The Truth about Money Printing. Do you want to understand?

Discussion in 'Markets & Economies' started by President Trump, Jul 4, 2020.

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After reading the above what do you believe:

  1. Interest rates will go up.

    7 vote(s)
    22.6%
  2. The Fed can just keep buying treasuries to infinity

    17 vote(s)
    54.8%
  3. Modern Monetary Theory will fix the problem

    2 vote(s)
    6.5%
  4. The US will default.

    10 vote(s)
    32.3%
Multiple votes are allowed.
  1. JohnnyBravo300

    JohnnyBravo300 Well-Known Member

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    Alot of countries are in the path to default, most in fact. Cant print money forever. It's never lasted very long. Fiat isnt a new invention.
    I couldn't see any other way around this. Theres no way to pay the debts everyone owes.
    At least in america we'll never have 300 trillion to pay this down.

    I know they can keep acquiring debt for now but that wont last.
     
    Last edited: Jul 12, 2020
  2. President Trump

    President Trump Active Member Silver Stacker

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    Historically debasement causes problems in commodity based currencies and non-commodity based. It is the debasement that causes issues because it creates more money but not necessarily more production. I agree with Leo25 that there is really no problem with a currency devaluing over time it is the extent of the devaluation that may cause the problem. There are some great examples of debasement of commodity currencies. Clipping of roman coins, the Spanish finding a mountain of gold in South America and producing a mountain of coinage. But there are also modern examples of non-commodity based economies where unrestrained printing created hyperinflation. The issue is always the same, the government wishes to stimulate production but they cannot tax or borrow externally enough to take the action that they believe is required to stimulate the economy, so they print. It happened in Weimar Republic, Zimbabwe and Venezuela. If governments have to borrow from their central banks first before they print there is a natural indicator of when the printing has gone too far (one hopes) because the interest charged by creditors increases and the central bank must take a higher and higher percentage of the debt to keep interest rates low. These rising interest rates are simply a reflection of the deteriorating ability of government to repay debt through tax. This indicator is working now in the US to show the government may be going to far. Just look at the Fed balance sheet.
     
  3. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    ^ I've only got an issue with your insistence that this will lead to a default. Which it won't because a sovereign nation can only default when it can't meet its repayments. Now as sovereign nations are not revenue constrained they can always meet their repayment obligations and therefore can't default.

    Unless they choose to.

    Edit to add: I'm not sure what the function of a central bank is nowadays, I just think they're a legislative artefact, they're not really an essential part of a modern monetary system.
     
    Last edited: Jul 13, 2020
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  4. JohnnyBravo300

    JohnnyBravo300 Well-Known Member

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    When the dollar collapses and theres not enough gold to pay the bills it will happen.
    Whether they choose to or not.
    The dollar collapse is already well underway.
     
  5. President Trump

    President Trump Active Member Silver Stacker

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    Our definitions of "Default" are different.
    Sovereign nations default fairly regularly and there is a huge market in Default protection. Default protection is bought and sold on Sovereigns including the USA. As you would imagine the parties to this market have had to define "Default". They do not let the country that has defaulted decide if it has defaulted or not. The consequences of a default is that huge sums flow from the protection sellers to protection buyers (usually bond/treasury holders).

    If you think about it this makes sense (even though it is a market that most people are unaware of) of course institutions that own treasuries want to protect against a risk that the US will restructure, revalue, restrict, or not pay on those treasuries.

    I believe you think of a default and a bankruptcy as being the same. A sovereign can't go bankrupt but it certainly can default. It has contractural obligations and if it does not honour them that is a Default. Do a google search you will discover that Greece has defaulted on its Debt recently, Russia defaulted in 2000, all of the following countries have defaulted in recent history Pakistan, Ukraine, Ivory Coast, Moldova, Uruguay, Nicaragua, Grenada, the Dominican Republic, the Seychelles and Cyprus. If you look back a bit further Germany has defaulted 4 times, Spain 6 times Argintina I believe has defaulted several times. So yep I do insist that a sovereign can default and the USA can default. None of these countries choose to default. I don't insist it will happen I just insist that it can.
     
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  6. JohnnyBravo300

    JohnnyBravo300 Well-Known Member

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    Yeah Argentina, Venezuela and zimbabwe as recent examples.
    All sovereign states in default and with past defaults.
     
  7. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Tinpot shit countries, hardly a fair comparison between them and the US. When did Germany default? It can definitely default now, so too France, so too Greece, so too Ireland etc etc.

    And as I've stated countless times, a sovereign nation cannot default unless it chooses to. The US will not default. Australia will not default. The UK will not default. They all have the capacity to print money forever. They all have the capacity to meet their debt obligations forever.

    And they all have the capacity to create runaway inflation but it won't be hyperinflation.

    Now, if you want to make investment decisions based upon the notion that your country will default, then knock yourself out. If I was living in Spain then I'd be considering a default, but I don't, I live in Australia and it won't happen.
     
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  8. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    It's 2020, not 1920.
     
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  9. Timmy88

    Timmy88 Active Member Silver Stacker

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    There is enough gold to pay all the bills in the world, the question is what price will gold have to go to in order the cover all the bills...

    Id expect slightly higher that where we are today.
     
