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Thread: FEDERAL DEBT PRIMED TO EXPLODE...

  1. #1

    Default FEDERAL DEBT PRIMED TO EXPLODE...

    From Drudge:

    FEDERAL DEBT PRIMED TO EXPLODE...

    Trillion-dollar deficits come roaring back...


    The GOP tax plan means short-term gains for the economy, but federal debt is primed to explode, CBO analysis says



    • The Congressional Budget Office forecast that the new tax law will generate an average of 0.7 percent growth over the decade and create 1.1 million jobs.
    • However, larger budget deficits would crowd out private investment in later years, dampening economic growth.
    • As a result, the CBO estimated the cumulative deficit over the next decade will be $1.6 trillion larger than previously projected. By 2028, the national debt would total 96 percent of GDP.


    Ylan Mui | @ylanmui

    Published 5 Hours Ago Updated 1 Hour Ago

    CBO: Tax law will add $1.9 trillion to deficit over a decade 3 Hours Ago | 02:15

    The Republican overhaul of America's tax code and increased government spending are projected to boost economic growth to 3.3 percent this year but push the national debt to nearly the same size as gross domestic product by 2028, according to government data released Monday.

    The Congressional Budget Office forecast that the new tax law will generate an average of 0.7 percent growth over the decade and create 1.1 million jobs. It also predicted the two-year federal spending deal would increase GDP by 0.3 percent this year and 0.6 percent in 2019. However, larger budget deficits would crowd out private investment in later years, dampening economic growth.
    As a result, the CBO estimated the cumulative deficit over the next decade will be $1.6 trillion larger than previously projected. By 2028, the national debt would total 96 percent of GDP.
    "Such high and rising debt would have serious negative consequences for the budget and for the nation," the CBO report said.





    Related

    National debt hits $21 trillion




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  3. #2

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    Quote Originally Posted by enhanced_deficit View Post


    Wow, that sounds scary. Kind of like a "ticking time bomb"?

    Here is a list of similar claims going back to the 1940's of the same sorts of dire predictions. It's been 78 years, do you really think that it's for real this time?

    Sept 26, 1940, New York Times: Deficit Financing is Hit by Hanes: ” . . . unless an end is put to deficit financing, to profligate spending and to indifference as to the nature and extent of governmental borrowing, the nation will surely take the road to dictatorship, Robert M. Hanes, president of the American Bankers Association asserted today. He said, “insolvency is the time-bomb which can eventually destroy the American system . . . the Federal debt . . . threatens the solvency of the entire economy.”Feb 11, 1960, New York Times: Mueller Assails Rise in Spending: The enormous cost of various Federal programs is a time bomb, threatening the country’s fiscal future, Secretary of Commerce, Frederick H. Mueller warned here today “. . . the accrued liability is a ticking time bomb. Someday someone will have to pay.”

    Oct 4, 1983 Evening Independent – The United States and the developed world face a “ticking time bomb” because of the huge foreign debt involving loans to Third World nations

    Oct 26, 1983, David Ibata: “ . . . home-building officials called for a commission to propose ways to trim the $200 billion federal deficit. The deficit is a ‘ticking time bomb‘ that probably will explode in the third quarter of 1984,’ said Fred Napolitano, former president of the National Association of Home Builders.

    Feb 21, 1984, James Warren: “‘We now hear from them (the Reagan administration) that deficits don’t cause high-interest rates and inflation,’ AFL-CIO President Lane Kirkland said. ‘If that’s the case, we’ve suddenly discovered the horn of plenty and should stop worrying and keep borrowing and spending. But I don’t believe it. It’s a time bomb ticking away.”


    January 12, 1985, Lexington Herald-Leader (KY): The federal deficit is “a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell, a Louisville Republican, said yesterday.


    Feb 17, 1985, Los Angeles Times: We labeled the deficit a `ticking time bomb‘ that threatens to permanently undermine the strength and vitality of the American economy.”


    Jan 5, 1987, Richmond Times-Dispatch – Richmond, VA: 100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB

    November 28, 1987, The Dallas Morning News: THE TICKING TIME BOMB OF LONG-TERM HEALTH CARE COSTS A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government and our nation’s elderly. The ticking bomb is the growing cost of long-term care.
    October 23, 1989, FORTUNE Magazine: A TIME BOMB FOR U.S. TAXPAYERS The government guarantees millions of mortgages, bonds, deposits, and student loans. These liabilities, now twice the national debt, are growing fast.

    May 1, 1992, The Pantagraph – Bloomington, Illinois: I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion and growing now at an annual rate of $400 billion per year.

    October 28, 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion. Seventy-five percent of this debt is due and payable in the next five years. This is a bomb that’s set to go off and devastate our economy and destroy thousands of jobs.

    Dec 3, 1995, Kansas City Star: Deficit is sapping America’s strength. Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.


