How is austerity doing in Europe

[RKMBrown]

Corrections in blue

I’m not trying to be rude, but you’re legitimately misinformed. There are many problems with the FED which are open to criticism, such as obvious cronyism, a certain level of incompetence, etc. Most of the anti-FED conspiracies come from a general misunderstanding about monetary operations or just subscribing to a John Birch Society worldview. My only point made, that is even remotely near such conspiracy discussions was to the decided lack of auditing by Congress of the FED activities. A requirement that Congress has ignored. That you continue to ignore "what I said" and instead make "blanket" accusations about conspiracy theories does not support your accusation.

The FED doesn’t lend money to the government in any capacity [I provided you with a link where the fed most certainly did do just that during this recession. You are correct in saying that it's not supposed to do this. ]

, so there&#8217;s no debt slavery or some other conspiracy to take over the world being led by Jews or <insert> nebulous, shadowy group</insert>. As I&#8217;ve tried to explain too you many times, this works a little different than your ordinary commercial bank. The interest on &#8220;debt&#8221; held by the Federal Reserve ends up in two places. They pay themselves out of the interest to cover operating expenses and the remainder of the interest is rebated to the US Treasury. So, for the umpteenth time, despite the Ron Paul and John Birch Kool Aid, the Federal Reserve doesn&#8217;t sell us into debt slavery, nor does it own or control the government in any capacity. [Again, you can explain this a thousand times. I understand this process "fully." You are not listening to me. You are assuming what I'm telling you must be based on some misunderstanding of mine based on a misunderstanding of how it works. What you don't understand is that I know exactly how it works. I never said anything about "debt slavery" or any other "conspiracy." You are the one making that point up, not me. ]

I&#8217;m legitimately trying to clear up any confusion you have. [That may be true, but that does not mean you are listening. You may be assuming that my terms are terms out of your 30year old liberal arts textbook. No. My terms are the terms used by Private Citizens, Bankers, Stock traders, Business owners.... Having personally written many software packages for many industries I'm somewhat familiar with most areas of finance and accounting, albeit not from the, forgive me, myopic perspective of an Economics expert. ]

Many of the FED critics obsess over the fact that the FED is a private corporation that&#8217;s partially governed by private banks as opposed to an alphabet soup agency of sorts. Who cares? This isn&#8217;t any different than the US Postal Service or fucking Amtrak. Sure, they can be run by a bunch of schmucks at certain times, but this is hardly a global conspiracy.
That may be true, but that does not mean you heard that argument from me.

There&#8217;s also the erroneous belief that the FED is literally independent or private. It&#8217;s actually a partially public entity. The Federal Reserve, like every other central bank in the industrialized world, is independent within government, which means its daily operations aren&#8217;t overseen by Uncle Sam. The Chairman of the Board of Governors is appointed by POTUS and subject to oversight by Congress. Its mandate is also determined by Congress. It&#8217;s also audited by the GAO which is available to the public online.

I've skimmed over the so called audit. It's more a summary report than any audit report I've ever read. They've only done one correct? Or can you point to a complete audit other than the one at this link GAO Fed Investigation ?


The way the banks control the FED system is that they are technically in an ownership role, but not the same way that shareholders own Cisco or Google. The FED was created by Congress, so it&#8217;s organizationally different than a regular corporation. These shareholder banks have zero voting power, and ALL decisions are made by the publicly appointed Board of Governors. These banks have zero say about monetary policy. This power resides with the Board of Governors. Actually, compared to most other government agencies, the FED runs like a well-oiled machine.

Well oiled machine... lol Grease is the word alright. Again you ignore the fact that these guys in the cartel get exclusive access to nearly unlimited funds. All they have to do to pay the prior years funds is take more each year. It's a joke. Unlimited expansion, into their pocket. You are focused on profit. ROFL Who cares about the FED profit? The real money isn't in the interest paid to the FED for the unlimited funds, the real money is in USING THE UNLIMITED FUNDS to make a higher rate of return than that charged by the FED. The delta between year two's sales of the FED instruments and year one's sales of the FED instruments minus interest is "float" that the banks can use recursively to do whatever they like.

All of this information could have been covered by an Intro to Money and Banking course at your local community college. You are being Rude again. You assume I'm wrong in what I say. Because I'm not an Economics major? heh... I may be wrong, but it's not because I only took Econ I&II while getting my degree in mathematics.

Lastly, I never said the government owns ALL assets. Your earlier formulas and results had the effect of saying just that.

