If the debt ceiling isn't raised, we'll see interest rates start soaring and the market start collapsing. It could trigger a financial panic. The market will quantify the cost of crazy.
Hi and thanks. It would lead to rates rising day after day as long as the ceiling isn't raised. The stock market would tank. It could trigger a financial panic. As we've seen, they are easy to trigger.
I really value these "riddles." I always cheat but find the answers informative and well worth knowing. Thanks and keep offering us more of them. I echo Howier's question about your thoughts on a possible GOP debt ceiling crisis.
Insightful information as always, thanks Larry. Looking for your thoughts on potential debt ceiling issues with GOP house. If extraordinary measures run out and there is no agreement what market reactions do you see occurring ? Thanks
I started investing in TIPS, I-bonds and treasuries this year. Currently I enter into Maxifi planner as other assets. I may take another leap and try to understand the upside investing at next renewal.
Ironic isn't it that the cause of "inflation" is the Federal reserve. That's right, other than supply chain, middle man, or even producer greed problems. The reason that prices increase, quality and quantity derease is because of the interest on our debt money (fracdtional reserve system).
Less you think I am looney, google Modern Money Mechanics, a publication of the NY Fed, once distributed freely on demand to the likes of my when I was a finance major working on my MBA.
All money in existence is created our of debt, be it public or private, and when the debt is paid off and as it is being paid down, the money thus created is wiped off the books. No debt means money.
The one thing not created by the act of indebtedness is the money to pay the interest on the debt
The only way to pay the interest is by raising prices or shrink flation.
Example: An island of 11 people, of which I Own a printing press and a barrel of gold painted rocks, and convince the people that my rocks are worth something I loan each person $100 to be paid back at years end with 10% interest.
At years end there is $1,000 in existence but they own me, $1,100. The story goes on from there, but you get the drift.
Paul A. Volcker, the chairman of the Federal Reserve Board, asserted today that Americans must accept a reduction in their living standards, if inflation is to be reduced. Oct 18, 1979
p.'s 131 & 183 of the '83 Annual Report of the BIS) is to decrease the standard of living for the U.S. and world.
The B.I.S. is the central bank of Central Banks, i.e. the boss. It meets on first Mondays of every month, representatives, usually the head of a central bank, report, they occupy identical offices, identically equipped.
As to interest rates causing devaluation (inflation), to pay back $100 at 10% interest an individual must come up with 10 extra dol lars; a nation must do the same th i ng. If the supply of money is fixed (and it is to the extent that debt capacity is limited), then the purchasing power of that $100 is going to have to be decreased. (How can you pay back $110 when there is only $100 in existence?) When the extra $10 is brought into circulation a new debt is created (rolling over the old debt and netti ng $10 extra). Th i s further dilutes the purchasing power of the U.S. dollar unless the extra money can be put to productive use (other than paying interest). Mon ey spent by a n at i on , w i th i n th at n at i on by government or individuals, raises the effective demand for goods and services, thus causing pressure to produce, thus creating and sustaining employment (here Keynes was right again). What Keynes ignored, or more properly took judicial notice of, was the devaluation of money via interest rates (managing the nation's credit). It is the continuous rolling over of debt, and pressure on interest rates that result from the practice, that creates our so called "inflation” a ' euphemism for devaluation) .So long as wages rise with the devaluation of the money, the standard of living stays at least steady, but the anti-worker propaganda has been successful and people have proven that they will risk their lives and welfare for the chance to eat.
It is the fractional reserve (debt money) system that is squeezing the life out of people, and IMO responsible for the Tea Party, Freedom Caucus, QAnon phenomenon,
When you can't comprehend what the problem is with your ability to live and at least stay above water, you cast around for reasons and minority populations make perfecdt scapegoats, be they racial, religious, ethnic or sex.
The Financial Riddler - 1/6/22
Hi Jerry,
Many :)s.
If the debt ceiling isn't raised, we'll see interest rates start soaring and the market start collapsing. It could trigger a financial panic. The market will quantify the cost of crazy.
XO, Larry
Hi and thanks. It would lead to rates rising day after day as long as the ceiling isn't raised. The stock market would tank. It could trigger a financial panic. As we've seen, they are easy to trigger.
Cheers, Larry
I really value these "riddles." I always cheat but find the answers informative and well worth knowing. Thanks and keep offering us more of them. I echo Howier's question about your thoughts on a possible GOP debt ceiling crisis.
Insightful information as always, thanks Larry. Looking for your thoughts on potential debt ceiling issues with GOP house. If extraordinary measures run out and there is no agreement what market reactions do you see occurring ? Thanks
I started investing in TIPS, I-bonds and treasuries this year. Currently I enter into Maxifi planner as other assets. I may take another leap and try to understand the upside investing at next renewal.
Ironic isn't it that the cause of "inflation" is the Federal reserve. That's right, other than supply chain, middle man, or even producer greed problems. The reason that prices increase, quality and quantity derease is because of the interest on our debt money (fracdtional reserve system).
Less you think I am looney, google Modern Money Mechanics, a publication of the NY Fed, once distributed freely on demand to the likes of my when I was a finance major working on my MBA.
All money in existence is created our of debt, be it public or private, and when the debt is paid off and as it is being paid down, the money thus created is wiped off the books. No debt means money.
The one thing not created by the act of indebtedness is the money to pay the interest on the debt
The only way to pay the interest is by raising prices or shrink flation.
Example: An island of 11 people, of which I Own a printing press and a barrel of gold painted rocks, and convince the people that my rocks are worth something I loan each person $100 to be paid back at years end with 10% interest.
At years end there is $1,000 in existence but they own me, $1,100. The story goes on from there, but you get the drift.
Paul A. Volcker, the chairman of the Federal Reserve Board, asserted today that Americans must accept a reduction in their living standards, if inflation is to be reduced. Oct 18, 1979
p.'s 131 & 183 of the '83 Annual Report of the BIS) is to decrease the standard of living for the U.S. and world.
The B.I.S. is the central bank of Central Banks, i.e. the boss. It meets on first Mondays of every month, representatives, usually the head of a central bank, report, they occupy identical offices, identically equipped.
As to interest rates causing devaluation (inflation), to pay back $100 at 10% interest an individual must come up with 10 extra dol lars; a nation must do the same th i ng. If the supply of money is fixed (and it is to the extent that debt capacity is limited), then the purchasing power of that $100 is going to have to be decreased. (How can you pay back $110 when there is only $100 in existence?) When the extra $10 is brought into circulation a new debt is created (rolling over the old debt and netti ng $10 extra). Th i s further dilutes the purchasing power of the U.S. dollar unless the extra money can be put to productive use (other than paying interest). Mon ey spent by a n at i on , w i th i n th at n at i on by government or individuals, raises the effective demand for goods and services, thus causing pressure to produce, thus creating and sustaining employment (here Keynes was right again). What Keynes ignored, or more properly took judicial notice of, was the devaluation of money via interest rates (managing the nation's credit). It is the continuous rolling over of debt, and pressure on interest rates that result from the practice, that creates our so called "inflation” a ' euphemism for devaluation) .So long as wages rise with the devaluation of the money, the standard of living stays at least steady, but the anti-worker propaganda has been successful and people have proven that they will risk their lives and welfare for the chance to eat.
It is the fractional reserve (debt money) system that is squeezing the life out of people, and IMO responsible for the Tea Party, Freedom Caucus, QAnon phenomenon,
When you can't comprehend what the problem is with your ability to live and at least stay above water, you cast around for reasons and minority populations make perfecdt scapegoats, be they racial, religious, ethnic or sex.