The Inescapable Math That Dooms Our System

[dusty88]

A reserve currency has never collapsed? You sure about that?

There have been other currencies used somewhat globally, but not to this extent.

 

[Blackhawk2001]

I'm not sure why any of this should be controversial; someone said long ago that when a people stop voting for what's good for their country and start voting for what's good for themselves, the country will not stand. (Something about "bread and circuses" comes to mind.) We're already there, folks.

 

[foszoe]

Math don't mean nothing

 

[Blackhawk2001]

Math don't mean nothing

Well, if what I read once is correct, math doesn't NECESSARILY mean 'nothing.' It only means 'something' when it describes the real world.

 

[BugI02]

I'm not sure why any of this should be controversial; someone said long ago that when a people stop voting for what's good for their country and start voting for what's good for themselves, the country will not stand. (Something about "bread and circuses" comes to mind.) We're already there, folks.

We could revert to requiring 'freeholder' status to be eligible to vote. Unfortunately, that would solve quite a few real world problems

 

[Tombs]

I'm not sure why any of this should be controversial; someone said long ago that when a people stop voting for what's good for their country and start voting for what's good for themselves, the country will not stand. (Something about "bread and circuses" comes to mind.) We're already there, folks.

That's why the founders gave us a republic... If we could keep it.

We've devolved into democracy, the charter of the democratic party. Democracy is what kills a republic and paves the way for people to vote themselves entitlements, leading to the destruction of the nation.

Still amazes me that so few people can put together this extremely basic 1+1=2.

 

[BehindBlueI's]

There have been other currencies used somewhat globally, but not to this extent.

Arguable, but given that the economy has never been this global either I don't think that's entirely fair. The dollar is more widespread than, say, the Dutch Guilder was in the late 1700s, but it's tough to say it's more vital to the "global economy" of the time. Global just means more global.

Most Americans born in the last 60 years or so are so biased to the faith in our dollar, that they don't see the insurance/wealth storage value in gold and silver. Nor do they understand that there is a reason why society bounces back to metals at least for a time, every time someone screws up another fiat currency. But I don't have a "pitch". I don't have any for sale.

I knew we'd get there. There's nothing magical about gold or silver. It has very limited inherent value. Ask the Mayans. It's valuable because we've agreed it's valuable. As an exchange medium it suffers from the same trust issues as paper money, or electronic money. It just brings about a different set of problems, primarily lack of flexibility and the inability to respond to coordinated attempts to drain national reserves/kill an economy. Ask England...or most of Europe at some point in time or the other, really.

Anywho, you fellows enjoy. It's not a bad idea to hedge a bit...just don't go overboard planning for the collapse of currency. Hedge your hedge, so to speak, so you can have a decent retirement if things don't go belly up in your lifetime.

 

[BugI02]

Not thinking gold or silver this time. Canned food and ammunition

 

["Username"]

Same old story; different scale.

It culminates with and ends in war.

Then the cycle starts over.

 

[dusty88]

Arguable, but given that the economy has never been this global either I don't think that's entirely fair. The dollar is more widespread than, say, the Dutch Guilder was in the late 1700s, but it's tough to say it's more vital to the "global economy" of the time. Global just means more global.

I don't think the dollar is necessarily more vital. I think the effect of a currency correction will be more significant.

I knew we'd get there.

Well you did ask

There's nothing magical about gold or silver. It has very limited inherent value. Ask the Mayans. It's valuable because we've agreed it's valuable. As an exchange medium it suffers from the same trust issues as paper money, or electronic money.

No not the same issues. Gold isn't perfect. An ideal currency would expand exactly with economic growth. The FED theoretically could have taken that task, but they have done what governments (and in this case a banking cartel) always do with a fiat currency. Gold works pretty well because it's so hard to counterfeit repeatedly.

It just brings about a different set of problems, primarily lack of flexibility and the inability to respond to coordinated attempts to drain national reserves/kill an economy. Ask England...or most of Europe at some point in time or the other, really.

A gold standard is not utopia. But gold is a reasonable, portable way to store value and insure against certain currency problems. Obviously it can also be used for speculation but that's not my point.

Anywho, you fellows enjoy. It's not a bad idea to hedge a bit...just don't go overboard planning for the collapse of currency. Hedge your hedge, so to speak, so you can have a decent retirement if things don't go belly up in your lifetime.

I'd normally say 5-10% of your net worth is about right. Right now, maybe closer to 20% . But I'd certainly do the obvious first: pay off debt, have some food storage and other basic needs covered. Those things aren't really subject to timing. Pretty sure we are going to eat almost every day

 

[spencer rifle]

I'm not sure why any of this should be controversial; someone said long ago that when a people stop voting for what's good for their country and start voting for what's good for themselves, the country will not stand. (Something about "bread and circuses" comes to mind.) We're already there, folks.

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, (which is) always followed by a dictatorship." - Alexander Tyler, 1787

 

[dusty88]

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, (which is) always followed by a dictatorship." - Alexander Tyler, 1787

The government spending is only half of it though (mathematically only about 1/4 of the problem). It's the bank cartel called the FED that has stolen much more from the people, screwed up our markets, and destroyed our trade balance. Giving the power of money creation to the FED was a bigger mistake partially because it's more opaque.

