"America is in debt" - To WHOM?? What fool would lend American government money?

[Rshermr]

Sorry I haven't posted, I've been busy with work.

Work does get in the way. I left this post for over 2 months while I was having a triple bypass and a couple related heart attacks. All better now, not looking for sympathy, quite happy with my new blood flow, and feeling great.
Trying to figure out whether it is worth posting or not. You make a rational statement on this board, and about 10 trolls show up supporting each other and making irrational statements. And a plethora of personal attacks. Kinda funny. Kinda sad.

Hope you had good insurance. Sounds costly otherwise. Here's hoping you have a good recovery and a long life.

Still looking at the bills. Had medicare and supplemental, and think all is covered. Makes you aware of what would happen had you not been insured. Couple hundred thousand would bankrupt many. And does.
Thanks to you and Kimura for the well wishes. I think I am better than for years. No concerns at all in my mind. Me and Alfred E.

 

[Bombur]

Yeah, it's called shifting funds from dollar deposits at the FED (US Treasuries) to reserve accounts. The US government doesn't borrow its own fiat, so it doesn't owe anyone anything. US Treasuries are nothing more than dollar deposits at the FED very similar to a savings account. It boils down to debiting and crediting reserve accounts and Treasuries. This is literally how it works.

I've got a government bond right now that says the gov't promises to pay me. So they dont owe me? Are they lying?
Or do you not know what you're talking about?

Bonds and cash are effectively the same thing - both are liabilities of the federal government and assets of the non-government. The $$$$ they "owe" you consists of nothing more than dollar deposits at the FED. Whether's it one dollar or twenty trillion dollars, it can never become a financial strain for the federal government. It boils down to debiting one type of account and crediting another. You now know more than 99% of the dimwits in Congress and staffers at the CBO. Congrats.

The Federal Reserve doesn't concern itself with "financial strain" as you put it.

The Federal Government and the Funds that actually spend the money most certainly do have financial constraints.

I am not sure what point you were trying to make but from what I can tell it is a rather meaningless point or you are simply confused.

 

[The Rabbi]

Bonds and cash are effectively the same thing - both are liabilities of the federal government and assets of the non-government. The $$$$ they "owe" you consists of nothing more than dollar deposits at the FED. Whether's it one dollar or twenty trillion dollars, it can never become a financial strain for the federal government. It boils down to debiting one type of account and crediting another. You now know more than 99% of the dimwits in Congress and staffers at the CBO. Congrats.

I know you're a crackpot, so you might be right on that one.
How is cash an obligation of the federal gov't? What are they obligated to do when I hold it?

It all goes back to accounting. The federal government creates $$$$ and has these liabilities on its side of the ledger (government sector); and it’s on the other side we have the non-government sector which gains an asset so to speak. Individuals, firms, etc make up the non-government side of the spreadsheet. We obtain $$$$ without any liability since we’re on the non-government side. Even though the government sector holds onto the liabilities for the $$$$ it creates, this is purely accounting logic – the federal government doesn't have any real obligations and technically/operationally doesn't owe any type of debt on the fiat it creates. We’re simply talking an accounting entry at the end of the day.

Also, when the government runs deficits, the $$$$ it creates is injected into the non-government sector as financial assets, and the same amount of liabilities are added the government sector side of the ledger. On the other side of the coin, for example, would be a government surplus. This is when the government takes in more $$$$ in taxes than it spends (assets are taken away from the non-government) and its liabilities are removed from the government sector.

The government's public monopoly on the currency ensures all debts, assets, and prices are denominated in US dollars. The government's obligation is to provide its citizens with a stable national unit of account.

An obligation to provide an environment is not an obligation in any accounting sense.
Again, what does the existence of cash obligate the government to? A bond obligates it to pay money back. What does cash obligate them to?

 

[Kimura]

I've got a government bond right now that says the gov't promises to pay me. So they dont owe me? Are they lying?
Or do you not know what you're talking about?

