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That could be ended quickly with taxes. Inflation is a political act, every time. It can never happen by people spending too much money because da guberment has the power to tax.
The power of the government to tax is the amount of mo0ney in the economy. When a government tries to spend more money than can be taken out of an economy with taxes and they have the power to print money you get hyper inflation. If you don't believe me look at what would be required to balance the budget from here. Just about doubling the taxes if you don't cut spending. What would that do to the economy? With doubling the Federal taxes to economy would contract strongly. Then to balance the budget you would need even more taxes and you would get an even smaller economy. If people stop buying our debt we have the choice of cutting spending or printing the money. Now if the government prints the money and doesn't spend it but gives it to everyone then the economy grows. Then you can increase the tax base to run the government. But if the government tries to spend the money then the value goes down (Inflation is too high) but the economy doesn't grow fast enough to support a high enough tax base to run the government. You can't print money fast enough to run a government. Everyone that has tried has failed.
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Originally Posted by gwynedd1
Goverments who have no taxing power resort to printing, often in their death rattle. Its basically the easiest tax to raise. The problem is when it becomes excessive it destroys the medium of exchange and real liquidity.
Ultimately its very simple. Of the 3 choices built into the system, da guberment debt is the most innocuous. However as I said, there is no debt, its just money created as debt.
And the problem lies in when that money starts to move, when people decide that they want to exchange there “money” for something of real value. The price of oil will go through the roof. The same with the price of food, iron, aluminum, anything that is tangible and real. You could go to work tomorrow and come home and not have enough money in your retirement account to buy a tank of gas with. OK it would probably take longer than that but not by much.
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Originally Posted by gwynedd1
Da guberment does not borrow, they print money with a banking facade. Since we always must have debt which is to be preferred? I certainly do not want to create money by taking on debt.
If you want more money then all you have to do is to put in the bank. Saving money in banks grows the money supply just like more government debt does. It does it better. As it also tends to balance trade.
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Originally Posted by gwynedd1
We don't even need to promote it. If someone in bf Egypt doesn't trust his own currency and chooses to use dollars, all that money will leave the US. So if there is a $100 and $10 leaves to circulate, then we will have a depression domestically because only $90 remains. Its pure market forces. So then trade deficits happen as a matter of course by market forces. Its economic gravity. However it is also an opportunity for abuse.
The savings rate has a lot to do with balance of trade. If $10 leaves to BFE because they want something of value then we just need to put $1 in the bank to make up for it. (The $1 turns into $10.) We need a higher savings rate.
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Originally Posted by gwynedd1
We did that before we had the world's reserve currency. People just take the money around the world, and it never makes it back here. We can never sell without a buyer.
If we put more money in the banks (and credit unions my personal preference) than is demanded by the need for domestic debt creation then we export debt not cash and we export goods not dollars. We have to loan people the money to buy our goods just as they are loaning us the money to buy their goods now. That takes savings in banks.
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Originally Posted by gwynedd1
Agreed, but that is essentially the bankster TARP plan. Its a plan to get Americans to borrow to get the economy moving again. Of course the plan is ridiculous.
I am tired of repeating myself like a broken record. If you get a raise from $7 an hour to $ 30 an hour you can take on a lot more debt, you can also save a lot more money, and you can pay more taxes.
If you want Americans to borrow more money you need to give them a raise. This is the fundamental flaw in the economics of outsourcing. Less income in America ,means less ability to borrow more money, means economic contraction.
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Originally Posted by gwynedd1
The Fed is the buyer of last resort. The FED is obligated to buy treasuries and does so with an infinite supply of notes. That is exactly what you want during the liquidity problem. If people buy the debt, they take dollars already in the economy to buy them. No new money is created. You want the FED to put it on its balance sheet using this system. When da guberment runs deficits and the Fed buys bonds you will have inflation. When the deficit is to create a tax holiday, it would create wage inflation.
We are back to where we started. A tax holiday doesn't put money into the bottom end very effectively. Upping the minimum wage does. We need to push the median income higher. The top end pays more in taxes than the bottom end does. A tax holiday does more for wealth transfer from the middle and bottom end to the top end. This does bad things for the economy.