I simply stated the obvious: deficit spending by the government creates net financial assets for the non-government sector.
I agree with this statement. More particularly I agree that deficit spending by the government can result in the creation of a portion of the net financial assets of the non-government sector

 

[AmazonTania]

Then for christ sakes, stop it.

I don't need to stop anything. I'm not talking about me. I'm referring to the ones debating from the backseat. Its bad enough if people are going to throw ad homineims, but they do it in debates which do not involve this person, at the same time offering zero substance to the discussion.

These people need to grow up, and by these people, I mean you.

I see. Well, that would be your opinion. And you know how much I appreciate your opinion. But the attack was by you against me. Get the problem there, me girl. I am trying to ignore you, not respond to things you say.

Congratulations, you've used your own over-used catchphrase. You waste zero time being unoriginal. The attack wasn't on just you, but anyone who feels the need to back seat debate without offering nothing of value to the discussion. If you feel this was initially targeted to you from the beginning, then then you are the cause of the problem.

Just stop.

And then, you toss ban ad hominem attack my way and tell me to stop making ad hominem attacks. Funny.

I haven't made any ad hominems attacks, and I doesn't surprise me that you cant understand the difference. Ad hominem attacks are when you are not attacking the argument, but the person instead. This is all you've done, while offering nothing to the initial discussion but your sad pandering, like here:

http://www.usmessageboard.com/economy/281130-how-is-austerity-doing-in-europe-79.html#post7681173

Maybe you weren't paying attention, but we are trying to have a high level economic discussion. The discussion is between Kimura and RKMBrown. If you don't have any meaningful to add, butt out. Kimura arguments aren't so bad that he needs anyone coddling him or propping him up. It makes you seem desperate for attention and acceptance, and it makes the side you are advocating for particularly weak that it cannot convey its thoughts correctly that it needs a cheerleader.

Just stop.

 

[Rshermr]

I don't need to stop anything. I'm not talking about me. I'm referring to the ones debating from the backseat. Its bad enough if people are going to throw ad homineims, but they do it in debates which do not involve this person, at the same time offering zero substance to the discussion.

These people need to grow up, and by these people, I mean you.

I see. Well, that would be your opinion. And you know how much I appreciate your opinion. But the attack was by you against me. Get the problem there, me girl. I am trying to ignore you, not respond to things you say.

Congratulations, you've used your own over-used catchphrase. You waste zero time being unoriginal. The attack wasn't on just you, but anyone who feels the need to back seat debate without offering nothing of value to the discussion. If you feel this was initially targeted to you from the beginning, then then you are the cause of the problem.

Just stop.

And then, you toss ban ad hominem attack my way and tell me to stop making ad hominem attacks. Funny.

I haven't made any ad hominems attacks, and I doesn't surprise me that you cant understand the difference. Ad hominem attacks are when you are not attacking the argument, but the person instead. This is all you've done, while offering nothing to the initial discussion but your sad pandering, like here:

http://www.usmessageboard.com/economy/281130-how-is-austerity-doing-in-europe-79.html#post7681173

Maybe you weren't paying attention, but we are trying to have a high level economic discussion. The discussion is between Kimura and RKMBrown. If you don't have any meaningful to add, butt out. Kimura arguments aren't so bad that he needs anyone coddling him or propping him up. It makes you seem desperate for attention and acceptance, and it makes the side you are advocating for particularly weak that it cannot convey its thoughts correctly that it needs a cheerleader.

Just stop.

Just stop?? I did. How about you return the favor?
And, me girl, to the best of my knowledge, I have as much right to post here as you. As a matter of fact, it is a thread I started. So, as best I understand you have every right to respond as do I.

Interesting that you think there is a MY SIDE. So by definition, I guess you must believe there is a YOUR SIDE. But in my opinion, this is not about "sides". Kimura to the best of my knowledge has no "side". At least, I have not seen a side. He is interested in truth. As am I. If Kimura is wrong, I would be glad to point it out. If I am wrong, I welcome his effort to point that out. But it is you who said you have an agenda. And here, you admit you have a "side". Discussion is not about sides, or agenda, imho. It should be about the facts.

 

[RKMBrown]

Discussion is not about sides, or agenda, imho. It should be about the facts.

Speed is a clever and witty servant. (William Shakespeare) But, quick is the fool who is assured that he has all of the facts readily at his disposal. (RKMBrown)

I thought the cheerleader poke was apropos. Why not inject something meaningful into the discussion? I'm not one of those that is easily convinced based on consensus votes.

