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

[moda0306]

But in the end, if you think anything spurred on by government is just "economic activity," and not real "economic growth," I suppose you think South Korea, Japan, Western Europe, Taiwan, Singapore, Manhattan, (on and on and on) are just statist houses of cards of "economic activity."  Is this what you're stating?  Because these economies (most of them, anyway) have governments that spend money on healthcare, control education and currency, build massive statist-manipulated living areas known as "cities," and supply various infrastructural services, and by all common measures are extremely productive.

But that's not "real" productivity, is it?  It's just "economic activity" spurred on by statist goons and carried about by obedient slaves.

This is a combo of a straw man "productive areas that have lots of government are just statist houses of cards" (haven't ever said that) & and claiming correlation implies causation (places that are productive have lots of government, therefore lots of government means you will have a lot of productivity).

This is why logic and reason trump evidence. It's entirely possible that when people are very productive, they attract parasites who try to gain control of the society by promising to redistribute the wealth to the ones who don't have it. Maybe because people are so wealthy because of their high productivity they don't resist the theft of government as much because they're so well off.

The thing is if person A lays a case for why government hurts productivity, and person B trots this "evidence" out to refute it, their false argument derails the discussion every single time while they smile smuggly at their debate victory or whatever. Who wants to constantly respond to this evidence....it turns into a situation where person A has to explain everything in the entire universe. It's endless. It's sometimes reffered to as argument by question or Moving The Goalposts (Raising The Bar, Argument By Demanding Impossible Perfection) The point is if A successfully addresses some point, then he must also address some further point. If B can make these points more and more difficult (or diverse) then eventually A must fail. If nothing else, B will eventually find a subject that A isn't up on

First, as usual, and I mean this, I didn't mean to misconstrue what you meant.

But when you say government spending is a waste and destroys wealth, I'm assuming that these monuments of government spending and investment (called cities) must be inherantly disastrous.

And now you're doing the straw man thing, because I'm not saying having government necessarily MEANS you will have a lot of productivity, but that when put into a symbiotic balance, government can significantly facilitate the creation of wealth.  If the government decides to, oh I don't know, wage massive war and kill millions of a race it doesn't like... it might just end up on the losing end of a war with the rest of the world.

And, again, logic and reason are fine and all, but we're talking about markets here, which tend to move like schools of fish, where everything is co-dependent, so trying to drill down to a perfect logical chain of behavioral prediction is going to be difficult.

If we're talking about personal logic, then we're probably closer to the same page than you think, because I invest in a way that doesn't make the SHTF if I'm wrong about all of this.

If we're talking about how "markets" should work, well then we have to talk in terms of market risk, inflation risk, interest rate risk, curves, expectations, etc, because that's the "logic" of the market: Reduce risk, maximize return, because more is better.

If we're talking about the logic of a societal organization like goverment, then we have to talk in terms of social harmony and systemic risk, or, to be blunt, "where do we have to point the guns to maximize people moving in a harmonious way in a macro perspective."



But if this all comes down to QE, then my question would be, what would a "logical" person do if they woke up, and $100,000 of their T-bills had been converted to cash, and they could only earn .25% instead of .5% on t-bills bought on the market today?

Oh, and let's make that $100,000 into $25,000 because that's what the average person has in retirement dollars.


What would a "logical" bank president do if they woke up, and $1 Million of his .25% t-bills were now reserves yielding .25% interest on reserves?


And this one's for you: What would a logical libertarian do if he truly thought that he was enslaved in the U.S. and didn't think leaving was feasible, but some places were FAR more inherantly "enslaved" (cities in liberal states) than others (rural areas in conservative states).  If you can't tell, I'm asking you where you live, and for a detailed logical analysis.   

Logic takes us only so far in economics and sociology, but if you want to play this game, I can try.

[moda0306]

I don't understand how the debate turned into one about economics / philosophy / logic because while those things are fun to argue about, rarely do they have a real world implication in subjects such as these...

The current government shutdown / impending default / increased treasury risk is not being driven by logic or economic truth it's being driven by a handful of humans with emotions including pride, power, knowledge (lack of knowledge), intention, greed, etc.  Humans, who like us, have thoughts and emotions that are largely influenced by memes, whether they realize it or not.

