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View Diary: Guess Who’s America’s Largest Creditor (Hint: It’s NOT China) (160 comments)

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  •  IOU's (4+ / 0-)
    Recommended by:
    Smoh, Lujane, MKSinSA, trkingmomoe
    Or....that it's just a useless box of IOUs.
    And that's just the "pure" debt, i.e., the money the US Government openly borrows.

    Let's open another can of worms and consider the portion of our nation's net indebtedness we owe to, and because of, the Federal Reserve System. Every dollar the Fed doesn't own is a dollar the Fed owes, with the United States itself as the co-signer on the loan.

    The result? We're paying interest on every U.S. Dollar now existing. In those same dollars.  (WTF??)

    We ought to be charging that interest to all the other rich nations' governments who use the U.S. Dollar as a reserve currency. (But we don't.)

    "It's high time (and then some) that we put an end to the exceptionalistic nonsense floating around in our culture and face the fact that either the economy works for all, or it doesn't work AT all." -- Sean McCullough (DailyKos user thanatokephaloides)

    by thanatokephaloides on Sun May 25, 2014 at 06:37:53 PM PDT

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    •  They have been paying (10+ / 0-)

      See my comment below about exchange rates. Other governments are paying the USA to hold dollars because the value of them in their own currency has gone down. In the case of the UK, the dollar gets you around 11% fewer pounds than it did a year ago (or put another way, this August there will be more British and EU tourists in the USA taking advantage of the cheaper vacations on offer)

      "Come to Sochi, visit the gay clubs and play with the bears" - NOT a Russian advertising slogan.

      by Lib Dem FoP on Sun May 25, 2014 at 08:05:07 PM PDT

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    •  Wrong (4+ / 0-)
      Recommended by:
      katiec, trkingmomoe, OllieGarkey, Bluefin

      The IOUs are in fact the backing for every Federal Reserve Note in circulation, which is over 95% of the US currency in circulation. (The remainder are coins; United States Notes, which are IOUs directly from the US Treasury; and some old currencies no longer issued.)

      The alternative would be to return to a metallic standard, which would be catastrophic.

      •  And even in the case of metals, the metal is (2+ / 0-)
        Recommended by:
        trkingmomoe, OllieGarkey

        a commodity.

        The money is the stamp.

        •  See, that's the thing. (3+ / 0-)
          Recommended by:
          katiec, ozsea1, charliehall2

          Gold was valuable because it was:

          A)Rare
          B)Pretty
          C)Completely useless in an industrial sense.
          D)Damnably difficult to get out of the ground and refine.

          Gold was not a commodity, it was pure wealth.

          Now, gold is used in electronics as a major commodity. It has industrial uses as an excellent conductor. It's not really surprising that as the electronic age dawned, everyone abandoned the gold standard.

          There is no useless, pretty, rare substance we can switch to. Everything has some kind of industrial use or industrial value. There's no such thing as a valuable non-commodity anymore.

          Hell, even bitcoins are a commodity, NOT a currency.

          An Fhirinn an aghaidh an t'Saoghail.

          by OllieGarkey on Mon May 26, 2014 at 10:00:01 AM PDT

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          •  True, except: The money value of gold (1+ / 0-)
            Recommended by:
            OllieGarkey

            was the stamp.

            Though I think you agree with this.

            I'm not sure what bitcoins are, haven't made up my mind yet.

            If they're money, then their liability side seems to be booked in a computer program which is the bitcoin issuer :)

            •  The money value of gold (1+ / 0-)
              Recommended by:
              charliehall2

              was NOT the stamp. It never was.

              "The oppressors most powerful weapon is the mind of the oppressed." - Stephen Biko

              by gjohnsit on Mon May 26, 2014 at 10:35:33 AM PDT

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              •  Well, except for one thing. (1+ / 0-)
                Recommended by:
                boran2

                If someone handed you a Guinea, or a Florin, or whatever the coin was, you trusted the stamped value of the coin.

                If someone just had gold bullion, you'd need to weigh it. While the price of gold still fluctuated, a guinea was a guinea, with a set weight. And it was the stamp on the gold that guaranteed it's weight and value.

                Yeah, the price of gold fluctuated back then just like the value of the dollar fluctuates today.

                But not as catastrophically as gold does today as an industrial commodity.

                An Fhirinn an aghaidh an t'Saoghail.

                by OllieGarkey on Mon May 26, 2014 at 11:41:45 AM PDT

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          •  What is "pure wealth"? That sounds rather like (0+ / 0-)

            neo-Platonic mysticism to me. Gold is and was a commodity like anything else. If you mean that it wasn't consumed in any significant way, then Bitcoins fit that. They are produced at a set rate (which is built into the software and can't be tampered with, at least by design) and there is no obvious incentive to destroy them (though one can). However, the fact that gold did and Bitcoins do tend not to be destroyed or consumed does not alter the fact that they can be, e.g., hoarded then dumped to effectively take money from other Bitcoin/gold holders when this is done in conjunction with other financial instruments. That kind of instability, which unmanaged currencies necessarily facilitate, is why the gold standard was abandoned. It happened well before gold was used routinely and in large quantities for mass-produced electronics, in the 1910s and 30s.

            •  I'll take your points one by one. (0+ / 0-)
              What is "pure wealth"? That sounds rather like neo-Platonic mysticism to me.
              It was simply an expression, not a technical term. Please don't read into it like you're doing, because I wasn't making any allusions to platonic theory.

              I meant to say simply that gold was valuable but useless. Hence, it was a good placeholder for wealth before the creation of fractional reserve banking. (A system which only works well with a tightly controlled, intelligently supervised central bank, and punitively strict regulation, but still works better than wildcat banking of the early modern or cryptocurrency variety.)

              You and I don't disagree on hoarding. I'll simply say that as a product which is mined rather than issued by a central authority, as a placeholder for wealth which has no backing from an issuing agency, by definition, Bitcoins are a commodity, rather than a currency. They're like wheat which is grown or gold which is mined. That they are useless makes them quite similar to the old gold standard. The problem with them is that they require greater and greater amounts of electricity to create, which would make them naturally deflationary as a currency. They're a good "get rich quick" scheme for the folks who build a mining rig early on and get all the easily accessed coins. But once you reach a certain level of complexity, their energy costs make them an environmentally damaging product.

              If you mean that it wasn't consumed in any significant way, then Bitcoins fit that.
              Yes. That's exactly what I meant. But gold did become a consumer product in the gilded age, which led to even more instability. The rise of electronics in the early part of the 20th century was pretty much the death-knell of gold as a stable but industrially useless commodity.
              It happened well before gold was used routinely and in large quantities for mass-produced electronics, in the 1910s and 30s.
              Like I said, as the electronic age dawned, we abandoned the gold standard. I didn't say the information age.

              Punch card systems, cryptography, laboratory instruments, early computers like the ones we put on battleships in the 40's, it was the rise of modern industry that started using gold, which caused those major instabilities. As well as advances in mining technology.

              An Fhirinn an aghaidh an t'Saoghail.

              by OllieGarkey on Mon May 26, 2014 at 11:52:57 AM PDT

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