Ready, Debt, Go – BILL READER

Ready, Debt, Go

BILL READER

            In honor of the new Republican majority I would like to take today out to discuss— in basic and easily communicated terms— a favorite topic of conservatives everywhere. Today I devote to debt, particularly public debt, and the problems therewith. And while virtually all of Sarah’s readers except for trolls are probably already well-versed in this issue, my goal here is to sum it up in sufficiently plain and direct terms that it can only be misunderstood with great effort. Granted, there are layers of unexplored obtuseness out there that assure no one can get through everyone’s head, but I’m going to give this my best shot.

The thing to bear in mind in the ensuing discussion is this: not only are Democrats not serious about combating public debt, but they are ideologically and structurally interested in its expansion. Understanding that fact makes it very easy to comprehensively predict and contextualize the entire response of the left to debt.

With that said, let us start by discussing the basic dynamics of US debt. Economists generally agree that debt accrued by the United States is different from other debt. Leftist economists try to use that fact to excuse virtually any fiscal behavior— at least, provided they like the politicians doing it. But in the basics, US debt is actually very similar to debt you might owe yourself, to a local business or another person. The difference is largely in scale and inertia. Scale is obvious. Even if you had a vaunted Amex Black, you’d be hard pressed to borrow a trillion-with-a-T dollars. Inertia is a little more complex. It refers to the fact that things that would happen very quickly in dealing with your debt happen quite slowly on the scale of nations. For example, you, individually, as a person, have a credit rating. So does the United States, except that it changes more slowly to reflect the general attitudes of the electorate driving the borrowing rather than the personality of an individual. That’s a driver of inertia. It’s also rated by several independent agencies, rather than one single one, meaning in any scenario that there will always be an agency that reacts first and an agency that reacts last. That’s also part of inertia. And because loans are made government to government, a massive bureaucracy has to request the money and another, probably even more massive bureaucracy has to give it. Signing this vast sea of things in triplicate is yet another contributor to inertia.

This much is still true, however, and whatever Paul Krugman says about the matter. People who loan you money always do so with an expectation of being paid back. There is no such thing as infinite credit. China does not loan us money out of the goodness of its heart and regular interest checks, sizeable as they are, pale in comparison to the scale of the debt we’ve accrued. If the country is run as Democrats want it to be, with debt run up infinitely, at some point the countries loaning us money realize we have no intention of ever paying back the principal. They realize it partially because credit rating agencies explain it to them in detail, with graphs. When that happens, other countries stop loaning us money. The reason it hasn’t happened yet is because, as I said, this process is considerably slower with countries than with people (though, mark you, we have already had one credit downgrade under Obama). Democrats would like you to believe that, because it happens slowly, we can round up and say it doesn’t happen at all. In the grand scheme of things it’s like swearing the sun doesn’t exist during the nighttime. Tomorrow does eventually come. In fact, I can tell you precisely what it will look like.

If other countries stop loaning us money then we stop being able to cover our debts, whether the people in government like it or not. Likely as not, they’ll blow on the gravy train’s caboose with a huge round of inflation to get a little past that point. That is to say, they’ll print money that isn’t representative of any equivalent creation of value in the world and explicitly hope that the people cashing those checks are fooled into thinking it’s real money. Which they will be, for anywhere between a day and a month. And then after that the currency is devalued and the checks from your favorite entitlement program just stop cold. At around which time the Democrats would blame the collapse of the government on a 0.001% decrease in the budget won by the Republicans after months of bitter arguing a year earlier. And because knowledge of these simple economic facts is shockingly rare, if not actively obscured by the, ahem, media-governmental complex, an embarrassingly large number of US citizens will believe it.

Largely this is done because anywhere that large amounts of money are being thrown around there is opportunity. As we saw with Soylandra, and Obamacare waivers for lobbies, government officials tend to give the money to their friends. And given that an accepted way to make friends with a Senator is to write him a large check, that money is not going only one way. This is one reason Democrats like debt. In directing how the debt is spent they can put away a tidy retirement. They estimate, probably correctly, that no one will ever stick them with the bill for any debt they run up, and in the meantime they can leverage what they make to buy tangible assets that keep their value.

Of course, not all Democrats are planning to loot the stream of income and leave a smoldering ruin. Sometimes their goal in spending money is predicated on a desire to bring the rich low. Particularly in those more versed in the class-warfare doctrine of liberal politics, the theory runs thus: all money, by right of dollar bills being printed by the government, belongs to the government (these are usually the same politicians who are fuzzy on the difference between fiat currency and the value it is meant to directly represent). And the rich are evil, by right of being rich. This is because, in their view, all wealth is accrued by charging someone more than something is actually worth and pocketing the difference. The idea that the value of an item is actually increased when a place like Wal-Mart makes it available in your neighborhood, rather than making you drive to the production plant in Boise, Idaho, usually never occurs to them. (Or, if it does, then they believe there is some other way of measuring the value of the item than the price people are willing to pay for it in a competitive market, usually relying instead on the gas and labor put into moving the item to a new place. That Wal-Mart deserves money for arranging for this gas and labor to be put into moving the item is still totally alien to them. But I digress). Wealth is therefore, to them, an accounting of how many times you’ve ripped off someone (their own wealth, miraculously, always excepted). Consequently they feel that emptying out the rich is a noble end in itself and are fairly unscrupulous in the means. There is a significant contingent of the left that believes in massive spending not in spite of the fact that it will bankrupt the country, but because of it. They hope that, if the country is made sufficiently broke, it will turn in on itself, strip the rich of their property, and use it for the public interest. Usually they believe this is the first step of a larger social transformation into an egalitarian society. As to the opinion of history, that is to say, the track record of reality, while a country can indeed be driven to the point of eating the rich, the promised transformation into an egalitarian utopia has never been seen. Also, as can be very easily proven by anyone wishing to go do the math, the amount you get by robbing rich people is always a tiny blip next to the debt accrued in forcing it.

A cynic might be quick to point out that the United States has one other way of ensuring credit, in the form of its military. Stupid as it sounds, we wouldn’t be the first to try using war to escape debt. We may have an example as recent as World War II. I’ve heard people argue that the construction of Nazi Germany was in part enabled by the sheer scale of the reparations demanded following WWI. The theory goes that one of many perverse incentives set up by this was that it made more sense for Germany to attempt to conquer the world than try to pay down its impossibly large debts. Of course, implicitly that means that when people bid for the US to lean on its military might as a way of securing its debt, they are bidding for the United States to become embroiled in (if not initiate) another World War.

I say all this as support of one, single point. When Democrats call for more debt they aren’t really doing it out of the compassion they state. And when Republicans, and conservatives in general, call for austerity, we do not do it out of personal dislike for the people dependent on government programs. Quite the opposite. If (really, when, unless we turn things around) the country suffers bankruptcy, massive inflation, war, or all three, as a result of these benighted fiscal policies, it will be the people most dependent on them that are hardest hit. Reduction in a controlled way is the less painful path. Now yes, I, personally, as a Libertarian, feel these programs should eventually be removed entirely, being wholly outside the federal government’s jobs of representing the United States as a whole to other nations and moderating interactions between states, I appreciate there will never be political capital to make such a move in one fell swoop. Gradual, long-term change is the only way to get such things done, at least in a way that sticks.

Nor is there any way of reforming the debt without cutting back on entitlements. In 2013 we spent a quarter of our budget on Medicare and Medicaid, and almost another quarter of it on social security. Defense, meanwhile, constituted less than a fifth, barely more than the amount we spend in Non-Defense Discretionary spending, which is to say, the government slush fund. Furthermore, defense of the country is explicitly a job of the United States government and an appropriate role of the federal government under the duty of “representing the United States as a whole to other countries”. The entitlement programs, just the two most prominent of which now represent, I must emphasize, almost 50% of the US budget, are not a legitimate role of government under that standard. And indeed, Democrats argue to cut defense not because they have any rational or constitutional reason for it but, once more, almost precisely because they do not. By that I mean that conservatives, who support defense spending because it’s one of the things government is actually supposed to be doing, are therefore loathe to cut it. Democrats hence propose cutting it mostly on a political basis, probably with little or any desire to get what they’re asking for. Rather, they realize that asking for defense cuts incenses Republicans, shuts down discussion by starting arguments, and thereby blocks cuts to the programs that actually are ballooning the budget. Hence, for whichever of the reasons driving their vested interest in expanding the debt, they enable it to continue expanding. The commitment to entitlement programs specifically is another sign that expanding debt is an end in itself. Entitlement programs have been noted since the days of bread and circuses to be notoriously difficult to get rid of, because people grow accustomed to the money and eventually find it impossible to live without. If your goal is creating an institutional debt problem they’re consequently the perfect tool. They also have the added advantage of often being redistributionist in nature, so they feed the doctrinaire Marxists too, by giving them lots of opportunities to draw battle-lines for class warfare. Something for everyone!

Democrats can do this without publically seeming unreasonable, because the army is the part of the federal government’s legitimate roles that is least visible in people’s day-to-day lives. Politically they also get to paint the Republicans as warmongers, which is a tasty bonus (Parenthetically, this is not to say that defense spending is always sane or efficient, or that we do not overspend on defense. It is to say that the Democrats really don’t care about that, except for a couple of died-in-the-wool idiot peaceniks. The rest pay it lip-service because it’s a convenient pretense.).

In the end it really is just this simple: Money has to come from somewhere. The left tells you otherwise only so they can direct the excess to themselves and cronies out of greed, or else act upon irrational ideological vendettas. To this end they work politically to ensure that debt is always being run up, especially in entitlements. Being foolish enough to believe the façade of political correctness overlaying this fact will lead to dire consequences, and indeed there is no world in which the free money does not, eventually, stop. It’s just that in some it stops the “easy” way, through controlled and managed expenditure reductions of the kind conservatives recommend, and in many it stops, well, the other way.

And for the most part, Democrats know it. They just find it more profitable to lie about it.

165 responses to “Ready, Debt, Go – BILL READER

  1. By about 1820, Britain had a public debt worth in the vicinity of about 260% of GDP. It’s central government had revenues around 10-15% of GDP. So, its debt was around 17+ times revenues. The joke at the time was that it had accrued half the debt pushing the Bourbons off the throne of France and the other half putting them back on.