So as the OP's title states, treasuries can no longer be popularly labeled as risk free - now what?

A few things:

- A label is only as good as a market's willingness to act with that label in mind.  Right now, the market has acted as if treasuries are nominally risk free.  Otherwise, no way would expectations of short-rates still be driving long-rates to 3% over 30 years.

- With that said, I like fundamentals to be with me, not against me (and I'm just relying on the market being stupid), so if we keep the debt-ceiling in place:


We have to completely rethink the PP.  The worlds reserve fiat currency defaulting on debt that was previously deemed to be unable to be defaulted on is a big friggin' deal.

I'd say that the best way is to go with a world-wide PP as far as bond diversification, but you want sovereign fiat currencies, because, as HB and others have pointed out, they move so much better with how the PP works.  Throw in Japan and Britain in with US long bonds and you have a good LTT strategy.

As far as cash goes, just hold physical cash.

However, realize, this strategy is only going to work as long as the market unlinks the US treasury debt as just "savings account with the fed."  We will have completely undone the standard relationship between the fed, member banks, and treasury, in my estimation.



But part of me wonders... if the treasury defaults on SOME of its debt, will it only serve to strengthen the rest in the face of a global or U.S. depression.  We could bee looking at some really crazy things going on economically.  The dollar could weaken in some senses (foreign countries would want to reject our currency), but strengthen it (credit markets could collapse, stifling investment and causing a massive demand crisis.

We're looking at something that could be so fundamentally systemic that it's hard to tell what direction our "rush to safety" will go.

But I'm almost positive LT Bonds of other soveriegn fiat countries that aren't governed by numbskulls is going to be a good safe-haven.

[systemskeptic]

We have to completely rethink the PP.  The worlds reserve fiat currency defaulting on debt that was previously deemed to be unable to be defaulted on is a big friggin' deal.

I'd say that the best way is to go with a world-wide PP as far as bond diversification, but you want sovereign fiat currencies, because, as HB and others have pointed out, they move so much better with how the PP works.  Throw in Japan and Britain in with US long bonds and you have a good LTT strategy.

Very interesting to see you say this, it sort of sounded from some of the threads that things around here were still business as usual?

[Xan]

Xan,

I'm about to e-hug you.  You're saving me here.  Thanks... though I'm sure you don't want/need it .

Moda,

I'll take it!

Kshartle, I probably agree with you politically far more than I agree with Moda.  But what I used to believe and no longer do is that there's One Correct Way to organize an economy.  Certainly there are principles that I believe in, strongly, but Moda has pointed out quite well (months and months ago, before the recent dust-ups) how such arrangements really are largely arbitrary.

Arbitrary doesn't mean that government should be able to do whatever it wants; one example of an arbitrary but worthwhile way to arrange things (at least at the federal level) is the Constitution.  I believe that things like Obamacare, unlimited federal authority, and even going off the gold standard violate the Constitution, and if such things really are a good idea, then that document should be changed via the proper process.  So that's how I like to argue for more limited government in practice.

In theory, though, I recognize that the limits of government are not set down from on high, and somebody who disagrees with me about where those limits should be in theory is not per se wrong.  Now, any given policy suggestion could have positive or negative economic or moral effects, and could be gauged to be better or worse on that basis.  But there is no theory of governance like a theory of gravity (which, come to think of it, we may never fully understand either).

It is NOT in my nature to accept something like that.  I want everything to be predictable, reasonable, laid-out, and according to plan.  But that's just not the way things are.

So, thanks to Moda and others on this forum (and to Craig and Tex for running it!) for their thoughtful discussions of this kind of thing over the years.  I've really grown as a result.

To *completely* bring this full circle and tie in some other discussions going on here, I don't think I could have accepted this (and it would have eventually driven me nuts) if I hadn't become a Christian.  I had to realize that I am NOT in charge, that many, even most things are beyond my understanding, that the world is full of paradoxes (physicists will tell you that too), and most importantly, that the kingdom of heaven is not of this world.  We're just doing the best we can here.

