So much for the "risk-free" nature of Treasuries

[Gumby]

Btw, if the US ever owed foreign-denominated debt, we'd be in serious trouble. Some people believe that our vast military helps persuade the world to accept our fiat dollars.

If the world ever decided to stop accepting dollars, say for oil, we'd have a big problem. But, I also tend to think it would become a matter of national security and we'd probably invade any country that tried to deny dollars for oil. It's a major concern for the nation in terms of national security and I suspect many countries (or at least their leaders) know this.

So, as you can see, I don't believe that the US is impervious to a monetary crises. I suspect something will eventually cause the dollar to falter (though not necessarily in our lifetime). A fiat nation typically is most susceptible to exogenous issues that can disrupt its money supply. But, choosing default for self-imposed political games is just political looney tunes, in my opinion.

[dragoncar]

Btw, if the US ever owed foreign-denominated debt, we'd be in serious trouble. Some people believe that our vast military helps persuade the world to accept our fiat dollars.

If the world ever decided to stop accepting dollars, say for oil, we'd have a big problem. But, I also tend to think it would become a matter of national security and we'd probably invade any country that tried to deny dollars for oil. It's a major concern for the nation in terms of national security and I suspect many countries (or at least their leaders) know this.

So, as you can see, I don't believe that the US is impervious to a monetary crises. I suspect something will eventually cause the dollar to falter (though not necessarily in our lifetime). A fiat nation typically is most susceptible to exogenous issues that can disrupt its money supply. But, choosing default for self-imposed political games is just political looney tunes, in my opinion.

I'm curious why we don't have any foreign denominated debt.  Was this foresight or luck?  Is it because, as you allude to, we have military power and/or are the world's reserve currency?  What are the likely circumstances that would lead us to issue foreign-denominated debt?

I know that's a lot of questions, so feel free to respond generally to my musings if you wish.

[Gumby]

Btw, if the US ever owed foreign-denominated debt, we'd be in serious trouble. Some people believe that our vast military helps persuade the world to accept our fiat dollars.

If the world ever decided to stop accepting dollars, say for oil, we'd have a big problem. But, I also tend to think it would become a matter of national security and we'd probably invade any country that tried to deny dollars for oil. It's a major concern for the nation in terms of national security and I suspect many countries (or at least their leaders) know this.

So, as you can see, I don't believe that the US is impervious to a monetary crises. I suspect something will eventually cause the dollar to falter (though not necessarily in our lifetime). A fiat nation typically is most susceptible to exogenous issues that can disrupt its money supply. But, choosing default for self-imposed political games is just political looney tunes, in my opinion.

I'm curious why we don't have any foreign denominated debt.  Was this foresight or luck?  Is it because, as you allude to, we have military power and/or are the world's reserve currency?  What are the likely circumstances that would lead us to issue foreign-denominated debt?

I know that's a lot of questions, so feel free to respond generally to my musings if you wish.

It's hard to say, but I believe that it has a lot to do with our military might. I think in the decades after WWII we went from a trade surplus nation that hoarded gold to a trade deficit nation that lost gold and realized that our military spending allowed us to secure global trade routes and favorable arrangement with our dollar. Once all of the countries of the world started accepting dollars (and later fiat dollars), that made the dollar a reserve currency. There wasn't a need to take on foreign denominated debt (and who would want to?)

But, I don't think losing reserve currency status is automatically the end of the dollar. The British pound did well enough after it lost reserve status. The problem is if we were to ever owe debt that we couldn't print to pay. But, to summarize, I believe the military is partially what persuades countries to accept dollars. There's probably more to it than that (a generally stable currency, etc.) but I think the military is a significant factor. To over-simplify...we secure global trade routes and provide stability to leaders good and bad in exchange for favorable dollar trade.

[notsheigetz]

I really can't get my head around what is going on here.

I've always been of the opinion that the U.S. would never default on its debt except in an extreme SHTF scenario. I actually still believe that, so what is the point of this game of chicken?

Personally, I'm sitting on about 60k of T-bills that just matured. Normally I would roll them over but here is he U.S. Secretary of the Treasury publicly using the word "default" and I even think I heard him use the word "bankruptcy". Does he expect me go ahead and loan him the 60k  even though he is warning me I might not get it back?

And I'm just small potatoes. What about the big investors like China? Don't we need them to keep buying the debt? It's like biting the hand that feeds you.

