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Is Trump's idea about renegotiating the national debt unconstitional?

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posted on May, 6 2016 @ 11:35 AM
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originally posted by: AugustusMasonicus

originally posted by: ScepticScot
Yes but the dollars are still dollars and still reflect potential future spending in the economy the exact same way as the debt does.


No, they do not. The debt instruments have a fixed value. Hoarded dollars do not. They could be worth more or less depending on the economy.


They have a fixed value denoted in dollars. The 'real' value changes as much as currency does.




posted on May, 6 2016 @ 11:37 AM
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originally posted by: ScepticScot
They have a fixed value denoted in dollars.


There is no fixed value. Currency valuation as financial instrument is a byproduct of numerous other factors and fluctuates regularly. This is a big picture thing, not just an overly simplistic 'dollar as currency' equation.



posted on May, 6 2016 @ 11:39 AM
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a reply to: AugustusMasonicus

If you hold us debt it is denoted in dollars, currency valuation has nothing to with it.



posted on May, 6 2016 @ 11:41 AM
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originally posted by: ScepticScot
If you hold us debt it is denoted in dollars, currency valuation has nothing to with it.


It is denoted in dollars but it is NOT dollars. It is a fiduciary instrument redeemable, at some future date, in dollars. The dollars used to purchase said instrument are now in the economy instead of being hoarded where they would have been generating no appreciable effect on the economy.



posted on May, 6 2016 @ 11:57 AM
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a reply to: AugustusMasonicus

If a Chinese company sells goods to the US and holds its proits as dollars it is money temporarily removed from US economy. If it holds it as debt it is also money temporarily removed from US economy ( in both cases the US has benefited from goods).
What may make a difference is the fact that the debt has been issued in the first place adding funds to to the US economy via government spending. It makes no difference whether the debt is held overseas or not.



posted on May, 6 2016 @ 11:59 AM
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originally posted by: ScepticScot
If a Chinese company sells goods to the US and holds its proits as dollars it is money temporarily removed from US economy. If it holds it as debt it is also money temporarily removed from US economy ( in both cases the US has benefited from goods).


Incorrect. If it is converted to debt instruments those dollars are recirculated.



posted on May, 6 2016 @ 12:22 PM
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Nope, not unconstitutional. Perhaps unethical. What Trump is talking about is coined 'haircut' or write off. It has occurred in the past. Though, most economically feasible countries like the US, UK, Europe, Japan, etc...have only needed to restructure sovereign debt through exchange.  The last big restructuring for America was after WW2. Many countries have renegotiated, restructured, lowered or exchanged their debt with creditors.

Donald Trump is not breaking any laws when he says this, he is just pointing out a loophole in the structuring of our global financing. 

Simple List of sovereign debt crisis 1800-2015. 

List of sovereign debt crisis source

If you want to dig deeper and read it in more detail, straight from the source: 

Sovereign Debt Restructurings 1950–2010: Literature Survey, Data, and Stylized Facts - IMF (International Money Fund) Working Paper PDF 

International Money Fund PDF

edit on 5 6 2016 by CynConcepts because: (no reason given)



posted on May, 6 2016 @ 12:39 PM
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originally posted by: AugustusMasonicus

originally posted by: ScepticScot
If a Chinese company sells goods to the US and holds its proits as dollars it is money temporarily removed from US economy. If it holds it as debt it is also money temporarily removed from US economy ( in both cases the US has benefited from goods).


Incorrect. If it is converted to debt instruments those dollars are recirculated.

Makes no difference. It matters not one jot whether the debt is bought overseas or domestically. The net affect on the economy is the same. What is relavent is the initial transaction of real goods for currency.

If we are taking about the primary market for US debt then the effect is that the debt is issued, not who buys it.

If talking about the secondary market in matters not all. It is simply an exchange between two parties with no effect on the net amount of money in the economy.



posted on May, 6 2016 @ 12:42 PM
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originally posted by: ScepticScot
Makes no difference. It matters not one jot whether the debt is bought overseas or domestically. The net affect on the economy is the same. What is relavent is the initial transaction of real goods for currency.


And after the initial material goods purchase if the proceeds remain in currency form, they are effectively removed from the economy and further circulation, this is cash hoarding.



posted on May, 6 2016 @ 01:24 PM
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a reply to: AugustusMasonicus

Either way it is just deffered spending. The debt is created any way and any affect on the economy has already happened. The goods have already changed hands. The only difference is whether China chooses to hold it dollars as as currency or debt. There is no change to the net amount of either in the economy.



posted on May, 6 2016 @ 01:28 PM
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originally posted by: AugustusMasonicus

originally posted by: JoshuaCox
If we went to war with China, do we pay our debts? Nope


At first, most likely not. After? It would still be difficult to entirely eliminate them and as war is not exactly in the offing, this a rather unlikely scenario.


If China decided " screw you...we are calling in all of our debts!" Do we financially bankrupt ourselves to pay it or give them Alaska as payment?? Nope


China cannot 'call in their debts'. The Treasury Bonds, as debt instruments, have a clearly outlined timeframe as to when they reach maturity. They would lose money if they tried to redeem them early.