Bonds and cash are effectively the same thing - both are liabilities of the federal government and assets of the non-government. The $$$$ they "owe" you consists of nothing more than dollar deposits at the FED. Whether's it one dollar or twenty trillion dollars, it can never become a financial strain for the federal government. It boils down to debiting one type of account and crediting another. You now know more than 99% of the dimwits in Congress and staffers at the CBO. Congrats.

The Federal Reserve doesn't concern itself with "financial strain" as you put it.

The Federal Government and the Funds that actually spend the money most certainly do have financial constraints.

I am not sure what point you were trying to make but from what I can tell it is a rather meaningless point or you are simply confused.

Ok. Trust me, I'm not confused. The only constraint would be that of inflation.

 

[Bombur]

Bonds and cash are effectively the same thing - both are liabilities of the federal government and assets of the non-government. The $$$$ they "owe" you consists of nothing more than dollar deposits at the FED. Whether's it one dollar or twenty trillion dollars, it can never become a financial strain for the federal government. It boils down to debiting one type of account and crediting another. You now know more than 99% of the dimwits in Congress and staffers at the CBO. Congrats.

The Federal Reserve doesn't concern itself with "financial strain" as you put it.

The Federal Government and the Funds that actually spend the money most certainly do have financial constraints.

I am not sure what point you were trying to make but from what I can tell it is a rather meaningless point or you are simply confused.

Ok. Trust me, I'm not confused. The only constraint would be that of inflation.

Or more accurately said, there is no financial constraint without the threat of inflation. The threat of inflation does exist therefor there is a financial constraint.

Maybe I missed a part of your argument earlier on but from what I quoted it seems to me that you are rather blatantly ignoring the financial constraints of national finances. That you seem to be focusing on a rather specific set of circumstances and only addressing small variations from those circumstances.

Please correct me if I am wrong but you are pretty far out on a limb from what I can tell.

 

[Rshermr]

Here come the clowns.

 

[Kimura]

I know you're a crackpot, so you might be right on that one.
How is cash an obligation of the federal gov't? What are they obligated to do when I hold it?

It all goes back to accounting. The federal government creates $$$$ and has these liabilities on its side of the ledger (government sector); and it’s on the other side we have the non-government sector which gains an asset so to speak. Individuals, firms, etc make up the non-government side of the spreadsheet. We obtain $$$$ without any liability since we’re on the non-government side. Even though the government sector holds onto the liabilities for the $$$$ it creates, this is purely accounting logic – the federal government doesn't have any real obligations and technically/operationally doesn't owe any type of debt on the fiat it creates. We’re simply talking an accounting entry at the end of the day.

Also, when the government runs deficits, the $$$$ it creates is injected into the non-government sector as financial assets, and the same amount of liabilities are added the government sector side of the ledger. On the other side of the coin, for example, would be a government surplus. This is when the government takes in more $$$$ in taxes than it spends (assets are taken away from the non-government) and its liabilities are removed from the government sector.

The government's public monopoly on the currency ensures all debts, assets, and prices are denominated in US dollars. The government's obligation is to provide its citizens with a stable national unit of account.

An obligation to provide an environment is not an obligation in any accounting sense.
Again, what does the existence of cash obligate the government to? A bond obligates it to pay money back. What does cash obligate them to?

You’re still missing the point. When vast quantities of $$$$ are accrued, firms, people, or countries that hold them tend to invest those $$$$ back into US bonds, since they earn some interest and are risk free place to park $$$$. This is what constitutes US public debt. As you may be piecing together (I hope you are), it's not really national debt, but rather a form of national savings or equity.

For example, let’s say you have 50K in a non-interest checking account at your local bank. You need only 5K to be available for checking, so you put 45K in a CD at the same bank. The bank debits your checking account by 45K and credits your CD/savings account by 45K. Once it hits maturity, the bank then debits your CD/savings accounts for 45K and credits your checking account for $45,098. Now have 50K and a bit more with interest. You were always in the same financial position. We wouldn’t say the bank is in debt if for 45K just because you shifted funds from checking to a CD account. When you and others constantly say the federal government is in debt because $$$$ has been exchanged for bonds it's simply inaccurate and untrue. Government bonds are basically cash, you can trade them in for US $$$$. And the government creates both ex-nihilo.

