The Classic Strawman: But 47% Don't Pay Taxes!

That is a lie.

Import duties and tariffs are not state. There are federal gas taxes. Telecom taxes. And a plethora of other very regressive taxes that we all pay.

Also what does it matter whether a tax is federal or state? The people are still paying taxes.

 

Use taxes (excise taxes) are generally earmarked for expenses created by use of what is taxed. You pay for what you use. Few individuals pay import duties or tariffs.

It matters when you ask the question of who is paying for the federal government. It's silly to claim you've paid for what you're getting from the federal government, because you paid taxes... to someone other than the federal government.

 

Mmm... state schools and state roads are built with a lot of state dollars. And yes everyone pays import duties. They are built into the pricing structure of a lot of things we buy. Most educated people know that.

 

And here we have another example of profound economic ignorance. We don't "print" money into existence. First of all, we don't print money, we print currency. But currency under the Federal Reserve is borrowed into existence to buy bonds. We have a debt-based currency, and that is why the system will eventually implode. Either you will have a deflationary collapse, a hyperinflation, or the U.S. will default on its debt which will have almost equally serious consequences for the currency.

We almost went to stage 3 inflation in 1980, but the high interest rates kept enough stability in Treasuries and the dollar to prevent the meltdown. But now we cannot raise interest rates anywhere close to those levels. If we did, the interest payments alone would absorb 100% of tax revenue.

No, it has value because of the petrodollar standard. If it weren't required for oil purchases on the world market, the dollar's value would plummet rather quickly. And that is changing slowly because of private deals China is making with a few other countries. That list of countries will expand. It's another nail in the coffin of the Fed's fiat currency.

 

If I'm so ignorant. Than please explain to me where we get money to buy bonds in the first place?

And none of what you said there is a factual statement. We will either have deflation or hyperinflation? So basically society will collapse either way, lol. Embarrassing rebuttal!!

But we are still alive today aren't we?

False, we produced a quarter of the world's output last year. Our value of the dollar has nothing to do with the "petrodollar" standard. Another one of your conspiracies I see, lol!!

You will feel right at home. Dr. R, Bacardi, and Hoytmonger will get your back!! hahahaha

 

Yes, you are profoundly ignorant. Let me try to make this easy for you.

The Treasury creates a bond - which is an I.O.U.: "Loan me a trillion bucks in 30 years I'll pay you back 2 trillion bucks." That's basically a bond.

In the middle you have something called open market operations - which is just a shell game that obscures what is really going on. Banks show up at the Treasury auctions - the primary dealers, they're called. Then the Fed comes along through open market operations - they write a check to the bank and they buy that bond from the bank. And so the Fed ends up with the bond. But then... the next month those banks show up at the Treasury auction again. So the Treasury ends up with the dollars and the Fed has the bonds.

This process repeats itself over and over again and there's a build up of dollars at the Treasury and bonds at the Federal Reserve.

SO WE BORROW CURRENCY INTO EXISTENCE WITH AN I.O.U., THE BOND. The Federal Reserve opens up their check book that doesn't have a single penny in it, and writes a bad, counterfeit check and hands that to the Treasury. Dollars spring into existence. The Treasury deposits that into various branches of the government and they do some deficit spending on social programs, public works, war, etc. and then they pay government workers, contractors and soldiers and all of those people deposit into their private banks.

And then fractional reserve lending comes into play. Yet another fraud thanks to the Federal Reserve.

The bottom line is that the debt cannot be repaid under this system. Why? Because more debt must be created into the future in order to create the dollars to pay down the present debt. It is designed to fail and it will ultimately fail, one way or another.

It is quite factual, and it has happened many times in history.

Ludwig von Mises said it best (emphasis added):

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion (deflation), or later as the final and total catastrophe of the currency involved.(hyperinflation)”

Because stage 3 hyperinflation was barely prevented when we were a creditor nation. Now, we are the world's largest debtor nation - and the greatest debtor nation in the history of the world. As I said earlier, if they raise interest rates above 15% today, it will absorb 100% of tax revenue just for the interest payments. Good luck with that.

The dollar has a de facto backing of oil because all OPEC countries except Iran require payment for oil in dollars. This means every other central bank in the world must hold dollars in reserve if they intend to buy oil from OPEC. This extra demand creates value for the dollar, since they need it to purchase oil.