    April 14, 2003: Porter Stansberry, for the Daily Reckoning: The baby boomers are heading into retirement with no savings and no productive companies to support them in old age. Generation debt is a ticking time bomb…with about ten years left on the clock.

    October 1, 2004, Bradenton Herald: A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB: Lawmakers approved Bush’s request without cutting federal spending by a penny, thereby fattening the country’s projected record deficit of $422 billion by another $145 billion next year.

    May 31, 2005, Providence Journal, Defusing the Medicare time bomb, Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb, set to wreak havoc on the budget and shoot future tax rates sky-high.


    April 5, 2006, NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.


    Dec 3, 2007, USA Today: US debt: $30,000 per American. WASHINGTON (AP): Like a ticking time bomb, the national debt is an explosion waiting to happen.


    September 24, 2010, Email from the Reason Alert: ” . . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”


    July 7, 2011, Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode as the cost of health care rises and the nation’s population ages.

    If the debt is a "time bomb" that's going to "explode", it surely has the slowest fuse in history. The pundits have been wrong, wrong, wrong, all these years. We should understand federal deficits, even large federal deficits, have not caused inflation or any other negative economic effect, and the debt is not a ticking time bomb? It’s an economic necessity. Let us turn away from faith and start to rely on facts.



    Quote Originally Posted by enhanced_deficit View Post
    The Republican overhaul of America's tax code and increased government spending are projected to boost economic growth to 3.3 percent this year but push the national debt to nearly the same size as gross domestic product by 2028, according to government data released Monday.
    There is a problem with this assumption. Future spending=future income. Whatever the debt ends up being will add to future income. Future income will lead to future spending. The only question is, will the real labor and resources exist to meet whatever level of demand that future consumers place on the economy.

    Quote Originally Posted by enhanced_deficit View Post
    The Congressional Budget Office forecast that the new tax law will generate an average of 0.7 percent growth over the decade and create 1.1 million jobs. It also predicted the two-year federal spending deal would increase GDP by 0.3 percent this year and 0.6 percent in 2019. However, larger budget deficits would crowd out private investment in later years, dampening economic growth.
    As a result, the CBO estimated the cumulative deficit over the next decade will be $1.6 trillion larger than previously projected. By 2028, the national debt would total 96 percent of GDP.
    "Such high and rising debt would have serious negative consequences for the budget and for the nation," the CBO report said.
    The CBO is wrong.
    Last edited by econ4every1; 04-10-2018 at 11:44 AM.

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    Those darned tax and spend liberals ringing up debt right and left! Wait- this was the cut taxes and spend Republicans bringing back the $trillion deficits.
    Quote Originally Posted by NorthCarolinaLiberty View Post

    Half the crap I write here is just to entertain myself.
    I am Zippy and I approve of this post. But you don't have to.

  5. #4

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    Quote Originally Posted by econ4every1 View Post
    [Wow, that sounds scary.

    Yeah, it's so scary that the prescription follows immediately after that article you posted:


    The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

    Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

    Implementation of The Ten Steps To Prosperity can narrow the Gaps:



    Ten Steps To Prosperity:


    1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
    Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
    *FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
    *The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
    2. FEDERALLY FUNDED MEDICARE [/B]— PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
    This article addresses the questions:
    *Does the economy benefit when the rich can afford better health care than can the rest of Americans?
    *Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
    *How much would it cost taxpayers?
    *Who opposes it?”
    3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
    This article is the fifth in a series about direct financial assistance to Americans:

    Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
    MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
    Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
    “You can’t fire me. I’m on JG” Saturday, Jun 2 2012

    Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
    4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
    Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
    Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
    An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
    5. SALARY FOR ATTENDING SCHOOL
    Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
    If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
    6. ELIMINATE FEDERAL TAXES ON BUSINESS
    Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
    7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
    Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
    8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
    There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
    But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
    9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
    Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
    Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
    10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
    Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

    https://mythfighter.com/2018/02/14/w...to-understand/

    Last edited by NorthCarolinaLiberty; 04-10-2018 at 01:12 PM.
    Quote Originally Posted by TheCount View Post
    ...I believe that when the government is capable of doing a thing, it will.
    Quote Originally Posted by Influenza View Post
    which one of yall fuckers wrote the "ron paul" racist news letters
    Quote Originally Posted by Dforkus View Post
    Zippy's posts are a great contribution.




    Disrupt, Deny, Deflate. Read the RPF trolls' playbook here (post #3): http://www.ronpaulforums.com/showthr...eptive-members

  6. #5

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    Econ4every1's solution is freebies for every 1!
    Quote Originally Posted by TheCount View Post
    ...I believe that when the government is capable of doing a thing, it will.
    Quote Originally Posted by Influenza View Post
    which one of yall fuckers wrote the "ron paul" racist news letters
    Quote Originally Posted by Dforkus View Post
    Zippy's posts are a great contribution.