    The US currently had debt around 100% of GDP and its central government has revenue around 20% of GDP. So, its debt is about 5 times revenue.

    That being said, debt is costly and while interest rates are likely to be low for quite a long time, there is no law that says they need be so forever.

    Moreover, fiscal policy only has the stimulus effect that the central bank decides it does. So, you can have as much “austerity” as you like, and the economy will keep churning away as long as the central bank compensates for the effect. Which it mostly has been. (The problem in the Eurozone hasn’t been fiscal austerity, it is that the European Central Bank is incompetent/a German plot–take your pick–and imposing monetary austerity on {almost} anyone who isn’t Germany.)

    So, I don’t think the US has a dire debt situation, but there is no good reason to add to it–building some sensible infrastructure would be good, but there is not a lot of that one offer. The odd pipeline or two perhaps.

    So, continue to cut back on the deficit and let a growing economy reduce the debt burden. Which is I believe what folks just voted for and (hopefully) will get.

      • Basically, if I understand correctly, quit digging the hole deeper and let the growth of the economy pull you out of it.

        • But that ain’t happening.

          • Either the not digging or the economic growth – the feds and the state-media still think there’s a pony down there somewhere.

            • Unicorn not pony

            • I’m all for not digging the hole deeper. And a dynamic, growing economy ought to do a great deal to fill it in. My liberal relative posted something about how great the stock exchange is doing and how this means the economy has recovered, which was about the exact claim as one of the TA’s made last Friday in class… which of course is nice for people who depend on stock investments but I don’t really see the “trickle-down” happening yet, or the “tide lifting all boats” yet. I don’t disbelieve either of those concepts, and I *have* seen more young employees at McDonald’s lately, but for the most part this “recovery” seems to be more top than bottom, which is apparently not a “liberal thing” to worry over when the president is Obama.

              But what I meant to get around to saying is… stopping digging and letting a dynamically growing economy fill the hole isn’t a bad idea if we can figure out how to get a dynamically growing economy, and I think that the answer to *that* is energy. And that actually is something that the government could do something about. It’s nice that gas is a little cheaper now, but we ought to be aggressively pursuing the future and approving (demanding) nuclear development. (Yes, Keystone, too.) This isn’t something that private companies are free to do without someone in government making sure they get the permissions they need. So far energy policy seems to be focused on making power expensive on the theory that if it costs more we’ll use less… which treats power as a luxury good we can chose to do without instead of the basis of *everything*.

              • Everything is getting more expensive. Stocks going up in price is just another sign of the inflation that the government swears doesn’t exist.

                • William O. B'Livion

                  No, “everything” isn’t getting more expensive. The CPI is at least partially bullshit, but there are lots of things–big ticket things–that can be bought for cheaper than in 1990.

                  • Yes, but they are things you do not need. Food, fuel, and housing keeps going up. Which is why they quit counting them in the CPI.

                    • Food goes up because fuel goes up.

                      And then we’ve got purposeful policies to make energy more expensive…

                  • I can come up with “computers”. Which you don’t need to buy very often.

                    In 1990:
                    Gas cost less than a dollar a gallon.
                    I remember that I could easily buy a month’s worth of groceries for $100.
                    Houses were half the price they are now. Rent was even lower.
                    I could buy a new car for $8000. Or a clunker (that I could actually fix up myself!) for $400.
                    Insurance (as a male teenager) cost me less than $50 a month.

                    Granted, inflation has decreased the purchasing power of the dollar since then. But that’s more or less what we’re talking about.

                    • William O. B'Livion

                      Computers, Televisions (especially on a per-square-inch basis), clothing (not fashion, but the solid stuff) and shoes, and many other things.

                      Other than a few brands which aren’t sold in the US any more (yugo, Suzuki (sadly)) the low-end cars aren’t that much more–the Nissan Versa comes in at under 12k. No, it’s not a great car, but if you’re needing something to get to and from work it’ll do. But compare what you get for that today v.s. in 1990. It’s not just not that much more expensive, it’s *better*.

                      Steak today is pretty much what dead sliced cow was 20 years ago.

                      Houses built in the 2000s have *huge* closets compared to houses built in the 1960s. Bigger than in the 1980s. Heck, the wife and I have a walk-in closet in the house we rent, and I’ve got some clothes stored in the downstairs office.

                      Guns are better today than what you could get 20 years ago, and the prices–well, there’s some artificial manipulation there. Ammo is more expensive, but that’s more changing market conditions than inflation.

                      Energy is more expensive, and is–from what I can tell–one primary drivers of price inflation for consumer goods and food. Of course there are solutions to the energy problem (Nukes) but there’s too many bed wetters out there for that.

                    • New tech like computers and TV’s (new style, flat screen, plasma, etc.) always go down after they have been out a little while. By solid clothing I’m assuming you are meaning work clothes, I could buy a good pair of work jeans for $5 in the 90’s, now you’re lucky to find a pair of even single legged jeans for under $30, a pair of Carhartt or Key double legged work jeans will cost you $35-40; I saw Irregular Carhartts for sale the other day for $27. The only hickory shirts I have anymore are the ones my grandmother buys me for my birthday every year, they just cost too much, I have went to buying thrift store shirts, even though they don’t last half as long as a good hickory, they cost a tenth as much.
                      Shoes, well I can’t really say, other than Romeo’s I haven’t bought a pair since the 90’s and it has been so long since I bought a pair of Romeo’s new that I can’t tell you what they cost (they cost about $25 in the nineties, $50 for a good pair of Redwings or Hoffman’s). Boots haven’t went up much; unless you want to have the same quality you got in the 90’s then you are going to pay about a third more.
                      Sure there are low-end cars for not a tremendous amount; we can thank the Chinese and Korean imports for that, they force the competition to keep their prices down. Still you could buy a Geo Metro (Suzuki) for not much more than half of the price of a Versa, and quality was comparable and a Geo Prism (Toyota Corolla) for 2/3rds. Now look at work vehicles like diesel trucks, to start with the best ones, before the government put so many regulations on them were (depending somewhat on manufacturer) mid-late nineties to mid 2000’s; and those pickups in good shape with 100-150K on them are selling today for close to what they sold for new. And a new 2015 is selling for double that, for an inferior (comparing new to new, they are arguably superior to a 15 year old vehicle with 150K on it, even if they get worse fuel mileage) vehicle.
                      http://cnsnews.com/news/article/ali-meyer/average-price-ground-beef-hits-all-time-high That shows the average price of ground beef (sorry don’t see a link to steak prices right off, but they are usually fairly closely correlated to burger prices) has tripled since the 90’s.

                      Yes houses are bigger today, but even for a comparable sized house the cost is a lot more, and not every couple with no kids needs a 3000 square foot house.

                      Guns, well that is arguable either way, there is just to much variance in all the brands and models. Savage bolt guns are a lot better than they were 20 years ago, for about the same price, but fans of the Winchester model 70 (I’m not particularly one myself) will be spitting mad if you try and tell them the ones produced today are better than their pre-64. On average, your off the shelf rifle is more accurate, and your automatic pistol or rifle is more reliable than they were 20 years ago, you’re going to pay more for it (usually there are exceptions, like the Savage above or the AK, can’t get much more reliable than an AK), but it is probably worth it. Some other models and actions, well there are just too many variables.

              • Yeah, what I’d llike to see proposed is an across the board freeze for some number of years, for everything. This would allow any growth to pull us to at least a less-underwater position.

                And no exceptions. Once exceptions are allowed for this or that, we’re right back to where we are now, fighting about increases.

                It’s difficult for me to see how the budget appropriated last year, which was enough to keep things running last year, would be so woefully inadequate this year, or next.

                But hey, I’m just a outside-the-beltway unsophisticated rube – what do I know.

                • Personally, I’d like to cut their budgets to fit their audits, then freeze ’em, except for cutting to audit next time. If they can’t remember where they spent the money, it couldn’t have been important.

          • No, it’s not. I meant to clarify what Lorenzo said, not to agree with him.

          • No it ain’t. Furthermore, there is a lot of Federal agency debt out there that is not counted in the official debt total. I used to own some of it. But the US can’t default on the agency debt because the roof would cave in–a default is a default. So at some point the Fed will be buying all debt issuance.

      • My interpretation was “Well, at least we aren’t fighting Napoleon….”

        • The real Burden of Empire is the ones the Brits were facing about 1820 or so – they had to fund enough Royal Navy and naval bases around the world so they could police the shipping lanes and maintain global trade, or else their balanced-on-the-edge economy would crash, taking the Empire with it. This plus the various laudable but not-essential-to-Britain efforts they voluntarily took on (i.e. eliminating the slave trade) put them into deficit with no easy way out.

          In our case our global hegemon role has being abdicated in order to fund domestic subsidies, apparently with the hope that plastic reset buttons can fill the void left by cutting Carrier Battle Groups and Army Divisions.

          Around about when the Iranian mullahs were freaking out due to the Iraq invasion we had a chance to increase our security by striking fast, killing the hierarchy, and getting out fast, leaving lots of wreckage and also lots of uncertainty as to when those crazy Americans would lash out next, but instead we overstayed trying to impose democracy on an incompatible culture.

          That fatigue led directly to the election of The One who bowed and kissed hands and apologized and distributed buttons. And spent like a drunken sailor.

          And as a result we’re much further in the hole financially, and in addition facing foreign challenges from all directions.

          The British basically embraced the reliable hegemon role from Napoleon’s last exile until after WWI, keeping the peace through the power of the RN.

          We’re not be doing that, and so we live in Interesting Times with much less flexibility financially than we might have had.

          • William O. B'Livion

            You’re overstating several things:

            1) In 1945 Germany’s culture was incompatible with, let’s not say Democracy, but rather “Liberal[1] Pluralistic Society” which is more the point. As was Japan’s in 1947, the Phillipines etc. Over time cultures can be adjusted to allow for “more things under the sun than are dreamt of…”. If we could have spent anywhere near as much time in Iraq as we did in Germany and Japan (when did we leave? Oh, yeah, not yet) then maybe the poor bastards could have stood a chance. I was there for a year. It’s a stinking festering shit hole, but when we were there they had a chance. Now it’s just misery and death.

