How is austerity doing in Europe

[Oldstyle]

Still waiting for Kimura to explain why if debt isn't an issue we shouldn't just pile it on and make everything peaches and cream.

The reality of the situation is that national governments very rarely run down their stock of debt from a macroeconomic standpoint.

In terms of the overall macroeconomic point of view, all tax and spending decisions by the federal government should be done in such a fashion that total net spending in our economy is good enough to produce a level of real output in which firms would be able to employ any and all available labor. The goal of government should be to make sure the level of spending is sufficient enough to employ any and all available productive capacity. Period. Done deal.

Well since we are obviously NOT employing any and all available labor then why don't we spend trillions more to make that happen, Kimura? According to your version of economic voodoo there isn't a downside to that because things all "even out" on a balance sheet...so why AREN'T we? The "reality of the situation" is that there ARE negative repercussions to carrying huge amounts of debt.

 

[itfitzme]

Still waiting for Kimura to explain why if debt isn't an issue we shouldn't just pile it on and make everything peaches and cream.

The reality of the situation is that national governments very rarely run down their stock of debt from a macroeconomic standpoint.*

In terms of the overall macroeconomic point of view, all tax and spending decisions by the federal government should be done in such a fashion that total net spending in our economy is good enough to produce a level of real output in which firms would be able to employ any and all available labor. The goal of government should be to make sure the level of spending is sufficient enough to employ any and all available productive capacity. Period. Done deal.

And the real kicker that'll just get panties in a bunch is that taxes don't effect purchasing power in the long run. *Once the economy has reached a steady state condition on the change to rates, pending power is affected by relative net income differential and aggregate production. **

 

[Oldstyle]

Still waiting for Kimura to explain why if debt isn't an issue we shouldn't just pile it on and make everything peaches and cream.

Simplistic question. Easy answer. For the same reason the doc does not suggest taking a 50 gallon barrel full of pain pills for your head ache.

So you admit that too much debt is a fiscal recipe for a trip to the ER? Ok...Mr. Easy Answer...at what point does your "remedy" become the cause of pain rather than the cure for it? Kimura feels that because he can make assets and liabilities balance on a sheet that more debt isn't an issue. Even you seem to realize that's ridiculous...

Better get your story straight, progressives...

 

[itfitzme]

...
**The "reality of the situation" is that there ARE negative repercussions to carrying huge amounts of debt.

Excellent.

Specifically, in terms of the flow of funds, goods, and labor, what are the "negative repercussions to carrying huge amounts of debt"?

So far, there is the clear effect that funds flow from taxes to "investment". Households provide labor, businesses provide goods. Taxes are levied on income and EBT. *Part of those funds flow to interest payments on bonds. *That monies presumably becomes M2, or anything not M1. *(I can't find any proxy measure to determine whatay be considered as flow from bond interest back to M1.)

Interest is then not flowing to government expenditures on services which is flow back to M1. And if the bond interest were high enough, potentially all tax revenue could become bond interest.

The resultnis the government is restricted from further borrowing.

What else?

 

[Oldstyle]

The primary negative repercussion to carrying large amounts of debt is the interest you pay on that debt.

Anyone with a limited budget and credit cards understands that concept.

 

[Kimura]

Still waiting for Kimura to explain why if debt isn't an issue we shouldn't just pile it on and make everything peaches and cream.

The reality of the situation is that national governments very rarely run down their stock of debt from a macroeconomic standpoint.

In terms of the overall macroeconomic point of view, all tax and spending decisions by the federal government should be done in such a fashion that total net spending in our economy is good enough to produce a level of real output in which firms would be able to employ any and all available labor. The goal of government should be to make sure the level of spending is sufficient enough to employ any and all available productive capacity. Period. Done deal.

Well since we are obviously NOT employing any and all available labor then why don't we spend trillions more to make that happen, Kimura? According to your version of economic voodoo there isn't a downside to that because things all "even out" on a balance sheet...so why AREN'T we? The "reality of the situation" is that there ARE negative repercussions to carrying huge amounts of debt.

