Compersion
Senior Member
- Joined
- May 6, 2013
- Messages
- 2,258
- Likes
- 923
what happens if a country does not want to repay its debt ...
it has happened before
it has happened before
https://en.wikipedia.org/wiki/Sovereign_defaultwhat happens if a country does not want to repay its debt ...
it has happened before
No theory is sound because it is no Physics. It is social science at the end of the day and some stories are more credible than others.Let's look at one of the scenarios you presented in your post—Credit demand by household. Let's take a somewhat related scenario, i.e. house buying.
I am sure you are familiar with the US housing bubble, and it was even mentioned at @5:50 in the video posted by @Mad Indian.
Home-buyers had a lot of money, and this inflated the prices of houses.
By "having" a lot of money, I don't mean that people actually had their own money, but had money that they received as loans.
People were able to "afford" nicer and more expensive houses which they would otherwise not be able to afford. ("Cheap Credit," as you mentioned in your post.)
So, what happened here? There was too much money supply in the housing market, which was a result of manipulation of the monetary system, and the manipulators were the people in the US Congress, who did this for political reasons.
So, if there is too much money supply, it can eventually create a bubble, like it did once before. QE does the same thing. It increases money supply, without actually creating any wealth. So, Ben Bernanke might claim that QE has boosted GDP, but the reality is that such tactics can either have a negative effect or positive effect, as @Mad Indian stated. However, I won't be surprised if you come back after two months in another thread and self coronate yourself by claiming something like I have provided no evidence in my favour.
Bottom line, and I am sorry to say this, your theories are not sound.
Good job man!! That's a great example!@Mad Indian @Sakal Gharelu Ustad
I do not know for sure whether manipulation of currency or the use of gold standard is a good idea. However there should be measures to help the economy in times of crisis. If that involves the manipulation of currency so be it. I think the manipulation of currency can have both advantageous or disadvantageous consequences.
(Note: This is what I have understood. I maybe completely off track. So I would like to be corrected.)
A little analogy
Let me that example of a leak in the radiator. Let us say there is a trucker who has a leak in the radiator of his truck. The cost of repairing that leak is quite high and more than the cost of filling it with a coolant. The trucker is short of money. He can either sell of his truck(thereby relinquishing his job) or he can incur a debt to buy the coolant(a risky venture). He decides to buy the coolant by taking a loan from a friend. This is similar to the manipulation of money by printing more currency. Now two things can happen.
Case 1: Positive
The trucker runs his truck with the coolant and he goes on to do his business with as usual. He makes a huge profit. He uses that money to pay off his debt and also take care of his leak permanently.
Case 2:Negative
The trucker cannot find a suitable contract and earns a meager profit. Soon the coolant he has bought runs out. He is forced to take another loan to buy more coolant. This continues till his debt crosses all limits and he is forced to sell off his truck to pay his debt.
Similarly the fiat and gold currency can have both positive and negative sides to it.
In case of gold currency, there is little scope for the manipulation of currency and thus acquiring astronomical debts. It is like the trucker has no way to get a loan and he would have to sell off his truck and find another job. By doing this he would never have a risk of financial ruin. However he will lose his occupation and have to do something other than trucking.(which will be less profitable as he was a trucker.)
In case of fiat money the govt can print money without the need of anything backing it up. Thus the trucker can take loans to have a quick remedy to his problems. However if there was little profit from the investment of that loan then it can quickly lead to financial ruin.(like the trucker not making profits.)
As for which method is better, I cannot make that call with total conviction. If I go into probability of the trucker losing his truck, then in case of gold standard it would be a sure event that he would lose it. However in case of the latter part there is a lesser probability that he would lose the truck.(I think it is 0.5 at worst case or even less if he takes a second/third loan etc)
So I would choose fiat currency albeit reluctantly.
Doesn't show anything.Here is how Leaving Gold Standard & Economic Growth are linked. Decide for yourself how much and how important the link is.
A monetary policy is credible as the institution that weilds it. No surprise you have banks with different credibility. Bundesbank being on the one end of the spectrum due to its inflation hawkishness. No surprise that they created the current european mess due to their austerity measures!Economics should be left to mathematicians and not con artists, and I am not talking about you, but those that come up with postulates that fail, and have repeatedly failed.
Again, fixing the damage instead of addressing the root cause.
Let me rephrase that:
"You have a small leak in your radiator. You consistently refuse to acknowledge that you have a leak in your radiator. Instead, you keep topping up the coolant in your radiator every week, but never really fix the leak."
