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$3.8 trillion budget


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  #11  
Old 02-03-2010, 02:51 PM
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Will inflation ultimately be the answer? If the government keeps printing money, the value of it is less and therefor the debt is less?

Do you think this will be the way it goes?
No. I think and absolutely believe the more money we print, the more we will have to pay. Consider this. You buy a house for $150,000 and then they print a lot of money. The dollar value goes down to half of what it was before. On the Gold standard, before the money was printed, you house was worth XX amount of ounces of gold. Now it is still worth XX amount of gold. But in cash, your house is now worth $300,000. At least this is the way I understand it.

I have heard say that gold and oil stay the same relative value when compared to each other. They may fluctuate slightly, but stays relatively the same, no matter what currency does. Example: when Gold was about $1,000 per ounce oil was about $100 per barrel. I was told they generally stay like that, about 10 to 1.

Inflation is simply (at least the way I understand it) that we say things are worth more and more and more. Essentially what we are doing is making the dollar worth less. If my house was worth $100,000 4 years ago, but now sells for $125,000, despite me making no improvements to quality or curb appeal, it is simply due to the inflation. Bottom line is, I have not increased my homes quality or physical worth, but it sells for more. Where is the difference? The dollar is now worth less than 4 years ago. Though in reality, 4 years ago when I bought my house, it was likely worth more than it is now, but that is simply due to the economy. So physical property values and the gold standard do not completely adhere to each other.

Any thoughts or clarification anyone? I am not sure I understand this correctly.
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  #12  
Old 02-03-2010, 03:08 PM
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Default I think it's worse

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I think it is worse than that! According to the CBO (Congressional Budget Office), under the current budget $0.42 of every $1.00 spend by government is either borrowed or printed. This is a double hit to the economy. We are borrowing money with the prospect of repaying it with a diminished dollar.

If the new budget is passed, that means that almost $1.6 trillion will be either borrowed or printed! Incidentally, that is almost 2X the oft reported Bush Deficit Obama was supposedly saddled with.

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Old 02-06-2010, 05:00 AM
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Ok, so if I understand what you are saying this is what happens: we borrow $1.6 trillion, but if the dollar is worth only $0.50 on the $1 (of its current value) when we go to repay, we would actually have to repay $3.2 trillion?
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Old 02-06-2010, 10:41 AM
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Default Without inflation

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Ok, so if I understand what you are saying this is what happens: we borrow $1.6 trillion, but if the dollar is worth only $0.50 on the $1 (of its current value) when we go to repay, we would actually have to repay $3.2 trillion?
$3.2 trillion if we don't have inflation and, many economists are predicting Super Infaltion.

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Old 02-07-2010, 05:18 AM
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many economists are predicting Super Infaltion
What causes Super Inflation and what are the results of it?
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Old 02-07-2010, 06:39 AM
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Default Super or Hyper Inflation

[quote=Steve;64327]What causes Super Inflation and what are the results of it?[/quote]

Inflation is a sustained increase in the aggregate price level. Superinflation or hyperinflation is very high inflation.

Although the threshold is arbitrary, economists generally reserve the term to describe episodes when the monthly inflation rate is greater than 50 percent. At a monthly rate of 50 percent, an item that cost $1 on January 1 would cost $130 on January 1 of the following year.
 
What Causes Hyper Inflation

Usually, countries with hyper inflation have the following features

Large government debt, usually over 100% of GDP

Printing Money. To cope with meeting the debt, the government starts printing money. This decreases the value of existing money creating a multiplier effect where people lose confidence in money and keep demanding wage increases.
 
Reluctance / inability to deal with it. When Germany experienced hyperinflation in the 1920s it was not a phenomena they fully appreciated or understood. Their primary fear at the time was unemployment. They feared that unemployment could precipitate a Communist Revolution so they didn't want to do anything to reduce demand and possibly cause a recession.

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Old 02-08-2010, 04:35 AM
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When Germany experienced hyperinflation in the 1920s it was not a phenomena they fully appreciated or understood. Their primary fear at the time was unemployment. They feared that unemployment could precipitate a Communist Revolution so they didn't want to do anything to reduce demand and possibly cause a recession.
That is certainly interesting. And then look where it led!
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