18 Replies to “It’s Probably Nothing”

  1. But unlike Greece, the US has the ability to print unlimited dollars to “pay off” its debt.
    And anyone who balks at accepting such freshly minted paper, quickly find themselves perched precariously upon on the “axis of evil”.
    See Iraq, Venezuela, Libya, Iran.

  3. “… But unlike Greece, the US has the ability to print unlimited dollars to “pay off” its debt.”
    True, but more important than that, America still knows how to build good stuff that the world wants/needs, DESPITE having off-loaded a sh*t-load of jobs to the third world.
    MM

  4. The day of reckoning happens when the bond vigilantes show up. The US being the reserve currency will have more time but they will not be spared. Math is math. They will eventually collapse in a deflationary of hyper-inflationary depression.
    Von Mises:
    This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.
    But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against ‘real’ goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.
    It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.

  6. CP, your numbers are right as far as they go. But you should really add in the provincial debt for Canada to create a true cost comparison. Just quoting federal debt is a bit misleading. Roughly this would double Canada’s per capita debt, but still leaves it far better than the US.
    Kevin, that day of doom by the bond vigilantes will likely come when China unpegs its currency from the US dollar. At the moment, the run on the US currency isn’t happening because there’s nowhere else to go. When that happens, the floodgates open.

  7. @kevin
    Misses theory is flawed as people don’t save, expecting prices to decline anymore. They spend everything and then borrow more so they can spend that too.
    Been waiting for hyper inflation since Y2K. It’s not happening.

  8. Ron Paul is our only hope. Cut the deficit and our budget, NOW. Unfortunately, most establishment Republicans — and many conservatives on this board — are not at all serious about our debt problem.
    Only Ron Paul will cut spending. Now.

  9. Jeff,
    Without the US government creating money they would currently be in a deflationary depression. They are printing money to stop that from happening. It is impossible to predict when hyperinflation will occur because it depends on a loss of confidence. This is what Mises is saying. Until that happens it is still possible for the government to stop the printing presses and take the natural medicine. Once confidence is lost people start trading their money for other goods as fast as they can. This increases the velocity of money (where it normally may trade hands weekly it will now start to trade hourly – it becomes a hot potato). This process can take years to develop but happens quickly once it starts. The US government is aware of this and are trying to walk a fine line (see financial repression). They can delay it but they can not change the laws of gravity.

  10. Here’s the real story. The story that the press is too dull to get, and the politicians don’t ever want mentioned.
    The debt per capita by itself is a meaningless statistic. What counts is the debt on the shoulders of the private sector worker/businessman. After all, in addition to his own debt he shouders the debt of the young, the old, the chronically unemployed, the disabled, and, the debt of everyone who gets a government paycheque.
    When you start collecting the figures and doing the math, the debt load on the poor bugger in the private sector is crushing and frightening.
    I would venture a guess that in Ontario, the actual combined public debt (provincial, federal, municipal)on the private sector working guy/girl is somewhere in the neighbourhood of $70,000 – $90,000.

  11. Jamie MacMaster is 100% correct. Government has nothing, creates very little, and must TAKE goods & services from the private sector.
    Fire all bureaucrats. Shrink government to its minimum. Ron Paul is our only hope.

  12. The only way that Greece won’t default is for the Greeks to accept significant reductions in wages, benefits and entitlements to the point where they are running trade surpluses. Think public sector unions and retirees saying sure, no problem!
    This is why Nixon left the Gold standard (deflationary corrections are necessary and effective but not politically desirable) as the Euro is not responsive to what would affect exchange differentials within the Euro zone.
    Greece will default and soon and then they could leave the Euro and actually accomplish the above by tricking their citizens while reclaiming their sovereignty. They could even pretend to give their “entitled” slight “raises” while their Drachma settles into an appropriate trading range. Remember the (USD) $0.62 Loonie?

  13. The thing is we are about to see before our eyes a western society collapse on itself. When Greece goes down and takes down the Euro people will start to realise what has been happening. Why do you think everyone is so panicked and desperate to kick the greecian can of goo down the road?
    Anyway the most insane person in the world right now that some fools take seriously is Paul Kraugman. The man is STILL saying that the answer is MORE DEBT not less.

  14. John, wage losses are going to hit the Greeks in any case. If Greece defaults and is forced out of the Euro, the new drachma will be enormously devalued compared to any other world currency. That constitutes a wage cut by the extent to which the Greek currency is devalued.
    They’re going to have trouble running trade surpluses even if all their debt is forgiven. Greece doesn’t have a meaningful economy which produces anything.
    Mike: “Fire all bureaucrats. Shrink government to its minimum.”
    So what are you saying? Fire all government employees? That means no government, not minimum government.

  15. Does anyone hear a tree crash when it in a forest.
    Yes it does when your deaf than it falls on you.
    America is ready to fall & we are all going to feel the crushing weight of it. Of course Obama will have been the guy with the Axe.

  16. Slight difference betwen Greece and USA. The Yanks have enough weapons to justify the T-shirt that shows an array of fighter aircraft and reads, “So we owe you money–come and get it.”

  17. cgh: let me rephrase. Fire 90% of government employees that serve no purpose other than the redistribution of wealth, the upholding of liberal programs and agendas, the raping of the public treasury in order to finance their growing and growing pensions, and job creation for left-wing big-government politicians.
    State-owned liquor store workers? superfluous job creation. HUD employees? same. TSA? Education? PBS? These jobs exist for no other purpose than to employ and appease simpleton masses.
    This is California, but represents a close mirror of what needs to be PRIVATIZED and DEFUNDED across the entire USA:
    http://en.wikipedia.org/wiki/List_of_California_state_agencies

  18. With reduced industrial/productive capacity (which continues to dwindle daily)and compounded interest of the primary by the debt holders, and the dwindling value of the over inflated US dolllar, and with rising interest rates due to the global credit crisis, the American taxpayer has an unpayable debt load and none of those who caused it will take responsibility for it. The US taxpayer is on his own with an elephant in his living room to feed and care for lest it wreck the house.
    In some ways, getting into such a situation seems like it was almost planned that way. Because when the debt becomes apparently unrepayable and the weakness of the dollar is widely recognised, ony the IMF stands to profit from bailing out America’s currency system/economic collapse. Is it coincidental that many of the same finance interests who sit on the IMF, own seats on the Fed reserve which has mismanged the debt and currency situation so badly?

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