Social Question

Darbio16's avatar

Why does the U.S. Government do this!

Asked by Darbio16 (767 points ) August 26th, 2009

Our government borrows money at interest even though it can print its own interest free money? Did you see the 1–800 Safe Auto commercials? One such commercial displayed a man in a lab coat going over some complex calculations on the chalkboard. He said that it doesn’t take a rocket scientist to figure out that by cutting out the middle man you save money.

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42 Answers

evelyns_pet_zebra's avatar

Removed by Fluther Moderators

PerryDolia's avatar

Are you kidding? Why should we do anything about it? We are the recipients of the money that we owe and will never have to pay back.

Don’t shake the table or we will all be cowering in our houses defending the last of our food.

I say, look the other way, baby. Keep taking the money.

wundayatta's avatar

I agree with @PerryDolia. This is a nice explanation of how it works, but you don’t say why this is a problem. What’s wrong with borrowing or lending money? Why should companies and banks get money for free? What difference does it make who manages the money supply, so long as it is the right money supply (inducing neither inflation nor deflation)? What does gold have to do with it, anyway?

CMaz's avatar

“What’s wrong with borrowing or lending money?”
Neither a borrower nor a lender be…

The problem is that the lender ends up taking advantage of the borrower.
Taking control of their life and preventing them from owning nothing and never getting out of debt.
As is the case of our country and the Federal reserve.

scamp's avatar

In this scenario, it’s hard to know who is Peter and who is Paul!

dalepetrie's avatar

In my opinion as an Accountant, I would say that a certain amount of debt is acceptable. I’m not too concerned honestly with collateralized debt, which is what this is, realistically with the price of gold tied to the world market, that means if our dollar is in higher circulation and worth less, usually expressed in terms of our dollars, gold is going to be worth more. As long as we are able to retain enough gold to collateralize our debt to the Federal Reserve, the debt is essentially paid for. We could buy this currency with gold instead, but what the Fed really is, even though they are a private bank, they are a quasi-governmental organization…they exist for the purpose of printing our money, and much like other areas of the government which are outsourced, this is no different. But it has worked for many, many years. The debt to the Fed is not ever going to come due unless our entire monetary system collapses, in which case the gold will be taken and sold on the world market, the Fed will be fine, but our government will lose its money printing house, which won’t matter because our money will be worthless.

The debt I’m worried about is the foreign debt. Essentially, we sell T-Bills to China, and if China ever stops buying these T-Bills, we’re screwed…something they will do if our level of debt with them and other foreign entities gets too high. Right now, the government is in the same situation as most Americans…as long as it keeps making its minimum payments, it’s fine, BUT if they’re ever called upon to make good on one of their debts in full, or if they run out of credit, they’re screwed, and as such, we’re screwed. The big problem is, if we have a system of continually increasing unemployment rates, and people become so disenfranchised they follow a false prophet, that’s going to tip the whole house of cards in the perspective of foreign governments and it all comes crashing down.

Just like any house of cards, if you want to take it apart piece by piece rather than see it all collapse in a big heap, you have to be VERY careful. And that means that the government needs to begin serving the needs of individuals and no longer the needs of corporations. Consider FISA….the Democrats were in the majority in Congress, yet they gave the telephone companies what they wanted…carte blanche to spy on Americans, because they had $15 million to throw into lobbying efforts. And look at health care reform…private insurance companies and the pharmaceutical industry are spending $14 million a DAY to block reform that would serve the people and not the businesses.

I think one of the first steps needs to be election reforms, something along the lines of Instant Runoff Voting, combined with a publicly financed election system. Yes, it would cost more money in the short term, but if the people could break the back of the two party system, now that not only the Republicans but a growing number of Democrats are in the pockets of special interests, we could actually get back to a Representative Democracy where the people we hire to represent US, actually DO represent us.

Another VERY important step is to stop acting as the world’s police force. We spend over 700 billion a year on military defense (which failed the one time we actually needed it to protect us against a hostile attack), the next largest amount spent by any country on the planet is China which spends less than 60 billion. There is no NEED for this much money pissed away…you bring our military spending in line with other countries and you have our national debt paid off in a couple decades, then the collateralized debt to the Fed is all we have.

