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'Paying back' the national debt of a country.

BrettNortje

BrettNortje

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I am aware that every country has a deficit, which is where they owe the people money, yes? the facts are that they owe themselves money, as it is owed to the federal reserve , which is money they are in charge of.

This money is not owed to the people, as, they do not lend from the federal reserve. the closest thing to the people owning the money in the federal reserve is the banks owing the federal reserve money, yes?

So, the national debt should be wiped clean! this will mean the money no longer annihilates as it is paid back to themselves - what happens is that the state has [x] money, and owes [y] debt. if they use [x] to pay back [y], then the money in the country is [z], thus, the equation is [x] - [y] = [z]. this is typical in banking and economics, you could say.

So, if [z] is less than [x] because of [y], why is [y] factored in, if nobody owes anybody anything? they are lending money from themselves to pay themselves back and ending up with less money, just because of some sense of paranoia. this paranoia is that their money will be worthless if it is generated so easily, but, the money remains with the state until it enters the banking or private sector, yes? this means, if they keep all the money, they can afford to buy, build or upgrade anything they want to by generating money for the people to benefit from. all that is needed is justification and balance.
 
BrettNortje said:
I am aware that every country has a deficit, which is where they owe the people money, yes? the facts are that they owe themselves money, as it is owed to the federal reserve , which is money they are in charge of.

This money is not owed to the people, as, they do not lend from the federal reserve. the closest thing to the people owning the money in the federal reserve is the banks owing the federal reserve money, yes?

So, the national debt should be wiped clean! this will mean the money no longer annihilates as it is paid back to themselves - what happens is that the state has [x] money, and owes [y] debt. if they use [x] to pay back [y], then the money in the country is [z], thus, the equation is [x] - [y] = [z]. this is typical in banking and economics, you could say.

So, if [z] is less than [x] because of [y], why is [y] factored in, if nobody owes anybody anything? they are lending money from themselves to pay themselves back and ending up with less money, just because of some sense of paranoia. this paranoia is that their money will be worthless if it is generated so easily, but, the money remains with the state until it enters the banking or private sector, yes? this means, if they keep all the money, they can afford to buy, build or upgrade anything they want to by generating money for the people to benefit from. all that is needed is justification and balance.
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Not really.

Most money is still bank-created money, from loans. The bank loans you $100,000 for a mortgage; they credit your account (or immediately write the check), and they add your promissory note for $100,000 (plus interest) to their ledger as an asset. And $100,000 has just been created, and it will last as long as your loan principle lasts. This is the stuff that fills our bank accounts.

Government-created money is used for bank reserves (basically settlement accounts) and cash. The government creates money in similar fashion, in that they create an asset-debt pair that exists until the debt is extinguished (via taxation). But unlike banks, the government holds the liability, and can do so indefinitely. In short, they can create their own dollars for free. Bond issuance in a fiat currency regime is not accurately described as "debt." It's just an accounting operation, not a loan.

The national debt could be "wiped clean" if we simply changed a few laws and issued dollars directly, instead of issuing bonds. But that would not change the government's total liability, as dollars and bonds are both similar liabilities.
 
Of course, the inflation rate is also a problem. to reverse inflation we could easily reduce costs and salaries at the same time.

If you want to reduce inflation, you could also try to get prices to 'recede.' this can be done by observing that competition brings lower prices, yes? this means, if you were to merge markets, to one 'super market' - not the grocery store! - then you could see the traders all mixing their brands and then bulk buys will go up in supply, brining riches to the owners and investors, and, a price war will erupt.

This means the whole world will be trading on the same boards with the same goals - to make more money. to make some, you need to spend some, of course. then, after you have secured shares in all the safe stocks, the up and comers will look too good to believe, as, they could open one store in each major city, and that could be their franchise to buy in bulk for, of course - you can see how many moderate stores would settle all over the planet, yes?

This will bring prices down, while driving salaries up, because, they could all join the smaller business, and, the smaller business people could join the bigger business - where there is opportunity, there is demand.
 
theres another term for wiping the debt clean and its called defaulting, and it has serious economic consequences. Also about half the national debt is owned by foreigners, not paying them back would mean they would never loan us money again. The USA has never defaulted and because of its position as the worlds reserve currency defaulting could be disastrous for every country on the globe
 
JohnfrmClevelan said:
The bank loans you $100,000 for a mortgage; they credit your account (or immediately write the check), and they add your promissory note for $100,000 (plus interest) to their ledger as an asset. And $100,000 has just been created, and it will last as long as your loan principle lasts. This is the stuff that fills our bank accounts.
Click to expand...

