ChrisMartenson.com

[stone]

From the break down of Bretton Woods until the mid 1980s, Australia did not link bond issuance to deficit spending. They deficit spent and issued bonds but choose the amount of bonds to issue on the basis of "liquidity management".

Lone Wolf, don't you agree that the amount of base money does not have a fixed connection to the M1 or M2 money supply? Banks produce the M1 and M2 money supply that they want based on what demand they can drum up for loans that they consider will get repaid / they manage to keep from going bad.

[moda0306]

LW,

If we printed up enough to pay off all of our national debt, that means that instead of 14 trillion of bonds yielding somewhere between 0% and 3% for savers (most of which you've said yourself are short in duration... everything 5-year and under is yielding less than 1% interest), we'd have $14 trillion in figurative greenbacks being held by savers... foreign and domestic... deciding what on earth to do now that they aren't collecting their pathetic interest.

I almost feel like a fool saying this, but I'm not totally sure it WOULD result in very high inflation... if so, maybe not for all the reasons we think (maybe because a world without risk-free rates to set a floor is scary for the financial sector). QE hasn't done much get banks loaning reserves or people spending cash.  If people are willing to park their $$'s for 5 years at .8%, are they going to go buck-wild spending if they're traded cash for their bonds?  How about people loaning the gov't money for 1 year at .11%?  I don't think so... they'll still want to save their financial assets, just as you or I would if the bank cancelled our CD's and gave us cash back.

Unless the mere existence of that much legal tender vs short-term debt would spark a self-fulfilling panic... maybe that's the purpose of the bonds in a fiat currency world... simply to hold the pause button on cash and disallow spending for a certain period, not allowing those panics to take place.

I guess I don't get it... on one hand you're saying the US can print it's way out of debt, but then you say that we'll be in a fiscal pickle if rates rise, and "what do we do then?"  Inflation, and moreso the instability and lack of confidence it may cause in the markets, truly appears to be the only real problem.

[stone]

Much of the stock of the bonds is held by banks. Banks can make loans anyway out of thin air. If a bank has $10B in bank reserves instead of $10B in bonds, it will be no more inclined to make loans when what is limiting the loan book is the lack of creditworthy borrowers IMO.

[moda0306]

stone,

Sometimes I forget you're from Great Britain... you seem to pay a lot of attention to the US monetary system.

[Gumby]

The Treasury could simply mint a multi-trillion dollar platinum coin, coordinate with the Fed, and be done with the whole matter. I think that highlights the ridiculousness of our so-called "debt" problem. But, doing that would take away Congress's ability to pinpoint where money is spent into existence, and Congress would likely be highly critical of such a maneuver — even though it could easily be done without creating inflation.

You're probably (hopefully?) being facetious but I've actually seen this "trillion dollar platinum coin" idea floated as a serious proposal.  Incredible.

As for "without creating inflation", I could not disagree more.  I'm not sure how you figure that printing up $15 trillion in order to overpay for 15 platinum trinkets and then using this money to pay off the national debt would not result in inflation.  I can't see how this action would result in anything but destruction of the currency.

I am amazed that you don't see any danger in what you're suggesting (even setting aside the separation of powers issues inherent in granting the Executive Branch the power to create infinite numbers of dollars to use however it wishes.)

I'm not being facetious. People hold Treasuries because they have a desire to save. If we replaced Treasuries with pure dollars, the desire to save would not vanish. People would just demand another instrument to save with — a government CD for instance.

Even if people suddenly decided to start spending wildly (and I still can't imagine why they would) our economy could easily satisfy the demand with new jobs.

Is it possible that the government could spend so much money into existence that unemployment dropped and inflation took hold? Of course! But merely replacing the world's Treasuries with dollars (i.e. monetizing the debt) wouldn't cause inflation. You are no richer or poorer if you hold $1 million dollars in cash or $1 million in Treasuries. Your desire to save would remain constant either way.

By the way, only Congress has the ability to choose what the Treasury spends money into existence on. Even if the Treasury monetized the debt with a platinum coin, only Congress would still decide who gets what with future seigniorage-based spending. The Executive branch doesn't have the power to decide how money is spent into existence.

[moda0306]

Gumby,

I agree 99%!!, but if people we accepting .11% on 1 yr bonds, isn't that an indication that they're 99% looking to save and 1% seeking income?  Would they even seek out non-treasury debt in droves as opposed to just holding greenbacks?

