If you use the same formula for inflation back from the old Carter days, we're about the same inflation rate as the average of the Carter Administration - 9%.
Posted on 05/08/2016 5:20:55 PM PDT by RayofHope
Presumptive Republican presidential nominee Donald Trump just revealed an inconvenient truth about U.S. debt, the outspoken and often controversial Peter Schiff told CNBC in a recent interview.
Last week, Trump joined CNBC's "Squawk Box" last week to discuss a wide range of topics including U.S. debt, interest rates and replacing Fed Chair Janet Yellen. It was Trump's comments about potentially renegotiating the more than $19 trillion in U.S. debt and the sensitivity surrounding higher interest rates that raised eyebrows.
While some observers argued that Trump's approach could be tantamount to a debt default, Schiff told CNBC the GOP nominee was fundamentally correct in his observation.
(Excerpt) Read more at cnbc.com ...
Again, you seem to think this is something bad. It isn't because it is mutually beneficial to both parties who have both voluntarily negotiated the deal. Who are you to say two parties can't do this. It's common practice.
Trump can negotiate with China because we can. Not because you don't want to.
I'm so glad you're not in charge. We'd all be living by YOUR rules whether we liked it or not because you obviously know better than others how they should run their lives.
And a good day to you.
“Interesting since the us debt is owed to the federal reserve bank
Does the question become: “how big a discount is the fed willing to take?”
Considering that they already take a 99%+ discount it will hardly matter. By law, any income above routine expenses that the Fed earns gets turned over to the US Treasury.
And to be precise, the US debt is owed to anyone who owns a T-Bill or a US Savings Bond.
Before there was a Fed, JP Morgan’s private bank acted in the role of the Fed. How would returning to that system improve anything?
How is offering to pay back a debt with anything less than the full amount not a default?
Regards,
We are looking at debt differently. SS is an unfunded liability in the future. Operating debt is what makes up a substantial portion of the CROmnibus legislation.
lol, no one elected me to anything that I am aware of.
And you are correct. IF..I were in charge if someone or some entity borrowed money...they would pay it back.
Restructuring of debt means terms and interest rate. Not reduction of principle. Why in the he!! would any responsible lender reduce principle? Why would China? Unless, like I said earlier, they are in the clutches of a collection company.
Maybe, we as a country, are and I haven’t read about it.
I am very glad that I’m not in charge. As much as you are. I’m pretty “old school” about things.
BTW...if you ever need a loan, even a small one, don’t call me. But you are correct about one thing...if I decide to forgive a portion of your loan that would be my business.
Wages didn't match inflation in the 70s, they won't now either. Devaluation will all but the 1%, who will be warned and are capable of shifting out of dollars easily. Folks on fixed incomes can't shift at all.
The US debt is about to hit $27 trillion.
That’s what I have been trying to say.
Thank you for being so succinct.
The Federal Reserve lent ‘created money’ to its large member banks to loan to its Bond Traders. The 0% loans were used to buy treasuries at about 2%; “carry trade”.
The bond traders hold the treasuries as collateral on the loans. If the Fed were to call in the loans, the bond traders would have to turn over the collateral in the form of treasuries.
Ultimately, the Fed is behind all of the buying of treasuries that are not bought by foreign traders and most of the foreign purchases of treasuries have been drying up. For example, China has dumped massive amounts of its US debt holdings in the last 6 years.
Some people on this thread think the SS Trust Fund holds treasuries; they do not. The federal government does not issue treasuries to the SS Trust Fund. The SS Trust Fund is still receiving income via payroll taxes and the shortfall which is still a fraction (albeit growing) is made up from the general fund. The general fund shortfall is funded from the issuance and sale of US treasuries on the bond markets. Most of the purchases are made from ‘money’ created/borrowed from the Federal Reserve via bond traders associated with the big member banks.
As for ‘haircuts’, the bond traders are in a precarious bubble situation. They want the gravy train to continue just as it is.
