How can you owe someone more money than what exists? (political question)

Off-topic
1

How can the United States owe more money than it has minted, or in fort knox, whatever you use to base how much money the united states has.

I’m really trying to figure out how we are physically able to owe so much, even though that number of our unit of money doesnt exist, and probably doesnt exist in the other countries.

I hope you understand my question, Please discuss it as well.

(please no, “i hate the US”, “bush sucks”, “the government sucks”, or any other anarchist statements, i want this to keep to a political discussion upon US, and the other countries) :thinking:

edit: i’ll check up on this in the morning, i need to go to bed.

2

http://www.brillig.com/debt_clock/

according to that the US is in debt $9494178585.00.

The U.S. owes more money it has minted because it is just borrowing money from people, and not planning on paying them back.

Also, the more money that the U.S. prints out, the more the dollar goes down.
You can’t really make money, if there are 100 1 dollar bills, and you print out another 10 1 dollar bills, each of the other bills will be worth that much less, although they will still be $1 each, the value of that $1 has just gone down.

3

There are more assets that can be used in payment of debt than just the one currency.

4

I am hoping that land isn’t one of them :frowning:

5

Land is an asset that can be sold in payment of debt, but it’s only one of many.

6

FYI, the M3 money supply right now is about $13.4 trillion. The US debt is about $9.5 trillion. M1 is $1.4 trillion, and M2 is $7.7 trillion.

Learn the difference between the money supply numbers: http://en.wikipedia.org/wiki/Money_supply

7

I figured as much.

Is anyone else aware of the plan that was announced in 1999 for buying back the debt? By 2009 it was projected that the debt would have gone from 3 trillion to about 1 ish.

8

I think Gilby had the answer

M0 is the amount of printed dollars. M1 is the amount of printed dollars plus the electric money in all the accounts.

M2 is M1 plus small CD’s and stuff. M3 is M2 plus even more stuff, like all the bonds and anything else they want to count.

So basically, the amount of printed money means nothing. It has no connection to the debt. If people use electric money more, they will print less dollars, and if a lot of people suddenly demand their dollars, they will sent them a truck full, and print more then. Basically, they print as many dollars as they think people are going to ask for. It is valued the same as the electric dollar that lives on some machine in a Fed branch somewhere. It’s value has no connection to the amount or value of gold in Fort Knox.

Fort Knox is a historical relic left over from the time when the exchange rate and debt between countries was accounted for with gold, but those days are long past.

The USA gov debt is mostly in the form of pieces of paper that say the bearer will be paid 20, 000 $ in 20 years. These are then sold on the market for a lot less then 20,000$. USA Fed reserve banks must buy so many to have a credit line with the central bank. Various countries buy them for various reasons, because having a big credit line in dollars facilitates trade.

So basically, the USA debt is so much larger then the paper dollar supply, for the same reason you can buy a 200,000 $ house with 10,000 $. You can borrow a whole lot more money then you could earn in a year. So you never have to save up 200,000 $ at once in a pile. Just like we don’t need to have 10 trillion $ stacked in a vault somewhere for the USA to go so far down the hole.

Personally, I think some gov debt can have advantages, but that point was long passed, about 9 trillion dollars ago. :frowning:

9

The deficit alone reduces the value of the dollar, whether the USA prints more money or not is irrelevant. Think: they could just write a check, but it would bounce, unless they have a huge line-of-credit.

10

so maybe, considering that we could sell our national forests and parks and monuments to people who could profit by charging higher admission prices, we’re not really in such trouble.

Maybe the Native Americans would buy it back!

11

I say we have a bake sale as a benefit for the national debt. I can bring cupcakes.

12

I used to think that too, but the history has shown that coercive power, money creation, and debt should not be held in the same hands.

Money should not be able to be created from nothing and derive it’s value from coercive power (ie. legal tender laws and taxation). Any “money” should have the value the free market would give it in the absence of coercive power. The ideal setup in the US would be to allow the states to take on debt, but the federal government could not. The federal government in it’s very limited scope of powers (which it far exceeds today) should be able to have it’s annual costs taken care of with the tarriffs (a small uniform one), and then resort to the only direct tax they have the power to do in emergencies, such as when we are in a legitimate war. That direct tax is a tax on the states, not the people. It’d then be up to the states to determine how to raise those funds and whether to take on debt or to immediately impose taxes to pay for it. Of course you also need to abolish the 17th ammendment so that the states once again have power in the federal government and thereby limit the likelyhood of excessive spending that would be passed onto the states.

