The Debt Debate: Mr Panic and Mr Don't Worry

[EdwardBaiamonte]

My point is, that government spending is 'money printing' regardless of tax revenue or bond sales, because there is an automatic increase in reserve balances.

dear, the government taxes money and then spends it. There is no money printing unless they spend more than they tax.

Secondly, inflation is simply not caused by an increase in the supply of money, which any economist will tell you.

dear, for prices to go up you need more money. Its as simple as that. Its Econ 101

In today's environment, given our excess capacity, low industrial output, and high unemployment rate, inflation shouldn't even be part of the debate.

dear inflation is already 3-4% and with Fed balance sheet at 3 trillion it threatens to get much much higher

 

[Kimura]

My point is, that government spending is 'money printing' regardless of tax revenue or bond sales, because there is an automatic increase in reserve balances.

dear, the government taxes money and then spends it. There is no money printing unless they spend more than they tax.

Why would the goverment have to collect that which it issues? When the federal government spends, it's in no way, shape of form operationally constrained by revenues. This means there cannot be a solvency risk . In other words, the government can always makes payments in its own currency, regardless of how the large the deficit is, or how much tax money it collects. This is how fiat monetary systems operate in the post-gold standard and Bretton Woods world.

Secondly, inflation is simply not caused by an increase in the supply of money, which any economist will tell you.

dear, for prices to go up you need more money. Its as simple as that. Its Econ 101

A increase in the supply of money isn't solely the cause of inflation. As long as there is a tandem increase in real goods and services along with the money supply, there won't be any inflation. Explain to me how we can possibly have inflation with high unemployment and all this excess capacity?

Also, speaking of taxes, they regulate aggregate demand, which means spending power per se. This means if the economy heats up, then tax increases will cool it down. In the event the economy is too cool, cutting taxes will warm it up. Taxes aren't about funding expenditures, they're about regulating spending power to make sure the public doesn't have too much, which can result in inflation. On the other side of the coin, too little will cause high unemployment and recession.

Inflation only happens when there is consistent excess demand relative to the real capacity of the economy to produce.

In today's environment, given our excess capacity, low industrial output, and high unemployment rate, inflation shouldn't even be part of the debate.

dear inflation is already 3-4% and with Fed balance sheet at 3 trillion it threatens to get much much higher

The FED purchases securities on the asset side, then on the liability side reserves are created in the banking system. These are just deposits which commercial banks have with the FED. The amount of money in circulation doesn't increase, since banks are only holding more reserves with the FED. QE, being an asset swap, whether with Treasuries or mortgage-backed securities, simply changes the composition of these assets and nothing more. There are no new net financial assets added to the domestic private sector.

 

[Procrustes Stretched]

The Debt Debate: Mr Panic and Mr Don't Worry

Michael Kinsley, who is as irritating a media personality as they come...has moments of pure clarity. He breaks through the bs here.

Peter G. Peterson

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

Businessman and billionaire Peter G. Peterson is Mr. Deficit Panic. He's spending a billion of his own dollars warning people about the danger of the growing national debt. And yet, speaking about the deficit to Time magazine in December, he said, "I wouldn't enact any measures to reduce it until the economy recovers properly." In fact, he told Time that he actually favors more stimulus spending, "as long as it's well designed and paid for."

Peterson is a bit confused here. If an economic stimulus is paid for, it ceases to be a stimulus. The borrowing isn't incidental: Spending more than you've got is the whole point. But Peterson's basic scenario is this: Let the deficit grow and don't worry about it until economic recovery, then get serious about reforming entitlements and go ahead and raise taxes if you insist. The national debt is what I care about.

Paul Krugman

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

New York Times columnist and Princeton economics professor Paul Krugman is Mr. Don't Worry About the Debt. He believes that unemployment is a much more pressing problem, and that the stimulus at the beginning of President Obama's first term was inadequate. Even now he wants more stimulus, which means more government borrowing and a higher national debt.

Is there any limit on how long we can keep borrowing like this? Yes, Krugman says. When "the economy is robust again," it will be time to start paying down the debt. More specifically, he wrote last year that when the unemployment rate falls to 7%, it will be time to reverse course. Currently the unemployment rate is 7.8%, so we're close.

Krugman probably did not mean actually paying down the debt, since that would involve running an annual surplus, which even Krugman does not see on the horizon. But Krugman and Peterson are in agreement on the right formula: First, you run up the deficit in order to stimulate the economy, and then you reduce the deficit in order to bring the national debt into a safer range

read full Op-ed article here:
Op-ed - editorials, commentary, letters, cartoons, endorsements - latimes.com - latimes.com

of course its perfectly stupid to run up the deficit until there is a recovery since by then we'll have another recession!! Guess what??? We have been running up bigger and bigger deficits( $16 trillion so far!!!) into the largest recession since the depression and the economy just turned down yet again!!!

a deficit causes a recession, of course, as libturd soviet bureaucrats stupidly invest our money for us creating mal-invesment bubbles, like the housing bubble!

you and Quantdumb may play economist on the internets, but some of us know that blowing smoke out of your asses is not impressive

 

[EdwardBaiamonte]

blowing smoke

of course if it was blowing smoke the prefect illiterate would not be so afraid to show us his best example. What does your fear tell us about your IQ and character?