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Jim Grant Warns America's Default Is Inevitable
Authored by James Grant (of Grant's Interest Rate Observer), originally posted at The Washington Post,
“There is precedent for a government shutdown,” Lloyd Blankfein, the chief executive officer of Goldman Sachs, remarked last week. “There’s no precedent for default.”
How wrong he is.
The U.S. government defaulted after the Revolutionary War, and it defaulted at intervals thereafter. Moreover, on the authority of the chairman of the Federal Reserve Board, the government means to keep right on shirking, dodging or trimming, if not legally defaulting.
Default means to not pay as promised, and politics may interrupt the timely service of the government’s debts. The consequences of such a disruption could — as everyone knows by now — set Wall Street on its ear. But after the various branches of government resume talking and investors have collected themselves, the Treasury will have no trouble finding the necessary billions with which to pay its bills. The Federal Reserve can materialize the scrip on a computer screen.
Things were very different when America owed the kind of dollars that couldn’t just be whistled into existence. By 1790, the new republic was in arrears on $11,710,000 in foreign debt. These were obligations payable in gold and silver. Alexander Hamilton, the first secretary of the Treasury, duly paid them. In doing so, he cured a default.
Hamilton’s dollar was defined as a little less than 1/20 of an ounce of gold. So were those of his successors, all the way up to the administration of Franklin D. Roosevelt. But in the whirlwind of the “first hundred days” of the New Deal, the dollar came in for redefinition. The country needed a cheaper and more abundant currency, FDR said. By and by, the dollar’s value was reduced to 1/35 of an ounce of gold.
By any fair definition, this was another default. Creditors both domestic and foreign had lent dollars weighing just what the Founders had said they should weigh. They expected to be repaid in identical money.
Language to this effect — a “gold clause” — was standard in debt contracts of the time, including instruments binding the Treasury. But Congress resolved to abrogate those contracts, and in 1935 the Supreme Court upheld Congress.
The “American default,” as this piece of domestic stimulus was known in foreign parts , provoked condemnation in the City of London. “One of the most egregious defaults in history,” judged the London Financial News. “For repudiation of the gold clause is nothing less than that. The plea that recent developments have created abnormal circumstances is wholly irrelevant. It was precisely against such circumstances that the gold clause was designed to safeguard bondholders.”
The lighter Roosevelt dollar did service until 1971, when President Richard M. Nixon lightened it again. In fact, Nixon allowed it to float. No longer was the value of the greenback defined in law as a particular weight of gold or silver. It became what it looked like: a piece of paper.
Yet the U.S. government continued to find trusting creditors. Since the Nixon default, the public’s holdings of the federal debt have climbed from $303 billion to $11.9 trillion.
If today’s political impasse leads to another default, it will be a kind of technicality. Sooner or later, the Obama Treasury will resume writing checks. The question is what those checks will buy.
“Less and less,” is the Federal Reserve’s announced goal. Under Chairman Ben Bernanke (with the full support of the presumptive chairman-to-be, Janet Yellen), the central bank has redefined price “stability” to mean a rate of inflation of 2 percent per annum. Any smaller rate of depreciation is an unsatisfactory showing to be met with a faster gait of money-printing, policymakers say.
In other words, the value of money has become an instrument of public policy, not an honest weight or measure. In such a setting, an old-time “default” is impossible. How can a creditor cry foul when the government to which he is lending has repeatedly said that the value of the money he lent will shrink?
The post-1971 dollar derives its value from the stamp of the government that issues it. Across the seas, this imprimatur is starting to look a little tenuous. Lend us your dollars for 10 years, the Treasury proposes. We will pay you the lordly interest rate of 2.7 percent per annum. And at the end of those 10 years, we will hand you back your principal, which will almost certainly buy less than the money you lent.
This is the unsustainable conceit of the world’s superpower-cum-super debtor. By deed, if not audible word, we Americans say: “The greenback is the world’s great monetary brand. You have no choice but to use it. Like it or lump it.” But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.
What to do? Let us face facts: We have defaulted in the past. Let us confront the implied message of the Federal Reserve’s pro-inflation policy: We will default in the future, though no lawyer will call it “default.” And let us preempt the world’s flight from our intangible money by taking steps to fashion a 21st-century improvement. We have the gold and the brains to find the solution.
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BULLSHIT! Fuck them! They are already eternally tortured. Just snufff em. I have way too many jokes for you guys to do all that shit!
I love them all, as does my Father.
If it is justice we thirst for, fear not. Should these people (as well as everyone else) choose to ignore the many warnings we've all heard and not come to true repentance by changing their ways and following Jesus, where they will be going is eternal torture.
The reason no politican wants default is because they loose their power.. and hair cut money
Default would likely lead to much messier consequences than those you describe
As long as they can trash gold at will by using the USD and Comex as the pricing mechanism, the Ponzi scheme can go on indefinitely, regardless of solvency.
Only when the USD loses reserve status will gold trade freely.
Lloyd. Even if true. There is a 1st time for everything.
i would feed them 1 100th of a percent of nutrients and water till they beg, then feed them enough to do hard labor for life.
chains shakles never to be undone-permanently welded...