            2) There as almost 0 chance that a Republican would follow Bush as president, the press had been screaming about Republican whatever since Bush refused to take voter fraud in 2000 lying down (He should have challenged a couple more states just to be aggressive). Especially with Dick Cheney’s heart problems.

            3) Obama, while profligate (hey, Drunken Sailors can only pawn so much. Obama doesn’t have that constraint) is not entirely at fault. The Republicans love their earmarks and pork almost as much.

    • Government figures aren’t very honest.
      The government takes in special taxes to fund Social Security and Medicare, and counts these as income. Then it buys special US Treasury bonds from itself with them and counts these as income again. (And counts the accumulated bonds the government owes itself as liquid assets.)
      Now, both programs have recently gone from having a surplus to a deficit. This will continue to for the foreseeable future. That’s a major reason the debt is exploding.
      If you have more going out than coming in, you can’t double-count the excess. While the imaginary assets they apply to the positive side of the ledger are decreasing in number.
      (Not to mention excusing itself from having to pre-fund pension liabilities.)

      That the whole house of cards hasn’t fallen over yet, is a testament to the power of inertia.

      Added to this, the government has moved a very high percentage of our debt to short-term bonds. If the interest rate increases even marginally from zero, we’ll be feeling a lot of pain, very quickly.
      (Not to mention that the main buyer of these bonds seems to be the Federal Reserve. But I’d advise against harping on this. People don’t want to believe there’s a problem, and are looking for an excuse to dismiss the concern. Talking about the Fed. even in passing. is generally enough to be marked as a conspiracy theorist and dismissed.)

      • Is there any question why former Enron advisor Paul Krugman doest see a problem with the way the government counts money?

      • “The government takes in special taxes to fund Social Security and Medicare, and counts these as income. Then it buys special US Treasury bonds from itself with them and counts these as income again.”

        Any company that tried that trick would see executives behind bars — just buying the bonds in itself, before they get into accounting.

    • This gives me some hope that America can grow her way out of our current debt. Though note that 1820 was right before the Mid-Industrial Revolution vastly increased British productivity. Steam power, for factories, railroads and steamships, was just coming in.

      The equivalent today may be nuclear power (both the advanced ultra-safe fission designs and the experimental deuterium-tritium fusion ones) and complete industrial automation (robotic factories) for heavy production coupled with 3D printers (fabbers) for light production. These technologies combined could bring us absurd levels of personal wealth.

      Though note: government spending can always grow more rapidly, so we must keep the Left reined in if we are to enjoy these benefits. The 19th century was also the century when the Classical Liberals reined in the Mercantilists; political solutions are needed or the technological solutions will simply be swamped by impossible promises.

    • it sounds nice but, under any reasonable accounting rules the US should include about $5 Trillion the GSEs Fannie & Freddie are in the red. There are another couple of trillion in bad loan guarantees from a variety of sources that should be put on the books, but the government has gotten pretty good at robbing Peter to keep those off the books.And what about the $45 Trillion or so in unfunded obligations like SS, Medicare, Medicaid & Obamacare? While it has improved, a few years ago the total financial obligation (not national debt) of the US was about 110% of the total wealth (not GDP) of the US – the US literally owed more than it was worth. The total financial obligation of the US is likely close to $70 Trillion or about 430% of GDP, and about 550% of non-governmental GDP.

      The 1820s British government may have had a higher public debt-to-GDP ration but they didn’t have to try to repay that debt while maintaining a national healthcare system, universal OAP, universal education, subsidies for ecologically friendless energy production and all the other things the US government has subsumed into it’s portfolio. And even without all those obligations the British government was still spending almost twice as much on interest as it was on it next largest expense, defense.

  2. God I hate auto-correct gone mad. That should be “on offer”.

  3. And the sad fact is that while Democrats are mentioned as principally engaged in this, there are a lot of “Republicans” involved as well. I think the next Conservative President should do the following.
    Declare martial law – thus suspending most Constitutional functions for the duration.
    Enact a vigorous investigation into all financial boondoggles – i.e., The owners of Solyndra WILL repay their debt, at the cost of their full financial estate. Failing that, they will be sent to hard labor until the debt is deemed paid.
    Phase out all entitlements. Note: I don’t really include Social Security as that is a program we are required by law to contribute to. But nevertheless the funds should be transferred to private accounts as soon as possible.
    Declare a Balanced Budget requirement of all legislation. Lawmakers – if you want to add to the public debt, you’d better have the means to pay for it, without foisting it onto the public.
    And finally a requirement that all public officials, down to County Sheriff level, be fiscally open. A private citizen should be able to view the finances of those who supposedly are taking care of public business.
    Of course, at this point the new President would be assassinated – likely by his own party. But think of the actual progress (in resetting Government) we would make!
    And let it be said that I wouldn’t trust any human with the powers thus enumerated. Myself included.

    • Oh, god, there are just sooooo many things wrong wiath that idea that I don’t know where to start.

      Point one, I seriously doubt that declaring martial law under these circumstances is even remotely legal. It is, therefore an awful idea simply because we don’t want to give the political parasites any ideas. We want them to start OBEYING they law of the land, not putting it aside as convenient.

      Point two; end entitlements bang/stop and we will have rioting in evey major city in the country. We need to come up with a legal mechanism whereby we can say “Everybody that got promised “A” gets “A”, but therafter it stops.”. Why? Because our government is too godsdamned casual about breaking its word.

      Point three; we should only get to gRab back the money that crony pRojects have gotten iF we can demonstrate that defrauded the country. Otherwise we are simply cRiminalizing being on the losing side. And that is GONNA but us in the butt.

      This isn’t going to be solved in one election, and any “solution” that proposes to do so is going to result in an unstopable State that we will deeply regret the instant power changes hands.

      And it WILL change hands.

      • Unless the declarers of Martial Law suspend elections, be ASSURED it will change hands. This proposal offers highly visible costs and nearly invisible benefits. Such a plan would make the Wall Street Occupiers and Anti-Walker demonstrations seem feeble — and would receive highly sympathetic nightly news coverage.

      • I don’t want any benefits. I don’t expect to see one red cent from SS. I just want them to stop taking my money.

        If people currently receiving, or expecting to soon receive, SS handouts want “their” money “back”, well good luck to them. They certainly don’t need *my* money though. I have better uses for it than to subsidize people who’ve had 40+ years to save for their retirements or have children who would support them in their old age.

        • At Sib’s college graduation, a gal from the Social Security admin got an honorary degree in something fluffy (sociology? It’s been a while). Anywhoo, she got a rousing cheer from the dimmer part of the student body when she announced that the SocSec was fully funded for at least the next ten years. This was, oh, almost 20 years back. As you can imagine, neither Sib nor I plan on seeing a dime in retirement or benefits from the .gov.

      • William O. B'Livion

        There is a simple, straight forward way to solve the SS problem in a manner consistent with the “promises” and “pay in”.

        Start increasing the age at which you can take “early” and “full” retirement by one year for every two that passes. At the same time stop collecting SS taxes from anyone until they’re within 40 years of their full retirement date, and allow them (not require) to put that money in 401k/403b/IRA investments, including the employer match.

        Those who are on SS will continue to collect it. Those near will have to work an extra year or two.

    • Yeah, No.

      If that’s the path, then what’s to prevent a future President (when the political pendulum swings again) from doing the same thing and changing it all back? And of course, just to make sure this time, she’d have to round up everyone who ever voted against her team, or made speeches, or commented against any of her team’s policies on the intertubes and lock them up in camps, just to protect her totally necessary changes to society from the pendulum’s next swing.

      But camps can be opened and the residents freed by reactionary forces, so in the end the revolutionary omelet must break some eggs.

      Which leads to mass graves.

      So yeah, No.

  4. It ain’t just Democrats. It is ALL political classes, in all times, always. The exceptions are not frequent enough to matter. They ALL cannot resist spending money that does not exist, once it becomes clear that the consequences are unlikely to catch up with them.

    Right now the Democrats are slightly worse because they are slightly further divorced from reality.

  5. History shows that no government once they have made fiat money legal can restrain themselves from over spending. The average life time of a unbacked currency is 40 years. The idea the full faith and credit of the US government IS backed by the ability to tax the American worker is flawed. It assumes they have the sense to allow them to continue creating wealth faster than the government takes it. They aren’t. It also assume a willingness to pay. That’s becoming very iffy. You think they can be forced? Go look at Greece. Tax evasion is the national sport.
    Allen Greenspan who headed the Fed for years admitted decades ago that gold is money and nothing else, just as JP Morgan said back in 1913. He recently reaffirmed that in a speech to the Council on Foreign Relations. They censored it out of the transcript.
    About that 40 years. Nixon closed the window on convertibility of dollars to gold for foreign banks and governments in 1971…

    • Hard money, of course, has never been debased…

      The problem is the abuse of the mint, not the form of currency.

    • Egregious Charles

      Gold isn’t money either. Like anything else, gold is worth exactly what people are willing to give you for it, or what you can use it for. 1,177 little sheets of good linen paper probably have more intrinsic useful value than an ounce of a soft, easily-melted metal that doesn’t corrode. (Gold is about $1,177 an ounce today.) In most situations I can imagine, 90 lbs. of tenpenny stainless steel decking nails ($12.99 for a one-pound box on Amazon Prime) have far more intrinsic value than either. When, in the modern world, the number of nails you can buy with an ounce of gold changes radically, the intrinsic value of the nail isn’t changing. It’s because the gold has a trade value wildly out of proportion to its intrinsic value. In an economic collapse, the value of paper money will plummet relative to things like canned beans or ammo; the value of gold will too, depending on the depth of the collapse. You will be able to trade gold for a buttload of paper money, but if a man’s worried about starving an ounce of gold won’t buy a case of Spam from him.

      Chris Bryne did an excellent treatment of the imaginary value of gold: http://anarchangel.blogspot.com/2005/06/specious.html

      • Gold’s actually pretty handy as an electrical contact, bio-inactive implant, optical coating, etc.There are industrial uses. There is also a rate of consumption due to these uses, and a rate of production due to interesting mining practices to squeeze it out of outrageously diffuse deposits.

