Author Topic: Help me figure this one out  (Read 4651 times)

Offline Rottenclam

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Help me figure this one out
« on: November 24, 2013, 08:38:12 AM »
I'm not sure if this is a stupid question or not, so please indulge me...

Jack has often said that if everybody piled ever last bit of money that had been actually minted / printed into one pile, and then attempted to pay our debt, that the debt would still never be paid off (because of accrued interest).  This makes perfect sense to me.

However, is it fair to say that if everybody helped each other pay off all debt to the banks (like even Bill Gates and Warren Buffet jumped in and helped pay off people's credit cards, charge cards at nordstroms, auto loans, home loans, etc), and THEN we all took any and all the cash leftover and put it in a pile, and then paid off as much of the national debt as possible, there would still be leftover debt (because of accrued interest on the debt).

But also, wouldnt there still be a ton of "cash" left in various people's and company's accounts, because of fractional reserve banking?  Of course, there would be no actual CASH (i.e. - dollar bills), because that was all put in the pile and used in the big national debt payment.  But there still would be electronic money in circulation, right?

Maybe the question I'm asking is simply answered by way of me having a better understanding of the M2 money supply, but if not, could somebody shed some further light on this?

BTW - sorry if this is too abstract or if it is unclear.  Please let me know if I can do a better job of articulating my question if that is the case.
 

Offline Herew

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Re: Help me figure this one out
« Reply #1 on: November 24, 2013, 10:25:51 AM »
I'm probably not the best guy to try to tackle this but here goes anyway!

From what I understand: Yes, if we all got together and pooled our money, we could pay off all individual, personal debt.

To pay off the national debt, we'd need to pay with something besides our own debt backed currency. For example, some kind of commodity i.e. timberland, farmland that would be accepted in place of the debt payment.
   

Offline fred.greek

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Re: Help me figure this one out
« Reply #2 on: November 24, 2013, 12:14:30 PM »
$17+ trillion – US treasury debt
$16+ trillion – US private debt
 $3+ trillion – US money issued

http://usdebtclock.org/

Eat The Rich...
http://www.youtube.com/watch?v=661pi6K-8WQ
What happens if the US government takes ALL the wealth in the country?

http://www.kitco.com/ind/Dougherty/jan222010.html
A 2010 article:  "… According to the Federal Reserve’s most recent report on wealth, America’s private net worth was $53.4 trillion as of September, 2009. But at the same time, America’s debt and unfunded liabilities totaled at least $120,000,000,000,000.00 ($120 trillion), or 225% of the citizens’ net worth. Even if the government expropriated every dollar of private wealth in the nation, it would still have a deficit of $66,600,000,000,000.00 ($66.6 trillion), equal to $214,286.00 for every man, woman and child in America and roughly 500% of GDP. If the government does not directly seize the nation’s private wealth, then it will require $389,610 from each and every citizen to balance the country’s books… "

Offline RitaRose1945

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Re: Help me figure this one out
« Reply #3 on: November 24, 2013, 12:39:26 PM »
Maybe I'm misunderstanding the question (or my own answer, for that matter) but when you take someone like Warren Buffett, his wealth is not generally cash dollars.  It's land, stocks (which are perceived value) and companies (which are perceived potential earnings).  But rarely flat out cash.

I guess if the creditor(s) were willing to accept perceived value or potential earnings you could make it work.

Offline NWPilgrim

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Re: Help me figure this one out
« Reply #4 on: November 25, 2013, 04:36:02 AM »
Yeah, basically we owe more than our entire country is worth if we liquidated it. Probably more than the world is worth.

The globalist bankers have taken the horrid scheme of the mining town company store and writ large on the national economy.  We owe so much that no matter how hard we work we have to keep borrowing more from the comapny store to buy our sustenance.  We can never leave the holler because "we've sold our souls to the Company Store."