The best way to punish someone who covets power over others would be to make them powerless.
doop
Indifference is sunlight to a psychic vampire. -Baudrillard
you mean McDonald's?
Don't forget the Iron Masks.
They are too ugly to look upon.
https://www.youtube.com/watch?v=yAEQafvL6nQ
Fractional "hypothetical" future earnings ( congressional bull- shit ) TOTUS discussing the deb.ceiling????? Negative Ghost Pilot...
I capitulate. Spend. SPEND SPEND SPEND. Lets get this fuckin show on the road. I want free Porsches from .gov and a Filet Mignon on every plate. I'm serious. If I were the Republicans I would simply say let them have whatever they want. That is what most of these pieces of shit want...MOAR FREE SHIT. Fuck responsibilty. Just get it done. I'd release a statement that reads: "ATTENTION AMERICA! We hear your cries and pleas for all things free. We yield to the Democrats and your giving leader. We are your huckleberry. Enjoy!"
That would make sense except for the republicans to surrender absolutely would mean they were useless and should just go home. They wouldn't mind defeat as they are quite used to it, but they can NEVER give up their power.
They're not winning anyway so why not switch game plans? Quit. Give in. Think of life support....Terry Schiavo type situation. Do we just keep on life support and a feeding tube, or let us choke and die on our cud?
I'm in agreement, I just don't think it will happen becasue of my stated reasons. I've been saying the same thing for years, its just the latest push by people I would estimate are at least representing true conservatives in action rather than words have given me a little hope. But the old guard is far to afraid of losing to ever take a chance at winning. For them it is all about power and position. That is why we are fucked. I would love to see all the repblicans just close their DC offices and go home. People have continuously said that just let Obama win and make a mess and people will see. the same with Obamacare and so much else. Its just that the republicans are always just standing their making lame gestures for the MSM to pick up on, and take the blame for all of it. They should just go home.
We have the gold and the brains to find the solution.
That would require a republic, not a "democracy".
Good luck with that...but it somehow feels good to say one man, one vote ...even when surrounded by complete idiots, throwing gold at me for mere paper ;-)
There is no solution, republic or otherwise. A solution implies fixing the little debt problem where America can continue its standard of living with nothing more than a hiccup. That is laughable. There is no "solution".
There is no "solution".
there is, but for most Americons, it only lives in the realm of nightmares and cinema/computer screens. however, if one individual sovereign human being were to choose to redefine the variable standard of living, and then choose to assert his/her natural rights, then the equation perhaps might become a bit more solvable. (don't forget, the debt that most discuss here does not exist except in the minds of men. )
now the debt to the earth is another story...time to start paying it back/forward?
Bingo. That is exactly the truth. Embracing what this rogue government created by way of coercion is idiocy. Repdudiate their debt and shun D.C.
Did you hear about the 3 legged dog that walked into the saloon?
Bartender says...."What can I get for you?"
Dog says (Duke voice) I'm looking for the man that shot mah paw."
Where did you get that joke--a Dixie Cup?
man, that was so funny i fell off my dinosaur.
When we actually do default we will all be reassured that all of the scary scenarios that have been described this past week will never come to pass. Nothing to worry about.
it is hopeless? isn't it...
run the run til the lines are gone...
"debt serfs with lose of all physical means to freely produce and prosper, just as debt does to every free man and woman.
then why do honest hard working peoples sign the line to ppromise?
in the case of politicians, they certainly are not doing what we want and there are clearly legal means in the constitution
to revoke their authority. are you pissed off enough? yet?"
Revoke their authority?
So you vote for these assholes? You consent to the assfucking?
Good for you. Do you think THE SYSTEM works for the little guy?
"The Constitution". Yea, pull my finger.
Hey man, keep believin' if it makes you feel any better....
hahahahahahahahhaa
I'm an anarchist.
I'm pissed off enough.
If voting changed anything, it would be illegal.
Taxation is theft.
......I could go off on a rant.
I won't
If voting changed anything, it would be illegal.
+17,000,000,000,000
Jacky Lew says it is unprecedented, Obama saying he doesn't want to be the first President to default now Blanenkstein talking about lack of precidence. They are all lying sacks of shit we defaulted though they claim it was technicality in 1979 under Carter which unlike what everyone would either like to ignore since facts get in the way of a good argument or claim it is ancient history well it is not.
I've posted on this earlier but to recap.
US technically defaulted most recently back in 1979 under Jimmy Carter. Lest everyone forget since this stuff as far as the MSM is concerned is ancient history like the building of the pyramids in Egypt or unprecedented according to Jack Lew. There was also a fight over raising the debt ceiling in 1979 to $830bn going on at the time when it happened. They did raise it at the last second but the Treasury missed payments totaling about $120m on April 26, May 3 and May 10 that year. What was the excuse for missed payments. They blamed the missed checks on printer problems specifically word processing equipment used to print the checks along with large amount of small investors involved for the amount checks needed to be cut.
To be fair the investors all did eventually get their checks including back interest even though they were paid late and all Treasuries maturing on May 17 and later that year were paid on time.