[stone]

moda, I think what I was saying applies just as much to the UK, Sweden, Japan, Malaysia, Singapore, Iceland, New Zealand etc etc as to the USA. A lot of countries now have free floating fiat currencies. The euro zone is a weirdness all of its own. Pegged currencies such as the Yuan are also not that typical (but used to be the norm a couple of decades ago). The unique thing about the USD is that it is used much more as a global reserve currency than any other currency is but I thought that what was being said here was about the workings of any free floating fiat currency.

[MachineGhost]

Gee, this all sounds like...  deflation a.k.a. loss of future confidence.  See Japan.  As always, the government is the #1 problem.

MG

LW,

The 70's are definitely something I don't think the MMT'ers have addressed with sufficient detail, but we're not in the 70's... we're borrowing at somewhere between 0%-3% and have unemployment at 9%.

We have savers seeking interest, but not getting it because households & businesses don't want to borrow/expand (outside of short-term payroll loans).

We have businesses seeking demand, but not getting it because people's balance-sheets are a mess and they might lose their job.

We have people wanting to work, but not getting it because the private sector doesn't have enough demand for their products and services to hire everyone.

Maybe the gov't should continue to borrow at between 0%-3%, hire construction workers for the cheapest they're likely to be, and build/improve the things WE KNOW we want gov't to build/improve eventually as the economy grows, instead of letting labor, machinery & capital go to waste just sitting around.  This isn't about getting the gov't into healthcare & postal work... it's about creating an environment where gov't does the things its supposed to do well (build infrastructure) while simultaneously keeping the currency such that our people can engage in enough economic activity to prevent misery.

The 70's saw a strain of real resources' ability to keep up with demand.

Today we have real resources sitting around waiting for something to do.

This debate may seem like it's around currency, but it's all about real products and services, and our ability to produce much more than our currency will allow us to consume at this point... so we've been reduced to bartaring and high-unemployment.

[Lone Wolf]

I'm not being facetious. People hold Treasuries because they have a desire to save. If we replaced Treasuries with pure dollars, the desire to save would not vanish. People would just demand another instrument to save with — a government CD for instance.

If we printed up enough to pay off all of our national debt
...
I almost feel like a fool saying this, but I'm not totally sure it WOULD result in very high inflation...

Oh man, you guys.  This is important, fundamental stuff.  Let me try to break down why this "free lunch" isn't free.

First crucial point -- Treasury securities are IOUs, not money in the sense that you can use them to buy things at the grocery store.  They are a form of bond, and the whole idea of a bond is that you are saying, "I will forego using my purchasing power for X period of time.  Instead, I will allow you to use it on condition that you pay me back later."  The issuer of the bond can buy stuff with that money and the holder of the bond can't (unless you sell the bond to someone else for actual cash.)

In short, a bond holder lent the bond issuer a dollar.  Under normal circumstances, when the bond matures, the bond holder gets a dollar back from the bond issuer.

You have fundamentally changed this.  Now the bond holder gets their dollar back.  But now the bond issuer (the government) keeps their dollar!  I don't think that it can be stated any more plainly than this.  That's monetary inflation stripped absolutely bare.  There's more money here than there was before.

Now we have all of these new dollars that were formerly used to purchase Treasury securities.  That money is going to be spent on something.  Anyone holding these dollars must purchase goods, assets, or services denominated in US dollars.  This may be corporate bonds, stocks, food, oil, copper, real estate, you name it.  I really don't know.  But those dollars are going to flow into some asset somewhere and start bidding that asset's price up.  Whether the holder of the dollar is looking for food to eat or a positive rate of return, they're going to buy something.

In short, the dollars flow in and US assets and goods flow out.  Your existing dollars are going to compete with this new stock of dollars.  The person from whom these assets are purchased now has money that he didn't have before.  This individual will now spend these dollars to buy whatever assets they desire.

Consider: the current monetary base is something like $2.6 trillion.  Do you seriously believe that you can add $15 trillion to it (increasing it to 7 times its current size!) without causing horrific inflation?

If MMT is leading you to the conclusion that we can simply "print up" the national debt, I think it is actively harming your understanding of economics.