Well, at the end of the day, all money creation is nothing more than a balance sheet operation.

What are the negative repercussion to these 'huge amounts of debt'? The whole debt-to-GDP ratio arguments are pure fantasy. Many of us realized this even before the Rogoff and Reinhart debacle.

As I've stated, and perhaps I need to get into more detail, budget deficits have added net financial assets to the private sector. This has helped to provide demand for real goods and services which have enables us to have income growth. This increase in income growth has also enabled us to save and accrue financial assets at a much greater pace than would be possible without deficits.

The only issues you should have with public debt should be about equity considerations and who owns these assets and how the private wealth emanating from these deficits is provisioned so to speak. This is a reasonable debate, but there's no other logical reason to obsess over the level of US public debt. The federal government can always honor its debt, it cannot operationally go bankrupt. There is zero risk. Again, this debt gives firms, households and the rest of the private sector a place to stash their wealth risk-free.

The only possible risk is that of inflation, not insolvency. However, with that being said, we need to realize that inflation is a risk from any type of overspending. It could emanate from consumption, exports, government spending or even investments. Any part of aggregate demand could tip the economy towards inflation, not just spending by the federal government.

Here's my point: Budget deficits can be too small or too large. The goal of government should be to make sure they're just right so we can employ any and all available productive capacity.

We can get into the Job Guarantee and Employer of Last Resort as a means to achieve full employment, but that's a completely different animal. I personally have a problem with NAIRU and the current arrangement.

 

[bripat9643]

Right. Here's what disturbs me: thanks to retards like Rand and Ron Paul this shit gets peddled on campuses all over the US. You really aren't doing these kids any favors in point of fact. You're creating a nation of parrots so to speak. I run into these kids all the time since we hire interns and shit. Dude, it's so bad, the brainwashing, these kids don't even understand monetary operations. I'm a bond trader. Once I explain to them how reality works, I simultaneously kill their dreams and enlighten them. Basic shit. For example, I have interns that don't understand that the FED sets interest rates all along the term structure. The don't understand we have a central bank that literally determines interest rates. It like a fucking epiphany for these people.

You have to be a fool to believe that the fed has that much control over interest rates. In the short run, it can nudge interest rates in one direction or another. In the long run, interest rates are set by the consumers time preference for money.

You believe the fed determines interest rates because you've been brainwashed with statist propaganda.

The FED controls the interest rates up and down the entire term structure. I can get into detail if need be.

The Fed's control over interest rates is illusory. Jimmy Carter believed the Fed's could control interest rates. They went up to 21% during his administration. Was that what he or the fed wanted?

 

[itfitzme]

Still waiting for Kimura to explain why if debt isn't an issue we shouldn't just pile it on and make everything peaches and cream.

Simplistic question. *Easy answer. *For the same reason the doc does not suggest taking a 50 gallon barrel full of pain pills for your head ache.

So you admit that too much debt is a fiscal recipe for a trip to the ER? *Ok...Mr. Easy Answer...at what point does your "remedy" become the cause of pain rather than the cure for it? *Kimura feels that because he can make assets and liabilities balance on a sheet that more debt isn't an issue. *Even you seem to realize that's ridiculous...

Better get your story straight, progressives...

He's just presenting MMT. *That's not progressive, it's simple MMT accounting. *Accounting is 1+3 = 2 + 2.

He is is a bit vague, but tracable back to detailed descriptions under MMT.

You have no story at all. *At best, I can infer it to fit with the home economics model. *But that's a ridiculous analogy because the national economy *is a closed system while the household economy is an open system. *

Households must go externally to provide labor, get income, borrow, and pay debt. *

The national economy contains all the labor, productivity, debt and assets internally. *

The way to examine the national economy, which consists of households, businesses, the government, and a banking sector, is to find boundary conditions. *Money simply facilitates the flow of goods in an efficicient manner. There are accounting rules that set boundary conditions.

