Modern Monetary Theory (MMT): How Fiat Money Works

[Dovahkiin]

Gold is real money, and notes that can be exchanged for gold are real money. Everything else is worthless trash.

Gold is real money? I don't see people using gold to pay their mortgages or buy cars.
You can't exchange dollars for gold, not anymore, and the gold standard was a disaster.

That's because it's illegal to use gold as currency. People have tried it, and they are in federal prison now.

The gold standard was anything but a disaster. In 1913 before the Federal Reserve was created the gold backed dollar was worth more than it was worth in 1789 when the Constitution was ratified.

Good. The government has to make sure the currency it issues is always in demand so they can spend for the public good.
Dude, that sounds like austrian shit. The money supply has to increase, get over it. I work less and earn more in relation to someone in the 1820's.

When the several sovereign states came together and established their union, they gave it a very small, specific set of powers. Can you show me in the constition the power to make sure the currency it issues is always in demand? I'd like to see the language you quote.

The Federal Government doesn't even have the authority to issue paper currency. That's why they pretend the Federal Reserve is a private bank. It's fraud committed right out in the open.

The federal reserve is an independent entity within the government. Dude, I'm literally explaining how it works and you're agreeing! You just don't like it.

 

[bripat9643]

So what's your point? If government didn't force you to use the currency it issues, then the value would quickly drop to zero as people shifted all their transactions to other currencies, except for their payments to Uncle Sam, of course. They would be happy to pay Uncle Sam in now worthless Federal Reserve notes.

I find it funny, you're agreeing with the idea that taxation drives demand for the currency issued by the government, but you hate the idea of it.

That isn't what I said. Pointing guns at people and forcing them to use government funny money is the only thing that "drives demand" for it.

Think about what you just said. The government only comes after you like that WHEN YOU DON'T PAY TAXES.

Wrong. It comes after you if you attempt to use anything but Federal Reserve notes for currency. Many people have tried to create private currencies, and the Feds sent them to prison. It's against the law for anyone to issue a currency.

So the government doesn't come after you if you don't pay taxes? You are indeed correct that the government will come after people who try to create private currencies, because these people are a threat in the eyes of the government. Remember, the government wants us to keep using their currency.

Yes, they are a threat to the federal government. It can't swindle and loot you if you can go elsewhere for currency. Just like Al Capone, the government doesn't like having competitors.

 

[bripat9643]

Gold is real money? I don't see people using gold to pay their mortgages or buy cars.
You can't exchange dollars for gold, not anymore, and the gold standard was a disaster.

That's because it's illegal to use gold as currency. People have tried it, and they are in federal prison now.

The gold standard was anything but a disaster. In 1913 before the Federal Reserve was created the gold backed dollar was worth more than it was worth in 1789 when the Constitution was ratified.

Good. The government has to make sure the currency it issues is always in demand so they can spend for the public good.
Dude, that sounds like austrian shit. The money supply has to increase, get over it. I work less and earn more in relation to someone in the 1820's.

When the several sovereign states came together and established their union, they gave it a very small, specific set of powers. Can you show me in the constition the power to make sure the currency it issues is always in demand? I'd like to see the language you quote.

The Federal Government doesn't even have the authority to issue paper currency. That's why they pretend the Federal Reserve is a private bank. It's fraud committed right out in the open.

The federal reserve is an independent entity within the government. Dude, I'm literally explaining how it works and you're agreeing! You just don't like it.

How is it "independent" when the President nominates the board of governors and Congress approves them?

 

[Dovahkiin]

That's because it's illegal to use gold as currency. People have tried it, and they are in federal prison now.

The gold standard was anything but a disaster. In 1913 before the Federal Reserve was created the gold backed dollar was worth more than it was worth in 1789 when the Constitution was ratified.

Good. The government has to make sure the currency it issues is always in demand so they can spend for the public good.
Dude, that sounds like austrian shit. The money supply has to increase, get over it. I work less and earn more in relation to someone in the 1820's.

