Economic Turmoil

[buster]

Keynesians vs Monetarists:

Quote:
"Galbraith was largely a Keynesian who believed that only
fiscal policy can restore “spending power.” Fiscal policy is
what economists call tax cuts and spending increases, and
spending in general is what they call aggregate demand.
Galbraith’...s academic antagonist, Milton Friedman, led
another school of thought known as the “monetarists.” The
monetarists believe the federal government should always
keep the budget in balance and use what they called “monetary
policy” to regulate the economy. Initially that meant keeping the
“money supply” growing slowly and steadily to control inflation,
and letting the economy do what it may. However they never
could come up with a measure of money supply that did the trick nor could the Federal Reserve ever find a way to actually
control the measures of money they experimented with.
Paul Volcker was the last Fed Chairman to attempt to
directly control the money supply. After a prolonged period of
actions that merely demonstrated what most central bankers
had known for a very long time - that there was no such thing
as controlling the money supply - Volcker abandoned the
effort.
Monetary policy was quickly redefined as a policy of
using interest rates as the instrument of monetary policy rather
than any measures of the quantity of money. And “inflation
expectations” moved to the top of the list as the cause of
inflation, as the money supply no longer played an active
role. Interestingly, “money” doesn’t appear anywhere in the
latest monetarist mathematical models that advocate the use of
interest rates to regulate the economy."

 

[Tempest]

Quote:
Tempest, you don't know what you're talking about

Then it should be very easy to disprove my real life examples. Yet, you don't?
Quote:
As far as interest rates, spending and inflation are concerned

I never said anything about interest rates, so I'm not sure why you are posting that?

How do you print limitless amounts of money without causing inflation? Answer, you don't:
Quote:
Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

http://www.usatoday.com/money/industries/retail/2011-03-30-wal-mart-ceo-expects-inflation_N.htm

 

[Tempest]

Quote:
For example, it is not realistic to posit a case where the private sector is providing full employment and the Government is still deficit spending to the tune of 6% of GDP unless there is considerable leakage of demand to private savings and international trade. To do that not to point to a case where MMT doesn’t work; it is to point to a case in which policy makers are acting against the advice that MMT economists would certainly be giving them.

http://smarttaxes.org/2011/03/27/krugman...ible-scenarios/
Central planning is key to MMT. This pro-MMT guy admits it.

Using taxes to moderate "aggregate demand" (how much people spend) is the same.

Quote:
So are you telling me that we can spend our way to prosperity?

Yes, the above statement is true if slack (i.e., idle resources exists in the economy). We can increase our standard of living by simply borrowing and spending. Of course, utilization of idle resource will most likely use up more energy resources (like fossil fuels) or other natural resources (like trees and iron ore).

Doesn't borrowed money have to be paid back with tax revenue?

Yes and no. Let me explain. Borrowed money does have to be paid back or the debt has to be rolled-over as government debt matures. The Government (via the central bank) is a currency issuer and can always borrow more. MMT helps us here too. MMT views taxation as a reduction of purchasing power of the taxpayer and not a "transfer" of money from the taxpayer to the government. At the time of maturing of the debt owed by the government the decision to roll-over or pay off the debt will depend on at least two variables: The price level (i.e., inflation) and policy goals. If inflation is below target then the government can "safely" print new currency units (via the central bank) and pay off the debt. If inflation is above target then it must reduce its spending (reduce its own purchasing power) and/or tax (i.e., reduce private sector's purchasing power) in order to keep inflation in check.

http://www.housepricecrash.co.uk/forum/index.php?showtopic=154382

So how can real countries (not in theoretical land) have large inflation AND unemployment?

 

[buster]

Wrong again. Boy you are dense.

First of all, MMT is a descriptive way the modern money system works. PERIOD. What we do with it is political. The size government we want are POLITICAL decisions. Got it? L. Randal Wray would abolish the Fed. Some want to combine the Treasury and Fed. There are ideas out there to make the fiat system work very well. The idea we need to start digging in the ground for our wealth is barbaric and stupid.

http://pragcap.com/resources/understanding-modern-monetary-system

I doubt that CEO is an economic expert on monetary policy. LOL

 

[Drew99GT]

So if China and other countries stopped buying treasuries, your saying the Federal Government can just magically create money it needs to spend, and there won't be consequences? The federal debt is some myth that is irrelevant?

