2023-10-31 15:40 from LoanShark

more than just that, a deflationary environment is, in the long run,

financially unstable because banks would be better off holding currency

than lending it. it causes problems for the bank balance sheet and you

don't want the universal waves of bankruptcy that may result.

You can also argue that inflationary environments are finantially unstable in the long run because the banks are better off lending off currency instead of holding it. You'd also have an advantage with that argument because the proof is in the pudding already.

This is completely un-controversial for anyone who studied the Great Depression.

Not really applicable under present high-interest-rate conditions though, I'll admit. The low-interest-rate historical moment has come and gone (at least for now)

So what, then, is considered long term stable? Massive deflation makes non-liquid assets worthless, massive inflation makes liquid assets worthless. Our economic system is based on the idea that we want our assets to appreciate.

I've heard it said (wikipedophilia would add "[by whom?]") that "a little bit of inflation is good" and that might be because we want our assets to appreciate while we are holding them.

During periods of natural prosperity, there is some inflation that happens naturally, but it is manageable. It's difficult to argue that massively expanding the money supply for government spending sprees is healthy, though.

2023-11-08 12:32 from IGnatius T Foobar
So what, then, is considered long term stable? Massive deflation makes

non-liquid assets worthless, massive inflation makes liquid assets

worthless. Our economic system is based on the idea that we want our

assets to appreciate.

Non liquid assets that are useful will be useful in both scenarios. I think we have forgotten that.

If you have a corn field, you will eat as much corn as you want and you may ever sell or exchange the corn at whatever price you can get a given year.


THe theory with massive deflation is that you'd rather hold currency instead of using the currency to set a corn field, based on the assumption that you will be able to buy corn from your currency savings. I don't think the assumption holds because if everybody has the same idea, corn supply is not guaranteed. Game theory is you go and set your corn field because even if the market value of your field crashes you will be happily eating corn.


I am making the point of liquidating my liquid assets and turning the money into means of production for things that are directly useful to me precisely because you can no longer depend on the stability of The System to give value to your stuff. Set an okra processing facility at home and you won't care for the price of okra ever again, period.

I'd prefer lawyers, guns and money, but yea.

2023-11-14 16:59 from Nurb432
Somewhere i read that we are now paying 1 trillion a year in interest
payments.  What happens when the economy collapses and the feds cant
suck enough of our income out of our pockets and we default?  

What happens is Biden is replaced by a Chinesse puppet. An **official** puppet, instead of an unofficial one, I mean.

2023-11-15 09:39 from Nurb432
What i mean mostly is i dont think we put up collateral ( how could
we? ), so when we default and the others country flip us the bird
demanding money, what physically happens beyond us looking ( more )
stupid? Do we just flip the bird back and walk? Do we just dismiss
what they owe us and call it even? file in some international court
for bankruptcy, and then take down the planet with us?

 

 

What happens is "If you want us to forget your debts, give us Taiwan, or else..."

Somewhere i read that we are now paying 1 trillion a year in interest
payments.  What happens when the economy collapses and the feds cant
suck enough of our income out of our pockets and we default?  

Before answering that question, it would be nice to see a breakdown of who owns all of the current debt.

I have head it said [by whom?] that the largest holder of US government debt is the public itself. I have to assume that means it's in things like savings bonds. I also don't know the mechanics of how we borrow money from foreign governments -- do we just ask them to buy our bonds?

We don't anticipate a sudden collapse. Last summer, Fitch Ratings downgraded US "issuer default rating" from AAA to "AA+". In their statement, they said "In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters" and went on to imply that they were *not* impressed by what had just recently happened then, which was the unipartisan agreement to suspend the debt limit until January 2025.

So theoretically you go next to AA, then to A, B, C, and D, before it all goes to hell. Theoretically that means along the way, bond buyers become more hesistant to buy government debt because it's not the guaranteed payback it once was. What happens next is anyone's guess, but it can't be good.

The point however, is that we don't simply take out a loan from the Bank of China every time we want more money. It's far more complicated than that.
And also the Chinese government isn't exactly in the greatest of financial shape either.

So theoretically you go next to AA, then to A, B, C, and D, before it

all goes to hell. Theoretically that means along the way, bond buyers

become more hesistant to buy government debt because it's not the
guaranteed payback it once was. What happens next is anyone's guess,

but it can't be good.

The point however, is that we don't simply take out a loan from the

Bank of China every time we want more money. It's far more complicated

than that.
And also the Chinese government isn't exactly in the greatest of
financial shape either.

What happens when your credit rating goes to trash is not that you stop selling debt. What happens is you sell the same debt, but more expensive. INstead of selling it for a 3% interest you sell it for a 30% interest and the sort of people who buys it stops being regular nice investors but high risk takers and motherfuckers you don't want to deal with.

At that point you end up printing moar money to pay your unpayable debt, crashing your currency Weimar Republic style, so you don't really go ever bankrupt but your people starves because a potato is worth now ten million dollar.

2023-11-23 14:01 from Nurb432
Long ago I have heard the same about % of ownership. But as time has
gone on, i question if that is still true. Not sure where the facts
are published, or if they're obfuscated enough not to really get
anything useful from it.

 

And ya, china is in a rough spot too which is even more reason to
call in their chips and demand payment. 

The issue with owing debts t your own citizens is that if you default then your citizens don't get paid and local industry gets bankrupt and people starves and the government starves and then Mexico invades and you all end up eating cocaine and tequila.