Offline PolicePrepper

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Re: Help me figure this one out
« Reply #5 on: November 25, 2013, 07:39:00 AM »
I think the only way our debt would go down signifigantly is if our creditors take collateral in lieu of cash for the debt. For example, if we just start giving control of US territories from around the world to the foreign countries who own our debt (which is just over $4 trillion and won't help that much).

Offline Prodigy

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Re: Help me figure this one out
« Reply #6 on: November 26, 2013, 11:19:35 AM »
I think it depends if you're talking about the M0, M1 or M2 money supplies.  M2 makes the most sense to talk about, since it is virtually all physical and electronic money.  I think there is something around $11 trillion in M2 currently.  If fred.greek's numbers are correct, that means there isn't enough to even pay the privately held debt (and I think his $3 trillion number must be the M1 money supply, which is cash/coin/checking accounts/travelers checks/other equal to cash things).

I am guessing this question was mostly a thought experiment, but the whole idea of 'paying off all our debt', even if somehow possible, just can never happen.  Our system cannot work that way.  Yes, $17 trillion is a large number, but there are other numbers that are much more important.  How much interest we are paying on that debt, and how much more are we spending than taking in are the 2 most important figures. 

The biggest problem with our country financially today is that 1 - the interest we are paying on the debt is very large, but not insurmountable by any means.  There is the possibility that may increase a lot  once the power of the dollar starts to rapidly decline and we aren't as 'safe' as we used to be.  That would cause massive problems.  And 2 - we are spending a lot more than we are taking in, and that is also a big long term problem. 

There are plenty of other problems, but I think those 2 are the big ones.  The 500 kajillion dollars in 'unfunded liabilities' is kind of inconsequential if you stick to the idea that 'spending more than you take in is bad, mkay'.  Unfunded liabilities are just a means to calculate future expenses.  Look at the costs we'll be having per year, not the total expenditures we will be having over the next 20-30 years - for this discussion, I'm not sure how that is helpful.  If I looked at the totality of what I will spend on bills/mortgage/other costs over the next 20-30 years of my life, it would look like an absolutely ridiculous number as well compared to what I am earning per year.



Also, as an interesting side note: 
Yeah, basically we owe more than our entire country is worth if we liquidated it. Probably more than the world is worth.

I've been listening to The History of Rome podcast (thanks MTUCache!) and at one point there was an emperor who came into power and found the state was essentially bankrupt.  I can't remember the exact details, but the plan ended up being snatching away a TON of land from wealthy land owners (political rivals, or perceived ones, and plenty of other random unlucky schmucks) and sold them off to try and get the empire back on its feet financially.  They ended up flooding the market with land, and by the simple law of supply/demand ended up getting far less for the sales than they had figured originally.

I can only imagine putting the US 'up for sale' and how crazy cheap everything would be from the flooded market : )  Note to future horrible dictators:  steal the land/assets slowly over time, so you can maximize your profits.

endurance

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Re: Help me figure this one out
« Reply #7 on: November 26, 2013, 01:56:54 PM »
Good points.  Think about it.  If most people's assets are tied up in the stock market and their homes.  Both of which lose all value if everyone decides to sell tomorrow and nobody is buying.  Thus, there's really very little "cash" in this world.

If you eliminated the ability to buy on credit tomorrow, who would be able to pay $250k for a house?  Who would be able to buy a $25k car?  The result, which has been witnessed recently in Argentina, is $25k homes.  If you think we had a real estate market collapse before, ha, you ain't seen nothing by those numbers.

Offline NWPilgrim

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Re: Help me figure this one out
« Reply #8 on: November 27, 2013, 01:15:39 AM »
Good points.  Think about it.  If most people's assets are tied up in the stock market and their homes.  Both of which lose all value if everyone decides to sell tomorrow and nobody is buying.  Thus, there's really very little "cash" in this world.

If you eliminated the ability to buy on credit tomorrow, who would be able to pay $250k for a house?  Who would be able to buy a $25k car?  The result, which has been witnessed recently in Argentina, is $25k homes.  If you think we had a real estate market collapse before, ha, you ain't seen nothing by those numbers.