    Disrupt, Deny, Deflate. Read the RPF trolls' playbook here (post #3): http://www.ronpaulforums.com/showthr...eptive-members

  7. #6

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    Quote Originally Posted by econ4every1 View Post
    There is a problem with this assumption. Future spending=future income. Whatever the debt ends up being will add to future income. Future income will lead to future spending. The only question is, will the real labor and resources exist to meet whatever level of demand that future consumers place on the economy.
    If that was true every county on the planet would be rich. Just let govt spend as much as possible.


    Quote Originally Posted by econ4every1 View Post

    The CBO is wrong.
    I agree. The CBO is always orders of magnitude wrong on the low side.

    10 years ago govt debt held by the public was 5.1T and GDP was 14.6T(actually higher using the new formula). For 2017 debt was 15.4T and GDP was 19.7T. If debt and GDP keep growing at the same rate in 10 years it'll be: Debt 46.5T and GDP 26.6T for a ratio of 175%. If my math is correct.

  8. #7

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    Quote Originally Posted by NorthCarolinaLiberty View Post
    Econ4every1's solution is freebies for every 1!
    Looks like roads are about the only thing I have in common with that guy.

  9. #8

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    Quote Originally Posted by Zippyjuan View Post
    Those darned tax and spend liberals ringing up debt right and left! Wait- this was the cut taxes and spend Republicans bringing back the $trillion deficits.
    Although according to you debt is not a problem.

  10. #9

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    Quote Originally Posted by Madison320 View Post
    If that was true every county on the planet would be rich. Just let govt spend as much as possible.
    That's simply false because all nations of the world are constrained by labor and real resources. This is the mistake that Austrians make when evaluating fiat money systems.

    If I asked you if you can jump off a 10 story building...How would you answer?

    Of course, you can independent of the consequences. But if the consequences matter then the answer is no (assuming you're not using any technology).

    So can government's spend infinitely? Sure, just like you can jump off a building. But if the consequences matter they create a real constraint.

    Quote Originally Posted by Madison320 View Post
    10 years ago govt debt held by the public was 5.1T and GDP was 14.6T(actually higher using the new formula). For 2017 debt was 15.4T and GDP was 19.7T. If debt and GDP keep growing at the same rate in 10 years it'll be: Debt 46.5T and GDP 26.6T for a ratio of 175%. If my math is correct.
    Few thoughts, every dollar the government debt increased the private sector debt decreased.

    The private sector was allowed to create too much debt (risk) in the run-up to the GFC. When the economy was on the verge of failure, private sector debt was passed onto the government.

    Spending=income.

    Reduction in debt on the private side=increase in debt on the government side.

    Increase in spending on the government side=Increase in savings on the private side.

    It's just simple (ok, maybe not that simple) accounting.



    What went wrong? The belief that markets are self-regulating. They aren't and the GFC is evidence of that fact.

    As far as the level of debt, tell me, how has an increase in debt from $5.1T to $14.6T changed your life? Do you pay more taxes? is everything three times more expensive?Do you receive fewer benefits? What has changed?

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    Quote Originally Posted by econ4every1 View Post
    That's simply false because all nations of the world are constrained by labor and real resources. This is the mistake that Austrians make when evaluating fiat money systems.

    If I asked you if you can jump off a 10 story building...How would you answer?

    Of course, you can independent of the consequences. But if the consequences matter then the answer is no (assuming you're not using any technology).

    So can government's spend infinitely? Sure, just like you can jump off a building. But if the consequences matter they create a real constraint.



    Few thoughts, every dollar the government debt increased the private sector debt decreased.

    The private sector was allowed to create too much debt (risk) in the run-up to the GFC. When the economy was on the verge of failure, private sector debt was passed onto the government.

    Spending=income.

    Reduction in debt on the private side=increase in debt on the government side.

    Increase in spending on the government side=Increase in savings on the private side.

    It's just simple (ok, maybe not that simple) accounting.



    What went wrong? The belief that markets are self-regulating. They aren't and the GFC is evidence of that fact.

    As far as the level of debt, tell me, how has an increase in debt from $5.1T to $14.6T changed your life? Do you pay more taxes? is everything three times more expensive?Do you receive fewer benefits? What has changed?
    See we are an empire exporting our debt/inflation. It may not be as apparent to many of us. but the rest of the world can see it. Some are definitely benefiting, but many are not. Starvation on a planet of plenty. Women in China chaining there children to posts while they work in hideous conditions to make junk for us, etc. Do you think we could sustain this system without a large and sophisticated military punishing any country trying to break away from it? Just look at Libya as an example. Trying to establish a currency outside of the Fed. for an African currency. Then there was Iraq and now Iran...


