IMF proposals to bail-out government!!!!!!

[Kshartle]

Ya gotta do what ya gotta do, I guess.

I realize that anything can happen and nothing has to happen, I just can't see how the government can ever pay back the purchasing power that gets loaned to it (even if it repays the dollars nominally). I also hear nothing from the fed except how they are going to keep rates low and below inflation for probably a very long time. I believe them. I don't want to fight them, I'd rather profit from their actions.

If next week Yellen says they are going to start shrinking their balance sheet, raise rates and fight inflation I will sell all my stocks and hold just gold and cash because I expect the inflationary boom to end in deflationary crash.

I'm comfortable with the volatility that comes with a concentrated portfolio. Despite the bumps my 12 month return on all investments is over 18%. Of course I took a pounding in the couple months before when gold dropped 400 in two months or whatever 

It doesn't get paid back. It only gets serviced. Because it is a government, not a household that needs to retire someday, they can afford to look at debt very differently.

If it never gets paid back....and I agree with you.....every new loan to the government, every dollar increase in principle is essentially a gift. It's an interest only loan that the borrower never repays. It's also an adjustable rate. It's also growing.

The government can afford to look at it's debt in anyway it wants because no one is personally responsible for it.

That's of little consolation to the lenders though and my point is the lenders will continue losing purchasing power by loaning it to the government, which cannot repay it.

[Pointedstick]

If it never gets paid back....and I agree with you.....every new loan to the government, every dollar increase in principle is essentially a gift. It's an interest only loan that the borrower never repays. It's also an adjustable rate. It's also growing.

Individual bold holders do get paid back. If I buy a government bond, eventually I will get my principal back.

Now, the idea of endlessly-growing debt implies that eventually, someone won't get paid back. Sure. But answer me this: if the Fed at that point is buying 100% of the debt, and the government defaults on the Fed, does anybody care?

[Kshartle]

Now, the idea of endlessly-growing debt implies that eventually, someone won't get paid back. Sure. But answer me this: if the Fed at that point is buying 100% of the debt, and the government defaults on the Fed, does anybody care?

Yes because the belief that the loans from the fed will get paid back are tempering inflation expectations. If the market realized the fed balance sheet would never be reduced the dollar would plunge or at least drop.

There is a belief that the balance sheet has been increased only temporarily. The fed has kept saying it has an exit strategy...it does not.

[murphy_p_t]

Now, the idea of endlessly-growing debt implies that eventually, someone won't get paid back. Sure. But answer me this: if the Fed at that point is buying 100% of the debt, and the government defaults on the Fed, does anybody care?

What is the market value of a paper Federal Reserve Note (aka US$1) if this should happen?

[Kshartle]

Now, the idea of endlessly-growing debt implies that eventually, someone won't get paid back. Sure. But answer me this: if the Fed at that point is buying 100% of the debt, and the government defaults on the Fed, does anybody care?

What is the market value of a paper Federal Reserve Note (aka US$1) if this should happen?

No telling but it would certainly drop because the 4 trillion or whatever the fed holds is supposed to be extinguished at some point. When the market realizes they will never exit or reduce their holdings the deflationary expectations will be replaced.

In my opinion.

Ohhh the answer is it will still be $1 but certainly it will buy less of just about anything else