Who? Republicans?
Surely you jest!
It's probably more simple than that. Most of them are probably just getting rich off of this somehow or another.
US Federal Government Shutdown | Shutdown Shutdown, Debt Ceiling Raised
- Thread starter Jarmel
- Start date
- Status
It's probably more simple than that. Most of them are probably just getting rich off of this somehow or another.
empty vessel
Member
I somewhat agree, but his argument rejecting repealing laws requiring bond sales in the amount of deficit spending was premised (for some reason) on his belief that the money supply is controlled by a government agency. It isn't, so he is going to have to come up with a different post hoc rationale to support what he has clearly been well conditioned to believe about how the economy works. I agree it doesn't really matter whether it is the Treasury or Fed that he thinks was doing it (and indeed, I think it useful to combine them for purposes of understanding the system), but I do think it behooves one coming into a thread and accusing another of espousing unempirical "crackpot" theories to at least try to get some very basic facts right along the way.
What is the difference between "printed" money and money that is not "printed"? You must be able to answer this question.
The bottom line is that all money is printed, Sanky. Every dollar you own was printed. It is backed by nothing but the paper it is printed on. And, in many cases, not even that, because it doesn't even exist in paper form to begin with but as a mere number on a computer screen. Again, if "printed" money is anathema to you, I will happily accept all the "printed" money that you want to give me. I'm sure others will happily take all of your printed money as well.
Of course they are.
They're getting paid to do nothing but sabotage the government.
They're getting kick backs from their constituents for doing this.
They're getting kick backs from the insurance companies for trying to delay/remove ACA.
That doesn't negate them being evil.
Ok, I can admit I didn't see the whole context of it, as I didn't have time to read more than a page back or so.
Yeah, discussion can easily devolve into the wrong thing, so I see where you're coming from, sometimes arguing purely on backing up your statements and facts ain't gonna get you anywhere, sadly
No actually i havent seen this and ive been following like a hawk. Unbelievable.
Epsilon-delta
Banned
Yes and that includes military members who are medically retired as well if the debt limit isn't raised. With the federal government still shutdown, it affects VA benefits such as the GI Bill and the housing stipend that goes with it, VA disability, and a hold on all USDA mortgage loan applications and VA disability claims.
If the shutdown goes past Tuesday, the VA will not be able to make disability checks scheduled to go out the first of November.
The proper gold standard was hugely unstable for the populations of many countries historically, do you really think that just because there was 0 inflation, there were no recessions or anything?
Either you're ignorant of the sacrifices needed for having a proper gold standard, or if you're actually educated in the history of it, I wouldn't refrain from calling you evil.
I'm gonna give you the benefit of the doubt, and just gonna guess that you actually have no education on the subject.
I hadn't seen that yet either, and I too have been following things very closely. Also, if you notice he says the rule was changed on Oct. 1, which was the first day of the shutdown. It's pretty obvious what the purpose was.
Ether_Snake
å®å®å®å®å®å®å®å®å®å®å®å®å®å®å®
They are probably shorting the markets and losing money every time it doesn't tank.
TheHeretic
Banned
Let's just cut to the chase, you want the Government to finance itself by issuing its own currency, rather than investors through securities (bonds). Ok. So the Fed credits banks and finances itself. The banks presumably lend that money, the debtors spend it, and I think you would agree we've got some inflation. Then what happens? Well two things happen. The first is prices rise, and now the Government has to issue more money to cover its expenditures. The second is, knowing this new policy, people now expect inflation and start spending. More inflation. So the government issues even more money to cover its costs. This process repeats and eventually the governments own currency is basically destroyed.
This is why bonds exist, this is the problem with your idea.
reddmyst
Member
That's the entire process. Infuriating.
This never should have happened. There was no reason for it to happen. But now we all have to live with the consequences. I'm really hoping that this helps wake a lot of people up, if nothing else.
Snowman Prophet of Doom
Member
My point is that it's often manifestly the case that you see 2, and you see 2, yet somehow reach 5, regardless, and act as though everybody else is blind when they disagree. In no way is EV the only PoliGAFfer (nor GAFfer, more generally) that you've gotten into discussions on economics with, and you tend to get schooled every time. You're not unlike the conservative guy who used to post endless streams of charts in the PoliGAF thread, in terms of general discursive tactics, even if your politics are different.
