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Smoking Some Bad Debt Dope?
All week, I've been watching the circus and clowns in Washington make fools out of themselves. The "debt ceiling drama" is annoying me. More smoke & mirrors to scare retail investors away while the big guns load up on risk assets. Let me go over a few key points to convince you to keep buying the dips hard and ignore the debt boogeyman which permeates our mass media every day.
First, take the time to read Peter Coy's article which appears on yahoo Finance (provided by Bloomberg Businessweek), Why the Debt Crisis Is Even Worse Than You Think. I quote the following:
The language we use is part of the problem. Every would-be budget balancer in Washington should read "On the General Relativity of Fiscal Language," a brilliant 2006 paper by economists Laurence J. Kotlikoff of Boston University and Jerry Green of Harvard University (available online from the National Bureau of Economic Research). The authors write that accountants and economists have something to learn from Albert Einstein's theory of relativity, about how measured quantities depend on one's frame of reference. Terms such as "deficit" and "tax," they write, "represent numbers in search of concepts that provide the illusion of meaning where none exists."
The national debt itself is one such Einsteinian (that is, squishy) concept. The Treasury Dept.'s punctilious daily accounting of it -- $14,342,841,083,049.67 as of July 25, of which just under $14.3 trillion is subject to the ceiling and about $10 trillion is held by the public -- gives the impression that it's as real and tangible as the Washington Monument. But what to include in that sum is ultimately a political choice. For instance, the national debt held by the public doesn't include America's obligation to make Social Security payments to future generations of the elderly. Why not?
Suppose that instead of paying Social Security payroll taxes, working people used that amount of money to buy bonds from the Social Security Administration, which they would redeem in their retirement years. In such an arrangement, the current and future cash flows would be identical, but because of a simple labeling change the reported debt held by the public would skyrocket. That example alone should generate a certain queasiness about the reliability of the numbers that are taken for granted by budget combatants on both sides of the aisle.
A more revealing calculation is the CBO's measurement of what's called the fiscal gap. That figure is conceptually cleaner than the national debt -- and consequently more alarming. Boston University's Kotlikoff has extended the agency's analysis from 2085 out to the infinite horizon, which he says is the only method that's invulnerable to the frame-of-reference problem. It's an approach used by actuaries to make sure that a pension system doesn't contain an instability that will manifest itself just past the last year studied. Years far in the future carry very little weight, converging toward zero, because they are discounted by the time value of money. Even so, Kotlikoff concluded that the fiscal gap -- i.e., the net present value of all future expenses minus all future revenue -- amounts to $211 trillion.
Yikes! Douglas J. Holtz-Eakin, a former director of the CBO from 2003 to 2005, says he doesn't favor the infinite-horizon calculation because the result you get depends too heavily on arbitrary assumptions, such as exactly when health-care cost growth slows. But directionally, he says, Kotlikoff is "exactly right."
Which means we've been heading the wrong way for years. Even in the late 1990s, when official Washington was jubilant because the national debt briefly shrank, fiscal-gap calculations showed that the government was quietly getting into deeper trouble. It was paying out generous benefits to the elderly while incurring big obligations to boomers, whose leading edge was then 15 years from retirement. Now the gray deluge is upon us. As Holtz-Eakin, now president of the American Action Forum, a self-described center-right policy institute, says: "We're just in a world of hurt."
The U.S. is in danger of reaching a generational tipping point at which older Americans have the clout to vote themselves benefits that sap the strength of the younger generation -- benefits that can never be repeated. Kotlikoff argues that we may have reached that point already. He worries that the U.S. could become Argentina, which went from one of the world's richest to lower-middle income in a century of chronic mismanagement.
