Why The National Debt Is Good For The Country

[FA_Q2]

A better question, if the government hired all unemployed, would our economic situation be better?

Yes. If the government hired everyone who was willing and able to work, the economic situation would be better.

Hence the complete and utter failure of any system that works that way. Simply put, 100% employment is only preferable if 100% of those employees are actually producing. Almost all government jobs do not produce and there is zero incentive to produce if the government guarantees your job regardless of performance. Unfortunately, that is exactly what the government does. Government jobs do not require any real performance and usually rely on a couple of base metrics that have nothing to do with your job in the first place.

Fact is, you are incorrect in thinking that government providing universal employment would improve our economy, or at least the people’s situations within it.

I noticed that you also failed to address or even quote my actual point with that question. The very least you should do is quote the point that the question was highlighting.

Wow, utterly false. Our money is not backed by debt but rather by the government.

Money is backed by debt.

You can see the balance sheet for the Federal Reserve here.
The first set of tables are the Fed's assets. The Fed has 1.6 trillion in US Treasury securities, and another 900 billion in mortgage-backed securities. (The mortgages are new; before the most recent crisis the Fed bought government debt exclusively.) The Fed has a handful of other assets, but those two categories are the lion's share.

The second set of tables are the Fed's liabilities. The Fed has issued about $1 trillion in currency ("Federal Reserve Notes"), and has another 1.6 trillion which are reserve deposits. Again, it has some other miscellaneous liabilities, but those two are the lion's share.

Liabilities are what the Fed owes to others. Assets are what others owe to the Fed. As with any bank, assets must equal liabilities (+capital). If a bank has more liabilities than assets, it's insolvent.

US currency is a liability of the Fed because it is an IOU. (The "Note" in "Federal Reserve Note" is for "promissory note," which is a kind of IOU.)

When the Fed writes promissory notes, it creates a liability on itself. It must, therefore, create an asset of at least equal value in order to stay solvent. The asset the Fed buys when it issues money is debt. Traditionally government debt, but recently mortgage debt as well.

The asset that backs the Fed's liabilities, therefore, is debt.

Commercial banks operate the same way, except that they're required to keep a certain amount of Fed liabilities as reserves. That's why it's called the Federal Reserve System.

Anyway, the point is that just as commercial banks' liabilities (also known as customer deposits) are backed by loans they make to the public, the Fed's liabilities (currency and Federal Reserve accounts) are backed by the loans it makes to the US.

Money is, therefore, not just backed by debt, it is debt itself. It is bank debt - it is the money the banks owe to us. And it's backed by the money we owe to them.

No, no,no. That is how the system USED to work when cash was actually represented and backed by gold. You could turn in a dollar and get one dollar back in gold. Today, you can’t turn in a dollar at all. You have no right or means to and you would get nothing in return. Money is not debt though it is sometimes introduced into the system in that manner instead of printing it out. Anyway, all this is rather scholastic as it has no bearing on the subject other than the next point which can be addressed separately.

If the US had a completely balanced budget we would still have money and it would still have value.

It's paying off the debt that would cause the problem, not balancing the budget.

But I do need to retract something I said before. While the Fed has traditionally relied on US government securities, recently (since the financial crisis) it's bought mortgages as well. Treasury debt may be preferable, but it's not required. So paying off the debt would not necessarily put the Fed out of business.

No. If the debt was 100% paid off there would still be cash in the system. Where do you think all existing cash would go? What debt is created when cash is printed?

You can get dollars with gold and will always be able to do so as long as the dollar has value. Even further than that, you will easily be able to pay for things with gold long after the dollar ceases to exist. Even MORE importantly, an ounce of gold will get you roughly the same amount of food today as it will in ten years.

Between about 1973 or so and 1980 gold went from $60 - $850. Over the next ten years it fell to about $400, and then fell another $100+ in the ten years after that. Since then, as I'm sure you know, it's skyrocketed. Gold's record is not one of price stability.

Actually, it is the value of a dollar that has been in flux. The value of gold is rather stable. There are times like this when market forces become volatile and gold’s value becomes over inflated but it will become stable as it did before. Gold will ALWAYS have value. The dollar on the other hand will always shrink in value.

Gold has value for the same reason anything has value. Because people think it does. It has no inherent value.

The dollar has value for the same reason anything has value. Because people think it does. It has no inherent value.