US national debt is actually a representation or saved dollars or equity. And those saved $$$$$ will never decrease in any capacity, you can basically considered them to be extinguished. Now, in order to answer your questions more clearly, government bonds never really get exchanged and spent in the net sense of things. I mean, they could, but they just sit idle and some interest is added to them now and again. This accumulation of net financial assets really doesn’t have a noticeable effect on the overall economy.

 

[Kimura]

The Federal Reserve doesn't concern itself with "financial strain" as you put it.

The Federal Government and the Funds that actually spend the money most certainly do have financial constraints.

I am not sure what point you were trying to make but from what I can tell it is a rather meaningless point or you are simply confused.

Ok. Trust me, I'm not confused. The only constraint would be that of inflation.

Or more accurately said, there is no financial constraint without the threat of inflation. The threat of inflation does exist therefor there is a financial constraint.

Maybe I missed a part of your argument earlier on but from what I quoted it seems to me that you are rather blatantly ignoring the financial constraints of national finances. That you seem to be focusing on a rather specific set of circumstances and only addressing small variations from those circumstances.

Please correct me if I am wrong but you are pretty far out on a limb from what I can tell.

I really wouldn't worry about inflation at this juncture, though. It would be a concern if we were at full employment and the economy was at full capacity. Given all of our excess capacity, I really don't think it's a problem going forward.

I'm not ignoring national finances. It's ultimately Congress than makes the spending and policy decisions.

 

[Bombur]

Ok. Trust me, I'm not confused. The only constraint would be that of inflation.

Or more accurately said, there is no financial constraint without the threat of inflation. The threat of inflation does exist therefor there is a financial constraint.

Maybe I missed a part of your argument earlier on but from what I quoted it seems to me that you are rather blatantly ignoring the financial constraints of national finances. That you seem to be focusing on a rather specific set of circumstances and only addressing small variations from those circumstances.

Please correct me if I am wrong but you are pretty far out on a limb from what I can tell.

I really wouldn't worry about inflation at this juncture, though. It would be a concern if we were at full employment and the economy was at full capacity. Given all of our excess capacity, I really don't think it's a problem going forward.

I'm not ignoring national finances. It's ultimately Congress than makes the spending and policy decisions.

Then why did you say?

The $$$$ they "owe" you consists of nothing more than dollar deposits at the FED. Whether's it one dollar or twenty trillion dollars, it can never become a financial strain for the federal government.

I generally agree that inflation is not a fear now but the potential for inflation in the future is and our capacity to plan for that eventuality still limits our options today.

 

[Kimura]

Or more accurately said, there is no financial constraint without the threat of inflation. The threat of inflation does exist therefor there is a financial constraint.

Maybe I missed a part of your argument earlier on but from what I quoted it seems to me that you are rather blatantly ignoring the financial constraints of national finances. That you seem to be focusing on a rather specific set of circumstances and only addressing small variations from those circumstances.

Please correct me if I am wrong but you are pretty far out on a limb from what I can tell.

I really wouldn't worry about inflation at this juncture, though. It would be a concern if we were at full employment and the economy was at full capacity. Given all of our excess capacity, I really don't think it's a problem going forward.

I'm not ignoring national finances. It's ultimately Congress than makes the spending and policy decisions.

Then why did you say?

The $$$$ they "owe" you consists of nothing more than dollar deposits at the FED. Whether's it one dollar or twenty trillion dollars, it can never become a financial strain for the federal government.

I generally agree that inflation is not a fear now but the potential for inflation in the future is and our capacity to plan for that eventuality still limits our options today.

Well...it depends. Some inflation is good for a vibrant and growing economy, it prevents hoarding, encourages investments, etc. The FED has tried to inflate for the past eight years and failed miserably, so barring full employment and the economy redlining at full capacity, an inflationary scenario is highly unlikely. I'd like to explore this further.

Edit to add:

Sorry, didn't see the first response.