      • The value of Gold or Silver or whatever hard currency is not in the intrinsic value of the metal, but the fact that it cannot be forged, or inflated. As such the money supply stays fairly static and you get away from the large business cycles that are the boom and bust the US and the world has been seeing in the last two centuries.
        Fiat money are not as stable for a number of reasons, mostly because the temptation is there to print more because free money helps everyone and taxation is hard.
        Basic economics states that the ideal money gets you away from barter, is indestructable, is divisible, is convertable and can’t be forged or have more generated. Beanie babies make terrible money, cows only so much better, salt a little better because the consumption is about the level of production, Iron and bronze were OK until the supply increased, but Gold and Silver (and PT and IR and U and such) supplies stay the same more or less.

        This is not to say that Gold and Silver cannot be inflated. Inflation is “too much money chasing too few goods” and can be caused by the introduction of money or the reduction of goods.
        When Portugal and later Spain started raking in the riches from overseas -Portugal from trade to the indies and Spain from the conquest of the new world- their inflation was such that it became more profitable to import goods like clothing and wheat than produce it at home. This was because so much Gold was coming in that there was the issue of an excess of money chasing limited goods. By buying wheat from France and clothing from England and Germany Spain was actually exporting it’s inflation. When the Spanish crown asked how to end this inflation at home, it was informed that it should spend less of the gold from the indies, and that would draw the teeth of the inflation and allow things to settle down. Spain was attempting to subdue the low countries, gain control over the Holy Roman Empire and subvert England, so they kept the inflation that eventually contributed to the destruction of the economic production of Spain (in my opinion)
        This was all from the school of Salamanca during the Siglo de Oro.

        • Ha! found the quote!
          From an article by Jesus Huerta de Soto:

          Martin Azpilcueta was born the year following the discovery of America (1493), lived to be 49 years old, and is especially famous for explaining the quantity theory of money for the first time, in 1556. Azpilcueta observed the effects on Spanish prices of the massive inflow of precious metals from America and declared,

          “Experience shows that in France, where there is less money than in Spain, bread, wine, cloth, and labour cost much less; and even when there was less money in Spain, saleable items and the labour of men were given for much less than after the Indies were discovered and covered Spain with gold and silver. The reason is that money is worth more when and where it is scarce than when and where it is abundant.”

        • The problem with specie currencies isn’t that the currency is unstable, but that it makes the underlying economy unstable. Because the money supply cannot easily increase, the economy stalls out in a deflationary cycle when people start running out of exchange media. That’s why every single specie currency has been devalued. On the flip side, you have inflationary problems when large amounts of the backing good are discovered. The other huge problem is that specie currency makes the fundamental assumption marxists make about the economy, that it’s a finite pie, true. If gold is the measure of value and there’s only so much gold in the world, then there can be only so much value. The only way to have more gold is to get it from somewhere else.

          The best form of currency is a fiat currency that only grows as fast as the economy does. Unfortunately it’s impossible to exactly match the two, so a small and relatively stable inflation rate is probably the best we can do. The biggest problem we have in the US is that 40-odd years ago some genius decided to give the Fed the mandate to maintain full employment. Right now we’re living the experiment demonstrating that monetary policy is very limited at increasing employment.

          • Gold is not wealth. Gold is only a counter that can be reliably be trusted to not balloon up like a fiat currency. Wealth is in the things you can buy with it or the services you can procure with it. Even though the amount may not fluctuate what people are willing to do for some of it can vary on circumstances and needs.

            I know you are looking at the depression and the stalling out of the availability of currency, but I would argue that the US economy of the 30’s, after Wilson’s Fed, Hoover’s social welfare programs, Smoot-Hawley’s Tariff plan, and FDR’s massive takeover of the banking, economic, market, labor and manufacturing, as well as criminalizing the private ownership of Gold currency and meddling with the Gold market was the farthest thing from a free market or a specie based currency that it was possible to have in the circumstance.

            Fiat currencies have failed regularly and spectacularly. It is impossible for any individual, group of individual or special or limited set of rules policies and philosophies to accurately predict the future economic trends and react in a way to forestall those trends and not overreact and amplify them.
            It is also apparently impossible for any government to keep from printing extra money because taxing people directly is too much of a struggle, so the temptation always leads to high inflation.
            Species backed currencies are more stable, just looking at US inflation figures from 1800 to 1900 indicate, in fact there was a mild deflation in that time.

            An alternate issue with this is that the US money and banking was never fully species backed during that time, nor was the British system since Robert Peel developed the British currency laws after the Napoleonic wars. Both systems allowed a limited amount of non-specie backing in the way of commercial paper and such to fund the reserves, as well as the practice of limited fractional reserve banking.
            Both of these systems allowed an oversupply of money to meet high demands, allowed for speculation to increase the money supply on unsecured paper, and as is usual, often led to business cycles of unwise investing based on the ease of money, which eventually corrected by bad investments having to be absorbed by the rest of the economy when the cycle collapsed.

            I am going to be rude and speculate on what you are saying, but I suspect that what you are calling a deflation may also be a correction or contraction to offset a bubble of unwise investment triggered by an increase of the money supply to meet a temporary demand.
            In both situations money is hard to find because no-one wants to risk loosing it in a bubble collapsing, and what funds can be found generally are got at high rates of interest for the possible risk.

            Another thing to remember is that even though deflation is hard on borrowers – that money that once bought an egg now buys a steak, and you have to work longer to earn it – it is a pretty good deal for lenders. Under continuous inflation the lender has to factor in not only handling fees, and risk, but also estimate inflation so that he won’t lose money on the deal. With deflation the lender can actually knock some points off to make the loan look a better deal to the consumer.

            I talk too much.

            • The value of gold does ballon, though. Every trade increases the total wealth of the economy, which means the value of each unit of gold – which is essentially fixed in quantity over short timescales – goes up. Which means that those who have gold get wealthier without actually doing anything. That’s also why deflation is so dangerous – it’s a positive feedback cycle. Why would a lender bother sweetening loan terms when he could see positive real returns with zero risk just by burying his money in the back yard? Furthermore, how many borrowers will have investments that could offer real returns high enough to service the debt and deflation? The velocity of money slows as people hoard and save, which adds more deflationary pressure, which rewards more hoarding and saving, which slows money even more…

              This is why you don’t see purely specie currencies in the modern Era. You call them “corrections” the people who lived through them called them “Panics”. I’m not just thinking of the Depression, I’m thinking of the Panic of 1893, the Opium Wars, the end of independent Scotland and the French Revolution. The Federal Reserve didn’t just happen. It was a deliberate effort to address the weaknesses in the monetary system.

              There’s a simple way to find the number of failed fiat currencies: take the number of failed specie currencies and subtract one. Neither is a panacea, both have serious weaknesses. But fiat currencies are human-derived, which means that they can be theoretically controlled, while specie currencies faults stem from their fundamental nature, which means they can only be reacted to.

              • I am not up on all your examples but the French Revolution was exacerbated by price and wage controls on foodstuffs that made it not worth while to bring wheat to Paris and made it not worth the while for bakers to buy it at the official price, meaning no bread of flour could be found officially in Paris. Marie Antoinette’s comment about the people eating cake was because cake flour, un-controlled by edict, could be found since it could be sold at the market price. The subsequent actions of the terror were made worse by the adoption of the revolutionary fiat currency, the Assignats, based on seized ecclesiastical properties, and the Mandats which were basically an attempt to revalue the fiat money when the government overprinted. The Mandats were in turn hyperinflationary. One of the first things Napoleon did was to institute Specie payments on the Consol, as well as mint gold and silver coins. I would add that the French system appears to have been more robust than the English because where the English had panics and bank collapses because of fractional banking, the French only ceased payments in specie for a couple short weeks.

                The Panic of 1893, where my Great grandfather had to move the family to Namaimo and work in the Ymir silver mines for a while, was created through the artificial fixing of the price of silver to gold (bimetalism only works well in thermostats) and political moves in congress to have the Treasury purchase silver at above the market value of silver and mint coinage with it. This depleted the gold reserves, and caused insecurity in taking US paper since the debt could be paid in gold or silver that was priced above what the actual market value for silver. In spite of the increase in silver coinage, the paper money that was redeemed in Gold was basically not backed. This increase in the money supply was an actual inflation , which caused a boom, which collapsed with the successive failures beginning with the railroads and led to even greater losses.

                Both of these were caused by government meddling, both were examples of government caused inflation by the creation of unbacked currency.

                Dunno about the opium wars or Scotland, but I figure the Brits were involved in those.

                Some reading:
                1893 panic
                http://fee.org/the_freeman/detail/the-silver-panic

                and the other is Dickson White, Fiat Money in Revolutionary France at the gutenberg site.

                • The Union of Parliaments that put paid to a semiindependent Scotland was the result of a fair amount of dirty pool involving the Darrien Colony.

                • I find it funny that you say the great strength of specie currency is that governments cannot meddle with it, while providing multiple examples of government meddling with specie currencies.

                  Furthermore, you fail to fully pull the string. Why did these governments meddle? It’s because they were trying to expand the money supply to permit economic growth.

                  • Well, those are your examples of how species backed monies are bad and lead to deflation and panics, not mine. In review they actually failed because: in 1893 the price of silver and money was inflated, and the money of revolutionary France was nothing but a fiat regime that went into hyperinflation and lead France to the edge of collapse until Napoleon instituted a species backed currency again.

                    When a government meddles in an economy it damages the economy. A group of even the best men, the best minds, with the best training and philosophizing cannot fully understand, predict and forestall economic changes because it is too complicated and depends on people doing rational things. It is not a relatively simple system like a steam turbine.

                    In the 1893 panic, there had been a push since 1877 to artificially fix the price of silver high to allow greater flow of money. This was rejected by Grant’s administration on the comment that such a practice would destroy the money and cause panics. Eventually the Bland-Allison act was passed over a veto of president Hayes who noted that the artificial fixing of silver to gold would drive gold out of the market (Gresham’s law). Which it did, but not until the Sherman act had been passed that pushed the treasury into purchasing and minting twice as much silver.
                    Which, by the way pushed the silver prices higher than normal market would drive it, and was one of the reason G-grandfather wound up working in the BC silver mines. It also pushed increases in silver production in Mexico, and that boom in production is often blamed as the sole cause of the 93 panic, not the economic actions since 1877 that pushed the production.