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Originally Posted by gwynedd1
In this system the debt is the entire money supply. If da guberment does not go into debt, than only consumers and business can go into debt and create new money with interest. We must run deficits and drive up the national debt at all costs if we intend to use the Fed system. The Fed loans don't cost us anything BTW. All profits are returned to the treasury. Its phony baloney debt.
No we don't. Here is a metaphor for you. If you plant grain you take one unit of grain plant it and it turns into 20 units of grain. The Greeks in antiquity collected taxes in grain. If you do hard work you can create money when you turn your work into cash. You can take the value of your labor and leverage it.
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Originally Posted by gwynedd1
But da guberment debt is the money. I think you are still missing that there is essentially no difference fundamentally. Da guberment can create endless debt and the Fed is obligated to buy it. Its like children who got candy IOUs from their parents. They can trade toys or earn them from each other doing another's chores, etc. However if the parents give them the ice cream and pay off the IOU, the whole economy is ruined.
Nice metaphor. As I said the coins in your pocket are used to pay off the bills in your pocket with. Back in 2007 we were only using $800 billion out of how many trillion of those IOUs for dollars? We could pay off 90% of the national debt before we got into trouble with not having enough debt to trade as dollars. The problem isn't the number of units of exchange the problem is the units of exchange aren't moving. The money has moved from the US to China, etc. it needs to flow the other direction. The money has flowed from the middle class to the rich, it needs to flow the other way.
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Originally Posted by gwynedd1
Again its just a non interest bearing government security vs an interest bearing one. It is more intuitive for the average person I will grant you that.
Did you read what else I wrote?
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Originally Posted by gwynedd1
Again this is no obligation. Its market forces that create Tiffin's dilemma.
How good are you at manipulation and control? If we were to create a national savings rate in banks of 20% of GDP then we would have more exports than imports. Tiffin's dilemma be (blocked by a large earthen embankment). How you do this is you pass a flat tax that you can get a 100% return on if you buy a CD in banks or credit union that matures when you are between the ages of 65 and 70. Then how you keep the economy from contracting is you print money and give it to everyone to spend. The market forces don't support that high of a savings rate. But our actions aren't limited by market forces.
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Originally Posted by gwynedd1
The way out is da guberment debt by design. That was the whole framework of Keynesian economics. People don't really understand it because they don't realize that we have an IOU, debt based money supply where all money is debt. Almost was an MBA...I am an MBA drop out and changed to CS. I decided I wanted to work for a living....
1% of the money in circulation is debt free. It is the coins in your pocket. We can mint some more. We don't have to have an ever expanding debt bubble. We can't have an ever expanding debt bubble. The cost of keeping it growing ends up collapsing the economy.
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Originally Posted by gwynedd1
da guberment debt is effectively debt free money. It is especially so when citizens purchase it because its owed to self. I think your misunderstanding is about the role of the FED.
The Fed will return about $45 billion to the U.S. Treasury for 2009, according to calculations by The Washington Post based on public documents. That reflects the highest earnings in the 96-year history of the central bank. The Fed, unlike most government agencies, funds itself from its own operations and returns its profits to the Treasury.
Many people bark up the wrong tree. The liquidity trap is the privately created money at interest from banks. The scam is not at the Federal Reserve but rather the member banks. Other than treasury created currency the national debt must expand like any money supply. If we don't want to have increasing debt, than we cannot use it as money. The problem was the deficit was used to give money to banks so it never made it to the real economy.
Up the minimum wage and it will leak into the real economy.
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Originally Posted by gwynedd1
Though I think you can see how useful this is. The commercial banks have the American populace angry, and yet because most people think we need to pay off the debt, the bank trust has them all acting against their own interest. They have no problem with the system locked up as it is. Zero interest is free money for the banks and they can go on local and international buying sprees. Welcome to Japan.
