quote:

But for argument's sake, let's assume that they do buy muni bonds. Bonds still create more debt with interest. Where does the money come from to pay those off? Remember, all money is still debt, and all debt is subject to interest.  

quote:

And that completely neglects that as the debt declines a balanced budget could be maintained with progressively lower tax rates which would make everyone, escpecially our descendants, happy.

Well, if you're talking lower tax rates, then the "small amount" isn't coming from the taxpayers. So where does it come from?

Under our current monetary system, the only way to pay down debt is to create even more debt. There's not enough money in the system to retire all debt. If we tried, we'd get monetary contraction. Too much contraction equals another depression.

The only way I can see to get out of this massive hole of debt, is to restructure the monetary system and issue non-debt money. 

quote:

ORIGINAL: greyangelus

quote:

But for argument's sake, let's assume that they do buy muni bonds. Bonds still create more debt with interest. Where does the money come from to pay those off? Remember, all money is still debt, and all debt is subject to interest.  

quote:

And that completely neglects that as the debt declines a balanced budget could be maintained with progressively lower tax rates which would make everyone, escpecially our descendants, happy.

Well, if you're talking lower tax rates, then the "small amount" isn't coming from the taxpayers. So where does it come from?

Under our current monetary system, the only way to pay down debt is to create even more debt. There's not enough money in the system to retire all debt. If we tried, we'd get monetary contraction. Too much contraction equals another depression.

The only way I can see to get out of this massive hole of debt, is to restructure the monetary system and issue non-debt money. 

and score one for you subfever.  By the non-debt money is otherwise reciept money, which I just explained.  This is the main reason why gold-standard propenents like myself think answering the question to the problems of governmental debt using any other method than by going back to gold standard will do exactly NOTHING.  You can shovel around a pile of cowshit all you want, it still just a pile of cowshit at the end of the day.

By the way, theres another term for perpetual debt, its called  "usury"

quote:

ORIGINAL: greyangelus

I've been reading aa rather fascinating book on this very subject tonight, "Creature of Jekyll Island" by G. Edward Griffin.  Its long and extremely lenghty and I'm not going to even into depth of it, but here's the short, short version.

The frist thing you must understand is that the economy of our nation is run using what is called "fractional-reserve banking".  This system of banking is what every single bank in the US uses, as well as pretty much the rest of the world. "Fractional-reserve" currency (such as the US dollar) is a specific kind of money and medium of exchange, of which there are basically 5 types

-Barter ( 2 people agreeing to exchange good and services based on their perception of value for said goods)
-Commodity ( Gold and silver coinage, although lots of other things has been used, cigarettes included)
-Recipt ( Paper issued in lieu of a commodity, mainly for convience reasons, with the quantity of paper issued dependent on the amount of said commodity)
-Fiat ( currency issued by decree, the only worth of which is the full faith and belief of the issuer )

.... and "fractional-reserve".  Fractional-reserve money is the transition from a receipt based money (where the quantity of paper is backed 100% by a commodity) and fiat money (where the quantity of paper is backed by 0% of anything ).    

In reciept based economy, when a bank has X amount of deposits (called "assets"), it can then lend out a Y amount of money ( debt in other words, but called "liabilities" ) up to BUT NOT over X.  So in essence, the X > Y ratio must be kept to ensure that 100% percent of liabilites can be covered by assets. 

In a Fiat based economy, Y is the amount created from "thin air" by the issuing institution simply decreeing as such ( Fiat in Latin means "let it be done").  Since the money is created from nothing, Y can expand at an exponential rate, with no X to back it up.

Fractional-reserve money is the split difference between these two forms.  In fractional-banking, bank the equation reads X/A = Y.   The A is the percentage of reserves that must be kept relative to the amount of Y.  In real numbers and assuming A is 10%,   X is equal to 10$ and Y is equal to 100$.   This percentage is hypothetical, it can go anywhere from 99% to 0.0001%, depending on who has the authority to set the percentage (In our case Congress.)


What the hell this all has to to with the economy.

This is where it gets even more complicated, even more than my supposedly short, short version, but I'll try to keep it brief.  From 1913 (the year the Federal Reserve Sytem was created) until 1973 (the year the dollar was completely removed from the gold standard), the supply of dollars was increased, with no equivalent increase in the amount of commodity used to back those dollars.  The supply of dollars was increased by lowering the percentage of assets banks were required to keep.  Here's where it gets sticky. If you increase the amount of dollars in circulation, but there is no increase in the amount of goods to buy with those dollars, what happens to the price of said goods?  Simple math says the price goes up, in other words, "Inflation".  This type of inflation is "devaluation" ( which is a lowering of the purchasing power of the currency, purchasing power meaning value ).  In order to prevent "hyperinflation" (where the money begins to devalue exponentilly), the money supply must be contracted. 