Sorry but gold has an inherent value in the rarity and stable supply. That creates that inherent value. If anyone could ‘print’ out gold at any time like you can do with dollars then it would lose that inherent value but until then, gold has something the dollar does not: it is rare and cannot be created.

No. I'm not supposing a dollar must be spent in America. I'm supposing that America is the only place where a dollar must be accepted.

So, you did not state:

Ultimately the only use for dollars is to buy stuff from us.

That is not the only use of dollars. Here, you were stating that a dollar is an IOU of sorts, which it is not. It is a medium of exchange, as all currencies are.

 

[gslack]

Just wanted to point out this idiot made another thread asking if rich people earn their money... I confronted him on his conflict with his assertions in this thread about debt being a good thing, and he played idiot again....

His contention there is using money to make money or rather rich people using their money to make themselves more money is not earning that money. Yet here he contends debt is a good thing and we need not ever pay it off...

Debt is the process of making money from the use of money. I told him as much and just like he has been doing here he played dumb and rambled nonsense...

He is a fake and only trying to get attention please do not humor him any more I will not...

 

[Sundial]

No, no,no. That is how the system USED to work when cash was actually represented and backed by gold. You could turn in a dollar and get one dollar back in gold. Today, you can’t turn in a dollar at all. You have no right or means to and you would get nothing in return. Money is not debt though it is sometimes introduced into the system in that manner instead of printing it out.

Anyway, all this is rather scholastic as it has no bearing on the subject other than the next point which can be addressed separately.

No. If the debt was 100% paid off there would still be cash in the system.

Only if the Fed purchased other kinds of debt.

Where do you think all existing cash would go?

Dollars are a liability of the Fed. When dollars are paid to the Fed, they cease to exist.

It's the same as if you wrote me an IOU for $5. I could - if other people would accept it - trade it to someone else. That's because it's an asset to me, and to everyone in the world. Everyone in the world except you. To you it's a liability.

If someone comes to you and hands you that IOU, and you hand him $5, the IOU ceases to exist. Not physically, of course. You still have a piece of paper with writing on it. But it's no longer worth anything. When a debt is paid off, it ceases to exist.

When the government redeems its bonds, it gives the Fed dollars. Both debts are extinguished simultaneously.

What debt is created when cash is printed?

Cash itself is a debt - it's a liability of the Federal Reserve. This is the nature of debt. All debt is a liability to one party (the issuer) and an asset to the other (the purchaser).

 

[Meister]

No, no,no. That is how the system USED to work when cash was actually represented and backed by gold. You could turn in a dollar and get one dollar back in gold. Today, you can’t turn in a dollar at all. You have no right or means to and you would get nothing in return. Money is not debt though it is sometimes introduced into the system in that manner instead of printing it out.

Anyway, all this is rather scholastic as it has no bearing on the subject other than the next point which can be addressed separately.

No. If the debt was 100% paid off there would still be cash in the system.

Only if the Fed purchased other kinds of debt.

Where do you think all existing cash would go?

Dollars are a liability of the Fed. When dollars are paid to the Fed, they cease to exist.

It's the same as if you wrote me an IOU for $5. I could - if other people would accept it - trade it to someone else. That's because it's an asset to me, and to everyone in the world. Everyone in the world except you. To you it's a liability.

If someone comes to you and hands you that IOU, and you hand him $5, the IOU ceases to exist. Not physically, of course. You still have a piece of paper with writing on it. But it's no longer worth anything. When a debt is paid off, it ceases to exist.

When the government redeems its bonds, it gives the Fed dollars. Both debts are extinguished simultaneously.

What debt is created when cash is printed?

Cash itself is a debt - it's a liability of the Federal Reserve. This is the nature of debt. All debt is a liability to one party (the issuer) and an asset to the other (the purchaser).

Dude, you've been pwn'd so bad....your yesterdays news.

 

[saveliberty]

Just wanted to point out this idiot made another thread asking if rich people earn their money... I confronted him on his conflict with his assertions in this thread about debt being a good thing, and he played idiot again....

His contention there is using money to make money or rather rich people using their money to make themselves more money is not earning that money. Yet here he contends debt is a good thing and we need not ever pay it off...

Debt is the process of making money from the use of money. I told him as much and just like he has been doing here he played dumb and rambled nonsense...

He is a fake and only trying to get attention please do not humor him any more I will not...

I put him on ignore. A fool and his money are soon in debt. Apparently, that is a good thing.

