How is austerity doing in Europe

[Rshermr]

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.

Right. Jesus, what can I say to you. You must know better than that, me boy. Uh, maybe not.

 

[Rshermr]

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?

Fooling? No one. You never ask someone to define anything on the internet, dipshit. If they know the answer, they tell you. If they do not, they look it up and tell you.
So, dipshit, go look it up. It is simple enough that even you may be able to understand it. And I have no reason to educate you.

 

[Kimura]

I'm well aware that households and governments that can print their own currencies don't operate in the same manner but THAT doesn't alter the fact that too much debt is bad for both. Can you imagine the result if households WERE able to do what government can do...simply print money to pay their debts? Anyone care to wager how long it would be before all currency would be essentially worthless? Just because a nation CAN print limitless amounts of money doesn't mean it's sound fiscal policy. The truth of the matter is that we've spent ourselves into a mountain of debt that is staggering in size. That isn't me being a "frothing at the mouth ignoramus"...that's me stating the situation that we currently face.

I wasn't referring to you, dude. Seriously.

My point is, that this debt argument is illogical, given all of our excess capacity, lagging aggregate demand and employment numbers. It's a trivial non-issue. It's not a mountain of debt, it simply represents the private sector's desire to save. These payments get made the same way as you or I would shift funds between our checking account and savings account. For example, China has a checking account (reserve account) over at the FED. It purchases US securities and money is shifted into a savings account (Treasuries). These payments are merely the shifting of funds back and forth between reserve accounts and Treasuries. In other words, purchasing US debt is nothing more than shifting dollars from a checking account (reserve account) to savings (Treasuries), paying off US debt entails nothing more than shifting dollars from savings (Treasuries) to checking (reserve accounts).

Also, there's more to inflation than increasing the supply of money. If we listened to actual ignoramuses like Peter Schiff or Kyle Bass, we should have all committed ritualistic suicide back in 2008.

We should ultimately get rid of bonds since they're no longer operationally necessary under a fiat system. This whole thing has been hijacked by politicians and we're seeing it played out with all this austerity talk by the moron in the White House. Conservatives should support this, it would render the 'public debt' issue a moot point. The Chinese, Saudis, Japanese and whoever could park their money into reserve accounts and that would be that. Obviously, it would require more tweaking, such as permanent overdrafts, etc., but I think you get the point.

You're really making the point that our national debt is a "trivial non-issue"? I'm sorry, Kimura but to be quite frank with you...I think you've lost your mind. This notion of yours that debt isn't an issue amazes me. Somehow someone has convinced you that "creative accounting" can nullify common sense. Not only is it a mountain of debt...it is a Mt. Everest of debt...a sum that is so vast that it's hard to comprehend.

We're no longer on a gold standard or fixed-exchange rate for the umpteenth time. This whole debt issue is really nothing more than propaganda. There isn't some vault with a finite amount of money in it.

The federal government is obligated to pay all US debts as they come due. Our national debt isn't a burden for anyone, including the US government. The US has an unlimited credit card to obtain 'debt' at whatever interest rates it so chooses. It can create all the money it needs to pay off any and all debt without creating new debt if it so chooses. The only time we'd run into trouble is if the government taxed more than it spent (running budget surpluses) . Again, no matter anyway you cut it, spending is virtually costless for the federal government.

Here's the reality: the US Government has no limits on its ability to create/spend money other than one that's arbitrarily self-imposed. The level of public debt or debt-to-GDP ratios cannot affect the government's ability to spend. It all boils down to appropriations by Congress. A fiscal policy should be measured by policy outcomes, not by something as trivial as the size of the deficit.

 

[Rshermr]

I'm going to have to reread the Constitution of the United States where it says that states are sovereign nations. *

Try finding the part that says states take orders from the federal government. *Then read the 9th and 10th Amendments.

Dammed Supreme Court with their*power to interpret the Constitution. *How did that happen?

For that matter, if states are sovreign nations, why do we even have a Constitution? *Seems awefully useless. *

Well, but......you mean states are not nations. What, then, are nation states??? For christ sake, we have all these folks in the south, particularly texas and la wanting to succeed, and you intimate that states are not nations???
Sorry, but your post got me laughing. Funny.

 

[bripat9643]

Try finding the part that says states take orders from the federal government. *Then read the 9th and 10th Amendments.