If the government paid off its debt today, all outstanding bonds would be swapped out for bank reserves and deposits. I'm not suggesting we do this. This could be inflationary or even deflationary in such a scenario. It's still not like the process of crediting and debiting reserves and bonds would be a problem. My point to Rabbi is that bonds and $$$$ are just two different forms of liabilities for the federal government. And financial assets for the non-government. Neither of these things can be a burden for our children or grandchildren, etc.

 

[Bombur]

I really wouldn't worry about inflation at this juncture, though. It would be a concern if we were at full employment and the economy was at full capacity. Given all of our excess capacity, I really don't think it's a problem going forward.

I'm not ignoring national finances. It's ultimately Congress than makes the spending and policy decisions.

Then why did you say?

The $$$$ they "owe" you consists of nothing more than dollar deposits at the FED. Whether's it one dollar or twenty trillion dollars, it can never become a financial strain for the federal government.

I generally agree that inflation is not a fear now but the potential for inflation in the future is and our capacity to plan for that eventuality still limits our options today.

Well...it depends. Some inflation is good for a vibrant and growing economy, it prevents hoarding, encourages investments, etc. The FED has tried to inflate for the past eight years and failed miserably, so barring full employment and the economy redlining at full capacity, an inflationary scenario is highly unlikely. I'd like to explore this further.

Edit to add:

Sorry, didn't see the first response.

If the government paid off its debt today, all outstanding bonds would be swapped out for bank reserves and deposits. I'm not suggesting we do this. This could be inflationary or even deflationary in such a scenario. It's still not like the process of crediting and debiting reserves and bonds would be a problem. My point to Rabbi is that bonds and $$$$ are just two different forms of liabilities for the federal government. And financial assets for the non-government. Neither of these things can be a burden for our children or grandchildren, etc.

Is paying back those bonds a burden now?

 

[Kimura]

Then why did you say?


I generally agree that inflation is not a fear now but the potential for inflation in the future is and our capacity to plan for that eventuality still limits our options today.

Well...it depends. Some inflation is good for a vibrant and growing economy, it prevents hoarding, encourages investments, etc. The FED has tried to inflate for the past eight years and failed miserably, so barring full employment and the economy redlining at full capacity, an inflationary scenario is highly unlikely. I'd like to explore this further.

Edit to add:

Sorry, didn't see the first response.

If the government paid off its debt today, all outstanding bonds would be swapped out for bank reserves and deposits. I'm not suggesting we do this. This could be inflationary or even deflationary in such a scenario. It's still not like the process of crediting and debiting reserves and bonds would be a problem. My point to Rabbi is that bonds and $$$$ are just two different forms of liabilities for the federal government. And financial assets for the non-government. Neither of these things can be a burden for our children or grandchildren, etc.

Is paying back those bonds a burden now?

Of course not, unless we think crediting reserve accounts is a burden.

 

[The Rabbi]

It all goes back to accounting. The federal government creates $$$$ and has these liabilities on its side of the ledger (government sector); and it’s on the other side we have the non-government sector which gains an asset so to speak. Individuals, firms, etc make up the non-government side of the spreadsheet. We obtain $$$$ without any liability since we’re on the non-government side. Even though the government sector holds onto the liabilities for the $$$$ it creates, this is purely accounting logic – the federal government doesn't have any real obligations and technically/operationally doesn't owe any type of debt on the fiat it creates. We’re simply talking an accounting entry at the end of the day.

Also, when the government runs deficits, the $$$$ it creates is injected into the non-government sector as financial assets, and the same amount of liabilities are added the government sector side of the ledger. On the other side of the coin, for example, would be a government surplus. This is when the government takes in more $$$$ in taxes than it spends (assets are taken away from the non-government) and its liabilities are removed from the government sector.

The government's public monopoly on the currency ensures all debts, assets, and prices are denominated in US dollars. The government's obligation is to provide its citizens with a stable national unit of account.

An obligation to provide an environment is not an obligation in any accounting sense.
Again, what does the existence of cash obligate the government to? A bond obligates it to pay money back. What does cash obligate them to?