 

[AmazonTania]

I see. Well, that would be your opinion. And you know how much I appreciate your opinion. But the attack was by you against me. Get the problem there, me girl. I am trying to ignore you, not respond to things you say.

Congratulations, you've used your own over-used catchphrase. You waste zero time being unoriginal. The attack wasn't on just you, but anyone who feels the need to back seat debate without offering nothing of value to the discussion. If you feel this was initially targeted to you from the beginning, then then you are the cause of the problem.

Just stop.

And then, you toss ban ad hominem attack my way and tell me to stop making ad hominem attacks. Funny.

I haven't made any ad hominems attacks, and I doesn't surprise me that you cant understand the difference. Ad hominem attacks are when you are not attacking the argument, but the person instead. This is all you've done, while offering nothing to the initial discussion but your sad pandering, like here:

http://www.usmessageboard.com/economy/281130-how-is-austerity-doing-in-europe-79.html#post7681173

Maybe you weren't paying attention, but we are trying to have a high level economic discussion. The discussion is between Kimura and RKMBrown. If you don't have any meaningful to add, butt out. Kimura arguments aren't so bad that he needs anyone coddling him or propping him up. It makes you seem desperate for attention and acceptance, and it makes the side you are advocating for particularly weak that it cannot convey its thoughts correctly that it needs a cheerleader.

Just stop.

Just stop?? I did. How about you return the favor?

I'm putting you on notice. That's all. The last thing we really need is anyone getting a big head, not because someone said anything coherent, but we decided to incorporate mascots in our discussion.

Just stop.

And, me girl, to the best of my knowledge, I have as much right to post here as you. As a matter of fact, it is a thread I started. So, as best I understand you have every right to respond as do I.

If you want your thread to be a joke, be my guest. But for majority of the few hours when meaningful discourse was going on was when you said nothing. If you really cared about such discourse, you would continue to say nothing and only add something of value to the conversation.

Just stop.

Interesting that you think there is a MY SIDE. So by definition, I guess you must believe there is a YOUR SIDE. But in my opinion, this is not about "sides".

I don't know exactly who you think you are fooling, but majority of your cheers are directed to a few people, and 100% of what they are saying is not exactly correct. I've never seen you point out anything that was wrong. I know this because I read everything. The only thing I've seen are very prudent examples of d-ride fever... And also:

Nice job. But you did not get anything into RKM's head. I see him now pounding his ears with both hands while saying NO, NO, NO, NO, NO....... Along with all of the others who want to believe what RKM believes.
But, your information is clear, and correct. Again, nice job.

no, me poor ignorant con tool.

Try again, me poor ignorant con tool.

Again, you have a distinct bias. It's not very difficult to see. You're not fooling anyone by pretending you don't have a horse in this race.

Just stop.

Kimura to the best of my knowledge has no "side". At least, I have not seen a side. He is interested in truth. As am I. If Kimura is wrong, I would be glad to point it out. If I am wrong, I welcome his effort to point that out.

Apparently, your head was so far up his ass than you couldn't near the positions of a Chartalist and an advocate of the Modern Monetary Theory when you heard it. Or maybe your economic knowledge was so limited that you thought all economist advocated such inane Monetary theories.

Chartalism - Wikipedia, the free encyclopedia

You are not the arbiter or the facts, nor credible nor knowledgeable to determine what the facts are. You are not the moderator. If we really needed one, we could do much better than you. You must obviously know this.

Just stop.

But it is you who said you have an agenda. And here, you admit you have a "side". Discussion is not about sides, or agenda, imho. It should be about the facts.

All I did was made a sarcastic remark which flew over that empty vessel you call head. Your bias and warped sense of logic makes you believe everyone who doesn't see things your way has an agenda, and if they don't see things your way, then they are a con tool. Clearly, you're not objective, and you do have a side.

As for whether or not you have a side, I don't care. That's why a debate is. A debate is what happens when opposing sides argue best for their side using the evidence presented. You obviously can't understand how this works, which is why you are such a terrible person to debate with. You can be on all the sides you'd like. Just don't jump into decisions with zero to add to the discussion, spouting Ad hominem and claiming the only thing you are after is the true. It just makes you sound intellectually dishonest.

Just stop.

 

[oldfart]

Back on topic
How is austerity doing in Europe?

Didn't mean to ignore you! This thread does have a tendency to wander.