When the several sovereign states came together and established their union, they gave it a very small, specific set of powers. Can you show me in the constition the power to make sure the currency it issues is always in demand? I'd like to see the language you quote.

The Federal Government doesn't even have the authority to issue paper currency. That's why they pretend the Federal Reserve is a private bank. It's fraud committed right out in the open.

The federal reserve is an independent entity within the government. Dude, I'm literally explaining how it works and you're agreeing! You just don't like it.

How is it "independent" when the President nominates the board of governors and Congress approves them?

It's an independent government agency that is accountable to congress.
FRB: What does it mean that the Federal Reserve is "independent within the government"?

he Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress. The Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. The Congress also structured the Federal Reserve to ensure that its monetary policy decisions focus on achieving these long-run goals and do not become subject to political pressures that could lead to undesirable outcomes. So, members of the Board of Governors are appointed for staggered 14-year terms and the Chairman of the Board is appointed for a four-year term. Elected officials and members of the Administration are not allowed to serve on the Board.

The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the Federal Reserve System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

 

[Dovahkiin]

I find it funny, you're agreeing with the idea that taxation drives demand for the currency issued by the government, but you hate the idea of it.

That isn't what I said. Pointing guns at people and forcing them to use government funny money is the only thing that "drives demand" for it.

Think about what you just said. The government only comes after you like that WHEN YOU DON'T PAY TAXES.

Wrong. It comes after you if you attempt to use anything but Federal Reserve notes for currency. Many people have tried to create private currencies, and the Feds sent them to prison. It's against the law for anyone to issue a currency.

So the government doesn't come after you if you don't pay taxes? You are indeed correct that the government will come after people who try to create private currencies, because these people are a threat in the eyes of the government. Remember, the government wants us to keep using their currency.

Yes, they are a threat to the federal government. It can't swindle and loot you if you can go elsewhere for currency. Just like Al Capone, the government doesn't like having competitors.

Indeed they are. Yep, we're being looted all the time. Sounds like we're living in the worst place on earth..

 

[bripat9643]

Good. The government has to make sure the currency it issues is always in demand so they can spend for the public good.
Dude, that sounds like austrian shit. The money supply has to increase, get over it. I work less and earn more in relation to someone in the 1820's.

When the several sovereign states came together and established their union, they gave it a very small, specific set of powers. Can you show me in the constition the power to make sure the currency it issues is always in demand? I'd like to see the language you quote.

The Federal Government doesn't even have the authority to issue paper currency. That's why they pretend the Federal Reserve is a private bank. It's fraud committed right out in the open.

The federal reserve is an independent entity within the government. Dude, I'm literally explaining how it works and you're agreeing! You just don't like it.

How is it "independent" when the President nominates the board of governors and Congress approves them?

It's an independent government agency that is accountable to congress.
FRB: What does it mean that the Federal Reserve is "independent within the government"?

he Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress. The Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. The Congress also structured the Federal Reserve to ensure that its monetary policy decisions focus on achieving these long-run goals and do not become subject to political pressures that could lead to undesirable outcomes. So, members of the Board of Governors are appointed for staggered 14-year terms and the Chairman of the Board is appointed for a four-year term. Elected officials and members of the Administration are not allowed to serve on the Board.

The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the Federal Reserve System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

Spare me the propaganda. I know what it is: a scam, a vast swindle, fraud. The government has no Constitutional authority to issue paper currency, and therefore it has no authority to run something like the Fed.

 

[bripat9643]

That isn't what I said. Pointing guns at people and forcing them to use government funny money is the only thing that "drives demand" for it.

Think about what you just said. The government only comes after you like that WHEN YOU DON'T PAY TAXES.

Wrong. It comes after you if you attempt to use anything but Federal Reserve notes for currency. Many people have tried to create private currencies, and the Feds sent them to prison. It's against the law for anyone to issue a currency.

So the government doesn't come after you if you don't pay taxes? You are indeed correct that the government will come after people who try to create private currencies, because these people are a threat in the eyes of the government. Remember, the government wants us to keep using their currency.

