Canadian Explains U.S. Debt Crisis

[Kimura]

Again, for a second time, you can't compare the finances of a household to that of a sovereign government which issues its own currency.

too stupid!!! the comparison is identical. There is no free lunch!! Can you ask your father who said that and what it means????

If a house runs out of money it can cut back and live within its means, or steal money from its neighbors.

If governemnt runs out of money it can cut back and live with its means or steal the money from us through taxaction or money printing.

Still over your head?????????

A sovereign government, which issues its own currency, cannot run out of money. It's operationally impossible under a fiat system. How can the US run out of dollars?

 

[EdwardBaiamonte]

Monetarists and Austrians look at government deficit spending as 'money printing', which it most definitely is,

too stupid and illiterate for words. If the government borrows money from us through Treasury bonds no money is printed. Instead of buying a car we bought bonds that the government then buys a car with. This is called fiscal policy

Money printing or monetary policy is when the government intends to print money to increase the quanity of money to maintain prices or to stimulate the economy!

 

[Kimura]

Monetarists and Austrians look at government deficit spending as 'money printing', which it most definitely is,

too stupid and illiterate for words. If the government borrows money from us through Treasury bonds no money is printed. Instead of buying a car we bought bonds that the government then buys a car with. This is called fiscal policy

Money printing or monetary policy is when the government intends to print money to increase the quanity of money to maintain prices or to stimulate the economy!

All goverment spending is money printing regardless of bond sales or taxes, because there is an increase in reserves. Under our current system, bonds simply function to drain excess reserves from the banking system, that's about it in a nutshell.

Also, when a country like Japan and China purchase US securities, where do their dollars come from to purchase said Treasuries? These countries all have accounts at the FED, correct? Those dollars used to purchase Treasuries come from government spending itself.

 

[EdwardBaiamonte]

All goverment spending is money printing regardless of bond sales or taxes, because there is an increase in reserves.

why try to change the subject unless you know you lack the IQ for the subject?????????????????

If the government borrows money from us through Treasury bonds no money is printed. Instead of buying a car we bought bonds that the government then buys a car with. This is called fiscal policy.

 

[Kimura]

All goverment spending is money printing regardless of bond sales or taxes, because there is an increase in reserves.

why try to change the subject unless you know you lack the IQ for the subject?????????????????

If the government borrows money from us through Treasury bonds no money is printed. Instead of buying a car we bought bonds that the government then buys a car with. This is called fiscal policy.

First of all, the government doesn't borrow from 'us', that makes zero sense. It doesn't need to borrow that which it creates as the monopoly issuer of the US dollar. The government spends by simply writing Treasury checks or by crediting private bank accounts. This is why, regardless of who purchases Treasuries, the Chinese, you or I, the money used to purchase said Treasuries comes from government spending at some point, because those dollars need to be created at some point, in order to purchase securities. Talk about a fucking tautology, Jesus H Christ.

 

[Toronado3800]

Monetarists and Austrians look at government deficit spending as 'money printing', which it most definitely is,

too stupid and illiterate for words. If the government borrows money from us through Treasury bonds no money is printed. Instead of buying a car we bought bonds that the government then buys a car with. This is called fiscal policy

Money printing or monetary policy is when the government intends to print money to increase the quanity of money to maintain prices or to stimulate the economy!

How many times on this page have you called someone a name?

Who taught you to talk like that?

I hope your mother does not read this

 

[EdwardBaiamonte]

Monetarists and Austrians look at government deficit spending as 'money printing', which it most definitely is,

too stupid and illiterate for words. If the government borrows money from us through Treasury bonds no money is printed. Instead of buying a car we bought bonds that the government then buys a car with. This is called fiscal policy

Money printing or monetary policy is when the government intends to print money to increase the quanity of money to maintain prices or to stimulate the economy!

How many times on this page have you called someone a name?

not someone, just a liberal. Besides, if you demonstrate that a liberal is an idiot you have a democratic duty to label him as such. Imagine a world without accurate labels?

Also, liberals lack the IQ to think for the most part so a label is going to be far more meaningful for them than reasoning.

Its easy enough to prove. PLease say something intelligent in suppport of liberalism. See what I mean.

 

[Toronado3800]

too stupid and illiterate for words. If the government borrows money from us through Treasury bonds no money is printed. Instead of buying a car we bought bonds that the government then buys a car with. This is called fiscal policy

Money printing or monetary policy is when the government intends to print money to increase the quanity of money to maintain prices or to stimulate the economy!

