US Debt Limit 2016


#1

The Bipartisan Budget Act of 2015 | Public Law 114-74 suspends the debt limit from 2015-11-02 to 2017-03-15.

TITLE IX—Temporary extension of public debt limit

SEC. 901. Temporary extension of public debt limit.(a) In general.—Section 3101(b) of title 31, United States Code, shall not apply for the period beginning on the date of the enactment of this Act and ending on March 15, 2017.
(b) Special rule relating to obligations issued during extension period.—Effective March 16, 2017, the limitation in effect under section 3101(b) of title 31, United States Code, shall be increased to the extent that—INDENT the face amount of obligations issued under chapter 31 of such title and the face amount of obligations whose principal and interest are guaranteed by the United States Government (except guaranteed obligations held by the Secretary of the Treasury) outstanding on March 16, 2017, exceeds
(2) the face amount of such obligations outstanding on the date of the enactment of this Act.
[/INDENT]

SEC. 902. Restoring congressional authority over the national debt.(a) Extension limited to necessary obligations.—An obligation shall not be taken into account under section 901(b)(1) unless the issuance of such obligation was necessary to fund a commitment incurred pursuant to law by the Federal Government that required payment before March 16, 2017.
(b) Prohibition on creation of cash reserve during extension period.—The Secretary of the Treasury shall not issue obligations during the period specified in section 901(a) for the purpose of increasing the cash balance above normal operating balances in anticipation of the expiration of such period.

The US House passed the Bipartisan Budget Act of 2015 on Oct 28th (US House Roll Call 579). The US Senate passed it on Oct 30th (US Senate Roll Call 294). The President signed it Nov 2nd.

Kudos to the Congressional Republican leadership for assuring the US has the means to pay obligations incurred and enabling the usual political theater on the debt limit without brinkmanship or the threat of default.


#2

“Kudos” for cursing the nation with more unrestrained debt that will still be owed when my Grandchildren are playing with their Grandchildren?

Of all the horrific things to openly praise you have chosen a dandy, THREE CHEERS FOR BLATANT IRRESPONSIBILITY AND SELFISH SHORT TERM GAIN!


#3

Norman, Norman, Norman…oh how the clueless truly fail.

We will NEVER be in danger of NOT meeting our obligations because the Treasury receives deposits WEEKLY, MONTHLY and QUARTERLY. Therefore, we can (on at least a monthly, if not WEEKLY basis) pay those obligations that truly are required…debt service, military, infrastructure, SS, MC…and can defer those “obligations” which are less necessary - i.e. welfare, foreign aid, etc. - until such time that we properly balance the budget. Make no mistake, though…once the money is gone every month, so are the payments to programs of enslavement…er, excuse me…benevolence.


#4

Do you advocate paying off the debt? If not, what would be an acceptable level of debt?


#5

Does anyone think its possible to sustainably grow the economy if the US government runs a balanced budget or a budget surplus? If so please explain how?

In order to be sure we are on the same page I want to point out that over the last decade we’ve averaged a $700 billion dollar (rough estimate) trade deficit per year and the velocity of money has fallen in a fairly narrow range (1.7 to 2.2 (if memory serves) and when answering the question, my response presumes that these factors will stay the same unless you explain why they could change.


#6

I don’t see how it’s possible to sustain or grow an economy without balancing the budget. In the long term (and I see us heading that way), growing the debt will lead to bankruptcy and a collapse of the economy.


#7

Can you explain what a “trade deficit” has to do with the national debt???


#8

I wasn’t suggesting that it has anything to do with the national debt per se, but it has everything to do with the money available in our economy depending on several other factors including (but not limited to) Federal spending, taxes, exports and private sector borrowing and by extension is a contributing factor in the claim I make below.

Before I “play my hand” and explain why growth isn’t possible if your Congress balances the federal budget, I’d like to see if anyone thinks that we can, as a country, grow our economy under the circumstances I’ve outlined.


#9

[quote=“csbrown28, post:5, topic:47920”]
Does anyone think its possible to sustainably grow the economy if the US government runs a balanced budget or a budget surplus? If so please explain how?

In order to be sure we are on the same page I want to point out that over the last decade we’ve averaged a $700 billion dollar (rough estimate) trade deficit per year and the velocity of money has fallen in a fairly narrow range (1.7 to 2.2 (if memory serves) and when answering the question, my response presumes that these factors will stay the same unless you explain why they could change.
[/quote]Is it your argument that public spending – err massive national debt – is required to “grow” the economy?

