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all 100 comments

[–]thedude213 88 points89 points ago

In the case of the Federal Reserve: It's printed and loaned to the U.S. with interest attached to it, so the only way to pay it back is to print and loan more money. In short, if someone loans you 20 bucks and it's the only 20 bucks in the world, and they want you to pay it back next week, but instead, they want 25 dollars, then you have to borrow that as well to pay the original debt back and that 5 dollars will have interest attached to it as well.

[–]-Tommy 11 points12 points ago

So basically America will NEVER be out of debt unless we start using a different currency?(never)

[–]thedude213 9 points10 points ago

Yes, that's the point. The Federal Reserve is a complete fucking sham, and we should have never left the gold standard.

[–]makeshiftreaper 3 points4 points ago

That's such an awful idea. The amount of gold needed to support that kind of system would be impossible to gather.

[–]kingcherub 3 points4 points ago

That's a stupid fallacy. You don't need more money for an economy to grow...the money is supposed to gain in value as the economy grows. Money isn't some magical thing that makes people wealthy. It's a abstract representation of real wealth creation that serves as a store of value and a means of exchange.

[–]makeshiftreaper 4 points5 points ago

But inflation happens and when it does some economic scenarios like the various collapses that happened recently would cause people to go running to get their gold from the bank. When the bank runs out you know what happens? Because I bet your grandfather does. A depression.

[–][deleted] ago

[deleted]

[–]RedditGreenit 4 points5 points ago

Deflation is a risk (it happened post-Civil War, causing the gold vs silver debate). Gold standard seems very limiting to growing an economy and I think our economy is too complex to have it's currency placed in some random metal we assign arbitrary value to.

That said, I'm up for dumping the Fed and putting its useful functions back to the Treasury like it deserves to be

[–]jhabitearockinspace 0 points1 point ago

The total amount of money is in no way represented any more by physical assets like gold houses bread whatever. Banks only need a very small percentage of actual assets to give out a loan on. I.E. All the shit bankers drive and live in is basically a margin they create in making our money less valuable.

It´s the world´s largest pyramide scam and the intire system is based on creed. It´s only a short time until a massive revaluation of money will take place. That or we convert to bottlecaps or shells.

[–]argh523 -1 points0 points ago

I think the way this system works is actually quite beautiful. But it's missused, and it is easy to missuse because people don't get how it works..

But yeah, there might be some revolution around the corner where we difuse the dangerous effects to some degree with loan free social services, basic income or some other mechanisms. But that's unlikely. Going back to, lets say, 80's standards of banking would probably go a long way in reducing unnecessary risks already.

[–]argh523 0 points1 point ago

If an economy grows, and the money supply doesn't grow with it, the value of money grows. Like you say it is supposed to do. That's deflation, and the problem with that is, it's less attractive to invest in stuff or take a risk, because if you can only gain a few percent (which is the case in most investments), you might as well just leave it in the bank an wait for the currency to gain in value, so it's bad for the overall economy because it's hard to find capital.

Yes it's an abstract thing that should represent value. In an ideal world, it shoud always represent the same value (a loaf of bread should aways cost the same), but that's impossible, and a little inflation (a little inflation) is much less of a problem than deflation, for the reason stated above.

[–]blackpanther6389 0 points1 point ago

Could you elaborate?

[–]argh523 16 points17 points ago

Have an upvote! Sadly, nobody seems to be interrested in the actual answer..

edit: Hurray, I was wrong!

[–]Quasid 9 points10 points ago

Ish.

The main cause of U.S. debt is four fold. It's military spending, medicare, social security, and interest on the debt.

The problem with interest is that it only grows bigger as time goes on.

With military spending it's not just the planes and bombs, but mostly the salary of people in the military, particularly those who spend 20 years in the military then collect a pension for three times that timespan. There's a reason businesses in the U.S. moved away from pensions back in the 90's and it's because it's an unsustainable business model and is like having twice the staff on payroll.

For social security and medicare, the biggest problem is that the money was collected over many years. It was supposed to be used to pay them back, instead presidents like nixon and clinton dipped into the funds (quite heavily) to make it seem like the deficit wasn't nearly as bad. (nixon used it to fun Vietnam, clintion used it to show that we weren't running a deficit. Which is true, at the time, we were taking in more money for social security than we were spending. Just that, in the long run, it doesn't work that way.)

That's the funny thing. All of what i just listed is 88% of the U.S. Budget. Even if we cut all federal spending except for those 4 (FBI, white house staff, air force one, IRS, USDA, post office, subsidies for companies, EVERYTHING) then that'd only be 12% of the budget cut.

[–]argh523 2 points3 points ago

Have an upvote for the answer that sums up where the money is actually going. But still, the fact that people don't know shit about how money actually works means it's hard to have a meaningful discussion about what should be done about the finacial sector, where quite a few things are just crazy.