Senior citizens are being told by their own lobbyists, repeatedly, that any attempt to rein in the cost of Social Security and Medicare is an unjust attack on earned benefits. "Stop the liberals from raiding the Social Security Trust Fund once and for all!" says a recent mailing from the National Retirement Security Task Force. Similar messages aimed at Democratic voters make the same charge against Republicans. No wonder Obama and Boehner were rebuffed by their own parties for putting entitlements on the table. In the end neither the House nor the Senate debt-ceiling proposals touched Social Security or Medicare. Not pretty.
So is the US at risk of becoming the next Argentina or worse still, Greece? Of course not!!! This is all nonsense doctored up by the power elite to scare the masses into believing that the US economy is heading down a "path of fiscal destruction" so they can abdicate their duty to pay their fair share of taxes. I watch all these debates on television and think to myself "what a bunch of bullshit!"
On Friday, I spoke to my favorite fixed income senior portfolio manager/analyst at the Caisse -- a guy that PIMCO only wishes would be working for them. As far as brains go, he can take on Bill Gross and any other 'top gun' at PIMCO but he's too nice of a guy to work with sharks there or on Wall Street. He should be working for an elite global macro hedge fund but he's content where he's at and they value him (even though he's probably grossly underpaid relative to his peers at other large Canadian pension funds).
Anyways, this person confirmed a lot of my thinking on the US debt drama, namely, that most people don't have a clue of what they're talking about when it comes to public economics:
- On the 'balanced budget' proposal we both agreed that this is a stupid and dangerous proposal and President Obama would be nuts to accept it. Running government finances is not the same thing as running a family budget (thank God!). By law, states have to balance their budgets. When states need money, they go to the federal government. Why in the world would the US federal government -- the lender of last resort -- accept an economic straightjacket? "That's just stupid and would effectively mean the end of counter-cyclical fiscal policy and the end of the welfare state." I would go a step further and state that a balanced budget at the federal level would effectively kill the US economy for long time by posing serious economic, social and health risks. Only lunatics would accept such a proposal, ignoring the serious risks it actually entails.
- We both agreed that this "US debt crisis" is a political crisis, not an economic crisis. The lack of leadership in Washington is disconcerting. It's actually disturbing to see Tea Party representatives sticking to "their principles" with little or no concern as to the harm that a US default will cause not only in the US, but throughout the world. Already billions have been wiped off the stock market this past week, making a lot of investors poorer, but these politicians have no concern. Like religious zealots who think they will end up in heaven if they carry out their god's work, these lunatics are holding the US economy hostage. The only good thing from this entire messy debt debate is that it will set the Tea Party back years. On that front, Obama and his advisors are brilliant.
- As far as austerity goes, my friend and I are in full agreement. It's a disaster in Greece, it's a disaster in England, and it's pretty much going to be a total disaster everywhere else. My friend told me that the only place austerity worked was in Canada during the 90's but "that's because the economy was growing." Those of you who still cling to this silly notion that austerity works should take the time to listen to Michael Hudson at the end of my comment on the rottenness of the world.
- We both agree that the debt crisis is way overblown. The August 2nd deadline is not set in stone. "The cost of capital extending it by a week is zero but the stock market will likely slide further on uncertainty. In theory, the Fed could mint a trillion dollar 'platinum' coin and the US government will pay all its obligations." More importantly, we both agree that the real long-term issue for the US and other developed economies remains the jobs crisis. And the real unemployment scandal is how it's impacting certain minorities much harsher than others. Importantly, if you don't tackle the jobs crisis, the debt and deficit will only get worse.
- As far as Bill Gross and PIMCO, my friend chuckled at his advice to "short Treasuries" when yields were at 3.75%. "Anyone following his advice would have gotten killed, but to be fair to him, he has a fiduciary responsibility to his clients and won't reveal his true positions beforehand." Yields continue to fall as the US economy slows and flight to quality reigns as global investors remain jittery.
- In Europe, my friend sees this as a long, drawn out mess where yields will gyrate widely over the next year. He joked: "the way spreads are moving, BCA Research should start a new publication call the European Fixed Income Weekly."