This is how supply side economics makes the rich richer at the middle's expense. You give the rich a tax brake, they then borrow money at 0% interest rate to loan to the government at what ever interest rate and keep the interest as income. Instead of paying taxes they loan the government what was their tax obligation with the expectation of getting it back with interest. Do you see the flaw with this long term? Your tax holiday that you are advocating is doing this for everyone. If we all get our tax money back with interest where does it come from? Someone somewhere has to give the government the money to spend on giving us our money back.
You are familiar with the term Ponzi? Keynesian economics is a Ponzi scheme.
The interest on the national debt is a tax on the poor by the rich.
The power of the government to tax is the amount of mo0ney in the economy. When a government tries to spend more money than can be taken out of an economy with taxes and they have the power to print money you get hyper inflation. If you don't believe me look at what would be required to balance the budget from here. Just about doubling the taxes if you don't cut spending. What would that do to the economy? With doubling the Federal taxes to economy would contract strongly. Then to balance the budget you would need even more taxes and you would get an even smaller economy. If people stop buying our debt we have the choice of cutting spending or printing the money.
Now if the government prints the money and doesn't spend it but gives it to everyone then the economy grows. Then you can increase the tax base to run the government.
That is precisely what should be done.
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But if the government tries to spend the money then the value goes down (Inflation is too high) but the economy doesn't grow fast enough to support a high enough tax base to run the government. You can't print money fast enough to run a government. Everyone that has tried has failed.
In an inflationary environment what I propose would be a disaster. You don't run budget deficits during inflation. I do not suggest more spending. What I suggest is running running a large budget deficit by suspending all payroll taxes as a start.That is how interest free money is created in this system.
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And the problem lies in when that money starts to move, when people decide that they want to exchange there “money†for something of real value. The price of oil will go through the roof. The same with the price of food, iron, aluminum, anything that is tangible and real. You could go to work tomorrow and come home and not have enough money in your retirement account to buy a tank of gas with. OK it would probably take longer than that but not by much.
Raising interest rates would end speculation and money creation from the private banks. What you end up with is wage inflation and asset disinflation.
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If you want more money then all you have to do is to put in the bank. Saving money in banks grows the money supply just like more government debt does. It does it better. As it also tends to balance trade.
No way in hell with the fractional reserve system. Deposits in banks just become bank money printing at interest. I am genuinely confused at your position. You clearly realize that the treasury could just create money and pay off the debt and seem to have a genuine grasp of the system. However they are not doing that. In this environment all money is created as debt. Just take the next step and realize that the entire money supply is debt. Every time you pay down debt money is destroyed. My choice is public debt which is interest free or bank created debt where we pay interest on things like mortgages. There is little difference between treasury created money or treasury created bonds.
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The savings rate has a lot to do with balance of trade. If $10 leaves to BFE because they want something of value then we just need to put $1 in the bank to make up for it. (The $1 turns into $10.) We need a higher savings rate.
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If we put more money in the banks (and credit unions my personal preference) than is demanded by the need for domestic debt creation then we export debt not cash and we export goods not dollars. We have to loan people the money to buy our goods just as they are loaning us the money to buy their goods now. That takes savings in banks.
It can't happen wages will dry up. Money will flow out of the country and cause deflation. Triffins dilemma...
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I am tired of repeating myself like a broken record. If you get a raise from $7 an hour to $ 30 an hour you can take on a lot more debt, you can also save a lot more money, and you can pay more taxes.
But you need to print money. The way we print money in this country, unless we change it, is with deficits and a growing public debt. I also feel like a broken record all money begins as debt.
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If you want Americans to borrow more money you need to give them a raise. This is the fundamental flaw in the economics of outsourcing. Less income in America ,means less ability to borrow more money, means economic contraction.
I don't want Americans to borrow more because they have to pay interest to a bank. I want to have a tax holiday and run a large deficit to effectively print money and cause wage inflation.
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We are back to where we started. A tax holiday doesn't put money into the bottom end very effectively. Upping the minimum wage does. We need to push the median income higher. The top end pays more in taxes than the bottom end does. A tax holiday does more for wealth transfer from the middle and bottom end to the top end. This does bad things for the economy.