Furthermore, so much of our military spending is used to prop up private businesses like Halliburton. We need to stop the waste. We spent for example $100 million to retrofit a fleet of battle ships to make them each 10 feet longer, when they were done, the company essentially destroyed them, they were no longer seaworthy because of structural instability and needed to be retired. So the original cost of the ships plus $100 million we spent on them was just thrown away, we didn’t even request accountability from the company which received the no bid contract. Our government doesn’t look for value for its money, it doesn’t ask for accountability for anything, it needs to negotiate (instead of say refusing to let Medicare negotiate drug costs with big Pharma like Canada does to achieve a 40% savings). The government has all this leverage it is not using, and we need to insist upon getting value for every dollar we spend.

But of course, that’s a vicious cycle because as soon as we do that, the companies that make all this money off our government’s blind eye will spend whatever it takes to stay on the gravy train, which is why we need publicly financed elections and IRV. Essentially we need to end corporate welfare. Our government gives so much in tax breaks, tax incentives and no bid contracts to businesses which don’t do ANYTHING to look out for the common good, but which are only betrothed to the shareholders, bound to make the maximum profit by any means necessary, that we could probably wipe out our national debt in just a couple years if we were to end these practices.

Now I believe in Capitalism, but unfettered Capitalism with no regulations, which is pumped up by government expenditures is NOT a good thing…it is what has gotten us to where we are, and it’s going to destroy us if we don’t do anything about it. But we give this money to the corporations which can survive just fine without it (they just wouldn’t be able to pay 8 figure compensation packages to their CEOs), instead of using it to serve the public good. Instead of taking a trillion dollars and doing something to help the millions of people who lost their homes, their retirement savings, etc., we gave it to the people who caused the problems in the first place so they could pay 8, sometimes 9 figure payouts to their CEOs who were more responsible for the problems than anyone, when they’re on their way out the door and of no more use to the company. If a trillion dollars were instead invested to keep people in their homes and in their jobs, we would recoup this through increased tax revenues.

Now re taxes, you can’t compare the first 137 years of our government to today, nor were those days exactly the halcyon good old days for the common man who worked a lot harder for a lot more hours, had a far lower standard of living and died at a much younger age. Our government is supposed to be of by and for the people, but we only seem to have been able to achieve that between FDR and LBJ, a time when tax collections on the highest earners were MUCH higher than they are now, a time when our social safety net was strong, a time when poverty was a rarity (it’s estimated that 50 million Americans go hungry, and that 16 million of those live in what is considered poverty), and when our wages were the envy of the world. This was a time when we manufactured the things we need. In Minnesota alone, our transportation budgetary needs over the next 20 years will outstrip our budget by 50 billion dollars. We have crumbling roads and mass transit efforts are grossly underfunded. A good contrast, when the NYC subway system took bids to build something like 80 new cars, they did not receive a single bid from a US company. We had to send that money overseas to build something for Americans. Yet, China opens a new subway line every single year with cars built right there in China.

What needs to happen is this. We need to spend money to repair our schools (⅓ of which are in so bad a state of disrepair that it interferes with learning), we need to spend money to give a hand up to people who don’t have enough…by raising the minimum wage to above poverty level, by adjusting the tax rates so they are borne by the people and companies which can afford to pay them, and by giving those who are trying but falling through the cracks a hand up. We could do ALL of this and more if we ended corporate welfare and spent just what we need for national defense (rather than have active military bases in 77 countries).

Basically, we can’t keep giving money away to the corporations. A corporate CEO who tried to run a company while paying its employees a fair wage, obeying all environmental laws, paying its due share of taxes and basically being a responsible corporate citizen, could be JAILED by its Board of Directors for not doing what corporations are bound by LAW to do…return maximum value to the shareholder. Since a corporation is a fictitious person, it is given all the rights of a person, but lacking a body and soul, it is not subject to the same type of criminal liability that a person would be. This means that if there is a choice between doing the right thing and losing money, and doing the wrong thing and making money, even if the wrong thing breaks the law, the CEO would be in more danger of going to jail if he did the right thing than the wrong thing.

So, we need to require a results based pay structure for our CEOs. And we need to collect taxes from the right people. If we’d stop allowing companies (like Haliburton which for all the billions in no bid contracts it gets from the government) to avoid tax liability by setting up companies in countries with no tax, if we’d stop taxing things like capital gains (where most of the money made in this country is made, despite no actual work being done to earn it) at 15%, the same rate you pay if you make 30 grand a year (and work 80 hours a week to do it), if we’d institute a tax system which essentially said that first we’re going to collect what we need, instead of looking at the revenue side FIRST, and setting a tax rate that didn’t kick in until after a person made so much money, then was just progressive enough after that to offset the effect of all the regressive taxes we pay now, ensuring that everyone (including corporations which are after all fictitious people) pays the same percentage of overall tax on their discretionary income, whatever that rate might need to be in order to do all the things our government SHOULD do FOR the people, eventually we would be flush with cash.