    We are so productive, but the middle class is shrinking, That productivity should not lead to people working many jobs just to stay a float, whereas, in the past, just one household income earner could support a family.
    Last edited by Danke; 04-10-2018 at 09:31 PM.
    Quote Originally Posted by TheCount View Post
    Drudge is a traitor to the Leader and the Revolution.



    Quiz: Test Your "Income" Tax IQ!


    Short Income Tax Video

    The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes

    The Federalist Papers, No. 15:

    Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.

  12. #11

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    Quote Originally Posted by Danke View Post
    See we are an empire exporting our debt/inflation. It may not be as apparent to many of us. but the rest of the world can see it. Some are definitely benefiting, but many are not. Starvation on a planet of plenty. Women in China chaining there children to posts while they work in hideous conditions to make junk for us, etc. Do you think we could sustain this system without a large and sophisticated military punishing any country trying to break away from it? Just look at Libya as an example. Trying to establish a currency outside of the Fed. for an African currency. Then there was Iraq and now Iran...


    We are so productive, but the middle class is shrinking, That productivity should not lead to people working many jobs just to stay a float, whereas, in the past, just one household income earner could support a family.
    My old lady needs a better job.
    "The Patriarch"

  13. #12

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    Quote Originally Posted by Origanalist View Post
    My old lady needs a better job.

    What does she look like, I might have an opening.
    Quote Originally Posted by TheCount View Post
    Drudge is a traitor to the Leader and the Revolution.



    Quiz: Test Your "Income" Tax IQ!


    Short Income Tax Video

    The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes

    The Federalist Papers, No. 15:

    Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.

  14. #13

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    Quote Originally Posted by Danke View Post
    See we are an empire exporting our debt/inflation. It may not be as apparent to many of us. but the rest of the world can see it. Some are definitely benefiting, but many are not. Starvation on a planet of plenty. Women in China chaining there children to posts while they work in hideous conditions to make junk for us, etc. Do you think we could sustain this system without a large and sophisticated military punishing any country trying to break away from it? Just look at Libya as an example. Trying to establish a currency outside of the Fed. for an African currency. Then there was Iraq and now Iran...


    We are so productive, but the middle class is shrinking, That productivity should not lead to people working many jobs just to stay a float, whereas, in the past, just one household income earner could support a family.
    Do you have any idea the cycle of spending that occurs between the US and China? China buys US dollars with money it creates out of thin air to devalue its own dollar and impoverish its own people in order to advance into the age of technology. I agree the costs are born out in human suffering and environmental damage. There are trade-offs, but let's be clear, these conditions are imposed on the Chinese people by their leaders, not by the US government. US consumers are complicit, but not responsible.

    So tell me...Do you know where the Chinese government gets 's most of the money it uses to buy US Treasuries?
    Last edited by econ4every1; 04-10-2018 at 09:50 PM.

  15. #14

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    Quote Originally Posted by econ4every1 View Post
    Do you have any idea the cycle of spending that occurs between the US and China? China buys US dollars with money it creates out of thin air to devalue its own dollar and impoverish its own people in order to advance into the age of technology. I agree the costs are born out in human suffering and environmental damage. There are trade-offs, but let's be clear, these conditions are imposed on the Chinese people by their leaders, not by the US government. US consumers are complicit, but not responsible.

    So tell me...Do you know where the Chinese government gets 's most of the money it uses to buy US Treasuries?
    Oh well, in that case it makes it right, just like the Opium wars. NVM, the Clintons sold a lot of our tech to them for personal gain and we have looked the other way as they stole intellectual property. For what, to prop up the dollar?

    As long as others are suffering by our policies, it is ok, if my stock portfolio beats inflation.
    Last edited by Danke; 04-10-2018 at 09:58 PM.
    Quote Originally Posted by TheCount View Post
    Drudge is a traitor to the Leader and the Revolution.



    Quiz: Test Your "Income" Tax IQ!


    Short Income Tax Video

    The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes

    The Federalist Papers, No. 15:

    Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.

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    Quote Originally Posted by Danke View Post
    What does she look like, I might have an opening.
    You have a opening? She'll get right on that.
    "The Patriarch"

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    Quote Originally Posted by Danke View Post
    Oh well, in that case it makes it right, just like the Opium wars. NVM, the Clintons sold a lot of our tech to them for personal gain and we have looked the other way as they stole intellectual property. For what, to prop up the dollar?

    As long as others are suffering by our policies, it is ok, if my stock portfolio beats inflation.
    Who said it was "right"?

    I notice you avoided answering the question I asked, so I'll ask again and assume that if you don't answer that you don't know.

    Where does China get most of the dollars it buys US Treasuries with?

  18. #17

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    Quote Originally Posted by econ4every1 View Post
    Who said it was "right"?

    I notice you avoided answering the question I asked, so I'll ask again and assume that if you don't answer that you don't know.