EDIT: Sorry, now we're WAY off topic.  To get back on track, I don't think there will be a default of any kind; this is just another game of chicken, and I think we can still call US Treasuries "risk free".

[moda0306]

i think there is some confusion being made between  argumentative fallacies (or informal logic) and formal logic. Asking to prove an argument about the behavior of millions of people using formal logic is a bit silly, but that's not the request, the request is to add focus to the debate by adhering to the rules of informal logic and avoiding argumentative fallacies.

Well we throw exaggerations and sarcasms and mistakes about what others have said, so straw man's going to get thrown around a lot.

But when I use observations to back my assertions about human nature, especially in the areas of robustness and productivity, I'm being accused of a logical fallacy, when I'm not trying to make a logical statement, but instead an observation to illustrate how unlikely his assertion is to be true... instead of offering some insight as to how such "artificial" economies could even exist for this long.

It's a lot easier to call it a logical fallacy than it is to look around the world and acknowledge that to call government spending a destructive waste is, dare we say, an over-simplification.

But if I can de-rust my philosophy class logical argument construction.... and at the risk of misconstruing Kshartle's arguments, he's asserting the following.

- "Free societies" are the most robust, natural, productive option for a group of people to choose to live in.


Here's my detangling of that assertion.

- Robust and natural things tend to be present in nature for a long time (a rock, a large, healthy tree, a mountain)

---- Therefore, in a world of 7 billion people, and countless territories, if a particular social arrangement was the most robust, natural, and productive arrangement, there would be at least a few around, if not lots and lots of them.

- There are no free societies around, nor have there been in recent memory.

---  Therefore, free societies are not robust and natural.

- High productivity requires a robust social arrangment.

- Free societies are not robust.

--- Therefore, free societies are not highly productive.


Here's another on to try:

- I desire the social arrangement I place myself in to maximize my expected future freedom over my lifetime.

- Free societies are not robust.

- Mixed economies are robust.

- Totalitarian or communist governments offer very little freedom, and are most likely to aggressively challenge the robustness of any free society I try to align with.

--- Therefore, a free society will not likely be the best way for me to maximize my lifetime freedom. A mixed economy is more likely to maximize my freedom over my lifetime, in spite of being an a guaranteed loss of some freedom.

[moda0306]

Simon,

Regarding your statement about what direction you want government to go, while not getting into details about "perfect freedom" because we'll never get there anyway, part of me can agree with this, but as one who sees that various branches of government serve VERY different segments of society, and that this "balance" is actually kind of important, I'd hate to see the following things abolished:

- Taxes
- Welfare
- Social Security
- Medicare
- Medicaid
- NASA
- All regulatory entities
- National Parks

... only to have the remaining stay...

- criminal justice system
- military
- Federal reserve
- Transportation infrastructure
- Recognition/defense of existing "legitimate claims" on private property with police and courts system
- Limited liability on business "entities"
- Mining/drilling rights

But if you gave a lot of "libertarians" the axe with which to chop government, they'd go after list one and probably "get tired" by the time they hit list two.

This is probably a bit harsh, but when I see people get furiously angry about taxes who were never angry while all the poor kids were getting shipped against their will to Vietnam, I know I'm likely dealing with someone motivated by greed, not liberty.

the question isn't so much to axe or not to axe, but how to eliminate the stupidity, corruption waste, incompetence, unintended consequences, failure to problem solve, etc etc...that each of those items listed have associated with them, i might be a very happy "libertarian" if all those items you listed existed without any of the items i listed... on the other hand if any of those items are so hopelessly mired in the items i listed (i suspect more than a couple are) then i would be happy to consider axing or decommissioning them in favor of some new/better or private option.

[moda0306]

We have to completely rethink the PP.  The worlds reserve fiat currency defaulting on debt that was previously deemed to be unable to be defaulted on is a big friggin' deal.

I'd say that the best way is to go with a world-wide PP as far as bond diversification, but you want sovereign fiat currencies, because, as HB and others have pointed out, they move so much better with how the PP works.  Throw in Japan and Britain in with US long bonds and you have a good LTT strategy.

Very interesting to see you say this, it sort of sounded from some of the threads that things around here were still business as usual?

