From Learn Liberty.org by way of the Activist Post
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get your state to succeed from the union if you don't want to pay that.
I luv that Fed credit card. I want one! ;-)
This is exactly what the Ron Paul campaign needs: clear, brief, and direct education without selling a candidate. ..then maybe they will realize that there is only one candidate to vote for.. Ron Paul (..and all the other representatives who stand for the same values). Wake up, then warm up, to Liberty and to the Ron Paul's political movement.
Paul needs to simplify. His intelligence and command of the issue seems to get in the way of realzing and stating things in layman, simplified terms. Objectively, he sounds like all the other people on money investment shows, that I can't even follow what they are saying all the time.
Operation Iraqi Liberation
(As Greg Palast pointed out, has such an unfortunate acronym XD so they had to change 'Liberation' to 'Freedom' LOL... Official facts btw)
"Earth provides enough to satisfy every man's need, but not every man's greed."~Mahatma Gandhi
Quick Humorous Satire course on Ron Paul: http://www.youtube.com/watch?annotation_id=annotation_65316&...
The best thing about this video is that it is easy to understand. Great way to get the message across. Simple, to the point, and informative.
Live within your means.
What if the National Debt belonged to those who Benefited?
What if you went to court and argued that since you received no benefits from the Spending that Congress Unconstitutionally demanded?
How can someone be held responsible for a bill that they neither authorized or benefited from?
What if it is our 'Representatives' who own the debt that they created and benefited from politically?
This is a good video and a rreal public service because we really really need to educate Americans on this issue and most people have no idea of how government works and about debt and stuff. He ends by saying that it's time to take the credit card away from the government which of course can't be done unless you have a bigger military and more cops than the government does.
This leads me to ask an honest question-since there's no way the US government can ever pay off it's debt, and the only other option according to all economists, is default, what would that actually mean? I mean, say the US tells China and the rest of the world who bought US debt, "Hey, you fucked up...you trusted us. we can't pay you back." What is the rest of the world gonna do? I mean, the US has the world's mightiest military, its not like they can come and repo North Carolina or California or something. So what if we default? What's yal's opinion?
"He ends by saying that it's time to take the credit card away from the government which of course can't be done unless you have a bigger military and more cops than the government does."
I don't think you should take it quite so literally. Voting in politicians who will get spending+interest below revenue (and/or holding existing ones accountable if they do not) is probably what is meant by the video.
"So what if we default?"
Keep in mind that we have already defaulted, multiple times, and pretty much continuously for the past several decades. The gold confiscation/repricing in the 1930s was a default. The closing of the gold window in 1971 was a default. And monetary inflation (which devalues dollars and therefore decreases, in real terms, dollar denominated debt) is a continuous/gradual default. The game plan is likely to keep inflating enough to keep the debt under control while doing whatever is necessary to keep bond yields from getting above (or anywhere near really) the real inflation rate. That plan will ultimately fail -- but the exact timing and failure mode are hard to know.
But to try to answer the question you were really asking (i.e., an "in your face, tell 'em to get lost" kind of default): The dollar would collapse. The US government would not be able to obtain any credit from abroad. There would likely be trade sanctions imposed. People in the US could suddenly find themselves without critical goods, and with no manufacturing capacity. Unless the US is prepared to go to war with the world, the abilility of the US to have any influence abroad (militarily or otherwise) would evaporate. (This is really wild speculation -- I'd be interested in hearing what others think might happen.)
Thank you very much for your answer! I have read a good bit about this sort of stuff since becoming a Ron Paul supporter in 2007 but there's still so much I don't understand. So rather than do an actual in your face default, you see us continuing along the path of more subtle forms of default. I can understand that but I would imagine that the other nations are beginning to wake up to this tactic and will try to do something to change the status quo-BRICS for example.
Anyway thanks again for your clear answer!
"I can understand that but I would imagine that the other nations are beginning to wake up to this tactic and will try to do something to change the status quo-BRICS for example."
Exactly. That's why the plan will ultimately fail. Once enough of the world decides it doesn't want to play this game (which is rigged such that real lenders and dollar-holders lose wealth), the game is over. (And over the past year or so there have been a lot of signs of dollar hegemony unraveling -- different countries not using US dollars for activities that used to be done exclusively in US dollars.)