Edit: And you're very dishonest about EV. I agree that his surety of MMT's empirical reality is likely ill-founded, as economics simply is NOT a very reliable science, no matter who's crunching the numbers, but he posts charts, data, and relevant quotes from economists quite often. Or at least, he used to. I was gone for a while and wasn't very into politics in that time, so perhaps he's cut down recently, but he's generally a pretty fact-based arguer.
Sanky Panky
Banned
There does not have to be a difference between printed to dollars, for you to understand that the value of that dollar versus anything tangible can change on a whim... there is nothing holding that value constant (no not every person or company in this world have to pay US taxes) aside from when governments TRY to manipulate that value, ultimately failing to fight against market forces (over and over and over through history).
Be it paper, printed, electronic, imaginary... money is simply a medium of exchange between a buyer and a seller. Not only that, but people hold liquid assets (money) for contingencies, expecting for it store value. If investors think that US dollar won't hold value against, say, the Euro... they will either rather invest in Euro assets, or demand higher returns in the US to counteract the expected loss of value.
There are too many dynamics that MMT flatly ignores, because the theory is just a bunch of hypothetical bs. Sorry to be blunt, but there is no way around it at this point.
theprodigy
Member
sorry to be blunt, but you get your ass kicked every single time you attempt to enter an economics debate
wait until the budget runs out
ZedIndyLil
Member
Sounds like for whatever reason, the "R's capitulate" side has become far more confident in the last 24 hours. There's even talk of reducing the sequester cuts? Never thought we'd be there. I'm still not getting my hopes up over the whole thing.
Sanky Panky
Banned
Hehe yes, I understand PoliGAF is knee deep into the fantasy economics of MMT. It is still fun to argue.
Snowman Prophet of Doom
Member
Most of PoliGAF is not. EV is the only true devotee I'm aware of. But even folks like Black Mamba and Ghaleon, who are garden-variety Keynesians as far as I'm aware, have often argued with you in the past and made you look, well, kind of fanatical.
brucewaynegretzky
Member
My mistake. I thought you were suggesting we just print money to cover our debts, aka putting more money in circulation.
Evolved1
make sure the pudding isn't too soggy but that just ruins everything
At least you aren't in an evolution thread. Small blessings.
This is insane. How is this constitutional, at all?
empty vessel
Member
Actually no. I am saying the government already does finance itself by issuing its own currency. That is precisely what a fiat monetary system is. The money that exists now exists because the government declared it money by fiat, i.e., by "printing" it. If your position is that the government should be precluded from adding money into the system, then you are effectively just arguing in favor of severe deflation and economic ruin.
I am further saying that bond sales to investors currently do not fund anything. The practice is continued (1) because it is a legal relic of the gold-standard era when the government was required by the convertible nature of its currency to restrict new issuance (and hence borrow back its previously issued dollars); and (2) because it is in effect a subsidy to relative high income people (risk free interest). The gold-standard legal relics requiring that the government sell bonds in an amount that matches its deficit spending is what makes it appear to finance the spending. But it doesn't. In fact, the Treasury spends just by debiting and crediting bank accounts. It can do that with or without bond sales. And saying that does not mean that there will be runaway inflation. Nothing in fact has changed at all. The Treasury is still spending the same amount as Congress directed it to.
Consider that the reason the gold standard was abandoned was because of its instability and tendency to depress economic production. It had this tendency precisely because of its finite and limited character, which puts deflationary pressure on an economy over time. The reason for abandoning the gold standard was precisely to avoid this artificial limitation on the amount of net financial assets in the private sector and hence this artificial limitation on economic growth. Unfortunately, our governments (and much of the economics profession, sadly) are stuck in gold-standard type thinking, which needlessly continues to place the same deflationary pressures on the economy as the gold standard itself did (although thankfully not as severely for various reasons). And the Eurozone! Don't get me started on the Eurozone! They were so stuck in gold-standard type thinking that they effectively created a gold-standard like monetary system. The results speak for themselves.
Sanky Panky
Banned
Yeah unfortunately Black Mamba didn't respond in that last instance, where I highlighted that he himself does not understand Keynes... or the history of the world. I may sound fanatical because the idea that a lot of what we see today is the direct effect of a concentrarion of financial power in the 1800's, although 100% factual, is hard to imagine for those that stop reading after Intermediate macro.
TheHeretic
Banned
I don't care about the gold standard. The mechanics of what you are advocating don't work. There isn't a reserve bank in the world that agrees with your ideas for exactly the reason I just described. Money issues are too inflationary to finance deficits, so they use bonds instead. You are doing economic ju jitsu to dodge simple questions about how this actually works.
brucewaynegretzky
Member
I'm not sure that this isn't regularly changed by the house... There are lots of rules that give authority to party leadership to control what is on the floor.