In 1973, the dollar went completely off any commodity standard and became a fiat currency, which is what its been ever since.  Since the value of fiat currency is in direct proportion to its amount in circulation (the more there is, the less it is worth), the value of the dollar continues to drop.  The only wayto hold stable this value is to increase the amount of people using this dollar, which is how the dollar became the worlds reserve currency (through the transaction of oil purchases using OPEC ).   The housing bubble going poof ( see Bear Stearns mortgage collapses this summer ) may jsut be the final straw.  Since our government works on debt, there must be something into which to plow this debt, and we're just about tapped out on things to plow it into.


The solution to basically fixing the economy is basically simple (keeping in mind the truism "the simplest things are often the hardest ones to do. )

1. The US fed must take stock of how much gold/silver or other commodity is has in hand ( gold and silver have been used historically because time does relatively little to the amount and value of the metal )
2.  Congress must pass a bill setting forth a time at which all dollars currently in circulation will be packed by gold/silver ( Fiat by reverse, as actually collecting all dollars in circulation and issuing new gold/backed money would be logistically and financially impossible).  Basically, 1$ in Federal Reserve notes is now worth 1$ in new 100% gold-backed notes.
3. Dissolve the Federal Reserve Board and amend the bill of rights to close forever the door for fiat and fractional-reserve banking (fairly easy there, it merely requires saying that all legal tender accepted by the federal government must be 100% commodity backed, using the congressional power to regulate the value of money to define what and how much that commodity is). 

Those are the easy parts.  The next 2 parts are what the Federal Board Sytem and the banks have been preventing from happening since 1913, using fractional-reserve and fiat banking.

3.  The Fed must actually balance its books.  With the free fiat money gone for good, a serious re-evalution of what the Fed does with money, with some extremely far-reaching consequences, especially in the areas of foriegn policy and defense.
4. LET THE BANKS FAIL.  A very HUGE amount of what has created this montrosity of economy is that with the current system is that the major banks will NEVER go bankrupt.  The Fed was designed to prevent this from happening from its very inception, using a "bailout" of the involved banks using T-bonds (which is basically money you and I have to pay back at some point).  Go look up the term "moral hazard" as the term applies to finance.  The very existence of the Fed (and FDIC and a host of other federal organizations) is what allows the major banks to operate in "moral hazard" with impunity.  The mortgage crisis is not really a crisis for the major players, as the Fed was designed to insulate the banks from any losses from exactly this sort of crisis.

quote:

ORIGINAL: greyangelus
By the non-debt money is otherwise reciept money, which I just explained.  This is the main reason why gold-standard propenents like myself think answering the question to the problems of governmental debt using any other method than by going back to gold standard will do exactly NOTHING.  You can shovel around a pile of cowshit all you want, it still just a pile of cowshit at the end of the day.

By the way, theres another term for perpetual debt, its called  "usury"

quote:

ORIGINAL: DomKen

As to going to a gold backed dollar, will we back all the non physical dollars with gold or just the actual currency? We don't actually have 9+ trillion dollars in circulation. at $900 to the troy ounce, a rough estimate, backing the debt in gold, as of 01/28/08, requires in excess of 10 billion troy ounces of gold. At 400 troy ounces to the bar thats 25.55 million gold bars. At 27.4lb per gold bar that is almost 350,000 standard tons of gold. At the peak the US government held a little more than 20k tons of gold. I'm sure we could buy up a few thousand tons more but where would the 300,000 tons come from? Where would we put it? The Fort Knox repository isn't that big and neither is the Federal Reserve vault in NYC. I'm not entirely sure that much gold bullion actually exists on earth.

quote:

ORIGINAL: KenDckey

I think the people, have crated this monster where we think that everything is Government's responsibility and has shifted society away from individual responsibility.  

quote:

ORIGINAL: DomKen

All right a few basic things. The federal budget could be balanced without raising taxes its called reducing spending. Get out of Iraq, stop paying outrageous amounts to Haliburton for services previously done much more cheaply by government employees etc. It would be a very slow process. The deflationary aspect would be trivial over the 40 or 50 years it would take to make a huge dent in the debt.

As to going to a gold backed dollar, will we back all the non physical dollars with gold or just the actual currency? We don't actually have 9+ trillion dollars in circulation. at $900 to the troy ounce, a rough estimate, backing the debt in gold, as of 01/28/08, requires in excess of 10 billion troy ounces of gold. At 400 troy ounces to the bar thats 25.55 million gold bars. At 27.4lb per gold bar that is almost 350,000 standard tons of gold. At the peak the US government held a little more than 20k tons of gold. I'm sure we could buy up a few thousand tons more but where would the 300,000 tons come from? Where would we put it? The Fort Knox repository isn't that big and neither is the Federal Reserve vault in NYC. I'm not entirely sure that much gold bullion actually exists on earth.

quote:

ORIGINAL: greyangelus

quote:

ORIGINAL: DomKen

All right a few basic things. The federal budget could be balanced without raising taxes its called reducing spending. Get out of Iraq, stop paying outrageous amounts to Haliburton for services previously done much more cheaply by government employees etc. It would be a very slow process. The deflationary aspect would be trivial over the 40 or 50 years it would take to make a huge dent in the debt.