Well this is a very touchy thing... it's really tough to say.  It's a huge confidence thing, but realizing that it's self-induced by our own government, and not a natural market force due to insolvency or even "soft default" of inflation will probably tempt the market to "stare it down" at long as it can, because to question the treasury isn't just questioning the PP, but our entire banking system.

So what would U.S. banks have to win by trying to "reject treasuries" beforehand.


But to take this to a new level:

Let's say we do default on a little bit of debt... what's to say the market's logic will be this:

- For every 1-in-100 units of treasury debt that is defaulted on, it will shock the market into defaulting on 1.2-in-100 units of non-treasury debts in our payments system.

- For every 1-in-100 units of treasury debt that is defaulted on, it will cause .7% less inflation than before.

---- Therefore, treasury debt is still a relative safe-haven, as the mere default-load of 1% in your treasury portfolio causes a more toxic effect elsewhere in the market, and .7% inflation-reduction.

I don't know... this sounds stupid but you get what I mean?  I mean once you have a precipitating credit crisis, who knows what the cause/effect relationship will be.

I'll reiterate, though... two simple moves to still keep a PP but get (mostly) around this:

- Instead of STT's, physical cash!!!

- Instead of 25% LTT's, mix some Japan and Britain sovereign bonds in there.


Anybody else like this recipe?

[Libertarian666]

How about Swiss francs and Swiss franc government bonds? Fidelity can sell both of those. Some of the Swiss francs could be in the form of travelers checks or cash, for that matter.

[moda0306]

i think there is some confusion being made between  argumentative fallacies (or informal logic) and formal logic. Asking to prove an argument about the behavior of millions of people using formal logic is a bit silly (or at least difficult requiring very broad and general premises to be true), but that's not the request, the request is to add focus to the debate by adhering to the rules of informal logic and avoiding argumentative fallacies.

Well we throw exaggerations and sarcasms and mistakes about what others have said, so straw man's going to get thrown around a lot.

But when I use observations to back my assertions about human nature, especially in the areas of robustness and productivity, I'm being accused of a logical fallacy, when I'm not trying to make a logical statement, but instead an observation to illustrate how unlikely his assertion is to be true... instead of offering some insight as to how such "artificial" economies could even exist for this long.

It's a lot easier to call it a logical fallacy than it is to look around the world and acknowledge that to call government spending a destructive waste is, dare we say, an over-simplification.

  my formal logic is from a 101 university class over 16 yrs ago so excuse me if i get this wrong or am unclear, but the above statement in bold is the confusion  i was speaking of, the difference between making a logical statement and making an argument logically, logical statements follow a “true premise plus true premise = true conclusion”? type format.  Making an argument logically (what you were accused of not doing ) means avoiding argumentative fallacies, i would have to spend some time with it and read carefully to be absolutely certain but this time it appears kshartle is right the form of your argument was a fallacy

Logic is a very conclusive art.  You're using hard-fact premises to support a definite conclusion.

I'm not trying to prove anything, but combine observations, philosophies, and facts to support some reasonable likelihoods going forward, or some reasonable assertions about human behavior and motivation, or at least spark some thought that might inspire a response in the form of a hypothesis as to why things are what they are.

Neither of us are dealing in certainties, so we can't use perfect deductive logic.  We have to insert our own observations about things, and that involves things that aren't provable, which means that automatically I could get accused of an Argument from Ignorance.

But there is one trick to all of this, and it's in my logic above... Kshartle is talking about something being ROBUST and NATURAL.

Lucky for me, those words actually lend themselves to a logical conclusion that at first glance might look like "Argument from Ignorance." 

So if Kshartle was saying "The sky is red at night, but you can't see it because there's no light," and I said "What, that can't be... I've never seen any evidence of that," that'd be an argument from ignorance.

But if he said, "Invisible unicorns come out at night and paint people red," and I said, "If that were the case, there'd be some lasting evidence of that, so that can't be," I don't think that's an argument from ignorance.

I'm right, there WOULD be some evidence of that!!

Just like there would be some evidence that a social arrangement is both Natural and Robust, because having those traits would actually imprint itself into the modern world.  Those words actually have meanings that, when taken in combination, imply a logical conclusion that we would see them all over.

