Editorial
The Coming Debt Limit Drama: Government Wins, We Lose
Last week President Obama bluntly warned Congress that he will not negotiate when it comes to raising the statutory debt limit. If Republicans attempt to use a debt ceiling vote to win concessions on spending from the White House, Mr. Obama threatens simply to raise the limit by executive order or other unilateral action.
This is business as usual in Washington. Democrats literally do not believe we have a deficit and debt problem, and reliably propose greater borrowing and spending. Republicans talk a good game when it comes to government debt, but have no credibility to argue against deficits or abuses of executive power. Brinksmanship ensues, and ugly compromises are reached at the 11th hour. We all lose as the endless borrowing and money printing further erode our dollar and our economy.
Keep in mind that the federal government relentlessly spends about $100 billion more each month than it collects in taxes. This means roughly 40% of every dollar Washington spends is borrowed, to be "paid back" only in highly devalued, newly created money. Ultimately this can only lead to the destruction of the US dollar, as history plainly teaches. But in the face of this reality Obama just shrugs, turning to demagoguery and talk of little old ladies' Social Security checks. Like Obama, far too many Americans view federal debt as a nonissue. Consider Paul Krugman, America's most reliable Keynesian economist and a beloved figure among mainstream journalists. He recently wrote an article about the debt limit issue, in which he discussed a controversial proposal to have the federal government simply create a platinum coin with a face value of $1 trillion:
"Here's how it would work: The Treasury would mint a platinum coin with a face value of $1 trillion (or many coins with smaller values; it doesn't really matter). This coin would immediately be deposited at the Federal Reserve, which would credit the sum to the government's account. And the government could then write checks against that account, continuing normal operations without issuing new debt."
To be fair, Mr. Krugman acknowledges that minting such a coin would be an accounting "trick," but he is dead serious about this option for the Obama administration. This then is the state of modern economics discourse in America, where a respected New York Times economist literally can propose creating "money for nothing" and have the idea taken seriously.
Krugman's suggestion is just another variant of the endless stimulus proposals, which purport to create greater aggregate demand in the economy by creating more money. Whether this is done by the Fed or the Treasury is of little importance, as long as government is creating demand-side "growth," however artificial.
But in just a few short sentences Professor Hans-Hermann Hoppe eviscerates the Krugmans of the world by pointing out the obvious: If governments or central banks really can create wealth simply by creating money, why does poverty exist anywhere on Earth? Why haven't successive rounds of quantitative easing by the US Fed solved our economic recession? And if Fed money creation really works, and doesn't create inflation, why haven't Americans gotten richer as the money supply has grown?
The truth is obvious to everyone. Fiat currency is not wealth, and the creation of more fiat dollars does not mean that more rice, steel, soybeans, Ipads, or Honda Accords suddenly come into existence. The creation of new fiat currency simply strengthens a fantasy balance sheet, either by adding to cash reserves or servicing debt. But this balance sheet wealth is an illusion, just as the notion we can continue to raise the debt limit and borrow money forever is an illusion.
Dr. Ron Paul is a former US Congressman from Texas and candidate for 2012 Republican US Presidential nomination.
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Posted by 1776 on 01/23/13 07:48 PM
Is America too big for democracy? Too big for its traditional republican form? What does it mean if the answer is yes? This video series proposes that the source of our biggest social and political problems is our SIZE.
Click to view link
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Posted by 1776 on 01/23/13 07:48 PM
Is America too big for democracy? Too big for its traditional republican form? What does it mean if the answer is yes? This video series proposes that the source of our biggest social and political problems is our SIZE.
Click to view link
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Posted by washingtongriz on 01/23/13 11:53 AM
It just occurred to me that if we wait long enough, we can deposit such a coin with the Federal Reserve, and it WILL be worth $1 Trillion--in our devalued currency. It will then be an honest transaction. But by that time our debt will be orders of magnitude higher, so we'll be faced with the same problem, only at higher prices.
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Posted by washingtongriz on 01/23/13 11:45 AM
BTW--Why make the coin out of platinum, Mr. Krugman? To give the illusion of great value? Symbolism over substance. In this paragraph, Mr. Krugman's belief that something (paper, metal) is given value by government fiat is on full display. Why not make the $1 Trillion be a bond or some other paper instrument rather than platinum? Because he's scamming the rubes, that's why.
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Posted by washingtongriz on 01/23/13 11:37 AM
The only reason federal debt is an issue is because the government controls the currency. Sever that link, and the gov can go play in its sandbox without affecting the rest of us. Under the current arrangement, when the gov goes down, it takes the rest of us with it.
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Posted by amanfromMars on 01/23/13 02:01 AM
Regarding the information supplied by "Do Western Central Banks Have Any Gold Left??? By: Eric Sprott David Baker ….. Click to view link " and Posted by 1776 on 01/22/13 12:18 PM
Does one buy gold …. and all other precious and semi-precious metals and gems and goods and services for that matter, with practically useful but really worthless fiat currency ….. which today is even relegated to just being an arbitrarily agreeable sum on an electronic sheet/balance statement, and requires no physicality at all?