[moda0306]

LW,

In a world starved of mediums of exchange (and without legal tender laws... let's just set that aside for a moment), bonds, especially in the short-term variety, could very well be used as money.  It's one piece of paper for another of almost identical value... but one has a contract to pay interest for a period of time... in our case, pathetically low interest, making it almost identical to cash in hand (given, sans legal-tender laws).  Your description of it being a trade off of one persons consumption vs anothers is valid... but it's the POINT of expansionary monetary policy that when factories are UNDER capacity that we give people more means to purchase.  

The person from whom these assets are purchased now has money that he didn't have before.  This individual will now spend these dollars to buy whatever assets they desire.

This is where I think you and Gumby/me are disagreeing fundamentally... dollars are a form of savings not all that different than bonds.  In fact, the very act of issuing debt is considered to be expanding the money supply, but at the hands of the private sector.  Expansion of credit allows economic activity to happen now, putting peoples' skills and other peoples' capital together to form prosperity.  In a asset swap scenario, instead of loaning the money for interest you just keep it.  Like I said, if a bank were to redeem all of its CD's prematurely and you, me and every CD holder now had cash earning 0% interest instead of a CD at .4% interest, would that fundamentally change our balance sheets?  Why would we go out and spend just because our balance sheets have assets of a slightly shorter-term nature? Wouldn't we still want to save, whether or not we're getting some measly interest?

We don't borrow money to the gov't to guarantee someone is foregoing consumption... we loan money to the gov't to collect interest on a financial asset that would otherwise not collect interest.  In fact, the very idea of monetary policy is to increase consumption when unemployment is high and factories are under capacity and could easily produce more wealth without creating inflation.

When that interest is .1% on 1-year debt, it's reasonable to say that they're almost interchangable, and that if legal tender laws and common practice didn't prohibit it, there'd be nothing preventing us from trading 1-year treasuries for groceries instead of cash.

Value can be traded for value anywhere in the absence of laws prohibiting otherwise... asset swaps of near identical assets are probably not going to fundamentally change the motivations of individuals.

That said, since we DO have legal tender laws and common practices... a bunch of greenbacks in place of treasury bonds COULD imagineably create a self-fulfilling panic as once-blocked financial assets are now free to roam our shopping malls.

[moda0306]

I guess this is all coming down to the question of WHAT IS a dollar vs a bond?

I see them as similar financial assets, one representing an expansion of credit (bond), the other pure savings (cash)... (actually, not THAT pure, as it requires a functioning gov't).

Our balance sheets come down to several items of value, some of which are financial assets... I tend to view that we could legitimately trade any item of value for economic value in return... even if it's a bond... but choose not to because we wish to save, and money is one of the most effective forms of saving (in spite of inflation, other assets tend to depreciate faster than cash).

Our homes, cars, lawnmowers and even our bodies tend to whither away... we save in things that at least MOSTLY keep their value... 1-3% loss per year isn't the end of the world... if we can loan our savings to someone that expansion of credit can deliver us REAL return, which is always nice.  But in reality, we could trade anything of value for someone's work if they are willing.  It's just that it's most efficient to do this with greenbacks, not bonds or a lawn mower.

LW seems to think that financial assets in bond form by definition means halting consumption... yes, it's an asset, but you seem to think that there is an implied "non-marketability" of a bond that you can't go take your Die Hard bearer bonds out and hire someone to come build you a shed with it.  You also can't take your SHY fund and trade it to Joe the Plumber for some work.

Legal tender laws tend to make that 100% the case, as does common practice, but I don't see any reason in reality that a bond means a halting of consumption... if I want to trade value for services, then let me dammit!!

This is what I think needs to be understood in this discussion: People don't save because bonds pay interest, they save first and foremost because they think that what they're saving will retain most of its value for future consumption at any future point that they deem appropriate.  Cash in the bank or in a mattress accomplishes this.  Bonds put a little icing on this cake, and also function to allow businesses access to capital so they can put their skills to use if they haven't earned money yet, but by no means is it a contract with that business/mortgage broker for me to forego consumption by putting their bond in a figurative safe... it's simply a contract to loan money and earn interest.  I should be able to go out and hire a plumber with my bonds if I see fit.