Its working but very slowly and very painfully in my view.
We are not out of the woods yet and I personally fear it will get much worse before things really improve.

There seem to be three main schools of thought here. First is the position that "true" austerity has not been tried anywhere because that entails returning to the gold standard, cutting public expenditures sufficiently to create a government surplus, and apparently reducing taxes and taking unspecified measures to be determined later. I believe that this is basically and insincere attempt to avoid having to admit failure, as the only purpose seems to be to deny accountability.

Second, there is a group which claims success for austerity based on cherry-picking (usually small) countries that show some upturn (Ireland and Latvia come to mind). These cases on closer examination turn out to not be as represented.

The final group, of which I am a part, believe that austerity has, as it did in 1928--1933, made things worse.

From an Irish point of view we had a lovely boom for over a decade with low unemployment rates high GDP growth figures, a very high export surplus and virtually 0% government debt to GDP ratio. Most did not see the crash coming and to be fair it all happen so fast it was just unbelievable to most.

The question logically arises as to what caused the boom and export surplus in the first place. It all begins about 1995 (I'm going from memory here so I could be off on the date) when Ireland adopted a strategy to attract multi-nationals by becoming a low tax haven. Big Pharma was a major part of this. The problem with pharmaceuticals is that the industry is extremely capital intensive and most of its production is for the export market. This seriously distorted the Irish economy and skewed the economic statistics on Ireland so that they gave an impression of the Irish economy that was misleading.

For example, because pharma is a capital intensive industry owned by foreign corporations, it makes export growth look very high while very little of those earnings pass through to the rest of the Irish economy. I've seen a figure that it takes $100 of gross Irish pharma sales to generate the same impact as $4 spent by tourists visiting Ireland!

Add to this the "hot" money flowing into the country for tax avoidance reasons. It settled into the Irish banking system which, like all good bankers tried to lend it out. The result was one of the biggest real estate bubbles in Europe. I understand that part of the government's response is to bulldoze more than 100,000 completed but unsold housing units in tracts where public services and utilities had been planned but never built!

It turned out that a large portion of the GDP growth was from the accumulation of debt by the public at large. Money via banks had been flooding into the country and had the net result of increasing the number of jobs and also tax revenue. When this flow of money finally stopped we found out the hard way the real cost of it. The unemployment rate skyrocketed and the tax revenue plummeted.
Overnight we went form country with budget surplus to a double digit deficit. Each year since 2008 this deficit figure has been reduced as a result of austerity, by 2015 it should finally be back under control provided there is not a global economic collapse

I certainly hope Ireland has a shining recovery. But to prevent another debacle, Ireland will have to wean itself off of the tax haven model of economic development and develop an economy based more on domestic demand than export growth.

 

[AmazonTania]

Discussion is not about sides, or agenda, imho. It should be about the facts.

Speed is a clever and witty servant. (William Shakespeare) But, quick is the fool who is assured that he has all of the facts readily at his disposal. (RKMBrown)

I thought the cheerleader poke was apropos. Why not inject something meaningful into the discussion? I'm not one of those that is easily convinced based on consensus votes.

There, I put my twitter on my signature. 3,200 + people follow me. Now I know everything I say is right... Consensus is grand, ain't it.

Which reminds me, instead of responding to whatever I was going to, I need to post my thoughts.

Until then, this circus is all yours.

 

[RKMBrown]

Usually the rhetoric approach to debating is based on a history of beating ones' head against the wall to no avail. I'm willing to learn new things. I'm willing to agree when I'm wrong. I don't think he's expecting that. Fundamentally, I just don't see the argument that the sum total of ever larger deficits of a government (US or Europe) and unlimited expansion of credit are both a necessary and efficient means for managing growth of private assets. I see these things more as a means for redistributing wealth. In the case of expansion of credit, we redistribute wealth to the folks who take the risk of borrowing into growth, and the bankers profit through the management of the easy money to be made in lending said with safe instruments that have a higher return than fairy dust backed money. In the case of govco debt, the taxpayer foots the bill, thus anyone that refuses to participate in the taxable items benefits over the people who have no choice but to get punished for their insolence in being in a position to be taxed.