I think we will eventually get to that point, where loans are very hard to come by, and prices come down to what folks can afford to pay in saved cash.  that means a lot simpler products as well, and fewer.  Look at how much is in a modern car, even "basic" cars versus nice cars of 1972. Same with electronics, they just get ever more feature laden.

What happens between now and that point could be lots of bad stuff: hyperinflation, depression, anything.  But eventually I believe our current madness of ever increasing debt through endless borrowing will be forced to stop and we will revert at least for a time to where folks have to pay cash for cars, houses, vacations, etc.

endurance

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Re: Help me figure this one out
« Reply #9 on: November 27, 2013, 08:32:50 AM »
I think we will eventually get to that point, where loans are very hard to come by, and prices come down to what folks can afford to pay in saved cash.  that means a lot simpler products as well, and fewer.  Look at how much is in a modern car, even "basic" cars versus nice cars of 1972. Same with electronics, they just get ever more feature laden.

What happens between now and that point could be lots of bad stuff: hyperinflation, depression, anything.  But eventually I believe our current madness of ever increasing debt through endless borrowing will be forced to stop and we will revert at least for a time to where folks have to pay cash for cars, houses, vacations, etc.
I agree, that's the direction we're heading, with all the good, bad and ugly that comes with it.  The interesting part is the fact that there's a hell of a lot of bankers with a hell of a lot to lose in the process.  They will fight like hell to hold the current system together because debt makes them rich.  ...And unfortunately, our "representatives" are all in their pockets.

Offline RitaRose1945

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Re: Help me figure this one out
« Reply #10 on: November 27, 2013, 08:56:14 AM »
The interesting part is the fact that there's a hell of a lot of bankers with a hell of a lot to lose in the process.  They will fight like hell to hold the current system together because debt makes them rich.  ...And unfortunately, our "representatives" are all in their pockets.

Yes, this.  So very much this.

Offline RationalHusker

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Re: Help me figure this one out
« Reply #11 on: November 27, 2013, 09:33:34 AM »
I agree, that's the direction we're heading, with all the good, bad and ugly that comes with it.  The interesting part is the fact that there's a hell of a lot of bankers with a hell of a lot to lose in the process.  They will fight like hell to hold the current system together because debt makes them rich.  ...And unfortunately, our "representatives" are all in their pockets.

Question of the generation.  How long does this process take?  5 years, 10 years, 50 years?  I know nobody can answer that, but does anybody have any strong opinions (and rationale to back it up)?

Offline RitaRose1945

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Re: Help me figure this one out
« Reply #12 on: November 27, 2013, 10:22:16 AM »
Question of the generation.  How long does this process take?  5 years, 10 years, 50 years?  I know nobody can answer that, but does anybody have any strong opinions (and rationale to back it up)?

I think it depends on the public's attitude (how accepting they are of being led) and how much interference there is (kicking the can down the road "so it doesn't happen during MY term in office").

endurance

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Re: Help me figure this one out
« Reply #13 on: November 27, 2013, 10:45:11 AM »
I have a good friend from Argentina and the unraveling was remarkably quick once it started, but it took much longer for people to accept the interim mess and try to figure out what to do with it.

I think there's no way to predict when.  It could have very easily been September-November 2008. 

The problem is figuring out how you as an individual deal with massive inflation on the stuff you need (food and energy costs) while also experiencing massive deflation in the value of your home and potentially precious metals, too.  If you're barely putting food on the table, are you going to be buying or selling silver and gold?  If 50 million other people are selling their jewelry to make the mortgage payment on their homes and put food on the table, where do you think the price of gold will be?  If nobody is giving home loans because it's too risky and there's a glut of foreclosures on the market, how low will the prices have to go before people will have the cash needed to buy homes?  Will you continue to pay $1200 a month on a home that you put $35k down on, but your neighbor's house just sold for $24k? (essentially 20 months of payments)  When do you walk away?  What if rents have gone up and you can't find an equivalent rental for less than $3000 a month (inflated dollars)?