"Fairies exist on earth in droves and are very blinding."
"Our hearts are too heavy for our bodies to carry."
"The moon's gravity is greater than the sun's."

Each of these would have a predictable affect on the world around us, but those predictable affects are not present.

See how my "Argument from Ignorance" is different?  If he'd said that free societies raise healthier children, or build better cabinets, or whatever, I wouldn't be able to test his logic by saying "but they're not here so that can't be true," but because he is describing something's likelihood of existence in nature and ability to withstand destabilizing forces, I can build my logical retort on what those traits imply about its likelihood of existence in the modern world.

[moda0306]

How about Swiss francs and Swiss franc government bonds? Fidelity can sell both of those. Some of the Swiss francs could be in the form of travelers checks or cash, for that matter.

If we think inflation will follow the default, which could be (though it could be massively deflationary if the cards fall a certain way), then you're probably right on diversifying currency too.

But yes, any stable, productive country with a sovereign currency.  If you want thos LT bonds to work when you need them to, I can't imagine you could go to wrong.

[moda0306]

Kshartle is talking about something being ROBUST and NATURAL.

depends on what that something was, the effect of freedom on society? or something else? if you are claiming that the effect of freedom on society isn't natural or doesn't add to its robustness because a perfectly free society doesn't exist then its a fallacy. if he brought up the "perfectly free society" then its lack of existence is relevant to the argument...

Simon,

We can agree that freedom contributes to robust societies, I'd hope, but only to a degree... eventually you start stripping away things that will actually hinder future freedom (in my opinion).

Kshartle asks for perfect freedom.  That is his position.  He's pretty close to full anarchist with the exception that he believes in valid property rights (some anarchists don't).

The reason I debate you guys so hard on perfect freedom is to remove the premise that force is inherantly evil, because force is necessary, and just needs to be harnessed.

I can't have discussions about the role of government if, at any time, someone can just fall back on the ol' standby, "but you're holding a gun to my head forcing me to (insert horrible act of slavery here)!"

I'm not going to argue on a premise that I'm essentially, at best, a slavery-sympathizer, and at worst, the guy whipping your back.

We're all on this rock together.  Force a given.  You can't procure something for your own use without taking it out of use for everyone else.  Even "perfect liberty" isn't perfect because force is still present.  We must harness force with the entity called "government" in the most harmonious way possible, to maximize productivity, prosperity, security, freedom and fairness.  Freedom is a state of existence, with no real value unless you put it in context with other states of existence.  If I dropped you into the middle of the Sahara Desert with a note saying "Do whatever you want!  You're a free man!" you wouldn't be able to use that freedom.  However, if I dropped you in NYC with $500,000 to spend and said, "Obey the law, don't piss on the street, and enjoy yourself within the limits of the central planning around you," well, you and some lovely Yankee ladies would have a great time that night.

Simon,

We can agree that freedom contributes to robust societies, I'd hope, but only to a degree... eventually you start stripping away things that will actually hinder future freedom (in my opinion).

i don't disagree with this, however we likely disagree how far we can strip before it happens

Kshartle asks for perfect freedom. That is his position. He's pretty close to full anarchist with the exception that he believes in valid property rights (some anarchists don't).

i am a philosophical anarchist , i see little difference between the foundational principals of liberty and those of anarchy, however i am also a realist, perfect freedom cant exist without perfect people, but as i have mentioned before, improving both the people and our liberty is definitely the direction we should choose to head in

The reason I debate you guys so hard on perfect freedom is to remove the premise that force is inherantly evil, because force is necessary, and just needs to be harnessed.

I can't have discussions about the role of government if, at any time, someone can just fall back on the ol' standby, "but you're holding a gun to my head forcing me to (insert horrible act of slavery here)!"
I'm not going to argue on a premise that I'm essentially, at best, a slavery-sympathizer, and at worst, the guy whipping your back.