As we put people to work, and raised up their standard of living, more people would have more money to buy more goods and services, which they would do. This would spur demand which would spur a need for greater supply, which would spur job creation. Which would put more people to work. They would pay more taxes and buy more things, creating more jobs and so on. IF we invested in our people, instead of in our corporations, we’d have everything we needed to get out of debt forever, no one would have to live in poverty and we’d kick ourselves for not doing it sooner.

rebbel's avatar

In case you wondered: that were 1977 words.
Lurve just for that.

eponymoushipster's avatar

Why do you keep posting your political views, in the guise of a question? at least have the wherewithall to use a question mark instead of an exclamation point.

start a blog if you want to grandstand.

ubersiren's avatar

It’s ok to borrow as long as you can pay back, and it’s ok to lend as long as you investigate your client and conclude that you will be paid back. The US gov’t is apparently good at neither.

It is not ok to just print money at will because it decreases the value of the dollar. The US gov’t is guilty of this, too.

dpworkin's avatar

This isn’t a question, it’s just trollbait, and we’ve had the same tedious conversation about the Fed and the money supply over and over. Quit being disingenuous, all you are doing is spamming us with your antedeluvian 19th Century nostalgic conspiracy crapola. We get it, already.

Poor @dalepetrie took you seriously enough to do all that work for nothing.

Yahoo has these cool chatrooms, and you can make one on this topic and rule it like a monarch. Why not go do that, and let us enjoy Fluther?

Bri_L's avatar

I would like to suggest this pamphlet for part of the country.

Don’t Buy Stuff You Can’t Afford.

avvooooooo's avatar

Gold, not money. There is an essential difference in gold and money. Gold is inherently valuable, money is worthless unless there’s gold to back it up. We place a value on money based on how much gold its worth. The government borrows “gold,” essentially gold vouchers, to back up the money thats’ already printed.

Printing more money with the same amount of gold just makes the money worth less. Just like if you get more potatoes to make your plate look fuller because there’s not a lot of steak on it, it doesn’t change the fact that there’s only so much steak on there. And the fact that its got potatoes all around it overwhelms the steak completely.

dpworkin's avatar

@avvooooooo Join the 21st Century. Nixon took us off the Gold Standard 45 years ago. Take an economics class, do something, just please don’t post this ignorant crap.

The_Compassionate_Heretic's avatar

[Mod Says] Let’s keep it civil please.

avvooooooo's avatar

Excuse me. Money is still intrinsically worthless and only has value because of that we place in it and on it.

dpworkin's avatar

@avvooooooo To be as civil as possible, a great deal has been written, studied and learned about economics in institutions of advanced learning such as the London School, Chicago University, Harvard and Berkley. These monographs are available to you through inter-library loan services, and perhaps even Google Scholar.

You repeat the same themes over and over, but they are backed by very little knowledge and are full of antiquated ideas subscribed to by no one who understands 21st Century economic theory.

For that reason, it is very difficult to take your posts, and those of your crime partner @Darbio16 seriously. They echo the rantings of a fringe group of right-wing loons, and really have no place in a reasoned discussion of these issues by knowledgeable people.

If you are interested, I could direct you to some current thinking on the subject, but I fear you would not benefit, as you seem to be rather close minded on the subject.

At any rate, we have all seen your opinions, we all understand them, and there is no good reason I can think of for you to repeat them, unless you can back them up with some scholarly citations.

eponymoushipster's avatar

you think this is an issue? pfft. try finding somewhere that still takes wampum. damn near impossible.

avvooooooo's avatar

@pdworkin FYI, since you seem to be lacking both information and common sense, I have never, ever posted anything on a question of @Darbio16. Ever. To call him my “crime partner” is ignorant in the extreme.

You know nothing about me more than what I wrote in one comment because I haven’t posted on this topic before. Nor have I engaged in more than four political discussions on this site over my entire time here. Your claim to know my opinions is ABSURD. There is nothing “right wing” about my thinking which you would know if you had actually seen comments from me in the past on anything remotely political. You are making assumptions based on who knows what and coming up with something that make no sense at all.