Keep holding all of your wealth in dollars. We'll see who wins.

 

When you insult another person you better be darn sure that you are correct. I agree with your premise that money in our economy is introduced through debt. But in order to do this, the money has to be "printed". A loan in our system is "printing" money. A bank purchases a treasury just like it gives you and I a loan.

Now where the Fed comes in is they create a usable form of money for the system. The amount of money and who gets the money is determined by Congress. Like I always say, the Fed creates a form of money to represent another form of money. So you are partly correct.

But the Fed doesn't write checks, they simple swap non-interest bearing Govt debt with interest bearing Govt debt.

Why is it a fraud?

No it doesn't. You are using the mathematical flaw theory which doesn't exist. Interest can be paid off with current money and you don't need to go in to more debt to pay off old debt. We go in to more debt to pay off old debt simply because we have no reason to take the money back from the people and drain their ability to consume goods and services.

I see you are an Austrian, explains your brazen and arrogant attitude. Unfortunately us educated folk consider Austrian economics more of a philosophy rather than a science. Why would they raise interest rates above 15%. That is illogical in the present day especially after the Fed said they weren't going to even consider raising interest rates till 2014.

All you are doing is pointing out potential flaws of the current system with out any better alternatives. Going back to commodity based money is not a better alternative to our "debt" money.

Get educated, than we will talk. Thanks!

 

And I was correct.

No, money does not have to be printed. In our system, money can be created and transferred digitally. Again, you are in error.

But we do not "print" currency into existence, in and of itself. It cannot be created until a debt is established. The government doesn't just print currency free and clear. So it isn't correct to say the government is just "printing" currency in any event.

Again, the Federal Reserve does not create money. First of all, fiat currency is not a store of value, a distinguishing feature that separates money from currency. And a dollar (Federal Reserve Note) is just a receipt or claim check on an I.O.U.

They do indeed create checks and exchange them for bonds.

Because they can create up to 10 times the actual value of a deposit. It further dilutes the value of the currency for one thing. And it defrauds anyone who believes the bank actually loses something if they're not repaid on a loan. These guys make Enron look ethical.

You are the one relying on a flaw.

The cruel joke is that people are forced to pay part of this currency to the IRS, at gunpoint if necessary, who then hands it over to the Treasury, so that it can then pay the principal plus the interest on that bond, which was paid for with a check from nothing.

There's another joke - there was interest due on that bond. Let me ask you - if you borrow a dollar into existence and that's the only dollar that exists on the entire planet but you promise to pay back two dollars, where do you get the second dollar? You have to borrow it into existence.

I'm not arrogant. You are the arrogant one. You're the one who wants to force people to use an unethical system based on placing them further into debt. You want the government to control the entire process because you don't trust people. I want people to have the freedom to choose alternatives currencies. Now again, which is the arrogant, know-it-all position? Yours.

Right..... I have a PhD. How about you?

ROTFL. Yeah, you're "educated" all right. They raised interest rates back then to slow something called money velocity. As people spend a currency faster to get rid of it, or exchange it for other currencies, velocity can signal a crisis. Higher interest rates make Treasury bonds a more attractive investment, and therefore make people want to hold onto their dollars. Now we're at the stage where other governments won't purchase long term bonds, and China has significantly dropped its purchases of all bonds. The Fed has been forced to monetize the debt by buying bonds directly. This a death spiral for the currency.

Commodity money can't be hyperinflated into worthlessness. Several fiat currencies have suffered that fate. So, it is clearly a better alternative from that obvious standpoint.

Again, keep holding those dollars. I'll keep buying gold. We'll see who wins in the end. Keep believing the Keynesian fools who claim we can fix a debt problem with more debt.

 

This shows your lack of economic knowledge. When someone talks about "printing" money... they do not refer only to physical printing of paper money. It just means creating money. I'll bill you later for that knowledge.

This is what normal people call money

They do not. They swap non-interest bearing debt with interest bearing debt. Huge difference. But I understand why uneducated people think they are writing checks, lol.

That's not how our system works.

For instance in 2007 there was $6.25 trillion in loans and $43 billion in reserves. We don't have the money multiplier like you think. Our entire system is leveraged based on capital not reserves.

