Manhattan Buckeye;1584226 wrote:"Outstanding U.S. Treasuries are not "debt"."

Explain your strange definition of "debt." I know Isadore is a troll, but do you actually believe the BS you are peddling here?

Boatshoes

I'm just curious what his definition of "debt" is because what he wrote made no sense, hell even the US admits it is issuing debt:

http://www.sec.gov/answers/treasuries.htm

Manhattan Buckeye;1584248 wrote:I'm just curious what his definition of "debt" is because what he wrote made no sense, hell even the US admits it is issuing debt:

http://www.sec.gov/answers/treasuries.htm

In form it appears like the United States is incurring a debt obligation like any ordinary currency user but that's not what is happening in substance. The United States has the Power of the Purse. It has no need whatsoever to borrow money from ordinary currency users when it can issue money whenever it wants.

If you had an unlimited checking account would you use a credit card and pay a bank interest? No, of course not.

But, the U.S. Federal government is not just consuming resources for its own benefit. It has a responsibility to try and make sure its spending does not destroy the value of U.S. dollars. It is the custodian of the money supply.

So, instead of just spending all kinds of new dollars into the private economy when it deficit spends, U.S. Treasuries are issued to lock up dollars out of the transactional money supply when the Federal Government spends more money than it taxes. If it did not issue treasuries when it spent more than it taxed, it would increase the money supply and in normal times affect the Fed's ability to control interest rates, risk inflation, etc.

U.S. Treasuries are necessary as part of controlling the money supply, not because the only provider of dollars in the world needs to "borrow" them.

Don't believe me? Of course you don't.

Here is Former Deputy Secretary of the Treasury Frank N. Newman describing how it is misleading to refer to U.S. Treasury's as "debt"/"borrowing" in his book "Freedom From National Debt" which is available for less than $5.00 on a Kindle http://www.amazon.com/Freedom-National-Debt-Frank-Newman/dp/1626520380/ref=sr_1_1?ie=UTF8&qid=1393343766&sr=8-1&keywords=freedom+from+national+debt.

"People often have misconceptions about Treasury securities "national debt" because they think of them as similar to personal debt. When people borrow money, they incur real debt, an obligation that must be repaid in full with money earned from another source. Borrowers owe money to their lenders. But "national debt" is not the same as personal debt for countries like America, with their own currencies".

"In many ways, applying the term "debt" to Treasuries leads to a number of assumptions that are relevant for individual debt but are simply not applicable to Treasury Securities."

Calling it "debt" is really a holdover from the Gold Standard. During the Gold Standard, we would have to get our hands on Gold and therefore the terms "borrow" and "debt" were applicable. We went through the looking glass on August 15th, 1971 and that all changed. We just kept the old terminology around.

However, as the "debt" and "deficit" hysteria has swept the nation and driven democrats insane over "budget busting tax cuts gahh" and Republicans mad over "$1trillllllllllion dollar deficits gaghahh" It's probably time to change the terminology so we can focus on designing taxing and spending proposals that will lead to maximum employment and output rather than stagnation and mass unemployment because we're scared of big numbers of outstanding Treasury Securities because we call them "debt".

For instance, the SEC and the CBO and the OMB ought to call it the U.S. Monetary Trust (IMHO) instead of the "National Debt", or something like that because that more accurately describes what is happening. The U.S. Treasury holds X amount of dollars on trust at the FED and compensates for the Time Value of Money with interest payments (which do not consume real resources) in exchange for keeping those dollars out of the M1 money supply.

I'm guessing you don't have a passport. You do realize there are other countries that exist, and expect more than a monetary trust.

Even a third-grader understands that if I issue a contract that says I will pay you "x" if you buy this, it is called debt.

Manhattan Buckeye;1584328 wrote:I'm guessing you don't have a passport. You do realize there are other countries that exist, and expect more than a monetary trust.

Even a third-grader understands that if I issue a contract that says I will pay you "x" if you buy this, it is called debt.

And even a third grader understands that an issuer of a token can always pay any obligations incurred in that token. Other countries can and always will be paid U.S. dollars from the Federal Government that creates dollars. And, U.S. Treasury Securities will always be the safest place to put dollars. Period.