Snowman Prophet of Doom
Member
I can't control whether or not you get gratification from being maverick-y, but it's not that hard to see when someone is simply cramming the world into a mold they've already decided it fits. That you accuse EV of the same while failing to recognize it in yourself is, I assure you, something that probably does not go unnoticed by most.
Well, then you guys should be buddies, considering you don't seem to understand what implications a gold standard has for the general population.
Sanky Panky
Banned
Obviously, central bankers in the world don't understand how money works... according to people like EV.
Indeed we are here to argue about our own molded views, but I have facts and history, and people like EV have hypotheticals. That is what it comes down to.
theprodigy
Member
brucewaynegretzky
Member
Ok... I missed some context here before, but EV, even you have to agree that in the short term, practical world if the Fed simply decided to put more currency into circulation just to cover obligations on a default on Thursday, then we'd see some pretty massive inflation pretty quickly without immediate changes to the tax system as well, no?
This all also ignores statutory authority of the Treasury to do that, which I have no clue whatsoever as to how far that extends, and whether or not they could come up with some sort of legal justification.
This all also ignores statutory authority of the Treasury to do that, which I have no clue whatsoever as to how far that extends, and whether or not they could come up with some sort of legal justification.
Yeah I read about this; it's just plain horrible. This was a premeditated shutdown through and through. I'm not even sure how a rule like this would be allowed to stand. It serves no purpose except for being obstructionist to the running of the government.
There really needs to be reforms in how the senate operates after all this is over. This shutdown doesn't help our country and shouldn't be allowed to continue just because a minority in the House aren't getting their way. That's not democracy.
brucewaynegretzky
Member
Ummm.... that was in the House, a body which has a long tradition of majority party rule.
empty vessel
Member
This is ironic, because I am the only one talking about the actual mechanics of government spending here. When the Treasury (the government) sells a bond to the private sector, and the Fed (the government) eventually buys it back from the public sector, what is the difference between that and the Treasury selling a bond directly to the Fed? Answer: nothing, except some interest has been paid out to the private sector (inflationary). What does it mean for the Treasury to borrow directly from the Fed? In other words, what does it mean for the government to borrow from itself? Answer: nothing, in real terms. This is the government "printing" money.
Did you know that from 1914 to 1935 the law actually allowed the Treasury to "borrow" directly from the Fed? The then-Chairman of the Federal Reserve, Marriner Eccles, testified to Congress in 1947 urging it to revert to allowing the Treasury to "borrow" directly from the Fed:
Mr. SPENCE. I assume the reason the authority [for the Treasury to borrow directly from the Federal Reserve] was repealed in 1935 was because of the existing conditions, then, when there was no reason for the authority: is that correct?
Mr. ECCLES. Well, as I remember the discussion—and I have referred to it in this statement—there was a feeling that this left the door wide open to the Government to borrow directly from the Federal Reserve bank all that was necessary to finance the Government deficit, and that took off any restraint toward getting a balanced budget.
Of course, in my opinion, that really had no relationship to budgetary deficits, for the reason that it is the Congress which decides on the deficits or the surpluses, and not the Treasury. If Congress appropriates more money than Congress levies taxes to pay, then, there is naturally a deficit, and the Treasury is obligated to borrow. The fact that they cannot go directly to the Federal Reserve bank to borrow does not mean that they cannot go indirectly to the Federal Reserve bank, for the very reason that there is no limit to the amount that the Federal Reserve System can buy in the market. That is the way the war was financed.
Therefore, if the Treasury has to finance a heavy deficit, the Reserve System creates the condition in the money market to enable the borrowing to be done, so that, in effect, the Reserve System indirectly finances the Treasury through the money market, and that is how the interest rates were stabilized as they were during the war, and as they will have to continue to be in the future. So it is an illusion to think that to eliminate or to restrict the direct borrowing privilege reduces the amount of deficit financing. Or that the market controls the interest rate. Neither is true.
Mr. ECCLES. Well, as I remember the discussion—and I have referred to it in this statement—there was a feeling that this left the door wide open to the Government to borrow directly from the Federal Reserve bank all that was necessary to finance the Government deficit, and that took off any restraint toward getting a balanced budget.