Yes, they are a threat to the federal government. It can't swindle and loot you if you can go elsewhere for currency. Just like Al Capone, the government doesn't like having competitors.

Indeed they are. Yep, we're being looted all the time. Sounds like we're living in the worst place on earth..

The fact that most other places people are being looted even worse doesn't mean we aren't being looted.

 

[Dovahkiin]

When the several sovereign states came together and established their union, they gave it a very small, specific set of powers. Can you show me in the constition the power to make sure the currency it issues is always in demand? I'd like to see the language you quote.

The Federal Government doesn't even have the authority to issue paper currency. That's why they pretend the Federal Reserve is a private bank. It's fraud committed right out in the open.

The federal reserve is an independent entity within the government. Dude, I'm literally explaining how it works and you're agreeing! You just don't like it.

How is it "independent" when the President nominates the board of governors and Congress approves them?

It's an independent government agency that is accountable to congress.
FRB: What does it mean that the Federal Reserve is "independent within the government"?

he Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress. The Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. The Congress also structured the Federal Reserve to ensure that its monetary policy decisions focus on achieving these long-run goals and do not become subject to political pressures that could lead to undesirable outcomes. So, members of the Board of Governors are appointed for staggered 14-year terms and the Chairman of the Board is appointed for a four-year term. Elected officials and members of the Administration are not allowed to serve on the Board.

The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the Federal Reserve System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

Spare me the propaganda. I know what it is: a scam, a vast swindle, fraud. The government has no Constitutional authority to issue paper currency, and therefore it has no authority to run something like the Fed.

Alright, we get it, you hate reality. The government (consolidating fed/treasury) has been issuing paper currency for a long time.

 

[Slade3200]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

 

[Dovahkiin]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

Well, inflation has never been an issue apart from the 70's which was an example of cost push inflation. (Inflation due to energy prices.)
Inflation becomes an issue when demand exceeds supply, which is the only real inflation risk. It's easy to avoid this though, using taxes to drain dollars, reducing spending, etc..

 

[bripat9643]

The Federal Government doesn't even have the authority to issue paper currency. That's why they pretend the Federal Reserve is a private bank. It's fraud committed right out in the open.

The federal reserve is an independent entity within the government. Dude, I'm literally explaining how it works and you're agreeing! You just don't like it.

How is it "independent" when the President nominates the board of governors and Congress approves them?

It's an independent government agency that is accountable to congress.
FRB: What does it mean that the Federal Reserve is "independent within the government"?

he Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress. The Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. The Congress also structured the Federal Reserve to ensure that its monetary policy decisions focus on achieving these long-run goals and do not become subject to political pressures that could lead to undesirable outcomes. So, members of the Board of Governors are appointed for staggered 14-year terms and the Chairman of the Board is appointed for a four-year term. Elected officials and members of the Administration are not allowed to serve on the Board.

The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the Federal Reserve System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

Spare me the propaganda. I know what it is: a scam, a vast swindle, fraud. The government has no Constitutional authority to issue paper currency, and therefore it has no authority to run something like the Fed.

Alright, we get it, you hate reality. The government (consolidating fed/treasury) has been issuing paper currency for a long time.

ROFL! Apparently you enjoy being bent over and fucked up the ass. That's reality.

 

[Dovahkiin]

The federal reserve is an independent entity within the government. Dude, I'm literally explaining how it works and you're agreeing! You just don't like it.

How is it "independent" when the President nominates the board of governors and Congress approves them?

It's an independent government agency that is accountable to congress.
FRB: What does it mean that the Federal Reserve is "independent within the government"?

he Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress. The Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. The Congress also structured the Federal Reserve to ensure that its monetary policy decisions focus on achieving these long-run goals and do not become subject to political pressures that could lead to undesirable outcomes. So, members of the Board of Governors are appointed for staggered 14-year terms and the Chairman of the Board is appointed for a four-year term. Elected officials and members of the Administration are not allowed to serve on the Board.

The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the Federal Reserve System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

Spare me the propaganda. I know what it is: a scam, a vast swindle, fraud. The government has no Constitutional authority to issue paper currency, and therefore it has no authority to run something like the Fed.