                    But, why do governments meddle? Because someone wants free money. Species regimes make that harder, and when left alone push production of species at the rate of growth more-or-less.

                    In a Fiat regime, money manipulation is the feature, not the bug. Which means the big lever for manipulation is there for everyone to yank on, making these business cycles of boom and bust inevitable, instead of preventing them as the fiat systems were supposed to be created to do.

                    • “When a government meddles in an economy it damages the economy.”

                      Agreed. So why do you advocate the government setting the price of one particular commodity.

                      Again, you’re not following the causal chain back far enough. The government meddled because the specie currencies had already failed and the meddling were attempts to kludge together a solution. Like most kludges, they weren’t terribly robust and usually failed spectacularly.

                    • Jeff, I don’t advocate the government setting the price of a commodity. I barely tolerate the idea of a government pegging the value of a fiat money to a particular commodity since there is still the temptation to cheat and lie about the actual value (see the latest iteration of the Argentine Peso, which is pegged to the dollar and the official rate and the black market rate for exchange are listed next to each other in the business papers)

                      I advocate a floating price of specie and the gold notes issued by the state to be 100% backed in specie, not in financial instruments, or other “paper” money like state bonds or promissory notes. This includes the idea that the currency unit be equal to so many grains of specie.

                      I suggest that the cost of administering and guaranteeing savings be carried by administrative fees on holding the funds and on charging a percentage on all loans, above the interest rates of the loans, with the option that the saver receive part of the actual percentage on the loan.

                      I would hope there would be a class of private banks that could issue private paper and engage in limited fractional reserve banking to supply the needed extra volume of money to allow speculative prospects to be funded, albeit at a higher interest than at the state banks – but with the understanding that there is no FDIC to bail out your account when “Bob’s House of Sushi and Savings and Loan” goes toes-up and you get paid back at pennies on the dollar in the dissolution.

                      I would want the full purpose of the Treasury to be to collect taxes, chase counterfeiters, and act as a forum to resolve disputes and mediate violation of contract between the banks and their depositors. I don’t want them anywhere near making money policy since they always put their thumb on the scale.

                      I want a used Aston Martin too. And I’m more likely to get one of those.

                      We are going to have to disagree about the genesis of governmental entry into banking. I will argue that it hasn’t worked well, maybe we should try something else?

                    • +1

              • As to the hoarding comment:

                When Scrooge McDuck and all his millionaire buddies hoard their money because they think in the future it will be worth more, and every couple in a 3-bedroom ranch house does the same, the demand for goods will go down. As demand falls price sinks. And it will continue to sink until someone decides that the new reduced price of stuff makes it more valuable than having money buried where only the moles can enjoy it. And at this point we have found the actual value of money to goods. At this point the deflation starts to break. Remember we are talking about personal judgment of cost/benefit, as well as personal needs.

                If you ask what happens if the price a product now brings on the market is less than the cost of production, all you can say is producers better lower production costs, increase the value or demand, or make another product. To you attempt to support prices instead of allow the market to direct the price level is to engage in another form of planned economy like those of the old Soviet Block, or Cuba and Venezuela.

                And Scrooge and his 0.01%, what about them? Well, most millionaire are actually more interested in doing things and making things. They can conceivably live on far less than what they earn, and most do acording to studies, but what they will probably start doing is buying or investing in now undervalued companies, buying capital goods to get them up to earning potential, buying goods and services….in short working in an economy at the new price and spending the money that makes it run instead of leaving it under the turnips.

                Except maybe Scrooge because he likes rolling in stuff
                that has been touched by hundreds of dirty hands, the perv.

                Deflations have floors. They are corrections of previous business cycles and proof that the bubble is healing. Corrections happen because the market overbought or overinvested or just bought the wrong thing. If you ever bought day old bread or a McGovern Tshirt for rags you have profited from deflation.

                • “As demand falls price sinks.”

                  A process known, depending on the severity, as a “recession”, “depression”, or “panic”.

                  All economic cycles are self-correcting, that’s why the first recession didn’t blow up the economy. Deflationary cycles have floors, so to inflationary cycles. The difference is that inflationary cycles can be controlled by the government reducing or re-baselining the currency, while deflationary cycles feed off of themselves until that floor is reached. At speed.

                  Old bread and rags – along with used cars – are examples of depreciation, not deflation.

                  • And to be obsessive, sorry Jeff, but if someone last year set up a factory to build Z-80 chips for a perceived need for repairing broken TRS-80’s, and they folded because, hey, they were idiots, if you buy the plant or the equipment at a knock down price from the creditors to retrofit to a product that actually sells or to turn the site into condominiums, you and the creditors are engaging in resolution of mal-investment. You benefit, the creditors eat the loss.
                    The same thing with day old bread. The loss may be planned on, but it is still the resolution of a mal-investment.
                    But that is my point, no-one can see the future completely. And if the baker who has been in business for 20 years cannot accurately foretell the volume he will have in his business tomorrow, how can a functionary tell what plans need to be formulated to control an entire economy in a year or two?
                    Planned economies do not work. They fail, people cannot get basic foods, consumer goods become impossible to find. Maduro of Venezuela calls me a liar (well, he would if he knew I existed and actually cared what I thought) but he runs a major oil producing country and cannot find enough toilet paper to fill the local needs.
                    Planned economies and planned currencies cannot survive because economies cannot be successfully planned.

                    • +1

                    • Nobody knows exactly what electrical demand on the grid will be in 15 minutes, yet the lights stay on because of one simple – for sufficiently complex values of simple – device: the governor. As load on the generator changes it causes the turbine to slow down or speed up. The governor senses this change in speed and supplies more or less steam (or fuel in your fancy modern gas turbines) to maintain frequency and voltage.

                      Planned economies don’t work because there are too many parameters and no bureaucracy has the information processing capacity to match the market. But we don’t have to plan the entire economy, we’re just looking to control the money supply, and for that we need to look at just one parameter: inflation. Simply set a target band – say 1-2% – and if inflation starts getting too low, increase the money supply; if it starts getting too high, choke back. It’s no coincidence that the decision making body for the Federal Reserve is called the Board of Govoners.

                    • Some people say things that make my brain hurt.

                      *Ouch*

                    • Jeff,

                      Not sure if you have actually studied Econ History but this little bit of it:

                      usagold.com/gildedopinion/oz.htm

                      &

                      http://www.measuringworth.com/uscompare/

                      &

                      shadowstats.com/charts/monetary-base-money-supply

                    • Controlling the currency and money supply is attempting to control the economy. That is the only purpose for it.

                • +1

              • Fiat currencies are manipulated to the benefit of the state. This has been the one truth about them since Kublai Khan started printing paper money to his own satisfaction.
                To be blunt, the reason there are no modern specie currencies is because of the cost of them modern military, the cost of the social welfare programs that are being administered, and the giant size of national governments. Deficit spending and borrowing can only take you so far. Such institutions cannot be supported by mere taxation, the taxed would revolt.
                Instead fiat monies are printed and so dilute the value of the money you have in your wallet, or mattress or bank account. In such case there is no need for robbing, distraining or sending out tax-assessment letters. Just print up more, and since the central bank has control over the books and the money is measured only in definition to itself it is not even the same as writing an NSF check.

                • Bullshit. The US spends more on defense than any nation in history and our defense spending over the long term averages under 4% of GDP. That’s hardly a unbearable overhead cost.

                  Fiat monies were implemented to protect the currency from repeatedly slamming from deflation as economic growth exceeded specie extraction to inflation whenever new lodes of specie were discovered, causing the money supply to grow faster than the economy.

                  • I quote myself:

                    cost of them modern military, the cost of the social welfare programs that are being administered, and the giant size of national governments.

                    Millitary spending in the US is the smallest part of the pie, but that was not true during wartime: 42% of GDP for military in the 40’s is what I find. Authors like Friedman, Rothbard and Raico say that modern warfare and the state to support it could not exist without the central banks and fiat money.

                    I am not Friedman or Rothbard, I do not say that military spending is bad, I am saying the cost of modern government is so large that it could not be paid for in any country without fiat currencies. Note that post war Europe has had smaller defense budgets and still had larger, more expensive and more intrusive governments by any comparison with the US.
                    The current purpose of fiat money is to control the economies to the benefit of the central banks, the governments and those that support them.

                    You still haven’t explained why the possibility of inflation caused by specie extraction is worse than inflation of fiat monetary schemes by a government giving free money to its friends and supporters.
                    One would end when the cost of specie extraction becomes greater than the value of the specie extracted (short of some sort of Sherman act like that which triggered the Silver panic of 1893 and subsequent deflation) whereas the other ends in hyperinflation, default- or revaluation-type deflations.

                    • The problem with your theory is that during the ’40’s when defense spending was so high (and we spend so little time at war vs. at peace the long term average is going to be closer to the latter) the US was still on the gold standard. The US has only truly been fiat since Nixon.

                      I’m not arguing that free money inflation is better than specie inflation. Both are bad and should be avoided. But while the former is subject – however imperfectly – to political control, the latter is condemned to the vagaries of resource exploration and extraction. Plus there’s the inevitable deflationary phases when specie extraction doesn’t keep up with economic growth (there might be some hope in cryptocurrencies, but those are too young and I haven’t given it enough thought to be sure) which fiat currencies are immune to.

                      On the balance fiat currencies are superior to specie currencies, which is why there aren’t any specie currencies today. But they aren’t RonCo products, you can’t just set it and forget it. Fiat currencies can be abused, which means that we need to keep a weather eye out and watch those in control. The first step for the US is to end the Fed’s mandate to maintain full employment.

                    • FDR seized the gold specie and set the price at $35, up from $20 per ounce, a fixed price but not a true market price. A true species backed money has the value fixed to the specie and inflation beyond the actual species is not allowed.
                      The British and American practices of fractional banking violates this, as does printing various paper debt like savings bonds or straight “greenbacks”, however this sort of thing is better than some straight up fiat money like the French Assignats, the Argentine Austral or the Weimar Mark

                      Jeff, I got to go, my dad turns 82 today and he wants me to rake his leaves (and I want to do it before it rains) and I will try to get him to go out for lunch

                    • I am saying the cost of modern government is so large that it could not be paid for in any country without fiat currencies.