How many times on this page have you called someone a name?

not someone, just a liberal. Besides, if you demonstrate that a liberal is an idiot you have a democratic duty to label him as such. Imagine a world without accurate labels?

Also, liberals lack the IQ to think for the most part so a label is going to be far more meaningful for them than reasoning.

Its easy enough to prove. PLease say something intelligent in suppport of liberalism. See what I mean.

Who are you gonna tax to build the road Edward, the substinance farmers and the middle class equally? Or are ya gonna redistribute some wealth?

Its 1981 and Reagan is President, how is he gonna pump the economy? Why deficit spending.

A few years later and some savings and loans are going under? Time to decide to bail em out.

The good ppl of Oregon have voted legally to allow assisted suicide in some ridiculously limited end of life cases. What do you do? Change the Constitution to make government bigger and inflict your religion on em?

Be nice big boy.

 

[EdwardBaiamonte]

Its easy enough to prove. PLease say something intelligent in suppport of liberalism. See what I mean.

Who are you gonna tax to build the road Edward, the substinance farmers and the middle class equally? Or are ya gonna redistribute some wealth?

Its easy enough to prove. PLease say something intelligent in suppport of liberalism. See what I mean.

 

[Toronado3800]

The quote cutting is getting the best of ya.

I just brought up your own "liberal" points of view. If you think they are stupid so be it. I may agree or disagree.

 

[Norman]

What problems? We receive dollars, they receive goods and services, which will create a massive trade surplus in our scenario.
.

Yes USA will start to save again instead of spend, when the money flow runs out. But the example is exactly like the one I gave you about a man overspending. Printing press changes nothing. You can't print goods. You can choose between inflation and other forms of taxation though.

It wouldn't affect the standard of living one bit. It will actually cause firms to hire in certain sectors of the economy. For the second time, foreign credit doesn't fund consumption, that makes zero sense. We do not borrow from China to finance our consumption: ANY type of 'borrowing' that finances an import from China is accomplished by an American consumer at an American bank.

Funny you said that you should view economy in an aggregate. In this case it actually makes sense. Yes a consumer might not burrow money from china. Instead what happens is they go to store, load up on chinese goods. And the dollars end up in China. And you end up with huge trade deficit and balance of payments deficit. USA owes China, and the money that they owe is mostly used to BUY consumer goods from China. That means financing consumption by burrowing from the chinese.

This setup also means USA will not suffer from inflation as goods are currently flowing in and dollars out. But what happens when this reverses? Decreased standard of living, as American no longer can get free goods and will instead have to produce things for the chinese.

Inflation isn't caused by an increase in the money supply. As long as there is a tandem increase in the supply of money and goods and services, inflation isn't a problem. The Quantity Theory of Money (MV=PQ) identity is rife with inconsistencies which even Milton Friedman admitted was very problematic. The aforementioned equation basically tells us that the total quantity of money is equal to the total amount of nominal output. It really tells us nothing special, nor can it accurately gauge inflation. For example, we have record deficits, yet prices have been stable or falling, because the velocity of money is extremely low while the quantity is high. We also have a TON of excess labor and excess capacity. As a matter of fact, there's a chance that the more the government spends/prints money, prices could even decrease and fall if people don't want to spend. This is where the Monetarists and Austrians are out of touch with reality, they simply refuse to grasp these basic concepts. These people act as if we're still on a gold standard, it's pretty insane and delusional in my opinion. I'll just keep making money betting against their calls.

First of all MV=PQ unnecessarily complicates simple demand and supply in this case. You must also remember that it only takes value additions to account (which funnily enough can be generated by inflation). Second I beleve that the prices are not raising faster because there should have been a lot of deflation. In other words the monetary base has grown, but the aggregate supply has grown a lot less.

In any case the velocity goes up if inflation goes up.

But as I said, there will be less products in the USA and more dollars. Even if GDP would increase (very doubtful) - the gains would be flowing to China as exports. Not much good for USA's standard of living.

Again, for a second time, you can't compare the finances of a household to that of a sovereign government which issues its own currency. We have to operate with a fixed amount of dollars, the government does not as the issuer of the currency. Households can’t legally issue their own currency and require that Americans use that currency to pay taxes. The supply of dollars for the government is a matter of decision, plain and simple.

