How would you fix the deficit?

[doubtingmerle]

McFall, I am still trying to figure out why you write "I am hoping the government defaults on its loans." (post 106) That seems like a terrible idea, and your defense of it is very muddled. You speak of wanting the USA to cease. I asked you why you would not want the continued existence of America and you replied:

Because I consider "America", by which I mean the political apparatus associated with the United States government and the doctrines by which it functions to be entirely corrupt and unworthy of existence.

This is where we differ. I see the USA as worthy of existance. I cannot imagine how it would possibly be better for you if the United States government ceased to exist.

It's not "OK with me". It just has to happen, regardless of how anyone feels about it. It's been probable since 1913 and inevitable since 1971. Debts come due, and the plain fact is we do not have enough real wealth in the entire world to sustain the debt that we have now. Massive liquidation and deep restructuring are an eventuality. The question is when and how, not whether, it will happen.

But why does it have to happen? If we really wanted to balance the budget, we could take 5 slices out of defense (70%), add 7 slices of revenue increase (28%), and take one slice out of all the other functions, for instance. Presto, 13 slices, and the budget is balanced.

We had a balanced budget in the 90s. Why not now?

And we could even pay off the debt. We could make it 6 slices of military, 1 slice of income security, 1 slice of everything else, 8 slices of increased revenue, and presto, we have $300 billion surplus which would eventually pay off the past accumulated debt.

This would certainly shock the economy, but if you are so concerned, wouldn't this be better than deliberately defaulting on our loans and allowing the collapse of the USA?

I do not only keep my liquidity in alternatives to the dollar, I also promote those alternatives in the hopes that others will do likewise. A dollar crisis may be inevitable, but it is possible for us to build alternative markets that will be, if not immune, then at least resistant to the effects of the crisis. Such alternative markets must be based on alternative currencies that are not tied to the dollar and therefore cannot be devalued through the creation of further debt by the Federal Reserve and other central banks.

OK, you keep your liquidity in something other than the dollar. May I ask you what? If you choose any form of fiat currency, you run the same risk that somebody will inflate the currency and make it worthless. If you hold physical objects such as gold coins, you run the risk of theft, or even that new mining operations will make gold more plentiful.

And even if you have something foolproof that will survive the collapse of the dollar, how will you use it to buy groceries if the supply chain is broken, and there are no groceries left to buy? You have not answered that question. One would think it is an important question.

I don't see how you can suggest that we take actions to deliberately collapse the dollar and hope that you will be OK because you have an alternatvie currency. If trade all around you has collapsed, no currency is going to guarentee that you personally survive while the rest starve.

 

[MacFall]

I cannot imagine how it would possibly be better for you if the United States government ceased to exist.

I am sorry you are so unimaginative.

We had a balanced budget in the 90s. Why not now?

Only on paper. We were still creating more debt than we had the ability to produce in actual wealth. Remember, dollars are not wealth.

wouldn't this be better than deliberately defaulting on our loans and allowing the collapse of the USA?

As I said, I believe the USA, as a political entity, is evil. I do not believe that it would be good to preserve it, any more than it would have been good to preserve the political structure of any particular pagan empire you can name. At the very least, it would mean a respite for all the people currently suffering under US occupation and brutal regimes supported by the US (such as Saudi Arabia). And maybe even permanent change away from that.

OK, you keep your liquidity in something other than the dollar. May I ask you what? If you choose any form of fiat currency, you run the same risk that somebody will inflate the currency and make it worthless.

True, but not every fiat currency is managed as irresponsibly as the dollar.

If you hold physical objects such as gold coins, you run the risk of theft, or even that new mining operations will make gold more plentiful.

The risk of theft is nothing compared to the certainty of devaluation through inflation. And whereas the supply of specie as money has doubled only a couple times in the past five thousand years, the supply of dollars has been doubled many times in the past century alone. The only way gold could be devalued at a rate similar to that of fiat money would be if alchemical transmutation were possible.

In addition to specie, I also use bitcoin, which is regulated by mathematical laws rather than political ones.

And even if you have something foolproof that will survive the collapse of the dollar

I doubt that specie, which has been around for literal thousands of years and survived the collapse of many fiat money systems, will have any trouble surviving the collapse of the dollar. And the only thing that would take out bitcoin or other cryptocurrencies would be the end of the internet, which isn't being predicted by anyone except for a few survivalist types.

how will you use it to buy groceries if the supply chain is broken, and there are no groceries left to buy? You have not answered that question.

