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22 March 2014

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MRW

"Perhaps some Bitcom like creature of technology eventually?"

All US currency currently, with the exception of 11% that is doled out in physical cash and coins as the citizens' walking around money, is electronic. Has been since 1971. Not even treasury securities with their coupons are printed up anymore. Social security checks were abandoned last year; they're 100% electronic now.

US currency is a spreadsheet item.

MRW

Upper and Lower Canada were created in 1791.

turcopolier

MRW

Yes. SWMBO is obsessed with the genealogy of the Canadian lines in my ancestry. My French ancestors had been in the St Lawrence Valley and in the western places in the present US and Rockies since the 1630s. I am a descendant of "les premiers" as the French call them. My Anglo Canadian ancestors arrived in SE Quebec around 1800 from New England. My wife explains that the separation of Upper and Lower Canada was occasioned by the unwillingness of the French majority members of the previous form of government's parliament's to cooperate with British attempts to tax them. pl

Norbert M Salamon

This would work if and only if a large part of the debt was not held outside of USA due to the US is/was running continuously [for at least 30 years] a negative balance of trade.

As pointed out above, destruction of the petro dollar either bankrupts the USA or creates the greatest austerity the world has known - lacking in most natural resources sans food [no phosphate fertilizer for agro business] and coal. your oil/gas is to a large extent imported there is no possibility for self sufficiency in these two resources within the 50 states.

Babak Makkinejad

I think you are perhaps unaware of the great chasm that exists between laboratory medicine and effective, commercially available medical drugs and procedures.

New drugs are developed with specific animal models - usually genetically modified strains - and then validated through 2 other steps in clinical trials.

These 2 steps are where the drug companies spend large sums of money; often ending in failures - either drugs are ineffective in humans or they have deadly side effects.

And what motivates all this risk-taking is the profit motive.

I personally doubt that there would be a large appetite in a democratic system for this type of expenditures: the plebs would be clamoring for more bread and more circus rather than risky undertakings.

William R. Cumming

Highlander! The 2028 Presidential election will be about this issue after it is discovered that no one in the US Federal Reserve was accountable
to anyone for anything over its history.

William R. Cumming

MRW! Agree and bits and bytes tough to regulate!

William R. Cumming

Thanks nick b!

William R. Cumming

NMS! Agree! And 58-60 dialects in China.

William R. Cumming

PL! Again set Quebec free so North Americans can have a civilized place to eat, and play!

kao_hsien_chih

Not to mention a lot of "debt" is held by US gov't entities themselves (although that makes the Social Security situation a lot more peculiar than people think--the Social Security Administration is the biggest holder of US Debt, by far, due to the reforms introduced in 1980s which theoretically has made Social Security solvent forever...assuming that the USG honors its "debt" to its own retirees. All the so-called reforms of social security is trickery designed to absolve the gov't of not honoring this debt.)

MRW

"I too believe the dollar will eventually lose its reserve currency status."

What do you base that belief on?

US Treasury auctions of treasury securities (the majority of US Money) sell out in nanoseconds. There are always more buyers than treasury securities available. The world hungers for the safety of the US dollar. The world doesn't pay a "Roman tax." We float our currency, which means it isn't fixed to another currency or metal; we are beholden to no one. All this is perfectly transparent.

The only reason why we really issue treasury securities is because of a leftover law from the gold standard days. The US federal government, by law, is not allowed to have a negative balance in its general account at the Fed (that's the leftover from gold standard days part).

So, when Congress appropriates something or other, say five new airports for $200 billion, the US Treasury, honoring the constitutional legal duty of Congress to do this, marks its Federal Reserve general account up by $200 billion by keystroke, and orders the Federal Reserve to pay the vendors from its general account by crediting the vendor's bank accounts. This results in a $200 billion add, then subtract, from the general account. Let's say, to make this explanation easy, that the 'subtract' results in a $200 billion overdraft in the US Treasury general account.

What the US Treasury does NEXT is issue treasury securities in the amount of $200 billion to balance the increase in the money supply. This happens every month.

So the government spends first, then issues treasury securities. or, put another way, the government spends first, then--here it comes--'borrows' by issuing treasury securities.

But it really isn't 'borrowing'. The term 'borrowing' is an unfortunate nomenclature that derives from the double-entry accounting terminology. (What the US Treasury is doing is issuing currency.)

Every person, household, firm, foreign government or foreign bank that has more than the *federal* FDIC insurance limit of $250,000 in its savings account wants treasury securities to reduce risk. The safest risk-free financial asset in the world is US treasury securities, because they are backed by the full faith and credit of the US Government.

So, maybe some day we might not be the world’s reserve currency. Big whoop. As long as the US federal government can issue currency in its own currency to pay its own debts, who gives a damn? The Japanese Yen is not the world’s reserve currency, but it can denominate its own debts in its own currency, and it has one of the strongest currencies in the world. The bond vigilantes can’t touch Japan. Ditto Canada, Australia, and Great Britain (although David Cameron does not understand how this works so he is currently impoverishing his people the way our village idiots Obama and Jack Lew are…jeezuss, they’re stupid).

The only thing you have to worry about in the US is the ‘balanced budget’ nonsense. The moment you hear that you can count on two things: (1) the politician doesn’t have a clue what he’s talking about, and (2) say hello to our leetle friend recession.