Um... what do you mean "created"?

Whether you are taking a mortgage from a bank or from an individual, the entity that gave you a mortgage actually has to pay money to the person taking the mortgage. That person then pays the bank/individual back over time, plus interest. That $100,000 comes from the bank, and the person buying the house pays $100,000 + interest back. The bank didn't "create" money by giving you a loan. It loaned you money.
 
BrettNortje said:
I am aware that every country has a deficit, which is where they owe the people money, yes? the facts are that they owe themselves money, as it is owed to the federal reserve , which is money they are in charge of.
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Uh, no, that's not the facts.

One major source of lending right now is the Social Security trust fund, which by law loans its surplus to the rest of the government. If that isn't paid back, Social Security beneficiaries won't get their paychecks. So that really is money owed by the government to the people (sooner or later).

The other source is bond sales. When the US government borrows money, they sell a variety of T-Bills, bonds etc. These range anywhere from 3 months to 30 years. The lenders are a variety of national and international financial institutions, many of which are buying bonds on behalf of their clients (e.g. the American people). Foreign banks and foreign governments also often buy that debt. A few citizens still directly purchase T-Bills.


So, the national debt should be wiped clean!
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Or, not.

In theory, the Fed could print enough money overnight to pay off the national debt. In practice, that would cause massive inflation, as well as eviscerate the standing of future borrowing. The price of borrowing would go through the roof, assuming anyone was willing to buy any future US debt for another 20 years.

It would also decimate bondholders, since it would effectively wipe out the value of their holdings. I.e. most Americans would kiss their retirement savings bye-bye, both from inflation and from the buyout.

Next plan?
 
Mr Person said:
Um... what do you mean "created"?

Whether you are taking a mortgage from a bank or from an individual, the entity that gave you a mortgage actually has to pay money to the person taking the mortgage. That person then pays the bank/individual back over time, plus interest. That $100,000 comes from the bank, and the person buying the house pays $100,000 + interest back. The bank didn't "create" money by giving you a loan. It loaned you money.
Click to expand...

No, the bank actually creates new dollars by expanding their balance sheet. They don't loan out a pre-existing money; nobody's account balance (including the bank's) goes down when the loan is disbursed. They mark up your account by the amount of the loan, and they count your promissory note as an asset. The only transfer that goes to the other bank is a transfer of reserves between reserve accounts. Then, accounts are marked up or down, and the deed is done. That, M1, is the stuff that fills our bank accounts.

Govt.-created money, MB, is cash plus reserves, and banks really don't get their hands on reserves.
 
BrettNortje said:
I am aware that every country has a deficit, which is where they owe the people money, yes? the facts are that they owe themselves money, as it is owed to the federal reserve , which is money they are in charge of.

This money is not owed to the people, as, they do not lend from the federal reserve. the closest thing to the people owning the money in the federal reserve is the banks owing the federal reserve money, yes?

So, the national debt should be wiped clean! this will mean the money no longer annihilates as it is paid back to themselves - what happens is that the state has [x] money, and owes [y] debt. if they use [x] to pay back [y], then the money in the country is [z], thus, the equation is [x] - [y] = [z]. this is typical in banking and economics, you could say.

So, if [z] is less than [x] because of [y], why is [y] factored in, if nobody owes anybody anything? they are lending money from themselves to pay themselves back and ending up with less money, just because of some sense of paranoia. this paranoia is that their money will be worthless if it is generated so easily, but, the money remains with the state until it enters the banking or private sector, yes? this means, if they keep all the money, they can afford to buy, build or upgrade anything they want to by generating money for the people to benefit from. all that is needed is justification and balance.
Click to expand...

The deficit is when the government spends more than it collects.
The debt is what happens if the government doesn't pay the deficit.

Or the government has to borrow to pay the deficit.
The treasury does this by selling us securities on the bond market.