Why don’t you just “play your hand” now instead of trying to build some kind of “gotcha” and make your point.


#10

No gotcha, I just thought it would be a way to engage someone, to start a conversation.

It’s a simple question. Why not take a crack at it? I’m not trying entrap anyone, I freely admit that I believe the US economy cannot grow without deficit spending given the circumstances our economy finds itself. Tell me how an economy can grow while running a balanced budget given the factors I’ve outlined and I’ll tell you why it’s not possible. Or, tell me how one of the other factors can, reasonably speaking, change so that it’s possible to run a balanced budget, and maintain growth. There are nations do it, but given our capacity and desire for consumption, we’re not one of them.

Truth is, this isn’t a partisan issue. If you will excuse a broad generalization, Liberals/ Dems or no more capable of answering this question than Republicans/ Conservatives. I’ve been in many a Liberal forum and had this discussion. Nether ideology (again, generally speaking) understands sovereign money systems. When people on the right and left compare the US to Greece, or talk about the debt as some time bomb that future generations are going to have to pay for or support decreased spending with decreased taxes OR support increased spending with increased taxes…Both of these positions hurt everyone except those that profit from the waning of the boom/ bust cycle.

I’ll finish with this, baking bricks no more makes a building than printing money makes an economy. They both require skillful manipulation and understanding of the principles involved.

Now come on, give it a shot!


#11

[quote=“csbrown28, post:10, topic:47920”]
No gotcha, I just thought it would be a way to engage someone, to start a conversation.

It’s a simple question. Why not take a crack at it? I’m not trying entrap anyone, I freely admit that I believe the US economy cannot grow without deficit spending given the circumstances our economy finds itself. Tell me how an economy can grow while running a balanced budget given the factors I’ve outlined and I’ll tell you why it’s not possible. Or, tell me how one of the other factors can, reasonably speaking, change so that it’s possible to run a balanced budget, and maintain growth. There are nations do it, but given our capacity and desire for consumption, we’re not one of them.

Truth is, this isn’t a partisan issue. If you will excuse a broad generalization, Liberals/ Dems or no more capable of answering this question than Republicans/ Conservatives. I’ve been in many a Liberal forum and had this discussion. Nether ideology (again, generally speaking) understands sovereign money systems. When people on the right and left compare the US to Greece, or talk about the debt as some time bomb that future generations are going to have to pay for or support decreased spending with decreased taxes OR support increased spending with increased taxes…Both of these positions hurt everyone except those that profit from the waning of the boom/ bust cycle.

I’ll finish with this, baking bricks no more makes a building than printing money makes an economy. They both require skillful manipulation and understanding of the principles involved.

Now come on, give it a shot!
[/quote]You’re making the unusual claim. Please explain and support it.

I believe that your thesis is that deficit spending is required to “grow the economy” under current conditions. I’m curious what makes you think this, and I’m curious under what conditions you don’t think deficit spending is necessary.

Another question for you: Is growth always desirable?


Is it possible to run a balanced budget and the economy in a sustainable fashion?
#12

Ok, so I’m kinda derailing this thread and the contents of my reply will make a great thread on it’s own…

http://www.republicanoperative.com/forums/f34/possible-run-balanced-budget-economy-sustainable-fashion-49555/#post752524

#13

You don’t have a “hand”, the economy is the exchange of goods and services between people; the economy “grows” when value is added.

A tree converted into a house “adds value” since a tree can be regrown over and over again for very little expense but a house has many years of value, likewise when gravel, sand water and cement is combined into concrete; the raw materials and labor needed to convert these items into more valuable items “adds value” to the world and grows the economy wherever it is happening.

Government creates NOTHING and adds very little “value” (if any) in most of its endeavors, government takes from those who add value to the world in order to sustain itself and its endeavors; an economy will grow best when government is restricted to doing only what is absolutely necessary since government hinders the economy.

The subject of debt as it relates to the economy is not static, if debt is used to add value and the value exceeds the cost of the debt then debt can assist an economy to “grow” whether the debt is public or private.

Public debt to build a road or a dam that will serve many and enable much more economic opportunity for many decades is an example of debt that can grow the economy; the return is greater than the debt and the cost of the debt (interest).

A business that needs infrastructure to expand and meet the demands of its customers is no different, the return is greater than the cost so this debt helps the business to grow.