- Finally, my friend thinks universities across the world should "burn standard economics textbooks." Having graduated from McGill University with an M.A. in Economics, I'm somewhat in agreement but also recognize that some of the greatest social thinkers of the 20th century were brilliant economists like Keynes, Hicks, Hayek, Fisher, Friedman, etc. The problem isn't economics, it's what they're teaching students, ignoring a rich history of economic thought (too much mathematics and programming, not enough economics and history!)
I leave you with an excellent roundtable discussion from ABC's This Week (entire show is worth watching online; watch both parts of roundtable discussion below). Pay close attention to what Paul Kruman and Mohamed El-Erian are saying. Cutting spending now will only exacerbate the jobs crisis and will make things much worse. In my opinion, Krugman is wrong about targeted cuts to the federal government, but he's absolutely right that the Obama administration has basically pandered to the Republicans and caved into every one of their demands.
As I stated before, the world is sinking into a hellhole. We have incompetent fools running our governments, major corporations, banks and yes, alas, our public pension funds (with a few exceptions). It's a total disaster but remember this: the power elite need to continue making profits. These sociopaths will stop at nothing to extend and pretend, which is why I'm not worried about this entire "debt crisis debacle" and keep buying the dips on risk assets. And lo and behold, as I wind down my comment, Bloomberg reports that a deal framework has been reached on raising the debt ceiling. Relax, it should be a great week in the stock market. :)
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is she a goddess?
She may not look like one, but she can cook like one.
It is quite normal for the groups dependent on the status quo (welfare recipients, those expecting a 20 x payout on their Social Security contribution, bankers, pension fund managers who promised the moon, etc.) to feel like the rug could be pulled out from under them by those asking for adherence to the Constitution and a government which does not debase the currency by reckless printing/spending. My only gripe, the t.p.ers should be calling for huge pullbacks in military spending as well.
Leo, go to Greece, get a boat and start catching fish for a living. Pensions will soon be a relic of the past. Saving should be done by each individual, not managed by eggheads.
Delta, your post is 100X more insightful than anything ever posted by leo.
And you are exactly correct: those whose livelihoods are dependent on the continuation of the status-quo power structure, as are leo's and RobotTarder's, for example, are NEVER going to fundamentally question or challenge that status-quo power structure. They have chosen their side in the ongoing existential battle, and it is with raw power, corruption and evil that they have thrown in their lot.
We are all dependent on the system. Even though my business produces food and has been profitable, I am humbled by the reality that soon my customers will be unable to pay. I marvel at the professional investors in my circle who still think everything will stabilize. Magical thinking. Leo your article did make some great points as to how poorly measured the indicators are, but your conclusions are wrong. Can't have jobs without competively producing things people can/want to buy. These are the jobs which enable the service sector and the government sector.
"But then I read the comments section, and I am amazed and disappointed at the unprofessional and nasty posts from Leo to the criticism. I've read his comments about losing his job, and I think in his comments here, and in the tone of the post, we can see a guy with some kind of schizophrenic childish personality, as well as a big chip on his shoulder."
That's what I like about Leo, he's unafraid to express his perspective despite what people think, as does everyone else here on ZH....
What does it mean to be a professional? Do we look at our political class as professionals? Perhaps one sees the elite secular university class as professionals? Are attorneys professionals? Is the mainstream media professionals? How about our public school system, are they full of professionals? The EPA? Good lord, the best these idiots can do is dumb down our youth, propagate lies, bankrupt our great nation and write laws that criminalize free trade. So called "professionals" are corrupting our independence and are making a mockery out of our Constitution.
Take a look around!
The mentally ill could probably not do much worse than what these political clowns are doing to this great nation today.
http://www.youtube.com/watch?v=zWXcjYNZais&feature=related
I agree with everything mentioned by Leo's Friend. Leo welcomes the Inflation dilution on foreigners to pay for this debt dilution for US citizen.
I too prefer it with only one exception based on moral values - big/welfare govt are breaking families. fathers are being replaced by state and we are having a positive feedback to destabilize the family unit leading to crime, drugs, atheism...
