Does the United States borrow the money or just print it?

[mediaman007]

We have no money to fund the rebate, but I can't imagine that anyone or any country would think of loaning us any kind of cash. So it begs the question: Are we just printing money? It seems like most prices have doubled in the last 7 years. A glass of house wine used to be about four dollars. Last night at Ruby Tuesdays a glass of house wine was served for $9.00!

[ayeshahaqqiqa]

1. Just print it, I think

guess that is why I prefer the barter system. You know what you get has value.

[DemocratInSoCal]

2. HELICOPTER BEN To The Rescue!!! nt

[enid602]

3. both

Both, I would think. I think they're really about the same thing anymore.

[Tempest]

4. Both

The Treasury issues bonds to foreigners and they pay in dollars for them, and they print money.

They can't print money exclusively for funding because it would make the dollar more worthless than it is now and inflation would be in double digits.

[truedelphi]

15. Inflation is in double digits.

A gallon of gas was $ 1.37 the day of Bush's 2001 inauguration.

It's at $ 3.96 right this minute where I gas up.

Food is shooting up in price over night.

of course, these measures are probably no longer examined by the CPI, but that doesn't mean it isn't inflation.

[Celebration]

5. Well, physically money has to be printed of course

But we have to borrow money to fund our budget deficit--we don't just "print" it to make up the shortfall.

[wordpix]

12. don't forget the $9.2 trillion debt we owe to China, Japan & the Mideast oil sheiks

[Gman]

6. I don't think we know for sure because

they quit publishing the money supply numbers (M1?).

[DemocratInSoCal]

8. M3 Stopped Getting Published nt

[Clear Blue Sky]

7. All of the above.

[A HERETIC I AM]

9. Why do you think no country would think of loaning us cash?

I can't imagine that anyone or any country would think of loaning us any kind of cash.

Why? The fact is, the rest of the world still sees the United States as being an incredibly stable economy as a whole, despite the fact that we experience occasional downturns in our economy. Regardless of opinions on DU to the contrary, it is important to bear in mind that the financial markets in the United States - including the structure of the market for Treasury Securities (Bonds, Notes and Bills), are extremely liquid, well regulated, transparent, very deep and there is a reliable court system in which disputes can be mediated. Investors the world over, from individuals to foreign corporations, Central Banks and Governments have justifiable confidence in this country for several reasons. Among them is the fact that Americans reliably get up every morning, go to work and willingly pay their taxes and do this without burning down the Capitol building or the White House every 4 years. We have a political system that is stable, compared to many major economies and we have regular, non-violent transfers of political power. Also, the government is seen to have virtually unlimited taxing power over the population (which it does) so, while troubling, large Government debt is not seen to be as serious a problem as one might think because the Government can always tax its way out of it over time.

And no, the Government does not simply print money like wall paper when it needs more. Suggesting this is what they do is incorrect, in spite of how many DU'rs think it to be true.

[mediaman007]

10. Thanks for the reasoned reply. I wanted a little more information,

because there isn't a lot of information in the media about the source of our refund. Your reply helps me to understand a little more about our economy.

[A HERETIC I AM]

11. The "rebate" is essentially a tax cut for this year

but instead of you receiving or realizing it in 2009 when you file, you are getting it during this calender year. The SF Gate has a good article on it.

Here are the Google results for "Tax Rebate".

And for the record, I think it is a horrible idea. It is my opinion most Americans who receive this check will do one of two things with it; They will pay down existing credit card or other debt with it or will buy something they probably don't need.

We don't need more tax cuts.

[Art_from_Ark]

13. Yeah, they don't print money like wallpaper

they print it like newspaper inserts.

That's why they quit reporting the M3 figures.

[truedelphi]

16. Thank you for some sanity here.

Wallpaoper, newspaper inserts, etc.

It's not worth what it is printed on, that's for sure.

[On the Road]

14. They Borrow Money by Issuing T-Bills

The US does not simply print money.

[truedelphi]

18. That assumes that there is a market for the T Bills

And of course until the writing became clear for all the other markets in the world to see over the last few weeks, there always has been that market.

But right now, if you have money, in a world of tighteneed credit, why would you go for the USSA when you can go for the Euro or the Franc or for gold?

This video explains a LOT:
http://www.youtube.com/watch?v=3RhnHo3RDfg&NR=1

[gravity]

19. T bills are the safest investing instruments in the world

There will always be a market for them.

[notesdev]

25. are currently perceived to be

There's a difference between being stable and being perceived as stable.

The underlying factors don't justify the perception of stability of T-bills.

Just look at the housing market. Mortgage-backed securities were considered to have a nearly insignificant stability difference in comparison to T-bills. Now they're radioactive, because bills started coming due and people couldn't make good on their promises.

Borrowing forever is simply not a sustainable strategy. We've been able to get away with it for longer than we should have due to our currency's status as the world's reserve currency, but that is fast changing.

[On the Road]

20. Well, That is How the United States DOES Borrow Money

It is conceivable, but not likely, that there will be no buyers for the bonds at some point. Generally less demand simply means that interest rates have to be raised.

There's really no reason for investors to avoid US bonds. Curency can be hedged and the dollar is probably not a bad long-term bet. For all the deficits of the Bush Administration, the US still has a lower proportion of debt to GDP than most other industrialized nations. Since things like the real estate bubble and speculation in derivatives have spread, even the problems that started in the US affect other countries as well.

[A HERETIC I AM]

21. "This video explains a LOT"

Wow, what a shocker! A video produced by and advertising for a precious metals broker.
http://www.mcalvany.com/products.php
Yup, sure explains a lot.

Next, the "Money as Debt" video will be submitted (yet again) as the answer to all questions.

[truedelphi]

23. Well here's a statement regarding inflation from a site that wants to sell people stock

"After that, however, the future gets considerably cloudier. With the Federal Reserve apparently willing to do whatever it takes to avoid recession, credit risk is no longer the primary concern. Rather, it's inflation. And the more money the Fed and other world central banks pour into the system now to bail out the likes of JP Morgan, the greater the risk."

[truedelphi]

22. Regardless of the supposed "security" of the T BIlls

The fact is that they are tied into the value of our currency.

Since our currency is about to go the way of the Weimar Republic's Deutsche mark, I would think that investing in them is probably less than desirable.

When someone like Jim Rogers plans on raising his daughter in Asia, I think it bodes well to consider what is about to befall this country.

[Art_from_Ark]

26. Not to nitpick or anything, but

as a foreign currency collector, I should mention that the Deutsche Mark was the relatively stable post-WWII currency of Germany. The hyperinflation currencies of the WWI and post-WWI era were the Reichsmark, which became the Papiermark (and their unofficial derivative, Notgeld). The Papiermark was eventually demonetized and replaced by the Rentenmark.

[truedelphi]

17. And so the transfer of the wealth continues unabated

With the printing presses churning out the new bills, the inner circle (soemething like one percent of the top one percent) will find themselves owning everything in sight.

But not too worry. The uncomplaining American tax payer will just continue to shoulder the load.

[notesdev]

24. Money and currency are NOT the same thing

You can print all the currency you like but you don't create money by doing so, it is simply stealing a percentage of all the other money that the currency represents. If you quadruple your currency, you don't get four times as much money - you have the same amount of money, but each unit of currency will be worth one quarter of the original value.

So to answer your question... we're not printing all that much new currency, no. There's no need to actually print it when they can create it out of thin air by the tricks you see happening at the Federal Reserve (unconstitutionally exercising Congressional power in the process, by the way).

As far as money, yes, we borrow tons of it, on a scale so large that most people really can't get a good handle on the size of the numbers and what they mean.