Completely baffling. Looks to me like some sort of extreme power play in which the Obama administration is insisting on a blank check from congress for the remainder of its term in office. How far they are willing to go to get it, I don't know but they have already gone farther in their rhetoric than I ever thought they would.

[Kshartle]

Personally, I'm sitting on about 60k of T-bills that just matured. Normally I would roll them over but here is he U.S. Secretary of the Treasury publicly using the word "default" and I even think I heard him use the word "bankruptcy". Does he expect me go ahead and loan him the 60k  even though he is warning me I might not get it back?

And I'm just small potatoes. What about the big investors like China? Don't we need them to keep buying the debt? It's like biting the hand that feeds you.

The US is bankrupt. It's admitting it won't pay if it can't borrow more which is just using your visa to pay your mastercard. It will never pay. The Chinese and Japanese are screwed on what they now own. To think they will throw good money after bad forever is a real leap of faith.

Debt service may have highest priority by law, but the US government ignores it's own laws. Did the GM bondholders get top priority or did the pensions?

Politicians don't care about laws because no one can hold them to account. No one is going to care if they give the Chinese and Japanese a haircut. They will care if medicare, SS, food stamps, military budgets, government pensions, government "workers" etc. are cut.

Thinking the law has a big impact on the Government seems silly. They aren't held accountable by anyone except voters. Votes trump the law. 

[Kshartle]

To service our national debt is something like $25B a month.  The US brings in $200B+ a month.  The priority of payments as mandated by law is debt is serviced first, then defense, then entitlements, and then discretionary spending.

All statements about defaults is a flat out lie, unless they do it on purpose. 

A default is the political equivalent of pushing the "red button" and flipping off the protective cover of laws they are bound to uphold.

It's not just the interest payments that make up the debt servicing. They have to roll over more debt per month than they bring in revenue-wise. They have to roll over trillions. The current talk about default is political rubbish yes. They can prioritize the debt and stay afloat if they cut elsewhere. I don't think anyone in Washington will stand up for the law though, voters come first. That means no cuts to spending ever, until it's clear that's the only way they save themselves.

The real problem happens if rates go up substantially. If they revert to even the historical average since going on a FIAT standard the interest alone will start consuming 50Bn per month, then 75Bn, then 100Bn. Where are they going to get it? Are they going to print 2Bn per year? 3Bn? Do you think the Chinese and Japanese will keep loaning them money if they do that? What does all that printing do to their budget deficits?

Does anyone think the economy is going to get better if all this welfare state stuff continues? Look at the labor participation rate. Look at how many boomers are going to stop working and go off the dole in the next ten years. Good luck with the tax revenues. These are a bunch of people that are going to stop pulling the wagon and instead climb in it.

If they never cut off their dependents their position will deteriorate further.

[Kshartle]

Looks to me like some sort of extreme power play in which the Obama administration is insisting on a blank check from congress for the remainder of its term in office.

How so?  My understanding is that the spending has already been decided upon by Congress.

The Republicans' behavior in all this reminds of the episode of The Office where Michael drives his car into Scranton Lake because the car's GPS tells him to.

Obamacare was passed without a single repuke vote. Many of them were elected specifically on the promise to stop Obamacare. How are they doing anything other than actually making good on their campaign promises?

POTUS has said it's all or nothing. If he doesn't get 100% of what he wants and a blank check he will order the Government to punish the americans and maybe default on the debt. He won't even talk unless the rupukes cave in 100%.

Now the repukes disgust me. I've never voted for them and never will. I consider them both two sides of the same coin. But how anyone can look and say it's the repukes who are unreasonable is beyond me. They've given the president virtually everything he wants. It's like meeting him on the 5 yard line for the coin toss instead of the 50 yard line.

I hope the repuke word doesn't offend anyone. When I defend politicians in anyway it makes me queasy so I needed to change their name a little to keep my own vomit down.

BTW - according to CNN in Sept, public support for Obamacare is below 40% http://blog.heritage.org/2013/09/11/cnn ... -below-40/

[notsheigetz]

What gets me is that according to MMR, as I understand it, comparing a sovereign government that issues its own currency to a household or a business is wrong because it can always pay its debts unless it chooses not to. Surely Mr. Obama and Mr. Lew are not believers in Austrian economics, but hold to this theory do they not? But here they are talking about default and bankruptcy. I can understand it with Obama since he's a purely political animal but for the Secretary of the Treasury to be talking like this strikes me as really irresponsible.