My over arching point is, that...

We only pay China more little pieces of paper, if we feel like it is in our best interest. The second it becomes more beneficial to default on the debt, we will.

That's the negative about having paper money only based on the concept that "we all decide to use it." It has no intrinsic value. At the end of the day, it will matter who has the best military... Followed not real closely by population and natural resources. Because a military can take natural resources and kill the population.

We will not let little pieces of paper make us lose our standing as the worlds best military. We will just take some one else's...



posted on May, 6 2016 @ 01:28 PM
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originally posted by: ScepticScot
The only difference is whether China chooses to hold it dollars as as currency or debt. There is no change to the net amount of either in the economy.


Yes there is.

If you have a dollar and stick it under your mattress what do you have a year from now? If you take that dollar and place it in an investment instrument that pays 5% annually what do you have in a year? Also, when you hoard the dollar it cannot be used for anything else. The invested dollar can be turned around and be spent or loaned thereby reentering the economy. Who is to say how many times that dollar will circulate in the ensuing year (velocity of money). Your hoarded dollar has a velocity of zero.

This is basic investment/economics 101.



posted on May, 6 2016 @ 01:29 PM
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a reply to: JoshuaCox

The conversation we are having is not about the merits or pitfalls of fiat currency.



posted on May, 6 2016 @ 01:32 PM
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originally posted by: CynConcepts
Nope, not unconstitutional. Perhaps unethical. What Trump is talking about is coined 'haircut' or write off. It has occurred in the past. Though, most economically feasible countries like the US, UK, Europe, Japan, etc...have only needed to restructure sovereign debt through exchange.  The last big restructuring for America was after WW2. Many countries have renegotiated, restructured, lowered or exchanged their debt with creditors.

Donald Trump is not breaking any laws when he says this, he is just pointing out a loophole in the structuring of our global financing. 

Simple List of sovereign debt crisis 1800-2015. 

List of sovereign debt crisis source

If you want to dig deeper and read it in more detail, straight from the source: 

Sovereign Debt Restructurings 1950–2010: Literature Survey, Data, and Stylized Facts - IMF (International Money Fund) Working Paper PDF 

International Money Fund PDF


Nope, not unconstitutional.

What's your argument for that exactly?

According to the following article, there was one time in history when the US federal government restructured its debt:


The 1933 Default. In the summer of 1933, Congress passed the “Joint Resolution to Assure Uniform Value to the Coins and Currencies of the United States” which declared invalid and provisions of obligations of the federal government which were “purported” to give the creditor the right to require repayment in gold. The Roosevelt administration wanted to depreciate the paper currency, and thought the “gold clauses” contained in various bonds were an obstacle.
Has the United States Ever Defaulted on Its Debt?


Was the US government following the Constitution there?


The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. [...]


I don't know enough about the specifics of the situation and I can't research it right now. The US federal government fails to follow the Constitution all the time. The above case may be unconstitutional but that has no bearing on whether Trump's idea is constitutional or not.
edit on 6-5-2016 by Profusion because: (no reason given)



posted on May, 6 2016 @ 01:48 PM
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a reply to: AugustusMasonicus

The velocity of money under a mattress is 0. The velocity of money in a tresuary bond is likewise 0.
If we are talking primary market for bonds then buying a bond is taking money out of the system. What puts it back in is the government spending ( actually that is oversimplified as it really happens the other way round but we are probably already off topic enough). It therefore makes no difference if the bond is sold domestically or overseas.

The problem with using economics 101 is that it is only economics 101.



posted on May, 6 2016 @ 01:54 PM
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originally posted by: ScepticScot
The velocity of money under a mattress is 0. The velocity of money in a tresuary bond is likewise 0.


Wrong. The velocity of money used for a bond is at least 1 as it was used to purchase the bond. It can go cumulatively higher as it used subsequently used for other purposes.




edit on 6-5-2016 by AugustusMasonicus because: Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn



posted on May, 6 2016 @ 02:11 PM
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a reply to: AugustusMasonicus

Ehmmm not wrong as purchase of financial instruments is not included calculating the velocity of money. (For fairly obvious reasons)
Really really off topic now.



posted on May, 6 2016 @ 02:11 PM
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a reply to: Profusion

Investors buy bonds as an investment and or they will see government bonds as a safe haven in troubled times such as the credit crisis or a market crash.
This of course means that there is no question of writing of debt, no investor will agree with losing money and the interest on bonds would fly through the roof, since it has become a risk, instead of safe haven.

I can't imagine that Trump would come with an idea like that, he himself is a businessman!



posted on May, 6 2016 @ 02:13 PM
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originally posted by: ScepticScot
Ehmmm not wrong as purchase of financial instruments is not included calculating the velocity of money.


Yeah, it does:


The term "velocity of money" (also "velocity of circulation of money") refers to how fast money passes from one holder to the next.



posted on May, 6 2016 @ 02:38 PM
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a reply to: AugustusMasonicus

In economics velocity of money is GDP divided by money supply. Bond purchases would not be included in GDP.



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