Dammed Supreme Court with their*power to interpret the Constitution. *How did that happen?

For that matter, if states are sovreign nations, why do we even have a Constitution? *Seems awefully useless. *

Well, but......you mean states are not nations. What, then, are nation states??? For christ sake, we have all these folks in the south, particularly texas and la wanting to succeed, and you intimate that states are not nations???
Sorry, but your post got me laughing. Funny.

Fools are always laughing at stuff they don't understand.

 

[bripat9643]

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?

Fooling? No one. You never ask someone to define anything on the internet, dipshit. If they know the answer, they tell you. If they do not, they look it up and tell you.
So, dipshit, go look it up. It is simple enough that even you may be able to understand it. And I have no reason to educate you.

Translation: You don't have a fucking clue about what Feudalism is.

 

[bripat9643]

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.

Right. Jesus, what can I say to you. You must know better than that, me boy. Uh, maybe not.

Only a fool thinks he knows better than the simple truth.

 

[itfitzme]

You're really making the point that our national debt is a "trivial non-issue"? *I'm sorry, Kimura but to be quite frank with you...I think you've lost your mind. *This notion of yours that debt isn't an issue amazes me. *Somehow someone has convinced you that "creative accounting" can nullify common sense. *Not only is it a mountain of debt...it is a Mt. Everest of debt...a sum that is so vast that it's hard to comprehend.

You should read up about it. It's not fancy, it's a basic accounting identity. Sorry, I don't have a link, I'm still looking. *But at a micro level, obviously savings equals loans. The bank needs savings to loan. *I know, it's a weak example, but that's the idea. In macro, it's much tighter. It says nothing about who has the savings.

So far, on the mountain of debt, I'm not finding your arguments convincing. *A mountain of debt is a bit subjective.. Mountains are nice. *You can go hiking, ski, etc. The fishing for trout is great.

So far, except that at some point interest equals tax receipts, it's a non issue.. And seeing as taxes have zero effect, that's a non issue.

 

[itfitzme]

The South fought a war because the North invaded them.

Right. Jesus, what can I say to you. You must know better than that, me boy. Uh, maybe not.

Only a fool thinks he knows better than the simple truth.

The simple truth is you're a fool.

Bada.. brump... brump....

Ya walked right into it, man...

 

[itfitzme]

Dammed Supreme Court with their*power to interpret the Constitution. *How did that happen?

For that matter, if states are sovreign nations, why do we even have a Constitution? *Seems awefully useless. *

Well, but......you mean states are not nations. What, then, are nation states??? For christ sake, we have all these folks in the south, particularly texas and la wanting to succeed, and you intimate that states are not nations???
Sorry, but your post got me laughing. Funny.

Fools are always laughing at stuff they don't understand.

And everyone laughs at fools.

 

[itfitzme]

"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?

Fooling? No one. You never ask someone to define anything on the internet, dipshit. If they know the answer, they tell you. If they do not, they look it up and tell you.
So, dipshit, go look it up. It is simple enough that even you may be able to understand it. And I have no reason to educate you.

Translation: You don't have a fucking clue about what Feudalism is.

It doesn't really matter because Libertarianism is futile. *It's Feutilism.

 

[Kimura]

Damn you, man... You can't blurt thing like that out and just walk away. *It leaves this big "I don't know" that causes a little permanent trickle of anxiety.

Now I'm gonna wake up tommorrow and realize I had been dreaming about that little Constitution cartoon guy, on Saturday morning along with "conjunction junction", standing on capitol hill and shooting little cartoon bond characters. *Then the little bond cartoon characters fall over, with big holes in their middle, gasping for breath before expiring and blowing away in a gust of wind. *I wake up with this uneazy feeling, like something is missing.

Damn you man....

Haha I apologize about the hit and run. I'll try to articulate my points a little more.

If we look at this from the federal government's point of view, there really isn't a functional difference between electronic credits, cash, bonds or treasury bills.*

The US could could stop issuing bonds today if it desired to. When people froth-at-the-mouth about US public debt, they don't understand the underlying mechanics of certain operational realities of our fiat monetary system. *The primary function of the US Treasury is to subtract or add net reserves in the banking system, which helps the Federal Reserve meet its target Fed Funds rate. The secondary function is give holders of US paper an ROI. Bank reserves really aren't really a great place to earn interest. I view bonds as a vestigial leftover from the dark days of the gold standard.