[Gumby]

KShartle, when a bond matures, the private/foreign sector is left with cash and needs to go out and find another T-Bill to continue accruing interest. They want another bond. So, everyone wants the bonds to be rolled over. The more money the government spends, the more demand there is for interest bearing Treasuries to earn interest on those reserves. With each rollover, the net effect is just adding a continuous flow of interest to the private/foreign sector. Of course, people want that interest. So, I don't see the problem. If the government didn't supply that interest, we'd just have to ramp up private credit to receive create those interest payments to ourselves. I don't see the problem. A fiat government can easily pay interest on its own fiat creation.

[Gumby]

What gets me is that according to MMR, as I understand it, comparing a sovereign government that issues its own currency to a household or a business is wrong because it can always pay its debts unless it chooses not to. Surely Mr. Obama and Mr. Lew are not believers in Austrian economics, but hold to this theory do they not? But here they are talking about default and bankruptcy. I can understand it with Obama since he's a purely political animal but for the Secretary of the Treasury to be talking like this strikes me as really irresponsible.

The problem is that the Treasury secretary has conflicting laws to follow. He may be given no choice but to break one.

[Ad Orientem]

It doesn't matter who you loan money to. There is always a risk they won't return it unless you have a time machine and can go into the future to know they will have paid you back.

If I had a time machine, I would go into the past and invest in something more profitable than lending money to anyone.

Otherwise, you're completely correct. 

I would go into the future and buy a sports almanac and prevent guys named Biff from stealing it.

Back to 1921... buy RCA. Sell in August 1929. Then buy US Treasuries and retire to some island where liquor is not illegal and live well.

[notsheigetz]

They're all political animals.

What are you advocating they should do?

Yes they are.

It's all above my pay grade but I would advocate doing what they are probably going to end up doing any way and that is to work out some sort of compromise that lets them all save face.

The bottom line for me is do I roll my T-bills over or not? I'm also at the point of of re-balancing into LT's and I'm not sure whether to do that either.

[Kshartle]

KShartle, when a bond matures, the private/foreign sector is left with cash and needs to go out and find another T-Bill to continue accruing interest. They want another bond.

So, everyone wants the bonds to be rolled over. The more money the government spends, the more demand there is for interest bearing Treasuries to earn interest on those reserves.

Really, they never want to spend it on salaries? They never want to buy assets with it? They never just want to use the cash for something else? Everyone who has a bond that matures always want to buy another treasury regardless of rates, nominal or real?

I hope you can see this is not a true statement.

Everyone does not want everyone else to roll over their treasuries. Even if they did, the rolling over is a problem if the rates go up. That means the government has to cough up more interest.

How on Earth does the government spending more increase the demand for Treasuries? I thought you've argued that government spending increases inflation. How does increased inflation translate into additional demand for treasuries which raises the price and lowers the interest rate?

[Ad Orientem]

Strictly speaking, the danger of an actual default on US Treasury debt is pretty low in the near term. But the good news definitely stops there. While there will be enough money coming in from ordinary tax receipts to cover the interest on US bonds for now, there is no where near enough to run even minimal essential services beyond that.

When considering what we need to spend money on, Government expenditures can be ranked into three tiers by priority. The top tier is the national debt. This is covered by language in the 14th Amendment which IMHO means the debt gets serviced before anything and everything else. Period. After that we have so called non-discretionary spending. These are programs that are required by law to spend certain amounts of money. Think Medicare. And then we have discretionary spending which pretty much covers everything else, like law enforcement, air traffic controllers and national defense. We probably have enough to cover the first two tiers of priorities without more borrowing. After that though, there will be damned little left over.

So we are talking about the immediate imposition of a level of austerity the likes of which would almost certainly be devastating economically and create serious risks to public safety and national security. And while our bonds are safe, contractors and vendors who are owed money by the US Government would be in the bottom tier of spending priorities for our suddenly balanced budget. They may be waiting a while until they get paid.

The ripple effects of this will be like an economic bomb going off. And it will get worse quickly. As the economy plunges into another recession, possibly including another panic on Wall Street, tax receipts are going to start dropping rapidly. This is going to mean that we are going to have to rebalance our budget on an almost month by month basis with ever deeper cuts in non-discretionary spending. Which in turn will have worse and worse effects on the economy causing further drops in tax revenue... repeat until sanity returns.

[moda0306]

My question is whether Obama, Lew, and the Bernanke are going to issue the trillion dollar coin or have the fed directly fund the treasury, or whatever.