The penalty was that 120m in late payments cost them 0.6 percentage point increase on interest rates the US government had to pay on debt. The other consequence was the rise in interest rates in the early 80s being at least partially due to this and not purely the FED's doing through monetary policy alone. So if history is any guide for every 120m in late payments will affect interest rates by about 0.6% in the up direction. Adjusted for inflation in 2012 dollars that is for every $373,629,301.90 in late payments interest rates will be affected in an upward direction by about 0.6% and an end to ZIRP in general whether the next FED chair she's a man baby wants to continue the policy or not.
They spun it as a delay not a default since everyone ultimately got paid and payments after the 17th were all paid on time. Didn't Jacky Lew make a variation on this excuse about the computer systems not being designed to prioritize payments. Seems like they always like to blame technology first.
All 3 are fucking liars and that is why.
Also just in case for those not familiar.
http://www.investopedia.com/terms/d/default2.asp
1. The failure to promptly pay interest or principal when due. Default occurs when a debtor is unable to meet the legal obligation of debt repayment. Borrowers may default when they are unable to make the required payment or are unwilling to honor the debt.
2. The failure to perform on a futures contract as required by an exchange.
...
What happened in 1979 regardless of the why is textbook definition #1 no if ands buts or maybes.
The wildcard on interest rates though this time around are Floating Rate Note (FRN) Treasuries being rolled out I believe this or next month. That is one tool the FED didn't have back in the early 80s since it gives them and the primary dealers a way to rig interest rates LIBOR style. What happened in 79 is about as close to an apples to apples for analysis purposes of what is going on right now and is also the most recent example making it a good starting point as a non-precedent vuja-de baseline scenario for analysis purposes.
don't forget GoldTrick Dick and Frank DR FeelGold (of course, they had the luxury of having some shiny to play with)
excellent reminder on how the default under BrotherJimmy led to the Volker ViceSqueeze : a fun fact that needs to go viral...
whos good at making videos?
Volcker wasn't some genius or savior some people made him out to be. He just took foward momentium and used it to his advantage. Anyone can harness that without too much effort, it is more of common sense smarts type of thing not some intellectual know it all thinking they can do what fuck they want because they are smarter than you due to education but clueless in how to apply it in the real world type of smarts like the current FED chairman rolls. It is a lot harder to put the breaks on it or start the ball rolling then it is to give it a push while it is rolling.
always saw Volker as Lurch to DRock's Uncle Fester.
https://en.wikipedia.org/wiki/File:Fester_lurch_1966.JPG
Since the Nixon default, the public’s holdings of the federal debt have climbed from $303 billion to $11.9 trillion.
If today’s political impasse leads to another default, it will be a kind of technicality. Sooner or later, the Obama Treasury will resume writing checks. The question is what those checks will buy.
Bingo !
and there in lies the problem...
ps haven't wasted the gas or time to vote for 9 years.
kinda gave up on the system, but haven't given up the real fight.
debt free, livin a day at a time without working-true freedom.
can you say that? you-duc88-yea you say what?
ps fuk merica and the ass fukd dead ass donkey ready to drop...
"livin a day at a time without working"
An odd thing to brag about. How do you compensate your servants?
"ps fuk merica"
Except you and your servants? "Fuck America" is exactly the attitude of a Wall St. banker.
"haven't wasted the gas or time to vote for 9 years"
Conceding a battlefield to the enemy without a scratch, eh? No Purple Heart for you.
Blankfein is a blabbering squid.
That's an understatement,,Billy- seven
then he works for God; as that earlier post clearly indicated.
The squid was God of finance and no decision was made in WH under Summers and Rubin without consulting Corzine, GS's incumbent CEO under Clinton.
In GOD (squid) we trust!
The FED is the true Templar breed that sings "God wills it!"
Blabber away Saint Bernanke!
-Used to be 1/20oz gold
-Became 1/35oz gold
-Became 0/0 oz gold
-Becoming 1/90 the dollar it used to be.
Only thing left is to make the dollar worth less than the dollar currently is.
Only way to accelerate de-valuation
-Default (inflation will skyrocket domesticly as foreign nations dump their dollars back into the usa.)
-Currency Re-Valuation, "Trade in your dollars for new dollars, Ameros or w.e'
-Pay banks to borrow money (negative interest rates).
-Default (inflation will skyrocket domesticly as foreign nations dump their dollars back into the usa.)
-Currency Re-Valuation, "Trade in your dollars for new dollars, Ameros or w.e'
perhaps the hidden reason behind the long-awaited release of the new Bennie?
(from the horse's mouth)
http://www.reuters.com/video/2013/10/08/us-set-to-debut-new-hundred-doll...
[The old bills] will eventually make their way to the Fed where they will be destroyed.
keyword : eventually
BitCoin Last price:$139.80500
I won't cum in you're mouthj
Completely Unexpected!
"debt free, livin a day at a time without working-true freedom.
can you say that? you-duc88-yea you say what?"
I am debt free and "nearly" non working.
Not payin the shit bags anymore....LOL
Soon I'll be watchin' pigs hump, fer real.
$92 for each piglet.
long story....LOL.
i'll buy that piglet, let it munch on food waste from a restaurant down the street, and sell it back to them in pigmeat form for 5x as much 7-8 months later.
localism, bitchez, it works...
