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?
What would cause their market value to rise relative to their nominal value if the dollar is devalued by inflation?
Why would we not be buying back the nominal amount with dollars that are now worth less?
I know neither party wants to fix the finances. My question is more academic than anything. If angels came down and ran the government as it should be run and they did what I suggested, could it work over the long term.
I’m not seriously suggesting it, because of what exactly you suggest.
Because the price we pay to purchase the debt back would increase to reflect the less valuable dollar.
“Because the price we pay to purchase the debt back would increase to reflect the less valuable dollar.”
That’s what I don’t understand.
When a bind matures, do we pay to the holder something different than it’s nominal value in dollars no matter what those dollars are worth at the time? And is that not how we would “buy back” our debt, by paying the nominal value of the matured bond in dollars?
Sorry, I misunderstood your plan. Treasury bonds have a maturity date of 20 or 30 years in the future. I had assumed you had a shorter timeline.
At maturity you will be paid back with dollars worth whatever they are worth at the maturity date. By the same token, in the case of bonds your interest payments will be paid in dollars worth whatever they are worth at the time as well. Things like that are factored in to the selling price on the open market.
Nothing good will happen unless it serves to keep the RATs in office. If it helps the rest of us but not them, it will be ignored.
How about they just stop spending on things they're not supposed to spend on? That might force us to execute Congress, though.
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