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Thread: Inflationary Depression Coming: Who Will Trump Blame?

  1. #1

    Inflationary Depression Coming: Who Will Trump Blame?

    Inflationary Depression Coming: Who Will Trump Blame?

    While campaigning for president, Donald Trump accurately said that American markets were a big, fat bubble. He was correct, and that same bubble has not burst, but has gotten even bigger! When the inevitable bust arrives, who will President Trump blame?





    Chris Rossini: “The Fed is the engine of big government. They finance the warfare and welfare state.”

    I have never understood this. *How* does the FED finance the warfare and welfare state? The House of Representatives fund these programs with American dollars that are already in circulation coming in the form of taxes + borrowing.

    Are they saying that *beyond* what Congress allocates, the FED prints dollars and that these dollars are *secretly* going to fund programs that are not on the books? Is that what’s being said here and, if so, is there any proof of this?
    Last edited by charrob; 07-27-2018 at 02:44 PM.



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  3. #2

  4. #3
    Quote Originally Posted by timosman View Post
    Thanks. But I still don't understand .

  5. #4
    Quote Originally Posted by charrob View Post
    I have never understood this. *How* does the FED finance the warfare and welfare state? The House of Representatives fund these programs with American dollars that are already in circulation coming in the form of taxes.
    This would be true if the federal government wasn't spending more money than it was bringing in.

    Quote Originally Posted by charrob View Post
    Are they saying that *beyond* what Congress allocates, the FED prints dollars and that these dollars are *secretly* going to fund programs that are not on the books? Is that what’s being said here and, if so, is there any proof of this?
    I didn't watch the video, but I doubt that's what they were saying. What they were saying is that the United States government is $21 trillion in debt. What did they spend that $21 trillion on? Welfare programs here and wars everywhere else. I'm sure you would find that taking away wars and welfare spending, the government would be running quite a budget surplus every year.

    What does that have to do with the Federal Reserve? Well, how does the federal government borrow money? It sells treasuries for an amount determined at auction to be redeemed for some (usually) higher amount later. Have you been buying a lot of t-bills lately? Probably not. Most people don't. Banks buy them and hold them as cash reserves, allowing them to lend ten times that amount of money to potential customers, including the federal government. Sometimes, like during QE, the Fed was buying U.S. debt directly. The banks are all part of the Federal Reserve system, backed by the Fed and have access to an unlimited line of credit from the Fed. Where does the Federal Reserve get money? It creates it, wills it into existence.

    Without a central bank propping up this whole show, there is no way on Earth the U.S. federal government could have borrowed $21 trillion in the first place, and if they managed to, the interest rates on that debt would be high enough that they would have defaulted on the debt service payments long ago. That is how the Federal Reserve finances and allows for a welfare and warfare state.
    Last edited by The Gold Standard; 07-27-2018 at 04:12 PM.

  6. #5
    At what point do we enter an unsustainable debt territory? $30T?

  7. #6
    Quote Originally Posted by timosman View Post
    At what point did we enter an unsustainable debt territory?
    Fixed that for you.
    Quote Originally Posted by Swordsmyth View Post
    Ron is wrong...
    Quote Originally Posted by Swordsmyth View Post
    Amash is wrong...

  8. #7
    Quote Originally Posted by charrob View Post
    Thanks. But I still don't understand .
    You were right- Congress determines spending- not the Federal Reserve. If taxes don't raise enough money, the US Treasury sells notes (borrows money) to finance the rest. The money comes from taxpayers or investors (buyers of US debt).

    Some claim that the Fed makes it easier for them to borrow the money they don't have but that is determined by those buying government debt (US Treasuries) not the Fed also. The US Treasury Department (not the Fed) issues and sells US debt (Treasuries).

    1835 was the last time the US was debt free. https://www.npr.org/sections/money/2...-it-didnt-last
    Last edited by Zippyjuan; 07-27-2018 at 04:49 PM.
    Donald Trump: 'What you're seeing and what you're reading is not what's happening'

    "Truth isn't truth"- Rudy Giuliani

    Quote Originally Posted by NorthCarolinaLiberty View Post
    I didn't actually read any of the thread. I now mostly just come here to mess with Zip.
    I am Zippy and I approve of this post. But you don't have to.

  9. #8
    Quote Originally Posted by The Gold Standard View Post

    Quote Originally Posted by charrob View Post
    I have never understood this. *How* does the FED finance the warfare and welfare state? The House of Representatives fund these programs with American dollars that are already in circulation coming in the form of taxes + borrowing.
    This would be true if the federal government wasn't spending more money than it was bringing in.