 

[Rshermr]

Usually the rhetoric approach to debating is based on a history of beating ones' head against the wall to no avail. I'm willing to learn new things. I'm willing to agree when I'm wrong. I don't think he's expecting that. Fundamentally, I just don't see the argument that the sum total of ever larger deficits of a government (US or Europe) and unlimited expansion of credit are both a necessary and efficient means for managing growth of private assets. I see these things more as a means for redistributing wealth. In the case of expansion of credit, we redistribute wealth to the folks who take the risk of borrowing into growth, and the bankers profit through the management of the easy money to be made in lending said with safe instruments that have a higher return than fairy dust backed money. In the case of govco debt, the taxpayer foots the bill, thus anyone that refuses to participate in the taxable items benefits over the people who have no choice but to get punished for their insolence in being in a position to be taxed.

Again, you seem to be arguing for lower taxes. We are close now to the lowest taxes since the early 50's. Can you show a time when, during high unemployment the lowering of income taxes has improved the economy??
Again, let me know how the wealthy are getting hurt by the supposed higher taxes that you are talking about if you would be so kind. I am missing it.

 

[Kimura]

[That may be true, but that does not mean you are listening. You may be assuming that my terms are terms out of your 30year old liberal arts textbook. No. My terms are the terms used by Private Citizens, Bankers, Stock traders, Business owners.... Having personally written many software packages for many industries I'm somewhat familiar with most areas of finance and accounting, albeit not from the, forgive me, myopic perspective of an Economics expert. ][/COLOR]

Well oiled machine... lol Grease is the word alright. Again you ignore the fact that these guys in the cartel get exclusive access to nearly unlimited funds. All they have to do to pay the prior years funds is take more each year. It's a joke. Unlimited expansion, into their pocket. You are focused on profit. ROFL Who cares about the FED profit? The real money isn't in the interest paid to the FED for the unlimited funds, the real money is in USING THE UNLIMITED FUNDS to make a higher rate of return than that charged by the FED. The delta between year two's sales of the FED instruments and year one's sales of the FED instruments minus interest is "float" that the banks can use recursively to do whatever they like.

^^^^^^^

See......this is what I mean by not understanding monetary operations. I didn't ignore your statements, but there's only a certain amount of times I can explain the same thing a different way.

My only point made, that is even remotely near such conspiracy discussions was to the decided lack of auditing by Congress of the FED activities. A requirement that Congress has ignored. That you continue to ignore "what I said" and instead make "blanket" accusations about conspiracy theories does not support your accusation.

[I provided you with a link where the fed most certainly did do just that during this recession. You are correct in saying that it's not supposed to do this. ]

I've skimmed over the so called audit. It's more a summary report than any audit report I've ever read. They've only done one correct? Or can you point to a complete audit other than the one at this link GAO Fed Investigation ?

Here are the independent auditors' reports:

2009

2010

2011

2012

 

[Kimura]

Discussion is not about sides, or agenda, imho. It should be about the facts.

Speed is a clever and witty servant. (William Shakespeare) But, quick is the fool who is assured that he has all of the facts readily at his disposal. (RKMBrown)

I thought the cheerleader poke was apropos. Why not inject something meaningful into the discussion? I'm not one of those that is easily convinced based on consensus votes.

There, I put my twitter on my signature. 3,200 + people follow me. Now I know everything I say is right... Consensus is grand, ain't it.

Which reminds me, instead of responding to whatever I was going to, I need to post my thoughts.

Until then, this circus is all yours.

When my best friend started his company, he bought like a thousand Twitter followers and like two thousand Facebook likes. I'd say he qualifies for Douche Of The Year.

 

[AmazonTania]

Speed is a clever and witty servant. (William Shakespeare) But, quick is the fool who is assured that he has all of the facts readily at his disposal. (RKMBrown)

I thought the cheerleader poke was apropos. Why not inject something meaningful into the discussion? I'm not one of those that is easily convinced based on consensus votes.

There, I put my twitter on my signature. 3,200 + people follow me. Now I know everything I say is right... Consensus is grand, ain't it.

Which reminds me, instead of responding to whatever I was going to, I need to post my thoughts.

Until then, this circus is all yours.

When my best friend started his company, he bought like a thousand Twitter followers and like two thousand Facebook likes. I'd say he qualifies for Douche Of The Year.

Spending money on followers and likes is the way to go apparently. It must be if the State Department spent $630,000 of taxpayer money on Facebook likes. I'm pretty sure most of mine are real. Haven't been losing too many followers. Just mostly due to inactivity.

Speaking of which, need to get back to my responses. Hopefully I can respond to both before bed...