An individual who borrows to buy a house is another example, the home is a necessity that becomes a static expense as inflation raises the cost of shelter, that means over time the “real” expense of meeting this necessity is reduced and the individual becomes wealthier as a result of having a smaller portion of their income go to shelter.

But…

If public debt is incurred just to make public payroll, no value is added and no benefit is passed to future generations to compensate for the cost of the debt and the interest, this destroys an economy.

A business that borrows to meet current expenses is no different, the cost of this debt must be serviced by future sales that are burdened with the expense but get no increase in productivity; this inflation will make it harder for the business to compete with others who only need to meet current expenses before establishing a profit margin.

An individual who borrows to meet a grocery bill or current debt payments is likewise adding a burden (interest) to static expenses that add no value to them long or short term; this reduces the real wealth of the individual and over time will stagnate then crush them economically.

Any argument that you try to make for our current public deficit spending is mute, we are adding a trillion dollars a year to our debt with absolutely nothing to leave to those who will be burdened with this cost that will increase their productivity; this is a long term anchor around the necks of those who will follow us and we justify it by claiming the short term benefit of meeting public payrolls today.

We have historically incurred public debt for things that would “add value” to a greater degree than the cost of the debt but that is NOT what we are doing now.

It is true that a “balanced budget” achieved all in a couple years would harm the economy but only because we have been so irresponsible for so long that the shock would be greater than the public sector demand and resources could absorb in that short amount of time.

But a balanced budget achieved via attrition and reorganization that phased out elements of governments that add no value and simultaneous reductions in the tax and regulatory burden on the private sector could achieve a BOOMING economy in just two years and a balanced budget in less than a decade with NO NEED for public debt; excepting of course an unforeseen war or infrastructure expansion.

I am absolutely right about this.

The “debt” and “deficit spending” or a “balanced budget” are not the same thing, a balanced budget is achieved by spending only what is taken in; that includes former obligations like debt service. The “debt” can be floated indefinitely as long as the interest payments and principle are covered via the terms of the borrowing but it still saps resources that could be better used in the private sector for real growth or the public sector for legitimate infrastructure expansion that will enable economic expansion opportunities for now and the future.


#14

Good answer, RET.


#15

What do you measure that value in?

And why would any do any of those things for anyone on a large scale (other than for themselves, family, charity ect) if not to trade today’s productivity for dollars that allow the saving of that productivity in dollars (or some other currency) to be deployed in the future? Without a way to store today’s productivity there isn’t a mechinisim to store value.

Rightly so, a government that owns the means of production is a truly socialist government. Socialism can work as an economic model, but capitalism, all other things being equal, will in my opinion, always out-compete pure socialism.

Here’s where we really start to part ways. It is unfortunate the coincidence of spending and taxing occurring at the same time. Think about what you’re saying. I hope we can agree that all currency (less coins) is created as a debt by the Government/Fed, as an IOU. If that is true, you believe that in order to spend the government must collect it’s own IOUs?

Having said that I admit that one of the uses of taxes is to redistribute income, but personally I support a $400K standard deduction for everyone. I think tax policy is misused mostly out a a lack of understanding.

Having said that, the government has no functional need to collect it’s own IOU’s to fund it’s endeavors. This is where I break ranks with Dems/ Libs as they believe that taxes are required to pay for programs. So functionally I agree with my Conservative friends on this point even if we agree for different reasons.

Besides being an assertion you’ve said nothing to back up, how exactly would you measure the economic growth of the US if the Government was “restricted to doing only what is absolutely necessary” (which frankly I’m not even sure what that is).

If that were true, the housing bubble of 2000-2007 would have never ended. The reality is that each persons capacity for debt is related to their productivity. If I have a job that pays me $100k per year, creditors simply measure my current obligations against my threshold for debt. At some point, creditors will turn me away because I can’t borrow any more. When enough people reach their threshold and begin to default, the economy must deleverage.

The governments constraint isn’t based on what it can produce rather on what the money actually represents, a share of some portion of productivity. Therefore the absolute constraint of money creation is the potential of productive capacity measured in labor, energy, raw materials, infrustructure ect and the peoples desire to meet that limit…

That’s not to say that we should borrow to that limit, just that we could, pushing up to that limit opens up unnecessary risk in the event of an energy, labor, or some other raw material shortage could have a severe impact on the economy.