I thought the Federal Reserve had that whole "subtract or add net reserves in the banking system" thing cover.

**The Treasury does accounting for the govt. They print species, coins and bills, but that goes directly under Fed control. *They sell bonds to cover gov't expenditures in lue of sufficient receipts. *

The Fed increases reserve bank reserves and adjusts the discount rate. *The Fed has the whole open market thing which works on the private bank reserve portfolio.

The Fed does the electronic switching from savings to checking accounts.

Now we've got the Treasury adjusting private bank reserves too? *Seems a bit of a cludge. *But if it works....

The Treasury spends base money into existence while the FED loans base money into existence.

The government spends by writing Treasury checks or crediting commercial bank accounts. It can spend it on hammers, entitlements, drones or whatever.

When the government credits accounts or spends, this is the actual process of money creation, which then finds it way into reserves in the banking system. The mechanism of selling bonds has the effect of draining these excess reserves from the banking system which are then swapped for Treasuries. This reserve drain leaves us with a positive interest rate to reach the targeted Fed funds rate.

These explanations are for the viewing audience, not for you.

 

[Kimura]

You're really making the point that our national debt is a "trivial non-issue"? *I'm sorry, Kimura but to be quite frank with you...I think you've lost your mind. *This notion of yours that debt isn't an issue amazes me. *Somehow someone has convinced you that "creative accounting" can nullify common sense. *Not only is it a mountain of debt...it is a Mt. Everest of debt...a sum that is so vast that it's hard to comprehend.

You should read up about it. It's not fancy, it's a basic accounting identity. Sorry, I don't have a link, I'm still looking. *But at a micro level, obviously savings equals loans. The bank needs savings to loan. *I know, it's a weak example, but that's the idea. In macro, it's much tighter. It says nothing about who has the savings.

So far, on the mountain of debt, I'm not finding your arguments convincing. *A mountain of debt is a bit subjective.. Mountains are nice. *You can go hiking, ski, etc. The fishing for trout is great.

So far, except that at some point interest equals tax receipts, it's a non issue.. And seeing as taxes have zero effect, that's a non issue.

On a side note, loans actually create deposits.

For example, when a bank makes loan to a customer, a bank deposit is created, which is a liability for the bank, since the customer can draw upon the deposit. And for our bank customer, this new bank deposit is a claim on base money, which is effectively an asset. The whole point of this loan/deposit arrangement is so that banks can let customers make claims on base money which can be liquidated instantaneously.

Banks also don't lend reserves to customers. They're utilized by banks as a clearing mechanism of sorts. Banks can use their reserves to purchase bonds, convert them into cash or lend them out to other banks (interbank lending market). Any reserve shortages will not prevent a bank from loaning money to customers. Any reserve shortfalls are dealt with after the loan is made, mostly through the interbank lending market or using the FED as the lender of last resort.

Must.not.get.into.the.money.multiplier.myth.

 

[Rshermr]

You're really making the point that our national debt is a "trivial non-issue"? *I'm sorry, Kimura but to be quite frank with you...I think you've lost your mind. *This notion of yours that debt isn't an issue amazes me. *Somehow someone has convinced you that "creative accounting" can nullify common sense. *Not only is it a mountain of debt...it is a Mt. Everest of debt...a sum that is so vast that it's hard to comprehend.

You should read up about it. It's not fancy, it's a basic accounting identity. Sorry, I don't have a link, I'm still looking. *But at a micro level, obviously savings equals loans. The bank needs savings to loan. *I know, it's a weak example, but that's the idea. In macro, it's much tighter. It says nothing about who has the savings.

So far, on the mountain of debt, I'm not finding your arguments convincing. *A mountain of debt is a bit subjective.. Mountains are nice. *You can go hiking, ski, etc. The fishing for trout is great.

So far, except that at some point interest equals tax receipts, it's a non issue.. And seeing as taxes have zero effect, that's a non issue.

On a side note, loans actually create deposits.

For example, when a bank makes loan to a customer, a bank deposit is created, which is a liability for the bank, since the customer can draw upon the deposit. And for our bank customer, this new bank deposit is a claim on base money, which is effectively an asset. The whole point of this loan/deposit arrangement is so that banks can let customers make claims on base money which can be liquidated instantaneously.

