Posted on 06/28/2021 3:25:12 PM PDT by Jonty30
Now, do understand, I realize that we cannot drop the dollar with the garbage politicians that we have in office. Inflation would go Venezuela and everybody would suffer. I totally understand that we cannot do that at all. So, I realize that we can't do this, so I don't want to discuss about how our politicians cannot be trusted and all that, because I know that.
However, my thought is what if we cleaned up the deficit financing and dropped the dollar to pay a bunch of debt back. Then we tightened up the federal financial policy until the dollar recovered and we dropped it again at some point to make another large payment on the debt.
Could the debt be paid off this way theoretically?
Several countries have done this in the past, the UK for instance had to devalue the pound a couple of times.
The problem with the idea is that the USA is too big. Most debt in the world is demarcated in dollars. If a Turkish construction company has borrowed from an Italian bank, that debt is in dollars.
As such if the the US were to suddenly halve the value of the dollar, every lender in the world would be celebrating.
The problem is every bank would go bankrupt as half their loans just went bad, leading to a general collapse of the global economy.
The other problem is the only debtor that wouldn’t benefit much is the USA. Only about a third of our debt is held offshore, so we would have shaved a portion of it off, but not enough to make a difference.
The value of the dollar IS dropping and it ain’t temporary. The pols think they can shrink the Debt by paying it back in cheaper dollars. That is a perenniel solution of kings and Congressmen. Then the cost of new debt or debt rollover begins to rise rapidly i.e. rising interest rates on the Debt. I could work if the inflation is accompanied by cutting spending to below revenue. Politicians are incapable of conceiving that. Suggest it to them and they only hear static. It makes no sense to them.
Our current economic system represents an existential threat to all of humanity. Only a slow, well-thought-out transition to a different monetary system (for example, precious metals, some form of cryptocurrency, etc.) stands any chance of avoiding a complete worldwide collapse of the current system.
This problem-solving isn't going to happen given our current leaders or history as our guide.
The best option then would be the government getting out of the money business entirely and allowing people to develop new exchange methods on their own.
Full disclosure: I fell asleep in every economics class I ever attended and I own precious metals, cryptocurrency, and hold cash in reserve.
Could we? Sure.
But currency manipulation is frowned upon amongst the rest of the world’s economies. We would lose our reserve currency status and that would would hurt us a ot.
What if all bunnies had pancakes on their heads?
As reasonable a question as yours.
These people have already decided that murdering off a couple hundred million fellow citizens via the covid/covax bioweapons is a great idea.
They dont need any more “great ideas”.
Isn’t that what inflation does?
I vote default, my children shouldn’t have to pay for a party they didn’t attend.
I am not sure that money works that way. I am pretty sure that it doesn’t. My operating theory is that the value of money comes from the bottom up, not the top down. You cannot just arbitrarily say that money is worth this or that. The people in the economy make that determination. You start f#cking with it like you describe, and people will flee from your currency like rats from a burning ship.
Nixon already did that nearly 50 year ago. It didn’t work then and it won’t work now.
“while at the same time income taxes or internal taxes were almost nothing.”
If you are going to spend, it is better to tax and pay for it than to print money and debase the currency.
Both parties have given up on any pretense toward balancing the budget. As long as they can get away with money printing they will. At some point the pain will come in hyperinflation and loss of dollar reserve status. At that point the government will be forced to make draconian cuts in spending as well as increase taxes.
Better to tax imports, and provide an incentive for producing in the USA where jobs can be created than raise rates on the 50% of US citizens who are paying taxes to benefit the 50% who aren’t. If the non-productive buy foreign goods, they’ll be contributing to the tariff tax, instead of contributing nothing.
For someone such as yourself, who has advocated on FR for the overthrow of the US Government, accusing people that don’t share that view as supporters of Biden is not a good look.
It would need to be long term, or we wouldn’t get to necessary levels of manufacturing on U.S. soil. Sustainable revenues with added manufacturing are required.
“Switching to a precious-metals-backed new financial system will have some hiccups in the transition, but bring us back to sovereignty and freedom in the long run.”
That is NOT what the ComDems and their foreign supporters have in mind. The will confiscate all assets and laugh at us dying.
They might not laugh long, we will fight back.
No. That will just spark a panic and crazy dollar selloff.
I start collecting SS in a little over 5 years.
I don’t want any reforms of what I have been promised.
Yes, I’m going to screw the young hipsters.
Gimme that damn fiddle Nero and go torch something.
Your theory falls apart right there. Neither party wants to end the deficit.
...and dropped the dollar to pay a bunch of debt back.
We're not talking about refinancing your mortgage. U.S. debt is traded on financial markets. Devalue the dollar and the market price of the securities goes up and the cost of buying back the debt goes up.
“We’re not talking about refinancing your mortgage. U.S. debt is traded on financial markets. Devalue the dollar and the market price of the securities goes up and the cost of buying back the debt goes up.”
You must understand something I don’t. Please explain how that works.
U.S. debt is issued by the Treasury in bonds, bills, and notes depending on maturity. Treasuries are sold and then enter into the secondary market where, depending on the type of Treasury and the return and the duration remaining and economic conditions, they can trade for more or less than face value. If you are trying to buy back Treasuries with dollars worth less than when they were issued you can expect to pay a premium. So to retire $X trillion in debt you will likely pay $Y trillion where Y reflects the premium paid.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.