Yes I did. You apparently missed it. I mentioned alternative markets based on the alternative currencies. That would involve the development of independent supply chains, which will of course not be as well-developed as the mainstream economy, but which can allow people to survive and later serve as a foundation on which the economy can be reestablished independent of political management and corporate privilege.

 

[doubtingmerle]

McFall we are discussing the federal budget for next year. You take the extraordinary path of recommending that we default on our loans, and let the government and the dollar collapse. I completely disagree.

As I said, I believe the USA, as a political entity, is evil. I do not believe that it would be good to preserve it, any more than it would have been good to preserve the political structure of any particular pagan empire you can name.

I disagree. I love America.

True, but not every fiat currency is managed as irresponsibly as the dollar.

Any fiat currency can be mismanaged. It is always a possibility.

That is why we should take steps to secure the dollar. Deliberately letting it collapse, when so much rides on it, seems foolish.

The risk of theft is nothing compared to the certainty of devaluation through inflation.

The losses through inflation have been acceptable for many years, and are generally more than compensated for by interest payments.

And theft of gold coins is a huge problem, especially if it is known that you have a large sum of gold coins lying around in your house.

The only way gold could be devalued at a rate similar to that of fiat money would be if alchemical transmutation were possible.

Gold significantly devalued in the past when the New World with all its gold was discovered.

Gold would be devalued today if people decided not to value it. Gold coins have little intrinsic value, other than the fact that currently everybody wants them.

In addition to specie, I also use bitcoin, which is regulated by mathematical laws rather than political ones.

And the only thing that would take out bitcoin or other cryptocurrencies would be the end of the internet, which isn't being predicted by anyone except for a few survivalist types.

This is the first I heard of bitcoin, and I find it very interesting. But getting it implemented is a huge issue.

I doubt that specie, which has been around for literal thousands of years and survived the collapse of many fiat money systems, will have any trouble surviving the collapse of the dollar.

There may well be gold and silver coins for years. And how will you pay your electric bill? Will the fedex man deliver your gold coins to the power company, and will the fedex man ask for payment in gold coins? Doesn't sound economical to me.

And trading in certificates for gold coins instead of the actual gold coins is really little different from fiat money.

Yes I did. You apparently missed it. I mentioned alternative markets based on the alternative currencies. That would involve the development of independent supply chains, which will of course not be as well-developed as the mainstream economy, but which can allow people to survive and later serve as a foundation on which the economy can be reestablished independent of political management and corporate privilege.

Developing such a system is years away. If the dollar collapsed tomorrow, how would the stores pay their electric bills? How would they pay the trucking companies? How will they pay for food shipped from overseas? Are you sure there would still be food in the grocery?

In the meantime you suggest we take immediate steps to insure the collapse of the dollar. That seems extremely foolhardy to me.

 

[MacFall]

I love America.

As I'm sure many Romans loved Rome.

That is why we should take steps to secure the dollar.

The only way to do that would be to remove the ability of the government and big banks to manipulate it. Since they control the dollar, we can be pretty sure that's not going to happen.

The losses through inflation have been acceptable for many years, and are generally more than compensated for by interest payments.

Acceptable to whom? Certainly not to me. And they shouldn't be to the lower class whose standard of living continually decreases by it.

Interest paid in increasingly worthless dollars is no compensation for the fact that the dollars are increasingly worthless. Besides, how many poor people do you know who have any money on which to receive interest?

And theft of gold coins is a huge problem, especially if it is known that you have a large sum of gold coins lying around in your house.

Theft of gold and silver was never as much of a problem as you seem to think it was. The crime rate is FAR higher today than it ever was before, and you'll note that most people don't keep gold around.

Also, that's what banks are supposed to be for. Secure deposit locations.

Gold significantly devalued in the past when the New World with all its gold was discovered.

Define "significantly". Because its value fluctuated less during the entire colonial period than the value of the dollar did in the decade following the creation of the Federal Reserve alone.

Gold would be devalued today if people decided not to value it. Gold coins have little intrinsic value, other than the fact that currently everybody wants them.

That is true of every money in existence, ever. The thing that makes it money is the willingness of people to accept it as a medium of exchange. And in case you haven't noticed, people are beginning to REJECT the dollar as a medium of exchange worldwide.

This is the first I heard of bitcoin, and I find it very interesting. But getting it implemented is a huge issue.

No kidding. Especially when it's up against people like you who apparently would fight for fiat currency until its exchange value is less than its value as toilet paper.

There may well be gold and silver coins for years. And how will you pay your electric bill? Will the fedex man deliver your gold coins to the power company, and will the fedex man ask for payment in gold coins? Doesn't sound economical to me.

It's worked fine in the past. No reason it shouldn't now, especially when dollar bills are comparatively worthless.