[stone]

Lone Wolf, do you not see that banks can make loans and that is why M1 and M2 not only are massively larger than M0 but what is more do not increase in proportion to increases of M0? You seem to be describing a world (very different from our current system) where M0 constitutes the money supply. I think there is a good argument for examining whether it might be preferable to just use base money but that would be a very radical departure and in effect would mean dispensing with banks. Our system has a M1 and M2 money supply that is determined by banks with little regard or influence from the M0 money supply.

[moda0306]

I think this is my favorite discussion yet... I think we should be fed governors after we're done with this.  Even you, stone... even though you're remoting in from GB.

Arrogance: off.

[Lone Wolf]

Like I said, if a bank were to redeem all of its CD's prematurely and you, me and every CD holder now had cash earning 0% interest instead of a CD at .4% interest, would that fundamentally change our balance sheets?

Hang on now!  There it is.

Normally, when your CD matures, the bank gives you $100 in cash from its vault and your $100 CD disappears.  You can call that a "swap".

That's not what you're proposing.  You are eliminating the part where the bank pays you back with money it actually has on hand.  If you "print it up", it's like the bank redeems your $100 CD with a $100 bill that it cooked up in the basement printing press.  The $100 you just got back early is now competing with the bank's $100 for the stock of real goods and assets.  That is not a swap.  That's inflation.

If you now use that money to buy yourself a stereo, invest in a corporate bond, buy gold, oil futures, stocks, or whatever, the bank still has $100 with which it can compete for the same stock of goods and assets.

[moda0306]

LW,

Where's the $14,000,000 the US gov't "still has?"  Where did the first bonds "come from"?  They were all made from nothing, backed by the promise of the gov't to throw us in jail if we don't pay taxes.

In fact, it has infinite $$'s already, right?

Step 1: Money's "printed" out of thin air and distributed, the value of which is backed by IRS clout.. Let's assume $1 Trillion.  People start building up "savings," mostly not at interest.

Step 2: $100 billion in Bonds are "printed" and traded for "printed" cash, fulfilling the will for people to save and earn interest.  The money supply, as soon as it is "destroyed," is re-expanded through deficit spending in the same amount because we're using old laws to define how to spend money.

(PS, THIS is when the money supply is truly expanded in my book... since debt is money... now both savers AND recipients of gov't spending have pieces of paper of value on their balance sheets that they could theoretically trade for real products or services).

Step 3: Money is "printed" and traded for the bonds to lower rates, but there you've just traded Green money for a different kind, both of which can be saved and (theoretically) spent. 

People CHOOSE not to spend either (see bank reserves today) because of their will to save... NOT because of a measly interest rates or because bonds look too complicated to take to the grocery store.  ALL bonds issued by the treasury were once cash that people/institutions decided to save, and noticed that earning treasury interest was better than none at all.

These assets truly ARE a swap, because they both come from nothing.

The cash AND the bond are both slightly different forms of financial asset that COME FROM NOTHING.

Don't take my caps as yelling... I just dont' like constantly going to the bold and italics buttons.

[stone]

I guess if the M0 is constrained, then liquidity requirements give special value to bank reserves. Perhaps for speculative trading, having very large amounts of bank reserves sloshing about greases the wheels. For the normal economy, I thought that the "special powers" of monetary base rapidly stop being "special" once banks have enough. Having more than enough doesn't give them any impetus to do anything that would increase spending by average Joes does it? They might pass the bank reserves around like a hot potato bidding up the price of other "stores of value" such as commodities, forex or whatever. Now monetary base earns a small rate of interest. That in itself makes it even more suitable as a store of value for saving just like short term bonds.

[stone]

Since we are quibbling about what MMT says about how the money supply comes about, this is from the horses mouth:
http://bilbo.economicoutlook.net/blog/?p=14620
"So what role do bank deposits play? How does this relate to the MMT claim that loans are just created from nowhere?

Think about what happens when you go to the bank and ask for credit. This is happening every hour of every business day as households and firms seek credit. The loan is a bank liability which can be used by the borrower to fund spending. When spending occurs (say a cheque is written for a new car), then the adjustment appears in the reserve account the the bank that the cheque is drawn on holds with the central bank.

Does the bank’s reserve fall as a consequence? Not necessarily because it depends on other transactions. What happens if the car dealer also banks with Bank A (the consumer’s bank)? Then Bank A just runs a contra accounting adjustment (debit the borrower’s loan account; credit the car dealer’s cash account) and the reserve balance doesn’t change even though a settlement has taken place.