You’re still missing the point. When vast quantities of $$$$ are accrued, firms, people, or countries that hold them tend to invest those $$$$ back into US bonds, since they earn some interest and are risk free place to park $$$$. This is what constitutes US public debt. As you may be piecing together (I hope you are), it's not really national debt, but rather a form of national savings or equity.

For example, let’s say you have 50K in a non-interest checking account at your local bank. You need only 5K to be available for checking, so you put 45K in a CD at the same bank. The bank debits your checking account by 45K and credits your CD/savings account by 45K. Once it hits maturity, the bank then debits your CD/savings accounts for 45K and credits your checking account for $45,098. Now have 50K and a bit more with interest. You were always in the same financial position. We wouldn’t say the bank is in debt if for 45K just because you shifted funds from checking to a CD account. When you and others constantly say the federal government is in debt because $$$$ has been exchanged for bonds it's simply inaccurate and untrue. Government bonds are basically cash, you can trade them in for US $$$$. And the government creates both ex-nihilo.

US national debt is actually a representation or saved dollars or equity. And those saved $$$$$ will never decrease in any capacity, you can basically considered them to be extinguished. Now, in order to answer your questions more clearly, government bonds never really get exchanged and spent in the net sense of things. I mean, they could, but they just sit idle and some interest is added to them now and again. This accumulation of net financial assets really doesn’t have a noticeable effect on the overall economy.

You havent answered the question. What obligation does currency create for the US government?

 

[Kimura]

An obligation to provide an environment is not an obligation in any accounting sense.
Again, what does the existence of cash obligate the government to? A bond obligates it to pay money back. What does cash obligate them to?

You’re still missing the point. When vast quantities of $$$$ are accrued, firms, people, or countries that hold them tend to invest those $$$$ back into US bonds, since they earn some interest and are risk free place to park $$$$. This is what constitutes US public debt. As you may be piecing together (I hope you are), it's not really national debt, but rather a form of national savings or equity.

For example, let’s say you have 50K in a non-interest checking account at your local bank. You need only 5K to be available for checking, so you put 45K in a CD at the same bank. The bank debits your checking account by 45K and credits your CD/savings account by 45K. Once it hits maturity, the bank then debits your CD/savings accounts for 45K and credits your checking account for $45,098. Now have 50K and a bit more with interest. You were always in the same financial position. We wouldn’t say the bank is in debt if for 45K just because you shifted funds from checking to a CD account. When you and others constantly say the federal government is in debt because $$$$ has been exchanged for bonds it's simply inaccurate and untrue. Government bonds are basically cash, you can trade them in for US $$$$. And the government creates both ex-nihilo.

US national debt is actually a representation or saved dollars or equity. And those saved $$$$$ will never decrease in any capacity, you can basically considered them to be extinguished. Now, in order to answer your questions more clearly, government bonds never really get exchanged and spent in the net sense of things. I mean, they could, but they just sit idle and some interest is added to them now and again. This accumulation of net financial assets really doesn’t have a noticeable effect on the overall economy.

You havent answered the question. What obligation does currency create for the US government?

It doesn't create any obligations for the federal government as a currency issuer. The federal government can't involuntarily run out of $$$$, because it has the constitutional ability to create as much $$$$ as it requires. This constraint is obviously limited by Congress.

Fiat $$$$ is nothing more than a tax credit at the end of the day.

 

[oldfart]

Yeah, it's called shifting funds from dollar deposits at the FED (US Treasuries) to reserve accounts. The US government doesn't borrow its own fiat, so it doesn't owe anyone anything. US Treasuries are nothing more than dollar deposits at the FED very similar to a savings account. It boils down to debiting and crediting reserve accounts and Treasuries. This is literally how it works.

I've got a government bond right now that says the gov't promises to pay me. So they dont owe me? Are they lying?
Or do you not know what you're talking about?

Bonds and cash are effectively the same thing - both are liabilities of the federal government and assets of the non-government. The $$$$ they "owe" you consists of nothing more than dollar deposits at the FED. Whether's it one dollar or twenty trillion dollars, it can never become a financial strain for the federal government. It boils down to debiting one type of account and crediting another. You now know more than 99% of the dimwits in Congress and staffers at the CBO. Congrats.