    Where does China get most of the dollars it buys US Treasuries with?
    I think I answered that, and it ain't good. Yes we are currently benefiting from those conditions in China. But it hurts a lot of people in the process. And we will/are experience that folly here some day. But currently our corporations are dumping waste in China that our States won't allow, and have terrible work conditions from displaced villagers that use to farm on their own land. I know, the argument is someday they will be better off. Well, that is not currently the case. I have live over there 3 years in Asia, and travel there regularly.

    Many new rich, but...look into Tiananmen Square. 1000's murdered, for what?
    Quote Originally Posted by TheCount View Post
    Drudge is a traitor to the Leader and the Revolution.



    Quiz: Test Your "Income" Tax IQ!


    Short Income Tax Video

    The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes

    The Federalist Papers, No. 15:

    Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.

  19. #18

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    Quote Originally Posted by Danke View Post
    I think I answered that, and it ain't good.
    Would you be kind enough to point me to your answer, I think I missed it.

    Quote Originally Posted by Danke View Post
    Yes we are currently benefiting from those conditions in China. But it hurts a lot of people in the process.
    Totally agree. China's rapid growth is being paid for mostly in human suffering and environmental damage.

    Though, and I don't know the answer to the question I'm about to ask, but do you think they would have endured any less suffering had they not tried to modernize?

    It sounds like what you are saying is that it's better to experience suffering and be free than be forced and be happy (not to suggest that everyone in China is happy).

    Now I understand it's even better to be free AND happy, but I'm curious if you think freedom, by itself, is happiness

    Quote Originally Posted by Danke View Post
    And we will/are experience that folly here some day.
    I suspect we'll disagree on how and why, but even Rome eventually fell.


    Quote Originally Posted by Danke View Post
    But currently our corporations are dumping waste in China that our States won't allow, and have terrible work conditions from displaced villagers that use to farm on their own land. I know, the argument is someday they will be better off. Well, that is not currently the case. I have live over there 3 years in Asia, and travel there regularly.
    Yes, it's shameful but what if there is no utopia where suffering doesn't exist. What if the only choice is suffering or greater suffering?

    It seems to me that there are people here that think that individualism and sound money will result in less suffering or that they really don't care how much suffering there is, as long as people that are suffering aren't suffering directly as a result of the actions of others.

    Quote Originally Posted by Danke View Post
    Many new rich, but...look into Tiananmen Square. 1000's murdered, for what?
    So what is the answer?
    Last edited by econ4every1; 04-12-2018 at 09:59 AM.

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    If I was a mod I would lock this thread .

  21. #20

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    Quote Originally Posted by oyarde View Post
    If I was a mod I would lock this thread .
    Why?

  22. #21

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    Quote Originally Posted by econ4every1 View Post
    Why?
    MMT treats all spending the same. Spending is part of a functioning economy but it isn't the driver. Cuba can spend as much money as it wants. MMT completely ignores the supply side. Production and innovation drives standards of living. The goal is to maximize productivity. The government is wasteful and unproductive. Government spending doesn't face a market test. Government spending takes productive workers and resources from the private sector and puts them to work inefficiently.

    Then there are the practical problems with government spending even if you ignore the productivity argument. Government spending isn't a faucet you can turn on and off. You have to pass legislation and figure out how to spend that money. That is time consuming. Then it isn't like you can just turn spending off once it starts. "Nothing is so permanent as a temporary government program."

  23. #22

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    Krugminator2. Thanks for the comment, I'm definitely interested in having a conversation with you about this. Some of what I'm going to say will be controversial or perhaps seem downright ludicrous. I hope you will ask questions where you think I'm mistaken and continue this as a conversation.


    Quote Originally Posted by Krugminator2 View Post
    MMT treats all spending the same.
    MMT as an economic discipline has NOTHING to say about where to spend, those are political choices. Even if those choices are wrong, MMT is still correct in that, as a discipline it does not prescribe policiy choices it just descibes how the fiat money system has worked since 1971. Understanding the effects of spending and how money are spent are two different things. However, most well-informed MMT'ers will insist that where money is spent matters, but any MMT'er worth their salt should understand that MMT is a description, not a prescription of economics. Thus MMT informs peoples opinions, but those opinions aren't part of MMT.

    For example, I can describe to you how solar power works, but if you support solar power policies, that has nothing to do with the description of how solar works. It's your opinion based on your understanding of solar power.

    Quote Originally Posted by Krugminator2 View Post
    Spending is part of a functioning economy but it isn't the driver.
    You are quite right.

    If we're going to analogize...how about this one:

    Supply is the "driver", demand is the "fuel" and money is the "road".

    Without supply, there is nothing else.