And I don't mean the various mechanisms of money creation, that's actually quite beautiful. And don't mistake me for one of those who want to go back to the gold standard, that's just all kinds of wrong..
I mean the low "reserves" banks need, the abolishment of the Glass-Steagel Act, high frequency trading, the new finactial products who got us in this mess, the people who pushed or welcomed all those changes that are now in charge of "fixing" the problems that come with them (their idea is to don't change a thing, exept maybe reduce government influence even more), and stuff like that. Without people understanding the basics of money, it's hard to get them to see the magnitude / implications of those things.

edit: grammar and stuff

[–]billdietrich1 0 points1 point ago

Social Security is easy to fix. Remove cap on SS-taxable income (currently about $110K); tax all income. Then might even be able to implement a "floor", so first $10K or whatever is not taxed. And means-test benefits; no need for wealthy retirees (such as me) to collect SS benefits.

[–]Cowzer 1 point2 points ago

This. And I think of the 4 main spending sources you listed military is like ~50-60% of all US spending. thedude123's answer is not right at all though, anyone who has taken a upper level college econ course would know this.

[–]Quasid 1 point2 points ago

this image sums it up nicely. It's from 2005, but the federal budget hasn't changed much since then (unless you count moving some funds from "medicare" to "national affordable healthcare act")

Keep in mind "income security" is analogous for pensions, but this is pensions for all federal employees. Veterans is different then the pensions (VA ect). But, basically, if everything associated with the military was to just go away, it'd be closer to the 50% mark; but yes, you are essentially right.

Actually, i heard a while back that if all the countries in the world were to get into a war, and the only measure of winning was how much money the countries were throwing at teach other, the U.S. could take on the whole world and only lose by 9%. wiki source

[–]kerrigan7782 2 points3 points ago

Why is death and taxes going unmentioned in this thread? http://www.deathandtaxesposter.com/

[–]Quasid 0 points1 point ago

for me, it's because i've yet to come across it. Thanks for sharing, i'll be sure to check it out.

[–]gak001 0 points1 point ago

You mean the Patient Protection and Affordable Care Act? There is no "National Affordable Healthcare Act" that I'm aware of and that makes it sound like nationalized healthcare, which it most certainly is not.

[–]1pointlessidea 0 points1 point ago

Pensions aren't unsustainable if it is the norm. It only becomes unstustainable as the competition cut's there pensions.

[–]DeadlyLegion 0 points1 point ago

Ah awesome! I was just about to post the same example, only with cats, but your example seems to get the point across. Here, have an up-vote! :)

[–][deleted] ago

[deleted]

[–]Graywolves 1 point2 points ago

The link takes me to Dragon's Dogma on eBay...

[–]TuriGuiliano 0 points1 point ago

Fuck, wrong link

[–]olee_bear 72 points73 points ago

China

[–]gedSGU 8 points9 points ago

enuff said. I'm curious how things will work out in like 20 years

[–]awesomeness1234 10 points11 points ago

Didn't China owe everyone money for a long ass time then just decide it wasn't going to pay? I think we will just do that.

[–]zookeepier 12 points13 points ago

How dare you support your position with facts and evidence!

[–]Esma698 16 points17 points ago

Fuck you, Atlantis.

[–]Ragnalypse 16 points17 points ago

All of the countries aren't all of the economic entities. The public sector owing the private sector is a pretty simple answer.

I'm sure Norway isn't in net debt, not with all of that oil money propping them up like trust fund kiddies.

[–]areus 2 points3 points ago

Norway has debt, but not foreign dept. This debt comes from printing "national bonds", when you buy this type of bond you are basically loaning money to a state and the interest you get on the bond is the interest the state have to pay to loan money from you. This interest is very low on norwegian bonds because the norwegian state has money up to its ears but other states with a more rocky economy (Greece, Spain, Ireland and so one) have a high interest on their bonds/debt.

[–]dmanww 1 point2 points ago

Also, Japan has a shit ton of debt (208.2% of GDP), but only small amount is owned by foreign investors (8.3%)

[–]FlankingSpineCrawler 0 points1 point ago

Wrong actually we still have dept from the the 60's/70's when the infrastructure was built up, not joking. It's has been considered better to invest it rather than paying it back.

[–]Dabuscus214 2 points3 points ago

Norway is always doing well

[–]Marcalogy 18 points19 points ago

Banks

[–]Epithemus 7 points8 points ago

And corporations.

[–]throwing_myself_away 2 points3 points ago

This needs moar upvoats.

[–]btechlol 4 points5 points ago

you heard the man, give me my fucking internet points.

[–]link2213 15 points16 points ago

There's always money in the banana stand!

[–]Erilacity 4 points5 points ago

Corrupt Leaders, Swiss banks.

