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Outlook for the economy in 2010 and beyond

Discussion in 'Speaker's Corner' started by dirtydog, Jan 3, 2010.

  1. kitch9

    Soldato

    Joined: Aug 13, 2008

    Posts: 6,453

    Our currency has been inflating since it was created, what's your point? Reasonable amounts of inflation is needed and is nothing to be scared of. I'll ask again, when money can be printed and pumped into circulation, pretty much without getting into the hands of the general population then removed again why would we let our banks fail? Hyper inflation is generally to be avoided, but it is there as a fail safe should it all go properly pear shaped. Countries have been through it and ended up ok.

    Are you implying that the vast majority of participants are aware of what is happening? The thing could be described as a Ponzi-pyramid scheme all in one.
     
    Last edited: Mar 17, 2014
  2. kitch9

    Soldato

    Joined: Aug 13, 2008

    Posts: 6,453

    Deleted
     
  3. El Capitano

    Mobster

    Joined: Oct 18, 2002

    Posts: 2,577

    The crucial difference is the central bank.
     
  4. kitch9

    Soldato

    Joined: Aug 13, 2008

    Posts: 6,453

    There's not much difference at all really, the entire thing just depends of the confidence of all its participants for it to work, as soon as confidence is lost it stops working as well until confidence is restored, either through time as participants forget they had lost confidence or through artificial means like QE etc etc. The main difference is as you say the central bank which can always ensure the system doesn't collapse completely by printing money when the government can no longer borrow money using money that doesn't exist yet as collateral.

    Money isn't actually anything other than a promise to provide something in the future and the entire system revolves around the perceived value of said promise at any given time.
     
    Last edited: Mar 17, 2014
  5. El Capitano

    Mobster

    Joined: Oct 18, 2002

    Posts: 2,577

    There is a huge difference, the central bank can print money if required, con artists do not have that luxury, not to mention the whole central government backing it angle. Trying to conflate modern monetary systems to Ponzi schemes and pyramid schemes is just silly, as those schemes are hollow whereas government can actually back its loans through taxes and the central bank can manage the money supply.
     
    Last edited: Mar 17, 2014
  6. kitch9

    Soldato

    Joined: Aug 13, 2008

    Posts: 6,453

    If everybody the government or any government (Other then China maybe.) owned money to called their loans in tomorrow none of them could pay it and the entire world economic system would collapse.

    The money to pay the loans hasn't been created, earned or taken yet and won't be for decades, confidence in the system would be totally lost to the point of complete collapse.

    Sounds like a Ponzi/Pyramid scheme to me, the only difference is its not hidden there for everyone to see, and wrapped up in a nice title such as "Modern Monetary System."
     
  7. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Then it's a good job that it's not possible for anyone to 'call in' the government debt, isn't it? I don't think you're qualified to call out the world's financial system if you don't understand as basic a point as that.

    10 year and 30 year bonds are called that for a reason.
     
  8. silversurfer

    Capodecina

    Joined: Jul 13, 2004

    Posts: 18,776

    Location: Stanley Hotel, Colorado

    No its still a good point. The turnover of debt is quite high for some and the average term of USA debt especially has fallen greatly over the decades, on purpose even

    Its part of what makes this an avalanche type scenario potentially, too much of a good thing is possible. Shorter term debt has been getting cheaper for over a decade, obviously base rates are incredibly low and it is cheaper to finance closer to that mark.

    In 2008 HBOS had to refinance 200bn of debt in just one year. Their mistake was not so much lending but putting pressure on themselves to juggle it all at once. It was a general mistake and it applies now to USA debt especially, they dont have to default but theres a failure likely occurring somewhere probably cash value
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    old data
     
    Last edited: Mar 18, 2014
  9. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    No it's not a good point. Bonds are fixed term. Just because the US has been issuing shorter term bonds more often does not change that fact - you can't 'call in' a bond, only sell it on the secondary market.
     