What you’re saying in effect is there is that the spending of money can be done more or less efficiently. Something I can totally agree with. However, as I’ve said, if growth is measured in dollars and the amount of dollars in the economy is shrinking as I detail in the link I posted below, then the dam never gets built and if it does it’s at the cost of some other thing that does not have adequate funds. This in turn forces the expansion of private sector debt to fund, but there is a very real and tangible limit to private sector debt as I’ve already explained.

http://www.republicanoperative.com/forums/f34/possible-run-balanced-budget-economy-sustainable-fashion-49555/#post752524

Agreed, One of the advantages of a small, predictable rate of inflation.

I keep hearing this claim about the destruction of the economy though the expansion of Public debt, but no one has offered anything in the way of an explanation to back up the assertion.

When the government fought World War II and exceed 100% debt/GDP (120% of memory serves), did future generations have to send their productivity back to 1945 in order to pay for the war? because that is, in effect, what your claiming.

Furthermore, debt service is at 2% of GDP. It’s about the same as it was in 1979 and is only lower prior to that because as a nation our export capacity relative to imports was much higher.

Besides the fact that I’ve pointed out that debt service is extremely low and add to that the fact that you are leaving out the fact that of the $400 billion we pay to service the debt, the US government and by extension the public got almost all of the value of that money out of it.

Now I’ll explain that.

If you had bought a $500 bond in 1983 it would earn interest for 30 years. When you cashed it in (in 2013) you would have received about $1900. On paper it appears the government got $500 and paid back almost three times that amount, but when you lent the government $500 in 1983 it’s purchasing power would have been closer to $1100 in 2013, so not all as as it seems, and that’s not even the end, because at the end of the year, you pay taxes on the realized portion if your profits, or about $650 tax. So the governments real payout is more like $150, not $1500 as it would appear on paper. I know this, because I found a bond that was given to me as a teenager in 1983 and recently cashed it in.

Now my $500 floated through the economy for 32 years (I didn’t find it until 2015). Do you suppose it enabled more than $150 in economic activity?

No argument there.

The debt to GDP ratio seems to contradict your claim. The fact that the economy grows at a similar pace to debt creation also seems to contradict your claim.

So I might partially agree with you here, but unless I know specifically of what you speak, I will reserve judgement.

No it’s because we have moved from an economy that imports more dollars and exported more goods to an economy that imports more goods and exports more dollars. Now I’m not going to argue the advantages and disadvantages of being in import/ export economy. Like most decisions there are plenty of pros and cons to each. The important thing is that you understand the consequences of each. It is the fundamental failure to understand the current consequences of being an exporter of dollars and an importer of goods that has, in my opinion lead to many of the problems we are faced with.

Without debt, there is no money, without money there is no economic activity on a national scale, at least as we know it.

You will have to forgive me if I don’t accept this claim.

I hope I didn’t give the impression that I thought they were.

For clarity…

Debt is the accumulation of all deficit spending. It is measured in the outstanding liabilities held by the government/ Fed.

Deficit is the negative measure between spending and taxes.

Balanced budget is simply when spending and taxes equal $0

I think at this point I’ve done a pretty good job of explaining where I think you’ve gone wrong.


#16

It makes no difference, it can be fiat dollars, gold, silver or cow dung; what is relevant is that the value of material, labor and other expenses is less than the market value of the commodity, service or intellectual creation.

Humans have always traded, the means of trade is not relevant except for convenience sake, what is important is that the Market determines that the value is as much or greater than the cost to bring it to Market.

The “Mechanism” as far as government is concerned is infrastructure that improves citizen economic opportunity and Justice/Security so that economic gain and those who create it are secure in their Property and person.

There is no need to “store” today’s productivity in government debt, it is not even possible and the suggestion is preposterous.

Socialism cannot work in an economic model because Socialism removes Market Forces in favor of a managed Market that is inhabited at every level by those with nothing to gain from excellence, efficiency or innovation.

Capitalism is not a “system”, Capitalism is what happens in the absence of a “system”; that is why it “grows” without need of government deficit spending as long as government does not chain it down.

That is not “unfortunate”, it was designed with the idea that government would be restricted to specifically enumerated powers and in all things not specifically enumerated it would stay out of; if we still honored the “necessary evil” concept that our Founders designed for government the taxes and spending would be nearly benign factors in the economy.

No it is not and we do not agree.

Currency can be created based on the acquisition of resources (a standard) or in the case of a Fiat currency on the basis of the creation of real property/ infrastructure; in the former there is a commodity behind the currency and in the latter there is real wealth in the form of infrastructure that adds value to justify the added dollars.

