up, there will be more contraction. Housing, finance, and gadgets have a long way to go down. Volatility has increased and hard commodities, food, and energy are double digits and climbing.

PS - M3+ dwarfs M0 by an order of magnitude and there's more deleveraging that still needs to happen.

The Fed doesn't cause inflation. All quantitative easing did was exchange one form of money(U.S Debt) for another form(U.S Dollar). The size of the monetary base remained the same.

http://research.stlouisfed.org/fred2/series/WRESCRT?cid=32215

This shows that the balance sheet of the Fed increased from 800 billion to 2 800 billion since 2008. That means the Fed has increased the amount of money by a factor of 3.8 since 2008. It would be reasonable to assume that if the FED was a significant source of inflation, then America should be experiencing an inflation of atleast 200%, and it is not. This is because the FED also purchased U.S debt equal to the increase, and U.S debt can be used for money.

The amount of money in the U.S has increased by a factor of 3.8 but serious inflation has not occurred.


Like I said before the inflation America is currently experiencing is caused by a shortage of essential resources.

Don't be so naive
The CONFIDENCE in USD and US debt worldwide -- is way MUCH more important.
When some day (very soon) confidence will gone, USD will fail like a rock into abyss.

Europe will print more euros. This is why Jurgen resigned. The US will print more dollars. And yes, the US Fed creates inflation. That was one of the key points to QE*. Congress spends money it doesn't have. The Treasury issues bonds it can't repay. And the Fed buys many of them back with numbers scratched onto the balance sheet lowering interest rates. Oh and the Chinese will print more yuan, Swiss more francs, Japan more yen. Anyone not printing paper?

Core CPI is 3%, but real inflation including such frivolities as food and energy is 12%.

Greece is in a bad situation.  Cannot be compared to the USA.  Greece debts are in Euros, even if they abandon the euros and print their own currencies, no matter how they devalue their currencies, the Euro debts will still be there and growing larger.  Americans are lucky as their debts are denominated in USD.  But of course devaluation hurts the general population.

Had a quick look at the money masters, which I think Bill produced? Below is a quote from the site.


This is exactly what should happen in America. The first point would end this perpetual 'debt' non-issue that occurs periodically.

America has defaulted on its debt, but the circumstances were significantly different. Today America issues its own money backed by nothing more than the faith of the people. The first time America defaulted in 1779, the U.S dollar was backed by the Spanish Dollar. This is exactly the same as the Greek situation today, where America has to source Spanish Dollars to service it's currency. The default of 1862 is similar, except instead of the currency backed by Spanish Dollars it was backed by Gold. Once again this is similar to Greece, America must source Gold to produce Dollars. So when America couldn't source enough Spanish Dollars or Gold, obviously this is the definition of default. This is the same situation that Greece faces.

However, since America has gone off the Gold Standard, the creation of the Dollar is no longer constrained by the amount of gold available. The American debt created today is denominated in U.S dollars and since America is the issuer of its own currency then there will always be enough U.S dollars to pay back the debt. Therefore as long as America remains the issuer of its own currency, which I'm sure she will, and backed by nothing more than the faith of the people, America can not default on its debts.

What is more important, inflation or unemployment? Monetary inflation will only occur once unemployment falls dramatically, and that clearly isn't the case in America at the moment. The more people that become employed, the more goods and services produced by America to meet the increased demand caused by printing money.

The inflation America is experiencing at the moment is caused by a shortage of essential resources. This type of inflation is solved by increasing the supply of such resources.

BTW when the Fed commenced quantative easing, this did not cause a net increase in the amount of exchangeable financial assets. The idea that the FED has been debasing the dollar is fictitious. The Treasury is the only authority that can debase the U.S Dollar.

America has defaulted on it's debt before.  To understand the creation of money and it's impact on society you should go watch Secret of Oz by Bill Stills.  Bill Stills has another document called The Money Masters which also is a good watch.  Bill is definitely a paperbug versus a bullionbug and he makes very valid points as to why we need paper money versus a gold standard.  Anyways, anyone who says America hasn't defaulted on it's debt is a liar, we've defaulted twice so far and definitely on track for a third time.

3.8% now

If they start printing tons of dollars to pay all the debts then inflation skyrocket, or better, more than skyrocket, it directly light it's Warp drive to go faster than light; a dollar will be worth nothing, less than the cost of the paper used to make it.

Some say that the recent American debt crisis is a non-issue. America can never default on it's debts since it is the issuer of the American Dollar, and all Government debt is issued in American Dollars. When it comes time to repay the debt, the American state can create more money. There is only one risk, and that is inflation. Since America's core inflation is 3.8% then this is not a real issue.

I think of it in terms of Bitcoin, lets say that there is also a decentralized Bitcoin Central Bank. Miners create Bitcoin Treasuries instead of Bitcoin Dollars. Bitcoin Treasuries are a promise to pay $100BTC at some future date. The total sum of BTC Treasuries created by Miners is the 'National Bitcoin Debt'. BTC Treasuries are sold at auction for BTC Dollars. If the number of BTC Dollars in circulation is too small, then naturally the price of BTC Treasuries will fall significantly below $100BTC. So the BTC Central Bank purchases BTC Treasuries and 'creates' new BTC Dollars to pay for the BTC Treasuries. This action pushes the price BTC Treasuries back up towards $100BTC.

From this view-point the recent American Debt Crisis is a non-issue. And the American Debt is not a debt in the traditional sense, rather it is a measure of the total amount of money created.

Greece is in a different position. Since Greek debt is denominated in Euro's, the Greek's have to attract Euro's from the market. The Greek's do not create Euro's, and so they can default on their debt.