 

[RKMBrown]

Usually the rhetoric approach to debating is based on a history of beating ones' head against the wall to no avail. I'm willing to learn new things. I'm willing to agree when I'm wrong. I don't think he's expecting that. Fundamentally, I just don't see the argument that the sum total of ever larger deficits of a government (US or Europe) and unlimited expansion of credit are both a necessary and efficient means for managing growth of private assets. I see these things more as a means for redistributing wealth. In the case of expansion of credit, we redistribute wealth to the folks who take the risk of borrowing into growth, and the bankers profit through the management of the easy money to be made in lending said with safe instruments that have a higher return than fairy dust backed money. In the case of govco debt, the taxpayer foots the bill, thus anyone that refuses to participate in the taxable items benefits over the people who have no choice but to get punished for their insolence in being in a position to be taxed.

Again, you seem to be arguing for lower taxes. We are close now to the lowest taxes since the early 50's. Can you show a time when, during high unemployment the lowering of income taxes has improved the economy??
Again, let me know how the wealthy are getting hurt by the supposed higher taxes that you are talking about if you would be so kind. I am missing it.

I don't care much where the tax rate is. What I do care for is that we all pay the same rate for taxes. I don't appreciate the idea that some folks are forced to pay my way and others gain the benefit of paying no taxes. What I despise is having to hear my daughter (nurse) decry the despicable leeches that steal from the tax payer every day by forcing the hospitals to get them high on the taxpayer's dime. What I really despise is seeing good people not work for years while they leach on the taxpayer's dime using disability and unemployment and food stamps and and and and ... to pay their way through life.

It sucks to know you are the mark and not be able to do a single thing about it. It sucks even more to know that half the friggin country does not give a shit because it's not their tax money that's being pissed away. Stealing GM from it's owners to give it to the Union...OMG.

 

[Kimura]

There, I put my twitter on my signature. 3,200 + people follow me. Now I know everything I say is right... Consensus is grand, ain't it.

Which reminds me, instead of responding to whatever I was going to, I need to post my thoughts.

Until then, this circus is all yours.

When my best friend started his company, he bought like a thousand Twitter followers and like two thousand Facebook likes. I'd say he qualifies for Douche Of The Year.

Spending money on followers and likes is the way to go apparently. It must be if the State Department spent $630,000 of taxpayer money on Facebook likes. I'm pretty sure most of mine are real. Haven't been losing too many followers. Just mostly due to inactivity.

Speaking of which, need to get back to my responses. Hopefully I can respond to both before bed...

His company has social proof now. It seems like a viable way to go. I'm debating whether or not to start a blog and go the Twitter route.

Have a good night....errr morning in the UK.

 

[RKMBrown]

See......this is what I mean by not understanding monetary operations. I didn't ignore your statements, but there's only a certain amount of times I can explain the same thing a different way.

You'll note, or not, that I did not have a single problem agreeing with the other economists that were posting remarks on this subject. Only you. Funny how that is, huh? Maybe I have it out for you. Or... maybe they said what they said in a different way. Maybe ... just maybe there are a few significant differences between what you said and what they said. Maybe, just maybe the problem isn't me not understanding, it's your statements? Or maybe it's your knee jerk reaction to my response to the differences, vs. their response to the differences.

 

[Rshermr]

Usually the rhetoric approach to debating is based on a history of beating ones' head against the wall to no avail. I'm willing to learn new things. I'm willing to agree when I'm wrong. I don't think he's expecting that. Fundamentally, I just don't see the argument that the sum total of ever larger deficits of a government (US or Europe) and unlimited expansion of credit are both a necessary and efficient means for managing growth of private assets. I see these things more as a means for redistributing wealth. In the case of expansion of credit, we redistribute wealth to the folks who take the risk of borrowing into growth, and the bankers profit through the management of the easy money to be made in lending said with safe instruments that have a higher return than fairy dust backed money. In the case of govco debt, the taxpayer foots the bill, thus anyone that refuses to participate in the taxable items benefits over the people who have no choice but to get punished for their insolence in being in a position to be taxed.

Again, you seem to be arguing for lower taxes. We are close now to the lowest taxes since the early 50's. Can you show a time when, during high unemployment the lowering of income taxes has improved the economy??
Again, let me know how the wealthy are getting hurt by the supposed higher taxes that you are talking about if you would be so kind. I am missing it.