There is no “government IOU” needed for any of that to happen, in our bastardized version where the government borrows without restraint for fleeting expenses that add no value the currency loses respect and eventually consumes the economies ability to be productive.

There is no limit to how much currency can be created to fund real value, that is why Property is called “Real Estate”, the added value secures the currency (not a government IOU) and the value in addition to the debt and interest becomes the basis for discretionary spending going forward.

We have ALL of that backwards now, we print currency to fund discretionary spending and cripple the productive sector under punitive taxation and regulation to service the interest while the debt grows sky high ***at the expense of the economy.


This comment is based on the former fallacy that I just revealed, no such thing is “what I believe” and no such scenario in necessary; the government should tax the productive sector uniformly to pay for only the very narrow, limited expenses that it incurs doing the very few things that it are specifically enumerated in the Constitution.

Any taxation of income is counterproductive as is taxation of Property, only the poorest of the poor pay these taxes regardless of the line you establish. Businesses are the main group in high income brackets and businesses collect taxes they do not pay taxes; taxes are just another expense that is passed on to their customers.

The government has no legal Right to engage in most of it’s “endeavors”, these “endeavors” are why the amount collected in taxes will never be close to what is spent; the forces which govern such basic behaviors in every private citizen or business are absent in a government which ignores it’s specifically enumerated limitations.

I think we would find little agreement on the subject of economics and government, all of the premises that I heard you use as the basis for your thesis lack veracity so the conclusions will not survive scrutiny.

I absolutely did but you are so far from the true measure of an economy that you cannot understand what I am talking about, you are thinking about currency and I am talking about value.

Value is added by building and creating things that produce and are inherently more valuable than the sum total of what it cost to bring them into existence, currency has no inherent value until it used for something that does has real value.

Homes will always exist and always have value because they are a necessity, the same is true for roads, water storage, power generating structures, commercial buildings and a myriad of other things. ALL of these things existed before our currency and all will exist and have value if our currency became toilet paper tomorrow; the means of trading for this value may take many forms but as long as people are free to engage with another in the Market the economy (regardless of the currency) will expand.

The next time you see a house get built when another was not torn down you will have seen the economy grow, the next time you see a new device becoming popular you are seeing the economy grow; government can nullify these gains by stomping out other elements of the economy but left to their own free people will innovate and continue to bring real value into the world.

Why not?
All Markets are subject to boom and bust, the demand creates a boom and saturation creates an ensuing bust; only a fool thinks a complicated and diverse economy can ever be managed in such a way as to never be subject to dynamic forces.

At one time a computer cost tens of thousands of dollars, now they will give you one for signing a phone contract. Demand creates competition and competition creates a surplus and falling prices, the profit from the volume funds the next innovation and pretty soon the poorest of your poor are carrying around phones that are more powerful and sophisticated than the computers that once took an entire city block on college campuses.

That is called created “value” and that is how real “wealth” is spread to everyone at every economic level.

Continued in the next post due to character limits.


#17

Not government, their capacity is unlimited once the Constitution is ignored and their productivity is non existent.

And a “capacity for debt” is by no means a requirement for debt, I only incur debt when the purchase is dynamic; meaning it will generate more than it costs me to service the debt; there was a time when every elementary student was taught that lesson but those days went south when the schools became propaganda mills for big government.

“Creditors” have to have a means of determining your capacity to repay, the criteria by which you choose to borrow is your responsibility. Stable and sustainable growth occurs when most people understand the science of money; these days very few understand this science so wealth becomes more concentrated every year; Socialism dumbs down the masses by making them think that government can and will watch out for them and in so doing it creates great windfalls for those who know better.

Government is only “constrained” by it limit to force the people to submit to it’s demands, the moment we say “enough” the government will have no more authority; we just have not yet had enough.

there is no absolute restraint to economic growth regardless of the state of currency creation, currency is not the “economy”; it is just the way we currently trade within the economy.

In fact, a large portion of the economy is already trading real value with one another without the use of our currency; currency is a convenience not a necessity.

If borrowing is done for dynamic purchases there is no arbitrary “limit”, if borrowing is done to pay for things that do not generate more value than the cost of the debt no “limit” could be low enough to avert disaster.

If demand exists among free men then no “shortage” will ever last long, necessity is the mother of invention and fuels everything that needs fuel. It is government that creates “shortages” that cannot be filled via regulatory attempts to manage the Market.