 

[FA_Q2]

No, no,no. That is how the system USED to work when cash was actually represented and backed by gold. You could turn in a dollar and get one dollar back in gold. Today, you can’t turn in a dollar at all. You have no right or means to and you would get nothing in return. Money is not debt though it is sometimes introduced into the system in that manner instead of printing it out.

Anyway, all this is rather scholastic as it has no bearing on the subject other than the next point which can be addressed separately.

No. If the debt was 100% paid off there would still be cash in the system.

Only if the Fed purchased other kinds of debt.

Where do you think all existing cash would go?

Dollars are a liability of the Fed. When dollars are paid to the Fed, they cease to exist.

It's the same as if you wrote me an IOU for $5. I could - if other people would accept it - trade it to someone else. That's because it's an asset to me, and to everyone in the world. Everyone in the world except you. To you it's a liability.

If someone comes to you and hands you that IOU, and you hand him $5, the IOU ceases to exist. Not physically, of course. You still have a piece of paper with writing on it. But it's no longer worth anything. When a debt is paid off, it ceases to exist.

When the government redeems its bonds, it gives the Fed dollars. Both debts are extinguished simultaneously.

What debt is created when cash is printed?

Cash itself is a debt - it's a liability of the Federal Reserve. This is the nature of debt. All debt is a liability to one party (the issuer) and an asset to the other (the purchaser).

I have already addressed this point. That is what the dollar USED to be. It is no longer that way. Actual cash monies have ZERO connection with debt – PERIOD. Paying off debt in no way negates existing dollars nor eliminates the feds ability to print more. What would the government pay current debts off with? That’s right – DOLLARS. The dollar has no connection with debt and if you still believe that a zero debt necessitates the extinguishing of the dollar then you need to provide some evidence other than you said so.

The dollar is not an IOU, it is a medium of exchange mandated by law within the US. That is all the dollar is. It USED to be an IOU when dollars were backed by gold, an IOU for exactly the weight in gold that the face of the dollar represented. When we left that system we left the idea that the dollar had any attachment to an IOU. Instead, it is simply a mandated medium of exchange.

Do you actually believe that the 20 in my pocket is representative of a debt the government owes to me? If so, what would they use to pay that debt? Can’t do it with dollars as you say that is debt…

 

[gslack]

Don't feed the troll FA...

He made a thread asking if the rich earn their money, where he contended that making money off of money is not earning the money, and here he claims debt which is the very essence of making money off of money, is a good thing and we shouldn't pay it off.... I confronted him on this and he played the buffoon like he is doing here.

He has no real point or argument to make, its all just him wanting attention. Thats why his responses are retarded to the point of nausea. I know its frustrating and ya want to show him how wrong he is, but trust me he will keep right on being a deliberate idiot just keep people arguing with him... Best to just let the troll die a natural death..

 

[bripat9643]

Dollars are a liability of the Fed. When dollars are paid to the Fed, they cease to exist.

The first sentence is wrong, and the second sentence contradicts the first. If dollars were an actual liability, the Fed would have to give you something of value in exchange for your dollars. Instead, what does it give you? Another Federal Reserve note - a worthless scrap of paper.

It's the same as if you wrote me an IOU for $5. I could - if other people would accept it - trade it to someone else. That's because it's an asset to me, and to everyone in the world. Everyone in the world except you. To you it's a liability.

It would be the same only if I could pay the I.O.U by writing another I.O.U. Would you be willing to take the original I.O.U. under those circumstances? Only if you're a moron. That I.O.U. isn't an asset to anyone. it's a worthless scrap of paper.

If someone comes to you and hands you that IOU, and you hand him $5, the IOU ceases to exist. Not physically, of course. You still have a piece of paper with writing on it. But it's no longer worth anything. When a debt is paid off, it ceases to exist.

When the government redeems its bonds, it gives the Fed dollars. Both debts are extinguished simultaneously.

That's how the government maintains the fiction that dollars are "backed" by something, but the reality is they are backed by nothing. Government prints both the dollars and the Treasury bonds it sells. It can print up as many as it wants of either. In the end, the value of Treasury bonds is determined solely by the ability of the federal government to extract money from future taxpayers.

Federal reserve notes have value only so long as people are willing to accept them as payment. When they refuse to accept them, the result is called "hyper inflation," which has occurred numerous times in the financial history of the globe. it's going on right now in Zimbabwe.

