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Politics : Liberalism: Do You Agree We've Had Enough of It? -- Ignore unavailable to you. Want to Upgrade?

To: Wayners who wrote (130988)	4/23/2012 8:42:37 PM
From: TimF	Read Replies (1) \| Respond to of 224890

I'm not sure its just an "under normal circumstances" issue. There is no legal requirement for gold convertibility. That faded away over a long time before the final nail was put in the coffin by Nixon. In theory the fed could go bankrupt but in practice it creates money, so it can pay off any level of dollar denominated debt. It would only face possible bankruptcy if it took on debt in other currencies. (Even debt denominated in terms of gold, could be paid back, because the dollar would be considered legal tender and payment of the dollar value of gold would have to be accepted or the courts wouldn't enforce the debt. If the payments and this the creation of dollars was large enough, the price of gold could soar after they made the payment, but the debt would be paid at the current value dollar. Debt in real dollars would just increase the dollar amount, and the fed could simply "print" more dollars with a lag before the inflation caused gets recognized and reported.