Mind you, another totally irrelevant post. "I take it you don't have a passport". You do realize that you post irrelevant, ancillary nonsense a lot right? You realize that that is why people on this board make fun of you and write stuff like "/MB'd"

U.S. treasury securities are an obligation, an IOU from the Federal Government...but so is every single dollar in every deposit account in the United States! Yet, there is no fear about the United State's ability to meet those obligations.

A private citizen that takes out a loan in U.S. dollars can become insolvent because they may not be able to get U.S. dollars from their labor or whatever else. That is impossible for the Federal Government. The United States Federal Government creates the very dollars that people use to buy Treasury Securities.

" Other countries can and always will be paid U.S. dollars from the Federal Government that creates dollars. And, U.S. Treasury Securities will always be the safest place to put dollars. Period."

That is the point, and the "fact" that US Treasuries are the safest place is nothing more than government propaganda. My wife and I own a considerable amount ourselves, but certainly not more than 10% of our portfolio. All it is, is a promise to pay - hence DEBT.

"but so is every single dollar in every deposit account in the United States!"

Most grocery stores and gas stations in the US will accept US currency as legal tender (and there are laws about this). Are you going into an Exxon station with a Treasury note and expect them to accept it as legal tender? And even more importantly, are you going into another country and expecting such?

And yeah, MB'd, as someone that actually understands this.

The point, Manhattan Buckeye despite your nauseating snobbery and haughtiness is that you apparently do not understand the fundamental difference between "debts" denominated in U.S. dollars incurred by the creator of U.S. dollars and debts denominated U.S. dollars incurred by users of U.S. dollars. While it is a "debt" in the most meta sense of the word as any obligation is, it is a "debt" that can always be met when the Federal Government promises to pay U.S. dollars at some point in the future to people who have purchased U.S. Treasury Securities.

But like I said, the U.S. isn't "borrowing money". It purposefully burdens itself with an obligation to pay dollars in the future to people who purchase U.S. Treasury Securities as part of controlling the money supply. It's not unlike a Bank purposefully agreeing to burden itself with a time deposit liability when it agrees to hold U.S. dollars in a savings account. Except, The U.S. Treasury/FED can never involuntarily fail to pay U.S. dollars to the people they have promised to pay them to.

A bank who promises to pay you U.S. dollars on demand can become unable to fulfill that promise.

An ordinary person who promises to pay U.S. dollars to Sallie Mae at some point in the future is incurring a debt that has risk of not being satisfied.

Etc.

The reason to avoid "debt" when talking about U.S. treasury securities is that the word carries negative connotations in our ordinary life and we erroneously project those on to U.S. Treasury securities when they are fundamentally different because of the entity that is making the promise to pay.

Manhattan Buckeye;1584344 wrote:" Other countries can and always will be paid U.S. dollars from the Federal Government that creates dollars. And, U.S. Treasury Securities will always be the safest place to put dollars. Period."

That is the point, and the "fact" that US Treasuries are the safest place is nothing more than government propaganda. My wife and I own a considerable amount ourselves, but certainly not more than 10% of our portfolio. All it is, is a promise to pay - hence DEBT.

"but so is every single dollar in every deposit account in the United States!"

Most grocery stores and gas stations in the US will accept US currency as legal tender (and there are laws about this). Are you going into an Exxon station with a Treasury note and expect them to accept it as legal tender? And even more importantly, are you going into another country and expecting such?

And yeah, MB'd, as someone that actually understands this.

1). It is a promise to pay from the entity that creates dollars. They are indeed "debts" as all obligations are but they are fundamentally different due to the entity promising to pay. People who get hysterical over U.S. treasury securities can't seem to figure out this distinct difference, hence why it is desirable to use different terminology.

2). LOLOLOL The point is that people who own U.S. Treasury Securities can and will always be paid U.S. dollars in the future which they can use at grocery stores and gas stations. The point of a U.S. treasury security is to store dollars out of the transactional money supply. The very function is to make sure that the dollars used to buy them are not used in transactions at grocery stores and gas stations.