That is a real argument. Though that is why I picked the SS withholding because it is the most regressive. I'd be fine with a wage subsidy. See, as before you can convince me. I just don't know why you are unaware that public debt serves as the best money supply under the FED system. Yes I'd scrape it if I could.
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No we don't. Here is a metaphor for you. If you plant grain you take one unit of grain plant it and it turns into 20 units of grain. The Greeks in antiquity collected taxes in grain. If you do hard work you can create money when you turn your work into cash. You can take the value of your labor and leverage it.
I am not sure what you mean by no we don't. Our government prints money but it simply takes the form of debt. It can do this because it has real credit form the people and its taxing power. Then the commercial banks take that credit and create copies of it and charge interest on it. I consider all money created by banks to be fraudulent. This is why I like your idea. We should create treasury money to end this facade. If the legal framework exists to create coins then do that.
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Nice metaphor. As I said the coins in your pocket are used to pay off the bills in your pocket with. Back in 2007 we were only using $800 billion out of how many trillion of those IOUs for dollars? We could pay off 90% of the national debt before we got into trouble with not having enough debt to trade as dollars. The problem isn't the number of units of exchange the problem is the units of exchange aren't moving. The money has moved from the US to China, etc. it needs to flow the other direction. The money has flowed from the middle class to the rich, it needs to flow the other way.
Unless we use your coins, we can't pay off the national debt. It would destroy the entire money supply.
Yes indeed the problem is again with the reserve currency status of the dollar. This flow was created, and now China has created a mercantilism economy. The few that benefit from this in China don't want to give this up. So they buy treasuries. This in turn does not put Americans to work producing anything. They use Chinese slave labor that has their buying power constantly siphoned off buying US treasuries.
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Did you read what else I wrote?
How good are you at manipulation and control? If we were to create a national savings rate in banks of 20% of GDP then we would have more exports than imports. Tiffin's dilemma be (blocked by a large earthen embankment). How you do this is you pass a flat tax that you can get a 100% return on if you buy a CD in banks or credit union that matures when you are between the ages of 65 and 70. Then how you keep the economy from contracting is you print money and give it to everyone to spend. The market forces don't support that high of a savings rate. But our actions aren't limited by market forces.
You stop Triffin's dilemma I figure with capital controls. Otherwise I think the rest of the world out saves us and gives us cheap credit. Though I think I know what would happen rather than savings. Many would pay off their debt.
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1% of the money in circulation is debt free. It is the coins in your pocket. We can mint some more. We don't have to have an ever expanding debt bubble. We can't have an ever expanding debt bubble. The cost of keeping it growing ends up collapsing the economy.
Actually we can and should. Without slight inflation then the hoarding dilemma becomes the problem.Again, there is no da guberment debt. Its our money supply. Without a national debt no money would exist except perhaps for those coins as you did indeed pint out to me.
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Up the minimum wage and it will leak into the real economy.
This is how supply side economics makes the rich richer at the middles expense. You give the rich a tax brake, they then borrow money at 0% interest rate to loan to the government at what ever interest rate and keep the interest as income. Instead of paying taxes they loan the government what was their tax obligation with the expectation of getting it back with interest. Do you see the flaw with this long term? Your tax holiday that you are advocating is doing this for everyone. If we all get our tax money back with interest where does it come from? Someone somewhere has to give the government the money to spend on giving us our money back.
I am only looking to not tax labor in this case. Though I would certainly like your idea.
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You are familiar with the term Ponzi? Keynesian economics is a Ponzi scheme.
I thought it was nonsense too until I discovered that our money is debt.
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The interest on the national debt is a tax on the poor by the rich.
I agree its worse than just creating currency. However I like it better than mortgages. The only reason this is the case is that the poor don't have enough money to invest.
In an inflationary environment what I propose would be a disaster. You don't run budget deficits during inflation. I do not suggest more spending. What I suggest is running running a large budget deficit by suspending all payroll taxes as a start. That is how interest free money is created in this system.