    [...]

    What does that have to do with the Federal Reserve? Well, how does the federal government borrow money? It sells treasuries for an amount determined at auction to be redeemed for some (usually) higher amount later. Have you been buying a lot of t-bills lately? Probably not. Most people don't. Banks buy them and hold them as cash reserves, allowing them to lend ten times that amount of money to potential customers, including the federal government. Sometimes, like during QE, the Fed was buying U.S. debt directly. The banks are all part of the Federal Reserve system, backed by the Fed and have access to an unlimited line of credit from the Fed. Where does the Federal Reserve get money? It creates it, wills it into existence.
    Thanks so much for responding. This is something I’ve never understood.

    So:
    The House of Representatives fund these programs with American dollars that are already in circulation coming in the form of taxes + borrowing.
    So it’s the borrowing part of this equation that the Fed is involved in?

    Is it correct to say then that if we had a balanced budget and no debt, that the Federal Reserve would play no part in financing the warfare and welfare state? And that if we had a balanced budget but also had debt, the Federal Reserve would play no part in financing the warfare and welfare state of the current year but would still be involved in financing the warfare and welfare state of previous years?

    So the paying back of the T-bills + interest when they are due is paid by American dollars in circulation or newly printed dollars created by the Fed? So we’re $21 trillion in debt: I know this is a stupid question, but that $21 trillion does not include the + interest we have to pay back to those who purchased our T-bills?

    Quote Originally Posted by The Gold Standard View Post
    Without a central bank propping up this whole show, there is no way on Earth the U.S. federal government could have borrowed $21 trillion in the first place ...
    Because no one would buy debt from a country with debt levels so high?

    Quote Originally Posted by The Gold Standard View Post
    , and if they managed to, the interest rates on that debt would be high enough that they would have defaulted on the debt service payments long ago. That is how the Federal Reserve finances and allows for a welfare and warfare state.
    So the Federal Reserve finances and allows for a welfare/warfare state because of two reasons:

    • They can keep interest rates on debt artificially low unlike an un-managed/free market economy which would naturally increase interest rates as debt levels rise and the value of the dollar decreases? In a true free market economy we could not go into so much debt because we would not be able to pay the interest on that debt and would default.
    • The Federal Reserve also finances and allows for a welfare/warfare state because the Federal Reserve can, and has, bought U.S. treasury bills directly from the Treasury Department (ie. the U.S. government can and has bought it's own debt when players outside the U.S. government (like China) might stop buying debt from a country whose finances are in such a mess?)
    Last edited by charrob; 07-27-2018 at 05:27 PM.



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  11. #9
    Quote Originally Posted by charrob View Post
    Thanks so much for responding. This is something I’ve never understood.
    Not a problem.

    Quote Originally Posted by charrob View Post
    Is it correct to say then that if we had a balanced budget and no debt, that the Federal Reserve would play no part in financing the warfare and welfare state?
    Pretty much. Of course, that was the entire purpose for creating the Federal Reserve in the first place, so I wouldn't count on any of that stuff going away anytime soon.

    Quote Originally Posted by charrob View Post
    And that if we had a balanced budget but also had debt, the Federal Reserve would play no part in financing the warfare and welfare state of the current year but would still be involved in financing the warfare and welfare state of previous years?

    So the paying back of the T-bills + interest when they are due is paid by American dollars in circulation or newly printed dollars created by the Fed? So we’re $21 trillion in debt: I know this is a stupid question, but that $21 trillion does not include the + interest we have to pay back to those who purchased our T-bills?
    Right, even if they balance the budget right now, they would still have $21 trillion in treasuries out there that would either have to be paid back with tax dollars when they come due, or they would have to borrow the money again to redeem them. And no, the $21 trillion does not include interest. Hundreds of billions of dollars of the federal budget each year is spent on interest, and it would be much more, in the trillions, if that debt had to be rolled over at higher interest rates.

    Quote Originally Posted by charrob View Post
    Because no one would buy debt from a country with debt levels so high?
    Well, that and supply and demand. If banks can't create money out of thin air to lend to the federal government, how much money is really available for them to buy treasuries? And how high would the interest rate have to be for banks to lend this scarce money to the federal government over more profitable private endeavors?