Of course, in my opinion, that really had no relationship to budgetary deficits, for the reason that it is the Congress which decides on the deficits or the surpluses, and not the Treasury. If Congress appropriates more money than Congress levies taxes to pay, then, there is naturally a deficit, and the Treasury is obligated to borrow. The fact that they cannot go directly to the Federal Reserve bank to borrow does not mean that they cannot go indirectly to the Federal Reserve bank, for the very reason that there is no limit to the amount that the Federal Reserve System can buy in the market. That is the way the war was financed.
Therefore, if the Treasury has to finance a heavy deficit, the Reserve System creates the condition in the money market to enable the borrowing to be done, so that, in effect, the Reserve System indirectly finances the Treasury through the money market, and that is how the interest rates were stabilized as they were during the war, and as they will have to continue to be in the future. So it is an illusion to think that to eliminate or to restrict the direct borrowing privilege reduces the amount of deficit financing. Or that the market controls the interest rate. Neither is true.
http://fraser.stlouisfed.org/docs/historical/house/1947hr_directpurchgov.pdf
Or how about this, in 1945, from a then-Federal Chairman of the Federal Reserve Bank of New York:
Final freedom from the domestic money market exists for every sovereign national state where there exists an institution which functions in the manner of a modern central bank, and whose currency is not convertible into gold or into some other commodity.
The United States is a national state which has a central banking system, the Federal Reserve System, and whose currency, for domestic purposes, is not convertible into any commodity. It follows that our Federal Government has final freedom from the money market in meeting its financial requirements.
The United States is a national state which has a central banking system, the Federal Reserve System, and whose currency, for domestic purposes, is not convertible into any commodity. It follows that our Federal Government has final freedom from the money market in meeting its financial requirements.
http://home.hiwaay.net/~becraft/RUMLTAXES.html
If it follows that there is no difference between the Treasury selling a bond to the private sector and directly "borrowing" from the Fed, then it follows that there is no difference between the Treasury directly borrowing from the Fed and the Congress passing a law requiring the Fed simply to credit the Treasury's account for any spending in excess of tax revenues. These are all equivalent actions. The only difference is that when the law requires the Treasury to use the private sector as a middle man, interest gets paid out to the private sector that is needless spending. That is why bond sales are actually more inflationary than "printing" money. Bond sales are just an independent spending program that the government operates for the benefit of investors.
TheHeretic
Banned
Again, why are you making this so complicated. Let's keep it simple and forget about m1, m2, m3 and stick to the mechanics of Government debt. The US Government has a $100 deficit (brave new world of US budgets!). In the bond scenario, an investor buys the bond, taking $100 out of the economy and putting it in the Governments pocket. The Government spends this, putting the $100 back into the economy - note the amount of cash in the economy hasn't changed. What has changed is that bond, but that bond isn't as liquid as cash, it can't be used to buy goods and services directly, hence it's less inflationary than cash.
What you want to do is allow the Government to just spend the $100, after all the Government controls it's own currency. That $100 goes directly into the economy. What you haven't explained is how the bond is just as inflationary as cash, because that's what we are supposed to believe for your financing ideas to work.
AstroNut325
Member
Is the only hope for reversing this BS is when democrats have majority of the house?
Removing the ability to have any congress person bring a bill to vote is outright obstructionist. This can't be constitutional.
Coriolanus
Banned
Your understanding of inflation is... interesting.
You believe in supply-side economics, don't you?
Additionally, weren't you complaining that EVs views were too simple just a second ago? And now too complex? wut?
Baraka in the White House
2-Terms of Kombat
Oh he's been on a roll lately.
TheHeretic
Banned
No, this doesn't have anything to do with supply side economics?
Aren't you leaving out the payment of a return on the bond? Inflation.
Otherwise your're advocating for the Fed to borrow directly from the treasury.
TheHeretic
Banned
Assuming it isn't paid via taxes it is inflationary.
Snowman Prophet of Doom
Member
If the government has already spent the $100 from the bond, and then has to pay out on the bond (plus interest), then it is, at that point, $200+ in debt. Money has been created. The only difference between this and simply printing money for the $100 is that selling bonds creates that money later while also putting some of it in the bank account of the bond holders. This tack makes sense when your money is tied to something finite, like gold, but if the currency is fiat, it doesn't really make sense that printing money now, rather later, is fundamentally more harmful, especially is that money is put toward increasing the quality of life and availability of resources, which will act to counterbalance the effects of whatever inflation might occur as a result of the money being printed.