I did not say “efficiently” I said “dynamically”, efficiency is good for cutting waste but dynamic is how wealth is created.

Capitalism is dynamic, competition creates efficiency within the dynamic; government is static and inefficient because government has no competition.

And I have said that dollars are not the economy and an increase in dollars is not economic growth, currency is a tool and nothing more; the economy will continue with or without this tool as long as real value exists and force is not used to suppress the trading of real value as individuals define it.

You do not understand private sector debt very well and your premise is so government centered that you are drawing fallacious conclusions.

Public debt and the interest on that debt consumes resources that would otherwise be used for innovation and expansion with the economic dynamic by the citizens, whatever short term benefits are gleaned by printing money and passing it around are traded for long consumption of needed resources to be productive.

If you maxed out all of your credit cards tomorrow and just drove around buying everything that tickled your fancy you would have a pretty prosperous looking year, followed by a pretty horrible 10 years; unless of course you just declared bankruptcy afterward which is what our government will do. In that case it will be the people who suffer while they relax in all the real wealth they bought before they turned the currency into toilet paper.

No, but we were not spending like we were in a world war for things with no value for decades prior to the war and “the war” had an end date, our current spending provides no value for those who will responsible to pay for it and if a genuine need like world war arose now there would be no cushion to fund it.

It’s like to idiot who keeps all his credit cards maxed out for non essentials then cannot figure out how to pay when the transmission goes out of his car or his refrigerator dies. WW2 was a necessity and lasted half a decade, our current debt levels rival that for pork and reward spending that is not necessary and that is ingrained institutionally with no end in sight or even the hope of not expanding every year with our baseline budgeting gimmick.

You are not comparing apples with apples in any way, all debt is not equal in it’s capacity to help or hinder.

Which is irrelevant because “GDP” is not the governments money and near zero interest rates are used to compile that statistic today, zero interest rates will NOT endure and neither will quantitative easing which is masking far more debt service than the numbers you are citing.

In 1979 interests rates were in the double digits, another scenario which was not sustainable but that one worked in favor of optimism; today’s rates should scare the living hell of us.

I explained why the “Low” is no reason for optimism and “the government” got zero value out that debt, whatever that debt gleaned was long gone within months of it being incurred and left nothing of value to those who will be responsible to pay it off.

No you won’t because it is a false premise.

As I said, false premise.
Today’s debt is funded by short term bonds purchased with money borrowed at near zero interest from the fed and they are cashed in for slightly more interest than the loan cost; it is simple money laundering. If our government had to sell long term bonds to citizens in order to cover their spending they would default in a month.

Today’s bonds don’t float for more than a few months but the debt will be here when my grandchildren are playing with their grandchildren.

You are attempting to compare long term debt spent mostly on things that were dynamic with short term debt that is spent only on static expenditures; we are simply NOT financing our debt that way anymore and we are NOT spending that way anymore.

No it does not “seem to do that”, correlation does not equal causation in economics any more than it does in any other discipline.

Hoover dam, the Interstate highway system, shipping ports, airports, a Judicial system, the military, the Central Valley Project, the railroad expansion west, telecommunication lines into remote territories and many other tangible expenditures that incurred a lot of debt but left far more economic benefit for the generations that followed who would service that debt.

Absolutely irrelevant, value is maximized by not burning up resources that could be spent on innovation; we import because we have punished producers with confiscatory taxation and pointless regulation; the imports have been the only thing that has saved us from the inflation that our idiocy deserved to bring upon our heads.

But that is but a bandaid and it is losing it’s ability to stick.

If competition without coercion of our Markets by our own government is the reason for more imports it is all good, if the reason for more imports is because we are intentionally making the United States an unattractive and noncompetitive place to do business then some of the benefits of cheap imports are lost but they are still a benefit.

Debt is not required to have money and economies do not require debt or our current currency to function and grow, the infusion of value that people want is how economies grow regardless of the things that you think are prerequisite.

Fine with me, that makes it no less objectively true.

Your focus and question was centered on a balanced budget, that is why I described the difference; it is not a doomsday scenario to balance our budget nor keep it that way if done in the manner I described.

And I think most of your explanations are based on false comparisons, false premises or irrelevant factors; there is no reason to fear fiscal responsibility and every valid reason to fear our current imbecilic course.

And I apologize to anyone reading these last two posts for my lack of time to edit out the myriad of errors, I know it is painful to read as it currently appears.