                      Your fallacy is in your assumption that if there was a currency shortage, prices would remain stable. They wouldn’t — just as they rise in inflation, they fall in deflation.

            • You’re assuming static technology. The value of precious metals is very likely to drop dramatically over the next 50-100 years as deep mining, oceanic mining and asteroid mining bring us tremendous quantities of pretty much any and every precious metal in existence. This will trigger inflation in terms of gold equivalent to that experienced when the Spanish conquered the Aztec and Inca empires.

              • But who is to say that the economy will not also expand at a greater rate? The US economy did so from about 1800 to 1850 and 1870 to 1900 with a resultant slow deflation of specie money even though there were major gold and silver strikes in California, Oregon, Canada and Silver mining expansion in Mexico.
                Jeff Gauch is right, you know. Expansion of the money supply does loosen things up and allow the economy to act faster. It is just that such expansions also create malinvestments or misinvestments that may have to be absorbed into the economy.
                There may be an expansion of specie in the future because of tech advances, but it seems inevitable that all fiat currencies will have inflation because governments eventually use it to expand their power and influence. My hope for a hard currency would be that it would remove a lot of government from the money and reduce its power and influence in our lives.

        • On the other hand, you also stifle economies. Discovering gold often led to prosperity because people had money enough to facilitate trade.

          Smaller coins were also a problem, to be sure; one Roman emperor brought about a boom by coining a lot to commemorate a victory of his. Making change became easier.

      • William O. B'Livion

        NO NO NO. GOLD IS MAGIC. IT’S SHINY YELLOW PERFECTION!!!!!

        • You’re just mad because dwarves don’t make songs about bitcoin!

          • If they did it would sound like a drunken modem. But in harmony.

          • William O. B'Livion

            Bitcoin is a toy that’s suckered a LOT of people into it.

            It has at least one of the limitations of Gold that Mr. Gauch notes above–that is to say that there are a fixed number of bitcoins available, and when they are all in circulation then that’s it. Done, Game Over.

            Then again, there’s got to be lots of gold in the Asteroid belt. Maybe switching back to the gold standard will encourage our enemies to destabilize our economy by going out there and getting some.

            • William O. B'Livion

              BTW, that last paragraph? Someone could wrap a heck of a story around that.

              • A cost efficient SSTO will kich off the biggest gold rush in the history of the planet. It would also be the death knell of the dreams of tyrants as it would be impossible to patrol the belt effectively forcing self reliance.

                • A fervent jihadi, an unredeemed Nazi and a retrograde Stalinist walk into a bar, meet, and agree to jointly develop an asteroidal pathogen laboratory from which to devise the elimination of the human race.

                  It ain’t just tyrants whose dreams might be ended.

                  There is Liberté, Égalité, Fraternité in the grave.

                • As pointed out in Leviathan Wakes by James S.A. Corey, water would then become the most mined and sold element in the solar system. Water, out there you don’t last long without it.

            • And anyone who thinks “governments can’t touch it” doesn’t understand that as long as it has to come into realspace in the servers, government can get to it. Witness the response of a columnist back in the 90s to the software / music pirates moving their servers to jurisdictions that don’t extradite: “So? that’s why governments have cruise missiles.”

    • There is probably some nontrivial fraction of an Earth mass of gold, and every other element on the periodic table in the core of the Sun. That gold is, and probably will remain, worth precisely zero dollars to humans.

      Gold doesn’t have intrinsic value – it’s a commodity like any other. The value of any currency is the value of the goods it can reliably be exchanged for. When the Spanish looted the gold that the Aztecs/Mayans had accumulated, there was a period of heavy gold inflation in Europe. Spain actually tried to run it’s economy on gold handouts from the government for a while. It created all sorts of toxic cultural problems, and the only people who got outrageously rich in the end were the Dutch/English foreign merchants who would do the work that was suddenly “beneath” the Spanish citizens.

      Though I agree with your point about governments inability to be disciplined about fiat currency, I’d rather have a complete anarchy of financial instruments (fiat, stock, commodity backed, whatever) – anyone can run one. Only those who run theirs in a stable manner will remain valuable and widely circulated. If anyone starts manipulating theirs to debase it, their customers will abandon it for another currency/instrument. With electronic devices, it’s probably just a software problem to make the specific instrument backing any given exchange completely fluid and transparent to the user. Buying a coke with some complex vector of a dozen different currencies shouldn’t be any more complicated than doing it in quintillion-dollar-bills or thousand-ton-lots of diamonds, or grams of gold if you have some software agent doing the conversion.

      • And there are arguments about whether a government should run a currency or if currencies should be private, and if fractional reserve banking should be allowed or treated as malfeasance. Both indicate a possibility of entrenched corruption.
        Of course, since modern banks make money by lending out money they don’t actually have, if they stopped that would a bank actually charge a maintenance fee for handling and transferring monies from going bankrupt?

      • Disagree about the gold (if any) at the core of the sun being valueless. If it disappeared very bad things would happen, so it is probably much more valueble than any gold on earth.

        • The amount of gold in the sun, while vast, is a tiny proportion of the mass. Assuming it could be extracted without disturbing anything else, it’s removal would have little effect. Carbon, on the other hand…

          • William O. B'Livion

            If you have technology such that you can pull specific atoms out of the sun then Gold? Really?

    • What happens to a precious metal standard when asteroid mining gets going? Scandium, maybe, it’s rare even in the asteroids, and very useful industrially. (makes bodacious aluminum alloys)

  6. Social Security is and had always been one of the greatest scams perpetrated on the American people. If any private company were to offer exactly the same service they would immediately be shut down, arrested, and convicted of operating a Ponzi scheme.
    It was sold as a means to help those who had inadequate savings or pensions to make ends meet in retirement. Take a bit out of each paycheck, tuck it away, and dole it back out starting at age 65, which at the time was very close to a typical life expectancy, so the draw down was assumed to be fairly brief on average.
    So the plan was implemented, and for a time worked as intended. The money flowed in, and payments trickled out. Positive cash flow, the Social Security “lock box’ filled to overflowing. And politicians, being the scavenging thieves they are. found ways to tap into all that lovely money, mostly by expanding eligibility through the SSI add on program.
    But darned if people didn’t insist on living longer, until 65 was no longer the sunset of our years, but rather simply a measure of late middle age. Still, young workers continued to pay into the system and the lock box remained filled.
    At some point, IIRC somewhere in the 80s, our politicians realized they simply could not stand the idea of all that money just sitting there, not available for their use. So they borrowed it, replacing it with government bonds backed by the full faith and credit of the US government. How could anything possible go wrong? The example I have used before is that this is much the same as parents raiding their kids’ piggy banks for beer and smokes money and leaving paper IOUs in its place. Not a problem until the kids go to tap their savings and find only worthless paper. Worthless because the folks have been living above their means and have no way to make the IOUs good.
    Workers aged, fewer jobs were created, and still life expectancy continued to grow. And then we experienced a significant and protracted economic downturn, ie the last several years. At some point (actually a year or so ago) the cash flow turns negative. At that point Social Security stops being a cash cow, feeding the general fund, buying all those government bonds, and turns into a drain on the system as some of those bonds in that proverbial “lock box” must now be turned back into cash to cover periodic payments out.
    So, while it’s perfectly true to say that Social Security is solvent for a good many years yet, it’s all on paper. In terms of cash flow, the system has already turned toxic.

    • Social Security was intended to be somethin FDR was “doing” about the depression. As set up it was only mildly toxic. The problem is that successive generation of parasites have tinkered with it, making it worse. Ultimately, the core problem is the notion that the State will be better at saving than the individual.

      But when SS,was mooted, the abject failure of tye Modern Benevolent State was in the future. Hell, there are people whi can’t see it even NOW. Calling it a Ponzi Scheme is crediting its creators with more malevolence than they really had. They were dreamers. And a lot of fairly smart people shared their dream. It’s the buch running things NOW that are the problem.

      • Social Security never was a “saving plan.” From the very start, as FDR intended, it was a generational transfer scheme, thus calling it a “Ponzi Scheme” is exactly correct,

        • The Problem is that FDR did a lot of things out of right now political expediency with no concern with what would happen down the road.:
          http://peoplespension.infoshop.org/blogs-mu/2012/06/01/reading-fdrs-mind-%E2%80%9Cfull-funding%E2%80%9D-and-the-original-intent-of-social-security/
          That sometimes burned him faster than he planned, like the NIRA did. Other time it just left a ticking time bomb for us in the future to defuse.

        • No. FDR intended it to be a transfer plan from the first. the “Savings” aspect wasn’t intended to fool much of anybody; it was a sop to oldsters who “didn’t want charity” (yes, an almost unimaginable sentiment now. Common then). He wanted them to friction’ RETIRE so that the number of highly experienced people competing with family men for the small number of jobs would shrink.

          It’s kind of like the rigamarole the Government went through with gas rationing during WWII; we weren’t short of GAS, we were short of rubber (because some South American countries too far from Germany to catch a whig of what Hitler really was bought his “last hope against Communism” crap, and besides they were sick to the teeth of US anyway.)

          At this distance it;’s kind of hard to tell if he expected Social Security to last anywhere near as long as it did. He was a politician. He had been elected to “Do something about the Depression”, so he was shucking and jiving as fats as he could. The theoretical econ types who insist he should have “left the economy along, it would have righted itself, and he probably delayed that) miss a big point. In a representative government, if you are a representative and enough people tell you to do something, you’d better frinkin’ DO it. Or at least look like you are TRYING.

          One of the less attractive features of representative government. On the other hand, other types tend to be worse, assuming participants on all levels of less than stellar intelligence. Democracy is slow; that’s one of its biggest FEATURES.

          • As originally conceived Social Security was mildly injurious, akin to a persistent cold, and served to protect against full on flu. The ratio of those paying in to those receiving payments was on the order of 40 to 1. Changing demographics has reduced this mightily; last figure I recall seeing has the ration down to under 3 to 1.