Pay your taxes freeloader.

Your example works if there is only $1. It does not work if there is $10 since $1 in interest can be paid with the other $9. Simple math bro.

It's what the entire world uses because it works. You are advocating the destruction of America. That's not very cool.

The Fed said they would not raise interest rates til 2014. You are dreaming. Come back to reality.

It can suffer deflationary depressions that provide mass worldwide starvation. So pick your poison.

Good job. I got some tin foil for you to, so PM me your address.

 

No. You act as if this was the first housing bubble to collapse, and the first banking failure.

These things occur repeatedly. The housing problems of the 70's, banking problems in the 70's, S&L crisis of the 80's.

Each bubble and crash results in Congress creating new legislation which they claim will prevent a future crash, and will strengthen the banking system. At the same time, they engage in social engineering via the banking system, Fed rates, monetary policy, etc. And they play politics with the system.

The roots of the current crisis go back to the 1970's, continues through Reagan, Bush 41, Clinton, and Bush 43. Both R's and D's are to blame.

In the end, the govt causes - or at a minimum sets the stage for - the next bubble and collapse out of their ignorance and hubris.

This won't be the last housing bubble or banking crisis.


A system does not have to be tightly controlled by an individual to operate properly. A light touch is much better than a heavy hand on the rein, particularly when the system is not well understood.

 

President Obama promotes the classic strawman. "There are those who say the healthcare reform is a Bolshevik plan." Of course, the only person to say that was President Obama. It's a totally bogus statement on which he can read from his teleprompter for five minutes before moving on to the next bogus statement.

Once he's done with strawman, Obama simply goes to lying, "I haven't taken money from lobbyist and I never will."

 

You apparently don't read many posts here. Folks call Obama a socialist or communist all the time because of "Obamacare"

His statement isn't bogus at all.

 

All you are doing is describing a flaw with out a solution. Did regulators drop the ball on the housing crisis? Of course. Was it their fault? Of course not. You have to put some blame on the banks who reduced their lending standards to the point they were giving out mortgages to homeless people walking through the door.

And the reason they did this was for one reason and one reason only... not because the Govt was forcing them too, but because Wall Street was a willing buyer. Banks profited on volume rather than low-risk. The risk of lending didn't matter any more regardless of the Fed's interest rate because banks didn't have to carry the risk. They just packaged it up and shipped it off to the highest bidder profiting off the spread.

The Fed's job isn't to regulate these activities. That's the SEC's job. The housing crisis was unique and taught us a lot about our economy. But to say that because of this flaw that we should erase everything else that is good about our economy and return to another flawed system is ridiculous. You are only pointing out flaws, you aren't pointing out any benefits to our system. And the other thing you definitely aren't doing is providing more efficient alternatives.

 

Be careful, DVD, you might make his head explode.

Our system is based on debt - DVD has explained this rather well. I see we have another liberal Keynesian who refuses to accept reality.

LOL. What dream world are you living in? If there is $10, then the interest on $10 must be borrowed into existence in order to pay it. There must be continuous creation of currency to pay for every dollar out there circulating at the present time. So it is the same regardless of the amount. I think you need a remedial course in "simple math."

You Keynesians are the ones advocating the destruction of America through the destruction of its currency and financial solvency. Congratulations.

And the world didn't "choose" this system. Governments mandated it by force.

The Fed isn't going to raise interest rates because it CAN'T RAISE INTEREST RATES. As was said, if it raised them to 1970 levels it would absorb all the tax revenue. That's why Volker bugged out of the Obama administration. He knew they had no way out except to continue monetizing the debt until they either default or create a hyperinflationary environment.

You pick your poison - it's your system that is creating this dilemma between having to choose between the two.

 

Of course it is based on debt, but you are confused on what creates what. Debt doesn't create money. Money creates debt. Money has to be "printed" somewhere in the system in order for us to have debt.

No it doesn't. If there is $10 and the interest is $1 than they can tax $1 out of the economy and pay the interest. The only hypothetical situation that you need more debt to pay off interest is if the entire debt came due at the exact same time. Time to go back to school buddy!

Govt's created by people... hmmmm

The question is why would it raise interest rates right now? You guys aren't making any sense

I love the current system. I much rather keep it than cause the mass suffering that your system provides.