#18

So I feel like we’re not really engaged on this topic. I’m talking about the way the system actually works not how I think it should work and you have not dispute my assertions, I feel like your lecturing me on how you think the system should work, which is fine, I guess, but imo it would make for a better conversation if you’d address my points directly.

Actually it does matter. Stores of value based on commodities are a an inefficient way to store value in that they require large amounts of work to be done just to create them. The argument is that this turns the currency into money and having alleged intrinsic value somehow improves the system of money?

The enormous effort spent creating commodity money is a waste of productivity. A society that uses a fiat currency will spend less effort making its currency, and as I said, this leaves more time for more productive endeavors. Fiat currencies do not prevent people from buying commodities.

Intrinsic value is not a binary choice. Different things have different levels of value depending on context. The objects that make the best stores of long-term value, generally have very little value in times of crisis. When society and by extension markets collapse, one of the arguments of a money of intrinsic value, is that people will still trade using that money, a very foolish notion. If there is a crisis, people will value shelter, food, energy, fuel and means to defend themselves and hunt when society collapses. There is a better chance that bullets will be the new money in that scenario than soft, pretty, useless metals.

Ultimately it is the organization of society and markets that give commodities predictable value. The same thing that makes fiat currency work. Without a society (at least roughly comparable to the one we live in now) with predictable markets, neither have value.

I really can’t comment on this as you’re not discussing the economy that exists, rather the economy you believe in, a kind of “free market worship”.

You keep skipping the part that tells us all how these markets you envision actually work. So far all I know is that you want a money that requires a lot of human effort to create. You haven’t told me how an economy based on this standard will compete with the other nations of the world that will undoubtedly lust for the land and resources this country now controls.

Fiat money is more efficient creating machines of war, because there is little effort spent creating the money. With fiat money the nations economic system can better scale in times of crisis or war. With a commodity like gold the amount of effort to reclaim it from the earth varies, but imagine the effort to takes to mine anywhere from2-91 tons of rock to recover a single ounce of gold.

You have some very strange notions about economics. Clearly people store their productivity in government IOU’s. I’m not claiming it’s the only way or even the best way, the only thing I’m claiming is that it happens every day despite your fervent objection. There are lots of claims as to why this system is flawed, some of which I’d agree with, but no one has produced a single shred of evidence as it why the system can’t work over the long-term. It’s all based on “feelings” and “intuition”, but there is little in the way of facts. Truth is, if this economy fails the failure is more likely to come from a self-imposed failure based on a lack of understanding, rather than an inherent flaw, unless the flaw is the lack of understanding. Can you say, ironic?

Now, I’m not here to extol the virtues of Socialism, but why say it “can’t work” when clearly it does in whatever capacity. Having said that I agree to some extent your criticisms.

Sorry, but this is more theory than anything. I really can’t comment on an economic system that you believe will rise on its own and I can only assume, though I’d like you to confirm, that you believe that this benign force that is Capitalism would create, if allowed to cultivate on its own, a country more powerful than the one we live in now?

Will this utopia that you envision be able to build a national highway system as efficiently as the one we’ve built?

How about a system like GPS?

What would a system of education and healthcare look like in a “free market”?

Will it have the power to create weapons of war similar to what we have now? Systems are, arguably, the most sophisticated in the world (the F-35 not withstanding)

The system you envision cannot exist on the scale of our economy because it would never be able to compete in the world with government-run fiat standards. This is why the system you envision does not exist in any advanced country in the world.

You missed my point. The government does not have to collect your tax money in order to spend. Go back to day one, where did the money come from to create the first currency? You can only tax after money is created, not before. As I said, taxes have several uses, but funding spending is not one of them.

And as I’ve already said an enormous waste of productive resources trying to give money intrinsic value, value that can only be realized on a scale as large as the US economy within the context of a government system to enforce it. Again, Ironic.

See, here you’re not really addressing the way the our economy actually works, your offering me an alternative. You make a claim i.e. “government borrows without restraint”, however there is a restraint, but you either don’t know what it is, or you don’t care to look.

Then you say something about “fleeting expenses that add no value”…Did the US highway system add value? Did the companies that built that system use the currency they had to expand their business and pay workers who in turn used that money to buy things like cars and houses?

You have some strange notions about value, or you’re in such denial about the way our system actually works as to refuse to comprehend it.