We have been finished since 2007 when the debt-to-income ratio of the American people surpassed 100%. From 2008 till now it's been zero or negative yields...so yes there's a bit of a problem beginning to show up.
There is no way to inflate out of debt because the only way to pay off debt is with more debt!
"This is a staggering thought. We are completely dependent, on the (compounding interest) Commercial Banks. Someone has to borrow (Request the manufacture of) every dollar, we have in circulation, cash or credit. If the Banks create (At the request of the consumer) ample synthetic (All money is fiat) money, we are prosperous; if not, we starve. We are, absolutely, without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity, of our hopeless position, is almost incredible, but there it is. It is the most, important subject, intelligent persons can investigate and reflect upon. It is so important that our present civilization may (Not may...Will Inevitably) collapse (Implode), unless it becomes widely understood, and the defects remedied very soon." (the remedy will cause the premature implosion)--ROBERT H. HEMPHILL (Credit Manager of Federal Reserve Bank, Atlanta, Georgia 1938)
There is no way you will ever be able to escape because to pay off the debt will cause the circulating money supply to shrink...the only way to sustain the existence of the circulating money supply is to get into more debt.
In 2006, the American people were borrowing (creating) $11.6 billion per day. Today ... it's on $.5 billion per day. The government has been making up the difference by borrowing (creating) the money to be circulated ever since. The game will continue until the government surpasses its 100% debt-to-income ratio too. That day is inevitable. Maybe another year or two at the most.
Better get to Greece and get some tail before it's too late!
I read one of Leo's posts last week I think it was, about healthy eating and living, and attitude to life, it was a great article, I thought 'what a nice guy'.
Then I read this post, and I disagreed with the arguments, and the conclusion that the dips should be bought. Fair enough, we're all allowed our view.
But then I read the comments section, and I am amazed and disappointed at the unprofessional and nasty posts from Leo to the criticism. I've read his comments about losing his job, and I think in his comments here, and in the tone of the post, we can see a guy with some kind of schizophrenic childish personality, as well as a big chip on his shoulder. Very strange, and it'll probably just mean I won't bother to read any more of his posts.
I think you are full of shit. My comments below are no nastier than the drivel I am routinely subjected to here. If you were constantly lambasted on ZH by mindless morons, you would also respond. As far as my mental and physical health, both are perfect. I have been going to the gym, beating MS, and I got two of the best psychiatrists in Montreal in my immediate family who will attest to my mental wellbeing. Also seeing a wonderful psychologist nowadays who told me I'll never be happy working in finance because most people are sociopaths. She is absolutely right which is why I trust only a select few and focusing on doing my own thing.
'A wonderful psychologist, who told me I'll never be happy working in finance because most people are sociopaths'
'She is absolutely right'
Well, your unhappiness and bitterness is all too clear to see Leo. Get out, become a bartender or a trapeze artist.
For some strange reason, I'm reminded of a great South Park episode...
"Your ego is so out of whack that it will do whatever it can to protect itself. And people with a messed up ego can do these mental gymnastics to convince themselves they're awesome when really, they're just douchebags!"
-Kyle Broflovski
"He's right. For so long I've considered myself God gift to the world that I couldn't take it when people made fun of me. But they weren't makin' fun of me. They were tryin' to help me."
-Kanye West
Gayfish:
http://www.youtube.com/watch?v=AAxailJPU5Q
-FN
Hey, this is fight club, and I love it when everybody is in there mixing it up. I love it even more when leftist socialist keynsian " I need your money so give it to me- I know how to spend your money better than you " get their clock cleaned.
Beating MS is something everyone should be on board with irregardless of one's opinion. Agree or disagree, comments averse to this line of thinking are uncouth and somewhat sinister.
Since when is seeing three (3) psychiatrists a sign of "mental well being". When the major tranquillizers stop working... they will put you on horse crank.