Alright, we get it, you hate reality. The government (consolidating fed/treasury) has been issuing paper currency for a long time.

ROFL! Apparently you enjoy being bent over and fucked up the ass. That's reality.

I do love my worthless paper! Buys me many real assets!

 

[bripat9643]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

Well, inflation has never been an issue apart from the 70's which was an example of cost push inflation. (Inflation due to energy prices.)
Inflation becomes an issue when demand exceeds supply, which is the only real inflation risk. It's easy to avoid this though, using taxes to drain dollars, reducing spending, etc..

Inflation is an issue when the government creates money out of thin air. "Cost push" is a leftwing myth. It's propaganda. It's the same as saying increased prices are caused by increased prices. It's not only a myth, it's stupid!

 

[bripat9643]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

Government is the only contributing factor to inflation. Government issues the currency and has complete control over it. So where do idiots look for the cause of inflation? Why, it's "cost push" that causes it!

I can't believe the stupidity of that.

 

[Dovahkiin]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

Well, inflation has never been an issue apart from the 70's which was an example of cost push inflation. (Inflation due to energy prices.)
Inflation becomes an issue when demand exceeds supply, which is the only real inflation risk. It's easy to avoid this though, using taxes to drain dollars, reducing spending, etc..

Inflation is an issue when the government creates money out of thin air. "Cost push" is a leftwing myth. It's propaganda. It's the same as saying increased prices are caused by increased prices. It's not only a myth, it's stupid!

You're an austrian. I take your nonsense to the trash. Claiming "cost push" is a myth is nonsense.

 

[Dovahkiin]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

Government is the only contributing factor to inflation. Government issues the currency and has complete control over it. So where do idiots look for the cause of inflation? Why, it's "cost push" that causes it!

I can't believe the stupidity of that.

You obviously know nothing about OPEC. Did the US control OPEC?

 

[bripat9643]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

Well, inflation has never been an issue apart from the 70's which was an example of cost push inflation. (Inflation due to energy prices.)
Inflation becomes an issue when demand exceeds supply, which is the only real inflation risk. It's easy to avoid this though, using taxes to drain dollars, reducing spending, etc..

Inflation is an issue when the government creates money out of thin air. "Cost push" is a leftwing myth. It's propaganda. It's the same as saying increased prices are caused by increased prices. It's not only a myth, it's stupid!

You're an austrian. I take your nonsense to the trash. Claiming "cost push" is a myth is nonsense.

Of course it's a myth. It's an attempt by so-called "economists" on the government payroll to deflect from the true cause of inflation: the government. If it's not a myth, then how does the sum total of all costs increase?

 

[bripat9643]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

Government is the only contributing factor to inflation. Government issues the currency and has complete control over it. So where do idiots look for the cause of inflation? Why, it's "cost push" that causes it!

I can't believe the stupidity of that.

You obviously know nothing about OPEC. Did the US control OPEC?

What difference would that make? The U.S. controlled the value of the dollar. That's the bottom line.

 

[Slade3200]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

Well, inflation has never been an issue apart from the 70's which was an example of cost push inflation. (Inflation due to energy prices.)
Inflation becomes an issue when demand exceeds supply, which is the only real inflation risk. It's easy to avoid this though, using taxes to drain dollars, reducing spending, etc..

How about the fact that a majority of our wealth has flowed to the infamous 1%... Should the government be motivated to stimulate the private sector and top earners to spend more, saving less and putting more money into circulation or do you see it as a simple matter of government deficit spending?

 

[Dovahkiin]

Interesting read... I am curious though, I hear plenty fear mongering by the conservatives about the debt cliff and other arguments that are so lopsided that it is hard to take seriously. I'd like to hear from somebody from the other side who see's the benefits of economic stimulus and deficit spending... What are the cautions and possible negative effects that can happen from having an extremely large debt? Is there a breaking point and how is it measured? and what is a healthy goal for spending and debt levels to have a sustainable and flourishing economy?