Of course there is a limit and you’ve just identified it. The things of real value constrain the creation of currency. Produce too much currency and you create instability as the system of prices has to adjust to prevent shortages. This is called inflation. But the fiat system will always adjust based on the availability of real value. If there is 1 trillion, or 1 quadrillion dollars in the economy, it makes no difference. What matters is the relationship between Productivity<-----> the quantity of money<----->prices. If you change any of them they will affect the other two. As long as they stay stable and predictable, then the system works.

I’ve already said that I agree the tax system is flawed. We just disagree on the reason it’s flawed. If I had to choose a system of taxation, I’d go with a Land Value Tax (as all productive endeavors start with land), not in addition to current taxation, but as a replacement of. But that is a subject best left for another thread.

I’ve also pointed out the fantasy that the debt is any higher than it was in 1979 relative to the size of our economy. If GDP $1 trillion dollars and the debt is $10 billion, or $10 Trillion and he debt is $100 billion, functionally these are the same. I’ve also pointed out that the numbers on paper are very misleading as the value of most of that debt has been realized.

Uniform taxes are punitive and restrictive to those that are trying to work their up and promotes a caste system as second and their generations inherit money they “earned” only as a privilege of their birth.

Actually, if only the land we’re taxed and not the improvements made upon it, it would have several benefits. One it would reduce speculation, people wouldn’t pay equally for improvements they don’t benefit from, it would make land use more efficient and the poor would benefit as a multi-tenement structure built on a plot of land would have lower taxes (passed on by the owner of the land) as the tax would be the same if 1 person or 100 people occupied the same volume of land, but again, that’s a different conversation all together and is really discussing the way we’d like to see things, rather than the way the are…

You claim to know these things absolutely, but make such basic errors in simple math. Growth of an economy depends on money. I don’t care what the unit is. In the economy we have now increased money, increased velocity of money, or decreased waste (though the last is the least effective as it has a rate of diminishing return) is the only way to grow an economy, but only an increase in the money supply can happen over the long-term and suitably.

You seem to believe that productivity can come before the money/ currency that would fund it. The way the economy works, right now, is that we run an enormous trade deficit, as a result we run a surplus to the private sector (you would call this government deficit). When the governments surplus to the private sector is smaller than the nations trade deficit, the economy shrinks unless the private sector borrows or spends its savings.

It is pure fantasy to believe that you can run an economic system this way for the long term. It’s math, pure math and no one has yet to explain, in simple terms as I’ve done how you overcome the problem of math. Again, try to sick, at least in this reply, to this comment, on how the economy works, not on your theory of how you think it should work.

Toché my friend.

Yes, it is clear we are speaking the same language but aren’t talking about the same thing.

If the currency can be used to acquire the thing of real value, then it has value. I got a gift card from Home Depot. Does the plastic card have value? No of course not, but yet, I can go into a store and walk out with things of real value.

I write an IOU on a piece of paper in the form of a contract, does that piece of paper have value? If it is enforceable it does.

I’m not claiming the currency is valuable, but in the context of a government that is the monopoly issuer of and to the extent that it can enforce rules regarding that currency, it has value.

Now you can claim the government has no right to create these boundaries, I’m not, nor have I ever argued this point one way or another. What I’ve been arguing all along is how the system we have in place today actually works.

Addressed several times.

This is like saying you can build more houses than you have bricks. Pure folly.

You can’t expand an economy beyond the money available to consume the productivity. Even if the “value” of what you build exceeds the value of the money in existence, without the money there would be no incentive to be productive in the first place.

Hmmm…Not sure what this has to do with what I said, which was to say, in so many words, that private sector borrowing has a real constraint.

“Demand creates competition and competition creates a surplus and falling prices”

Ahhhhh…finally, we get to address the real question.

Does the quantity of money affect demand?

I’ve shown in this thread that when the government fails to spend enough to create a surplus to the private sector that exceeds the trade deficit, the economy will eventually shrink. This will lower demand (constantly forcing a change in prices because of the resulting deflation and the incentive to save) and your theory fails, at least in the context of how the economy works today (the only argument I’ve made).


#19

So I feel like we’re not really engaged on this topic. **I’m talking about the way the system actually works **not how I think it should work and you have not dispute my assertions, I feel like your lecturing me on how you think the system should work, which is fine, I guess, but imo it would make for a better conversation if you’d address my points directly.

Actually, no, you are talking about how you think it should work. There is no logic to your system.


#20

Exactly, I don’t know how I could have been more specific without writing a whole book on each point, non sequiter and unsupported conclusion that he made so I will just let the posts stand and others can judge the veracity of our opposing positions.