"We have the gold and the brains to find the solution."
Appropriate brains could find solutions, even with a shortage of gold.
Time is of the essence, of course.
The first issue is Control, wherein the appropriate brains are rendered mute.
Clear the gorp from your mind and follow Grant's logic; slow inflation is a slow default, USA is slowly defaulting on its bonds and therefore its currency. Not a topic fools can obfuscate with ignorant observations and / or erroneous pronouncements.
I want some of what James has got.
I want some of what James has got.
Sure, giving less back than you borrowed is defaulting on the loan. Or, in modern vernacular, debt consolidation/rationalisation where lawyers gather for a powwow to squeeze the most cash out without suffocating the debtor, placing him in a permanent status of perpetual debt until all of his assets and future earnings are no more. That's par for the course. Welcome to modern finance written by the Squids.
But when does the fantasy of Fiat lose its allure? When GDP/Debt, Revenue/Spending, Productivity/Entitlements, and Employed/Unemployed ratios in the indebted population all indicate accelerated rates make it untenable to service the debt? When criminals in the Fed continue to dilute, devalue, and therefore make the hoarding (saving) of that Fiat an act of lunacy? When is the breaking point? $85 billion/month whistled out of thin air, then given to the big banks and large caps so they can gamble the global markets, steal, sorry "buy", assets abroad to launder worthless money into tangibles that other people have spent their lives creating? The reach of US corporations leveraged to the hilt buying out profitable enterprises around the world to form giant multinationals during my lifetime has been breathtaking. These are clearly unprofitable, failing business models that buy successful companies then turn it all into shit.
I digress. The intrinsic value of fiat is zero. However, the value of anything in this world is based on demand, or popularity, and as long as enough people trust the fantasy of prestige in the USD, that like Amex it will be welcomed anywhere to buy stuff - especially energy - then Ben and Janet can print to their hearts content for many years to come until the whole world is priced out of staple foods which is already happening in some parts today. I suspect the reset will come when enough people around the world refuse to participate in the insanity, or by a domino effect of collapse in the financial system triggered by a sovereign default and the associated derivative tsunamis. One thing is certain: It will happen almost overnight, because the warning signs have been around for years.
One day, no amount of dollars will buy gold, and as Jamie Dimon recently learned, that day may be coming soon.
One day, no amount of dollars will buy gold
wonder if that was said about the Pound somewhere in the City of London just less than 100 years ago? it would be interesting to chart the difference between the ubiquity of the Pound at the end of the height of the British Empire and the ubiquity of the FeRN at this point of the peak.
The money changers ditched the Pound for the Dollar a hundred years ago. Are they ready to ditch the Dollar for something else, something bigger, more improved? Any new ocean liners going on maiden voyages anytime soon?
A variety of currencies circulated in China during the Republic of China (ROC) era, most of which were denominated in the unit "yuán" (pronounced [j??n??]). Each was distinguished by a currency name, such as the fabi ("legal tender"), the "gold yuan", and the "silver yuan". The yuan written in Chinese as ? (informally) means beginning or written as ?(simplified, formal)/?(traditional) means round, after the shape of the coins.[9] The Korean and Japanese currency units, won and yen respectively, are cognates of the yuan and have the same Chinese character (hanja/kanji) representation, but in different forms (respectively, ?/? and ?/?), also meaning round in Korean and Japanese. However, they do not share the same names for the subdivisions. The principal unit of New Taiwan dollar, used in Taiwan as the currency of the Republic of China, is also referred to in the Chinese language as "yuán" (written as ?, ? or ?).
As the Communist Party of China took control of ever larger territories in the latter part of the Chinese Civil War, its People's Bank of China began in 1948 to issue a unified currency for use in Communist-controlled territories. Also denominated in yuan, this currency was identified by different names, including "People's Bank of China banknotes" (simplified Chinese: ????????; traditional Chinese: ????????; from November 1948), "New Currency" (simplified Chinese: ??; traditional Chinese: ??; from December 1948), "People's Bank of China notes" (simplified Chinese: ???????; traditional Chinese: ???????; from January 1949), "People's Notes" (???, as an abbreviation of the last name), and finally "People's Currency", or "renminbi", from June 1949.
https://en.wikipedia.org/wiki/Renminbi#Etymology
The Yuan.
(or Renminbi)
ok It's cyclone sea
Wake up to an abrupt 40% devaluation of the dollar.
Golly. Sounds inevitable given the massive debt as well as the failure to correct massive spending.
If those in charge of our society — politicians, corporate executives, and owners of press and television — can dominate our ideas, they will be secure in their power. They will not need soldiers patrolling the streets. We will control ourselves.
- Howard Zinn
This is what TV and Hollywood is. I bet 70+% of ZH readers still watch both.
The Walking Dead translates well to the real world here and now. We zombie citizens just keep getting skull fucked and ironicially it's the only thing that puts us out of our misery.
Do you have that comment on C&P?
OK, Freddie, I admit I do watch Boardwalk Empire and House of Cards.
I also watch old movies on tape and TCM.
But I must be out of it, because when I read the DM, they have all this news about celebrities I have never heard of.