There have been seven times in our 225-year history when the federal government budget was balanced or in surplus. Each time produced a depression. The Clinton surplus was delayed by the dot com and housing bubbles, but it happened in Sept, 2008. And guess who produced the Balanced Budget Act of 1997? None other then the odious jackass Jack Lew.

Take a look at this. Notice how the government deficits equal the private sector surpluses to the penny. Per Bloomberg, the last time a government surplus like the one that happened under Clinton appeared was 1927-1930.
http://postimg.org/image/d5lzdeufz/

Babak Makkinejad

Does Germany have coal reserves for these coal-burning plants or the coal for them would be imported - just like now - from Russia?

Do you know?

Matthew

NMS: Despite historically bad treatment, very few American blacks ever left the country. Do you have an explanation?

I think immigration rates are the ultimate bs detectors. When people find a situation intolerable, they leave. The Great Republic has been--and still is--the world's best people magnet. I take great pride and solace in that.

MRW

Joual (French Canadian dialect): "Eh bain-là, c'est la même chose aujourd'hui." lol. Aren't you also Irish, or some Celtic kin? There's no more peppery (and dangerous) fighting type than a French Canadian/Irish or Scottish mix.

MRW

I didn't see this Thomas post when it was a comment. I think it's intelligent.

turcopolier

MRW

By majority of blood: French Canadian, Irish, Scottish Highlander (Catholic), English puritan and German with a trace of Amerindian in the mid 18th Century. pl

William R. Cumming

MRW! YUP!

William R. Cumming

Matthew! They come for the freedom to eat all they want and spoil their children IMO!

walrus

Babak, I've worked with the field in building start-up medical companies and I think you are partially correct.

Most breakthroughs come from publicly funded research, we then build a start up company funded by venture capital to get through to phase Two trials usuallly held in Australia or the country of invention.

It is only for phase Three trials that we then go to Big Pharma in the USA, not because they have any expertise in basic research, but because they have the ability to design and fund phase Three, manage the FDA approval process manufacture under GMP and then take the drug to world markets.

As for innovation, it has no home in the USA, it appears everywhere and anywhere. What America does have second to none expertise in is commercialisation of the idea.

On that note, the militarisation of America, the hatred of muslims and obnoxious foreign policies mean that there will be fewer projects brought to American shores then there should be.

MRW

No US debt (money) is held outside the USA. By law. Period. Can't happen, does not happen, except for the actual 11% physical cash that is created for walking around money. All foreign bank US dollar accounts are at the NYC Federal Reserve.

Let's say that Walmart wants to buy 10 million tires from China for $5/ea. Walmart wires the $50 million to the Chinese bank in US$. The way the settlement system works is that the $50 million gets sent to the Federal Reserve (FedWire).

Now, the Federal Reserve has two types of bank accounts, just like your bank: checking and savings, but they are called something else. Let me keep checking and savings to keep it simple.

Walmart wires $50 million to the Chinese bank. It goes into the Chinese bank's checking account at the Federal Reserve.

The Chinese bank then has three choices:
(1) Exchange the US$ into Yuan and wire it home.
(2) Leave it in checking, and earn basically zip. (Only after the 9/2008 financial crisis did the Federal Reserve offer 25 basis points--0.25%--on cash in Federal Reserve checking accounts.)
(3) Buy a US federal government CD--called a treasury security-- and earn interest depending on whether it was a bill, note, or bond. (Bills mature in less than a year, notes mature 2-10 years, bonds mature 10-30 years.)

The Chinese bank chooses (3).

The Chinese bank tells the Federal Reserve to move the US$50 million in its checking account to its savings account so it can buy US$50 million in US treasury securities at auction and earn interest.

When the treasury security comes due, China tells the Federal Reserve to cash it in, and put the principal and interest in my savings account back in my checking account.
================

The action of going from China's savings account to its checking account is called "Paying Off The National Debt."
================

When you or I cash in our CDs at our local bank, we call it 'cashing in our CD'. We don't call it 'Paying off Wells Fargo Bank's debt' but technically that is what WELLS FARGO, say, IS DOING, because the bank owes us that money.
================

Even if China were to select option (1), the money never leaves the USA. The person or outfit that the Chinese bank used to exchange Dollars for Yuan would have the US dollars. Those dollars never leave the USA. BY LAW.
================

BTW, the Federal Reserve checking account is called a reserve account. A Federal Reserve savings account is called a securities account.

MRW

The US government can afford to pay its retirees anything the US people designate without any debt being incurred by anyone's children or grandchildren. There is no Social Security and Medicare crisis. Period.

What happened in 1983 was bank lobbyist Alan Greenspan instituting a user fee for everyone earning under $110G to $125Gs, hoping that they would rebel and want to dismantle Social Security, handing over their retirement cash to Wall Street. Greenspan was working for Wall Street when he did that. The people didn't revolt, so the regressive FICA tax survived.

MRW

Agree, walrus.

MRW

They're digging the coal up domestically. Don't know about getting the extra from West Virginia. I would research now, but need to get to a Sunday barbecue and I'm late. Everyone is mad at me, so gotta' run.

MRW

So, centuries of saying 'don't piss me off'.

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