Last week, a Chinese rating agency downgraded U.S. debt from triple A and number one globally, to “double A with a negative outlook” and only thirteenth worldwide. The downgrade renewed fears that the sovereign debt crisis that began in Greece will soon reach America.

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4 Responses

  1. Each of your articles is a breath of fresh air, but this one is like doing shots at an oxygen bar.

    You’re the most lucid financial commentator on the web. You have an uncommon quality, your own undeviating common sense. It is Franklinesque in its simplicity.

    I know it is not popular to say anything nice about Ben Bernanke, but we are actually lucky he’s holding the lever. He knows that deflation is the real issue and he’s not favoring the right wing deficit hawks. He learned something through his academic study of the 30’s. I believe he understands money and unlike so many in his class, did not become terminally neurotic when we left the gold standard.

    Ignorant people worry about inflation because their minds are repelled by the idea of paper money. The US dollar is like the tar baby of Uncle Remus. Speculators try to attack it and they just get stuck on it. They can’t inflate it like they did in 20’s Weimar Germany because they are just sabotaging their own returns.

    The US is big, sovereign, and still the reserve currency. Size matters.

  2. This piece is getting some attention and responses at The Daily Paul:


  3. Bobby,

    Posting Ellen’s article in a Ron Paul forum had predicable consequences! Somebody tried to rip you a new one, but failed, I think, by falsely claiming that the greenback was not a true fiat currency, but was issued against bonds sold to wealthy individuals. This was not true in the least. The greenback was not debt , nor was it a “promise to pay” in real money in the future. It was pure fiat currency backed by nothing more than the sovereign power of the US Government.

    To credit Lincoln with the bright idea of the greenback is incorrect. He didn’t like fiat money and was in favor of the banker’s prerogative to generate the nation’s money. For a comprehensive understanding of money, check out “The Lost Science of Money” by Stephan Zarlenga.

    Ron Paul is a man of the 19th Century in terms of his devotion to the gold standard.

  4. Ellen I think you missed the point of Vrabel’s article. You are using it to support your argument that the USA is not really in debt. Vrabel was arguing that the USA is not really sovereign, but that it is beholden to US and international banking interests which have essentially bought off our politicians.

    In order for your argument to work (that the USA is not in debt), the Federal Reserve Bank and the US Treasury would have to be one and the same entity. Arguably they are the same (Fed independence is laughable though; the Fed is allowed to independently continue its looting by the politicians who are either bought off or frightened into inaction by stories of tanks and soldiers in the streets.. can you say Obama?).

    The reality is probably more perverse, that the politicians in DC have been lulled by a multi-generational siren song of the bankers, that it’s been this way for so long that it must be correct to have private banks issue the national currency and loan that currency to the government (to be paid back to the private banks with interest).

    Those banks just need to be pulled into the government and put under more strict government regulation to make things right.. in that you are correct. There is no reason the USA should be paying interest on the creation of its own currency.

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