Is this true?
In the olden days, I don't know when it ended, the US Dollar was asset based. That means that for every dollar printed, there was a dollars worth of gold in the treasury.
At some point, the US government started printing money, without having the asset.
(To me, this is like writing checks without having money in your account)
If this is true, and the US government is screwing up anyway, why do they need tax dollars? If they need more money, they can just print it!
Straighten me out!
posted by MarkD60 at 6:02 AM
5 Comments:
I think the same thing, that they are just printing money without having the assets to back it up.
That's my 2 cents and I don't have proof of anything.
The US doesn't just print money. It sells debt obligations on the open market (i.e. buy this piece of paper from us with your cash and we'll pay you back, someday, with interest). Now some cynics would say this isn't much different than printing money, but technically it is. Just printing money would cause hyper-inflation like pre-war Germany had, or certain countries in Africa and South America (wheelbarrows full of cash for a loaf of bread). And we've sold so much debt the market won't buy much more so the only alternative is to raise our taxes (grumble).
They sell obligatory notes, like an IOU? Or like a mortgage company selling my mortgage to another company?
Well, they sell a "bond" (also goes by a hundred other names) that promises to pay you back over a certain time frame with a certain amount of interest. It is backed by "the full faith and credit of the United States Government" which means they'll let everything else go to hell first before defaulting on the bond (i.e. we the taxpayers will get screwed long before the bonds go bad). That means a lot to the borrowers (from all over the world), so they buy them. It's safer (they hope) than anything else out there. A separate question is this business of not having enough real assets (e.g. gold) anymore to back the money supply. Long ago it was decided that to keep the economy growing a lot more money was going to be needed in circulation than could be backed by assets. So a "fractional" reserve system was created. I have no idea how this works. It always sounded like a pyramid scheme to me..
Where do I learn all this?
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