Shopsmith Forums

Theoretically, the guy with a mortgage gains from inflation because he is paying off a fixed debt with dollars which are worth less than the dollars he got in the loan. However, I for one, have not found this to be very helpful (as far as paying off the debt). It still takes the same length of time to pay off the mortgage unless you pay additional principal with each payment.

But this discussion doesn't really fit if discussing the national debt because that KEEPS GROWING! You can't ever pay it off until (and unless) the principal stops growing! That's why we (read the gov't) MUST stop spending like a drunken sailor (no offense meant for sailors - it's an OLD saying). The only way to make that happen is to return to only spending on constitutionally authorized expenses - start with national defense - no one can argue that defense is not a government function although many can argue over the amount. Such a change will take decades to make - after all - it took decades to grow the government so far outside its constitutional mandates.

My problem is that fiscal issues are lumped together with social issues. You either have to take both or none, even if you disagree with some of the social issues one party is pushing for.

Real quick...it's a money supply issue.
People deposit money in bank. Bank loans said money minus reserve. 100 deposited, 90 is lent. Borrower of the 90 pays someone who deposits it. 80 is then lent. Money supply is created. If no one borrows money supply reduces ( people don't borrow when they don't feel safe) if many stop borrowing the fed reduces rates. Fed offers stimulus based on bonds. Stimulus is issued and fed takes on the debt. If borrowing stops demand drops, supply drops, unemployment rises. Deflation.this may be a horrible few sentence answer but I only have a minute....

holsgo wrote:I'm not sure what hidden tax you mean but mostly fixed incomes are safer during deflation. I believe we should all want mild inflation. This keeps people borrowing, lubricating the money supply and empowering purchases. Deflation upturns the apple cart and we have few fed tools to combat it. True deflation occurs about once a lifetime and I can hope we don't go that route.

When your buying power is being eroded by the government to the governments advantage, that is a tax.

It does not matter if all they do is clip off 10% of each coin as tax was once collected, or if it they otherwise make each coin worth less. A tax is a tax

This thread should get really exciting after tonight's debate between Joe and Paul Ryan. Ryan being the financial guy and Jow being the appointed spoaler it could get exciting.

I'll have pop corn popped and sausages on the grill with cold drinks in the frig. I'm expecting a knock down-drag out fight.

Winner? - totally unpredictable.

Loser - all of us who expect something better from our Government.

Problem: Far too many old farts in Congress and otherwise on The Hill. We need new blood throughout.

It's not the government that causing deflation. It's a bubble in the credit market. This collapsed as all bubbles do. So no, it's impossible to be a tax. Remember, everyone rode the wave up, now it's everyone's turn to ride it down. You can call it what you will, a tax then, but if that's the case 320 million people will see this tax. But it is not to the govt interest to have deflation. Deflation equals less tax thus an unpaid debt the government has no tools to get out of. Ps, it's not just us. Watch Greece. That's deflation...and it looks surprisingly like us.

Health insurance was requred as a condition of employment for DOD civil servants in 1972. So, was life insurance. When I purchased a comparable life insurance on the open market for better coverage and lower premiums, I had to show proof and have it documented so I could waive my employer sponsored life insurance.

In 2000, DOD offered long term care insurance. Very expensive, little coverage and you could be denied if you had been diagnosed with Lupus, MS, Parkinson's or any other debilitating illness. Found a better one after about 18 months of searching, still have it, pays more and cost less to me with no employer matching funds. They should be happy, but they continue to send me applications to sign up for Met Life that is sponsored by DOD.