I just don't buy it Buster.

 

[SteveSRT8]

Gulp!

Take a BIG sip of the kool-aid. Mmmmmmm, isn't it yummy?

For God's sake, when will anyone realize this simply does not work.

 

[Gary Allan]

Quote:
The FED exists due to an act of Congress. It was passed just before Christmas (the usual time to pass unpopular legislation) in 1913. It would take another act of Congress to get rid of it.


So, can we say that this power ..this centralized power ..that's privately held ..that creates an economic fiefdom where some powerful private citizens have managed to have leverage over all ..dominion over all ..was done under "rule of law"?

Aren't you in favor of such maneuvers and manipulations for the betterment of the private citizen ..to allegedly make them rich?

I'd say you would ..or should be applauding the coup. All neatly done and by the very process you allege it should be.

Naturally so ..as in Natural Law. The most shrewd and cunning shall achieve what they can ..by whatever means legal.

Don't they deserve it? If not, why not?

 

[Tempest]

Originally Posted By: buster

http://pragcap.com/resources/understanding-modern-monetary-system

Quote:
What’s the catch? This sounds like a free lunch

So what’s the bogey here? What’s the catch? Because surely you must be asking yourself why this sounds like a free lunch. We can just spend to our hearts content, right? Absolutely not. The bogey here is inflation which is constantly moving up and down with the amount of money in the system based on my tax rate, spending, borrowing, etc. Thus, government cannot just spend and spend and spend or the extra dollars in the system will chase too few goods and drive up prices. It’s important to understand that government cannot just spend recklessly. This is important so I’ll say it again. This does not give the government the ability to spend and spend and spend. If they spend too much and tax too little they can create mal-investment and inflation. Likewise, if the government taxes too much and spends too little they create a government surplus and private sector deficit (by accounting identity). This can result in deflation and/or excess private sector debt levels.

Some people claim that MMTers say deficits don’t matter. That is a vast misrepresentation of MMT. No MMTer would ever say such a thing. Deficits most certainly do matter. Maintaining the correct level of deficit spending is, in many ways, a balancing act performed by the government. It is best to think of the government’s maintenance of the deficit like a thermostat for the economy. When the economy is running cold the deficit can afford to be higher. When it is hot the deficit should be lower. Because there is no solvency concern in the USA (as there is in the revenue constrained European nations) the only concern is inflation and with record low inflation rates there is no fear of the deficit resulting in hyperinflation which would be a pseudo form of default.

That is exactly what I have been saying!!

The "barbaric and stupid" founders of this country wanted only precious metal coin as currency so as to constrain the ability of the government to enact the hidden tax that is inflation.

 

[Al]

David Walker (Former Head of the GAO and Comptroller General): Budget Debate: “Like Arguing About the Bar Tab on the Titanic”

http://finance.yahoo.com/blogs/daily-ticker/david-walker-budget-debate-arguing-bar-tab-titanic-20110401-055634-439.html;_ylt=AlNbw2wTEKf5xEfNzxJUy5xO7sMF;_ylu=X3oDMTFjZWFmaG0zBHBvcwMzBHNlYwNGUERhaWx5VGlja2VyQmxvZwRzbGsDZGF2aWR3YWxrZXJi

 

[ryansride2017]

Originally Posted By: Al
Budget Debate: Like Arguing About the Bar Tab on the Titanic


That's a great quote. If I would have knew of it, it would be in my signature.

 

[buster]

Originally Posted By: Tempest
Originally Posted By: buster

http://pragcap.com/resources/understanding-modern-monetary-system

Quote:
What’s the catch? This sounds like a free lunch

So what’s the bogey here? What’s the catch? Because surely you must be asking yourself why this sounds like a free lunch. We can just spend to our hearts content, right? Absolutely not. The bogey here is inflation which is constantly moving up and down with the amount of money in the system based on my tax rate, spending, borrowing, etc. Thus, government cannot just spend and spend and spend or the extra dollars in the system will chase too few goods and drive up prices. It’s important to understand that government cannot just spend recklessly. This is important so I’ll say it again. This does not give the government the ability to spend and spend and spend. If they spend too much and tax too little they can create mal-investment and inflation. Likewise, if the government taxes too much and spends too little they create a government surplus and private sector deficit (by accounting identity). This can result in deflation and/or excess private sector debt levels.