However there is a thing called the debt ceiling. It means that the federal government can only borrow up
To a certain point then congress has to approve another raise in the ceiling.

Most states are not allowed to run deficits they actually have to balance their budgets from year to year.
The majority of our debt is actually owed to us. The rest is held by international companies.
 
Mr Person said:
Um... what do you mean "created"?

Whether you are taking a mortgage from a bank or from an individual, the entity that gave you a mortgage actually has to pay money to the person taking the mortgage. That person then pays the bank/individual back over time, plus interest. That $100,000 comes from the bank, and the person buying the house pays $100,000 + interest back. The bank didn't "create" money by giving you a loan. It loaned you money.
Click to expand...

Banks are able to create what is called liabilities.
the bank itself doesn't lend out what is called reserves which is set by the federal reserves.

So the bank can lend out up to the reserve rate based on it's holdings.

So if a bank has 100k it can technically lend 1m dollar in liabilities.
However like all banking functions and accounting there are 2 sides to the equation.
When you pay the loan off the liability goes away and the bank makes money on the interest of that liability.

The liability has to be discharged once it is paid off.
If the bank lacks reserves then they can either get more deposits or they can take a interbank loan.

The bank must always have the reserve amount in the vault at all times.
So when you deposit 1000 the bank will lend out 900.
 
BrettNortje said:
I am aware that every country has a deficit, which is where they owe the people money, yes? the facts are that they owe themselves money, as it is owed to the federal reserve , which is money they are in charge of.
Click to expand...

No.

The Federal Reserve, contrary to popular belief, is part of the US government. So, saying that the US owes money to the Federal reserve is akin to saying you owe money to your own bank account...it's nonsense.

The deficit is the difference between what the government obtains in income (primarily through taxes) and what it spends.

How does the government make up for the deficit? By issuing treasury bonds (and treasury bills, which are essentially treasury bonds with a shorter term). Which are purchased by a mix of foreign and domestic investors.
 
I think this will clear it up?

https://en.wikipedia.org/wiki/National_debt_of_the_United_States said:
The national debt of the United States is the amount owed by the federal government of the United States. The measure of the public debt is the value of the outstanding Treasury securities at a point of time that have been issued by the Treasury and other federal government agencies.

The terms national deficit and national surplus usually refer to the federal government budget balance from year to year, not the cumulative total. A deficit year increases the debt because more money is spent than is received; a surplus year decreases the debt because more money is received than spent.
Click to expand...
 
Okay, so the solutions i offered might not be in tune with what everyone else accepts? this means... new solutions! of course, these need to be justified and work, as if they are not fully researched, they could make me look inferior again!

If the state owes money to, for example, social security, then they could lend money from the federal reserve to pay off the debt. this federal reserve is there to be lent from for the state, so, if they borrow money from themselves, they can afford to wipe it clean as they owe money to themselves. this will be like illegal for a bank to do, as they need to be able to pay the people back their own money they have invested with them, but, if the bank was to lend money from the reserve, to pay it back would be silly... maybe we need new guidelines? this sounds really good!

So, the state controls debt under my new plan. they owe a debt to other countries, but, they could pay this back and then just give themselves more 'digital money.' the state of a country is represented by the assets it owns, like a bank or other business. if they lend money to buy weapons, then there is a problem, because the weapons do not enrich anybody other than the army, but, i am sure they will do this too.

Now, if the state keeps all the money separate from the private sector, and simply pumps money into service delivery, they can give the people what they want, yes? this would mean the state can buy, for example, incubators for hospitals, and, nobody would care about where the debt lies - it is there, the incubator. the money has gone into the private sector, to be taxed and return to the state, who can artificially open the flood gates of service delivery and such to the public. i think this is a better plan than what we have at present, yes?
 
so, i guess it's finally dawning on some of you that the gravy train is over. but...instead of solutions, you simply don't want to pay for all the stuff you bought on your credit card? good luck with that one, the monolithic government you obamabots created will make you pay. and all of us with you.
 
ludin said:
TThe majority of our debt is actually owed to us. The rest is held by international companies.
Click to expand...

About 46% of the national debt is intragovernmental, held by federal trust funds, mainly Social Security, by state and local governments, and by the Federal Reserve. Another 21% is held by US private investors and pension funds. The remaining 33% is owned by foreign gubmints and international investors. (source)

QuadpolarNutjob said:
i guess it's finally dawning on some of you that the gravy train is over.
Click to expand...