    Quote Originally Posted by Krugminator2 View Post
    Cuba can spend as much money as it wants.
    Pointing out that a country can spend as much as it wants teaches us 1 simple lesson. That any nation that has a sovereign free-floating currency can create and spend as much as it wants and this teaches us that spending isn't constrained by taxes. That's it. That's all you should have taken from that statement if you read that somewhere. If you assumed the rest, that was a mistake on your part. Just as if you asked me if I can jump off a 10-story roof and I answered; "yes" and assuming that because I answered yes that I assumed that I could do it without facing the consequences that come when I hit the ground.Sovereign money nations can create all the currency they want, but that isn't the same as saying that they should.

    Quote Originally Posted by Krugminator2 View Post
    MMT completely ignores the supply side.
    Can you cite anyone considered an authority in MMT that has stated that?

    Quote Originally Posted by Krugminator2 View Post
    Production and inndriven drives standards of living. The goal is to maximize productivity.
    Agree 100%, which means the real question is how to achieve it.

    Quote Originally Posted by Krugminator2 View Post
    The government is wasteful and unproductive.
    What does it waste?

    If productivity is paramount, then the only way that government spending could be "unproductive" is if the money is used is zero-sum, or the products it purchases is zero-sum.

    Now of course productivity has limits, specifically real resources and labor and MMT recognizes that spending is constrained by real resources and labor (productivity) and that overspending will result in inflation (the economic constraint). That should tell you that productivity is pivotal to MMT.

    Quote Originally Posted by Krugminator2 View Post
    Government spending doesn't face a market test. Government spending takes productive workers and resources from the private sector and puts them to work inefficiently.
    That's only true if real resources and labor are unavailable. If there are unemployment and resources available to meet higher levels of demand, then nothing is taken, in fact, the economy in question will experience growth.

    The government can overspend and distort prices, this is true, but this is a deeper can of worms I don't want to delve into right now.

    Quote Originally Posted by Krugminator2 View Post
    Then there are the practical problems with government spending even if you ignore the productivity argument. Government spending isn't a faucet you can turn on and off. You have to pass legislation and figure out how to spend that money. That is time consuming. Then it isn't like you can just turn spending off once it starts. "Nothing is so permanent as a temporary government program."
    Most of the money spent each year (about 4/5ths) comes from the private sector. Banks take existing reserves (government money) and expand their balance sheets by creating credit money (banks liability) and depositing the customers promise to pay (asset) and securing it with the banks capital (investor dollars).

    The Banking system has been created to be "elastic" so that it can expand or contract based on the demand (or lack of) for goods and services.

    Government (Congressional spending) deficits add to banking reserves, government surpluses remove them.

    The Fed (which is technically part of the executive branch) can manipulate the number of reserves available in the banking system, however, it cannot create or destroy them.

    The demand for money is measured against available reserves and this is how the interest rates (pre-2008) was set. Post 2008 the Banking system is swamped with reserves so the Fed sets the rate directly by paying interest on reserves.
    Last edited by econ4every1; 04-12-2018 at 03:37 PM.

  24. #23

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    I think it is time to classify it as something else entirely . Debt describes money that is to be pd back . What we have here is just a huge amount of money that will have interest pd on it . Nothing else .

  25. #24

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    Former Speaker John Boehner: Deficit will be 'No. 1 issue' in six months



    • John Boehner warned that the normalization of interest rates would have a whipsaw effect on the deficit.
    • The former speaker supported GOP tax cuts and blamed a lack of entitlement reform for the expanding deficit.
    • He said failure to balance the budget had to be Paul Ryan's "biggest disappointment."


    James Thorne Published 23 Hours Ago

    Former Speaker John Boehner: Deficit will be 'number one issue' in six months 20 Hours Ago | 01:51



    Former Speaker of the House John Boehner said that the U.S. government deficit would become the No. 1 political issue in about six months.
    "As interest rates continue to get to a normal level, it's going to have a huge whipsaw effect on the deficit," Boehner told CNBC's "Squawk on the Street."
    Boehner voiced support for the tax cuts but lamented President Donald Trump's decision to maintain spending on entitlements. "I have to believe it's Paul Ryan's biggest disappointment as speaker," he said. "Paul Ryan had a plan to balance the budget over 10 years."

  26. #25

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    Quote Originally Posted by enhanced_deficit View Post
    Former Speaker John Boehner: Deficit will be 'No. 1 issue' in six months



    • John Boehner warned that the normalization of interest rates would have a whipsaw effect on the deficit.
    • The former speaker supported GOP tax cuts and blamed a lack of entitlement reform for the expanding deficit.
    • He said failure to balance the budget had to be Paul Ryan's "biggest disappointment."