I don't care much where the tax rate is. What I do care for is that we all pay the same rate for taxes. I don't appreciate the idea that some folks are forced to pay my way and others gain the benefit of paying no taxes. What I despise is having to hear my daughter (nurse) decry the despicable leeches that steal from the tax payer every day by forcing the hospitals to get them high on the taxpayer's dime. What I really despise is seeing good people not work for years while they leach on the taxpayer's dime using disability and unemployment and food stamps and and and and ... to pay their way through life.

It sucks to know you are the mark and not be able to do a single thing about it. It sucks even more to know that half the friggin country does not give a shit because it's not their tax money that's being pissed away. Stealing GM from it's owners to give it to the Union...OMG.

Stealing gm to give to the union??? Not sure I have ever read about that. Maybe you can flesh that out for me, and others.

 

[Kimura]

See......this is what I mean by not understanding monetary operations. I didn't ignore your statements, but there's only a certain amount of times I can explain the same thing a different way.

You'll note, or not, that I did not have a single problem agreeing with the other economists that were posting remarks on this subject. Only you. Funny how that is, huh? Maybe I have it out for you. Or... maybe they said what they said in a different way. Maybe ... just maybe there are a few significant differences between what you said and what they said. Maybe, just maybe the problem isn't me not understanding, it's your statements? Or maybe it's your knee jerk reaction to my response to the differences, vs. their response to the differences.

I probably should have prefaced our deficit discussion in a better way, such as differentiating between financial assets vs real assets, inside wealth and outside wealth, and a better overall explanation of stock and flow concepts (of income and/or spending) within the sectoral balances approach. It wasn't my agenda to engage in knee jerk reactions if that's how I came across.

 

[AmazonTania]

OK, since now is later, let's talk about the crowding out effect. This is related to something called Ricardian equivalence and has been around classical economics for a long time. The problem is that it dates from the period economists ASSUMED full employment of resources.

however, it's pretty difficult to deny that there is a crowding out effect. Again, going back to the equation:

G &#8722; T = S &#8722; I​

Again, if we take the foreign sector out of the equation and just focus on the domestic side. If government spending increases (G) while tax revenue (T) remains the same, then the left side of the equation gets bigger. Basic accounting (calculus rather) tells us that the right side of the equation must increase as well. It means people must cut down on consumption and save more, but this can also cause private sector investment to decrease.

Remember that this is an accounting identity and not a function. It describes the equilibrium post facto equivalence after the market effects have worked themselves out, not what happens in getting to that equilibrium. So the argument is that if we start from a full-employment equilibrium of all factors of production and increase government spending in a two-sector model, savings must go up by an equal amount in the next equilibrium, by definition. This is true.

The usual was to explain the MECHANISM is that the government increases the supply of government securities to fund the deficit, which drives prices down in the bond market, effectively raising interest rates. Confronted with higher interest rates, the household sector will find savings relatively more attractive and consumption slightly less and adjust their behavior to a new equilibrium involving less consumption and more saving. The process only stops when an interest rate is reached at which the additional saving enticed from the household sector matches the increased government spending.

Have I stated this fairly?

No complaints so far.

This is where the sticky part is. When interest rates increase, households will adjust their "consumption ratio" downward. Most of this effect will probably be consumers who cannot afford to borrow as much and thus lower plans for consumption, which is why consumer durables are more volatile than food or clothing, the mechanism is not on the consumer wants side, it is on the consumer capacity side of household optimization. Households are to some extent income-constrained.

But all of this rests on the initial assumption of full employment of all factors of production. Suppose this is not true. In linear programming terms the "shadow cost" of the partially unused resource is zero. Economists would say the opportunity cost of that resource was zero. Both mean that we can utilize more of that resource because it is "free". But while the resource may have a marginal productivity of zero, it is still likely to be paid a traditional price for that resource. Where I work the woods are full of half empty commercial space whose asking rents have not fallen the last five years. Combine sticky resource prices and excess capacity and you set up a new possibility. The government spending immediately injects income into the household sector (labor is paid wages and property owners start receiving rent on formerly vacant space). They are no longer as income-constrained as they were before, and can increase both consumption and savings!

All you've done was explain what effects idle resources can do for other people. Not necessarily analysis the benefits relative to the cost. This is where I take the time to mention another component of classical economics called Bastiat's Fable. What? I thought we were just mentioning economist at random...

The problem with those who concur that there is no crowding out is largely due to the assumption that there are idle resources. This also has to do with the distinction between wealth and employment. Even if you do believe that government would spend in a way which would only involve unemployed resources, the measure would result in a harmful solution which would make a particular area poorer.