If you have two psychiatrists in your family, I suggest you avail yourself of their services, stat --- that is, if they would even be willing to take on the daunting and formidable challenge of dealing with your rabid narcissism and your patently insane Keynesian psychopathy and sociopathy.
"Nothing last forever except the earth and sky!"
http://www.youtube.com/watch?v=1Dj7p3h03qQ
Pension assumptions are imaginary, no need to worry about portfolio valuations, just get a hedge fund manager to run things and go take a vacation on the Greek Isles, Greece has not defaulted--it is merely on an extended vacation until someone bails out the Euro banks bad Greek investments. Yes I do see Leo has a point buying on the dips too. Take an asperin ,you will feel better in the morning
Leo, I read your other posts on Zero Hedge and generally they seem well-balanced. This one however does leave a few important questions unanswered and I believe some readers above do have valid points. So can you please elaborate on the following:
* How are debts supposed to be ultimately paid if one just keeps going into debt to skyrocketing values?
* Do you think any other country NOT having a global reserve currency could afford (or would be allowed) to do this?
* Isn't having a global reserve currency an unfair advantage that allows US to essentially live well on other people's hard work? Because by devaluing you currency or defaulting on your debt this is what ultimately happens. How much longer do you believe BRICs and other countries will tolerate this instead of just using gold or some other non-printable currency for exchange?
Waiting for your thoughts.
An intelligent comment deserves an intelligent reply:
1) Debts are not a bad thing. We are conditioned to think this way. The US can easily wipe all its debts off its books by implementing Canadian or European style income and sales taxes, but this will never happen. The focus now should be on the jobs crisis, not the debt crisis. Importantly, the former is what is exacerbating the latter, not the other way around.
2) and 3) The global reserve currency is an advantage the US has as well as the Fed, which unlike the ECB, has more lattitude to print at will and monetize debt. As far as BRIC economies, they will continue to fund US debt because they have no choice. They are export led economies and they need US consumers. The US remains the tail that wags this global dog, and this will not change in the next 100 years.
So the U.S. is to be a global consumer forever! Ha! You are truly laughable Leo. Unfortunately, every country on this planet is going to need resources, regardless of whether or not they are the consumer or the producer. The rub is in the cost of those resources. The only resources that matter right now are oil, coal, and natural gas, and pretty much in that order. Should the dollar continue to fall, or oil no longer be priced predominantly in dollars, then the American customer dissappears completely. Something people never talk about is the committment of over 20% of the fossil fuels we burn to simply fixing nitrogen for fertillizer in order to grow crops for people and animals (that people eat later). If you add the cost of planting, harvesting and transporting, then almost 30% of our fossil fuels are burnt solely to feed us.
Guys like Leo are arrogant fucks who really think their economic models will best mother nature and save us all. This only makes his articles about "clean living" all the more hypocritical. Almost 20% of the American GDP is now "financial products" (in other words - bullshit, they add NO REAL VALUE). None of this crap is sustainable, even more so for guys like Leo who have no real marketable skills other than pushing paper. Crash the fucking corrupt system already, the sooner we do, the sooner compensation finds it's way back to people who are actually worth a shit.
The only deflation that is coming is the human kind. Hedge accordingly.
Something people never talk about is the committment of over 20% of the fossil fuels we burn to simply fixing nitrogen for fertillizer in order to grow crops for people and animals (that people eat later).
thank you for talking about it. the Alannis Morrisette in all this is that we then waste so much good nitrogen (and water) every time we take a leak in the toilet. but i guess we're all too far evolved to give a piss about it.
100 years? Like 1946-1971 four times again?
Thanks for your answer.