Grant, you remain somewhat an enigma.
P.S. The last enigma.
We need to see more of these on "ZH".
Your are an icon Jim. Thank you for being an oasis of sanity in the abyss that is insane!
tyler your system is corrupted.
I'm sure since they almost run of physical golds they had to knock down gold miner stocks&ETFs to secure underground golds. Also they moved gold prices up&down like roller coaster to scare away potential inverstors.
"You're right, I did lose a million dollars last year. I expect to lose a million dollars this year. I expect to lose a million dollars next year. You know, Mr. Thatcher, at the rate of a million dollars a year, I'll have to close this place in... 60 years."
For politicians, the day of reckoning is always 60 years away...
haha, great orson welles acting reference.
The US will not default because it can at the end of the day print enough to repay its creditors.
But what will happen is that at some point the world will reject the dollar and the US will no longer be able to print dollars.
Transactions require real value to exchange hands. Paper is just a promise.
Paper is the promise that capitalism is built on. We learned that from the Venitiens.
Junk paper you junk the money lender, and you junk modern capitalism. Simple as that.
These Von Mises austerians think by having a gold standard and NO fractional reserve banking you can save both market economy and money debasement.
Well, then we go back to pre-1277 when the Venitiens opened up the Bruges market where english wool was transformed into cloth by the drapers of Flanders; all to the benefit of French nobility, kings of the western world in those times. But warrior kings who had no inkling of what finance was and needed the "Lombards" to grease the wheels of commerce with their "I owe you" all based on FAITH and compensation deals that these bankers performed at the local trade fairs to square their respective balance sheets; all the while earning 14-20 % interest from the local barons their debitors.
Thats how it all began, admittedly on the backs of the Venitien Silver Ducat as money of last resort, followed by the golden Florin of Florence. There were crashes when kings went bankrupt, but the money line survived then, as it will today.
These fiendish bankers are clever and necessary but they are subservient to their political lords. Always have been and always will be, when their own sleight of hand defeats their own role in society. Just like for their kingly overlords. We are all expendible.
But our knowledge thread lives on and capitalism has not said its last word even though its current manifestation is all screwed up in petrodollar hegemony. Tuff times and reset chimes.
And, to further demonstrate the evolution of the capitalist thread, post 1492, when the europeans discovered the Americas, and the crisis of Catholicism nurtured humanism and reform under the Renaissance, the twin swords of western power moved over that period, from 1492 to 1648, from dual polarity of King and Pope to that of King and Banker.
The banker replaced the religious leader in the power house of the West when the Mayflower landed and TEa became the favourite topic of those roundhead Boston Puritans, in 1775. Sons of Venice and of England, they truly were.
Re:These fiendish bankers are clever and necessary but they are subservient to their political lords. Always have been and always will be, when their own sleight of hand defeats their own role in society. Just like for their kingly overlords. We are all expendible.
I was told by a reliable source who was in a position to know that as late as the 1960s, the Fed Chairman was required to write a signed undated letter of resignation as a condition of appointment. Treasury Dept maintained custody of the letter.
When the dollar is rejected, we will print a new note, the Obama.
The new notes will have engravings of Bath House at Valley Forge, crossing the Deleware, freeing the slaves, fighting in WW1 and 2, breaking the sound barrier and landing on the moon.
Bob Diamond ex ceo barclays
' when i read those emails i felt physically sick ' yes that i was banged to rights and my multi million £ bonuses would be a thing of the past. shucks. poor lad!
Soonafter the collar there was bravado
' if i'm going down for libor then i'm taking many others with me '. bob, death wish 6 or go to pasture for a few years and reinvent yourself, maybe treasury sec in 2016. Game boy.
I'm still not convinced that TPTB are ready to take the Dollar off life support. There was a massive effort in place this time to salvage a reserve currency status and save King Dollar. What other motivation could TPTB have than making sure their beloved FIAT stays on top of its game. Diluting is for Greeks and Italians. They're now bound by the Euro and their economies are failing as result.
It is crunch time for TPTB. They can either save the economy or they can save the Dollar, thus their status quo. Everyone who thinks this "deal" whatever it may be will simply be a roundtrip to business as usual is delusional. There will be massive spending cuts in order to avoid any delay or default in principal or interest payments, at least for the short term. The ride is over and much leaner times are ahead.
atleast the girls will look better leaner.
or... or... are they going to be using the ghetto diet?
fml
"But what will happen is that at some point the world will reject the dollar and the US will no longer be able to print dollars."
Pete, something tells me the day that happens, the "World" will be reduced to smoking rubble. Broken glass fallacy and such.
I am a strong believer in the gold standard although we should immediately acknowledge that in the 21C, the economy has outgrown gold and it would have to be based on a basket of commodities to insure some balance which should itself be regularly updated.
The problem is that no government in his right mind will accept such a straitjacket. They would become public accountants governing for the benefit of the nation. No more pork for pet projects, no subsidies for constituencies and "bribes" for potential voters: in other words, the end of politics. So OK, that's impossible. But the fact that an ideal cannot be reached should not disqualify it from being a goal. The alternative is... well, what we have now. Not quite yet a Pirate society but certainly a filibuster one!
