Deficit

[froggy]

If we were to fire everyone in the Gov't and start a new one then our deficit would be wiped out with the old Gov't. This one no longer works so its time to get rid of it, maybe sell it to Mexico.

 

[editec]

If we were to fire everyone in the Gov't and start a new one then our deficit would be wiped out with the old Gov't. This one no longer works so its time to get rid of it, maybe sell it to Mexico.

Good luck trying to convince America's BANSTER MASTER CLASS that that is a good idea.

I mean, come on froggy, who do you think benefits from the USA's debt load?

Precisely the people who OWN our government.

Wake up and SMELL the classism, amigo.

 

[waltky]

Global recession goin' into double-dip?...

US trade deficit figure causes concern for investors
10 March 2011 - Chinese government data also showed a surprise trade deficit

US stockmarkets have fallen after figures showed the US trade deficit had widened much more than expected in January. The US Commerce Department said the deficit had widened to $46.3bn (£28.8bn). The 15% increase caused concern amongst investors and shares on Wall Street fell.

In early trading the Dow Jones was down 1.2% at 12,065 points and the broader S&P was down 1.4% at 1,301. Analysts blamed demand for foreign cars and the surging price of oil for pushing up imports. US exports rose 2.7% to an all-time high of $167.7bn but imports rose to $214bn.

China surprise

Earlier, Chinese government data showed a surprise trade deficit for the first time since March last year. Exports grew at 2.4% in February from the same month a year ago. Imports on the other hand increased by 19.4%, resulting in a trade deficit of $7.3bn, the largest in seven years.

That announcement had also affected markets in Europe and Asia. The Nikkei ended the day down 1.46% and London and Frankfurt closed down 1.5% and 0.9% respectively.

BBC News - US trade deficit figure causes concern for investors

 

[Norman]

If we were to fire everyone in the Gov't and start a new one then our deficit would be wiped out with the old Gov't. This one no longer works so its time to get rid of it, maybe sell it to Mexico.

A bit easier would be to just default. Though firing the incompetent government would be quite awesome package deal. Problem with default is that it might also wipe out a lot and lot of liabilities to the people of the country. Which is the real problem.

At editec, have you looked at all what the budget consists off? There are LOADS of people who benefit from all classes and some benefit just out of stupidity (bankers being one). The US government is "commercialized" or democratized or whatever you want to call it. That is a bad thing.

 

[Sallow]

Oh cool.

Anarchy.

 

[zzzz]

Uhhh, wrong! If you fired them all then you would owe $45,738.84. Your share of the federal deficit. And don't think those Chinese don't want their money!

 

[skeptic]

If we were to fire everyone in the Gov't and start a new one then our deficit would be wiped out with the old Gov't. This one no longer works so its time to get rid of it, maybe sell it to Mexico.

There are two ways in which governments routinely escape the onerous burden of debt.

1) the reset the currency to a lower value, call this inflation by fiat and usually in powers of ten. The press posts stories that say things like "the government has mandated that new currency will be issued and the 100 Peso note will be replaced and exchanged for 10 peso notes". This has happened at least a hundred times and it is not the end of the world as we know it.

2) the other is simple default, and it isn't as bad as it sounds. Greece has been in default on their debt for more than half of their history as a constitutional democracy. The downsides are not life shattering.

Take the most radical example on record of currency collapse and truthfully it was a shock when it happened but it passed and without destroying the nation.

The hyperinflation episode in the Weimar Republic in the 1920s was not the first hyperinflation, nor was it the only one in early 1920s Europe or even the most extreme inflation in history (the Hungarian pengő and Zimbabwean dollar have both been more inflated). However, as the most prominent case following the emergence of economics as a science, it drew interest in a way that previous instances had not. Many of the dramatic and unusual economic behaviors now associated with hyperinflation were first documented systematically in Germany: order-of-magnitude increases in prices and interest rates, redenomination of the currency, consumer flight from cash to hard assets, and the rapid expansion of industries that produced those assets.

John Maynard Keynes described the situation in The Economic Consequences of the Peace: "The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance."

does that sound familiar?

When the new currency, the Rentenmark, replaced the worthless Reichsbank marks on November 16, 1923 and 12 zeros were cut from prices, prices in the new currency remained stable. The German people regarded this stable currency as a miracle because they had heard such claims of stability before with the Notgeld (emergency money) that rapidly became worthless. The usual explanation was that the Rentenmarks were issued in a fixed amount and were backed by hard assets such as agricultural land and industrial assets, but what happened was more complex than that.

In August 1923, Karl Helfferich proposed a plan to issue a new currency (roggenmark) backed by mortgage bonds indexed to market prices (in paper Marks) of rye grain. His plan was rejected because of the greatly fluctuating price of rye in paper Marks. The Agriculture Minister Hans Luther proposed a different plan which substituted gold for rye and a new currency, the Rentenmark, backed by bonds indexed to market prices (in paper Marks) of gold.[15]

The gold bonds were defined at the rate of 2,790 gold Marks per kilogram of gold, which was the same definition as the pre-war goldmarks. The rentenmarks were not redeemable in gold, but were only indexed to the gold bonds. This rentenmark plan was adopted in monetary reform decrees on October 13–15, 1923 that set up a new bank, the Rentenbank controlled by Hans Luther who had become the new Finance Minister.

After November 12, 1923, when Hjalmar Schacht became currency commissioner, the Reichsbank, the old central bank, was not allowed to discount any further government Treasury bills, which meant the corresponding issue of paper marks also ceased.[16] Discounting of commercial trade bills was allowed and the amount of Rentenmarks expanded, but the issue was strictly controlled to conform to current commercial and government transactions. The new Rentenbank refused credit to the government and to speculators who were not able to borrow Rentenmarks, because Rentenmarks were not legal tender.[17] When Reichsbank president Rudolf Havenstein died on November 20, 1923, Schacht was appointed president of the Reichsbank.

By November 30, 1923, there were 500 million Rentenmarks in circulation, which increased to 1000 million by January 1, 1924, and again to 1,800 million Rentenmarks by July 1924. Meanwhile, the old paper Marks continued in circulation. The total paper Marks increased to 1,211 quintillion in July 1924 and continued to fall in value to one third of their conversion value in Rentenmarks.[17]

The monetary law of August 30, 1924 permitted exchange of each old paper 1,000,000,000,000 Mark note for one new Reichsmark, equivalent in value to one Rentenmark.

Eventually, some debts were reinstated to partially compensate those who had been creditors. A decree of 1925 reinstated some mortgages at 25% of face value in the new Reichsmark (effectively 25,000,000,000 times their value in old marks) if they had been held 5 years or more. Similarly some government bonds were reinstated at 2-1/2% of face - to be paid after reparations were paid. [18] Mortgage debt was reinstated at much higher percentages than government bonds. Reinstatement of some debts, combined with a resumption of effective taxation in a still-devastated economy, triggered a wave of corporate bankruptcies.

anyway the gist is: Fiat money never has any real value, only the value people infer into it with their confidence....


But nations always have assets of real value that they can use to back new currency. So there is no real problem with a currency collapse except the drama of the transition. Which can be extreme tho short lived. But fortunes will also collapse. The rich can become paupers, the paupers need only to survive until the transition occurs.