One big problem Ricter with those arguments. There are a huge number of people on social security or disability who don't have the ability to "invest" their savings (in this case savings are the present value of future payments) because every attempt to privatize social security has been blocked by the Dems. We can make the argument that social security can be increased to keep up with inflation, but that isn't true for two reasons. The first is that SS payments are determined in Oct of the prior year. So just like wages, the increase always lags behind cost of living increases. The second problem is that we are already borrowing to support these programs and current debt projections do not account for the possibility of higher than expected inflation. If the CPI jumps to even 5-6% which isn't considered hyperinflation by any measure, social program payments will rapidly increase the deficit beyond current levels. This was ok ten years ago, but we are now at 110% debt:gdp so we'll have a much harder time borrowing to increase payments. Possible scenario; inflation jumps to 4% and we have to borrow more money to make these payments. At the same time, interest on new debt is 6-7% instead of 2-3% because of higher inflation. Our debt rises to 140% of GDP as we struggle to keep up with expanding payments. Credit rating on US is lowered again and consequently, yields rise further. I think you can see where I'm going with this. Basically, any sane person can see that the breaking point is somewhere around 140% debt:gdp and yields around 7%. We are then in a similar situation to Greece. We can't expect the rest of the world to write off more than 50% of their US investment. Our economy is too big to save at that point. We'd enter another global depression.
Forgive me, but are you suggesting that the Fed's "off balance sheet" is being lent out to third world countries?
1) Why is there off balance sheet dollars? 2) Where is it ? 3) Why isn't any politician blowing his top off that we borrow billions of dollars just to give it to 3rd world countries,especially when most of them are Muslims?
1. Banks park these reserves (I assume you're talking about the reserves, because I don't know what other off balance sheet dollars you're referring to) because: They want to earn the slight interest and have to protect against losses in other parts of their On Balance Sheet categories (Real Estate, for instance). They also do not see worthy loan demand to lend it out. 2. At the Fed. 3. Because they are politicians. Not sure where you're going with this. You responded to Phoenix's comments of "the government cannot print it's way to wealth" by saying: I (and others) asked you to clarify how, exactly, this works. You have yet to do so. The above three questions bring up more doubt that you understand how this works, not less. Please address the original question first, and then we can proceed to more topics regarding reserves.