It's a dilemma that I've been thinking about for a couple years now and there are no easy answers. 

Offline NWPilgrim

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Re: Help me figure this one out
« Reply #14 on: November 27, 2013, 11:14:08 AM »
endurance, your points are well made.  These questions are exactly why I think it is important to have or develop other marketable skills or production of goods.  You can bet the bankers will try to wipe out all types of assets and drag it out to force people to liquidate assets. Just as in the depression. Storing up food, cash, silver and the like only provides a buffer, a temporary cushion against the unknown.  We need to develop the skills and have the tools and means to trade for services or goods in an on-going situation.

If you can provide medical care, nobody can take that from you.  Or if you can repair a diesel motor or build a generator from scrap parts, or tan leather, wire or plumb a house, etc. Or represent one of the unwashed masses before a court.  Office minion jobs (like mine in SW project mgmt) probably do not translate directly to a skill or product for trade at the neighborhood level. So I am constantly challenging myself to learn new things like laying hardwood floor, roasting coffee, fixing an old sewing machine, basic wiring and plumbing, proper pruning of fruit trees, coin collecting, building an AR15, etc. 

One thing about DOING these different skills is that we learn what tools and materials are needed to do a better than average job.  Through performing several wiring projects I started putting together a dedicated wiring tool bag. I now have a Klein dominated tool bag that can handle most home wiring projects except metal conduit. Likewise with cutting firewood you learn which axes and chainsaws and maintenance parts and tools are necessary and you get them on hand. Years ago I started repairing our watches and now have a small cardboard box with all my watch repair tools and parts in one place.

We need the buffer of an inventory of food and supplies to tide us over through temporary disturbances and to buy us time to get re-organized and ramped up for sustainable survival in a long term disturbance using alternative skills and tools.

Offline RitaRose1945

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Re: Help me figure this one out
« Reply #15 on: November 27, 2013, 11:44:32 AM »
Agree.  The more ways you are useful to a group as a whole, the more likely it is that people will find a way to include you in their group, and that makes it more likely you will be able to pull through.

If you're like my Jay and can fix darn near anything, it's worth it for groups to keep you around.  You have value in everyday life.

If you have amazing basketball skills... not so much.

endurance

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Re: Help me figure this one out
« Reply #16 on: November 28, 2013, 05:17:10 AM »
Great discussion, folks!

NW, I absolutely agree that having marketable skills is the best way to insure you're both valued by your community and able to maintain a flow of essential goods and services in your household. Without it, as you mentioned, a set of skills that earned you an office job for 20 years wont do bupkiss for the next 20.

Where I see the friction for myself is staying in my home so my community. While my wife and I were wise enough to buy a home we fouled comfortably make payments on with just one of our two incomes, we still need to make those payments for the next 10+/- years. If that cant be maintained, what is plan B?  This is where this thread intersects the "would you ever give up" thread. How do you tactically retreat and maintain resilience and a quality of life your family continues to find joy in?  While I have no problem traveling back to my 20s with a carefree lifestyle in a travel trailer as my home, there's a lot missing there that threatens my family's integrity. My food forest ceases to be a resource, I no longer have the space for food storage, the pets lose their home, and my wife may not be down with that.

It's lousy to think about but perhaps better now than as things are unfolding on their own. Perhaps now you can pick up a small piece of land to develop into a food forest and pay cash for it today. Maybe you can do something with extended family like that.  Are their things you could do to insure your home from foreclosures in the future?  Can your ego take the idea of losing "everything"?   I've had an interesting chat with a friend from Serbia and no doubt, things could get incredibly ugly to a level few are prepared for. Running those scenarios through your mind may help one prepare for the worst psychologically rather than just waiting for the other shoe to fall.

Bonnieblue2A

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Re: Help me figure this one out
« Reply #17 on: November 29, 2013, 09:35:23 AM »
Yes, this.  So very much this.

IMO, this is exactly what is happening now. None of the Wall Street talking heads see how the FED has any exit strategy to stop the printing.