So default is inevitable? But we already are morally bankrupt. Financial bankruptcy can only be a small step in the right direction of economic redemption. Although it will be painful, that's certain!
Why have we outgrown the Au standard?
Why not an instrument or note backed by Au, Ag, Pt?
It would reduce reckless spending.
one reason i can think of off the top of the head is that no one truly knows how much Au there is in the world, hence opportunities for manipulation abound for those who have accumulated hidden stashes over the centuries (cough, the Vatican, cough).
If your nation has 8000 tons of gold,
then the wealth of your nation per citizen would be
8000 / X
where x = population.
When the population doubles,
the resulting calculation would be equivalent to X / 2, or the nation's population now has half the quantity of gold per head.
Under a gold standard, the wealth of the nation per citizen goes down as the population goes up.
If you read this far, now is a good time to click on the red arrow...
but I am not finished... a nation could try to obtain more gold... with a higher population that might be realistic...
The wealth of a nation is already calculated on a per capita basis. This is not unique to a gold standard. We need a gold standard or something like it to ensure that irresponsible governments do not use devaluation/QE as a means of avoiding dealing with national debt. Simple.
It never was about the quantity per person of gold. Anyone who ever read austrian economics knows that prices will adjust to the quantity of money available in a marketplace. Prices always have. For example, if you have more money creation, then prices go up to soak up the extra. The opposite is also true, unless you pull a Nixon/FDR and freeze prices, which is pure thievery.
The answer is simple: The world economy is now far too large for the limited amount of gold available. Gold would become so expensive that it would be untradable. We would dig the planet inside out to get the metal at 20,000 USD per once and war would break out for the remaining mines. More generally, the critics of gold are partially right: gold is a commodity with a specific market with ups and downs which is traded and can be manipulated.
The point of the gold standard anyway is not about gold, it is about anchoring the value of our money and avoid the runaway excesses of a fiat currency. I am convinced that we'll come back to reason after trying all the other options.
If it (gold) is a standard, it can't be manipulated. Then you can only manipulate things pegged to it, like paper. The problem with a gold standard, if done right, is that manipulation of paper money becomes impossible without the public seeing what the bankers and government has done to their wealth. Gold, it separates the wheat from the chaff, and turns over the economy to the people, not the crooks. How can 3000-5000 years of history be wrong? Saying that things changed over the past 40 years, so we should give up on gold, is absolutely absurd.
Basket of commodities? That is insane. Are we going to include wheat and corn, the production of which varies from year to year depending on weather and human factors. How about oil? Well output was growing, but now it has levelled off, shale oil is very expensive and won't last. Gold grows at 2% per annum, close to population growth. Go with gold, it's honest money.
The article says that Alexander Hamilton paid off the Federal debt in gold. Where is the default?
An event of default means that you are not paying in time. Not that you are not paying at all. The debt was accrued by the states during the revolution and the bonds by then were being traded at a discount. That is the definition of default. And yes by this definition Greece is in default. But we all know that!
I believe that Jefferson told the bankers to go screw themselves at 20% interest. He also recalculated the debt owed at a normal interest rate and paid them off with that. Jefferson loathed bankers.
The question was raised when will the end come? All you need to do is watch the 7day repo rate when it is above 12% the whole world monetary system will collapse. The fraud will be exposed and the derivitive markets will collapse. End game!
The Genius Republican, Richard Milhouse Nixon, is the one who took us off the gold standard anyway.
The Republican fool house is coming full circle.
Anyone tired of Obama/Congress/The Fed engaging in a group bukaki session with the citizens being the target all the while the MSM is telling us not to be alarmed it's just raining?
How's that for a graphic mental picture. We're all taking facials compliments of the US Government.
I prefer to think we're taking it up the ass.
For some reason, that does not seem gay. It seems like...Rape!!
BOHICA
The author conceals that is was the British who defaulted in September of 1931 on the gold standard as a means of waging economic war. The British Pound was the reserve currency at that time. Reprinting British Imperial propaganda from the City of London to attack FDR is shameful.
The Tylers are simply observing their master's beckon.
default occurs when interest and principal payments stop
highly unlikely that the US will do either
No, on most contracts, you have a clause which stipulate that you must repay the principal when you fail to pay the interest but not paying interest alone is enough to incur default. Basically, if you are a company, as soon as you stop any payment, you must pay all your debt to all your creditors immediately. (It is called pari passu) to insure that your assets are shared equally. It is of course different if you are a country. Then, you negotiate with your creditors.)
I have read that 5.2% interest rate is the magic number at which the US either defaults or ramps up the printing press to 'hyper-high'....
Inflating the currency is embezzlement of private wealth via dilution. It is similar to when a bartender waters down the drinks.
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
From the last two paragraphs of Gold and Economic Freedom by Alan Greenspan. 1966.
see: http://www.constitution.org/mon/greenspan_gold.htm
Just goes to show: you can have good ideas and intelligence but if you have no moral compass, look how you end up...
.
more wealthier?
When you educate a person's mind but neglect their morals, you create a menace to society.
Grant for FED head.