    James Thorne Published 23 Hours Ago

    Former Speaker John Boehner: Deficit will be 'number one issue' in six months 20 Hours Ago | 01:51



    Former Speaker of the House John Boehner said that the U.S. government deficit would become the No. 1 political issue in about six months.
    "As interest rates continue to get to a normal level, it's going to have a huge whipsaw effect on the deficit," Boehner told CNBC's "Squawk on the Street."
    Boehner voiced support for the tax cuts but lamented President Donald Trump's decision to maintain spending on entitlements. "I have to believe it's Paul Ryan's biggest disappointment as speaker," he said. "Paul Ryan had a plan to balance the budget over 10 years."
    Paul Ryan's balanced budget called for $5.2 trillion in spending cuts over ten years but also called for $5.7 trillion in tax cuts which would not balance the budget. $2 trillion of the cuts assumed that Obamacare was repealed (counting the spending cuts but not counting the tax cuts towards his "balanced" budget).

    https://www.vox.com/cards/paul-ryan-...-do-with-taxes



    Rand Paul submitted a balanced budget proposal which assumed that tax revenues were 25% higher after five years.
    Last edited by Zippyjuan; 04-14-2018 at 05:52 PM.
    Quote Originally Posted by NorthCarolinaLiberty View Post

    Half the crap I write here is just to entertain myself.
    I am Zippy and I approve of this post. But you don't have to.

  27. #26

    Default

    Quote Originally Posted by enhanced_deficit View Post
    Former Speaker John Boehner: Deficit will be 'No. 1 issue' in six months



    • John Boehner warned that the normalization of interest rates would have a whipsaw effect on the deficit.
    • The former speaker supported GOP tax cuts and blamed a lack of entitlement reform for the expanding deficit.
    • He said failure to balance the budget had to be Paul Ryan's "biggest disappointment."


    James Thorne Published 23 Hours Ago

    Former Speaker John Boehner: Deficit will be 'number one issue' in six months 20 Hours Ago | 01:51



    Former Speaker of the House John Boehner said that the U.S. government deficit would become the No. 1 political issue in about six months.
    "As interest rates continue to get to a normal level, it's going to have a huge whipsaw effect on the deficit," Boehner told CNBC's "Squawk on the Street."
    Boehner voiced support for the tax cuts but lamented President Donald Trump's decision to maintain spending on entitlements. "I have to believe it's Paul Ryan's biggest disappointment as speaker," he said. "Paul Ryan had a plan to balance the budget over 10 years."
    I'm curious, how do you think higher interest rates affect the US economy?

  28. #27

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    Quote Originally Posted by econ4every1 View Post
    I'm curious, how do you think higher interest rates affect the US economy?
    When the Fed was trying to lower interest rates, folks were complaining that rates were artificially too low and that it would cause inflation (even hyperinflation) and ruin the economy. Now that the Fed has started to very slowly raise interest rates, people complain that higher interest rates will choke off the economy- ruining it again.
    Quote Originally Posted by NorthCarolinaLiberty View Post

    Half the crap I write here is just to entertain myself.
    I am Zippy and I approve of this post. But you don't have to.

  29. #28

    Default

    Quote Originally Posted by Zippyjuan View Post
    When the Fed was trying to lower interest rates, folks were complaining that rates were artificially too low and that it would cause inflation (even hyperinflation) and ruin the economy. Now that the Fed has started to very slowly raise interest rates, people complain that higher interest rates will choke off the economy- ruining it again.
    Personally, I'm for Zirp as long as people can't use borrowed money (ie. leverage) to gamble with on Wall St.

    Having said that, I'm curious to see if any of the naysayers will answer my question.

  30. #29

    Default

    Quote Originally Posted by econ4every1 View Post
    Personally, I'm for Zirp as long as people can't use borrowed money (ie. leverage) to gamble with on Wall St.

    Having said that, I'm curious to see if any of the naysayers will answer my question.
    Rates are pretty much set by the market. The Fed only determines what they charge banks to borrow overnight. They did try to influence longer term rates with QE when they were buying US Treasury bonds and Mortgage Backed Securities. Interest rates are lower when the rate of inflation is lower.

    Treasury rates are determined by auction- supply and demand. The Federal Reserve does not participate in those auctions but buys from dealers in the resale market. And those purchases are also auctions- they say how many they wish to buy and the sellers say how many they would be interested in selling and at what price. The Fed pays the lowest price which gets them the total amount of notes they want. All sellers of that round get the same price.
    Last edited by Zippyjuan; 04-15-2018 at 10:07 PM.
    Quote Originally Posted by NorthCarolinaLiberty View Post

    Half the crap I write here is just to entertain myself.
    I am Zippy and I approve of this post. But you don't have to.

  31. #30

    Default

    Quote Originally Posted by Zippyjuan View Post
    Rates are pretty much set by the market.
    Interesting. I disagree. Perhaps we can have a conversation and see if one of us can convince the other.

