Right vs Right?


#41

Nonsense, AS. Please explain the meteoric rise of the stock market starting the very DAY after Trump’s election. It was because of HOPE that we finally had an administration that would lower taxes and get spending under control. The current downturn is because the morons in the Legislature are talking about INCREASING spending instead of getting it under control. Trump will veto it and the markets will rise again.


#42

Do you feel that spending is “under control”?


#43

Of course not…not with the RINOs and idiot Democrats talking about INCREASING spending yet again. We can only rely on President Trump’s word that he’ll veto any such bill. So far, he’s KEPT his word about other stuff.


#44

Yes, it will be very interesting to see if he vetos the spending bill.


#45

I have my own doubts that it’ll even pass the legislature.


#46

The stock market lives in its own damn world, thanks to Monetary policy, and printing off $2 trillion dollars for them to do whatever the **** they want.

You give people that much free money, what do you think happens Dave?

Thanks for being a Johnny-come-lately btw. It’s so nice to know that you’re both sticking me with a bill, and not even caring to notice that you’re doing it.


#47

If we’re talking about this:

I’ll assume you’re pretty upset about the $400 billion dollar spending deal? The House vote was 240-186 and the President was happy to sign it.

When are you guys going to learn that you got conned?


#48

As a matter of fact, I AM VERY disappointed with this “deal”. We need to STOP funding BS like Planned Parenthood’s abortuaries instead of INCREASING spending on them.


#49

Turns out the “establishment” Republicans are still in control, and that Donald Trump is every bit part of the swamp – All the clues were there during the election, not that any other choice would make a difference.

We need to defund a lot more than that. That’s just a drop in the bucket. It’s sad. Republican voters at least once opposed big government and deficit spending – although the politicians lied about it as long as I can remember, right along with the current crop. Tea Party? What Tea Party?

A lot of Republicans voted against this spending plan (since the federal government stopped writing budgets). Those are the Republicans I’d be most likely to support in the future.

Trump’s excuses about having to rely on Democrats are terrible excuses. His problem is that some Republican politicians actually do oppose his and Congress’ drunken-Democrat spending spree.


#50

I agree, RWNJ. We CERTAINLY do need to cut a LOT more than just PP. Space limitations preclude listing them here, though. I don’t know that RO has that much bandwidth.


#51

I was watching a video yesterday – dunno how accurate it is, but it makes some sense – that claimed if we cut the budget by 10 percent and held the line on increases the next five years, the budget would be balanced. We could pay interest and continue status quo at that point as long as the budget didn’t exceed the growth in GDP. That concept should be the minimal starting point.


#52

It’s not accurate because if you cut spending by 10% ($450billion-ish?) you cut incomes to the private sector by 10% (Government’s spending is earned as income in the private sector). within 5 years unemployment will have risen and federal receipts will have fallen. So in 5 years, you’ll need to cut another 7% over 5 years. In 5 more years, you’ll have more layoffs and you’ll still be years away from achieving your goal. In the meantime whatever jobs that $450 billion dollars were paying for are now going undone and who knows the potential economic damage that results from that.


#53

This isn’t true, as it isn’t proportioned right (Government takes in 20% of GDP, stopping 10% of its spending would translate into 2% of GDP) and the Private sector has expanded in years that Government spending has contracted.

For instance, 1947.

We’ve already been through this: Debt securities do not work the same way as loans. They do not affect the monetary supply the same way as loans. You entire theory hinges on them doing this, yet they don’t.

The Government can only spend what it first borrows from somewhere else; money that already exists. And the money must be credited to their accounts before they spend it.


#54

And yet that’s not the order of operations in government spending. The government spends first and collects taxes and sells bonds after to offset spending, but set that aside for a sec, let’s look at the numbers.

I would agree that it’s possible to have increases in GDP when the government is cutting spending, my comment should have been, “all other things being equal if the government cuts spending GDP will decline.”

So first here is GDP from 1995-2005:

In each year between 1998-2001 when the government cut spending relative to taxes.

Here’s the surplus’ during those years:

So it’s my claim that when the government cuts spending (relative to taxes) it results in a net loss of spending to the private sector. However, there is a caveat. The private sector can create money via the banking system.

So we look to see how much people increased their borrowing and decreased their savings over the same period:

Here we see debt growth total across all sectors and in the private sector (highlighted in yellow) as a percent. I included a few years before and after for a little context…

And here are the real numbers:

Again totals across the economy in the first row and private sector in the second row highlighted in yellow.

When the government reduces spending aggregate demand will fall unless the private sector responds by increasing its debt.

There’s one more factor.

There’s also private sector savings…

But that also supports my conclusion as well…

As you can see, in response to the governments decrease in spending (again relative to taxes) the private sector consistently dipped into it’s savings from 1998-2000.

So while GDP increases during this period it take’s it toll by increasing private sector indebtedness and decreasing private sector savings.

Either way, cutting government spending decreases aggregate demand. Even if you’re right and the government is borrowing money from savers, the effect is still the same. Savings is money that isn’t circulating. If the government sells a savings account and then spends it, it’s doing something with that money that wouldn’t be happening if it ended up in a mutual fund or a savings account.

The source on the screenshots is HERE

Find a year since 1974 (when fiat was fully adopted) that what I’ve said is not the case.


#55

Yes it is, Treasury officials have come forward, and outright stated that this is how they do things.

They don’t spend anything, until their accounts are credited with Bond money.

You’re proposing what you want the Government to do, not what it does.

Until you are willing to acknowledge the difference, you are either touting fantasy here, or a conspiracy.