It will continue for Democrats. Republicans and some others will be cut off and sent to camps for re-education.
 
BrettNortje said:
Okay, so the solutions i offered might not be in tune with what everyone else accepts? this means... new solutions! of course, these need to be justified and work, as if they are not fully researched, they could make me look inferior again!

If the state owes money to, for example, social security, then they could lend money from the federal reserve to pay off the debt. this federal reserve is there to be lent from for the state, so, if they borrow money from themselves, they can afford to wipe it clean as they owe money to themselves. this will be like illegal for a bank to do, as they need to be able to pay the people back their own money they have invested with them, but, if the bank was to lend money from the reserve, to pay it back would be silly... maybe we need new guidelines? this sounds really good!

So, the state controls debt under my new plan. they owe a debt to other countries, but, they could pay this back and then just give themselves more 'digital money.' the state of a country is represented by the assets it owns, like a bank or other business. if they lend money to buy weapons, then there is a problem, because the weapons do not enrich anybody other than the army, but, i am sure they will do this too.

Now, if the state keeps all the money separate from the private sector, and simply pumps money into service delivery, they can give the people what they want, yes? this would mean the state can buy, for example, incubators for hospitals, and, nobody would care about where the debt lies - it is there, the incubator. the money has gone into the private sector, to be taxed and return to the state, who can artificially open the flood gates of service delivery and such to the public. i think this is a better plan than what we have at present, yes?
Click to expand...

we should abolish money altogether
 
Mr Person said:
Um... what do you mean "created"?

Whether you are taking a mortgage from a bank or from an individual, the entity that gave you a mortgage actually has to pay money to the person taking the mortgage. That person then pays the bank/individual back over time, plus interest. That $100,000 comes from the bank, and the person buying the house pays $100,000 + interest back. The bank didn't "create" money by giving you a loan. It loaned you money.
Click to expand...

Both sides balance sheets increase by $100,000.

The bank doesn't actually have the 100k they lent the homeowner and the homeowner obtains the 100k over a period of time. On both sides of this is a balance sheet increase and a 100k creation.

http://www.bankofengland.co.uk/publ...lletin/2014/qb14q1prereleasemoneycreation.pdf
 
BrettNortje said:
I am aware that every country has a deficit, which is where they owe the people money, yes? the facts are that they owe themselves money, as it is owed to the federal reserve , which is money they are in charge of.

This money is not owed to the people, as, they do not lend from the federal reserve. the closest thing to the people owning the money in the federal reserve is the banks owing the federal reserve money, yes?

So, the national debt should be wiped clean! this will mean the money no longer annihilates as it is paid back to themselves - what happens is that the state has [x] money, and owes [y] debt. if they use [x] to pay back [y], then the money in the country is [z], thus, the equation is [x] - [y] = [z]. this is typical in banking and economics, you could say.

So, if [z] is less than [x] because of [y], why is [y] factored in, if nobody owes anybody anything? they are lending money from themselves to pay themselves back and ending up with less money, just because of some sense of paranoia. this paranoia is that their money will be worthless if it is generated so easily, but, the money remains with the state until it enters the banking or private sector, yes? this means, if they keep all the money, they can afford to buy, build or upgrade anything they want to by generating money for the people to benefit from. all that is needed is justification and balance.
Click to expand...

If I buy a treasury bill, does the treasury owe me or itself? What about when China buys 1.2 trillion in treasury bills? Does the US owe itself or China?
 
jonny5 said:
If I buy a treasury bill, does the treasury owe me or itself? What about when China buys 1.2 trillion in treasury bills? Does the US owe itself or China?
Click to expand...

I think the owner of a treasury bill owns the bill, and the treasury has nothing to do with it, as, the money has left the bank and entered the private sector.
 
BrettNortje said:
I think the owner of a treasury bill owns the bill, and the treasury has nothing to do with it, as, the money has left the bank and entered the private sector.
Click to expand...

I didnt say OWN, i said OWE. A treasury bill is a contract that the Treasury of the United States owes ME X currency. It doesnt owe itself, it owes the purchaser of the debt.
 
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