"force is inherently evil" is a partial truth, it needs to be separated from force used in defense

We're all on this rock together. Force a given. You can't procure something for your own use without taking it out of use for everyone else. Even "perfect liberty" isn't perfect because force is still present. We must harness force with the entity called "government" in the most harmonious way possible, to maximize productivity, prosperity, security, freedom and fairness. Freedom is a state of existence, with no real value unless you put it in context with other states of existence. If I dropped you into the middle of the Sahara Desert with a note saying "Do whatever you want! You're a free man!" you wouldn't be able to use that freedom. However, if I dropped you in NYC with $500,000 to spend and said, "Obey the law, don't piss on the street, and enjoy yourself within the limits of the central planning around you," well, you and some lovely Yankee ladies would have a great time that night.

this is where we start to really vary, you seem to think using something for your own ends is inherently evil because it robs somebody else of the chance to do so (property is theft / or we all own everything equally somehow) and the way to fix this is use government force (defense from robbery in your mind, the evil application of force in the minds of those you debate) i would far prefer an imperfect but ultimately self correcting free market with the defense of individual property rights over government coercion and redistribution based on some other imperfect humans concept of "fair",
the ultimate goal isn't necessarily different, we all live on the rock and we need to get along and make the best use we can with the stuff we got.

[Kevin K.]

Okay, I waded through the 9 pages of speculation and pontification here and the 13 on the thread about this I started earlier. Now what I want to know is who's actually planning on diversifying their 30 year U.S. Treasuries with long-term British and Japanese debt, and who's planning on turning their T-bills into cash in a bank or under a mattress?

[notsheigetz]

Okay, I waded through the 9 pages of speculation and pontification here and the 13 on the thread about this I started earlier. Now what I want to know is who's actually planning on diversifying their 30 year U.S. Treasuries with long-term British and Japanese debt, and who's planning on turning their T-bills into cash in a bank or under a mattress?

I rolled over some T-bills just last night. I'm also in need of re-balancing into LT's and I've been doing a little here and there as I get up the nerve.

[dualstow]

I've got a bunch due near the end of this month. I should "recycle" them.

[Kevin K.]

My 30 year Treasuries are all in IRA's. At the moment I'm having a hard time seeing any downside to just liquidating them until the default threat debacle is over. I've spent some time looking into ways to invest in UK and Japan treasuries, but I haven't been able to find any ETF's or mutual funds through which to access them. I suppose one could park money in an intermediate maturity international bond ETF like BWX.

[Xan]

The downside is that once the "crisis" is resolved, their value will pop up.

[dragoncar]

The downside is that once the "crisis" is resolved, their value will pop up.

I haven't really noticed that debt ceiling news has much affected LTT either way.

[Robert]

Don't think it works to compare the US Govt to a corporation like IBM or Apple. It doesn't create wealth, it can only confiscate and redistribute it. It's a different animal and those comparisons don't work.

[moda0306]

Don't think it works to compare the US Govt to a corporation like IBM or Apple. It doesn't create wealth, it can only confiscate and redistribute it. It's a different animal and those comparisons don't work.

Robert,

Is a bridge "wealth?"  Does it facilitate the creation of wealth?

[Lowe]

Gov't employees don't build bridges or roads.  They award contracts to construction companies.  They're middle men with a forced monopoly.

Your argument hinges on the necessity of middle men with a monopoly, to getting the value in the bridge.  Is there a reason that private companies would not contract bridges, if the state weren't doing it?  There must be a demand for bridges, else they'd have no value.

[Gumby]

Here's a different perspective.

Joe Weisenthal: Why The Claim That Government Can't Create Wealth Is Provably Wrong

The Erie Canal is a good example — it made New York into a major financial capital and helped open the West for settlement.

The father of the Erie Canal was Gov. DeWitt Clinton, and building the Erie Canal was his dream (despite the fact that his detractors called it "Clinton's Ditch"):

At the opening of the Canal, in 1825, Clinton said:

“As a bond of union between the Atlantic and Western states, it may prevent the dismemberment of the American Empire. As an organ of communication between the Hudson, the Mississippi, the St. Lawrence, the Great Lakes of the north and west and their tributary rivers, it will create the greatest inland trade ever witnessed. The most fertile and extensive regions of America will vail themselves of its facilities for a market. All their surplus productions, whether of the soil, the forest, the mines, or the water, their fabrics of art and their supplies of foreign commodities, will concentrate in the city of New York, for transportation abroad or consumption at home. Agriculture, manufactures, commerce, trade, navigation, and the arts will receive a correspondent encouragement. The city will, in the course of time, become the granary of the world, the emporium of commerce, the seat of manufactures, the focus of great moneyed operations and the concentrating point of vast disposable, and accumulating capita, which will stimulate, enliven, extend and reward the exertions of human labor and ingenuity, in all their processes and exhibitions. And before the revolution of a century, the whole island of Manhattan, covered with inhabitants and replenished with a dense population, will constitute one vast city.”?