To claim that Federal Reserve notes are backed by something that the government can print by the trillions at the snap of the fingers is pure delusion. You're claiming one pile of worthless paper is "backed" by another pile of equally worthless paper.

 

[Sundial]

No, no,no. That is how the system USED to work when cash was actually represented and backed by gold. You could turn in a dollar and get one dollar back in gold. Today, you can’t turn in a dollar at all. You have no right or means to and you would get nothing in return. Money is not debt though it is sometimes introduced into the system in that manner instead of printing it out.

Anyway, all this is rather scholastic as it has no bearing on the subject other than the next point which can be addressed separately.

No. If the debt was 100% paid off there would still be cash in the system.

Only if the Fed purchased other kinds of debt.



Dollars are a liability of the Fed. When dollars are paid to the Fed, they cease to exist.

It's the same as if you wrote me an IOU for $5. I could - if other people would accept it - trade it to someone else. That's because it's an asset to me, and to everyone in the world. Everyone in the world except you. To you it's a liability.

If someone comes to you and hands you that IOU, and you hand him $5, the IOU ceases to exist. Not physically, of course. You still have a piece of paper with writing on it. But it's no longer worth anything. When a debt is paid off, it ceases to exist.

When the government redeems its bonds, it gives the Fed dollars. Both debts are extinguished simultaneously.

What debt is created when cash is printed?

Cash itself is a debt - it's a liability of the Federal Reserve. This is the nature of debt. All debt is a liability to one party (the issuer) and an asset to the other (the purchaser).

I have already addressed this point. That is what the dollar USED to be. It is no longer that way. Actual cash monies have ZERO connection with debt – PERIOD. Paying off debt in no way negates existing dollars nor eliminates the feds ability to print more. What would the government pay current debts off with? That’s right – DOLLARS. The dollar has no connection with debt and if you still believe that a zero debt necessitates the extinguishing of the dollar then you need to provide some evidence other than you said so.

The dollar is not an IOU, it is a medium of exchange mandated by law within the US. That is all the dollar is. It USED to be an IOU when dollars were backed by gold, an IOU for exactly the weight in gold that the face of the dollar represented. When we left that system we left the idea that the dollar had any attachment to an IOU. Instead, it is simply a mandated medium of exchange.

Do you actually believe that the 20 in my pocket is representative of a debt the government owes to me? If so, what would they use to pay that debt? Can’t do it with dollars as you say that is debt…

In ordinary conversation we use the words "dollar" and "dollar bill" interchangeably. But technically they aren't the same. Currency is not actual dollars, any more than an IOU is the debt itself, or papers documenting a mortgage are the actual mortgage. You can destroy the papers, but that doesn't necessarily extinguish the debt.

A dollar is an intangible thing, in the same way as debts are intangible. You can't point to a debt and say, "There it is!" It doesn't have physical manifestation in the real world.

You're right that dollars are fiat money. They are also debt. The one doesn't preclude the other. You're also right that if you went to the Fed for payment for your dollar bill, they'd just stare at you. At most they'd give you a new dollar to replace your old one. That's true because that's the law in our country. It's also true because they couldn't give you an actual dollar even if they wanted to. Dollars do not take up space.

Nevertheless, currency is a liability on the Fed. You asked for evidence. I've already linked to the Fed's balance sheet. If you want to see it, you can easily google it yourself. You could also look at any bill you have in your pocket. It says "Federal Reserve Note" across the top.

You need to distinguish between the Fed and the US government. They're not the same thing. Dollars are liabities of the Fed, not the government. The government doesn't owe you anything for the money you have in your pocket.

You, on the other hand owe something to the government, assuming you pay taxes. Your tax liability can be extinguished by sending dollars to the government. (in fact, it's the only way.) The government, in turn, owes something to the Fed - represented by the Treasury Notes the Fed has purchased over the years. Should the government choose to redeem its Notes (in other words, to pay back its debts) it would send dollars collected from tax payers to the Fed, and the Fed would return the Treasuries to the government. The Treasuries would be cancelled, because they'd been redeemed, and the dollars would be cancelled for the same reason. As a matter of logic and accounting principles, one can't owe a debt to oneself.

I realize this is difficult and counter-intuitive shit. If you don't make an effort to understand it, you won't.

 

[Sundial]

That's how the government maintains the fiction that dollars are "backed" by something, but the reality is they are backed by nothing. Government prints both the dollars and the Treasury bonds it sells. It can print up as many as it wants of either. In the end, the value of Treasury bonds is determined solely by the ability of the federal government to extract money from future taxpayers.