You are the only one close minded in the exchange we’re having. You have made up your mind about who I am, what I believe, what I represent, and many other things based on two comments. And you’re calling me close minded. Astounding.

Not exactly a scholarly definition, but a working one. Definition of Fiat Money. Basically, “Fiat money is money that is intrinsically useless; is used only as a medium of exchange.” Which is almost exactly what I said in the above comment.

dpworkin's avatar

Thank you for your thoughtful and illuminating reply, @avvooooooo

Darbio16's avatar

In an earlier question I asked “Who believes that the President and Congress are just puppets for the people really running the show?”@pdworkin answered “Who doesn’t? Fourth graders?”

We talk on here all day about corporate greed. The Fed charging to do what Congress can do free. Low wages and high taxes. Anyone remember Iran Contra? How about the bay of pigs? Actions of a covert side of the government. Most, however, fail to connect the many dots laid before us in order to see a broader picture. One that can only be seen with reason rather than rhetoric. Obviously the education system doesn’t really progress much after fourth grade.

avvooooooo's avatar

@pdworkin Please let me know when you’re in need of further illumination. Also when you’re in need of actual information so you can use that instead of making nonsense assumptions.

You know what they say about people who assume.

elchoopanebre's avatar

Don’t mind me, guys, I’m just here for the fireworks…

NowWhat's avatar

@eponymoushipster That Glenn Beck comment was quite a compliment to Darbio. Anyhow, he’s right. Cutting out the middle man would save us a lot of money and help us in the long run.

Zuma's avatar

I’m sorry, I have to agree with @pdworkin that there is nothing sinister about the government issuing T-bills to borrow money at interest. This is what all central banks do to insure the liquidity of their economies, and it is all well covered in mainstream economic texts.

Usually, agitating for a return to the gold standard is an ultra-conservative hobby horse, since it tends to favor monied interests; it therefore puzzles me when it comes from someone who claims to be an anti-fascist.

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Darbio16's avatar

Did you look at the link?

Darbio16's avatar

Do I have to pay people to free them too?

avvooooooo's avatar

@MontyZuma There are two people you seem to be addressing as one person… or not? Very confusing.

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augustlan's avatar

[mod says] Flame off, people! Personal attacks are not permitted, and have been removed.

Zuma's avatar

@avvooooooo I was addressing the question, which was asked by Darbio16.

@Darbio16 While you did not mention gold per se, you didn’t have to. When people object to fiat money, it is because they advocate species money, and gold (as opposed to oil) is the only species commodity we have to back our currency.

The link you cite is loaded with nonsense and double talk. What in the world is an “inflationary depression”? Is it anything like expansionary contraction, or frictionless sex? The only inflation we’ve had in the past few years has been energy-led inflation as the price of oil has pushed up the prices of everything that uses energy or oil. Other than that there has been a downward pressure on prices as people who get laid off can’t afford to buy things and the people who sell them lower the prices just to keep in business.

The link says that the US is masking inflation by fudging the CPI? Not really. When there is inflation everyone can see it in rapidly rising prices, this creates an inflationary psychology which feeds the inflationary spiral—none of which is evident in the present economy. On the contrary, there have been severe contractions in the present economy. People are saving, which is the exact opposite of what people do in an inflationary economy. Something like two trillion dollars vanished from a 13 trillion dollar stock market last year, a very sudden contraction of the monitarized wealth of the country. For the Fed to create money to offset that contraction in order to provide liquidity and restore confidence is nothing nefarious.

The article notes that the US is $62 trillion in debt “with no way to pay it off,” therefore, the article concludes the country is “bankrupt.” Well, not so. We have a $13 trillion GDP (income); so the debt is roughly 5 times our annual national earnings, which we can easily pay off in the 10, 20, 30 years our mortgages and other securities are amortized over. If I earn $60,000 a year and have a $400,000 mortgage am I bankrupt? No. And neither is the country. The article is just filled with nonsense like that.

dpworkin's avatar

Thanks, @MontyZuma You seem to have the patience that I would be better off with. GA.

Fernspider's avatar

Whoa! This looked like it got excitable… awwww, I love a good drama lol… too bad I missed the fireworks! Hee hee

Pazza's avatar

So, all the gold is in the fort knox right?........

We sold most of our gold with cracks in it!........

PacificRimjob's avatar

Seriously, how old are you?

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