Some people claim that MMTers say deficits don’t matter. That is a vast misrepresentation of MMT. No MMTer would ever say such a thing. Deficits most certainly do matter. Maintaining the correct level of deficit spending is, in many ways, a balancing act performed by the government. It is best to think of the government’s maintenance of the deficit like a thermostat for the economy. When the economy is running cold the deficit can afford to be higher. When it is hot the deficit should be lower. Because there is no solvency concern in the USA (as there is in the revenue constrained European nations) the only concern is inflation and with record low inflation rates there is no fear of the deficit resulting in hyperinflation which would be a pseudo form of default.

That is exactly what I have been saying!!

The "barbaric and stupid" founders of this country wanted only precious metal coin as currency so as to constrain the ability of the government to enact the hidden tax that is inflation.


So what's your problem with MMT then? You clearly see that they don't believe you can spend forever and run deficits forever. I've been saying that all along.

This is a great explanation of it. Form your own opinion of it.

http://pragcap.com/resources/understanding-modern-monetary-system

Gold can be cornered, the output of our nation can not which ultimately what our currency is backed by. If you think gold is the answer, think again.


Quote:
PLATO Agreed With Aristotle and advocated fiat money for his Republic:

“The law enjoins that no private individual shall possess or hoard gold or silver bullion, but have money only fit for domestic use. ...wherefore our citizens should have a money current among themselves but not acceptable to the rest of mankind....”(Laws) “Then they will need a market place, and a money-token for purposes of exchange.”(Republic)

So both Aristotle and Plato noted the paramount principle - that the nature of money is a fiat of the law, an invention or creation of mankind.

 

[buster]

I personally think we are in more of a Japan type situation.

See here:

http://mikenormaneconomics.blogspot.com/2011/03/govt-spending-deficits-inflation-and.html

There is so much slack in the economy. Credit is tight among small business. As long as demand is low in the private sector and until they reduce their debt and gain confidence, only the government can prop up the economy, for better or worse. I'm well aware of the Broken Window Fallacy and problems with government tampering. MMT is simply an explanation of how a modern monetary system works. Monetary sovereignty and control are crucial. The Federal Reserve should be reduced or abolished or combined with the Treasury. I don't see fiat money as the problem. I see control and regulation as the issue. Gold solves nothing.

 

[Al]

Originally Posted By: buster

See here:

http://mikenormaneconomics.blogspot.com/2011/03/govt-spending-deficits-inflation-and.html

I kinda wrote this of in the first 15 seconds:

"Yet once again a simple analysis of past history reveals the TRUTH--that there is no such correlation between government spending and deficits and interest rates. In fact, there is even weak correlation between inflation and interest rates as I will show. The only real thing that we can see, quite clearly in fact, is that long term interest rates are anchored by Fed policy and nothing more. "

 

[Shannow]

Originally Posted By: Tempest
The "barbaric and stupid" founders of this country wanted only precious metal coin as currency so as to constrain the ability of the government to enact the hidden tax that is inflation.


Tempest, is there a universal law that states that an ounce of gold is worth x dozen eggs, y loaves of bread, a set of 255/75R16 tyres ?

If not, then how does a gold standard protect anything, when gold is only worth what people put on it, just like they do paper ?

What if you can't dig up enough gold (using massive fossil fuel input, pollution etc. in the process) to meet the perpetual exponential x% growth target ?

Deflation (relative of course) ?

Or would a gold standard provide a "natural" limit to growth, meaning less for all, as the value of their (increasing with population) labour, goods and services are spread with a decreasing (relatively) supply of shiney metal ?

 

[buster]

Our real means are everything we can produce at full employment domestically plus whatever the rest of the world wants to net send us. The currency is the means for achieving this. Dollars are purely nominal and not the real resources.
~ Warren Mosler

 

[JHZR2]

Originally Posted By: Gary Allan
Quote:
The FED exists due to an act of Congress. It was passed just before Christmas (the usual time to pass unpopular legislation) in 1913. It would take another act of Congress to get rid of it.