 

You are the one who is confused. It's just as DVD laid it out. A debt is created and currency is created to satisfy it.

LOL. But where did that $1 in taxes originally come from????????? Right - it was created as a debt also, and therefore adds to the debt burden.

The fact of the matter is that new currency is created every year to service new debt - and it can only be paid back by creating new debt/new currency.

Wrong again. You can have a societal collapse before such time when the debt grows above serviceable levels. In other words, when the interest payments, even at close to zero percent, draw too much away from tax revenue to the point that the government cannot pay its "bills," or has to tax too heavily, and it incites a revolution.

We've strung this out for over 40 years now, but there is no way to retrace. China and other countries are moving away from the dollar and away from Treasuries. They won't be coming back.

I told you, you need to sign up for that remedial math course.

They may have been created by people, but they aren't controlled by people. They serve the elite. The bailouts are a perfect example.

It would give China a reason to quit dumping Treasuries, for one thing. It is merely a tool that they won't have when the crisis deepens. That's the point. They will not be able to prevent a meltdown via a raise in interest rates once we cross over into stage 2 inflation. Assuming they don't default on the debt and allow a deflation to take place. They do have that joyful option.

I am not surprised.

 

All money is debt. "A debt is created". In our system that just means money is created, lol.

You stated that more debt needs to be created to pay interest. I simply told you that you are wrong. Don't know what your above statement is meant to imply.

Interest to GDP is at it's lowest level in decades. So what is your next imaginary problem?

Lol, more lies. They are diversifying their portfolios since they already have trillions of dollars. But they are definitely not running away from treasuries. Treasury yields are at an all time low.

You haven't said anything that needed math

LOL!!! You are just making stuff up again. Your imaginary world must be quite fun!

 

No.

I call Obama a socialist because that is what he is.

Obamacare is the example of Obama's socialist beliefs.

And I read his book. He's a socialist.

 

Depends on how you define socialist.

The way you define it, the US has been socialist for at least 80 years and vast majorities of us like it that way.

 

This (your comment) is what started this little sub-thread:

I have pointed out that these people that you think so highly of are very fallible, they thought they were in control, they blatanlty declared the business cycle had been tamed (refer to the Bernanke speech on Feb 2004), but were clearly wrong.

The idea that the Fed/Treasury can actively manipulate and control the economy is the height of hubris. History has shown repeatedly that the govt cannot do that (read about the Great Depression, or Nixon's activity which set the stage for the Carter recession, or Carters actions, or Clinton/Bush/Greenspan). People are not smart enough, the system is far too complicated, and the people with that kind of power will abuse their power.

Every system in this subject is flawed. There is no perfect solution. There always has been and there will always be ups and downs and recessions and bubbles and booms. Strong govt intervention in the economy makes them worse. The best approach is a light regulatory role for the govt which sets guidelines of fairness and punishes injustice, not a role directing the economy.

 

The private sector still drives the economy and still creates the boom and bust cycles. The Fed does not have as much control over the economy as you think. The benefits they provide to stopping deflationary depressions is much more beneficial to the economy than not having central planning.

There was a lot of people wrong during the housing/financial crisis. It does not mean you scrap the system and move to a system with even more flaws and even more catastrophic results. Wall Street's ability to play in the housing market was evolutionary. Credit default swaps, derivatives, CDO's at the mass scale they were produced is unheard of. There is no way for Bernanke or Greenspan to have understood what exactly Wall Street was doing.

If anything, this crisis proves the need for such organizations as the Fed and the SEC. Regulate the banking system and regulate Wall Street. They are the ones leveraging our country to death. Not the Fed and not the Govt.

 

If you think the US is socialist, then you don't know what socialism is. The nation has been moving in that direction and the move has accelerated greatly with Obama and his minions, but we aren't quite there.

And if we do become socialist, vast majorities of us will like it because we are told to like it. Or else.

 

Your only example is healthcare... and sorry to burst your bubble, but...

Socialism - Govt controlled healthcare
Liberalism - Public Option
Conservatism - Govt mandated payments to the private sector

LOL!

 

Well feel free to explain to us what socialism is, since you apparently hold yourself out as an expert on the subject.

 

I agree that a private sector coupled with a legal tender fiat currency managed by a central bank and massive government spending leads to the boom and bust cycle we have.