Can’t we just borrow money from the Chinese?
On one of the Sunday shows a guest actually complained about the govt printing extra money (it’s called “expanding the money supply” in better circles) to pay its bills and that this is partially causing the inflation, which has just hit a seventeen year high.
Another guest casually responded that the fed wouldn’t necessarily have to print more money to pay bills, but instead could get dollars from other nations. Then he yawned.
In other words, we could ask the Chinese government for a pile of those American dollars they are holding.
This is nice, isn’t it? Instead of printing dollars we simply get some from overseas!
A sigh of relief was heard from all those who don’t understand economics and continue to be fooled by the federal govt. An unquestioning smile of contentment, and the show drifted into more important matters.
Wait a minute!
Doesn’t anyone ask questions anymore?
How exactly are we going to get the Europeans, Chinese, or Arabs to hand us a boatload of American dollars to pay our bills with?
The answer is to sell them promissory notes, such as govt bonds, offering a competitive interest rate, in exchange for the dollars.
They will like this because bonds pay interest, dollars do not.
“But, but,” you might stutter “where do we get the money to pay the interest, and to redeem the bonds?”
You got it! We print more money.
Grimgold
Grim, your scenario isn’t that far-fecthed — some economists think China will hand us more money just because we’re such a big consumer market for their cheap crap. But our consumer days are coming to a close — people with massive mortgages and unpaid credit card debt won’t be able to afford the latest electronic gizmos and lead-painted toys from Asia.
With the recent downturn in the international markets, nobody wants the nearly-worthless US dollar, or our T-Bills, these days. The Big Money Boys are investing in Euros or gold or gems.
We’re in for a long, nasty ride economically; I hope we come out of it as well as our parents and grandparents came out of the Great Depression — and without a world war.
Comment by RS Janes — January 22, 2008 @ 7:23 pm
RS, I understand and share your fear. I wish you dems would consider the fairtax. It makes the cost of doing business much cheaper because companies don’t have to constantly fight the IRS, and with the fairtax the fed govt is directly tied to the economy. If we do well they do well. Suddenly they have incentive, therefore, to keep the economy on an even keel.
Also getting rid of fiat money is about 75 years overdue. FDR intended that as a very temporary measure. We need to go to uninflatible dollars, as the govt has proved beyond reasonable doubt it will not deal honestly with us. A gold standard may not be the answer, but something with the same idea in mind is needed to keep the fed honest.
We are in a position where we are being forced to compete globally and it’s high time we started doing it. Please, please read the fairtax book. Grim
Comment by grimgold — January 22, 2008 @ 11:34 pm
Grim, I am sincerely convinced that the national sales tax proposal, if implemented, would not yield anywhere near the revenue needed to meet the federal government’s financial obligations. I am further convinced that it would simply enormously expand the “underground”/black market/cash only economy, making tax evasion a national hobby.
Our grotesquely outsized military expenditures (which in reality are close to $1.1 trillion per year when the defense-related activities of all government departments are factored in) are putting an enormous strain on our resources. Our defense expenditures outnumber those of the rest of the world combined.
Further, our refusal to pay for what we are asking for in government services is tragically misguided. I know it’s heresy among conservatives, but taxes on the top 1% are too low and the Bush tax cuts have generally been a disaster for the economy. China already holds $1,530,000,000,000 in its central banking system because we have been borrowing from China so recklessly. How much longer can we continue this disastrous course?
Comment by Joseph52 — January 23, 2008 @ 3:44 pm
Joe, I agree about the huge military budget. Perhaps it’s time to loudly proclaim we no longer want to be the world’s policeman. We can’t afford it.
It’s obvious to us conservatives that we need to begin living within our means. I say part of the way to do this is to force the fed to go to a non-fiat dollar, one that cannot be inflated, and to demand balanced budgets.
The top 1% pay 35% of the taxes (do I have that right?). I’d rather see the rich get that money, then re-invest it or give it away (as per Bill Gates, for example). It’s the rich that are most interested in money, business, and perhaps by default job creation.
Also you’ll never be able to punish the rich as those who are jealous of them want to. It makes liberal hearts all warm and is good bullshit during campaign speeches, but will never happen because the rich push for the tax breaks that have caused the thousands of pages of tax code, are more politically aware, and if all else fails are quite capable of taking their money and moving out of the USA.
I agree with you that we can no longer go down the road we’ve been traveling.
Please read the FairTax book. It talks about the “underground”/black market/cash only economy, and answers your query very well.
My answer to you is too long already. I’d be glad to discuss this further if you’d like. Grimmy
Comment by grimgold — January 23, 2008 @ 7:22 pm