I certainly see it as a possibility that they would not.

However, this leaves usin a scenario where we have to decide how to invest.  The easy solution to me with the cash portion is to just take it out in pure cash, diversify into an FDIC-insured savings account (though without treasuries being stable who knows where that leaves our banking system). 

LTT's are another story.  Last time, in the face of the debt-ceiling, the only duration to get hit was STT durations falling in the supposed area of the debt-ceiling, but the rest went down (and that duration that got hit was minescule hit to say the least).  Who knows if an ACTUAL default or a closer-to-default would shock long-term rates up.  It could be massively deflationary, and without knowing specific durations that carried that risk, the rest of the yield curve could drop in general.

This is such an odd, multi-pronged macro-event that it's hard to tell exactly what will happen with a fiat currency.  Sometimes pressing hard on the gas can kill an engine... sometimes it can make it run super fast.... sometimes it can make it run so fast that it explodes and kills the engine.  Our currency/debt system is the same, it seems to me, when faced with such uncertainties.

I really think it's at least exploring the idea of adding some other sovereign fiat long-term bonds to our portfolios.  A little Japan and Great Britain, maybe?

[Gumby]

KShartle, when a bond matures, the private/foreign sector is left with cash and needs to go out and find another T-Bill to continue accruing interest. They want another bond.

So, everyone wants the bonds to be rolled over. The more money the government spends, the more demand there is for interest bearing Treasuries to earn interest on those reserves.

Really, they never want to spend it on salaries? They never want to buy assets with it? They never just want to use the cash for something else? Everyone who has a bond that matures always want to buy another treasury regardless of rates, nominal or real?

I hope you can see this is not a true statement.

Sure it is. If you decide not to renew your treasuries, you spend the money, the dollars are transferred to another bank and now another bank needs to buy Treasuries with those new reserves. Your inability to see this is because you are only thinking if the micro and not the macro.

How on Earth does the government spending more increase the demand for Treasuries? I thought you've argued that government spending increases inflation. How does increased inflation translate into additional demand for treasuries which raises the price and lowers the interest rate?

More dollars competing for more Treasuries. It ends up being pretty much a wash. The Fed tweaks the amount of reserves to hit the desired interest rate target. Whether you want to believe it or not, the private/foreign sector needs Treasuries to earn interest on a macro level without relying in private credit to provide it.

[moda0306]

Why don't they just cut some other budgets? The debt service is paltry compared to the other expenditures. What will happen when the debt service is triple or quadruple? What will happen if interest rates rise by three or four points for a couple years, the debt is rolled over and now the deficit has another trillion tacked onto it just from interest? They won't be able to cover it in taxes. They will have to print. The printing will cause the prices of their other expenditures to go up and put even more pressure on rates. Their position will just continue to deteriorate.

Does anyone else think their situation looks hopeless? None of them have the individual political will to stand up and be the one to tell seniors, welfare recipiants, the military, millions of government "workers" etc. that they can't be paid, won't be paid, forget about the pensions etc.

They cannot get out of this mess. The printing press will not save them and borrowing more will not save them.

Incidently, only an organization as pathetic as the government could afford to tempoarily lay-off "non-essential workers" until it could borrow more money to pay them. Pathetic. What organization has "non-essential workers"?

Imagine Apple saying it needs to lay off workers until it can float enough bonds to cover their salaries. What a joke that would be. The stock would be zero. How obvious does it need to be that this is just a big parasite on the economy? - ahhhh but that's another thread.

Don't you think the government can simply choose to issue more short term debt if it is really worried about interest rates? It's not like it needs to issue all it's debt in 30 year treasuries. Or maybe the Treasury realizes that it's job is to issue as much debt as Congress instructs it to issue — and at various maturities to serve the private sector.

Keep in mind that Treasuries play a role in the financial system beyond funding the government. They are basically little savings accounts for the private sector and many funds and institutions are required to earn their interest payments from them.

They are issuing short term debt. That's the point. The average maturity on the debt is low. A very high percentage needs to be rolled over every three years. It's a gigantic adjustable rate mortgage. The more they borrow and the shorter the maturity the more dangerous their position. Printing to make up their deficit makes their costs go up and puts upward pressure on rates. Both increase the deficit and exacerbate the problem.

Wait... now printing has upward pressure on rates?  I thought printing was "holding rates artifcially low" to a significant degree.