As to going to a gold backed dollar, will we back all the non physical dollars with gold or just the actual currency? We don't actually have 9+ trillion dollars in circulation. at $900 to the troy ounce, a rough estimate, backing the debt in gold, as of 01/28/08, requires in excess of 10 billion troy ounces of gold. At 400 troy ounces to the bar thats 25.55 million gold bars. At 27.4lb per gold bar that is almost 350,000 standard tons of gold. At the peak the US government held a little more than 20k tons of gold. I'm sure we could buy up a few thousand tons more but where would the 300,000 tons come from? Where would we put it? The Fort Knox repository isn't that big and neither is the Federal Reserve vault in NYC. I'm not entirely sure that much gold bullion actually exists on earth.

Yes it could, quite easily in fact.  The amount of gold which can be acquired for turning an electronic or paper note is immaterial, and is arbitrarirly set by the issuing institution. It is merely a ratio after all.  The total amount of money in circulation is actually 13+ trillion and increasing.  This increasing money supply produces inflation through devalution.    Ideally, when inflation (through devalution) in cosumer prices goes up, consumer wages should go up as well (law of supply and demand in effect) so that the consumers purchasing power stays the same.  Due to a lot of factors (outsourcing, simple lag time in raises, short term profit focus), this very rarely happens at the same time, in which case the consumers purchasing, power goes down.

I keep harping on devalution as being different than inflation.  Inflation is what happens when the demand for something exceeds available supply, this is natural or supply-and-demand inflation.  Devaluation is what happens when the money supply is expanded ( the amount of goods and demand for them does not change, only the amount of the medium for exchange goes up).   These 2 things have the SAME effect (i.e. things become more expensive), but they have different causes.

quote:

ORIGINAL: greyangelus

quote:

ORIGINAL: DomKen

All right a few basic things. The federal budget could be balanced without raising taxes its called reducing spending. Get out of Iraq, stop paying outrageous amounts to Haliburton for services previously done much more cheaply by government employees etc. It would be a very slow process. The deflationary aspect would be trivial over the 40 or 50 years it would take to make a huge dent in the debt.

As to going to a gold backed dollar, will we back all the non physical dollars with gold or just the actual currency? We don't actually have 9+ trillion dollars in circulation. at $900 to the troy ounce, a rough estimate, backing the debt in gold, as of 01/28/08, requires in excess of 10 billion troy ounces of gold. At 400 troy ounces to the bar thats 25.55 million gold bars. At 27.4lb per gold bar that is almost 350,000 standard tons of gold. At the peak the US government held a little more than 20k tons of gold. I'm sure we could buy up a few thousand tons more but where would the 300,000 tons come from? Where would we put it? The Fort Knox repository isn't that big and neither is the Federal Reserve vault in NYC. I'm not entirely sure that much gold bullion actually exists on earth.

Yes it could, quite easily in fact.  The amount of gold which can be acquired for turning an electronic or paper note is immaterial, and is arbitrarirly set by the issuing institution. It is merely a ratio after all.  The total amount of money in circulation is actually 13+ trillion and increasing.  This increasing money supply produces inflation through devalution.    Ideally, when inflation (through devalution) in cosumer prices goes up, consumer wages should go up as well (law of supply and demand in effect) so that the consumers purchasing power stays the same.  Due to a lot of factors (outsourcing, simple lag time in raises, short term profit focus), this very rarely happens at the same time, in which case the consumers purchasing, power goes down.

I keep harping on devalution as being different than inflation.  Inflation is what happens when the demand for something exceeds available supply, this is natural or supply-and-demand inflation.  Devaluation is what happens when the money supply is expanded ( the amount of goods and demand for them does not change, only the amount of the medium for exchange goes up).   These 2 things have the SAME effect (i.e. things become more expensive), but they have different causes.

quote:

ORIGINAL: Muttling

quote:

ORIGINAL: popeye1250

Muttling, as long as we have Lobbyists and lawyers in Washington none of this is going to work.

Sure it can.  We just need a president with the balls enough (or vagina enough) to shut down the Federal government to force a balanced budget.   It has been proven that it can be done and was done by an attorney.

quote:

ORIGINAL: DomKen

I'm sure there must be in depth discussions on the web somewhere about why a fiat money is better for a modern economy than a precious metal standard.

quote:

ORIGINAL: subfever

quote:

ORIGINAL: KenDckey

I think the people, have crated this monster where we think that everything is Government's responsibility and has shifted society away from individual responsibility.  

I disagree. I believe it was the PTB that created the monster. They saw a big opportunity with the Great Depression. It was easy to dangle a carrot in front of the hungry. Once they got their foot in the door with Social Security, they expanded their indoctrination of the masses by cleverly appealing to our fear and greed emotions. 

quote:

ORIGINAL: popeye1250

Muttling, yeah, bankruptcy, default, whatever name you want to give it.
If we can't pay it anyway what difference does it make?
Are we just supposed to keep pretending we can pay it?
It would be good for our economy comming out of bankruptcy with a clean slate as long as we outlaw lobbyists and lawyers in Washington as a "condition."
One thing is for certain, we cannot continue on this road we've been traveling.