Banks also don't lend reserves to customers. They're utilized by banks as a clearing mechanism of sorts. Banks can use their reserves to purchase bonds, convert them into cash or lend them out to other banks (interbank lending market). Any reserve shortages will not prevent a bank from loaning money to customers. Any reserve shortfalls are dealt with after the loan is made, mostly through the interbank lending market or using the FED as the lender of last resort.

Must.not.get.into.the.money.multiplier.myth.

So, at some point, it may be useful take some of the analytics that the two of you (the other being itfitzme, of course) and apply it to Europe. So, my contention is that austerity in europe is a failure, that it has been a failure from the start, and that it was easy enough to predict that it would be so, also from the inception of the idea. Unfortunately, between politicians, political operatives, pundits, and the press, folks have come to believe that there was some potential, at least, that it was a good idea.
The reasoning for those that believe austerity is a good plan is generally similar to the reasoning, if you would like to call it that, that relates to your discussion over the past three or so days as it was introduced from others.
By the way, impressive discussion. Thanks for the recap. It has been a few years since I have thought about the subject in the depth that you just presented.

 

[itfitzme]

You're really making the point that our national debt is a "trivial non-issue"? *I'm sorry, Kimura but to be quite frank with you...I think you've lost your mind. *This notion of yours that debt isn't an issue amazes me. *Somehow someone has convinced you that "creative accounting" can nullify common sense. *Not only is it a mountain of debt...it is a Mt. Everest of debt...a sum that is so vast that it's hard to comprehend.

You should read up about it. It's not fancy, it's a basic accounting identity. Sorry, I don't have a link, I'm still looking. *But at a micro level, obviously savings equals loans. The bank needs savings to loan. *I know, it's a weak example, but that's the idea. In macro, it's much tighter. It says nothing about who has the savings.

So far, on the mountain of debt, I'm not finding your arguments convincing. *A mountain of debt is a bit subjective.. Mountains are nice. *You can go hiking, ski, etc. The fishing for trout is great.

So far, except that at some point interest equals tax receipts, it's a non issue.. And seeing as taxes have zero effect, that's a non issue.

On a side note, loans actually create deposits.*

For example, when a bank makes loan to a customer, a bank deposit is created, which is a liability for the bank, since the customer can draw upon the deposit. And for our bank customer, this new bank deposit is a claim on base money, which is effectively an asset. *The whole point of this loan/deposit arrangement is so that banks can let customers make claims on base money which can be liquidated instantaneously.

Banks also don't lend reserves to customers. They're utilized by banks as a clearing mechanism of sorts. Banks can use their reserves to purchase bonds, convert them into cash or lend them out to other banks (interbank lending market). *Any reserve shortages will not prevent a bank from loaning money to customers. Any reserve shortfalls are dealt with after the loan is made, mostly through the interbank lending market or using the FED as the lender of last resort.

Must.not.get.into.the.money.multiplier.myth.

Ah, thanks..*

All you had to say was "On a side note, loans actually create deposits. "

I knew it was there, I was standing in the wrong spot to see it.

It's like the supply AND demand thing. *Sometimes I see the supply, sometimes the demand. I have to spin the game board around to see the other.*

Thanks for the detailed description. The more different ways it is described, the better it is understood.

 

[Oldstyle]

You're really making the point that our national debt is a "trivial non-issue"? *I'm sorry, Kimura but to be quite frank with you...I think you've lost your mind. *This notion of yours that debt isn't an issue amazes me. *Somehow someone has convinced you that "creative accounting" can nullify common sense. *Not only is it a mountain of debt...it is a Mt. Everest of debt...a sum that is so vast that it's hard to comprehend.

You should read up about it. It's not fancy, it's a basic accounting identity. Sorry, I don't have a link, I'm still looking. *But at a micro level, obviously savings equals loans. The bank needs savings to loan. *I know, it's a weak example, but that's the idea. In macro, it's much tighter. It says nothing about who has the savings.

So far, on the mountain of debt, I'm not finding your arguments convincing. *A mountain of debt is a bit subjective.. Mountains are nice. *You can go hiking, ski, etc. The fishing for trout is great.

So far, except that at some point interest equals tax receipts, it's a non issue.. And seeing as taxes have zero effect, that's a non issue.

