Ron Paul's Predictions

[David Newman]

Originally Posted by Big_Bill

Yes,

Inflation has been kept low the due to continued printing of dollars by the Federal Reserve Bank. But the affects of this have already driven up the prices of food, gas, utilities, etc.

Due to the continued overspending and borrowing by our Government over say the last 60 years, we are in debt clear up to our eyes.

And yes I know that we have had a balanced budget under Clinton, but we also had a 4 Trillion dollar Debt to pay off...

So if Ron Paul can save our sorry asses ? I don't know, but if we keep up as we have, you better have lots of gold and silver, because the dollar won't be worth the paper that it is printed on.

IN GOD WE TRUST, ALL OTHER MUST PAY IN SILVER OR GOLD !

Bill

Up to our eyeballs in debt that simply represents the total private sector and foreign savings in the Federal Reserve that we can continue to issue and payoff on a daily basis as we have since 1971 and can continue to do without issue forever. I've used this example before, but if you ran a bank, would you worry about allowing people to deposit too much money into a savings account? Honestly, I'd like an answer to that.

[Bigerik]

Not getting what you are referring to regarding the federal reserve and savings. Wanna pretend I'm an idiot and give me some learning?

[BlueStreak]

Originally Posted by David Newman

Up to our eyeballs in debt that simply represents the total private sector and foreign savings in the Federal Reserve that we can continue to issue and payoff on a daily basis as we have since 1971 and can continue to do without issue forever. I've used this example before, but if you ran a bank, would you worry about allowing people to deposit too much money into a savings account? Honestly, I'd like an answer to that.

Only if you're worried about paying out the interest. The only way to lower interest obligations would be to reduce the principal. Which by default would reduce working capital? Is that what you're saying?

Dave

[David Newman]

Sure. In a Reserve bank, a reserve account is the operational equivalent of a checking account whereas treasuries are the functional equivalent of a savings account or a CD.

The national debt is the total savings in the Federal Reserve (to the penny).

People invest in Treasuries because despite the S&P grandstanding and dropping of the US credit rating, our treasuries are still the safest investment in the world. As one analyst said "If the US has a AA+ credit rating, the rest of the world is lower than that". The evidence of that is since August, interest rates have dropped.

One other thing of note, countries cannot buy treasuries in their own currency, they can only use the US Dollars they have in their reserve account from selling us things. If they want to do business with us, and all of them most certainly would like to (who would really want to not deal with one of the biggest markets in the world, really?), they get a Reserve account at the Federal Reserve in exchange for the goods they produce. They can't demand payment in Gold or anything else, they only have three choices once that money exists in that account. They can buy our goods, leave it in the reserve account, or they can buy treasuries. Since they don't seem to be ready to really buy our goods, that leaves them with one real alternative, getting a little extra interest by moving the money to their savings (treasuries).

[David Newman]

Originally Posted by BlueStreak

Only if you're worried about paying out the interest. The only way to lower interest obligations would be to reduce the principal. Which by default would reduce working capital? Is that what you're saying?

Dave

No bank would ever try to reduce their savings account balances. Having money allows them to lend money, which is how they make money. If you walked into your bank and told them they must reduce their savings because they couldn't possibly afford to pay all that interest, they'd look at you like you were mad.

[BlueStreak]

Hmmmmmm.... Interesting. So, basically, what we call "debt" is partly money owed to ourselves, or money deposited by other nations earned in doing trade with us?

See, this is interesting, because one of my uncles, a banker by profession, once told me that the entire system runs on debt. And that a lack of debt can actually be worse than too much debt---On the international level. "Government debt is not like your credit card, it's an entirely different animal.", he said.

But, he did not elaborate. I think I'm getting a clearer picture, now.

Thanks.

Dave

[BlueStreak]

Originally Posted by David Newman

No bank would ever try to reduce their savings account balances. Having money allows them to lend money, which is how they make money. If you walked into your bank and told them they must reduce their savings because they couldn't possibly afford to pay all that interest, they'd look at you like you were mad.

Right. I hear what you're saying. It's money that technically belongs to other countries, but we are holding it. We are responsible for it to some degree, but, it is not necessarily money owed to them.

Dave

[David Newman]

Andrew Jackson once paid off the national debt which directly caused the worst depression (until the great depression) in our country's history.

I'd say your uncle knew how the system works.

Another thing to consider is that when looking at the economy on a macro level, too much savings on the consumer side is bad for the economy and probably more so than too much spending/borrowing. If someone decides they are going to save 2000.00 per year that they previously wouldn't have, that is 2000.00 taken out of the economy that someone else will need to spend to keep the economy rolling. Savings is good at a micro-economic level but it's dangerous to the economy as a whole.

[David Newman]

Originally Posted by BlueStreak

Right. I hear what you're saying. It's money that technically belongs to other countries, but we are holding it. We are responsible for it to some degree, but, it is not necessarily money owed to them.

Dave

Pretty much. If they want to sell stuff to us, they do it with the understanding that they are giving us tangible benefits in exchange for a bank statement.

[BlueStreak]

Originally Posted by David Newman

Andrew Jackson once paid off the national debt which directly caused the worst depression (until the great depression) in our country's history.

I'd say your uncle knew how the system works.

Another thing to consider is that when looking at the economy on a macro level, too much savings on the consumer side is bad for the economy and probably more so than too much spending/borrowing. If someone decides they are going to save 2000.00 per year that they previously wouldn't have, that is 2000.00 taken out of the economy that someone else will need to spend to keep the economy rolling. Savings is good at a micro-economic level but it's dangerous to the economy as a whole.

AGREED!

This ties into something a friend on another board was assailed for; "It's all about flow. When people stop spending, for whatever reason, there is no flow-the economy screeches to a halt. So, the government attempts to take it from us and reinject that capital back into the system. It's far from perfect, nobody really likes it, but there is litlle else they can do. Besides allow a total collapse. And no sane person wants that."

They hurled hate at him for days over that. But, it made sense to me.

Dave