Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: DuckTapeSunroof who wrote (25695)	2/4/2008 5:38:20 PM
From: TimF	Read Replies (2) \| Respond to of 71588

Government spending can be paid for by 1 - Taxation (including fees, fines etc.) 2 - Voluntary contributions (unlikely to cover government expenditures, and unlikely to even be a significant secondary source of income in the context of any but the lowest amount of taxation, people will think they already paid their taxes and shouldn't pay more), 3 - Borrowing, and 4 - Printing money. Since 2 is insignificant in almost every case that leaves you with 1, 3 and 4. 4 is directly devaluing the currency. 3 is not and doesn't inevitably lead to currency devaluation. OTOH it easily can and often does. If the debt and deficits are to the point where people become concerned about the stability of the economy than they will tend to bid the currency down. And this isn't an event with a sudden threshold (meaning no effect at first, and then once past a certain point a large effect), but rather deficits, even small ones, put pressure, even if a very small amount of pressure, against the currency. However this pressure can easily be something other than a decisive factor. The real decisive factor is the money supply. You have to look more to the fed for issues about money supply than to federal government deficits.