A 45% deficit isn't big enough? We have wage deflation by outsourcing. The problem isn't the creation of new money. The problem is that we are saturated with debt. We don't have room to take on more debt. We wont have economic growth until we have room for more debt. A temporary tax holiday doesn't create permanent wage inflation faster than new debt creation. If you want wages to go up faster than debt then try the minimum wage law.
We are set up for a commodity bubble. Sell your T-bills to the Fed for cash. Buy oil, corn, wheat, copper, steel, etc. with that cash at face value (no leverage). Dump 10% of the national debt into the commodities market in a short amount of time and look at what happens. Hyper inflation is not normal inflation gone fast it is a loss of faith in the currency and the desire to trade the currency for something of real value. The Euro is being trade for USD. But the USD is just as worthless as the Euro is. We both have too much debt.
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Originally Posted by gwynedd1
Raising interest rates would end speculation and money creation from the private banks. What you end up with is wage inflation and asset disinflation.
Asset deflation drive wages lower. You don't need to borrow money to run hyper inflation. Hyper inflation is done with cash not credit. Pump 10% of the national debt into the commodities market in a short amount of time as cash and you get a loss of faith in the dollar. If you buy oil from someone with cash then they have to do something with the cash. If T-bills are going down and oil is going up then what are they going to be doing with their cash? Buying corn? Iron? Aluminum? Do you remember the day back in 1987 that the Dow went down by 20%? Try that with T-bills. But with the Fed buying those T-bills with cash.
We need to do something to restore faith in the system. Balancing the budget does that. Taking steps to do that is also good.
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Originally Posted by gwynedd1
No way in hell with the fractional reserve system. Deposits in banks just become bank money printing at interest.
But they have implications in balance of trade.
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Originally Posted by gwynedd1
I am genuinely confused at your position.
No doubt that you are. Look at the failure modes. Turing the T-bills into cash, violent revolution, the brake down of the electronic transfer of funds. We need to keep the banks functional. We need full employment. And we need people to believe that dollars are as good as gold. Or at least better than anything else out there.
In order to keep the banks functional we need the dollar value of loans to be going up. But in order for the economy to be functional we need the amount of debt as percent of GDP to be going down. We need to cut the amount of debt as percent of GDP in more than half but at least by 1/3 would be better than nothing.
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Originally Posted by gwynedd1
You clearly realize that the treasury could just create money and pay off the debt and seem to have a genuine grasp of the system. However they are not doing that. In this environment all money is created as debt. Just take the next step and realize that the entire money supply is debt. Every time you pay down debt money is destroyed.
Yes and we need less debt because the cost of the current debt is to high but we can't write off or pay down the debt as this deflates the economy. So wage price inflation faster than debt creation. Up the minimum wage to $30 per hr.
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Originally Posted by gwynedd1
My choice is public debt which is interest free or bank created debt where we pay interest on things like mortgages. There is little difference between treasury created money or treasury created bonds.
The problem with public debt is when it starts to move. Greece is getting ready to pay $0.50 on the dollar for their debt. Our economy is structured the same way as theirs is. But if people lose faith in the US economy they lose faith in the USD and they will want to trade their T-bill for something of real value. Do you really want to play with hyper inflation?
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Originally Posted by gwynedd1
It can't happen wages will dry up. Money will flow out of the country and cause deflation. Triffins dilemma...
Lets see, I print money give it to you to spend. You spend it, you save it, you pay your debts with it. I up the minimum wage. You have more money to spend. I enforce a high savings rate. I take your money and say that you can have it back only if you buy a certain class of Certificate of Deposit. If I print enough money foreign people wont want any more of it. This brakes Triffin's dilemma.
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Originally Posted by gwynedd1
But you need to print money. The way we print money in this country, unless we change it, is with deficits and a growing public debt. I also feel like a broken record all money begins as debt.
Ya I'm sorry sometimes I forget to repeat all of the broken record. We need to print money and give to the people not the banks. The prople have too much debt and not enough cash.
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Originally Posted by gwynedd1
I don't want Americans to borrow more because they have to pay interest to a bank. I want to have a tax holiday and run a large deficit to effectively print money and cause wage inflation.