**The production of goods, the flow of goods, and the provision of labor exists *entirely seperate from the flow of funds except that we tie them together with the bookkeeping. The economy could function entirely on bartering, using a different accounting system that tracked only goods. *This would be somewhat like the Walmart model of moving stock from store to store. *It would be inefficient on a large scale. *But, it still would function. *The boundary condition is that of full production, the full utilization of resources, particularly labor. *Another boundary condition is maximum efficiency. *

When the efficiency of money is added to the economy, less effort is wasted figuring out how to distribute goods and labor. *Ther isn't the need to match up one goat, ten bushels of apples, and a new window.

We shouldn't, though, confuse the flow of funds with the flow of goods. The connection is tenuous and illusory. *Any rules that might be infered from observation is nothing more than convention. *They are rules of convenience, not immutable laws of physics. *

The only physical law of money is MV=PQ. Even then, the connection is still commingled with accounting practice. *

Saying "Better get your story straight, progressives." isn't a story. *It's an internalized emotional feedback, self reinforcent. By definition, internal self reinforcement is not external feedback. *External feedback is reality. Not external feedback is not reality. *Not reality is

The looney bin is full of people running around calling each other cuckoo. *(Personally, I prefer to not be either of the two looneys.)

The not cuckoo here is an objective, accurate, precise, and specific description of the flow funds, labor, and goods in the closed loop system of a national economy. *

It's a physics/accounting question. *Physics and accounting isn't progressive or*conservative. *It is the personal perception that spirals off into some subjective implication that leads to a progressive/conservative conclusion. *

So the questiom remains, what are the negative effects of national debt and deficit in terms of the flow of funds, goods, and labor?

 

[bripat9643]

Of course it has. For every liability, there is a corresponding asset.

Oh really? So where is the "corresponding asset" for all the money the Social Security administration owes future retirees?

I was referring to the deficit. The 16 trillion are liabilities of the federal government and assets of the public. If you don't think this is true, I will gladly relieve you of your burden in your checking or savings account.

Those "assets" are in reality worthless scraps of paper. They are claims on the earnings of future taxpayers. They are of no benefit to the taxpayers since the taxpayers have to pay them.

There isn't a SS problem. It's simply a faux problem. Just like Medicare, Congress can fund it into perpetuity. It's simply a political decision, not a financial one. The only problem would be if we didn’t have the real resources seniors need to retire, such as food, clothing, shelter, medical care, etc.

Yeah, Congress could pass a law saying anyone over the age of 70 should report to an extermination center. Problem solved.

They have added nothing but worthless scraps of paper to the private sector. Yeah, the certainly increased "demand" for goods and services, because the government distributed the money it received to all it's various classes of parasites and job-holders. However, the government has no way to repay this consumption other than by shaking down future taxpayers for it. So there is nothing of value to the taxpayers resulting from the exchange. Only a liability.

How is it an IOU?

Simple. There are no real assets backing them. They are nothing more than the government's promise to pay.

Under our fiat monetary system, all spending precedes taxation and “borrowing” from an operational standpoint. The government doesn’t need to tax in order to obtain that which it freely issues. The government essentially uses taxes to regulate aggregate demand and create demand dollars so to speak.

How does that change the legal nature of treasury bills?

US public debt represents the total savings of the US economy.

It represents no such thing. According to that theory, I have no savings in my bank account.

It consists of private wealth and all interest payments are private income. All it represents is the accumulated budget deficits run in the past.

You're devolving into mumbo jumbo. The fact the private individuals and institutions buy treasury bonds doesn't indicate they are wealth of any kind. They are the government's promise to pay the bearer a given amount some time in the future. There is no "tangible" wealth backing a treasury bond.

If you want to increase the savings of Americans, it simply cannot occur through deficit reductions, especially in the current economic environment.

Decreasing government borrowing doesn't increase the amount Americans save, but it does increase the portion of the existing savings that are available for private investment.