TheHeretic
Banned
Bingo. It's trading inflation now for later. What we can do when that bond expires is issue another bond, or run a surplus and finance it that way. Remember these bonds are very long. The goal here is to finance the Government whilst holding a steady inflation rate, and that's how it's achieved. And that's why every Government in the world does it this way and not through issuing money.
Of the last hundred posts in this thread, 57 are only and explicitly about modern monetary theory (or, I guess, about the personalities of the posters discussing modern monetary theory).
I reiterate my call for an MMT | OT. We can print as many posts as required to support it.
I reiterate my call for an MMT | OT. We can print as many posts as required to support it.
RustyNails
Member
I just heard on Fareed Zakaria that Peru is the #1 producer of counterfeit US dollars. Something like 95% of all the fake money in US is from Peru.
My immediate reaction was that it must be someone from this thread.
My immediate reaction was that it must be someone from this thread.
empty vessel
Member
This is incorrect, because you are not accounting for all of the government operations. Consider that the government has a deficit of $100. The law requires that it “borrow” this $100 from the private sector by selling a bond. So the government exchanges a bond for $100. It has removed $100 from the private sector, and the Federal Reserve credits the Treasury's account for $100. The Treasury then turns around and immediately puts $100 back into circulation by spending $100. But these are not the only government operations ongoing. The Federal Reserve buys bonds held by the private sector. What does that look like? When the Federal Reserve buys a bond, it credits the owner’s bank account using keystrokes (what you call “printing money”
. So the Treasury has re-spent the $100 it “borrowed” and then the Fed turns around and buys back the bond paying something more than $100 (to compensate the owner for the interest). There is, right now, more than $100 of additional money circulating. In short, the bond the Treasury sells is immediately worth more than $100. So it is adding more than $100 of net financial assets to the economy at the moment it sells the bond.Now consider an example in which the law directs the Federal Reserve simply to credit the Treasury’s account instead of requiring the Treasury to sell bonds to the private sector. The government has a deficit of $100. The Federal Reserve notices the deficit, and hits a keystroke giving the Treasury exactly $100. The Treasury spends $100. There is exactly, right now, $100 of additional money circulating and no more.
As you can see, the former is more inflationary than the latter. The reason is obvious. Selling bonds requires payment of interest, and when the Fed buys those bonds back (thus “indirectly” financing the government deficit in the words of Eccles), the Fed has to compensate for the bond’s value that includes the interest due. An arrangement in which the Fed simply credits the Treasury’s account does not require this, because there is no middle man who has to be paid off.
Keep in mind that a bond is really just another kind of fiat currency. A bond is an interest-bearing dollar. This is why the moment that the Treasury sells a bond, the net financial assets of the private sector increase and why it is always Treasury spending (whether of US dollars or bonds) that is the event (and the only event) that in fact adds net dollar-denominated financial assets to the economy. When the Fed buys the bond back, it is really just swapping non-interest bearing dollars for interest bearing dollars, and the net financial assets in the private sector remain unchanged.
That would be nice but I don't understand how one avoids discussion about the monetary system in subjects to which it is relevant. In other words, any time discussion of deficits, debts, and the creditworthiness of the US is being discussed, an accurate understanding of the monetary system (and the implications of it) is required to have meaningful conversation about it. I don't really consider this kind of discussion an MMT discussion so much as a discussion about the real world as it exists.
TheHeretic
Banned
I agree reserve banks buy securities (well its a fact), but that has nothing to do with my example. My example was a Government financing a deficit - why would that hypothetical reserve need to buy its same bond back that year? The objective was to finance $100 for the yearly budget, which we did. You've palmed a card in for no good reason.
Snowman Prophet of Doom
Member
Whether the $100 is paid back that year or in the future, there is more than $100 in money created over time vs. $100 created now.
This seems very much like the debate re: food stamp debit cards vs. direct cash stimulus to poor families; that is, in trying to establish control, there may be inefficiencies created that we don't realize. Again, I'm not an MMT devotee, but I see and understand their points, though my main objection is I don't see government ever being efficient or honest enough to print ONLY as much money as is needed and to distribute said money in a non-corrupt way.
TheHeretic
Banned
The difference is cash vs bonds and their effect on the velocity of money. We are talking about inflation, demand is a part of inflation. Yes the bond plus payments has a greater value than the cash itself, but securities are not money.
SouthernDragon
Member
I'd just like to take a minute and point out that the conversation thus far is one of the reasons I like GAF so much. Reasoned discussion between two (or more!) members that strongly disagree with each other. Neither vantage point falls along the traditional D-R axis, either.
- Status