And trading in certificates for gold coins instead of the actual gold coins is really little different from fiat money.

It is completely different from fiat money. A bank cannot inflate in excess of its gold or silver reserves while currency is a certificate of ownership for real gold. Or at least, their ability to inflate is very low. Fiat money is usually not backed by real wealth at all, except for a small fraction (i.e., fractional reserve banking). And besides that, under gold standard, nobody is going to force you to take metal if you don't want it. As a result, stronger currencies - that is, those issued by firms with the highest reserve ratios, tending towards 100% - become widely acceptable through competition. But fiat, by definition, is enforced by legal tender laws that can actually land you in jail if you do not accept it for some transactions. And those laws don't change when the money begins to lose its value and you may want to hold something else.

Developing such a system is years away.

It's been under development for years. It already exists. It only needs to be expanded. I'm not surprised you didn't know that. Most people who support the politically enabled system tend not to be aware of its alternatives.

In the meantime you suggest we take immediate steps to insure the collapse of the dollar. That seems extremely foolhardy to me.

I never suggested that. I only pointed out the fact that the collapse of the dollar is inevitable. There is literally NOTHING that can be done to save it; only to prolong the process and make the necessary correction worse.

But hey, you can go on clinging to the hull of the Titanic if you prefer. Go down to the bottom with it if you insist. "In the meantime" I'll be helping others build more lifeboats.

 

[doubtingmerle]

In the meantime you suggest we take immediate steps to insure the collapse of the dollar. That seems extremely foolhardy to me.

I never suggested that. I only pointed out the fact that the collapse of the dollar is inevitable. There is literally NOTHING that can be done to save it; only to prolong the process and make the necessary correction worse.

Sir, that is exactly what you said at the beginning of our discussion.

In post 107 you said, "Yes, I am hoping the government defaults on its loans."

I responded by saying, "Some people would say that would lead to a collapse of the dollar and global trade. How do you answer them?"

You responded in post 117. "I'd say they're right."

So that is exactly what you said. You said you want the government to default in post 107. You said that this action will lead to the collapse of the dollar and global trade in post 117. You said this is what you want. You said that you want the government to take an action (default on it loans) and you said you realize that this step will lead to the collapse of the dollar.

That is exactly what you said. Please go back and read it.

You may change your mind if you want, but please don't deny what you have said here.

That is the entire point of this discussion. What do you want the government to cut?

I know you want to hijack this thread and talk about other subjects, but I am interested in what you said about the topic of this thread. You said you want the government to default on its loans, and you said you know this will cause the collapse of the dollar.

 

[MacFall]

I said I hope the government defaults on its loans because the only alternative is monetization, which means eventual hyperinflation and THEN collapse. I'm not promoting the collapse; I'm promoting the less harmful way of dealing with it.

 

[doubtingmerle]

I said I hope the government defaults on its loans because the only alternative is monetization, which means eventual hyperinflation and THEN collapse.

Monetization and default are not the only options. Why would it not be possible to balance the budget and pay back what has been borrowed if we really wanted to?

 

[MacFall]

No, not really. The Fed can produce enough dollars to pay off the debt, but even if you cut spending by 100%, more has been borrowed than can realistically be produced in real wealth in order to pay off the principal.

 

[SnowCal]

Are you seriously complaining about the dollar's price stability and promoting Bitcoin, perhaps best known for its rollercoaster value, at the same time?

 

[MacFall]

No.

I'm complaining about the fact that the dollar is politically manipulated in the interests of big banks. I promote bitcoin because it is literally impossible for it to be politically controlled.

Also, you're a bit out of the loop if you think bitcoin still has a "rollercoaster value". It is now being accepted for far more goods and services than it was at the last major "pump and dump", which has tightened its value up a lot. For instance, WordPress now accepts it for their pro services, and Flattr and GitHub have announced their intentions to integrate it. So it has become very frustrating to the sort of people who were responsible for the last speculative bubble (the pyramid scheme manager who goes by the name of "Pirate", most notably). It's been steadily increasing for a while, with major changes in value being very brief. As more digital services begin to accept it its value will sure up even more, until eventually it will make more sense for more traditional merchants to use it, as they have recently begun to accept PayPal, Dwolla and other online currencies.

EDIT: I think I should add, WordPress accepts it because of its use in foiling political control; not for any economic reason. There are countries with states that take a dim view of freedom of the press, and PayPal collaborates with those countries by blocking payments to WordPress for that reason. Since bitcoin is a peer-to-peer system with no central control, there is no way for those countries to block it. I think it's going to prove to be quite a nuisance for the political class.