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  10. Timmy88

    Timmy88 Active Member Silver Stacker

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    On another angle on this topic the fed holds a lot of gold, but yet they claim to not understand it, or call it a barbaric asset, and generally dismiss it.

    In Jim Richards book - the new case for gold, he clearly out lines the fed's what he calls 'hidden asset'

    The fed holds approx 8000 tons of gold which they have on their balance sheet at the value they last market their gold, for memory was like $30 odd dollars an ounce.

    Now the hidden asset is the difference between what they paid for the gold, call it $30 a oz. and what it is worth today call it $1,800 an oz.

    Multiply this by some 8000 tons and you have some pretty big numbers. This is their hidden asset, insurance policy or mussel in the room when they need to negotiate on bailing out banks, countries, or the world.

    Its quite simple. On paper the bank might see you as a highly leveraged individual, with a lot of debt, just keeping up with your repayments. But if you have a hidden asset of gold in your pocket, at anytime you need it, it is there. The most secure insurance you can have in your hand. No doubt about it.

    Timmy
     
  11. JohnnyBravo300

    JohnnyBravo300 Well-Known Member

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  12. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    Everything that I have read in the foregoing posts is from a consumer perspective. Yes it's a big Ponzi scheme, and yes they keep kicking the can down the road, but the US Fed owns the government, not the other way around. The private owners of the Fed have mastered this for a hundred years, they know what they are doing! Not one Stackeratti has been invited onto the board of the Fed, with the possible exception Gold Pelican, who mysteriously moved to the US under a thin tissue of lies, so I don't think they need our help sorting this out. For them there is no problem - more of the same please. We need to rethink our strategies in light of this scenario rather than the other way round.
     
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  13. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    The Fed is privately owned in name only. Its charter is determined by legislation, as such it operates within whatever law of the land applies to it. I'm not sure if your post is tongue-in-cheek or not but the Fed does not own the government either.

    https://www.factcheck.org/2008/03/federal-reserve-bank-ownership/

    Now, many goldbugs believe that the Fed is privately owned AND that it owns the government. But many goldbugs also believe that the US holds gold in order to pay for its bills when the money printers eventually run dry, that money printing will lead to a burden of debt being placed upon future generations, that Bill Gates has a plan to depopulate the world, that the US ia at risk of default, that aircraft lay chemtrails in order to manipulate the population, that the Illuminati actually run the world, that the Pleiadians actually run the world, that Aliens have a blueprint for human destiny, that lizard people actually run the world, that Satanists actually run the world, not sure if they believe Masons run the world any more, that COVID-19 was developed in a lab (probably not the same lab that developed the aids virus), that the 2004 Indian Ocean tsunami was triggered by Indian nuclear explosions and was designed to wipe out the population, that MA370 was diverted to a Malaysian military airfield, the occupants of the plane were gassed and then buried and the plane was dismantled and destroyed in order for the Malaysian government at the time to kill 6 high ranking military officials and that gold is wealth.

    The upshot of that rambling paragraph is that goldbugs have a fancy for what could possibly be termed "fantasy". It doesn't matter if it is real, or factual, as long as it confirms their bias. And they have a particular penchant for viewing the world through 100 year old gold tinted glasses when it comes to our farcical modern monetary system.
     
  14. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Did I mention that they also believe that the gold price is manipulated? :D
     
  15. President Trump

    President Trump Active Member Silver Stacker

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    Although you keep trying to put words in my mouth, I am only correcting the thing that you say, that is incorrect. A sovereign nation can default. Many have recently and in the past. There is currently an active market buying and selling protection against a US default. So clearly a default is possible. I have never said I make investment decisions expecting a default. I believe a number of scenarios could unfold, default is only one scenario and everything is dependant upon what path is ultimately taken. The US runs a deficit which means that it buys more from its trading partners than it exports. When the US buys from China for example they currently accept US dollars. So the exchange is goods (that china expended real resources to produce) for money (that is brought into existence through a keystroke). The Chinese then take these US dollars and they lend them back to the US at negative real interest rates. It is a wonderful deal for the USA but there must be at least a small chance that at some point the Chinese wont accept US dollars if they are being debased and they have to lend them back to the USA at negative interest rates . There are multiple scenarios where the break down of this relationship and rising interest rates could cause a default. Its not a certainty otherwise the default premiums on the US would be be starting to go through the roof. But there is a default premium which means a default is possible.
     
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  16. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    The Fed acts independently from the US government and can therefore make decisions more favourable to itself rather than the country. This independent autonomy allows the Fed to control
     
  17. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    That's vastly different to owning the government. But it still doesn't mean it controls government business. Monetary policy is largely ineffective, it is fiscal policy that has more economic clout.
     
  18. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I have said that a sovereign nation can default. But only by its own choosing.

    International trade could be carried out in paperclips for all it matters. It has no bearing on whether the US will default.
     
  19. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    Point taken, but I believe influence is exercised.
     
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  20. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I totally agree. But I also happen to believe that central bankers have a better grip on how our monetary system operates than politicians, so as far as I'm concerned, their influence is welcome. Philip Lowe has been trying to influence the ScoMo government's fiscal policy for ages - and it's working. Which is a good thing considering the alternative is a depression.

    That doesn't mean I'm a CB advocate. I'm still an advocate of sound money and competing private currencies.

    And the eradication of central banks.

    And The State.

    :p
     
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