            You are quite right about it being a political solution, applying the logic of cargo cultists to avoid more drastic matters. The pressure on local governments to offer tax break inducements to relocating companies demonstrates this on a more finite scale. Few companies will select their location on the basis of such incentives; issues of access to raw materials, energy for production, sufficiently skilled labor force, transportation routes and various amenities drive decisions about plant location — and only then do the companies seek to extort bribes from local governments, confident that some politicians in one of their target communities will desire to brag about their “bringing in” new businesses.

            This need to have political “leaders” “do something” is one of the most harmful forces in human society, since mostly what they can do is ineffective at best.

          • I can’t find the quote right now, but FDR KNEW that SS was a temporary bandaid that couldn’t go on forever. He thought that it could get us through a rough spot and then we would have to change it or phase it out. Not only did he know he was kicking the can down the road, but he admitted that he was. Which made it a bad idea, but it wouldn’t have been THAT bad if it would have been handled the way he intended it to be, which was namely some other politician catching the blowback from curtailing the payouts. Problem being that NO politician wants to catch all the flak they’ll get for taking away peoples money when they AREN’T catching the blame for creating the problem.

      • Can’t speak to the original Ponzi, but I suspect in general most such don’t start out based on malevolence, but rather with an unrealistic expectation that through some miracle the underlying proposition will begin to pay off.
        Politicians, on the other hand, seem to just want the system to hold together long enough for them to skim a to them adequate nestegg for their own personal futures. Needless to say, such investment is never in government backed securities, more likely real property or off shore investments.

        • Ponzi flat out lied about how he was getting his money. Maddox did, too.

          When you pay your investors out the invested money — the definition of a Ponzi scheme — you have to know what you are doing.

          • Well, Ponzi’s scheme was supposedly defrauding the government. US International postage was a different price in Italy than it was here. The scheme was that bricks of the postage would be purchased in one place, and redeemed at face value in the other. He may have actually done it at first. But it didn’t take long before his scheme had more “invested” in it than all the International postage the US government had ever printed. Not to mention the time lag to ship things back and forth from Italy on tramp steamers.

            You have to know what it is that you’re doing. But somehow, Corzine remains out of prison.

    • William O. B'Livion

      which at the time was very close to a typical life expectancy

      A bit *past*. Which meant that mostly it was widows and old women who collected.

  7. This is because, in their view, all wealth is accrued by charging someone more than something is actually worth and pocketing the difference.

    Doug, this is an outgrowth of Marxist though of value. The idea is that all exchanges, all just exchanges, are of equal value, and any unequal exchange is caused by exploitation and coercion: this is to reflect the idea that the work put into an object defines the value of the object and justify the workers’ recompense for their labor. (Marx clearly never bought shoes, it doesn’t matter how many hours you put into a shoe. If it is ugly and it doesn’t fit it isn’t worth the price)
    In reality all just exchanges are unequal. I am more than willing to trade you what you want but you are going to have to value what I am offering more than what you already have. The exchange is unequal because by your trading you are getting something that has more value to you than what you originally had.
    This is the basis of barter and of trade and by extension employment.
    Simply put, if I have acorns to get me through the winter, and you have fish, I will not trade you acorns to fish if there is no benefit to me. No amount of “Just Exchange” is going to induce me to trade for something that will leave me hungry come February.

    Now, in reality wealth comes from supplying a need at a lower price than what you can source it for and keeping the difference, but it is not because of coercion, it is because by the consumer is willing to pay the price because it is cheaper than any other way of getting the product.
    This by no means includes regulatory capture, by the way, which is exploitation and coercion.

    • Marxists seem almost unable to grasp the dirt simple idea that agent A doesn’t have the same valuation over states that agent B does. That value isn’t a property of an object or state, it’s a property of an individual agent’s evaluation of an object or state.

      Heck, even that isn’t really required. If A has two (a)s, and B has two (b)s, and they each value having an (a) and a (b) more than having two of either, a trade increases value for both parties.

      Dirt. Simple. And yet a lot of people don’t seem to get this.

    • This idiocy is hardly limited to Marx or Marxists. It pops up,in Confucius, it runs through early Christianity. The notion that the facilitator brings no value to a transaction – that the merchant is exploiting his customers and his suppliers.

      People are unwilling to grasp that, generally speaking, if a product or service is being overpriced, somebody WILL undercut that price and equalibrium will return. They jst can’t see it.

      • Add in that Socialism in basic is- the government is responsible for all goods and services- which creates both a monopoly and a surcharge for their service to raise the inflation/debt even more.

    • I closed my italics tag. It showed when I posted to have closed.
      drat.

    • This is a concept on vivid display in baseball team development, readily studied through the application of sabremetric techniques. When Team A trades their third baseman to Team B for a starting pitcher it is typically because each team values what they gain more than what they give up. There is no absolute value to either player and each offers value contingent on what the teams need.

  8. I suddenly get an odd image of my head of Larry Correia in full accountant/auditor mode unleashed upon the national budget. Not sure where it would end but it would be a very interesting ride, and probably not the nicest thing to do to him.

  9. I keep hoping cryptocurrencies take off at some point. Before the Mt. Gox crash, I was messing around with some perhipheral cryptocurrencies like Dogecoin mostly for fun/education. 😛

    There are a lot of (probably unconstitutional by 1st and 4th amendment) laws restricting people from creating their own currencies. But trade, at least in the abstract realm of exchanging money and ownership, is a form of speech. Speech is *supposed* to be unconstrained by government, and the privacy of speech is supposed to be unconstrained by the government.

    It seems to me that there are two (possibly more, but these are two poles) futures with respect to electronic communications and transactions:
    1. The first is the dismal one that appears to be happening now, where the government, via large suborned companies, spies on everyone’s business, and intercepts and logs everything to later dig through so they can hang you with it. The panopticon police state, as already realized in the Chinese special economic zones, where it is against the law to operate any device without government spyware on it, and there are more police watching internet usage for unapproved thought than there are dealing with physical crime.

    2. On the other hand, there is a great deal of promise in asymmetric key encryption. There are ways that have been developed, pioneered, but have never really caught on, where communication can be rendered completely secure between two parties, even if the entire network in between is ridden with arbitrarily powerful spy agencies with superhuman computational capacity. There are unbreakable encryption schemes. One step below this, there are schemes that are more practical, but so difficult to break that the entire universe rearranged as a computer wouldn’t do it for you in a billion years.

    If the use of encryption became widespread, easy, and automatic, there is promise that spies, eavesdroppers could be locked out of communications. Once predatory third parties are locked out of transactions between people, the government could just as easily be locked out of economic transactions.

    Anyway, in the limit of arbitrary refinement, exchanging money is a form of speech. Trade, freedom of association, freedom of speech, and freedom of thought all run together as aspects of the same thing.

    • I think the 90’s caught our current political elites off guard. It took them 10 years to grasp the implications of the internet and computer technology, and perhaps another 10 years to get going with their latest round of trying to interdict/control all electronic communications to try to head off an encryption-secured and private future at the pass.

      In the 90’s, there was the V-chip. Ostensibly, this device was supposed to let parents censor their internet and TV for their children, to protect them from objectionable content. In reality, it was an attempt to install a remotely controllable blocker/kill switch on everyone’s means of obtaining news and information. It never took off due to the technical challenges of the time, inability to manage a vast network of kill switches, insufficient bandwidth, etc.

      There was also the arrest of Zimmerman for giving a mathematical talk outlining a cryptosystem. By acknowledging certain mathematical truths and talking about them, he was found to be “trafficking in arms”.

      • William O. B'Livion

        Phil Zimmerman was not arrested for giving a talk on Cryptography. He was investigated over the international release of PGP initiated purportedly because of a dispute with RSA over the use of their algorithm in PGP.

        The investigation was dropped, no charges were ever filed, and no finding was ever made.

        The law that he was investigated because of was the ITAR–“International Traffic in Arms Regulations”, which at the time considered strong crypto to be a military asset. Mostly because when the laws were written the idea of doing useful cryptography in software was science fiction.

        He was arrested once during an anti-nuclear protest, but not for smuggling them.

        Also don’t forget the Clipper Chip, that little bit of phone crypto (hardware) with the USG escrowing the keys. Thanks to Matt Blaze for sinking that one with a single white paper.

    • William O. B'Livion

      The Cypherpunks went over most of this in the 1994-1998 timeframe (some a bit earlier, and it ran longer but most of the work was done in those years, at least from memory).

      There are some pretty drastic ramifications of fully anonymous digital bearer certificates (aka anonymous digital currencies), really stirs things up, and not always in a good way.

      The biggest problem with any kind of crypto is key management. The harder it is to recover a lost key, the fewer people who will be able to use it. The easier it is, the less secure the system. Third parties don’t help here because of trust issues.

  10. Dems do so love to cut the Mil Budget, but try to save money by closing a base in their district …. whoa nelly. Teddy the lady killing Kennedy was great at protecting his bases.

    • It is not so much that Dems like cutting the military budget (remember Les Aspin’s insistence the Army buy something like 400 unnecessary trucks which just happened to be built in his district) as they like the pressure it puts on Republicans. Remember, the Sequestration’s significant cuts to Defense were put there by Obama in the expectation Republicans would never accept them and would be forced to back down on efforts to restrain government spending.

      The real difference between the parties on this is that the GOP remembers that there is a purpose to Defense Spending beyond the distribution of goodies to their supporters (although they don’t mind that aspect one bit.)

      • William O. B'Livion

        The Republicans expect to get some bang for their buck, while the Democrats just want the bucks.

      • Oh, they do both … demand they buy things like those trucks all while cutting the budget to get things other than those trucks. They then want to move that money over to a pet project.

  11. Egregious Charles

    “And then after that the currency is devalued and the checks from your favorite entitlement program just stop cold.”

    A small quibble, I don’t see it happening quite that way. They’ll keep printing the money to pay for issuing the checks until the value of the checks is so small that no one cashes them. Probably during this time the number on the front of check will regularly go up with much fanfare; a $1000 check that’ll buy 400 loaves of bread will become a $1200 check that will buy 200 loaves, and a $1500 that’ll buy 100 loaves, and a $10,000 that won’t buy one loaf.