There are more complicated situations where the reserve balance of Bank A is not implicated. These relate to private wholesale payments systems which come to the settlements system (aka the “clearing house”?) at the end of the day and determine a “net position”? for each bank. If Bank A has more cheques overall written for it than against it then its net reserve position will be in surplus.

What does that all mean? Loans are not funded by reserves balances nor are deposits required to add to reserves before a bank can lend. This does not deny that banks still require funds in order to operate. They still need to ensure they have reserves. It just means that they do not need reserves before they lend.

Private banks still need to “fund”? their loan book. Banks have various sources of funds available to them including the discount window offered by the central bank which I explained above. The sources will vary in “cost”?. The bank is clearly trying to get access to funds which are cheaper than the rate they charge for their loans. So they will go to the cheapest funding source first and then tap into more expensive funding sources are the need arises. They always know that they can borrow shortfalls from the central bank at the discount window if worse comes to worse.

So the profitability of the loan desk is influenced by what they can lend at relative to the costs of the funds they ultimately have to get to satisfy settlement. So the price that the bank has to pay for deposits (one source of such funds) impact on the profitability of its lending decisions. As noted in the introduction, at the height of the crisis, as wholesale debt funding sources became more expensive, the commercial banks in Australia turned to a greater reliance on fixed term deposits. The rate they were prepared to pay on these deposits also rose as competition for them increased.

Domestically-sourced deposits are usually cheaper seeking funds on money markets and/or the central bank. You might like to read this article from the March 2011 Reserve Bank of Australia Bulletin – The Effects of Funding Costs and Risk on Banks’ Lending Rates – which explains some of this in more practical terms."

[Lone Wolf]

In fact, it has infinite $$'s already, right?

A mafia don with a perfect counterfeit printing press has the potential to create unlimited amounts of currency.  If he never turns on this printing press, he earns no additional purchasing power and creates no inflation.

In this sense, you could argue that the mafia don has "infinite reserves".  But it's the point at which he actually prints out a crisp pile of Benjamins and starts using them that he creates inflation.

Let's say the mafia don prints up some currency.  He prints a $100 bill and asks you for 5 $20's in return.  Is that just a swap?  Any potential for inflation?  How about if he prints up a million dollars and gets people to make change for him?  Inflation or a harmless swap?

Perhaps he prints enough currency to buy a Treasury Bill yielding 0.10% from you.  Still a "swap"?  How about if he buys a corporate bond from you?  How about a house?  How about if he runs the printing presses hard enough to buy up all of the real estate in the neighborhood?  Say he decides that he wishes to corner the copper and oil markets.

I'm arguing that none of these are swaps but rather actual inflation.  If they are nothing more than swaps, the mafia don's counterfeiting is totally harmless and shouldn't be discouraged.  But we don't allow this.  Why?

[stone]

Lone Wolf, we do allow essentially unlimited money creation by banks. They can loan up any amount of money they want. Inflation or the lack of it is entirely down to who has the new money. If the new money is all in the hands of banks and they were not money limited before they got the new money, then how does that cause inflation? The 1970s had inflation because people with a propensity to spend got extra money. These days all the money goes to people who have a propensity to save. If they simply hoard the money then there will be no inflation. If they swill it about from one bubble to the next, then it could cause commodity and asset price volatility and perhaps asset price inflation.

[doodle]

Is our money system fundamentally different from every other other fiat money system that has resulted in inflation due to resorting to the printing presses to fund excessive government spending and debt?

Why would Voltaire write this..  “At the end fiat money returns to its intrinsic value—zero.”? almost 300 years ago if there wasn't evidence of fiat money systems running into issues?

How is our fiat money system different from all past fiat money systems that collapsed?

Some might say that it isn't tied to gold....but that isn't necessarily a valid argument. Because like it or not fiat money (even with the lack of a gold standard) is tied to the real economy and commodities.

Under  a gold standard you can't print more money than you have backed by gold in the vault. But in our system you can't print more money than you have real goods that you can deliver. You can print as much as you want but it isn't going to bring more oil out of the earth or more copper from a mine.