Source: http://www.canals.ny.gov/history/finch_history.pdf

Early private financing for building the canal failed. The State had to bring that dream to fruition. 

...In 1817, [Gov. DeWitt] got the legislature to appropriate $7,000,000 for construction...The Canal was an immense success, carrying huge amounts of passenger and freight traffic. The cost of freight between Buffalo and Albany fell from $100 to $10 per ton, and the state was able to quickly recoup the funds it spent on the project through tolls along the canal.

Source: http://en.wikipedia.org/wiki/DeWitt_Clinton

[Quasimodo]

Okay, I waded through the 9 pages of speculation and pontification here and the 13 on the thread about this I started earlier. Now what I want to know is who's actually planning on diversifying their 30 year U.S. Treasuries with long-term British and Japanese debt, and who's planning on turning their T-bills into cash in a bank or under a mattress?

I’ve been considering some ETFs that invest in foreign government bonds, such as Vanguard’s Total International Bond ETF (BNDX)
and ProShares German Debt ETF (GGOV).

GGOV’s actual expense ratio is .45% after waivers, although Vanguard displays it as 3.87%.

John

[Lowe]

Here's a different perspective.

Joe Weisenthal: Why The Claim That Government Can't Create Wealth Is Provably Wrong

The Erie Canal is a good example — it made New York into a major financial capital and helped open the West for settlement.

The father of the Erie Canal was Gov. DeWitt Clinton, and building the Erie Canal was his dream (despite the fact that his detractors called it "Clinton's Ditch"):

...

Early private financing for building the canal failed. The State had to bring that dream to fruition. 

...In 1817, [Gov. DeWitt] got the legislature to appropriate $7,000,000 for construction...The Canal was an immense success, carrying huge amounts of passenger and freight traffic. The cost of freight between Buffalo and Albany fell from $100 to $10 per ton, and the state was able to quickly recoup the funds it spent on the project through tolls along the canal.

Source: http://en.wikipedia.org/wiki/DeWitt_Clinton

A different perspective which lacks proof, despite the headline.  The Canal created value, compared to what?  The alternative isn't nothing.  It's something else, which might have been better.  We won't know though.

I could use the same argument the writer uses, to conclude slavery creates value.  Like public works, slavery has many products, which are valued.  But slavery creates value compared to what?  The alternative to slavery isn't no products.

Most people today believe slavery destroys value relative to its alternative, since it disincentivizes automation.  They believe something similar of serfdom, nobility, and communism.  There might be a trend here.

[Pointedstick]

Most people today believe slavery destroys value relative to its alternative, since it disincentivizes automation.  They believe something similar of serfdom, nobility, and communism.  There might be a trend here.

Couldn't one make the argument that everything destroys value compares to a hypothetical superior alternative?

you might also make the argument that, given the nature of government it is always an inferior alternative, and that since a better alternative will always exist it can never exceed the measure of being "adequate at best"

[Gumby]

A different perspective which lacks proof, despite the headline.  The Canal created value, compared to what?  The alternative isn't nothing.  It's something else, which might have been better.  We won't know though.

The question wasn't whether the government was a superior creator of wealth. The question was whether the government could create wealth or not. Robert said…

Don't think it works to compare the US Govt to a corporation like IBM or Apple. It doesn't create wealth, it can only confiscate and redistribute it. It's a different animal and those comparisons don't work.

All-or-none statements like that are easily disproven when you look at the Erie Canal. Sure, there can always be something better, but at the time, private funding didn't materialize for a shipping link to the West — despite the fact that many tried. Anyway, you have to have some pretty deep political biases to look at the Erie Canal and claim that the government can't create wealth.