So the rich can borrow money at 0.25% and loan it to the government and when the taxes are collected they get the interest on the national debt taken from those that work for a living? Ya I'm all for that one two. (Not)
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Originally Posted by gwynedd1
That is a real argument. Though that is why I picked the SS withholding because it is the most regressive. I'd be fine with a wage subsidy. See, as before you can convince me. I just don't know why you are unaware that public debt serves as the best money supply under the FED system. Yes I'd scrape it if I could.
Again it is not big enough and it is temporary. You can't get a house loan based on the tax holiday. You can based on a bump in the minimum wage. We need debt to go up in dollar amounts, we need debt to go down as a percent of GDP. We need to restructure the nation's total debt. Grow the debt a small amount in dollar terms and grow the economy a large percent in inflation. 2X on the economy by inflation without much increase at all in debt small positive increase.
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Originally Posted by gwynedd1
I am not sure what you mean by no we don't.
any thing done at all costs isn't worth the cost. We do not need to run up the national debt one dollar more than it is now.
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Originally Posted by gwynedd1
Our government prints money but it simply takes the form of debt. It can do this because it has real credit form the people and its taxing power.
Greece can't tax enough to cover the obligations it has. We can't do that as well. The power to tax is limited by what the economy will bear. T-bills are junk bonds. We need to devalue them by 50%. If we don't we will devalue them by 100%.
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Originally Posted by gwynedd1
Then the commercial banks take that credit and create copies of it and charge interest on it. I consider all money created by banks to be fraudulent. This is why I like your idea. We should create treasury money to end this facade. If the legal framework exists to create coins then do that.
At $2,074 an oz. The old $20 gold coin would be worth $2k, the old $10 gold coin would be worth $1k. The coin laws predate the establishment of the fed.
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Originally Posted by gwynedd1
Unless we use your coins, we can't pay off the national debt. It would destroy the entire money supply.
Part of the national debt is in the form of T-bills part in the form of cash. We can repay the part that is in T-bills, if you want to repay the rest then you can use coins to do it.
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Originally Posted by gwynedd1
Yes indeed the problem is again with the reserve currency status of the dollar. This flow was created, and now China has created a mercantilism economy. The few that benefit from this in China don't want to give this up. So they buy treasuries. This in turn does not put Americans to work producing anything. They use Chinese slave labor that has their buying power constantly siphoned off buying US treasuries.
The supply of treasuries isn't enough they are buying US consumer debt as well. In order for this system to be sustainable long term our job needs to be the consumption of their labor. They need to be paying us to buy their goods. What they are doing is loaning us money to buy their goods with. If we want this system to keep going we need to be printing money and giving it to people to spend. They can then buy the goods that are being made for their consumption and it will keep going indefinitely. Well not really.
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Originally Posted by gwynedd1
You stop Triffin's dilemma I figure with capital controls. Otherwise I think the rest of the world out saves us and gives us cheap credit. Though I think I know what would happen rather than savings. Many would pay off their debt.
You stop Triffin's dilemma by out saving the rest of the world. Enforced savings you take their money and the only thing they can get it back for is the purchase of CDs
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Originally Posted by gwynedd1
Actually we can and should.
There are two ways to measure debt on is in dollar amounts the other is in percent of GDP. In dollar amounts you can keep the debt bubble going. In percent of GDP you need it to be below 150% of GDP. Below 100% of GDP is better.
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Originally Posted by gwynedd1
Without slight inflation then the hoarding dilemma becomes the problem. Again, there is no da guberment debt. Its our money supply. Without a national debt no money would exist except perhaps for those coins as you did indeed pint out to me.
Upping the minimum wage solves the hording dilemma. Deflation and a growing economy. I had an argument that went on for 3 years with someone over this one He said that you could have both but couldn't show how. I said that you couldn’t have both. You can, If you print money and give it to everyone to spend then you can have full employment. You can do this in the face of a collapsing debt bubble.
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Originally Posted by gwynedd1
I am only looking to not tax labor in this case. Though I would certainly like your idea.
