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12/28/2010

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Queenbee

Government debt isn't important if you have no intention of paying it back. Just like the banks don't need to have your money in their vaults as the banks know Americans will not walk in en masse and remove everything they have. What we need is a good movement to take all of our money out of JPM/Chase, Wells Fargo/Wamu and Bank of America. Why would anyone do business with these TBTF? I'll tell you why it is because the average American has the IQ of a Chimp and that is giving the Chimps a bad rap.

Queenbee

The Fed is going to monetize all the debt so there is no need to be concerned. Now inflation should be a concern, but that too is way over the heads of the people.

DaShui

It's Game Theory. Why would a government employee submit to giving up their money, when they know that the government will take that money and spend it somewhere else, on someone with better influence? Gov. employees know more than anyone how the game is played.

BJ

I like how "stimulus" has now been relabeled "tax cuts," seeing as stimulus has become a four letter word in Washington and on Main Street. So now instead of the government cutting us a check, our employer is, assuming you have an employer and you make enough money to qualify. Instead of the consumer racking up more debt, our government is doing it for us. The government wants to ensure we are never free of the 800 lb gorilla.

http://econintersect.com/wordpress/?p=1114

Be happy, Prozac for everyone!

Oh, by the way, the average American household is exporting nearly $500 a month is wealth, and they are addicted to it, they just can't get enough. Our government is merely borrowing that money back so we can spend it again, and again, and again.

http://www.census.gov/indicator/www/ustrade.html
http://www.youtube.com/watch?v=M-vMxKvYfVs

Jennifer

We live in an entitlement society. Get used to it.

SF

You state:

"In fact, misguided Ohio Congressman Dennis Kucinich wants to introduce legislation that would take the money printer away from the Federal Reserve and give it to the Congress. We could wipe out our federal debt obligations in no time! I'd like to go on the record right now in saying that this is the single stupidest idea I have heard since our economy melted down"

Why is that stupid? I don't think you have thought through the implications of this idea: it would eliminate the role of *INTEREST* in the creation of money necessary to run the economy. Money is created as debt by the privately-controlled banking system, so as money is created more must be created to service the interest in an ever increasing spiral until the whole economy can't withstand the burden of this debt-creation spiral. It is a NECESSARY OUTCOME of the system in which money is created. It is a feature, not a bug.

Kucinich's proposal attacks directly the issue of who gets what. Who do you think benefits by creating money as debt that the government can then borrow - at interest? Where does that interest money go? Hmmmm? It goes to the uber-rich, the people who own the banks and the rest of the financial services "industry". It goes to the aristocrats and oligarchs who hold the majority of financial wealth. If congress created money and spent it into the economy rather than borrowing it for the same purpose, there would not be the wealth transfer from taxpayers to the Wall St. titans whose skimming otherwise grows exponentially via compounding interest until it all collapses under the very weight of this absurdity.

Don't get me wrong. This would not be a free lunch because if the government just created money at 0% interest and spent it freely, then you'd eventually get into an inflation nightmare. But, fundamentally it would eliminate the privileged position of wealthy owners of capital to effectively tax the system, with exponentially rising benefits to themselves, by controlling money creation via debt within the banking complex. Money must be able to exist outside of compounding interest spiral.

The SYSTEM is at fault here... money as debt. Eliminate the Fed and return the creation of money to Congress. Eliminate the debt-credit system. That is an essential first step in the Grand Restructuring that will have to come sometime soon.

Dave Cohen

To Jennifer -- "we live in an entitlements society. get used to it"

Ah, that's why I put in the effort here at DOTE. Comments like that give me reason to live! Thanks, Jennifer.

To SF -- "money as debt"

I would remind you that in the three decades following World War II, the economy, the banks and the Federal Reserve co-existed in relative harmony. It is only in the last three decades that we saw the system skew toward Finance with disastrous results. This was largely due to political influence which led to a dismantling of the regulations that had been put in place during the Great Depression. Those regulations created a system of checks and balances which kept the banking system in check. There is nothing in principle that says that the traditional system had to fail disastrously as it has.

Apparently you prefer an "inflation nightmare" to the current corrupt system. In fact, in your war on the bankers you would like to make the dollar almost totally worthless -- certainly this is what would happen if you give Congress the money printer. Just look at what they've done without one!

You would like to show those robber barons a thing or two. And so would I. But your solution would affect some other people, too. I hope you've got a wheelbarrow, because you'll need it to hold the several million dollars you'll need to to buy a loaf of bread. But even before solving the wheelbarrow problem -- there would be a run on wheelbarrows -- you'll need to get your hands on several million almost-worthless dollar bills to put into your wheelbarrow. And then hope that the price of bread did not go up 200% during the time you were on your way to the store.