    Quote Originally Posted by Zippyjuan View Post
    The Fed only determines what they charge banks to borrow overnight.
    With respect, I believe you have an incomplete understanding of the process. There are two "regular" places banks can acquire reserves. The discount window (the Fed) and the overnight window (other banks). Borrowing directly from the Fed is generally frowned upon if there are reserves in the banking system as it means that other banks see the borrowing bank as an unacceptable risk. (usually as a result of poor decision making by the bank in question) Thus (pre-2008) most lending was done within the system and the Fed simply manipulated the scarcity of reserves in the system as a way to target the rate it wanted to see.

    Quote Originally Posted by Zippyjuan View Post
    They did try to influence longer term rates with QE when they were buying US Treasury bonds and Mortgage Backed Securities.
    I'll agree with this, though in the case of MBS's there was a bit more to it.

    Quote Originally Posted by Zippyjuan View Post
    Interest rates are lower when the rate of inflation is lower.
    Perhaps I'm looking at the wrong stats? I'm not seeing a correlation between rates and inflation..



    There does look to be a slight inverse correlation, at least looking back, less so since 1990, would you agree?


    Quote Originally Posted by Zippyjuan View Post
    Treasury rates are determined by auction- supply and demand. The Federal Reserve does not participate in those auctions but buys from dealers in the resale market. And those purchases are also auctions- they say how many they wish to buy and the sellers say how many they would be interested in selling and at what price. The Fed pays the lowest price which gets them the total amount of notes they want. All sellers of that round get the same price.
    With respect, that's incorrect. The auctions determine the cost of Treasuries via supply and demand, not the cost of interest rates.

    Pre-2008 rates were determined by the level of excess reserves in the banking system. The mechanism worked like this. As I'm sure you know large banks are required to keep 10% in reserves for each loan they make. Hopefully, you also know that banks don't have to have the reserves in their possession at the time a loan is made (using colloquial terms). In other words, let's say I borrow $25k to buy a car. If the bank, at the moment the approve my loan does not have the required $250 in reserves, that's ok (reserves do not constrain lending as long as there are reserves to be borrowed somewhere in the banking system). Lenders are always aware of the cost of reserves from the discount window and the cost of my loan reflects that cost.

    Holding excess reserves was (pre-2008) considered a waste of money as banks weren't paid on any excess they held. The Fed could manipulate the interest rate by manipulating the scarcity of reserves which it did via the FMOC. If it wanted its target rate to be higher it would create dollar liabilities and use those dollars to buy government Treasuries (an action the Fed coordinated with the US Treasury). This would have the effect of increasing the reserves levels in the banking system and decreasing the scarcity of reserves. This was just a balance sheet operation. Basically, this could be done by expanding its balance sheet because purchasing Treasuries expanded both its assets (treasuries) and liabilities (dollars created).

    The increase in dollars in the system would decrease the scarcity of reserves would put downward pressure on the overnight rate that banks charged each other and ultimately lower the rate that banks charge you and me.

    Raising rates is just the opposite.

    Post-2008, obviously, QE added trillions of dollars in reserves to the banking system which was done in order to increase the asset side of a banks balance sheet by buying a banks bonds or it could purchase MBS's and remove the (future) liability.

    Under the new system, I just described the result was that rates would permanently fall to zero until scarcity of reserves could be reestablished or a new system was created. We know the former was what the Fed chose. The Fed now simply pays interest on reserves which effectively creates an interest rate floor below which banks have zero incentive to lend as earning interest from the government represents the lowest risk.

    The thought at the time was that Milton Friedman was right and that increasing reserve levels would encourage banks to lend. What wasn't considered is that banks cannot and do not lend reserves because banks don't lend money they possess (something I went over in my conversation with devil21 HERE). Loans (credit) are created when people create an asset (their loan) and the bank, in turn, creates dollars (it's liability). That is, banks create money when they expand their balance sheets and destroy money when they shrink their balance sheets (this is what happened during the GFC), something I'm sure you know as a "liquidity crisis". While QE was largely a failure, it did create liquidity which fixed the banking half of the problem, however, it didn't address Main St's problem of higher debt-to-income ratio's as a result of the loss in equity realized in the private sector. This had the effect of increasing aggregate risk in the private sector and, again in the aggregate, made lending more expensive even as rates were at record lows. Hence the massive slowdown in borrowing. People with higher rate loans, even those with good credit couldn't refi because the amounts owed on their homes was greater than the amount left on many peoples loans.

    In conclusion, the market does not determine rates because rates are linked to reserve levels. As long as the US government increases it's deficits reserve levels increase (as this increases exogenous money or so-called "high powered money" or base money) meaning there is always a large pool of excess reserves and rates will always be zero of left unmanipulated. Many want the government to get out of manipulation of rates believing that the rate is determined by the market (the natural rate of interest). Ironically, in our current system (post-1971) the natural rate has always been 0%, it takes the Fed's manipulation to increase rates above zero.

    I'll leave it there and let you respond.

    Respectfully,

    E4E1
    Last edited by econ4every1; 04-16-2018 at 08:42 AM.

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