Guillotine the FED and ALL the Tribal denizens thereof. It is and always has been a monstrous fraud, deleterious to the well-being of all humanity.
its all about the petrodollar. Who does Saudi Arabia want protecting its oilfields? Who does the world want patrolling the Straits of Hormuz? The French? The Soviets? The Chinese?
They want the USA, and thats why OPEC only takes dollars for oil, and thats why the dollar wis WRC. And thats why Obama was an idiot to allow Mubarak to fall in Egypt, and piss of the House of Saud.
Who, Spinone, in your opinion, constitues 'the world'? I think there are many people in 'the world' who would rather see no US military presence in the Straits of Hormuz.......times have changed. Also, OPEC is increasingly becoming a spent force - oil production in the US, Canada, Venzuela, etc. is reducing the power of OPEC which can no longer threaten to turn off the spigots if it doesn't get what it wants. In a multipolar world and a world where natural gas and alternative sources of oil are increasingly available, OPEC looks like an anachronism and the petrodollar an outdated tool. Btw if you think that the US could have stopped the fall of Mubarak you are not paying attention - the Arab Spring is not a one-off event that could be controlled remotely from Washington. The US would be better off cutting its ties with the oligarchs in SA and to promote the development of true democracies in the Middle East and Africa....that is the way things are going anyway. Also, isn't that what the US is supposed to be doing internationally? Isn't that what American Exceptionalism is all about? (Not that I really understand that thesis.)
Ovomit and his satanic muscum minions in the white mosque are promoting "democracy" in the arab world. The idiots are actually promoting "mob rule", which is exactly what "democracy" is. So why is anybody surprised that we are getting "mob rule" everywhere Ovomit and his morons leave their trail of ideological dung.
"democracy" is a Satanically-inspired ideological political cult, ...just like islam......intended to degrade humanity's ability to govern itself and impose chaos and confusion leading inevitably to oligarchy, then tyranny......over.....and over.....and over....
The U.S. has lost the safety net of its republic, have fallen quickly through a corrupt faux-democracy, and is already into the final stages of the rule of the oligarchs, the oligarchs having now consumed and weakened each other by their greed and avarice. We are rapidly being subsumed by the corporate tyranny being imposed by criminal, psychopathic, banksters and their debased political puppets.
A state of permawar is rapidly eating-out our remaining substance and will soon leave a destitute, dumbed-down, hapless population, homeless, hungry, and balkanised by ignorance and "diversity".
Who will finally subdue and govern an armed and dangerous population of 300+ million angry, fearful, and desperate people?
No credit events...ever.
Defaults get a new name like counterfiting gets called QE. Nothing to it.
They can control the US this way forever, just print.
The problem is when the rest of the world says "Fuck Off."
Then the milk turns bad.
Yep, a lot, and always, with intent. Bullshitting is an art form to him.
As George Costanza and Lloyd each once admitted, “This is what I do”.
George Costanza? I thought that Brando said that, in the "Godfather".
Sometimes a quick 20-30% devaluation of the currency is a better option then an all -out default. Then exports will pick up and 'stimulate robust growth.'
+100) its strictly a banana republic strategy, but workable, particularily if you announce you will defend the dollar at a certain level below where it is currently. you dont need to announce a cut, just continue your weak dollar policy and defend dollar weakness within limits. the problem with applying DIRECT solutions is that it unmasks their absurb policies, and defeats the status quo. what would all that TARP money have done for the economy if it was put in the hands of consumers? what if the 6t we spend in Iraq was given out in energy subsidies? (fight a war for oil and make the MIC companies rich, let them make money selling products to consumers, which is real economic activity). the age of DIRECT solutions is at hand, because no matter how untransparent POTUS and his WS friends want to be, we see right through them. the real message of the next election to the candidates will be quit fucking around and GIVE US THE MONEY, instead of playing trickle down with your rich friends
The problem being that the Treasury does not have the gold.After confidcation they are now down to 8100 tonnes.Originally had about 28000 tonnes confiscated and hoarded.Holy East Indian Shrines have over 3500 tonnes alone.Everyone knows except the stupid Keynesians running the Fed that China is draining the entire current world gold production to prepare for the eventual global monetary reset.A position of power holding more than 10000 tonnes easily,when it arrives which will involve a basket of currencies headed by the IMF's Special Drawing Rights (SDR's).
No one really know how much gold the US has. It hasn't been audited in decades. Jim Rickards speculates that the gold is leased out and when the SHTF the US will keep the gold and offer inflated paper as payment.
re. We will default in the future, though no lawyer will call it “default"
A rose by any other name is still a rose
- and a Blankfein by any other name is still a turd.
so the latest headlines are saying there is no deal to be had in DC and further it appears talks are at a standstill and going nowhere.
it looks like the idiotic, premature 500 pt ramp we all looked on with amusement at over the past few days was all for naught.
so with my tin foil hat firmly in place, is this it, the endgame, the final move by the globalist bankster cartel to shut down the US economy, create chaos and bring about the much debated New World Order?
certainly our federal government has been the largest prepper for the social unrest that is sure to follow a large scale economic collapse, we've all watched them do it for the past decade or so and those preparations have accelerated over the last two or three years. FEMA camps, AFV's and militarized "police" forces being trained to look at us as the new enemy and of course enough ammo to kill every man, women and child in North America. hell, they are already straight up gunning down mom in cold blood in our nations capitol and being hailed as hero's for it. they certainly have worked hard recently to acclimate us to they idea the authoritarian violence against anybody, at any time, for any reason is ok, normal and for our own good.
and most recently these Obamacare sites, there is a growing suspicion that they are empty shell's, who's only purpose is to collect as much information on as many people as possible. congratulations to all those "unique visitors", if Big Brother didn't know everything about you before, they sure as hell do now.
the question is never one of being paranoid...
it's are you paranoid enough?
the deep breath before the plunge?
guess we won't have to wait much longer to find out.