By the way, the 'US deficit' adds to our savings right down the last penny. This is an accounting fact not open to debate. This is basic national income accounting.

ROFL! That's only if you have a really twisted definition of the word "savings" where it really means borrowing.

For example, let's say the government runs a three trillion dollar deficit. This means there would be a total net increase in savings in the form of financial assets of three trillion dollars down to the last penny.

It is exactly compensated by a three trillion increase in the obligations of the federal government. Unfortunately the government spends all the "savings" by dispensing it to parasites.

Remember, financial assets are held as member bank deposits at the Federal Reserve, cash or Treasuries. In other words, the deficit is equal to the total increase in the holdings of US financial assets held by you and I, firms and households, which we commonly referred to as the non-government sector.

I'm not going to bother wasting my time further deconstructing your nonsense.

I wont waste my time with further deconstruction of your economic lunacy.

Please, I beg you, enlighten me.

Here's something you need to understand and I will gladly get into detail: Total net private financial wealth is equal to public debt down to the last penny from a sectoral standpoint.

Horseshit. The money in my 401K is savings, and it's not part of "public debt."

 

[Kimura]

You have to be a fool to believe that the fed has that much control over interest rates. In the short run, it can nudge interest rates in one direction or another. In the long run, interest rates are set by the consumers time preference for money.

You believe the fed determines interest rates because you've been brainwashed with statist propaganda.

The FED controls the interest rates up and down the entire term structure. I can get into detail if need be.

The Fed's control over interest rates is illusory. Jimmy Carter believed the Fed's could control interest rates. They went up to 21% during his administration. Was that what he or the fed wanted?

It was part of Volcker's attempt to control the money supply. In other words, it was part of the FED's policy to increase interest rates. This policy was an utter failure.

The FED cannot control the money supply, nor have any central banks since the 1980s attempted monetary targeting. They all came to the realization that central banks simply cannot control the money supply. All they can directly control are interest rates. Monetary policy is now accomplished by setting a short-term interest rate through liquidity management in the overnight cash markets.

 

[itfitzme]

The primary negative repercussion to carrying large amounts of debt is the interest you pay on that debt.

Anyone with a limited budget and credit cards understands that concept.

Which is all grand if the national economy were a household. It's not nor is the gov't a household. Analogies are an excellent tool, until they no longer map, part to part, process to process.

Seeing as the flow of tax receipts and expenditures, gov't debt and interest, don't map exactly to household income and expence, credit and interest, the home economics analogy doesn't function.

The mapping of elements is complete nonsense.

 

[bripat9643]

When this country really boomed there were also things like slavery, indentured servitude, and child labor which really increased productiviy. A modern libertarian country wouldn't have that advantage. Then there are regulations and environmental laws that the country didn't have to deal with back then. Also, this was before America was trying to be an empire like now, so they didn't have a huge military expense sucking the lifeblood out of the economy.

Slavery, indentured servitude and child labor is NOT conducive to productivity, Jason. Some rather intelligent people figured out that the most productive labor force is one that is working to better itself...not because you chain them to a machine.

Let me understand this, Oldstyle. Are you actually saying that the south fought a war over slavery because it did not increase their productivity. Perhaps if you would just think before you made a statement. Jesus.

The South fought a war because the North invaded them.

 

[bripat9643]

I have an BA and MS in Economics. Try again, cupcake.

If you want to debate, I'm definitely game. You pick: macro, micro, labor theory, monetary operations? Since you're clearly a superior intellect, and I'm clearly an idiot, I'll give it my best.

I think you have a BS and MS in commie propaganda.

OK, asshole, tell us what feudalism is. Especially explain how it differs from capitalism.

No on can help it that you are stupid. There is this invention, called the internet, wherein you may find answers to you questions. Stop wasting people's time with stupid questions. Dipshit.

In other words, you don't have the slightest clue what Feudalism is. "Go look it up" is the refrain of someone who has been exposed as a moron.