It's amazing how long they can keep the game going though. And you see all kinds of interactions happen that are hard to predict ahead of time. For example, the high demand for US debt when the real return is negative (and not much better than cash, sometimes even worse!) and the US is massively indebted already might seem very perplexing. That is, until you consider that people don't keep large amounts of cash in their mattresses but in banks, and the banks are insolvent. So people are using US debt as a more reliable bank, because if the bank doesn't have the money (think MF Global) you might lose everything, but if the US government doesn't have the money, it just prints more via the Fed (stealing wealth from everyone else so it can "make good" on its debt to you).
The way the US has been using its military in the MENA region (and forcing "liberated" countries to sell their oil in US dollars) likely has something to do with keeping this game going as well.
A big part of the problem is that banks are all too happy to play the game. They don't care if the principle loses value, because they create money from nothing. They basically buy US debt with money from nowhere, and when the bond matures they can send the (nominal) principle back to the nowhere it came from, and pocket the interest (which is a lot of money when you buy billions of dollars worth of bonds using money that doesn't exist). The net result is that you and I become more and more indebted to (enslaved by) the banks as long as they can keep the game going.
I see the banks as a big part of why the failure mode is so unpredictable. Increased leverage always makes markets more unstable (as it introduces positive feed-backs), and the banks constantly making money and promises to "pay it back" (extinguish it) has created lots of leverage in the system. And the Federal Reserve seems intent on ensuring the amount of leverage in the system never decreases, which only ensures it will fail spectacularly at some point.
One more question if you feel like keeping this going-I have never understood why China, Japan and other nations need to buy US treasuries in the first place? Like, why does a country have to put their excess money, money that I'm assuming they made over the last year in trade, anywhere? Why do they buy US treasuries, why not just put their money in the Chinese central bank or something? I know China and Japan both know that Washington is devaluing the dollar so why do they keep purchasing our debt? Why purchase anything?
That "excess money" is all US dollars. When we buy stuff from China we pay in US dollars, not yuan/renminbi or gold or anything else. Since China has a trade surplus with us (and has for a long time now), that means they are sitting on a lot of "excess" US dollars. When the US devalues dollars, the US dollars China is sitting on get devalued too. If the US were only devaluing at 2% a year and China could get a 3% yield on US debt, then it's pretty obvious that China should prefer to park their long-term dollar-denominated holdings in US debt rather than US dollars. Perhaps less obvious but still true is that even if the US is devaluing dollars at 15% a year and US debt yield is only 2%, it's still better for China to sit in US debt rather than US dollars if China knows that money is going to remain an "excess" (not needed) until the debt matures (or believes US debt yields will stay about the same or go lower so they can sell their treasuries on the open market before maturity and not lose significant money in the process).
The only way China can get itself out of the way of the "US dollar devaluation bulldozer" is to get rid of its US dollar holdings by using it to buy stuff (like resources, and rights to resources, which they have been doing). And the faster the US devalues the more incentive China has to do exactly that. But there's a whole lot of other factors at play. For example, if China started dumping US debt in the market, China's own holdings of US debt and dollars might start devaluing faster and China could end up being even worse-off. And even if they don't drive the dollar down too much, buying up stuff too fast could (via simple supply+demand) drive prices up giving them a bad deal. They may also intend on using their US debt for political influence purposes (perhaps a deal that gives them Taiwan). Then there's China's dollar-peg strategy which requires them to hold lots of dollars. (They keep the yuan pegged to the dollar by a combination of printing yuan and accumulating dollars. They could do it just by printing yuan, but then they risk out-of-control devaluation of their own currency.)
The whole dollar-peg issue (which I personally think is a flawed strategy - not really in China's best interest), reminds me of the insanity everywhere else. Even the Swiss franc, which as recently as the year 2000 was still on a gold standard, is now being pegged to the Euro by the Swiss central bank -- somehow their logic is they needed to do this because the Euro's value was sinking so fast. (In my mind, that's the perfect reason not to do it. But then, I'm not a banker willing to sell out my countrymen for my own personal profit.)
Thanks foo! I'm going to have to study on your answers a bit, its good food for thought for sure. You have a gift for explaining this stuff and you should think about writing an article for the DP on this.
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