Mountains can also kill your ass if you don't treat them with respect and your cavalier attitude to the mountain of debt that we've piled up does just that. This mumbo-jumbo that you and Kimura keep spouting about it all balancing out on your little accounting sheets is ridiculous. Banks do need capital to loan but when they make those loans they expect the loan to be paid back with interest. The problem with your little scenario is that we're rapidly approaching the point where the interest on the money we owe is going to be more than our entire Federal budget. What happens THEN to your "balance sheet"?

 

[itfitzme]

You should read up about it. It's not fancy, it's a basic accounting identity. Sorry, I don't have a link, I'm still looking. *But at a micro level, obviously savings equals loans. The bank needs savings to loan. *I know, it's a weak example, but that's the idea. In macro, it's much tighter. It says nothing about who has the savings.

So far, on the mountain of debt, I'm not finding your arguments convincing. *A mountain of debt is a bit subjective.. Mountains are nice. *You can go hiking, ski, etc. The fishing for trout is great.

So far, except that at some point interest equals tax receipts, it's a non issue.. And seeing as taxes have zero effect, that's a non issue.

On a side note, loans actually create deposits.*

For example, when a bank makes loan to a customer, a bank deposit is created, which is a liability for the bank, since the customer can draw upon the deposit. And for our bank customer, this new bank deposit is a claim on base money, which is effectively an asset. *The whole point of this loan/deposit arrangement is so that banks can let customers make claims on base money which can be liquidated instantaneously.

Banks also don't lend reserves to customers. They're utilized by banks as a clearing mechanism of sorts. Banks can use their reserves to purchase bonds, convert them into cash or lend them out to other banks (interbank lending market). *Any reserve shortages will not prevent a bank from loaning money to customers. Any reserve shortfalls are dealt with after the loan is made, mostly through the interbank lending market or using the FED as the lender of last resort.

Must.not.get.into.the.money.multiplier.myth.

So, at some point, it may be useful take some of the analytics that the two of you (the other being itfitzme, of course) and apply it to Europe. *So, my contention is that austerity in europe is a failure, that it has been a failure from the start, and that it was easy enough to predict that it would be so, also from the inception of the idea. *Unfortunately, between politicians, political operatives, *pundits, and the press, *folks have come to believe that there was some potential, at least, that it was a good idea. *
The reasoning for those that believe austerity is a good plan is generally similar to the reasoning, if you would like to call it that, that relates to your discussion over the past three or so days as it was introduced from others. *
By the way, impressive discussion. *Thanks for the recap. *It has been a few years since I have thought about the subject in the depth that you just presented.

Yeah, Europe is a bit difficult for me because of the whole Euro thing. *

What to do with Europe is an issue.**It's awkward.* * They are more like US states, to the best of my knowledge. There are no trade restrictions across US state lines. *In the Euro zone, they are sovreign nation-states. *So I've got no real knowledge as to how this works out. *The flow of goods and services is a huge deal and with money so intimately connected, I would be remiss to reach conclusions to quickly. Then there is the thing about US taxes and how the funds are spread out back to states. I can only imagine how odd it would be if US states were to be structured more like a sovreign nation, there were no federal taxes or grants, yet the money supply was still national. Interstate commerce, federal taxes and grant, and a national money supply equalizes variability.*

For these reasons, we want to be careful to distinguish between the Eurozone and the UK. *

I was comparing the US employment, unemployment, and labor participation rates to the UK. It's curious because the US looks more like a control system that is poorly tuned. *It was better before the recession, overshot on the recession effects, then has stabilized to near the UK. *What I see for the UK is that nothing has changes since the recession ended. *It's not the absolute levels that are important, not the rates, but the change in the rate. *Still, I need to look at them again.

I haven't looked at Greece, Germany, or any others.

It seems to me that Europe is unique and we have to be careful, like with that household analogy, to not be overly reliant on analogizing to the US.

 

[itfitzme]

You're really making the point that our national debt is a "trivial non-issue"? *I'm sorry, Kimura but to be quite frank with you...I think you've lost your mind. *This notion of yours that debt isn't an issue amazes me. *Somehow someone has convinced you that "creative accounting" can nullify common sense. *Not only is it a mountain of debt...it is a Mt. Everest of debt...a sum that is so vast that it's hard to comprehend.