Good luck with that.

Gail

ha! By coincidence, future son-in-law made this xtranormal vid about daughter's indoor riding ring, which is so big it looks like an airplane hangar:

http://www.xtranormal.com/watch/7759625/

Random Blowhard

The United States will default on it's foreign debt well before it hits 70 billion. My money is on 2014 being the year it all goes.

Jennifer

Thank you Dave. Everyone I know thinks they are entitled. Oh and they also think that they paid taxes and their employer paid UE insurance so that also entitles them. No one saves any more because there is no interest. The Fed is killing the American Saver. They want us all at the Casino (The Stock Market) or consuming. You other choice is supporting government debt by buying bonds. Pick you poison. Sadly what you sad is true. Post war the Fed did play fair. Now the tables are all tilted towards the financials and they just piss money away. Dave you do a great blog here and that is why I have you on mine. Add my blog to your list if you like. I read you often. Sometimes I can be a little blunt as I was yesterday, but at least I apologized. Don't want to be mean or hurt people's feelings.
It's not like I am a retired drill sergeant therapist. LOL

Jennifer

add an "r" to most of my you's as it is a blind spot in my typing.

Jamie

Wow, I don't usually disagree with Dave but this one I have to. A big elephant in the room as someone pointed out above is that we are insane creating currency by borrowing money at interest from private lenders for profit. We are a sovereign nation and can print our own currency without paying interest and in fact this was done during the Civil War. Dennis Kucinich is right on this issue.
The current trend to bash the civil service unions who for years took below market wages in return for benefits is just another push to destroy whats left of the middle class. What we need is to *raise* the wages of the working class by having a strong industrial policy, rechartering corporations to be responsible to their employees and communities, eliminating their status as "persons", taxing investment income and transfers more than wages and other structure changes. When CEO wages are back down to 25-1 ratios instead of 300-1 then private wages will once again be above public ones. The "Debt Problem" is a red herring to divert everyone from the serious structural problems.

Jason

Coming in at the end so no one will probably read this. But, just to say that the debate above about money printing and Dennis Kucinich needs to be re-framed in the DOTE spirit. We must remember that "we the people" or our government has a right (and an obligation I would argue) to add money into the economy for exchange of goods and services. If the money is being spent on adding more value (that is producing goods and services) then there will not be an inflationary effect - it is that simple! When we just print money to pay off old debts or pay off interest, then that does make the dollar worth less. The key thing here is that our government is incapable of using its power of money creation to create goods and services of value in out country, it can only now give money away to bankers. (For a great blog on this topic see: http://bilbo.economicoutlook.net/blog/). Let's try to stay focused here on the prize and show why the US inept and in decline.

Gail

Kunstler comparing current US to France circa 1793 - fun stuff!

http://climatechangepsychology.blogspot.com/2010/12/james-howard-kunstler-moment-of.html

..."Which brings me to the subject of our own financial crisis, soon to mutate into a political crisis. There really is no "solution" to our problem of debt except to become a less affluent society. You can get there via the path of compressive deflationary depression (no money), or hyperinflation (plenty of worthless money), but the destination is the same. In the meantime we're stuck with the extremely uneven distribution of hardship and luxury. Whole classes of formerly working people face the prospect of genuine ruin while an ultra-pampered class of celebrity clowns and professional swindlers fob off with whatever's left on the national buffet table. The real politics of all this are so far from being sorted out that sheer contemplation of what lies ahead leaves the mind harrowed and feeble."

"The Jacobins of 1793 France were basically the Left. It took only five hundred or so of them to bully a nation of 30 million. The Jacobins of the USA in 2011 are basically the Right Wing, followers of Senator Jim DeMint, the mind-slaves of Rush Limbaugh and "students" of Prof Glenn Beck, and, of course, the worshippers of Sarah Palin. Their brand of politics might be labeled Nostalgic Sentimental Paranoid Know-Nothingism. They're proud and loud, pious and ignorant, so deeply insecure that they depend on flag lapel pins to remind them to care about their country, full of righteous anger about their own sexual impulses, the religious notions (or not) of other people, and the possible introduction of the rule of law in banking matters. They pretend to represent the folks freezing in their mobile homes who subsist on Froot Loops, but they're really protecting the country clubbers, the corporate poobahs, the fraudsters on Wall Street, and every other racketeer in the land -- including their own class of political grifters."

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