    Quote Originally Posted by charrob View Post
    So the Federal Reserve finances and allows for a welfare/warfare state because they can keep interests artificially low unlike a un-managed/free market economy which would naturally increase interest rates as debt levels rise and the value of the dollar decreases? The Federal Reserve also finances and allows for a welfare/warfare state because the Federal Reserve can, and has, bought U.S. treasury bills directly from the Treasury Department (ie. the U.S. government can and has bought it's own debt when players outside the U.S. government (like China) might stop buying debt from a country whose finances are in such a mess?
    Essentially yes. Technically, the Federal Reserve isn't part of the U.S. government. It's considered a private institution. But in reality yes, they can buy their own debt, buy the debt of foreign governments, lend foreign central banks the money to buy U.S. debt, and prop up the entire system. If a welfare/warfare system could affordably be run on honest money and you just soak the taxpayers to pay for it, then you wouldn't need a central bank to have such a system. But for millennia, governments haven't managed to do that and have had to inflate to pay for these things, the Federal Reserve being our way of doing it.

  12. #10
    Quote Originally Posted by The Gold Standard View Post
    Not a problem.



    Pretty much. Of course, that was the entire purpose for creating the Federal Reserve in the first place, so I wouldn't count on any of that stuff going away anytime soon.



    Right, even if they balance the budget right now, they would still have $21 trillion in treasuries out there that would either have to be paid back with tax dollars when they come due, or they would have to borrow the money again to redeem them. And no, the $21 trillion does not include interest. Hundreds of billions of dollars of the federal budget each year is spent on interest, and it would be much more, in the trillions, if that debt had to be rolled over at higher interest rates.



    Well, that and supply and demand. If banks can't create money out of thin air to lend to the federal government, how much money is really available for them to buy treasuries? And how high would the interest rate have to be for banks to lend this scarce money to the federal government over more profitable private endeavors?



    Essentially yes. Technically, the Federal Reserve isn't part of the U.S. government. It's considered a private institution. But in reality yes, they can buy their own debt, buy the debt of foreign governments, lend foreign central banks the money to buy U.S. debt, and prop up the entire system. If a welfare/warfare system could affordably be run on honest money and you just soak the taxpayers to pay for it, then you wouldn't need a central bank to have such a system. But for millennia, governments haven't managed to do that and have had to inflate to pay for these things, the Federal Reserve being our way of doing it.
    Thank you!!! It feels good for the lightbulb to go on

  13. #11
    Quote Originally Posted by Zippyjuan View Post
    You were right- Congress determines spending- not the Federal Reserve. If taxes don't raise enough money, the US Treasury sells notes (borrows money) to finance the rest. The money comes from taxpayers or investors (buyers of US debt).

    Some claim that the Fed makes it easier for them to borrow the money they don't have but that is determined by those buying government debt (US Treasuries) not the Fed also. The US Treasury Department (not the Fed) issues and sells US debt (Treasuries).

    1835 was the last time the US was debt free. https://www.npr.org/sections/money/2...-it-didnt-last
    Thanks.

  14. #12
    Quote Originally Posted by charrob View Post
    Thank you!!! It feels good for the lightbulb to go on
    You're welcome. And I would rep you but I can't. I can't even remember the last time I posted here, let alone repped someone, so sorry about that. I owe you one.

  15. #13
    Quote Originally Posted by The Gold Standard View Post
    You're welcome. And I would rep you but I can't. I can't even remember the last time I posted here, let alone repped someone, so sorry about that. I owe you one.
    -no need for a rep; knowledge is worth more than all the reps in the world could ever be worth.
    Last edited by charrob; 07-27-2018 at 05:55 PM.

  16. #14
    Quote Originally Posted by The Gold Standard View Post
    You're welcome. And I would rep you but I can't. I can't even remember the last time I posted here, let alone repped someone, so sorry about that. I owe you one.
    You should visit RPF more often.

  17. #15
    Quote Originally Posted by timosman View Post
    You should visit RPF more often.
    Why? I usually only come here when I get so tired of Democrats that I need to remind myself why I hate Republicans too.

  18. #16
    Quote Originally Posted by The Gold Standard View Post
    Why? I usually only come here when I get so tired of Democrats that I need to remind myself why I hate Republicans too.
    Yeah, the site is perfect for that purpose lately.
    Quote Originally Posted by Swordsmyth View Post
    Ron is wrong...
    Quote Originally Posted by Swordsmyth View Post
    Amash is wrong...



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