 

[bripat9643]

It should be glaringly obvious the "libertarianism" of the variety espoused by the Murray Rothbard/Robert Nozick/Ayn Rand axis most definitely resembles feudalism. I can get into detail if need be.

Please do. I'm sure the results will be hilarious.

It will be, to you. Because you are a congenital idiot. They always find things hilarious. It is a function of a lack of intelligence. You are, in other words, stupid. No one can help you with that.

"You're stupid" isn't an argument or an explanation of Feudalism.

Why don't you just admit you don't have the slightest clue as to what you're talking about?

Who do you think you're fooling?

 

[Kimura]

Simplistic question. *Easy answer. *For the same reason the doc does not suggest taking a 50 gallon barrel full of pain pills for your head ache.

So you admit that too much debt is a fiscal recipe for a trip to the ER? *Ok...Mr. Easy Answer...at what point does your "remedy" become the cause of pain rather than the cure for it? *Kimura feels that because he can make assets and liabilities balance on a sheet that more debt isn't an issue. *Even you seem to realize that's ridiculous...

Better get your story straight, progressives...

He's just presenting MMT. *That's not progressive, it's simple MMT accounting. *Accounting is 1+3 = 2 + 2.

He is is a bit vague, but tracable back to detailed descriptions under MMT.

You have no story at all. *At best, I can infer it to fit with the home economics model. *But that's a ridiculous analogy because the national economy *is a closed system while the household economy is an open system. *

Households must go externally to provide labor, get income, borrow, and pay debt. *

The national economy contains all the labor, productivity, debt and assets internally. *

The way to examine the national economy, which consists of households, businesses, the government, and a banking sector, is to find boundary conditions. *Money simply facilitates the flow of goods in an efficicient manner. There are accounting rules that set boundary conditions.

**The production of goods, the flow of goods, and the provision of labor exists *entirely seperate from the flow of funds except that we tie them together with the bookkeeping. The economy could function entirely on bartering, using a different accounting system that tracked only goods. *This would be somewhat like the Walmart model of moving stock from store to store. *It would be inefficient on a large scale. *But, it still would function. *The boundary condition is that of full production, the full utilization of resources, particularly labor. *Another boundary condition is maximum efficiency. *

When the efficiency of money is added to the economy, less effort is wasted figuring out how to distribute goods and labor. *Ther isn't the need to match up one goat, ten bushels of apples, and a new window.

We shouldn't, though, confuse the flow of funds with the flow of goods. The connection is tenuous and illusory. *Any rules that might be infered from observation is nothing more than convention. *They are rules of convenience, not immutable laws of physics. *

The only physical law of money is MV=PQ. Even then, the connection is still commingled with accounting practice. *

Saying "Better get your story straight, progressives." isn't a story. *It's an internalized emotional feedback, self reinforcent. By definition, internal self reinforcement is not external feedback. *External feedback is reality. Not external feedback is not reality. *Not reality is

The looney bin is full of people running around calling each other cuckoo. *(Personally, I prefer to not be either of the two looneys.)

The not cuckoo here is an objective, accurate, precise, and specific description of the flow funds, labor, and goods in the closed loop system of a national economy. *

It's a physics/accounting question. *Physics and accounting isn't progressive or*conservative. *It is the personal perception that spirals off into some subjective implication that leads to a progressive/conservative conclusion. *

So the questiom remains, what are the negative effects of national debt and deficit in terms of the flow of funds, goods, and labor?

It's an overview of Modern Monetary Theory. I wasn't being obtuse, my goal was to avoid delving into accounting identities so to speak.

 

[bripat9643]

And another attack. Jesus, Oldstyle. Is that all you have.
Let me try to help you. You are in way over your head trying to argue economics. Good time to exit right.
but I predict that you will simply do what you always have done, which is attack and insult, cause you are toast economically.

Oldstyle understands feudalism far better than the drones in this thread.