I’d like to see the federal government sell all federal land to the state in which that land is within and let the people in each state decide what to do with it which may include selling it to Native Americans.

13

That didn’t go so well the first time.

14

Or let the states sell it to the cities, and the cities sell it to the neighborhoods.

My question is: Nations including Cambodia use the US dollar as their national currency.

When the dollar falls, how does that affect Cambodia’s economy.

Or Lichtenstein, which uses the Swiss Franc as their national currency?

15

answering a question with a question…

How do we allow cambodia to use our dollar?

16

They transfer all their currency use into US dollars, not really sure how we “let” them do it, I think they do it of their own accord.

17

Buying USA gov bonds or money

I think these things are sold in the open market. Anyone can exchange whatever they can make a deal for to get some.

We don’t really let anyone use dollars, for instance the black market in drugs, arms etc., is mostly done in dollars, for convenience. It is of course illegal, but when did that ever stop a black marketeer ? Likewise entire countries have pegged the value of their currency to the dollar. I don’t think they ask first, they just do it.

Gilby incorrectly states that people use USA dollars as a result of coercion. In truth, they use dollars because of convenience and predictable acceptance and predictable exchange rates. This helps insure that you make a profit. (knowing what the exchange rate will be in the future). For instance, people are free to use gold and silver for everyday commence if they wish. Few do, because it is an inconvenience. Dollars are fast and dependable. People will move to a different currency only if it has an advantage over the dollar they are using now. :slight_smile:

For instance, if the USA dollar should sustain an unacceptable inflation rate compared to the Euro , the world economy would slowly migrate to making the Euro the favored currency for international business. No coercion would be involved with this, just people looking out for their profits. :wink:

18

The value of the dollar is derived through coercive power. Legal tender laws and income taxes, using the threat of force, is what gives the US dollar it’s value. Those who are forced to pay up can only use this, so therefore they demand them in payment for goods and services. And yet again, I have to tell you that you cannot easily use gold and silver because of capital gains taxes. Will that ever sink in for you? It’s coercion.

A lot of countries use dollars because of the OPEC deal with the US to only accept dollars for oil. It’s further pushed through the IMF and World Bank. Dictators in power are happy to oblige as they then have a better hold on keeping power, at least for as long as the US dollar has this status.

No coercion, none at all? What is it that makes the euro have any value? Can I trade it to the issuer for something? If so, what?

19

Capital gains tax ?

That is part of income tax (federal ), not sales tax (local). So if I buy a unicycle from Gilby for 1 gold coin, who has to pay capital gains tax ??? :thinking:

The real tax involved in barter, which is what such a deal would be, is that it is an inconvenient pain to deal with someone who won’t accept the local $. It is an unprofitable waste of time better used for productive things. So people only barter when the avoidance of tax (barters modern use), is enough value to make up for the hassle of exchanging baskets of goods, or shipping heavy chunks of metal around. There is no coercion behind the popularity of modern money. You are free to use it to buy all the silver you can afford. Good luck finding a merchant that will give you a good value for the silver though. They will tell you to sell that crap yourself, and come back when you have some real money !:slight_smile: There is no coercion in that, they just don’t want to waste their time trying to figure out the true value (and how to sell it) of other forms of currency, or of commodities.

20

You’d have to pay capital gains tax. When you got that gold coin a year ago, it was valued at $655. But today, when you buy a unicycle with it, it’s valued at $931. You’d have to pay a capital gains tax on $276, as that is your gain in $, even though your actual buying power is the same.

I didn’t mention the sales tax, which also hinders use of gold and silver or anything else as money. You have the sales tax when buying the gold to begin with, and then a sales tax when buying something with the gold. So you get hit twice.

If I grow apples, and my neighbor raises chickens, and we decide to trade a bag of apples for a chicken, we both have to somehow figure out how to get Federal Reserve Notes to pay income taxes and sales tax. Income taxes and sales tax are coercion (the use of force), that is making it where we demand FRNs to meet the obligation that is forced upon us. This is what creates demand for fiat currency, so then the value is based on this and the supply of them.