We can’t have a discussion until you acknowledge the reality.

And that’s another thing; you don’t discern quality of GDP, and that’s important.

Otherwise, you’re just postulating on how best to create bubbles. How to best become more like Japan, and suffer their failures.

Ending WWII made GDP drop, but that didn’t drop growth in the private sector.

And it’s a good thing the Gov’t stopped, because what it was producing during the war, wasn’t worth a damn thing once the war was over.

Because of monetary policy; making credit cheap; cheaper than it would be if interest rates were allowed to float.

It devalues savings, and over values present consumption.

If it’s demand that shouldn’t exist, for things that don’t create value… why should we care? How is it any different than the War spending of the 1940s?

If you’re just making white elephants, you’re only forcing a cost onto the rest of us. Something the economy has to labor under while it tries to create value elsewhere.

It’s not consumption in a given period, or “spending” that matters, it’s value.


#56

Alaska, I respect you as you seem very intelligent and you base your opinions on facts as you know them. However, hear you are just flat out wrong. Your understanding of money comes from text written in the influence of the money system as it was known doing the gold redemption era.

The system is still built in that framework and I understand why you think it appears the way you say it does. But functionally Bonds are an anachronism from the time of economics as you understand it.

Banks don’t lend customer deposits anymore, they create credit based on the creditworthiness of customers who are willing to borrow at the prevailing cost of money (interest). The cost of money is determined by the Fed who tries to steer the economy from the monetary side by manipulating the cost of money, today, by paying interest on reserves.

I can’t really refute your claims about “Treasury officials” unless you give me a source.

If you’d really like to test your ideas, I’ll invite you to a group of people who agree with me and we’ll see how you do. If not, I understand.

Agreed, 100%. It’s just that this conversation is hard enough without adding that part of it. There is another aspect too. The distribution of wealth also impacts the economy. If 1 person had 99.99999% of the money, the economy wouldn’t function very well, but again, we have to settle the first half of this conversation before we can get to subtopics.

Again, baby steps.

No, not at all, because government spending had created vast sums of productive capacity that shifted into the private sector after the war.

Even though the military produced more stuff, it didn’t produce stuff of much value in peacetime. SO even though productivity was higher, it was like the broken window fallacy. Making a bomber and sending it to Germany to be destroyed only to build another to take it’s place is a great way to build industry and lower unemployment, but in the end, as you said, it matters how money is spent and war isn’t a very efficient use of money, labor or resources (save for the fact that it, ideally, prevents outside forces from influencing your economic and social fabric).

Couldn’t agree more.

That’s just it, this is the hole in your knowledge. Interest rates can’t “float” because they aren’t determined by the quantity of money people deposit in savings.

Banks
Don’t
Lend
Reserves (to non-banks)

Now you could argue that the Fed manipulated the market and drove rates down too low but that would have come with its own set of consequences that would have had significant drawbacks.

Demand that shouldn’t exist? If there are people that want to work and things that need to be done, then creating demand for those things creates value.

So I agree it’s possible to spend money on things of little value, like bridges to islands with 20 families living on them, but there are 10’s of thousands of bridges in the nation that need to be fixed and create value simply because the bridges are necessary, lower the cost of commerce and will only get more expensive if they aren’t fixed, but your statement can only be right by the way you define “value”.

With respect, you don’t understand the “cost” because you think money has to come from borrowing from the same people it’s spent on. The accounting of that idea does not work.

You need to Read Steve keen, he has an accounting program (not a “theoretic model”) that demonstrates your wrong. If you’re interested I’d be happy to link it. I’m just not sure you’re interested in really subjecting yourself to new information.


#57

Our “money” is created by the Federal Reserve and has been since the Nixon Administration. If they need more, they just PRINT it, which costs every American because it makes OUR money less valuable so that things cost more.


#58

The Fed creates bank reserves. Bank reserves are not lent (outside the banking system)and the only form most people ever see bank reserves are the physical bills they carry around, which is about 3% of the total money supply. Reserves are lent between banks and are used to settle trtansactions within the banking system.


#59

No CS, you’re either wrong, or misleading yourself.

The Government, does not credit itself money without first gathering that money from taxes or bonds.

It is legally required to do so.

Here’s Wray admitting it:

The easiest thing to do would be to sell them [bonds] directly to theFed, which would credit the Treasury’s demand deposits at the Fed…. But current procedures prohibit the Fed from buying treasuries from the Treasury…; instead it must buy treasuries from anyone except the Treasury. That is a strange prohibition to put on a sovereign issuer of the currency…. It is believed that this prevents the Fed from simply ‘printing money’ to ‘finance’ budget deficits so large as to cause high inflation" - Randy Wray

The Treasury cannot ask the Fed to credit its account, nor can the Treasury print up a bond and give it to the Fed in exchange for spending power. The only way the Treasury can spend is by moving previously acquired funds that are held in the private banking system into its Federal Reserve account—and the only way it can acquire these funds is through taxes and bond issues. Using the Fed to print money and fund a jobs guarantee program is impossible.” - From here

And here’s an article about the last time the Government was allowed to “overdraft” the Fed

Thus, you can advocate that these are “self-imposed” or “arbitrary restrictions” , but currently, this is how the Government operates. The consolidation you want of the Fed and the Treasury, isn’t what happens today.

You don’t have room to claim otherwise, it’s in the law, and it’s vouched for by the people who run it.

This is one of the two truths you keep side-stepping, and I’m not allowing it anymore. Either acknowledge the truth about this, or we can’t have a discussion.


#60

How’s that prediction working out?