Between the two of you, you you have what, an IQ of 100?? That would be your opinion. Dipshit. And you know how much we all respect your opinion.

So where is that post where you explained what Feudalism is and proved that Oldstyle is wrong?

 

[bripat9643]

Still waiting for Kimura to explain why if debt isn't an issue we shouldn't just pile it on and make everything peaches and cream.

The reality of the situation is that national governments very rarely run down their stock of debt from a macroeconomic standpoint.

In terms of the overall macroeconomic point of view, all tax and spending decisions by the federal government should be done in such a fashion that total net spending in our economy is good enough to produce a level of real output in which firms would be able to employ any and all available labor. The goal of government should be to make sure the level of spending is sufficient enough to employ any and all available productive capacity. Period. Done deal.

That's the Keynesian mumbo-jumbo. Too bad it's totally bogus. The empirical evidence has disproven Keynesianism multiple times.

 

[Kimura]

The primary negative repercussion to carrying large amounts of debt is the interest you pay on that debt.

Anyone with a limited budget and credit cards understands that concept.

Which is all grand if the national economy were a household. It's not nor is the gov't a household. Analogies are an excellent tool, until they no longer map, part to part, process to process.

Seeing as the flow of tax receipts and expenditures, gov't debt and interest, don't map exactly to household income and expence, credit and interest, the home economics analogy doesn't function.

The mapping of elements is complete nonsense.

Exactly. The Federal Government doesn't operate like household or business. Households can't issue their own currency and require that the public use said currency to pay taxes. A household has to operate on a limited supply of dollars while the federal government's supply is limited by a matter of policy. I wish people understood the difference between currency issuer and currency user. I'd like to take a moment to thank reactionaries in the US media for turning people into frothing-at-the-mouth ignoramuses.

 

[Kimura]

Still waiting for Kimura to explain why if debt isn't an issue we shouldn't just pile it on and make everything peaches and cream.

The reality of the situation is that national governments very rarely run down their stock of debt from a macroeconomic standpoint.

In terms of the overall macroeconomic point of view, all tax and spending decisions by the federal government should be done in such a fashion that total net spending in our economy is good enough to produce a level of real output in which firms would be able to employ any and all available labor. The goal of government should be to make sure the level of spending is sufficient enough to employ any and all available productive capacity. Period. Done deal.

That's the Keynesian mumbo-jumbo. Too bad it's totally bogus. The empirical evidence has disproven Keynesianism multiple times.

LOL, okay.

First of all, I'm not a Keynesian, so there goes that theory. What's this empirical evidence you speak of?

Also, from whom does the US borrow? You have stop thinking like we're still on the gold standard and a fixed-exchange rate. When we were on the gold standard, the government did indeed have to tax and borrow. This is no longer the case. And yes, if need be, I can get into detail. I was trying to avoid being wonkish.

 

[bripat9643]

The FED controls the interest rates up and down the entire term structure. I can get into detail if need be.

The Fed's control over interest rates is illusory. Jimmy Carter believed the Fed's could control interest rates. They went up to 21% during his administration. Was that what he or the fed wanted?

It was part of Volcker's attempt to control the money supply. In other words, it was part of the FED's policy to increase interest rates. This policy was an utter failure.

In other words, the government's attempt to control interest rates was an utter failure since it led to hyper-inflation.

The FED cannot control the money supply, nor have any central banks since the 1980s attempted monetary targeting.

ROFL! you are truly ignorant. About the only thing the Fed does have control over is the money supply. The Fed has been attempting to do that ever since it was created.

They all came to the realization that central banks simply cannot control the money supply. All they can directly control are interest rates. Monetary policy is now accomplished by setting a short-term interest rate through liquidity management in the overnight cash markets.

It's exactly the opposite of what you claim. They all came to realize that they can control the money supply. Interest rates are what the Fed can't control. However, Bernanke seems to have forgotten that lesson. He's keeping interest rates low by debasing the currency. It's only a matter of time until those chickens come home to roost.