The question of whether the Fed is part of the government is an interesting one. Some right-wingers claim that it's private bank, secretly defrauding the American public. You seem to be saying the Fed and the government are the same. In truth, the Fed is a kind of hybrid organization, which claims to operate independly from the government, but which receives its authority from Congress. If you want to understand the mechanics of money, I'd argue it's best to think of it as an independent entity, whether you think it's part of the government or not.

Either way, the ability and willingness of the government to collect taxes is an essential element of maintaining the value of our money.

As far as the worthlessness of money... If you have any old Federal Reserve Notes lying around, I'd be happy to take them off your hands.

 

[FA_Q2]

Don't feed the troll FA...

I would not but I don’t see him as a troll at this point. So far the conversation has no vitriolic behavior and sun has not been completely redundant. Ideology differences does not a troll make. Empty one liners and the inability to address points does.

As to sundial – I will respond to the above post after I have had time to think about it more.

 

[FA_Q2]

In ordinary conversation we use the words "dollar" and "dollar bill" interchangeably. But technically they aren't the same. Currency is not actual dollars, any more than an IOU is the debt itself, or papers documenting a mortgage are the actual mortgage. You can destroy the papers, but that doesn't necessarily extinguish the debt.

A dollar is an intangible thing, in the same way as debts are intangible. You can't point to a debt and say, "There it is!" It doesn't have physical manifestation in the real world.

I do not see the difference here and cannot understand what you are talking about when you refer to the dollar and not the dollar. That makes no sense. Not all money is in physical form but all money is connected in the same way and essentially has the same meaning. There is no intangible dollar that fits what you have been putting fourth. You would need to explain what you mean further.

You're right that dollars are fiat money. They are also debt. The one doesn't preclude the other. You're also right that if you went to the Fed for payment for your dollar bill, they'd just stare at you. At most they'd give you a new dollar to replace your old one. That's true because that's the law in our country. It's also true because they couldn't give you an actual dollar even if they wanted to. Dollars do not take up space.

Nevertheless, currency is a liability on the Fed. You asked for evidence. I've already linked to the Fed's balance sheet. If you want to see it, you can easily google it yourself. You could also look at any bill you have in your pocket. It says "Federal Reserve Note" across the top.

I read your link and it does nothing to prop up your point that dollars do not exist without debt. You said that all dollars would cease to exist or be worthless without debt and that assertion is asinine. You are also stating that dollars are essentially debt but when asked what is owed for them I get nothing from you. That is because dollars have no direct link with debt whatsoever.

You need to distinguish between the Fed and the US government. They're not the same thing. Dollars are liabities of the Fed, not the government. The government doesn't owe you anything for the money you have in your pocket.

You, on the other hand owe something to the government, assuming you pay taxes. Your tax liability can be extinguished by sending dollars to the government. (in fact, it's the only way.) The government, in turn, owes something to the Fed - represented by the Treasury Notes the Fed has purchased over the years. Should the government choose to redeem its Notes (in other words, to pay back its debts) it would send dollars collected from tax payers to the Fed, and the Fed would return the Treasuries to the government. The Treasuries would be cancelled, because they'd been redeemed, and the dollars would be cancelled for the same reason. As a matter of logic and accounting principles, one can't owe a debt to oneself.

I realize this is difficult and counter-intuitive shit. If you don't make an effort to understand it, you won't.

Why would those dollars be cancelled? I\

 

[gslack]

Don't feed the troll FA...

I would not but I don’t see him as a troll at this point. So far the conversation has no vitriolic behavior and sun has not been completely redundant. Ideology differences does not a troll make. Empty one liners and the inability to address points does.

As to sundial – I will respond to the above post after I have had time to think about it more.

A troll is also someone who deliberately makes a claim and then defends it like he either doesn't know anything about it or instead of defending a claim makes a new claim or slightly different one.

You can play with him if you want but I stand by my claim.

 

[Mr. Shaman]

I don't know I would say debt is good but there's a lot of truth in what you say. Running a business or the government of a cash basis means you bypass a lot a lot of good things, like the putting a man on moon and the interstate highway system. However, when you consistently grow debt faster than GDP growth, you will have problem. Interest will become such a large expense that it threatens your ability to continue borrowing and your credit standing with your lenders.

Don't we.....

....know THAT??!!!!