So, can we say that this power ..this centralized power ..that's privately held ..that creates an economic fiefdom where some powerful private citizens have managed to have leverage over all ..dominion over all ..was done under "rule of law"?

Aren't you in favor of such maneuvers and manipulations for the betterment of the private citizen ..to allegedly make them rich?

I'd say you would ..or should be applauding the coup. All neatly done and by the very process you allege it should be.

Naturally so ..as in Natural Law. The most shrewd and cunning shall achieve what they can ..by whatever means legal.

Don't they deserve it? If not, why not?


Unfortunately the group isn't a group that can be cracked. We are all the goyim and are the serfs to a greater agenda. Unfortunately the fed is part of the process to take back the freedoms of the private citizen to prosper, and rather revert the citizen to be indebted serfs to the manor... There was good reasons why most of the founding fathers did not want a central bank and there have been repeals on their creation multiple times.

 

[jmac]

Originally Posted By: JHZR2
Originally Posted By: Gary Allan
Quote:
The FED exists due to an act of Congress. It was passed just before Christmas (the usual time to pass unpopular legislation) in 1913. It would take another act of Congress to get rid of it.


So, can we say that this power ..this centralized power ..that's privately held ..that creates an economic fiefdom where some powerful private citizens have managed to have leverage over all ..dominion over all ..was done under "rule of law"?

Aren't you in favor of such maneuvers and manipulations for the betterment of the private citizen ..to allegedly make them rich?

I'd say you would ..or should be applauding the coup. All neatly done and by the very process you allege it should be.

Naturally so ..as in Natural Law. The most shrewd and cunning shall achieve what they can ..by whatever means legal.

Don't they deserve it? If not, why not?


Unfortunately the group isn't a group that can be cracked. We are all the goyim and are the serfs to a greater agenda. Unfortunately the fed is part of the process to take back the freedoms of the private citizen to prosper, and rather revert the citizen to be indebted serfs to the manor... There was good reasons why most of the founding fathers did not want a central bank and there have been repeals on their creation multiple times.


There is a new lexicon en vogue spread throughout the webasphere, out with the old terms 'serf' etc., in with the new. We are all dubbed mundanes.

 

[Tempest]

Originally Posted By: buster
Our real means are everything we can produce at full employment domestically plus whatever the rest of the world wants to net send us. The currency is the means for achieving this. Dollars are purely nominal and not the real resources.
~ Warren Mosler

So money is not also a storage of wealth? Mr. Mosler obviously doesn't think so. He only thinks of the now, not the later. Very typical of demand side thinking.

He also assumes that just because you introduce money into an economy, productive things will be done with it. And that it doesn't matter what you spend it on, or who is doing the spending. This is highly flawed, but is made very clear by the demand sider's key phrase, "aggregate" demand.
They only care about the communal, not the specific.

This is why they love government spending and control. But make work jobs are a poor utilization of resources and don't CREATE wealth.

China is building ghost cities with virtually no one in them. This is a perfectly valid use of resources under MMT and demand side economics.

 

[Tempest]

Originally Posted By: Shannow

Tempest, is there a universal law that states that an ounce of gold is worth x dozen eggs, y loaves of bread, a set of 255/75R16 tyres ?

If not, then how does a gold standard protect anything, when gold is only worth what people put on it, just like they do paper ?

What if you can't dig up enough gold (using massive fossil fuel input, pollution etc. in the process) to meet the perpetual exponential x% growth target ?

Deflation (relative of course) ?

Or would a gold standard provide a "natural" limit to growth, meaning less for all, as the value of their (increasing with population) labour, goods and services are spread with a decreasing (relatively) supply of shiney metal ?

All perfectly valid flaws of the gold standard. As I've said before, I have yet to see a perfect monetary system. Gold is recognized as "money" universally, however.

One thing is perfectly clear, the government has been more than happy for many decades to spend fiat money in great amounts to its own benefit... but to the detriment of the people.

In theory, having a separate issuing authority of fiat money (like the FED) from the government puts some level of check on government spending but obviously, it doesn't work that way in practice.

 

[buster]

Well, I guess we will find out.

http://www.reuters.com/article/2011/04/05/usa-budget-cuts-idUSN0429071020110405

vs


http://www.huffingtonpost.com/warren-mosler/tea-partys-economic-agend_b_700013.html