You should read up about it. It's not fancy, it's a basic accounting identity. Sorry, I don't have a link, I'm still looking. *But at a micro level, obviously savings equals loans. The bank needs savings to loan. *I know, it's a weak example, but that's the idea. In macro, it's much tighter. It says nothing about who has the savings.

So far, on the mountain of debt, I'm not finding your arguments convincing. *A mountain of debt is a bit subjective.. Mountains are nice. *You can go hiking, ski, etc. The fishing for trout is great.

So far, except that at some point interest equals tax receipts, it's a non issue.. And seeing as taxes have zero effect, that's a non issue.

Mountains can also kill your ass if you don't treat them with respect and your cavalier attitude to the mountain of debt that we've piled up does just that. *This mumbo-jumbo that you and Kimura keep spouting about it all balancing out on your little accounting sheets is ridiculous. *Banks do need capital to loan but when they make those loans they expect the loan to be paid back with interest. *The problem with your little scenario is that we're rapidly approaching the point where the interest on the money we owe is going to be more than our entire Federal budget. *What happens THEN to your "balance sheet"?

I'm open to examining any real issue with the debt. But all I've read is based on the false analogy of a household budget.

The thing that is important is production and efficiency. *If everyone is working, then the production of goods is at it's maximum. *That means consumption can be at it's maximum as long as we get it distributed. *

The monies are just tickets to the show.

The only thing that matters in consumption is net income differential, relative net real income. *Then, in the most democratic of processes, prices adjust according to everyones vote by what they are willing to pay for one good relative to others. *Companies vote on labor and skill based of what they are willing to pay for one skill relative to others. *

It is relative net income that determines relative consumption between households.

The only issue with the money supply is that it is appropriately balanced. *The fundamental constraint to it is that we count it and have rules for that counting, called accounting.

The tie between money and goods is the time it takes for changes to propogate through the supply chains.

Everything else is secondary.*And most of it simply illusory because prices adjust.

 

[itfitzme]

**
The problem with your little scenario is that we're rapidly approaching the point where the interest on the money we owe is going to be more than our entire Federal budget. *What happens THEN to your "balance sheet"?

When that happens, when interest equals tax receipt, then the government won't be able to*borrow more. *The deficit will end.

But isn't that austerity? *So the worse case scenario is austerity and smaller gov't. *Which is the conservative manrta.

So the conservatives are upset about the eventual occurance of what they want to do to avoid it.

The worse case scenario is the solution to the worse case scenario.

Nobody is saying that the budget shouldn't be balanced. But it should be done the right way, at the right time, for the right reason, with an understanding of what it is going to do. Paying down the debt reduces savings and depresses the economy. To much, to fast, at the wrong time causes the opposite effect.

It's like counter steering on a motorcycle. To turn a motorcycle, you push on the handlebar on the side you want to turn. It's completely counter intuitive. The handlebar literally pushes back harder and the bike just leans right over. The machine drops like a rock. It's the oddest thing. It has to do with precession, the way the angular momentum of the wheel is conserved. It's a feedback system.

Reduce government spending and tax reciepts fall off, by more than the reductionnin spending. It's a feedback system. That is if it's done at the wrong time, by the wrong amount. The next thing we know, Congess has jacked up spending somewhere else and we are right back where we started. It has happened every time.

 

[itfitzme]

Banks do need capital to loan but when they make those loans they expect the loan to be paid back with interest. *The problem with your little scenario is that we're rapidly approaching the point where the interest on the money we owe is going to be more than our entire Federal budget. *What happens THEN to your "balance sheet"?

That's nothing compared to how money even exists in the economy. *I'm suprised that one isn't freaking you out completely.

Basically, there is no money except that it is borrowed. *In order for there to be one penny in circulation, it has to be borrowed. *But, then interest is due on that. So where does the interest come from? *Someone else has to borrow even more, with even more interest due.

Here is a video that explains it.

YouTube

Of course, it's not explaining it completely either. It's only half the story. There are details about how and what circulates.*I'm not entirely convinced it always works, but as long as we have growth, it works. *Wait, didn't we just have a balance sheet recession that began as the collapse of an asset bubble?

I'm a pessimist. I don't think anything works. *My sense is that the balance sheet recession is inevitable. *My sense is that it just keeps getting put off. *But the thing is, everytime I think I've found something, it turns out to be a non issue.*

So I've learned to temper my freakouts.