rickdri wrote:
Good for France but if you will look a little harder you will see how much trouble they and the rest of Europe are in financially. They are having to cut back on some of their healthcare services due to lack of funds. They exceed their healthcare budgets by billions of euros every year. They have maybe 5 years or less left if dramatic changes are not made. People now have to settle for generic drugs instead of name brand. The French people think that generics aren't good enough. If a pharmacy doesn't substitute a generic for a name brand they are shut down until they comply with the law. Taxi rides to the hospitals are being cut back. This is just the beginning for them. More cuts will have to be made if their system is to survive.
You want The U.S. which already has a known debt of $17 trillion and an unfunded liability of well over $100 trillion to assume even more debt that we can not afford. Government programs are ripe with abuse and scandal. Every program ends up costing much more than originally estimated. If we continue with all of this reckless spending, it will not be long before we suffer a currency crisis. Don't be fooled into thinking it can't happen here. The laws of economics does not stop at our boarders.
Good for France but if you will look a little hard... (
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France and the other nations of Europe don't have their own fiat currency as we do. France is more like Illinois with Frau Merkel like the chair of the Fed. We can afford to have free and subsidized universal education because:
Q1: Is our so-called national debt really a serious debt, an interest-bearing burden that we must repay?
A1: No, It lacks the two essential qualities of a serious debt. Its a Debt In Name Only, a DINO -
1. A really serious debt is a burden. Our DINO is not now and never will be a burden for taxpayers.
Our DINO is the total value of all issued and still maturing treasuries. Who pays for the redemption of mature treasuries? Not the taxpayers! The buyers of newly-issued treasuries pay for the redemption of mature treasuries. In every auction, more bonds are demanded than are available from new issues. Auction winners get the safest, most liquid US dollar instruments; the losers are stuck with bank risk. If necessary, the Fed could even create a demand for bonds by buying large quantities in the open market with a few cost-free keystrokes. Wheres the taxpayers burden?
Our Treasury does not borrow money like a home-buyer undertaking a mortgage. It is a custodian of funds, like a bank accepting money offered for certificates of deposit. While a bank with too many bad loans can certainly have too many maturing CDs, our non-lending, fiat Treasury cannot have too many maturing bonds unless its deficit spending is causing harmful inflation. And that happens ONLY in a war or emergency requiring rationing. It NEVER happens during a recession. During prosperity, banks are ALWAYS the SOLE cause of inflation, creating over $6 of credit for every $1 of deficit spending. To curb inflation, regulate the banks before restricting infrastructure spending!
By calling our DINO unsustainable, a h**x meant to privatize Social Security and Medicare, Wall Street con artists seeking a fortune in commissions have panicked the ignorant public, journalists, and politicians in Congress and in the White House. And, by bribing Congress into austerity, the Wall Street charlatans are nursing a huge army of unemployed labor to suppress the wages and working conditions of the middle class. As our rotting infrastructure renders our industry incompetent, it is that growing army of unemployed labor that will become unsustainable.
2. A really serious debt must be repaid. Our DINO will never be repaid and should never be repaid.
Only a budget surplus can reduce our DINO. Since dropping the gold standard in1971, we have rarely had even a modest budget surplus. None is now in sight. To supply enough treasuries, the ONLY risk-free instruments used for trade collateral, insurance, pensions, bank reserves, etc., our Dino must continue to grow along with our economy. In fact, deflation and then depression will hit us hard unless big budget deficits replace the cash now flowing into China.
Q2: Could savers make a run on Treasury bonds?
A2: Yes, when savers can get risk-free returns from the Wall Street casino or from GM bonds, Illinois bonds, or Detroit bonds. Safety is not everything. Safety is the ONLY thing! Thats why the whole world relies on US bonds.
Q3. Could savers stop buying Treasury bonds?
A3. Sure, when nobody needs risk-free interest for trade collateral, insurance, pensions, bank reserves, etc., etc.
Q4: Could savers prefer foreign sovereign bonds?
A4: Yes, indeed! So far, almost two thirds of the worlds reserve currencies are in US dollars and half of all US Treasury bonds are held by foreigners. But if Chinas infrastructure and productivity become better than ours, its sovereign bonds could become safer than ours. But that could happen only if US v**ers worry more about our DINO than they worry about our falling bridges, failing schools, leaking sewers, aging power grids, etc., etc.
Q5: Wont we need higher tax rates to pay for infrastructure?
A5: Congress does not use our taxes for spending. The IRS destroys every cent of its receipts. (Cash payments are shredded and sold). For spending, Congress creates new money out of thin air, deposits it in the Treasury, and writes checks. The Treasury then auction bonds to finance the deficit, which is limited only by Congress and NEVER by tax revenue. The only rational reason to restrict spending is the threat of harmful inflation. Until that point, Congress can spend freely on our DINOs debt interest expense and on much-needed infrastructure for the future.
Every spent federal dollar not repossessed by the IRS is saved by the private sector. Our annual budget deficit is exactly equal to the annual increase in private sector savings. YES! DEFICITS = SAVINGS! No deficits, no savings! A tax deficit is a savings surplus. It is money left on the table for the savers by Uncle Sam because he didnt need it to prevent harmful inflation and because consumers need it to consume. We do not have a national debt. We have a national savings. The bad Debt Clock is really the good Savings Clock. How can we have too much savings?
Since bank loans must be repaid with interest and hard cash is moving to China, a tax deficit / savings surplus is the ONLY savings source that can sustain our economy. We need to DOUBLE our DINO / total savings to return it to the World War II level that was followed by 35 years of prosperity without harmful inflation, even with very high tax rates. Our (DINO + total bank deposits) / GDP ratio is less than half of the comparable figure for China. Our M2 (money supply) / GDP ratio is half of Switzerlands ratio and one quarter of Hong Kongs ratio. Too much savings?