Is that the big secret that crooked and corrupt systems admin are trying to conceal from general global public knowledge? Hmmm? Methinks that operation is guaranteed to be an epic fail and in the process of collapse will it out conniving conspirators for the undivided attention of the masses, who may not be inclined to be merciful with leading players should they have been abused and disenfranchised by the system. And who would blame them in the light of such knowledge which has been cynically used to enslave and impoverish/power and control them.
And methinks that is nothing less than designed wanton global abuse of the poor and ignorant by a stupid arrogant elite who really should have known better and are unable or unwilling to learn, don't you?
And that makes them, nOObs. ... ... .. Click to view link ... .. in the New Orderly World of Things
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Posted by mava on 01/23/13 01:16 AM
@Weimarphobia,
Well, you have noticed that the FED has the cake and eats it too. Which, can not be done. Are you going to keep thinking that somehow the FED does it, or are you going to question the planted myth of the FED being the private bank?
"The FED is a private bank" is a deception, designed by the federal government in order to separate itself from the fact that it is counterfeits money all day long, while at the same time, punishing the people for the same act.
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Posted by Weimarphobia on 01/22/13 08:05 PM
In response to Ron Paul's question "Is gold money?" Ben Bernanke replied "No." It is too bad that Ron did not have the chance to follow up "But isn' t money supposed to be a store of value, and hasn't the Federal Reserve Note you call the dollar lost 98% of its value in 100 years?
Of Bernanke's many obfuscations note especially the Fed's answer to the question whether they owned gold- "No, just gold certificates." In 1933, Roosevelt issued an executive order demanding that Americans turn in their gold certificates- i.e., dollars (!) and exchange any bullion for FRN's having no claim on gold. So the question arises: how does the private corporation known as the Fed get to have gold certificates when the rest of us can not? It sounds to me like they want to have their cake and eat it too- they really DO own what we like to think of "the people's*" gold in Fort Knox, but they also want to enable the creation of endless debt, almost interest-free to the very banks which own the central bank
* the people lost all claim to the gold by virtue of going 16 trillion in debt
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Posted by seer on 01/22/13 08:01 PM
Does it matter whether tokens are created by the FED or directly by the Government? The result is the same. It is the run away military spending that continues to plague the USA.
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Posted by 1776 on 01/22/13 12:18 PM
Do Western Central Banks Have Any Gold Left??? By: Eric Sprott David Baker
Click to view link
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Posted by 1776 on 01/22/13 11:47 AM
The Obama Inauguration Brought To You By Corporations and Unions Jan 21, 2013
Click to view link
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Posted by TerryWriterFromPortCredit on 01/22/13 04:34 AM
Amen to that, Mr. President. Amen to that!
As I see it, this wonderfully humble male human being (where true intelligence and genius lay) - is the President of the United States of America - morally, ethically, spiritually and therefore actually - because he is who most would really hope for as President. The kind of man who they actually thought they voted for, but find out afterwards when too late that he is not. The incumbent president should be fired by the people for a job badly (and it certainly seems with some pretty evil intentions) done. All living presidents should be fired as ex-presidents and their funds, that keep them in luxury while they spread their justifications for having done what they did while in office, cut.
Since the powerful theme running around the Western part of our electric brains (the internet) is Martin Luther King Jr. Day, if one listens to his 1967 speech at Ebenezer Church "Why I Oppose the Viet Nam War" (so much there it is jaw-dropping in its power of content) - I would like to point out one thing - in 1967 fifty three dollars was spent per person on 'eliminating poverty" and five hundred thousand dollars to kill one "enemy" - where do you think the profit lay? And it cost only $53 to buy the vote - in 1967! Only the true power that be could imagine what that cost is today.
President Paul (yes, free speech allows me to play with words no matter what anyone who uses words militantly says) is always on about DoD spending - because he knows what props up the evil of the Financial/Military/Industrial (whatever euphemism for evil works for you) Complex.
The Internet Reformation is analyzing the power elite's strategies and pointing out their finanacial arm (Central Banking Globally) - how they co-erce the unwitting (Military) - how they get the power to keep their agendas afloat (the vote)/western style "democracy") - and how they keep the vote alive (welfare state and minimum wage {unemployment/welfare/medicaid/obamaphones]), middle class/rich wealth wealth depletion [monetary inflation through fiat currency]). The the "Complex" ain't so anymore.
And so I say: Keep at 'em, Mr. President. You're wearing 'em down - Long live pattern recognition - The Canadian Curator.
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Posted by amanfromMars on 01/22/13 03:38 AM
Good Morning, DB and stalwart Daily Bell Ringers,
Do you think Ron Paul's views are toxic, or do they expose the fiat currency system's toxicity and Achilles Heel for relentless, more intelligent zeroday exploitation? And I ask that because of the software glitch or active censorious red pen mused about here, ... .. Click to view link ... . in a parallel post drawing attention to the Texas Congressman's post, The Coming Debt Limit Drama: Government Wins, We Lose