    • C4 mix B explodes just as well, and is less expensive at the local mini mart.

      Just sayin’.

      • Whatever happened to C5? I have an engineer soldier’s field manual that mentions it, but I’ve not seen it referenced anyplace else.

  12. One point about the effect of inflation. If you have money sitting in a bank account, it will devalue, possibly at an alarming rate. If you have debt, it’s relative drag on your balance sheet goes down at an alarming rate. This is another way that goosing inflation punishes people who are thrift and rewards those who are profligate.

    • This is why you should be profligate in inflationary currencies and thrifty in hard currency. Before the information age, you’d be driven mad by having to juggle multiple currencies but now? Why wouldn’t you take advantage?

      • And so we see the basis behind Gersham’s Law.

        • It’s related but not quite the same as the most likely challenge to the inflationary dollar will not be gold but the cybercurrencies that have well known future issuance rates that are small. Bitcoin is the current favorite.

          Bitcoin is increasing in circulation and is not being driven out of circulation by the national fiat currencies. I don’t think this violates Gresham’s law because Bitcoin has no commodity value, just like the national currencies it is supplementing. However it does have predictable issuance rates which means only demand drop can cause inflation surprises, not unexpected supply increases.

          • I don’t think Gersham’s Law applies to Bitcoins yet because a large portion of the population doesn’t see them as money, which means they aren’t money (if most people aren’t willing to accept them in exchange for goods and services, you can hardly call them a medium of exchange). When that changes, it’ll be interesting to see how it interacts with the dollar.

            Cryptocurrencies might be the innovation that solves the problems of both specie and fiat currencies, assuming they can be maintained secure. On the other hand, it could just be a new specie currency backed by computer cycles.

  13. My most highly rated comment on PJTV (it scored a 79) ran something like this:

    Some people don’t quite get the SCALE of our debt. I work for a company in the northwest that builds airliners.

    A 787 lists for about Two Hundred Million dollars. So Five 787’s is about a Billion dollars.

    That means FIVE THOUSAND 787s is a Trillion dollars.

    Our debt is 16 Trillion dollars. That’s EIGHTY THOUSAND 787’s worth that we’ve borrowed.

    At they rate we build them (or hope to) generations could live and die in the factory before we could build enough to pay off the current debt, and we’re adding another 6-8,000 787’s worth of debt EVERY YEAR.

    The world can’t buy that many jets. Even if we as a nation diversify our exports (like we have in reality) we can’t bring in the money it takes to pay that debt. The whole thing is going to crash.

    That was a bit over a year ago. I worked out later that it would take 666 years to build 16 trillion dollars worth of 787’s. Of course, not that’s what, 17-18 Trillion?

  14. This is why one of the first things the 114th Congress should do is send a balanced budget amendment to the states. I would go with something simple like Congress cannot appropriate more money next year than the Treasury took in last year. Also cap the debt ceiling at ~80% of GDP. Put in an escape clause saying one or both parts can be waived if 3/4 of both houses and the President declare an emergency.

    It’s an idea that always polls well, it would make for an excellent campaign issue in states with divided legislatures in 2016 with the potential to help up-ticket races, and it completely bypasses Obama which will help blunt the attack of “do-nothing” Congress. All of which is why I have little hope of it actually happening.

    • There are two essential tools available for reducing the debt: cutting spending and increasing growth. Happily, done well, the first aids the second.

      Some years back several states (IIRC, Colorado was one of them) limited the growth in the state budget according to population growth and a small inflationary factor. So long as revenues from economic growth outpace the increased spending the budget will eventually get into balance.

      Politicians, eager to buy votes by doling out goodies, are highly adept at finding ways around such limits.

      • That actually ties into another item on my political wish list: Ending baseline budgeting. That’s the weapon the progs have used for decades to label Republicans as cutting [education, food stamps, medicare, etc] even though the absolute amount spent goes up year to year. Instead of assuming an agency needs more money just because of population growth and inflation, force the agency to justify every dollar.

        • Everybody else uses zero base budgeting. In fact it fiduciarily irresponsible to use baseline budgeting in the real world.

          • If the amounts are stated in constant dollars some of the problem with zero-based budgeting is ameliorated. I suspect that if held to the same standards as the CPI the zero-bastards would find incentive for greater honesty.

            One reason the Democrats enjoy zero-basing is that it enables them to run millions of dollars of ads attacking Republican politicians such as (senator elect) Thom Tillis for “cutting $500 million from NC kids’ education” when in fact the absolute spending increased under his House Speakership, it simply did not increase at the rate the educrats demanded. Apparently, passing Obamacare did little to reduce the increased cost of Teachers’ (and administrators’) health benefits.

            It is a measure of how bad a candidate Kay Hagan was that she wasn’t able to come up with anything more substantial to sell the public.

  15. I am surprised to see so many comments made without yet addressing one of the primary drivers of Democrat support for increased debt: Government Employee Unions.

    These entities forever demand increased benefits for their members without regard to the polity’s fiscal health, knowing that their ability to deliver campaign contributions (both financial and in-kind) and politicians’ short-term incentives will create a compliant political class. These benefits are not only increased without demanding increased productivity as would be the trade-off for private sector entities, but arguably their increased productivity would be injurious to the polity.

  16. Ascher Goodrich

    I have to wonder at the ability of a country to collect on our debt. If say China, decides it’s time to collect and we go Full Evil and decline. What can they do about it? It would take a long line of asinine leadership in order to reach that point, but considering how things have been going the past few years…

    • Well, for one thing China can’t just decide to collect. That’s not how bonds work. China could decide to get out of US Treasuries, causing their value to plummet and interest rates to rise, but that would trigger the Fed to start buying Treasuries to keep interest rates stable. The net result would be substantial inflation.

      • Ascher Goodrich

        @Jeff Gauch- Sorry, I suppose I was being a little obtuse. I understand that “legally” China can’t collect whenever the fancy strikes them.

        I’m thinking something more along the lines of when Mexico defaulted on French loans in the 1860’s and France physically came to collect-which I should point out was VERY illegal.

        • France wasn’t the only one. As I recall England and Spain also invaded to collect many owed, it’s just that Napoleon III thought that setting up a puppet kingdom while the US was distracted would be a great idea.

          It should be noted that prior to WWII the US, particularly the USMC, rather frequently invaded Latin American countries to collect debts. Not only for ourselves but European creditors. That’s the part of the Monroe Doctrine that is often glossed over.

          • Ascher Goodrich

            You are right about England and Spain. Sorta slipped my mind. To be fair, in that particular instance, Spain and England gave Mexico a two year extension and never actually made landfall.

            I just don’t think China could pull off the same move as Spain or England, and they definitely wouldn’t manage a Napoleon. I don’t see any other way for them to collect on their loan if The United States simply decides not to pay.

            I should probably add that I think deciding not to pay would be a terrible idea.

          • It should be noted that prior to WWII the US, particularly the USMC, rather frequently invaded Latin American countries to collect debts. Not only for ourselves but European creditors. That’s the part of the Monroe Doctrine that is often glossed over.

            Which is a shame, because it is something of which we should be proud.

      • China has already been getting out of US Treasuries, and the Fed has already been buying them to keep interest rates from going up.

        • Keep in mind that should China dump Treasuries too quickly the market value of the T-Bills would drop precipitously, devaluing the remainder of the Bills China is holding, so they are caught in somewhat of a trap.

          As the saying goes, When you owe China 10 Billion dollars you have a problem, when you owe China 10 Trillion dollars, China has a problem.

    • William O. B'Livion

      The biggest threat they have is simply to not lend us any more money.

  17. We currently have no provisions for the bankruptcy of states. So it’s pretty much inevitable that states that get into trouble are likely to add to our federal debt troubles and certain states are likely to be hollowed out by investing state surpluses in federal debt instruments. We currently don’t have the sort of sophisticated tools we need to stop that from happening.

    At present reserve rates, US banks can loan out $9 for every $1 they have in reserves. If they have reserves deposited at the Fed but have not loaned out those $9, those reserves are called excess reserves and currently are at $2.56T. Surprisingly that’s down from August 6th when we peaked at $2.71T.

    http://research.stlouisfed.org/fred2/series/EXCSRESNW

    So US banks can, at the drop of a hat, loan out $23T under current rules by the miracle of fractional reserve banking. This puts a remarkable amount of play into the system. They can, if they wish, purchase the entire public debt of the United States were that action not to affect the price of that debt. Since the US Government can put all of these banks out of business, the likelihood is that for quite some time the government will be able to coerce US banks into buying up that debt. Thus we are not going to collapse on any random Tuesday.

    This by no means is an endorsement of our present situation or an assertion that we’re out of the woods. We’re well past the cliff edge and in our ‘Wile E Coyote moment’ of figuring that out. But it means that the timing of our fall is more uncertain than most think and we can still usefully do things to make the landing slightly less brutal. It’s time to get moving on that.

  18. The sickest joke of all. If the progressives hadn’t worked so hard to tie everything up in regulation, keep taxes so high, Help the poor with borrowed money, more than likely we would have none of the problems we have today:
    http://www.forbes.com/sites/richkarlgaard/2014/09/30/americas-missing-wealth/

  19. To understand economics you have to answer this question.

    What Is Money? | by Frédéric Bastiat

    If you don’t want to watch but need to read it.

    mises.ch/library/Bastiat_QJE_what_is_money.pdf

    The government of the world will not save the economy.

    • Then you need to look for…

      “That Which Is Seen, and That Which Is Not Seen” by Frédéric Bastiat

      A good, IMO, modern interpretation is…

      “Economics In One Lesson” by Henry Hazlitt

      mises.org/books/economics_in_one_lesson_hazlitt.pdf

      Then you will be able to deconstruct all the fallacies that some expert “Economists” will tell you are truths, because economics is not complicated at it’s core, we humans, as we often do, make sh*t more complicated than it needs to be.

      • The problem is that far too many people would rather pay attention to Krugtron and his ilk and misquote Adam Smith as if they know anything than try to understand how things really work. Then slap you all over with statist garbage when you try to explain things to them. More Malware.