So it would appear that the only things keeping us from even an implicit default are the current global currency war and massive gold price manipulation.
Correct! You win a cookie!
...
the problem with a default is that the list of people who don't get paid will be made arbitrarily. right now some goverment workers are furloughed, and some keep working. but when someone runs out of money they have to figure who do i pay, the grocer, the cable guy, the liquor store?. it leaves open the door to more corruption if thats possible
It gives the word "non-essential" a whole new meaning.
Yep. Eventually. It's only being delayed. Just piling on more to default.
Some earlier comment said the US can't default because the debt is payable in USD/FRN's.
I would say we default all the time. Every time a loan is paid back nominally with interest that does not cover at least real purchasing power it is a default on the real value of what was offered.
Just because the people involved in a transaction are too stupid to even realize the difference between nominal and real does not mean a real default did not occur.
“When the Congress shall declare a national monetary policy which shall give the Nation a dollar whose debt-paying, purchasing power shall remain the same from one generation to another, the people of the United States, for the first time in their history, will have an honest dollar. The only honest dollar is a dollar of stable, debt paying, purchasing power. The only honest dollar is a dollar which repays the creditor the value he lent and no more, and requires the debtor to pay the value he borrowed and no more. The people of the United States are entitled to a sound currency. The only sound currency is a currency whose exchange value is the same from one generation to another. The failure of the Government to create and stabilize the value of money has not only resulted in the unemployment of millions of people through no fault of their own, but it has seriously changed the- relationship between debtors and creditors,… The experience of the last 31 years of four serious panics and depressions is proof positive that the banks cannot control the volume of money, and that their failure to do so has not only destroyed thousands of banks, but has inflicted the people with great suffering. The Government alone can give relief. The Government alone has the legal authority and duty to establish and regulate the value of money, and to create it ill sufficient quantity to serve the national use. It alone has the power and the duty to prevent either injurious expansion or destructive contraction. “
-Robert L. Owen, Former Chairman, Committee on Banking and Currency, United States Senate. Sited in US Senate Doc. 23, 76th Congress, 1st Session – Written Dec. 23rd 1938, and printed January 24, 1939 pages 74-75:
http://www.archive.org/download/NationalEconomyAndTheBankingSystemOfTheU...
But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.
What to do? Let us face facts: We have defaulted in the past. Let us confront the implied message of the Federal Reserve’s pro-inflation policy: We will default in the future, though no lawyer will call it “default.” And let us preempt the world’s flight from our intangible money by taking steps to fashion a 21st-century improvement. We have the gold and the brains to find the solution.
When you know that money is "a promise to complete a trade", you see that it's not necessary to have a government (or capital or something scarce) involved at all (and we don't).
Traders create money by making trading promises. These are "certificed" by the manager of the Medium of Exchange (MOE). Our MOE manager is the Fed. But the Fed is not government. The Fed is a collection of international bankers.
If a collection of international bankers can be the MOE manager, a collection of local, county, state, national, or international "traders" could create a MOE and manage it also. Just as we have several credit card companies, we could have several MOEs under different management.
The key is "proper" management. That means observing the governing relation INFLATION = DEFAULT - INTEREST. It means "certifying" trades and collecting certificates when the trade delivers. It means monitoring DEFAULTS and collecting an equal amount of INTEREST such that INFLATION is zero at all times everywhere.
Any MOE that guarantees zero INFLATION, and transparently proves it, can not be beat. That's as good as can be done.
Start such a system and the Fed will have to meet that standard (which would not be sufficiently profitable to the owners) or they will wilt on the vine.
This isn't rocket science folks!
Todd Marshall
Plantersville, TX
You stated: We have the gold and the brains to find the solution.
This is false. We may have the brains, but not the gold. Fort Knox is empty. The Federal Reserve has taken control of the gold as collateral on the debt.
It is in the sub-basement at 333 Liberty St in New York City. This is another address for the Federal Reserve.
We have the gold and the brains to find the solution.------ In D.C.?
The article states: The U.S. government defaulted after the Revolutionary War,
This brought about the Constitutional Convention. They boarded up the windows of the building to keep people (especially the press) from spying on them.
When the Convention was over, the press asked Ben Franklin, "Mr Franklin, what have you given us." Franklin replied, "A Republic, if you can keep it."
Well, that Republic is long gone. The Act of 1871 created the corporate UNITED STATES OF AMERICA (ALL CAPS is how you designate a corporation).