That is why they are issued when the Federal Government spends more than it taxes...to subtract an approximately equal amount of money from deposit accounts so that those dollars aren't used in gas stations and grocery stores.

Manhattan Buckeye;1584344 wrote:" Other countries can and always will be paid U.S. dollars from the Federal Government that creates dollars. And, U.S. Treasury Securities will always be the safest place to put dollars. Period."

That is the point, and the "fact" that US Treasuries are the safest place is nothing more than government propaganda. My wife and I own a considerable amount ourselves, but certainly not more than 10% of our portfolio. All it is, is a promise to pay - hence DEBT.

"but so is every single dollar in every deposit account in the United States!"

Most grocery stores and gas stations in the US will accept US currency as legal tender (and there are laws about this). Are you going into an Exxon station with a Treasury note and expect them to accept it as legal tender? And even more importantly, are you going into another country and expecting such?

And yeah, MB'd, as someone that actually understands this.

Also, before I go for the day, seems you've confused safety and liquidity. U.S. Treasuries are always the safest place to park your dollars. Period. They are savings accounts at the bank that creates U.S. dollars.

And again you got it correct. One is a current, one is a promise. There is a pretty big difference. Again, I don't want to be hypocritical because I could definitely be with Treasuries, but it isn't current US dollars, or any type of "cash", it is a note, no different than if I wrote "Believer" a contract that I would pay him $10,000 for remodeling my house. It is a promise to pay, not an actual payment. And I can't just create dollars, nor can the U.S.

Manhattan Buckeye;1584344 wrote:" Other countries can and always will be paid U.S. dollars from the Federal Government that creates dollars. And, U.S. Treasury Securities will always be the safest place to put dollars. Period."

Boatshoes, as usual, is confused.

The Fed CANNOT just print money and buy UST issues. What Boatshoes is actually referring to is monetizing the debt, which is not a trivial matter. But in his world inflation is dead and unwinding that massive Fed balance sheet poses no risk to the economy when the Fed pokes the asset bubble it has created.

BoatShoes;1583771 wrote:Gut, Depression itself has nothing to do with just growth rates. For instance, in the graph you provide here the United States had high growth in part of the great depression but still had incredibly high levels of unemployment. If anything the term has more to do with unemployment. Europe is in essentially a depression and the United States is in a "lesser depression" as it has been called.

I don't know why it is so hard for you to understand.

Unemployment in Italy is about 3 points higher than it's normative rate. So by your definition, the US is also in a dperession? But, no, the US is in recovery?!?

You've got to stop getting your information from these hacks pushing an agenda pretending to be an economist.

If you don't like unemployment hovering around 9-10%, then you don't want European-style debt and deficits.

Manhattan Buckeye;1584360 wrote:And again you got it correct. One is a current, one is a promise. There is a pretty big difference. Again, I don't want to be hypocritical because I could definitely be with Treasuries, but it isn't current US dollars, or any type of "cash", it is a note, no different than if I wrote "Believer" a contract that I would pay him $10,000 for remodeling my house. It is a promise to pay, not an actual payment. And I can't just create dollars, nor can the U.S.

Wrong. The Founding Fathers empowered the Federal Government to coin money and regulate the value thereof. This is fundamentally different than you and me because we will go to prison if we do that.

Don't believe me? Of course you don't. Here is Alan Greenspan, a libertarian conservative and Ayn Rand disciple saying the same thing as me because he at least understands our monetary system.

[video=youtube;-_N0Cwg5iN4][/video]

gut;1584377 wrote:Boatshoes, as usual, is confused.

The Fed CANNOT just print money and buy UST issues. What Boatshoes is actually referring to is monetizing the debt, which is not a trivial matter. But in his world inflation is dead and unwinding that massive Fed balance sheet poses no risk to the economy when the Fed pokes the asset bubble it has created.

