barbos
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US just releases shitload of
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Free Market is signalling that the US has too little debt
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Horatio Parker
Veteran Member
If people stop selling us stuff we won't make so much. But right now they can't get enough.
whichphilosophy
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Gold Certificates are a debt.
whichphilosophy
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Correct. I was referring to the Government debt.
Horatio Parker
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I keep kicking myself for not investing a farthing when Jesus was born.
whichphilosophy
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Money is an official medium of exchange consisting of cash and coin defined by a government.
Without this we would be bartering. Try purchasing an airline ticket at the airport with 12 head of cattle and being given 24 water melons in change. It's a very cumbersome system at times.
I cant see it as a debt. It is an idea backed by confidence. It is a financial asset but the value does not come from the paper or metal but it is based on confidence and credit of the government that issued it.
Without this we would be bartering. Try purchasing an airline ticket at the airport with 12 head of cattle and being given 24 water melons in change. It's a very cumbersome system at times.
I cant see it as a debt. It is an idea backed by confidence. It is a financial asset but the value does not come from the paper or metal but it is based on confidence and credit of the government that issued it.
Horatio Parker
Veteran Member
You're both right and wrong.
Money exists by virtue of an authority, yes. But it's also a claim on that authority. What you're missing is that it's about a relationship where it's an asset on one side of the ledger and a liability on the other. The govt must accept it's currency as payment, and in that sense it's a liability.
market price signalling of course.
I guess I can put you guys down as the market being wrong on this one?
Again, how did you determine what is the "right" price for the debt?
I don't recall this "there is a right price for things" concept from Econ 101. My recollection is that price moves up or down to equillibrate supply and demand.
Yes, and right now there is an incredible amount of demand for US debt. Econ 101 says that the supply of debt should go up in order to meet the demand.
The "right" price would be the one where the amount supplied equals the amount demanded.
And right now the Market is saying there should be much more debt made available.
Do you disagree?
Axulus
Veteran Member
To little debt compared to what? Are you saying we should lower taxes and make up the difference with more debt? Maybe. I'd like to see a more through analysis of that, though.
No, it does not. Repeating again: it says price will go up/down to equillibrate supply and demand.
There is no "shouldness" about a given price.
Too little debt when compared with the demand for that debt.
So you're saying supply and demand doesn't change from price signalling only the price changes?
That's the first I've heard of that.
Axulus
Veteran Member
How do you determine that the supply is too little in relation to the demand? What criteria are you using? At what point is the amount "just right"?
Right now, the amount is just right at the given price and return offered. There is literally tens if not hundreds of billions of debt for sale right now that owners of the debt would like to sell that anyone who wants some can buy. Why isn't that sufficient?
I've said the same frickin thing like 3 times now.
Price moves up/down to equillibrate supply and demand.
Axulus
Veteran Member
Supply only changes in relation to other options. More debt to either lower equity (taxes collected in the case of government) or more investment.
I would be surprised if there weren't projects the government could invest in that would offer a risk adjusted return of greater than 1.75%. The problem is how to get the government officials to choose those projects vs. pork that gets them elected in their districts but destroys value?
Also, let's not forget that supply has gone up by about 80% since 2008 (federal debt). How did you determine that the supply response hasn't already been sufficient to account for the increased demand?
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I think what he is saying is that an increased demand would be expected to be met with an increased supply in equilibrium. A higher price means suppliers would supply more.