The ability to print money does not change anything in this scenario, as I already pointed out. USA will still be going from debt taker to debt payer. Which would not typically be a problem, if the money was not spent on consumption or if the deficits and the rate of them weren't one of their kind.

 

[EdwardBaiamonte]

The quote cutting is getting the best of ya.

I just brought up your own "liberal" points of view. If you think they are stupid so be it. I may agree or disagree.

for 3rd time:
Its easy enough to prove. PLease say something intelligent in suppport of liberalism or admit you lack the IQ to do so. See what I mean.

 

[EdwardBaiamonte]

The ability to print money does not change anything in this scenario, as I already pointed out.

you are so correct!! A liberal is always looking for the free lunch that Milton Friedman warned us about 1000 times.

Washington bureaucrats don't invent new stuff so they didn't get us from the stone age to here and they cant make the economy grow, all they can do is throw a monkey wrench into the works.

 

[Kimura]

Yes USA will start to save again instead of spend, when the money flow runs out. But the example is exactly like the one I gave you about a man overspending. Printing press changes nothing. You can't print goods. You can choose between inflation and other forms of taxation though.

Funny you said that you should view economy in an aggregate. In this case it actually makes sense. Yes a consumer might not burrow money from china. Instead what happens is they go to store, load up on chinese goods. And the dollars end up in China. And you end up with huge trade deficit and balance of payments deficit. USA owes China, and the money that they owe is mostly used to BUY consumer goods from China. That means financing consumption by burrowing from the chinese.

This setup also means USA will not suffer from inflation as goods are currently flowing in and dollars out. But what happens when this reverses? Decreased standard of living, as American no longer can get free goods and will instead have to produce things for the chinese.

But as I said, there will be less products in the USA and more dollars. Even if GDP would increase (very doubtful) - the gains would be flowing to China as exports. Not much good for USA's standard of living.

I'm going to attempt to explain this a different way, given that I may have have strayed from the initial discussion, mostly due to my responding to other posts. Sorry about that.

I don't view the economy in an aggregate, I was simply responding to a hypothetical. Imports equate to real benefits and exports equate to real costs. Trade deficits vastly improve our standard of living. People mistakenly blame imports for the loss of jobs when, in point of fact, jobs are lost because taxes are too high for a given level of government spending.

Basically, at the end of the day, working to produce real goods and services for someone else to consume doesn't have a net economic benefit, unless we get to consume the real goods and services others produce in return. Our real wealth is the following: all we produce and keep for ourselves, imports, minus out exports.

Our current trade gap is simply a reflection of the rest of the world’s ultimate desire to save in the form US financial assets. The only possibly way for the foreign sector to accomplish this is in the form of financial assets, such as securities, cash, stocks, mutual funds, etc. Our trade deficit has nothing to do with us being dependent on borrowing from China or any other country, as most talk show ideologues crow on about. To meet their needs for savings, foreigners literally compete like crazy to sell their products ans services in the US. They even suppress their own domestic wages and consumption to obtain an absolute advantage. In the event these countries no longer want to hold US dollars, they will either spend those dollars, which will ultimately result in a more balanced trade position between the US and the foreign sector. Obviously, while this can affect foreign currency exchange markets, it won't result in some financial catastrophe for the United States.

Therefore, in my opinion, there really isn't a jobs problem. A responsible fiscal policy will always result in Americans having plenty of spending power to purchase any goods and services from the foreign sector and obtain full employment. A responsible fiscal policy will maximize our employment, output and out standard of living, regardless of any trade deficit.

First of all MV=PQ unnecessarily complicates simple demand and supply in this case. You must also remember that it only takes value additions to account (which funnily enough can be generated by inflation). Second I beleve that the prices are not raising faster because there should have been a lot of deflation. In other words the monetary base has grown, but the aggregate supply has grown a lot less.

In any case the velocity goes up if inflation goes up.

The ability to print money does not change anything in this scenario, as I already pointed out. USA will still be going from debt taker to debt payer. Which would not typically be a problem, if the money was not spent on consumption or if the deficits and the rate of them weren't one of their kind.

I was simply pointing out the obvious problems with the QTM identity. My point is, it's not as static or linear as some people make it out to be. In other words, an increase in the money supply doesn't necessarily cause inflation, and as you pointed out, can even be deflationary.

 

[Kimura]

The ability to print money does not change anything in this scenario, as I already pointed out.

you are so correct!! A liberal is always looking for the free lunch that Milton Friedman warned us about 1000 times.