The debt cliff fear mongering is done by both sides. It's absolute nonsense and a political game. People have claimed that treasury securities are going to collapse the nation for decades and that we'll have to "pay for it" and all of this other nonsense. It's all politics. The "national debt" simply accounts for treasury securities, but in reality, all forms of government issued currency are liabilities of the government, reserves/notes/coins.. Those aren't included in the national debt fear mongering though. Bonds are, quite literally, an interest earning term savings account. Economic stimulus is a wonderful thing, fiscal policy works much better then monetary policy. The new deal, reagan's deficit spending, the recent stimulus.. Deficit spending is a necessity, there's a reason we run a net deficit.
Read this:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital.


This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level.

Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.

I tend to laugh out loud at the ignorant fools who want to balance the budget for eternity. These people are truly idiots.
I also laugh at people who believe countercylical fiscal policy is a failure. You can't ignore hard data. It's common for people to do this though.
Well, now that we've acknowledged the "national debt" simply represents bonds that are used as a place to save government issued dollars, and if you want to get wonky, bonds are also used to help the central bank manage interest rates. Anyways, nothing can stop us from crediting accounts of the entities that hold bonds when the time comes to "pay the interest." The only reason we're in a situation where people believe that taxes are needed to fund anything is ignorance. Greenspan, Bernanke, others know what is really going on. The average american doesn't care, or believes the government is a household, which is absolute nonsense. Now, "debt" is a problem for governments that do one of these things:
1.) Use a foreign currency, without the ability to create it when needed, having to rely on a foreign entity. (Greece)
2.) A country that pegs their currency.
Now, Japan's debt to GDP is simply massive, and are they collapsing? Absolutely not, because they don't fit any of the above conditions. Now, should we let debt to gdp get as high as Japan? That's up to the reader to decide, but right now, debt to GDP is absolutely fine.
A healthy goal for spending is to get to full employment, which I and others define as:
"Less then 2 percent unemployment, close to zero underemployment, and close to zero hidden unemployment."
Now, that seems like a pipedream, but the best way to aim spending towards full employment is to aim towards a pipe dream. Unfortunately, we have people who believe getting UE below 4.5% (Number is around there) will cause crippling inflation. That number used to be higher, until the 90's where they kept lowering it..
I'd like to borrow this quote, and it really demonstrates the importance of the government running a net deficit:

The private sector cannot survive in negative territory. It cannot go on, year after year, spending more than its income. It is not like the US government. It cannot support rising indebtedness in perpetuity. It is not a currency issuer. Eventually, something will give. And when it does, the private sector will retrench, the economy will contract, and the government's budget will move back into deficit."

Unfortunately, no one cares about private sector debt. It's what we need to be worrying about, not the treasury securities of a currency issuer that doesn't peg, have any foreign debt, and doesn't use a foreign currency. The national debt is absolutely necessary, it simply represents money the government has given the domestic private sector/foreign sector. It's earned money saved in the safest vehicle there is, bonds. Nothing to worry about. And I suppose I should ask, are we paying for the world war 2 "debt?" Are we throwing real resources into a time portal? We're idiots! We're worrying about something that benefits the private sector and the world, while we have real issues. Unemployment, education, the military..

I appreciate the response and details you went into. The economics is fascinating. To dig a little deeper, when does inflation become a problem and what are the most contributing factors?

Well, inflation has never been an issue apart from the 70's which was an example of cost push inflation. (Inflation due to energy prices.)
Inflation becomes an issue when demand exceeds supply, which is the only real inflation risk. It's easy to avoid this though, using taxes to drain dollars, reducing spending, etc..

How about the fact that a majority of our wealth has flowed to the infamous 1%... Should the government be motivated to stimulate the private sector and top earners to spend more, saving less and putting more money into circulation or do you see it as a simple matter of government deficit spending?

It's a huge problem. Spending drives the economy, and saving is a drag on consumption, harming the economy. The government should do its best to get dollars into the hands of the poor and middle class, and do all it can to encourage spending.