Your so called monetary policy is equivalent to this topping up of the coolant.
Gold is relatively more stable, that is the reason why it is better.
Excerpt:
I am used to such inane arguments. Doesn't surprise me. Let me rephrase that.
"In winter, a person should wear warm clothes. Under such a rule, it seems that wearing warm clothes is as good as not catching pneumonia. Except that it isn't–warm clothes is only as good as the person's willingness to stick to that rule. If a person can wear warm clothes, he can also take his warm clothes off , and catch pneumonia."
Here is another one:
"It seems that exercise is good for health. Except that it isn't–exercise is only as good as a person't willingness to exercise, because, he can stop exercising anytime he wants."
I guess there is no cure for the mental pneumonia of people who write such rubbish articles.
BTW, I am saying again, the currency should be free from manipulation. Also, I am saying, yet again, a currency should be free from manipulation. So, the question of taking it off the gold standard does not arise. Ok, one more time, the currency should be free from manipulation. Let me know if you want me to repeat this again. Because, apparently, you don't pay attention to what you respond to:
Thank you for waiting.
Ok, that is one way of looking at it.A monetary policy is credible as the institution that weilds it. No surprise you have banks with different credibility. Bundesbank being on the one end of the spectrum due to its inflation hawkishness. No surprise that they created the current european mess due to their austerity measures!Economics should be left to mathematicians and not con artists, and I am not talking about you, but those that come up with postulates that fail, and have repeatedly failed.
Again, fixing the damage instead of addressing the root cause.
Let me rephrase that:
"You have a small leak in your radiator. You consistently refuse to acknowledge that you have a leak in your radiator. Instead, you keep topping up the coolant in your radiator every week, but never really fix the leak."
Your so called monetary policy is equivalent to this topping up of the coolant.
Gold is relatively more stable, that is the reason why it is better.
Excerpt:
I am used to such inane arguments. Doesn't surprise me. Let me rephrase that.
"In winter, a person should wear warm clothes. Under such a rule, it seems that wearing warm clothes is as good as not catching pneumonia. Except that it isn't–warm clothes is only as good as the person's willingness to stick to that rule. If a person can wear warm clothes, he can also take his warm clothes off , and catch pneumonia."
Here is another one:
"It seems that exercise is good for health. Except that it isn't–exercise is only as good as a person't willingness to exercise, because, he can stop exercising anytime he wants."
I guess there is no cure for the mental pneumonia of people who write such rubbish articles.
BTW, I am saying again, the currency should be free from manipulation. Also, I am saying, yet again, a currency should be free from manipulation. So, the question of taking it off the gold standard does not arise. Ok, one more time, the currency should be free from manipulation. Let me know if you want me to repeat this again. Because, apparently, you don't pay attention to what you respond to:
Thank you for waiting.
Currency is no holy cow and cannot be free from manipulation if it serves public good. But yes, you can freely debate what is public good!
I have highlighted the words that I like in this post.No theory is sound because it is no Physics. It is social science at the end of the day and some stories are more credible than others.
Cherrypicking examples don't help. Bubbles can develop even without a monetary policy. You just need enough subset of people to believe that some asset with give astronomical returns. Sorry to say but you don't have any theory.
And just for clarification on the above example I gave. You need an easy monetary policy when things are rough and GDP growth is stagnant. Ofcourse if you give cheap credit during boom, it will overheat the economy. So, comparing the US housing bubble with cheap credit being available during good times is not comparable to cheap credit being available during bad times.
So, learn to apply a given theory during a given scenario.
Thanks! I posted the article as it was closest to my google search.Ok, that is one way of looking at it.
You gotta admit though, that the article you presented was indeed funny.
I have highlighted the words that I like in this post.
They may have to pay wealth tax or other taxes if they have huge cash in hand or there may be limits to hold cash. Most people who have white money don't prefer paper money.@Sakal Gharelu Ustad I cant think of a single reason why people would buy a negative interest rated bond. Seriously? Can you pls give me an example for why they might ? I tried thinking that it could be tied up to the inflation/deflation being higher than the impact of the negative interest rate but even then it would make much more sense to just hold on to the cash rather than on the bonds?
Thread starter | Similar threads | Forum | Replies | Date |
---|---|---|---|---|
Pakistan Up To Something at Shankargarh Bulge | Pakistan | 6 | ||
30 something big planes on XAC factory, including KJ600! | China | 23 | ||
Tell me something I don’t know!!!! | Members Corner | 24 | ||
ISI DG axed for not knowing something which did not happen. | Pakistan | 14 |