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Thread: The U.S. National Debt

  1. #1

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    Default The U.S. National Debt

    Click on the link below to read the entire article.

    Robo

    It Is Now Mathematically Impossible To Pay Off The U.S. National Debt


    A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

    And the U.S. government would still be massively in debt.

    So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?

    Well, for one very simple reason.

    That is not the way our system works.

    You see, for more dollars to enter the system, the U.S. government has to go into more debt.

    The U.S. government does not issue U.S. currency - the Federal Reserve does.

    The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers.

    If you will pull a dollar bill out and take a look at it, you will notice that it says "Federal Reserve Note" at the top.

    It belongs to the Federal Reserve.

    The U.S. government cannot simply go out and create new money whenever it wants under our current system.

    Instead, it must get it from the Federal Reserve.

    So, when the U.S. government needs to borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.

    The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days).

    So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.

    So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.

    Are you starting to get the picture?

    As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure.

    So how much money actually exists in the United States today?

    Well, there are several ways to measure this.

    The "M0" money supply is the total of all physical bills and currency, plus the money on hand in bank vaults and all of the deposits those banks have at reserve banks. As of mid-2009, the Federal Reserve said that this amount was about 908 billion dollars.

    The "M1" money supply includes all of the currency in the "M0" money supply, along with all of the money held in checking accounts and other checkable accounts at banks, as well as all money contained in travelers' checks. According to the Federal Reserve, this totaled approximately 1.7 trillion dollars in December 2009, but not all of this money actually "exists" as we will see in a moment.

    The "M2" money supply includes everything in the "M1" money supply plus most other savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000). According to the Federal Reserve, this totaled approximately 8.5 trillion dollars in December 2009, but once again, not all of this money actually "exists" as we will see in a moment.

    The "M3" money supply includes everything in the "M2" money supply plus all other CDs (large time deposits and institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements. The Federal Reserve does not keep track of M3 anymore, but according to ShadowStats.com it is currently somewhere in the neighborhood of 14 trillion dollars. But again, not all of this "money" actually "exists" either.

    So why doesn't it exist?

    It is because our financial system is based on something called fractional reserve banking.

    When you go over to your local bank and deposit $100, they do not keep your $100 in the bank. Instead, they keep only a small fraction of your money there at the bank and they lend out the rest to someone else. Then, if that person deposits the money that was just borrowed at the same bank, that bank can loan out most of that money once again. In this way, the amount of "money" quickly gets multiplied. But in reality, only $100 actually exists. The system works because we do not all run down to the bank and demand all of our money at the same time.

    According to the New York Federal Reserve Bank, fractional reserve banking can be explained this way....

    "If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000)."

    So much of the "money" out there today is basically made up out of thin air.

    In fact, most banks have no reserve requirements at all on savings deposits, CDs and certain kinds of money market accounts. Primarily, reserve requirements apply only to "transactions deposits" – essentially checking accounts.

    The truth is that banks are freer today to dramatically "multiply" the amounts deposited with them than ever before. But all of this "multiplied" money is only on paper - it doesn't actually exist.

    The point is that the broadest measures of the money supply (M2 and M3) vastly overstate how much "real money" actually exists in the system.

    So if the U.S. government went out today and demanded every single dollar from all banks, businesses and individuals in the United States it would not be able to collect 14 trillion dollars (M3) or even 8.5 trillion dollars (M2) because those amounts are based on fractional reserve banking.

    So the bottom line is this....

    #1) If all money owned by all American banks, businesses and individuals was gathered up today and sent to the U.S. government, there would not be enough to pay off the U.S. national debt.

    #2) The only way to create more money is to go into even more debt which makes the problem even worse.

    You see, this is what the whole Federal Reserve System was designed to do. It was designed to slowly drain the massive wealth of the American people and transfer it to the elite international bankers.

    It is a game that is designed so that the U.S. government cannot win. As soon as they create more money by borrowing it, the U.S. government owes more than what was created because of interest.

    If you owe more money than ever was created you can never pay it back.

    That means perpetual debt for as long as the system exists.

    It is a system designed to force the U.S. government into ever-increasing amounts of debt because there is no escape.

    We could solve this problem by shutting down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress (which is what the U.S. Constitution calls for). But the politicians in Washington D.C. are not about to do that.

    So unless you are willing to fundamentally change the current system, you might as well quit complaining about the U.S. national debt because it is now mathematically impossible to pay it off.

    http://theeconomiccollapseblog.com/a...-national-debt
    “There is only one side to the stock market; and it is not the bull side or the bear side, but the right side” Jesse L. Livermore


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  3. #2

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    Default Re: The U.S. National Debt

    It's a slow day in a small East Texas town. The sun is beating down, and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.