[moda0306]

Btw, if the US ever owed foreign-denominated debt, we'd be in serious trouble. Some people believe that our vast military helps persuade the world to accept our fiat dollars.

If the world ever decided to stop accepting dollars, say for oil, we'd have a big problem. But, I also tend to think it would become a matter of national security and we'd probably invade any country that tried to deny dollars for oil. It's a major concern for the nation in terms of national security and I suspect many countries (or at least their leaders) know this.

So, as you can see, I don't believe that the US is impervious to a monetary crises. I suspect something will eventually cause the dollar to falter (though not necessarily in our lifetime). A fiat nation typically is most susceptible to exogenous issues that can disrupt its money supply. But, choosing default for self-imposed political games is just political looney tunes, in my opinion.

Gumby,

Some excellent examples there... I'd add that the foreign debt would have to be of some reasonable significance to likely have any effect... and I'd add a massive alien invasion to your list of things that cold destroy our currency.

But notice that none of these are dependent on an increase in the monetary base traded for T-Bills.

[Kshartle]

Wait... now printing has upward pressure on rates?  I thought printing was "holding rates artifcially low" to a significant degree.

Bond-buying with freshly printed dollars at the moment is holding down rates by increasing the prices of bonds. You have to believe that printing is inflationary and that it increases the money supply to see how it pushes rates negative and is a negative incentive for people to buy bonds at these prices. I know many don't beleive this. The point is at some dollar level of printing you won't be able to ignore it. If the the deficit steadily increases to 2 trillion, then 3 trillion no one will be able to deny the inflationary effects. It will require more money printing and bond-buying to keep rates low.


Of course that just chases more legitimate buyers out who don't want to lose purchasing power. Increasingly the government and FED are the only printers and buyers of debt. As rates move further negative in real terms no one will be loaning money.

I can tell you that the negative real rates negatively impact the amount of legitimate purchases of dollar-denominated debt people are willing to buy. I am certain of that because I am not buying for that exact reason. I suspect many people invested in stock would much rather own bonds but not at these low yields.


They can't solve their debt and deficit problem by printing it will just get worse and worse. Do they have the political will to try any other method? I think not but I hope I'm wrong.

[moda0306]

I really can't get my head around what is going on here.

I've always been of the opinion that the U.S. would never default on its debt except in an extreme SHTF scenario. I actually still believe that, so what is the point of this game of chicken?

Personally, I'm sitting on about 60k of T-bills that just matured. Normally I would roll them over but here is he U.S. Secretary of the Treasury publicly using the word "default" and I even think I heard him use the word "bankruptcy". Does he expect me go ahead and loan him the 60k  even though he is warning me I might not get it back?

And I'm just small potatoes. What about the big investors like China? Don't we need them to keep buying the debt? It's like biting the hand that feeds you.

Completely baffling. Looks to me like some sort of extreme power play in which the Obama administration is insisting on a blank check from congress for the remainder of its term in office. How far they are willing to go to get it, I don't know but they have already gone farther in their rhetoric than I ever thought they would.

Blank check from congress?  Do you mean "allow the debt to float where it will given congressionally mandated spending and tax law? 

Realize, that the debt-ceiling forces the government to break a law.  Whether it's not spending what was already congressionally mandated, or to default on debt, or to have the fed fund the treasury directly, it HAS to break a law, unless it mints the coin.

If you're not for minting the coin, and you obviously don't like spending, what do you want the government to do?

I agree that Obama shouldn't be talking about default (unless he's saving minting the coin as a last-minute save), but that's because he should be very simply laying out his most preferred legal options, the most valid of which is minting the coin, because it's on of the only ways not to break federal law.

[Kshartle]

Btw, if the US ever owed foreign-denominated debt, we'd be in serious trouble. Some people believe that our vast military helps persuade the world to accept our fiat dollars.

If the world ever decided to stop accepting dollars, say for oil, we'd have a big problem. But, I also tend to think it would become a matter of national security and we'd probably invade any country that tried to deny dollars for oil. It's a major concern for the nation in terms of national security and I suspect many countries (or at least their leaders) know this.

So, as you can see, I don't believe that the US is impervious to a monetary crises. I suspect something will eventually cause the dollar to falter (though not necessarily in our lifetime). A fiat nation typically is most susceptible to exogenous issues that can disrupt its money supply. But, choosing default for self-imposed political games is just political looney tunes, in my opinion.