I'm still not convinced though by the whole argument (though I certainly feel that I'm still missing a lot of what's going on so I'm by no means certain my arguments are correct) and I'd summarize my doubts as following: if the current state of the international economy allows one to be the tail that wags the dog, I think one should be thankful for this because it still allows one sufficient time to turn things around. I don't think though that it's a smart thing to do to go to sleep happily hoping that the tail will continue to wag the dog for the next 100 years. IMHO, the economy always tends to come down to the basics of exhanging items of value for other items of value. Essentialy, I think the Chinese could just dump their gadgets into the sea and not lose much if they do not get other items of value in return (while also continuing to produce said gadgets). This is of course just one of the possibilities: they could just give those gadgets for free to their own population.
Not change in 1OOyears. Leo it already changed. The US Keynsian economy peaked in 2OO6 or 2OO7. It is now sliding down hill. The old policies are not working. The economy is not recovering. Foreigners have run out of money to lend. To keep the ponzi going the Fed is buying the debt, in other words they are printing money by proxy.
The party is over. It is time for everyone to go home and sleep it off and wake up with a hangover. If they try to keep it rockingp pretty soon someone is going to set fire to the drapes and the next thing you know the neighbors call in a SWAT team.
1) US federal government chronic overspending is far past the point, and has long ago passed far beyond the point, of being able to be remedied by any even remotely realistic additional level of taxation, which beyond a certain and not-too-distant level would only result in a downward cycle of falling net income to the government as the productive (i.e. non-governmental) economy was thereby sent into the tank.
2) The US dollar's role as a reserve currency is both a blessing AND a curse, as its near-future collapse will prove, when it finally begins to plummet in value as not just US citizens, but most of the rest of the world, abandons it as the failed fiat experiment that it is and was.
3) NOBODY outside the US "needs" the US consumer, when they are trading real goods of value to those consumers for near-worthless paper promises of a profligate and corrupt regime whose only real power lies in the printing press to which it will inevitably and ultimately resort.
Thank you, Paul Krugman, for more insipid and insane Keynesian pablum.
Now fuck off.
I can try to answer
* How are debts supposed to be ultimately paid if one just keeps going into debt to skyrocketing values?
via Inflation. savers(aka pension funds, pensioners, foreign govt, foreigners) will pay for it. Higher wage growth for debtors(aka US population) will pay the diluted debt. Govt get more money from asset holders via Inflation tax.* Do you think any other country NOT having a global reserve currency could afford (or would be allowed) to do this?
Yes everyone can and are doing, look at India, Brazil, China, etc... Inflation is the greatest wealth steal.
* Isn't having a global reserve currency an unfair advantage that allows US to essentially live well on other people's hard work?
Yes it is unfair advantage. For US, a Inflation burden is carried by Foreign savers unlike other countries where it is carried by their own savers.
It you are waiting for serious or intelligent thoughts from leo, prepare for a long, long wait.
In bold........this is why poor leo is having a tiff. Hells no!! Do not end the welfare state!! Why what forever would all the poor hapless souls do? Get over yourself leo. Pimp your social guilt somehere else. We got what we got in ovarion lottery. What we do with it is up to us and we don't need a trust fund or college degree to figure out we have to eat.
"On the 'balanced budget' proposal we both agreed that this is a stupid and dangerous proposal and President Obama would be nuts to accept it. Running government finances is not the same thing as running a family budget (thank God!). By law, states have to balance their budgets. When states need money, they go to the federal government. Why in the world would the US federal government -- the lender of last resort -- accept an economic straightjacket? "That's just stupid and would effectively mean the end of counter-cyclical fiscal policy and the end of the welfare state."
A balanced budget is "stupid and dangerous"? My God how far this country has fallen.
the balanced budget issue is a false paradigm. the problem is spending money we don't have on things we don't need. it worked for a while but now we are at the end of fiat. kind of like a guy who opens up lots of credit card accounts and uses credit checks from one account to pay on another. finally, the interest on the debts consume the entire game. such is happening now. it is about over and there is nothing that can be done about it except reset, i guess, whattever that means. i can tell you most americans could care less...........but they will.............they will............and i for one, will not shed one tear for them , any of them......and if they set foot on my land, God help them........
deleted
I like this article's fresh perspective. It's a nice contrast to the five jillion other articles that say exactly the opposite.
note to self: sarcasm not detectable.