If Trump arranges for the Fed to call their loans, the bond traders will have to turn over the treasuries thereby losing that income stream. They will have to turn to selling more corporate debt. In the interim, they will not be happy.
But who cares? They have had a helluva ride and they are so rich as a result. The real sour grapes will be the political lobbyists who trade favors for bond trader clients. These are the special interests, the privileged class. They are the ones that are opposed to Trump.
Trump will cause a shift in bond portfolios from government debt to corporate debt. People will make money still. But no one likes to change an easy and predictable scheme so they oppose him. But it’s the only way to get the natural laws of finance such as price discovery working again.
To understand how Trump will get the debt down, first understand the food chain of US debt.
1. The Fed creates ‘money’ at a computer to be ‘loaned’ to its big member banks at about 0% or even <0% in some situations.
2. The Fed instructs the recipient banks of these loans how the loans are to be managed. The policy today is to see the funds are used to buy treasuries (government debt).
3. The big member banks make loans available to their licensed bond traders who do the actual purchasing of the treasuries. These traders hold the treasuries in their portfolios and they collect net revenue from the US government.
Now what Trump can do is to cause to appoint a Federal Reserve Chairman that will change policy from purchasing US Government debt to purchasing corporate debt. He will aim to reach an agreement for the Fed to CALL BACK THE LOANS to the bond traders who are holding treasuries. The bond traders will have no alternative but to turn over their collateral in the form of treasuries. So the Fed ends up taking and holding the treasuries.
Then Trump can make a deal with the Fed to extinguish portions of the debt over time or in large tranches.
That’s how it will work.
The ‘money’ was created from nothing, and it will return to nothing. From ‘dust to dust’.
The reason that there is so much opposition to Trump is because the bond traders who have tentacles throughout the country and especially in Washington DC, do not want this change because they are living in a bubble while the rest of the country is just scraping by. The political establishment receives much of their funding and inside trading from this setup. They know Trump will upset their world. They don’t want uncertainty and Trump represents massive uncertainty.
Brilliant summary. Thank you. The dollar devaluation seems harmful but your analysis points out how it could be helpful: trigger manufacturing, enable debt reduction and follow through with a strategy.
They can if the iras are liquid date ed.
If you use the same formula for inflation back from the old Carter days, we're about the same inflation rate as the average of the Carter Administration - 9%.
Yep.
The one thing forgotten here is that Trump also intends to sell of US Assets (surplus buildings and likely land in the West) to partially attack at the debt issue.
A question for you, berdie:
Say I loaned HotHunt $100,000 at 10% interest, 10 year payback. HotHunt is making a usual $1321.50 monthly payment to me.
About 4 years in, I am still owed about $71,500. HotHunt offers to pay everything off right now, for $60,000. Now, to date (48 months in), HotHunt has paid me $63,400. So I’m being offered a complete payoff amount of $123,400 after 4 years. Which is a nice little ~7% return.
No, it’s not the full 10% I originally negotiated, but I’d have all my money back NOW, and have made about 7% average on it as well.
OR, I could say no - and hope that HotHunt can continue making regular payments for the next 6 years. What happens if HotHunt was severely injured or killed? Could I take 12-24 months of probate on a property with zero income from it? Would bankruptcy look for HotHunt’s estate, and I’d end up getting nickels on the dollar because of other creditors?
No, I’d be highly inclined to take the full payout, at less than the face-value of the remaining note, because I’m still up rather nice, still have a good return, and can get full liquidity right now, then re-invest.
It’s a pretty normal strategy, and one employed by BOTH sides. It’s why banks and most lenders do NOT charge early-payoff penalties - they will give up potential profit (interest) in order to get their money back and reduce their risk to future income streams.
The math is pretty simple. With a $20 trillion debt, every 1% addition to the interest rate paid is another $200 billion the traitors in DC can’t distribute to their patrons.
Why argue with a financial ignoramus?
Clearly the doofus doesn't know what he's talking about.
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