Washington bureaucrats don't invent new stuff so they didn't get us from the stone age to here and they cant make the economy grow, all they can do is throw a monkey wrench into the works.

Milton Friedman admitted the QTM was problematic later on in his life. I even gave you a very elementary example which I thought you could comprehend. I was clearly mistaken.

 

[Norman]

I'm going to attempt to explain this a different way, given that I may have have strayed from the initial discussion, mostly due to my responding to other posts. Sorry about that.

I don't view the economy in an aggregate, I was simply responding to a hypothetical. Imports equate to real benefits and exports equate to real costs. Trade deficits vastly improve our standard of living. People mistakenly blame imports for the loss of jobs when, in point of fact, jobs are lost because taxes are too high for a given level of government spending.

I agree, although I don't agree it's the taxes. The taxes in USA are pretty low overall. Further, trade deficits only improve standard of living if they are used for spending, AKA ordering consumer goods overseas. If they are invested into factories (ordering factory parts) they add to future standard of living that should exceed the cost of interest.

Basically, at the end of the day, working to produce real goods and services for someone else to consume doesn't have a net economic benefit, unless we get to consume the real goods and services others produce in return. Our real wealth is the following: all we produce and keep for ourselves, imports, minus out exports.

Exactly! Although exports can be viewed as increased future consumption. They are just one way for economy to save. Savings of course decrease current standard of living but increases the standard in the future.

Our current trade gap is simply a reflection of the rest of the world’s ultimate desire to save in the form US financial assets. The only possibly way for the foreign sector to accomplish this is in the form of financial assets, such as securities, cash, stocks, mutual funds, etc. Our trade deficit has nothing to do with us being dependent on borrowing from China or any other country, as most talk show ideologues crow on about. To meet their needs for savings, foreigners literally compete like crazy to sell their products ans services in the US. They even suppress their own domestic wages and consumption to obtain an absolute advantage. In the event these countries no longer want to hold US dollars, they will either spend those dollars, which will ultimately result in a more balanced trade position between the US and the foreign sector. Obviously, while this can affect foreign currency exchange markets, it won't result in some financial catastrophe for the United States.

I still disagree on this. I think USA orders the goods, and the dollars flow out. You don't get a trade deficit by simply having foreigners investing into US bonds. And a lot of the dollars outside USA are not being invested at all, they are simply on a balance sheet of a lot of central banks and etc.

But anyway I do think the consumers depend on the imports, as that is what the consumers are buying. Without imports there would be less for them to buy. Since USA is having a deficit they are dependent on borrowing. I think that's fair assesment, but I think you don't view trade deficits as borrowing, but I do.

Therefore, in my opinion, there really isn't a jobs problem. A responsible fiscal policy will always result in Americans having plenty of spending power to purchase any goods and services from the foreign sector and obtain full employment. A responsible fiscal policy will maximize our employment, output and out standard of living, regardless of any trade deficit.

Yeah but what is good fiscal policy? Anyway, I think the problem is that the trade deficits of USA are being used to finance consumption with all the 0% interest rates and crazy government borrowing. Further the government owes a lot to the people that the people are not thinking they should pay taxes for. That creates a lot of long term problems, which will soon be short term problems. IMO

I was simply pointing out the obvious problems with the QTM identity. My point is, it's not as static or linear as some people make it out to be. In other words, an increase in the money supply doesn't necessarily cause inflation, and as you pointed out, can even be deflationary.

I agree, I don't like that theory. In fact it's extremely easy to break. You could for example export a lot of stuff and pile up dollars in China. Money supply would stay the same but velocity would decrease, decrease and decrease. One day the chinese would spend all their dollars and BAM! inflation, but only because of increased velocity.

Or just print a bunch of money and burry it. Again decreased velocity., increased supply Spend it one day... inflation. Even the equation needs some though intepretation like CPI. So it's only correct in theory where you get those variables right.

 

[EdwardBaiamonte]

The ability to print money does not change anything in this scenario, as I already pointed out.

you are so correct!! A liberal is always looking for the free lunch that Milton Friedman warned us about 1000 times.

Washington bureaucrats don't invent new stuff so they didn't get us from the stone age to here and they cant make the economy grow, all they can do is throw a monkey wrench into the works.

Milton Friedman admitted the QTM was problematic later on in his life. I even gave you a very elementary example which I thought you could comprehend. I was clearly mistaken.

