MaryM Posted October 8, 2008 Share Posted October 8, 2008 Seriously. Does the US keep this kind of cash or are they printing new money? I need an education! Mary:D Quote Link to comment Share on other sites More sharing options...
tricia Posted October 8, 2008 Share Posted October 8, 2008 I was told they are printing it without backing it with gold. Hence, the inflated dollar. But normally I am completely in the dark about this stuff as it is in the sphere of my husband and I don't get too involved but have heard him talk this way. Tricia http://www.mommyx12.blogspot.com Quote Link to comment Share on other sites More sharing options...
Bev in B'ville Posted October 8, 2008 Share Posted October 8, 2008 that we (i.e. the U.S. government) have borrowed the money from the Chinese. Someone else feel free to chime in on this if you have other info. Quote Link to comment Share on other sites More sharing options...
Sara R Posted October 8, 2008 Share Posted October 8, 2008 The dollar hasn't been backed by gold since 1971. We had gotten into too much debt for the Vietnam War and couldn't afford to back the dollar with gold. The debt from the 60s led to inflation in the 70s. The money is coming from the government issuing more Treasury bonds (i.e. debt backed by "the full faith and credit of the US government"). In times past, this debt was held mostly in the hands of US citizens. Now it is mostly held by foreigners looking for a safe investment. We have a negative savings rate in the US, so it's not our money financing the government. But as our government uses this money to buy bad assets and as we get more and more over our heads in debt, that investment is looking less and less safe. As the government creates more money, it devalues the existing dollars, which is inflation. Once foreign governments get the idea that they don't think our dollars have the value they thought they did, watch out. That's when the value of our money goes way down and inflation goes way up. Quote Link to comment Share on other sites More sharing options...
Sara R Posted October 8, 2008 Share Posted October 8, 2008 that we (i.e. the U.S. government) have borrowed the money from the Chinese. Yes, the Chinese hold a lot of our Treasury bonds. They have a huge savings rate: 52% in 2006. Savings and production make a nation rich, just like it makes a household rich. We are told that consumption strengthens the economy (Keynesian economics, right?), but that doesn't work in the long run. Debt used for production is okay, because the production enables you to repay the money. Debt for consumption, what America has been doing, weakens an economy. Quote Link to comment Share on other sites More sharing options...
kokotg Posted October 8, 2008 Share Posted October 8, 2008 Yes, Paul Krugman had a column a couple of weeks ago addressing this. Basically, as I understand it, it's moving money around in a circle. There's no money required up front, because it will all come from Treasury notes. It will increase the national debt, though, so someone will have to pay for it sooner or later. Quote Link to comment Share on other sites More sharing options...
Sara R Posted October 9, 2008 Share Posted October 9, 2008 (edited) At the end of the day, it comes from you. It is a wealth redistribution program. Not saying whether it was necessary or not, but that is what it is. (sorry for over-commenting on this thread--) I don't think anyone is proposing that we increase taxes enough to pay for this. I don't even know if it's possible. Last year David Walker (former GAO head who was warning everyone about the national debt last year) that in order for the US to stay solvent and keep our promises re: Social Security and Medicare, we would have to immediately raise taxes 40% and decrease spending (not including interest on debt) by 20%. The longer we wait, the bigger those numbers go in both directions. And those numbers were before the bailout package! I don't think anyone is proposing that we increase taxes or decrease government spending on the necessary scale. So that spells inflation. Edited October 9, 2008 by Sara R Quote Link to comment Share on other sites More sharing options...
MaryM Posted October 9, 2008 Author Share Posted October 9, 2008 Scary stuff. Thank you all. I kinda figured inflation and inflation BIG TIME was in out future but never thought about the Chinese buying our TBills and therefore debt. Maybe I should add Chinese to school. Not a pretty picture going forward. Basically, it makes no difference who wins this election either...unless they spend even more money, I guess. Kinda like Letterman on global warming: Too late. We are doomed. Not to be too pessimistic or anything:D Time to simply trust in the Lord! Mary Quote Link to comment Share on other sites More sharing options...
Soph the vet Posted October 9, 2008 Share Posted October 9, 2008 Basically there are three ways the government will obtain this money: either through foreign investors (bonds), printing more money, raising taxes or I guess any combo of the three. None are great options, IMO. Printing more money devalues the dollar and we get inflation. Raising taxes in a sagging economy is not ideal either, everyone agree:001_smile:? Giving away more of America to other countries is bad too. I have heard two encouraging things lately: one was that if we could cut the government by a third we could get out of debt in 30 to 40 years. The other encouraging thing was one of our Congresswomen Michele Bachmann who is helping author something to repeal the bailout, I don't know if that is in part or in full. Quote Link to comment Share on other sites More sharing options...
MaryM Posted October 9, 2008 Author Share Posted October 9, 2008 I have heard two encouraging things lately: one was that if we could cut the government by a third we could get out of debt in 30 to 40 years. The other encouraging thing was one of our Congresswomen Michele Bachmann who is helping author something to repeal the bailout, I don't know if that is in part or in full. Well, while probably not realistic, I love the idea of cutting the government by 30-40%! Thanks for the insights. Mary Quote Link to comment Share on other sites More sharing options...
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