Shadow cost are 0 to someone else, which always come at a cost to another person. At zero prices, there is always greater demand than supply. Some people tend to assume that scarcity does not exist in some sectors of the economy. Goods are free by nature, but inappropriate institutional arrangements have led to scarcity. Free resources utilised in one sector can always be utilised in another sector which is more productive. There is really no such thing as a Free resource, not in the Government sector or Private Sector.

For example, the issue is what is the best outlet for all of these idle resources. Does the final mix output satisfy consumer desires? How can we be sure that channeling these resources into sector X won't actually do more harm than good? In practice, the market economy does a fanasitc job of doing this called a profit-and-loss calculation, which are conveyed in the form of market prices. Anyone can use an example of anyone who was currently laid-off as a result of the financial crisis. Me in particular, while we are still employing personal anecdotes.

This Wall Street Broker isn't doing anybody a service by cranking out models that give mortgage-backed securities a gold star for safety. What do I do with my degree? Should I go and teach other how to trade in the markets or was my education a complete was, in which given the economic opportunities, provide services at Wal-Mart. No one knows the answers to these questions, but what eventually happens in the recovery process as the unemployed initially looks for another job with the same salary as before. As the months pass, she realizes that this is unrealistic, and she begins lowering his minimum price. Eventually, he finds an employer with compatible desires, and the two agree to a mutually beneficial arrangement.

In this scenario, idle unemployment serves as a real function in the marketplace, but they're never truly idle. They're always assumed uses for resources which can be put to better uses. When government spends money and runs up deficits, all it means is that it is forcing taxpayers to spend money on projects that the market wouldn't normally fund, and for more often than not a very good reason.

For example, video game developer 38 studios going into bankruptcy, the state department purchasing 2,500 kindles, the bankruptcy of A123 Systems, and others. Now, I can give these examples all day, and I'm sure someone else would love that. But regardless at the extent at the government is using that money, whether for investment or for current government expenditures, it is not available for other people. The key thing to remember it's not whether or not investors are being crowded out. It's the fact that they could be investing into other economic activity, which could be more productive than government debt, given that the government activity is not very productive. The question of whether or not Government Spending is going to be less productive than Private Spending is ultimately an empirical one.

This is because in principle, we expect this to be the case. If you are spending your own money on yourself you are going to spend very carefully. If you are also spending someone else's money on yourself, you're still going to spend it with some reasonable amount of concern, but ultimately very carefully. However, if you are spending someone else's money on someone else (which is what is the case with government), then you have no real incentive to actually use that money effectively or efficiently. This is simply an economic reality. Ultimately, government spending frees up another income and produces savings at the expense of constraining anther's income and savings.

I leave it to you to explain how this gives rise to the multiplier effect. In summary, the closer we are to full utilization of resources (which is reflected in markets by price inflation), the more "crowding-out" we will observe. The more unused resources in an economy (high unemployment rates and commercial vacancy rates), the less "crowding-out" and the higher the multiplier. Both descriptions of an economy are correct given they are applied to the appropriate set of circumstances.

Again, all this has very much to do with scarcity, and the assumption that there is none. Depending on the economic sector your are referring to. If deficits are financed by the public, then it causes a diversion of savings into government projects. If deficits are financed by bank inflation, then the diversion is indirect and the crowding out takes place by the printing of new money for government, competing for resources with the old money saved by the public sector.

 

[RKMBrown]

See......this is what I mean by not understanding monetary operations. I didn't ignore your statements, but there's only a certain amount of times I can explain the same thing a different way.

You'll note, or not, that I did not have a single problem agreeing with the other economists that were posting remarks on this subject. Only you. Funny how that is, huh? Maybe I have it out for you. Or... maybe they said what they said in a different way. Maybe ... just maybe there are a few significant differences between what you said and what they said. Maybe, just maybe the problem isn't me not understanding, it's your statements? Or maybe it's your knee jerk reaction to my response to the differences, vs. their response to the differences.

I probably should have prefaced our deficit discussion in a better way, such as differentiating between financial assets vs real assets, inside wealth and outside wealth, and a better overall explanation of stock and flow concepts (of income and/or spending) within the sectoral balances approach. It wasn't my agenda to engage in knee jerk reactions if that's how I came across.

Same here... cheers.

 

[RKMBrown]

Stealing gm to give to the union??? Not sure I have ever read about that. Maybe you can flesh that out for me, and others.

Still living under a rock? GM and the Truth About One of America's Biggest Bankruptcies