Ron Paul’s Surprisingly Lucid Solution to the Debt Ceiling Impasse

[Wild Cobra]

LOL...

All my ideas are bad?

OK. Let's reelect Obama!

[Winehole23]

bAD IDEA.

[Winehole23]

i DONT KNOW WHAT REVERSED CAPITALIZATION MEANS EITHER

[Wild Cobra]

Seriously. What if we devalue the dollar by printing more?

[ElNono]

Seriously. What if we devalue the dollar by printing more?

You cause inflation, which can easily get out of control driven by speculation, and turn into hyperinflation. For reference see Brazil and Argentina, late 90's.

[ElNono]

Not to mention that salaries dwindle down while cost of living remains the same. You basically just moved whatever is left of the middle class under the line of poverty or very close to.

[Wild Cobra]

You cause inflation, which can easily get out of control driven by speculation, and turn into hyperinflation. For reference see Brazil and Argentina, late 90's.

I still see it as a better alternative than losing our national wealth to the trade imbalance.

[Wild Cobra]

Not to mention that salaries dwindle down while cost of living remains the same. You basically just moved whatever is left of the middle class under the line of poverty or very close to.

I disagree. Printing more money would affect the value of money vs. other currencies far more than internal inflation. National inflation would be kept in check with similar COLA pay adjusts. However, it would make foreign goods more expensive to us, and exports more affordable to the people of other nations. It would help bring manufacturing back to our shores.

[ElNono]

I still see it as a better alternative than losing our national wealth to the trade imbalance.

How many hyperinflations have you lived through? I mean, academically everything is easy, but you really don't know what you're advocating.

I disagree. Printing more money would affect the value of money vs. other currencies far more than internal inflation. National inflation would be kept in check with similar COLA pay adjusts. However, it would make foreign goods more expensive to us, and exports more affordable to the people of other nations. It would help bring manufacturing back to our shores.

Except that local manufacturing capacity isn't there. It went away when the currency was valued more, and it's not coming back overnight. That 'adjustment period', which normally takes at least months, sometimes years, is a spiral of high inflation where salaries can't keep up with the price of goods. You ALWAYS end up that cycle with more poor people, and the political cost of it is very, very high (People have a tendency to remember the guy in charge when the price of milk went up 300% in one week and the salaries didn't move)

You're also talking about this in a vacuum. Just like every other monetary shenanigan, you can make money out of inflation/hyperinflation. Meaning you WILL have speculators creating artificial lack of supply to extend the period of crisis.

Funny thing is, you are far from the first to suggest or even try this. It always ends bad without fault. That said, the US might just have to go for it at some point if it can't cover it's debts.

[ElNono]

BTW, I'll tell you how it plays out too... There's basically two scenarios:

1) Government starts printing in small batches, trying to 'control' the inflationary effect. People starts noticing the slow increase in inflation from printing, and realize that they'll be better off not holding on to dollars, but buying some other currency, precious metal not pegged to the dollar, etc. At which point everybody starts trying to pull money off the banks, and you trigger a bank run, along with panic because the money isn't there to try to sidestep the inflationary spiral. Most politicians/connected businessmen likely bought Euros/gold a week before. At that point the government is simply forced to ration access to money and go ahead with a full blown depreciation (whose effects I explain in point 2)

2) The government decides to devalue the dollar overnight, say, by adding an extra 0 ($10 dollars are now worth $1). An average salary of $60K/year now has overnight been transformed into a $6K/year salary. Gas is still going to cost $4/gallon. Goods that need to be transported and imported goods (everything made in China, basically) will now be appreciated by 10. Obviously, local production doesn't start overnight, and takes months, even years. Standard of living literally plummets. There's rationing of goods due to lack of supply. Companies have their value diluted too. There's a lack of trust to invest since you just don't know when the government will devalue overnight again and make you waste your investment.

I've seen both play out and they're both a disaster. It can be argued that in the long run (decade maybe), the country can have a better outlook and be more compe ive. But this is not a solution, it's a catastrophe you self impose because you're just not serious in doing what needs to be done for this to be fixed properly (stop spending more than what you collect).

[Winehole23]

How many hyperinflations have you lived through?

Please forgive us, profe. The answer is none.

None of us norteamericanos have lived through even one period of hyperinflation. Ever.



(but we will probably catch up)

[ElNono]

Please forgive us, profe. The answer is none.

None of us norteamericanos have lived through even one period of hyperinflation. Ever.

(but we will probably catch up)

If he would've done at least a modi of research of how his proposal works out in the real world (and there's a plethora of literature out there), I would think he wouldn't even think about it.

Or maybe he's advocating it since he already moved his assets to gold/silver/euros?

I do agree that unless there's something structurally substantial done about the budget, the temptation to fire up the magical money machine will be too great to just pass up. Most countries that end up with this do it for the exact same reason (the 'easy' way out)

[Winehole23]

(Urp)