[–]Professor_Pootis 1 point2 points ago

"I just need $10,000 to pay my bail from witch then I can give you half of $65,000,000,000,000,000 from my swiss bank account"

[–]argh523 -1 points0 points ago

I think $65,000,000,000,000,000 is more than the global GDP.

after looking it up When google says 63 Trillion, does it mean stupid wrong american trillions (1012 ) or "the rest of the world"-trillions (106*3 (milliontri(getit?) ) = 1018) ?

[–]Professor_Pootis 0 points1 point ago

That made no sense to me

Someone correct me if it does make sense, I might just be really tired, but I never said anything about 63 trillion, i said 65 quadrillion. Also it was a joke referring to the Nigerian Prince scam, hence the quotes.

[–]argh523 -1 points0 points ago

Sry, didn't get the reference. Somehow thought about global gdp. After looking it up, your number was right in the middle (kinda) of 65 trillion in the american sense and the 65 trillion in the "rest of the world"-sense. So I thougth it might have been the intention and you got it wrong either way.

Anyway, sry to bother you and have a nice day.

[–]philistic53 3 points4 points ago

Mitt Romney.

[–]seml4 6 points7 points ago

[–]this_is_suburbia 0 points1 point ago

i looked up, and he was on TV

[–]Soaring_Leap 3 points4 points ago

This philosoraptor really made me think. And now I am sad. And that is sad.

[–]DaveLambert 3 points4 points ago

[–]aesamattki 2 points3 points ago

messes up hair

Aliens.

[–]betafish37 1 point2 points ago

Fucking magnets...

[–]imperator285 3 points4 points ago

They borrowed it all from China, Germany, and Singapore.

[–]Albinzero -3 points-2 points ago

yeah.... 'cause germany isn't in debt...

[–]imperator285 1 point2 points ago

Yea, they are. But they're also a big creditor.

[–]TheFrenchGuySaid 1 point2 points ago

MONACO!

[–]shyam14111986[S] 0 points1 point ago

KELLY MONACO? Makes Sense.

[–]Nathonamore 0 points1 point ago

[–]HKnoxx 0 points1 point ago

War and stupidity.

[–]travdoty 0 points1 point ago

CEO's

[–]Blarg44 0 points1 point ago

CHINA!

[–]Connwaer 0 points1 point ago

Mega millionaires owning mega corporations

[–]thicka 0 points1 point ago

It never existed.

[–]billdietrich1 0 points1 point ago

China, Germany, Japan, Saudi Arabia, Dubai, Bahrain, etc. Much of the money invested right back into USA T-bills.

[–]jspliff1 0 points1 point ago

[–]tystevens64 0 points1 point ago

It's the illuminati man!

[–]andified 0 points1 point ago

Fucking China.... Or Japan.

[–]noodlesnstuff 0 points1 point ago

To the future...

[–]knightmare07 0 points1 point ago

to ten people

[–]Connor6 0 points1 point ago

I think Canada is doing pretty well. I Haven't heard of us having a bad economy up here in the Great White North.

[–]andnowforme0 0 points1 point ago

China. It went to China.

[–]MisterKibs 0 points1 point ago

Dubai.

[–]Villainsoft 0 points1 point ago

The value of currency and equity changes, so it is very possible for all economic powers to be in debt.

[–]InVultusSolis 0 points1 point ago

ALL currency is a form of debt. Keep "making" more currency, debt will keep increasing.

[–]FixingGosling 0 points1 point ago

Obviously it went to the Rothchilds and Rockafellas

[–]Darth2132 0 points1 point ago

Same place socks go to.

[–]griff-labarum 0 points1 point ago

Two Words. Central Banks.

[–]Melkath 0 points1 point ago

The 1%

[–]vaginitischlamydia 0 points1 point ago

THE BANKERS

[–]Calculator_on_Desk 0 points1 point ago

It's in Bill's house, and Fred's House...

[–]Keane1522 -1 points0 points ago

Muthafuckin SINGAPORE

[–]MitchMerk -1 points0 points ago

Can we not hit a big rest button on the worlds economic situation. That sounds like fun!!

[–]dpierce970 -1 points0 points ago

China and Dubai

[–]Sandfox92 -1 points0 points ago

Governments borrow from the private sector, not other governments, YO

[–]argh523 -2 points-1 points ago

Money = Dept

[–]Rumplepickleskin -2 points-1 points ago

It disappeared. Literally.

[–]Hansitheopgnome -2 points-1 points ago

Loch Ness monster..

[–]LascielCoin -2 points-1 points ago

Where did you get this information from? It's not true at all.

[–]MasterYoda458 -2 points-1 points ago

Aliens

[–]bitza -2 points-1 points ago

Individuals, corporations, companies, etc. This question isn't worth of a philosoraptor meme.

[–]Harwood8907 -2 points-1 points ago

Japan