4 ms·

Under gold standard, debt = savings, correct. But with government fiat, I not sure thats the case. Fed bought what, billions of USG debt, without saving this mo

Under gold standard, debt = savings, correct. But with government fiat, I not sure thats the case. Fed bought what, billions of USG debt, without saving this money first, they just printed it. Its not like they earned that money and instead of consumption they invested it into federal debt.

quadrangle 9y ago
No, one party's debt is still another's savings basically, even with a fiat currency. These caveats apply: * If we're talking private debt or debt from governments other than the fiat-issuer level then there's some risk of default which means the savings could be lost. * Without a gold standard, increase in fiat currency can diminish savings through inflation. But simply: savings in gold ≠ savings in fiat currency, but they are both savings still.
- dragonwriter 9y ago
  > Without a gold standard, increase in fiat currency can diminish savings through inflation. That's true with a gold standard as well, since all that means is that printed currency is backed by a peg to gold, usually with some form (perhaps not open to all currency holders, though) of redemption pledge. It's even true with non-debased gold currency, not just gold-backed representational currency, as demonstrated by the Spanish colonial experience.
  - quadrangle 9y ago
    Oh sure, inflation can happen with gold too, like when we find more gold…
nerfhammer 9y ago
They don't just buy and print ad naseum. Remember, when the Fed buys a bond from the Treasury money gets printed, but the Treasury has to pay the bond back and as that happens slightly more money gets destroyed. The amount of debt the Fed owns changes over time, it doesn't increase continuously. It tends to just maintain a fixed amount of it. It's been going down slightly lately: https://fred.stlouisfed.org/series/TREAST https://fred.stlouisfed.org/series/TREAST
jganetsk 9y ago
Finacial liabilities of the Fed (physical currency and bank reserves) are financial assets in the private sector. Therefore, yes, debt = savings.

quadrangle 9y ago

No, one party's debt is still another's savings basically, even with a fiat currency. These caveats apply: * If we're talking private debt or debt from governments other than the fiat-issuer level then there's some risk of default which means the savings could be lost. * Without a gold standard, increase in fiat currency can diminish savings through inflation. But simply: savings in gold ≠ savings in fiat currency, but they are both savings still.

dragonwriter 9y ago
> Without a gold standard, increase in fiat currency can diminish savings through inflation. That's true with a gold standard as well, since all that means is that printed currency is backed by a peg to gold, usually with some form (perhaps not open to all currency holders, though) of redemption pledge. It's even true with non-debased gold currency, not just gold-backed representational currency, as demonstrated by the Spanish colonial experience.
- quadrangle 9y ago
  Oh sure, inflation can happen with gold too, like when we find more gold…

nerfhammer 9y ago

They don't just buy and print ad naseum. Remember, when the Fed buys a bond from the Treasury money gets printed, but the Treasury has to pay the bond back and as that happens slightly more money gets destroyed. The amount of debt the Fed owns changes over time, it doesn't increase continuously. It tends to just maintain a fixed amount of it. It's been going down slightly lately: https://fred.stlouisfed.org/series/TREAST https://fred.stlouisfed.org/series/TREAST

jganetsk 9y ago

Finacial liabilities of the Fed (physical currency and bank reserves) are financial assets in the private sector. Therefore, yes, debt = savings.