[stone]

doodle, it is all about whether the government tries to get more stuff done than there is spare capacity for -standing unused waiting to be deployed. In times of war, there is a massive supply shortage. Such supply shortages are behind typical catastrophic hyperinflations. From what I can see, our governments are following a new path where they carefully build up the stock of debt without stretching available supply. I guess it will come to a sticky end but I guess it will be complex. The vast wealth created (more and more billionaires) will distort the economy into having valuable talent working as wealth managers or private jet manufacturers or just standing idle because the billionaires have better things to do than think of something useful for the masses to do. Poverty, strife and enviromental degradation will be perfectly capable of creating a historical lesson about our folly without hyperinflation needing to get involved.

[Gumby]

Gumby,

I agree 99%!!, but if people we accepting .11% on 1 yr bonds, isn't that an indication that they're 99% looking to save and 1% seeking income?  Would they even seek out non-treasury debt in droves as opposed to just holding greenbacks?

The government could offer a Government CD or Savings Bond for savers or for banks that wanted to drain their reserves in a risk free manner.

The idea that Treasury Bonds prevents people from spending their money is totally false. When was the last time someone said their Treasury Money Market fund wasn't liquid enough? It doesn't happen. You can even write a check from one Treasury Money Market Fund and give it to someone who can deposit it in their own Treasury Money Market Fund. The entire electronic transaction would take place in a nanosecond.

Even Harry Browne has said on his radio show, on many occasions, that inflation is not simply about the quantity of the money supply, but rather the demand for money (from banks/deposits).

[moda0306]

LW,

Your swap examples are great for moving the discussion... I'd argue that a mafia don printing $100 and trading for 5 $20's is a swap if he burns the 5 20's... or simply stores them his "vault" until he swaps them back for the $100 (equivalent of the fed holding a treasury bond till maturity)... then he is not creating inflation and it's simply a swap.  The fed holds these bonds, yes, but it doesn't use them like the mafia boss might use the 5 $20s if he tried to go out and buy stuff with it... this is fundamentally different and your examples are perfect to highlight it.  The fed is holding these savings papers with no plan to do anything with them... once they decide to buy widgets or pass the bonds out to the public, then we'll have a problem.  If the boss goes out and spends that hundred or does something with it out in the real economy then you are right.... this is not a swap but an increase in the money supply.  IMO that's the equivalent of deficit spending.

I'd argue that swapping the printed $$'s for a house or other non-financial asset is quite a bit different.  You are now fundamentally affecting the supply and demand for real assets in the real economy.  The gov't wouldn't need dollars to do this... if the gov't were to simply vacate 40% of homes and burn them down... spending zero dollars (except paying the military to burn them) then we'd have a similar problem but with less money in the economy... both burning and/or buying homes with printed money would be a MUCH different situation than if the gov't went out and purchased/destroyed 40% of the treasury bonds out there.
PS, I'm not suggesting they do this in the least.  Homes are to be lived in, while both cash and the bonds they buy are both financial assets for saving and buying things.  This is really changing the economic makeup of the economy in a way that exchanging marketable fiat paper for marketable fiat paper is not.

What I'm saying is that when the gov't prints dollars to buy back the bonds, it's actually ripping up one form of a person's savings to give them another.  The bond that they sold you with printed money was BOUGHT with printed money... it's simply reversing a transaction that's already happened to give you a different form of savings.  It's actually when they deficit spent that they increased the money supply, not when the QE'd... as that's when they exchanged paper for paper, but then issued more paper to various federal expenditures.  You are arguing almost that a bond should not be able to be used to buy real products and services... I say it should be anyone's right to use any asset they own to do so.

I think what it comes down to is that the fed effectively destroys the bonds it buys... it doesn't reissue them to people as savings or use them to buy anything... that's why QE is a swap.  The fed could very well take those bonds and try to go out and manipulate the real economy if it wanted to (like the mob boss spending his $20's) but it doesn't.  It literally sits on them.

[stone]

moda, your example of burning the houses as a hypothetical way to get hyperinflation is I guess very close to real historical examples of hyperinflation. Zimbabwe, 1920s Germany, 1990s Serbia etc all entailed real stuff going to waste on a colossal scale before that kicked off the hyperinflation.

[moda0306]

stone,

Yes... imagine all the stupid things a irresponsible entity with guns can do in the absence of some sort of justice in a region.

Any issued currency is only as strong as its government is legitimate and responsible.  A country could be on the gold standard, but if it doesn't serve the people properly its currency will implode along with the gov't itself.