Kimura's explanation used to be oversimplified, but now it is literally correct. I can go to Treasury Direct - Under Construction, log into my account and redeem any Treasury security I own, and the money will be in my bank account in the morning, depending on how long my bank wants to take. If you doubt me, open an account, buy a savings bond online, and test it yourself.

 

[oldfart]

You havent answered the question. What obligation does currency create for the US government?

It doesn't create any obligations for the federal government as a currency issuer. The federal government can't involuntarily run out of $$$$, because it has the constitutional ability to create as much $$$$ as it requires. This constraint is obviously limited by Congress.

Fiat $$$$ is nothing more than a tax credit at the end of the day.

Actually it's a little more than that. No one can legally demand payment in anything other than legal tender (duh, that's what legal tender means!) unless specified otherwise in a contract. So my bank is required to accept my mortgage payment in currency if I so choose (but not in coin! Pennies are only legal tender for amounts under $50.00. I forget the overall limits for other coin.)

And of course the government must accept its own issue in payment of taxes at par. The government is obligated to accept legal tender for amounts due it and to enforce through the judicial system the status of currency (and for all practical purposes, demand deposits) as legal tender "for all debts public and private". All of this was spelled out in the famous "gold cases" in the Supreme Court in the 30s.

 

[Bombur]

Is paying back those bonds a burden now?

Of course not, unless we think crediting reserve accounts is a burden.

Is any part of the Federal Budget a burden in your mind? Or can we just ignore debt service payments?

 

[Kimura]

Is paying back those bonds a burden now?

Of course not, unless we think crediting reserve accounts is a burden.

Is any part of the Federal Budget a burden in your mind? Or can we just ignore debt service payments?

Nothing I can think of. We should actually be spending more, our fiscal policy isn't sufficient.

 

[Bombur]

Of course not, unless we think crediting reserve accounts is a burden.

Is any part of the Federal Budget a burden in your mind? Or can we just ignore debt service payments?

Nothing I can think of. We should actually be spending more, our fiscal policy isn't sufficient.

Is Taxation a burden?

 

[The Rabbi]

You’re still missing the point. When vast quantities of $$$$ are accrued, firms, people, or countries that hold them tend to invest those $$$$ back into US bonds, since they earn some interest and are risk free place to park $$$$. This is what constitutes US public debt. As you may be piecing together (I hope you are), it's not really national debt, but rather a form of national savings or equity.

For example, let’s say you have 50K in a non-interest checking account at your local bank. You need only 5K to be available for checking, so you put 45K in a CD at the same bank. The bank debits your checking account by 45K and credits your CD/savings account by 45K. Once it hits maturity, the bank then debits your CD/savings accounts for 45K and credits your checking account for $45,098. Now have 50K and a bit more with interest. You were always in the same financial position. We wouldn’t say the bank is in debt if for 45K just because you shifted funds from checking to a CD account. When you and others constantly say the federal government is in debt because $$$$ has been exchanged for bonds it's simply inaccurate and untrue. Government bonds are basically cash, you can trade them in for US $$$$. And the government creates both ex-nihilo.

US national debt is actually a representation or saved dollars or equity. And those saved $$$$$ will never decrease in any capacity, you can basically considered them to be extinguished. Now, in order to answer your questions more clearly, government bonds never really get exchanged and spent in the net sense of things. I mean, they could, but they just sit idle and some interest is added to them now and again. This accumulation of net financial assets really doesn’t have a noticeable effect on the overall economy.

You havent answered the question. What obligation does currency create for the US government?

It doesn't create any obligations for the federal government as a currency issuer. The federal government can't involuntarily run out of $$$$, because it has the constitutional ability to create as much $$$$ as it requires. This constraint is obviously limited by Congress.

Fiat $$$$ is nothing more than a tax credit at the end of the day.

OK so when the feds issue bonds they are not swapping one obligation for another, which was your previous explanation.