If I write a mathmatics paper whose thesis is that 2+2=5, would you consider that a "fresh perspective," or simply asinine pap? I'll bet there's five jillion math books out there that tell us the answer is 4, but they must all be conformist 'sheeple.' Fresh, indeed.
I liked the article as well. I think Leo is old enough to recognize that this kabuki theater Congress is engaging in will only serve to kick the can down the road. So be it. The US enjoys a relatively high standard of living because of our reserve currency status. In this instance I think a budget resolution will bolster confidence in the dollar (albeit temporarily), and support equities as well. If the metals take a hit so what, I'll buy some more. If you haven't figured out that we're just buying time, and are flaming someone who has taken the time to pen a thoughtful piece just because it's not "hard money" enough for you, you are a tea-tard. By the way, they've been used throughout this whole process just for sheer dramatic value. Watch how well it works.
leo is just a grossly venal and spineless shill for the Establishment in all its manifestations, and a Keynesian assclown to boot --- there is NOTHING serious or thoughtful in any of the mindless, ridiculously pro-status-quo bullshit with which he is mysteriously allowed to pollute this site.
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feef, there is nothing fresh about this bullshit. it is the same old tried crap we have listened to for so long. many of us are sick of it and sick of the people who think like this, in our government.
You have a curiously twisted definition of the word "fresh", given that leo's kneejerk statist, Keynesian talking points are everywhere to be heard from the (increasingly desperate) status-quo defenders.
Leo Im afraid you are right. I will ignore the factual errors in your piece and stick to the main point. See if I have your thinking correct.
Borrowing and spending money is easy and fun. paying it back is hard and disagreeable. Therefore the only sensible course is to keep going deeper in debt and never stop.
This is true as far as it goes but the party must end some time and the longer you put it off the worse the reckoning.
Your point seems to be that it is still possible to kick the can down the road for a few more years before the scam collapses under its own weight.
That is the part that scares me. I know it is possible to live it up as if there is no tomorrow but what do you do if you survive.
Leo is smoking some REALLY BAD debt dope. Illustration: "In theory, the Fed could print a trillion dollar silver coin and the US government will pay all its obligations."
Generally speaking, coins are STRUCK, not printed. In any case, the law permits the TREASURY, not the Fed, to issue a coin in any denomination and make the coin legal tender for debt.
That's the theory: The Treasury could strike 14 or 15 coins, let's say in platinum, and stamp "One Trillion Dollars" on each, and then hand them over for all outstanding Treasury issuance, and say, "The national debt is paid! Praise Jesus!"
The reality is that doing so would constitute a default that would utterly destroy U.S. sovereign credit, since it's impossible to strike a coin, even a platinum coin, that comprised a trillion dollars of value at current platinum prices. Or any imaginable price for platinum.
Leo can write kinda pretty, but he can't think. Better stick to the pension fund spreadsheets, bud.
I have been right on buying the dips ever since I posted my January 2009 comment on post-deleveraging blues. The only thing destroying US sovereign credit is Tea Bagging fools like you! You're all going to burn in hell and not a moment too soon!
What's with all the "tea bagging" comments here? Those and your other comments are exposing yourself for what you really are, which is insecure, paranoid, and in over your head on the subjects which you choose to write about.
@Leo: "Tea Bagging fools like you!"
He does his own hair, too.
duplicate
You have never been right about ANYTHING, you disgusting and spineless Quisling for the corrupt and sociopathic power elite. I am still undecided if you are in fact serious in all your monstrously idiotic ramblings here on ZH, or just a sick joke being played on us to draw out our justified ire and outrage. If it is in reality the former, then I could not possibly have more contempt and loathing for you.
akak,
For the nth time,
Heh. Leo's a poor sport. If you can't take the heat, get out of the playpen.