    On this particular day a rich tourist from back east is driving through town. He stops at the motel and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one in which to spend the night.

    As soon as the man walks upstairs, the owner grabs the bill and runs next door to pay his debt to the butcher.

    The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

    The pig farmer takes the $100 and heads off to pay his bill at the supplier of feed and fuel.

    The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.

    The hooker rushes to the hotel and pays off her room bill with the hotel owner.

    The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.

    At that moment the traveler comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money, and leaves town.

    No one produced anything. No one earned anything. However, the whole town is now out of debt and now looks to the future with a lot more optimism.

    And that, my friend, is how the United States Government is conducting business today.

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  5. #3

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    Default Re: The U.S. National Debt

    For the U.S., the implications are clear. The annual fiscal deficit in the U.S. will remain close to $1 trillion over the next decade. Ultimately, concerns among foreign investors about a weak dollar will force Washington to put its house in order. The U.S. will have to raise taxes on most income groups and investors, close tax exemptions and loopholes, and reduce entitlement benefits
    http://finance.yahoo.com/banking-bud...&asset=&ccode=

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  7. #4

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    Default Re: The U.S. National Debt

    It never stops!


    http://www.usdebtclock.org/
    “There is only one side to the stock market; and it is not the bull side or the bear side, but the right side” Jesse L. Livermore

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  9. #5

    Default Re: The U.S. National Debt

    So, who's responsible for this?


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  11. #6

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    Default Re: The U.S. National Debt


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  13. #7

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    Default Phil

    That is always your point and never who is going to fix it and how. We know you hate the Republican Party and you worship the ground the Democrat Party walks on. Run back to where you came Phil, we don't need your derogatory input. Write BHO and ask him how the war is going. Ask him how closing GITMO is going. Ask him health care reform with a Democratic majority is going. How about how his Treasury Secretary is doing, the same one who can't file his taxes right.

    How is your TSP doing Phil? How about a account thread or getting on the tracker.

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  15. #8

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    Default Re: The U.S. National Debt

    Your toxic dude. Go away.

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  17. #9

    Default Re: The U.S. National Debt

    Quote Originally Posted by Show-me View Post
    Your toxic dude. Go away.
    This is why I do not participate as much anymore. Someone tells you something you do not like and instead of refuting the claim, you attack him/her and ask that they leave you alone to spread only your ideas without opposition or evidence.
    100% I August 14 (cob 8/14). Trying it again until Oct.


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  19. #10

    Default Re: Phil

    I just posted some graphs. You don't like the graphs? They're valid. They're not propaganda. Instead of writing the President, I'll just give him time to correct all of the bad things done previously. I've read your posts, and it's clear you don't have any answers other than "it's President Obama's fault". Malyla's observation is completely valid. You didn't like the truth.

    Gitmo, the "war", health care reform are things that I've mentioned before. This thread is on the national debt.



    Quote Originally Posted by Show-me View Post
    That is always your point and never who is going to fix it and how. We know you hate the Republican Party and you worship the ground the Democrat Party walks on. Run back to where you came Phil, we don't need your derogatory input. Write BHO and ask him how the war is going. Ask him how closing GITMO is going. Ask him health care reform with a Democratic majority is going. How about how his Treasury Secretary is doing, the same one who can't file his taxes right.

    How is your TSP doing Phil? How about a account thread or getting on the tracker.

  20.  
  21. #11

    Default Re: Phil

    Quote Originally Posted by phil View Post
    Malyla's observation is completely valid...
    phil's got girlfriend, phil's got a girlfriend,

    in the neighboorhood of B fellers...

    100g

  22.  
  23. #12

    Default Re: The U.S. National Debt

    Lone voice warns of debt threat to Fed

    By Alan Rappeport in Washington
    Published: February 16 2010 20:23 | Last updated: February 16 2010 20:23

    "The US must fix its growing debt problems or risk a new financial crisis, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, warned on Tuesday, adding a mounting deficit could spur inflation.

    Mr Hoenig said that rising debt was infringing on the central bank’s ability to fulfil its goals of maintaining price stability and long-term economic growth. “Stunning” deficit projections were putting political pressure on the Fed to keep interest rates low, infringing on its independence at the risk of inflation, he said.

    “Without pre-emptive action, the US risks its next crisis,” Mr Hoenig said in a speech at the Pew-Peterson Commission on Budget Reform."

    more
    Tom
    Market Commentary | My Blog | TSP Talk Plus | |

    I am not a Registered Investment Advisor and this is not investment advice. Please do your own due diligence.

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