Geithner: We need to monetize US debt

Well, not in those exact words. Good piece writte by ToastMaster:

In a letter to lawmakers on Friday, Timothy Geithner asked Congress to increase the national debt limit. The Treasury Secretary wrote,

"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations"

Did Geithner just state that we need to issue new debt to service and pay off old ones, which is essentially monetization? Did our Treasury chief just implicitly admit that our Treasuries constitute the largest Ponzi scheme in history? I will be keeping a keen eye on this development and how markets react in the following weeks. In the event lawmakers rebuff Geithner's request, do not be surprise if this piece of news gets underreported to minimize any impact on markets.

I would say the question to ask is, "at what point does it become a ponzi scheme?" It's hard to say, as it would be completely subjective. Fundamentally the US is not a "ponzi" scheme per se. We do create real valuable goods and services. But at what point does monetary excess effectively make it partially a ponzi (well it is at least already, but I mean more like enough to make it significant)?

I don't think you can really come up with a number (i.e. as a % of GDP). But I do think a tell tale sign is such what Geithner said. What he is quoted as saying is "let's effectively monetize debt." This feels like the beginning of the end.

So what is the end? Who knows. Maybe it's the death of the dollar and reissue of a new dollar some time in the future. Either way, the ability of the US to raise new debt will be significantly crippled at that point. And that may not be a bad thing.

If such crisis is needed to bring real "change," I say bring on unsustainable deficits.