No we're talking about an entirely different issue here. And, effectively, that is always what happens when the Federal Reserve buys treasuries from the open market in exchange for cash. The reason to do it that way, rather than simply buy it from the Treasury (which would be pointless) is that it is a reasonable safe guard to make sure that the supply of money does not outpace the demand for money. By definition the Supply of Money will not outpace the demand for money because the Fed buys a Treasury from a willing seller who is demanding money. In other words, it is a procedural device chosen for the pragmatic effect of making sure that increasing the money supply will not cause demand pull inflation due to the supply of money outpacing the demand for money.

But it has the same economic effect of deleting a treasury security out of existence. Any interest on those treasuries are returned back to the treasury. A needless and antiquated exercise held over from the Gold Standard.

gut;1584379 wrote:

Unemployment in Italy is about 3 points higher than it's normative rate. So by your definition, the US is also in a dperession? But, no, the US is in recovery?!?

You've got to stop getting your information from these hacks pushing an agenda pretending to be an economist.

If you don't like unemployment hovering around 9-10%, then you don't want European-style debt and deficits.

I've called the United States a "lesser depression". We've done better than the Eurozone because we have our own currency and used expansionary fiscal policies in 2009 and expansionary monetary policy. Not enough of one or the other or both depending on your politics. We could have done even better if we cut taxes even more or increased spending even more, depending on your politics.

Frank Newman, Former Assistant Secretary of the Treasury for Domestic Finance and Deputy Secretary of the Treasury is not a hack. Alan Greenspan, libertarian ayn rand conservative who understands a fiat currency is not a hack. Milton Friedman is not a hack. The Market Monetarists like Scott Sumner who were taught by Milton Friedman are not hacks. Ben Bernanke, Chairman of the Federal Reserve and Closeted Libertarian who nevertheless understands the monetary system are not hacks. Economists who are paid to be right at banks and investment firms are not hacks.

^^^^Those are the people who I have referenced as of late. None of them are wild eyed liberals.

gut;1584379 wrote: If you don't like unemployment hovering around 9-10%, then you don't want European-style debt and deficits.

Incorrect. Again.

European countries like Italy committed the ultimate sin by giving up their monetary sovereignty, effectively to the Germans, in joining the EURO. It is now analogous to a U.S. State. A U.S. state cannot make promises to pay dollars without risk because U.S. State's don't create dollars. The United States cannot make promises to pay gold or EUROs in the future without risk because it does not create Gold or EUROs.

The ability of the United States to spend more than it taxes is totally and fundamentally different than the ability of a EURO member state. Period.

So, Italy cannot run deficits like the United States can. The best bet to save Italy is more expansionary monetary policy like the United States did. The United States was able to overcome huge amounts of fiscal consolidation in our state governments and the federal government with monetary policy.

So, countries like Italy have 3 hopes; 1). Leave the Euro and devalue 2). The Eurozone forms a Federalized Treasury/Fiscal Authority that can deficit spend like in the United States or 3). Hope that the ECB pushes the pedal to the metal with monetary policy like in the United States.

Manhattan Buckeye;1584360 wrote:It is a promise to pay, not an actual payment. And I can't just create dollars, nor can the U.S.

The question is "why" is an entity with an unlimited purse writing a promise to pay? The Treasury's Financial Manual instructs the Federal Reserve to let it's account go negative if there's no money in it. It's on page 39. (They currently cannot do this because there is a ceiling on the number of treasury securities that can be issued and it is required by law to issue a treasury security in the event that it spends more than it taxes).

The purpose of you writing a promise to pay Believer is probably because you don't have any money. That is never the case for the Federal Government which is the entity from which all U.S. dollars must have originated in one way or another. The very dollars people use to purchase treasury securities must have been spent into existence first by the Federal Government.

The purpose of the Federal Government issuing a promise to pay dollars in the future is not to "borrow money" but to regulate the money supply. If it injects new dollars into the private economy from deficit spending it is incumbent on the custodian of the purchasing power of the dollar to find away to get other dollars out of the transactional money supply. So it issues a treasury security which citizens willingly buy so they can have a safe asset.

The Federal Government is fundamentally different than any individual citizen. It is the currency creator and provides all of the U.S. dollars that we all use and acquire in one way or another.