1) who's talking about QTM????????????
2) Friedman never said QTM was incorrect????????????
3) A liberal is always looking for the free lunch that Milton Friedman warned us about 1000 times.

Kumura is a typical illiterate liberal

 

[EdwardBaiamonte]

I was simply pointing out the obvious problems with the QTM identity. My point is, it's not as static or linear as some people make it out to be. In other words, an increase in the money supply doesn't necessarily cause inflation, and as you pointed out, can even be deflationary.

actually Friedman was very well aware that the V in MV stands for velocity!!! See how problematic being a nearly illiterate free lunch liberal is??

 

[Kimura]

I agree, although I don't agree it's the taxes. The taxes in USA are pretty low overall. Further, trade deficits only improve standard of living if they are used for spending, AKA ordering consumer goods overseas. If they are invested into factories (ordering factory parts) they add to future standard of living that should exceed the cost of interest.



Exactly! Although exports can be viewed as increased future consumption. They are just one way for economy to save. Savings of course decrease current standard of living but increases the standard in the future.


I still disagree on this. I think USA orders the goods, and the dollars flow out. You don't get a trade deficit by simply having foreigners investing into US bonds. And a lot of the dollars outside USA are not being invested at all, they are simply on a balance sheet of a lot of central banks and etc.

But anyway I do think the consumers depend on the imports, as that is what the consumers are buying. Without imports there would be less for them to buy. Since USA is having a deficit they are dependent on borrowing. I think that's fair assesment, but I think you don't view trade deficits as borrowing, but I do.



Yeah but what is good fiscal policy? Anyway, I think the problem is that the trade deficits of USA are being used to finance consumption with all the 0% interest rates and crazy government borrowing. Further the government owes a lot to the people that the people are not thinking they should pay taxes for. That creates a lot of long term problems, which will soon be short term problems. IMO



I agree, I don't like that theory. In fact it's extremely easy to break. You could for example export a lot of stuff and pile up dollars in China. Money supply would stay the same but velocity would decrease, decrease and decrease. One day the chinese would spend all their dollars and BAM! inflation, but only because of increased velocity.

Or just print a bunch of money and burry it. Again decreased velocity., increased supply Spend it one day... inflation. Even the equation needs some though intepretation like CPI. So it's only correct in theory where you get those variables right.

The U.S. national debt (I prefer national equity or national credit account) and all this talk about 'borrowing' from China tends to be misconstrued. We have to realize US Treasuries are, at the end of the day, nothing more than a savings account at the FED, which they call securities accounts. So yeah, as I'm sure you must realize, the trillions in national debt is nothing more than trillions in savings accounts at the FED. When China purchases Treasuries, people refer to it as going into debt, when all that occurs is transactional. All the dollars they receive from us by selling us stuff goes into their checking account (reserve account) at the FED and is transferred to their savings account (Treasuries) And when the US pays back China, which occurs on a monthly basis, all that occurs is that the Fed transfers those dollars (and some accrued interest) from China's savings account (Treasuries) back over to China's checking account (reserve account), which is all part of the Federal Reserves balance sheet. Our children and grandchildren won't ever be involved in the aforementioned process.

By the way, as a bond trader of ten years, I can tell you this is all common knowledge among my former colleagues. I don't know why people seem to lose sleep over it. This is simply the operational realities of how the Treasury market. For example, the US rolled over around 30 Trillion in Treasuries during the first half of 2012, yet we suffered zero hyperinflation and interest rates are still zero.

 

[Kimura]

I was simply pointing out the obvious problems with the QTM identity. My point is, it's not as static or linear as some people make it out to be. In other words, an increase in the money supply doesn't necessarily cause inflation, and as you pointed out, can even be deflationary.

actually Friedman was very well aware that the V in MV stands for velocity!!! See how problematic being a nearly illiterate free lunch liberal is??

I provided you with an elementary example of the problems inherent in QTM. You obviously didn't understand a word of it, which is to be expected when someone has zero background in the subject matter being discussed.

You've insulted me this entire thread and haven't added anything constructive or substantial to our debate, except insults and copy/paste jobs. You clearly have never taken in introductory class to economics or accounting in your entire life. Your whole worldview is based around talk show sound bytes which puts your ignorance on display for all to see. I really don't care, it's your life, but stop pretending to even understand some of the concepts I'm trying articulate when debating people that actually have a clue or basic understanding regarding monetary operations, macroeconomics, labor theory, econometrics, etc.

In other words, for the love of God, stop acting like a professional douche bag.