 

[DoggyDaddy]

Is there really 2 kinds of math - inescapable and... well... escapable? I mean, I've been trying for years to escape math, so I would really like to know.

[video=youtube;X5iaZf21R8w]https://www.youtube.com/watch?v=X5iaZf21R8w&list=RDX5iaZf21R8w[/video]

 

[dusty88]

Another central banker is voicing his concern that the system is flawed and fragile. What annoys me is these guys (including Greenspan and Dick Fischer) are all part of the problem until they quit; then they act like they want to help.

Anywho... Robert Pringle, former central banking consultant and Exec of the Group of 30 said
"Current monetary policies are immoral because….

….they weaken the institution of money, the crucial coordinating mechanism of each and every society. Following the inequitable allocation of losses from the great financial crisis, policy-makers are also knowingly further widening inequalities and divisions in society. The monetary mandarins treat people as tools to the realisation of ends that they, not the people, have chosen. They also view people as so stupid they will not understand what is going on."

I'm not glorifying Pringle. He still advocates central control. It looks like there is an attempt to gradually switch the SDR over to a global currency, but they will probably have to bring China in first and China wants some gold backing. While I would prefer we have no central bank at all, a gold-backed global currency might be better than what we have now (if they actually allow audits).

I know most of us aren't stupid. Let's not be blind though.

 

[BugI02]

If you research how much gold the Chinese currently hold (and they're still buying) you can get an idea of their reasons for being 'gold bugs'

 

[dusty88]

If you research how much gold the Chinese currently hold (and they're still buying) you can get an idea of their reasons for being 'gold bugs'

Agreed

 

[MCgrease08]

Infographic: Visualizing the Size of the U.S. National Debt

The national debt is larger than all of the world’s physical currency, gold, silver, and bitcoin combined.

That’s right, if you rounded up every single dollar, euro, yen, pound, yuan, and any other global physical currency note or coin in existence, it only amounts to a measly $5 trillion. Adding the world’s physical gold ($7.7 trillion), silver ($20 billion), and cryptocurrencies ($11 billion) on top of that, you get to a total of $12.73 trillion. That’s equal to about 65% of the U.S. national debt.

 

[Libertarian01]

Infographic: Visualizing the Size of the U.S. National Debt ...

And to just think...

This is only about 1/7 - 1/8 of the $131 Trillion in unfunded liabilities we are facing!

Which is why I argue, respectfully, that we must both cut spending and increase revenues IF we are ever to get ahead of this and survive it.

Regards,

Doug

PS - The range on unfunded liabilities cannot be nailed down due to a variety of reasons, mostly who is counting and how. The range is from about $70 Trillion to $200 Trillion, but many will agree near the $131 Trillion.

 

[Alpo]

What seems to be missing is a discussion of assets. There is a high-level discussion of Wikipedia.

https://en.wikipedia.org/wiki/Financial_position_of_the_United_States

The financial position of the United States includes assets of at least $269.6 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP)[a] as of Q1 2014.

In addition, there are numerous off-balance sheet assets (640 million acres of land, mineral rights, etc) owned by the US government. Along with the going-concern value of the "franchise" of the United States.

But, that doesn't ever get through to the gold bugs. If it came down to it, would you rather have an ounce of gold or an AR15 and 3000 rounds of ammo? About the same price. One has much more value.

 

[dusty88]

What seems to be missing is a discussion of assets. There is a high-level discussion of Wikipedia.

If you want to discuss assets, I hiope that is in terms of private debt also and not just government. I REALLY cringe when some liberal author suggests the US government debt isn't so bad because..... and then includes the value of all the private holdings in the US (which from the standpoint of many liberals, is quite subject to government confiscation.)

Two things are more important here though: we have very obvious asset bubbles right now and these assets are valued in US$$

When those bubbles pop, the debt will still existed until it is bankrupted. And when the bankruptcies occur, then the rolling defaults affect everyone's balance sheet even more.

The asset statement is meaningless when valued in a fiat currency. It's using meaningless information (fiat money having only perceived value).

Historically, the total debt to GDP ratio illustrates the limitations. And we are at the point where new debt is no longer producing expansion. It's at the limit, and that's even with years of NIRP. That's why we are in stagnation.

ETA: I think the point here that a lot of people miss is that this isn't about us owing money to an outside source such as a foreign government (although we have went from the largest creditor nation to largest debtor nation). The bigger problem is that we have borrowed from our future, about 40 years by reasonable calculations. Hence, the correction will be 40 more years of stagnation, or a really big correction.

Even if you don't think anyone owes you money, you might be expecting to get a SS check, a pension check, or just expect someone else to be able to buy your stocks or your home when you wish to sell it. It matters if there is someone (or enough "someones") out there to reimburse you. There aren't. Your expectations are too high if you are expecting to sell assets at current value or expect future taxpayers, funds, businesses to give something to you. What we probably should expect is a lot more confiscation as government tries to keep this all functioning.

But, that doesn't ever get through to the gold bugs. If it came down to it, would you rather have an ounce of gold or an AR15 and 3000 rounds of ammo?

Don't choose. Have both.