JPG, what you wrote is what I was taught in 1961 in high school. Insurance was originally a group of people who paid a fee to cover cost of loss of one of the members. This was called scattering or spreading the risk. And, like Credit Unions, it was a member thing. But, because of what you wrote about the gambling and hedging with the funds, it's hard to get insurance. AARP used to say that no one could be denied for their life insurance. So, my wife applied, admitted she has MS, Lupus and they denied her. Even refunded the initial premium. And, within 2 blocks in my neighborhood, 4 houses which are paid for and the owners are retired, no homeowners insurance is available. Only if the house is mortgaged. One neighbor finally got a liability policy in case someone comes on his property and gets injured or walks on the sidewalk in front of his house and gets hurt.

Insurance a right or privilege? Good question. I think it could be well argued either way. If it's mandatory for mortgages, autos, cycles, boats, planes, and other things then maybe it's a right. It's mandatory because unresponsible people will operate machinery without responsibilities or cares, then not be liable for the damages they cause. This requirement came about as a result of communities pushed governments at various levels to do something. On the other hand, if only responsibile and caring operators did the work, and would be responsible for damages, no insurance would be required.

Debates - I've been watching Paul Ryan and Daniel Issa for several years. They have both been after Social Security and Medicare programs as well as civil service employees and retirees. When I started my civil service career in 1972, it was mandatory to give 7% on every dollar (no caps such as Social Security has) to Civil Service Retirement System, a program not government implemented or managed when started in 1920. During the 1980's, Congress borrowed money from the CSRS and again in 2003, they borrowed $87 million to start the Iraq war. Not being political here, just the facts. Now, they have moved all our retirement funds into the general funds and call it an entitlement. Let's be clear, my retirement fund is not an entitlement. The only reason I started drawing from it was because my job was no-bid contracted out. I had to take a reduction that will last the rest of my life. But, Mr. Ryan accused us of getting $100,000 per year in retirement pay. Well, I say pay up for one year. Man, I could live like a king for the next 20 years. LOL Anyway, just saying that not all the stuff you hear is nearly accurate.

Ok, that's all I have to say on these topics.

holsgo wrote:It's not the government that causing deflation. It's a bubble in the credit market. This collapsed as all bubbles do. So no, it's impossible to be a tax. Remember, everyone rode the wave up, now it's everyone's turn to ride it down. You can call it what you will, a tax then, but if that's the case 320 million people will see this tax. But it is not to the govt interest to have deflation. Deflation equals less tax thus an unpaid debt the government has no tools to get out of. Ps, it's not just us. Watch Greece. That's deflation...and it looks surprisingly like us.

the money supply is directly under the control of the federal federal reserve bank and it is the government policies that are driving the dollar where it goes. The unfunded programs of the government and the like are the problem. Short of printing more money (inflation) the government has not left itself many options. I am tired of hearing that the problem lies somewhere else:eek:

holsgo wrote:It's not the government that causing deflation. It's a bubble in the credit market. This collapsed as all bubbles do. So no, it's impossible to be a tax. Remember, everyone rode the wave up, now it's everyone's turn to ride it down. You can call it what you will, a tax then, but if that's the case 320 million people will see this tax. But it is not to the govt interest to have deflation. Deflation equals less tax thus an unpaid debt the government has no tools to get out of. Ps, it's not just us. Watch Greece. That's deflation...and it looks surprisingly like us.

Yes look at Greece. If we as a country & monetary system don't quit spending more than we have we will have Greece's problems. In fact I believe we must have corrective steps taken now, even if it hurts to avoid their problems.

You are damn right it is not in the government's interest to have deflation (for exactly the reasons you suggest) - why can't you see that inflation gives them taxes they don't even have to levy(hidden)?

The term "printing money" (which is actually the government using bonds to create the debt it has) is not inflation but a tool to combat deflation. The problem lies everywhere not the fed necessarily. From the debt Bush inherited then increased via a war. To the collapse that Obama inherited and the Fed has tried to stimulate its way out of. All of this is the government debt including every Social Security check, medicare medicaid payment and assistance to every broke state. The Fed didn't start the problem....the american way of government spending and american expectations of govt programs did. Most cuts will hurt badly, retired, working, bankrupt etc...it will be painful.