  10. silversurfer

    Capodecina

    Joined: Jul 13, 2004

    Posts: 18,776

    Location: Stanley Hotel, Colorado

    There is a problem, even the USA would tell you this themselves. They need an active market, yes its correct the bond is solid but overall the USA cannot handle not issuing more debt.
    So no recall but Russia or China or any other major holder can influence USA by not buying bonds ie. by not repurchasing their holdings. In effect this is a nasty withdrawal of funds to their budget any time a holder does not renew.
    Not just the deficit spending requires more debt, even the variable interest is a problem for them so bonds are not completely stagnant once issued.


     
    Last edited: Mar 18, 2014
  11. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    What on Earth are you prattling on about? My point is really very simple, a bondholder cannot 'call in' the bond. Literally everything else you've said either makes no sense or has no relevance to what I said. You're arguing against things I haven't said.
     
  12. El Capitano

    Mobster

    Joined: Oct 18, 2002

    Posts: 2,577

    As El Pew stated, you can't just call in a government bond. There is a mechanism whereby the government can borrow so much that it cannot service the debt and it defaults, but that's not a Ponzi scheme and it is not a pyramid scheme.
    Anybody who actually operates with any significant investment in the sovereign bonds market knows how it works and they don't seem to have lost faith.
    Honestly, if it looks like a Ponzi or pyramid scheme, you should have gone to spec savers. First, you keep conflating two different schemes. Second, the government has ways of servicing it's debt. You may have heard of one of the big ones, it's called tax.
     
  13. kitch9

    Soldato

    Joined: Aug 13, 2008

    Posts: 6,453

    Bonds wouldn't work if they could, jesus. Way to miss a damn point.

    A Ponzi scheme works as long as it can "service its debt," they just don't have the benefit of creating money out of fresh air which is the main distinction as you say that governments have, so that creates the hybrid Ponzi/pyramid scheme.
     
    Last edited: Mar 19, 2014
  14. El Capitano

    Mobster

    Joined: Oct 18, 2002

    Posts: 2,577

    Which is achieved in only one way.
    Honestly, I think you're trolling at this point. A Ponzi scheme operator cannot tax people or create new money. They specifically pay dividends/interest from new deposits rather than from the returns of the money they've supposedly invested. Fraud is an integral part of a Ponzi scheme, can you show our government is being fraudulent about how it intends to pay the national debt?
     
  15. Freakbro

    Capodecina

    Joined: Jul 29, 2010

    Posts: 15,601

    Location: Lincs

    It's groundhog budget day!

    Will Punxsutawney George come out and tell us there is six more years of austerity ahead or does he see the green shoots of recovery?


    With all the pre-announcements and info fed to the media, are there going to be any surprises in todays budget or are we expecting a bit of a damp squib, waiting for the true pre-election bribe budget that will happen next year.
     
  16. kitch9

    Soldato

    Joined: Aug 13, 2008

    Posts: 6,453

    Now comes the strawman, I never said what the government was doing was fraudulent.
     
  17. El Capitano

    Mobster

    Joined: Oct 18, 2002

    Posts: 2,577

    Ponzi schemes are fraudulent! pretty much by definition. Use the transitive property, Luke!
     
  18. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Either you had no idea how bonds worked, or your "point" was to build a silly strawman argument that was totally irrelevant to the point at hand.

    It wasn't immediately obvious from your post which was the case, and your entire line of argument suggests you don't know what you're talking about anyway. It needed pointing out either way.

    This, too.
     
  19. kitch9

    Soldato

    Joined: Aug 13, 2008

    Posts: 6,453

    So?

    Think sensibly, the central bank turns on its printers and kicks off hyper inflation, who in the end ends up paying?

    I'm not really interested in arguing semantics but in the end pretty much every monetary policy decision made only affects us in the long run. I don't seen nationalising banks that are failing as a bad policy as we'll end up clawing most of the money back.
     
    Last edited: Mar 20, 2014
  20. Vonhelmet

    Caporegime

    Joined: Jun 28, 2005

    Posts: 48,109

    Location: On the hoods

    The budget was guff. The only good bit was the announcement of HMRC finally being given some money to tackle tax avoidance.