Gumby,

Some excellent examples there... I'd add that the foreign debt would have to be of some reasonable significance to likely have any effect... and I'd add a massive alien invasion to your list of things that cold destroy our currency.

But notice that none of these are dependent on an increase in the monetary base traded for T-Bills.

What would you consider destruction of a currency? The complete rejection of it's use or a drop in say...95% of it's value?

[Gumby]

Wait... now printing has upward pressure on rates?  I thought printing was "holding rates artifcially low" to a significant degree.

It's tough keep all those doomsday theories straight.

[Libertarian666]

KShartle, when a bond matures, the private/foreign sector is left with cash and needs to go out and find another T-Bill to continue accruing interest. They want another bond.

So, everyone wants the bonds to be rolled over. The more money the government spends, the more demand there is for interest bearing Treasuries to earn interest on those reserves.

Really, they never want to spend it on salaries? They never want to buy assets with it? They never just want to use the cash for something else? Everyone who has a bond that matures always want to buy another treasury regardless of rates, nominal or real?

I hope you can see this is not a true statement.

Sure it is. If you decide not to renew your treasuries, you spend the money, the dollars are transferred to another bank and now another bank needs to buy Treasuries with those new reserves. Your inability to see this is because you are only thinking if the micro and not the macro.

How on Earth does the government spending more increase the demand for Treasuries? I thought you've argued that government spending increases inflation. How does increased inflation translate into additional demand for treasuries which raises the price and lowers the interest rate?

More dollars competing for more Treasuries. It ends up being pretty much a wash. The Fed tweaks the amount of reserves to hit the desired interest rate target. Whether you want to believe it or not, the private/foreign sector needs Treasuries to earn interest on a macro level without relying in private credit to provide it.

Given that clear proof that the Treasury can never issue too much debt, I can't imagine why anyone is worried about the value of the currency. I mean, whenever you try to get rid of a Weimar mark, or an Argentinean peso, or a Hungarian forint, or any other currency, someone else has to take it from you, so what is the problem?

[moda0306]

Btw, if the US ever owed foreign-denominated debt, we'd be in serious trouble. Some people believe that our vast military helps persuade the world to accept our fiat dollars.

If the world ever decided to stop accepting dollars, say for oil, we'd have a big problem. But, I also tend to think it would become a matter of national security and we'd probably invade any country that tried to deny dollars for oil. It's a major concern for the nation in terms of national security and I suspect many countries (or at least their leaders) know this.

So, as you can see, I don't believe that the US is impervious to a monetary crises. I suspect something will eventually cause the dollar to falter (though not necessarily in our lifetime). A fiat nation typically is most susceptible to exogenous issues that can disrupt its money supply. But, choosing default for self-imposed political games is just political looney tunes, in my opinion.

Gumby,

Some excellent examples there... I'd add that the foreign debt would have to be of some reasonable significance to likely have any effect... and I'd add a massive alien invasion to your list of things that cold destroy our currency.

But notice that none of these are dependent on an increase in the monetary base traded for T-Bills.

What would you consider destruction of a currency? The complete rejection of it's use or a drop in say...95% of it's value?

I have thought about this...

Obviously, the utter 100% ruin of a currency is "destruction."  However, we probably should assign something short of that as a systemic, precipitous-enough event to essentially be currency "destruction," even if 2 years later it still holds 5% of its value.

However, the word "destruction of our currency" is a bit misleading if the cause is really a "destruction of our productive capacity" via alien attack.  I certainly hope that when guns are expensive after an alien attack, we're not blaming Ben Bernanke .

So I'm not so much interested in figuring out a number in terms of "what is destruction," so much as "when does a self-fulfilling inflation crisis catch hold?"  That's the line to be really scared of.  That's where you've broken through self-correcting cyclical bounces and into self-fulfilling chain-reaction destruction.  However, this type of destruction, I feel, is far less likely than Austrians would have us believe.  Further, it's usually not just an issue of printing money, it's an issue of massive corruption, war, foreign debts, and destruction of productive capacity (often interrelated haha).

[Libertarian666]

Wait... now printing has upward pressure on rates?  I thought printing was "holding rates artifcially low" to a significant degree.

It's tough keep all those doomsday theories straight.

The short-run effect of printing is to reduce rates. That's why they do it.
The long-run effect of printing is to increase rates when the printing stops or slows down, because the total amount of capital has been reduced by the waste induced by the incorrect interest rate. That's why they can't stop.