“When people talk about the United States going bankrupt, it’s nonsense. As long as we issue debt in our own currency, the only thing we have to worry about is the printing presses breaking down.”
“People should always distinguish between debt issued in your own currency and debt issued in someone else’s.”
(yet eve Buffet is a deficit hawk; go figure!)
roger ericksonOct 27, 2010 @ 18:43
Rick,
There’s one glaring oddity in your statements. Fed govs from Marriner Eccles to Bernanke have all acknowledged that the issuer of a fiat currency cannot default on debts denominated in it’s own currency. So the US cannot, of course, go bankrupt. You seem to be conflating two concepts:
1) currency issuers manage real goods budgets (& use currency ONLY as internal bookkeeping)
2) currency USERS manage a currency budget as a reliable proxy for THEIR real goods budgets
Splitting hairs here, aren’t we? I can’t think of any instance in history where a sovereign issuer of currency said, simply, “We default!” But there are many instances where sovereign debts were discharged/reduced through the mechanism of hyperinflation/inflation. Anyway, since the U.S. is bankrupt, how can there not be a — call-it-whatever-you-want — default? Bottom line, our creditors are simply not going to get paid — at least not in hard money. RA
ps: A coincidence concerning Marshall Auerbach. When I met him for the first time last year, we discovered that we had in common an address on Texas Street in San Francisco where we had both lived.
fallingmanOct 26, 2010 @ 18:37
Really good interview. For what it’s worth…I think the most salient observation here is that when the system implodes, it’s going to happen in an instant, figuratively speaking. That means the “lessons” learned from the 30’s and the 70’s will mislead us as we try to fight the last war.
One’s bets will have to be placed / money “insurance” gold/silver) purchased before people come to the realization … all at once in a kind of allelomimetic way (like birds in flight or fish in the sea changing course in unison) … that the ship has already struck the iceberg, there’s a huge gash in the side and the unsinkable vessel is about to actually sink.
C.C.Oct 25, 2010 @ 17:20
Great interview Rick –
And you are 100% correct about Peter Schiff – this is where he Indeed had it ‘right’. Anyone with modicum of logic and clear thought could see something was wrong with the housing ‘bubble’ and the downstream hyper-consumerism that it created from the false ‘wealth’ effect.
Where Schiff really had it right though, is when he spoke of the ‘worst of both worlds’ – where in the end, we would have crashing asset prices, combined with high unemployment and high prices for necessities. Of course, this scenario too was scoffed at as ‘doomsday/kook’ rambling.
As the focus ring on the camera begins to dial in however, we can now begin to see more clearly that his prediction of this ‘worst-case’ scenario is in fact what’s in store. In other words, when it’s bad – it’s really bad.
Comments on this entry are closed.
even Buffet seems to grasp this
http://money.cnn.com/video/news/2010/10/05/n_buffett_MPW.fortune/
“When people talk about the United States going bankrupt, it’s nonsense. As long as we issue debt in our own currency, the only thing we have to worry about is the printing presses breaking down.”
“People should always distinguish between debt issued in your own currency and debt issued in someone else’s.”
(yet eve Buffet is a deficit hawk; go figure!)
Rick,
There’s one glaring oddity in your statements. Fed govs from Marriner Eccles to Bernanke have all acknowledged that the issuer of a fiat currency cannot default on debts denominated in it’s own currency. So the US cannot, of course, go bankrupt. You seem to be conflating two concepts:
1) currency issuers manage real goods budgets (& use currency ONLY as internal bookkeeping)
2) currency USERS manage a currency budget as a reliable proxy for THEIR real goods budgets
The two are NOT the same thing.
just one example:
http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3629
http://moslereconomics.com/2009/12/10/7-deadly-innocent-frauds/
http://bilbo.economicoutlook.net/blog/?p=12089
http://neweconomicperspectives.blogspot.com/2010/10/are-there-spending-constraints-on.html
Marshall Auerbach, your neighbor in Denver
http://watch.bnn.ca/#clip364696
Specious Arguments Against a Bank Holiday
William K. Black and L. Randall Wray
http://neweconomicperspectives.blogspot.com/2010/10/specious-arguments-against-bank-holiday.html
&&&&&&&
Splitting hairs here, aren’t we? I can’t think of any instance in history where a sovereign issuer of currency said, simply, “We default!” But there are many instances where sovereign debts were discharged/reduced through the mechanism of hyperinflation/inflation. Anyway, since the U.S. is bankrupt, how can there not be a — call-it-whatever-you-want — default? Bottom line, our creditors are simply not going to get paid — at least not in hard money. RA
ps: A coincidence concerning Marshall Auerbach. When I met him for the first time last year, we discovered that we had in common an address on Texas Street in San Francisco where we had both lived.
Really good interview. For what it’s worth…I think the most salient observation here is that when the system implodes, it’s going to happen in an instant, figuratively speaking. That means the “lessons” learned from the 30’s and the 70’s will mislead us as we try to fight the last war.
One’s bets will have to be placed / money “insurance” gold/silver) purchased before people come to the realization … all at once in a kind of allelomimetic way (like birds in flight or fish in the sea changing course in unison) … that the ship has already struck the iceberg, there’s a huge gash in the side and the unsinkable vessel is about to actually sink.
Great interview Rick –
And you are 100% correct about Peter Schiff – this is where he Indeed had it ‘right’. Anyone with modicum of logic and clear thought could see something was wrong with the housing ‘bubble’ and the downstream hyper-consumerism that it created from the false ‘wealth’ effect.
Where Schiff really had it right though, is when he spoke of the ‘worst of both worlds’ – where in the end, we would have crashing asset prices, combined with high unemployment and high prices for necessities. Of course, this scenario too was scoffed at as ‘doomsday/kook’ rambling.
As the focus ring on the camera begins to dial in however, we can now begin to see more clearly that his prediction of this ‘worst-case’ scenario is in fact what’s in store. In other words, when it’s bad – it’s really bad.