If no one pays taxes then the system crashes. From here you can't reduce taxes, you can't cut spending, you can’t keep borrowing more money. (Even tho the new debt is also money.) We are saturated with debt. We need new non-debt based income. The bottom 99.5% work for the top 0.5%. The top 0.5% don't like to pay taxes, the bottom 99.5% don't have the individual resources to lower their taxes (to effectively lobby government) where the top0.5% do.
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Originally Posted by gwynedd1
I thought it was nonsense too until I discovered that our money is debt.
Normally inflation is caused by too much debt. But beyond too much debt comes economic contraction. The Return of Depression Economics was a good read.
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Originally Posted by gwynedd1
I agree its worse than just creating currency. However I like it better than mortgages. The only reason this is the case is that the poor don't have enough money to invest.
There are two kinds of people those that live of of interest and those that don't. The ones that live off of interest tax the ones that don't with the interest on the national debt. I want to repay the national debt to stop this tax.
That is in part why I want to tax the principle on debt. It is a tax that gets the rich more than the poor.
In order to keep the banks functional we need the dollar value of loans to be going up. But in order for the economy to be functional we need the amount of debt as percent of GDP to be going down. We need to cut the amount of debt as percent of GDP in more than half but at least by 1/3 would be better than nothing.
Yes and we need less debt because the cost of the current debt is to high but we can't write off or pay down the debt as this deflates the economy. So wage price inflation faster than debt creation. Up the minimum wage to $30 per hr.
The problem with public debt is when it starts to move. Greece is getting ready to pay $0.50 on the dollar for their debt. Our economy is structured the same way as theirs is. But if people lose faith in the US economy they lose faith in the USD and they will want to trade their T-bill for something of real value. Do you really want to play with hyper inflation?
I think we have a lot of things flying around here and I think we generally agree. So lets just assume that the rest just cascades from that. Perhaps I am complicating it with my mention of using the conventional options. But I believe it is important to mention the conventional options that would fix most of the problems because they are not doing that. It should be obvious to the powers that be, and even within the system they will not fix it.
The solution you suggest is indeed the perfect one. The treasury should create money and give it to the populace especially since we are in a debt liquidity trap.
However Greece is not structured like the US. I can see why we disagree on what American debt really is. Greece owes in euros that is a completely separate entity. Greeks don't trade with Greek debt. It does not have a central bank as a buyer of last resort. That is a real debt. In the US, when the FED buys US debt, its essentially interest free money because its profits are recycled back into the treasury. The real issue is where does the money created by the deficit go? As we agree, it would need to go to wage inflation. That would solve the debt liquidity trap. However as you point out, it still leaves the national debt tax of the debt that is purchased by the banks and the wealthy(in the form of inflation protection). However make no mistake, Greece is in a much more dire situation as was Iceland.
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Lets see, I print money give it to you to spend. You spend it, you
save it, you pay your debts with it. I up the minimum wage. You have more money to spend. I enforce a high savings rate. I take your money and say that you can have it back only if you buy a certain class of Certificate of Deposit. If I print enough money foreign people wont want any more of it. This brakes Triffin's dilemma.
That would help because it would lower interest rates, but so long as the world thinks the US is a safe haven it would still be a problem. You would need a capital control like a tax. That is essentially what Brazil has done to stop the "hot money".
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Ya I'm sorry sometimes I forget to repeat all of the broken record. We need to print money and give to the people not the banks. The prople have too much debt and not enough cash.
So the rich can borrow money at 0.25% and loan it to the government and when the taxes are collected they get the interest on the national debt taken from those that work for a living? Ya I'm all for that one two. (Not)
The buyer would actually take money in the economy to buy the national debt which would essentially keep down interest rates. That would still represent consideration because they are paying cash. I certainly don't like the system, but I believe it would not solve a thing unless we stop fractional reserve lending. They will just pound the $30 minimum wage into the ground again.We need to keep them from making money out of nothing when they "loan", to the public.
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Again it is not big enough and it is temporary. You can't get a house loan based on the tax holiday. You can based on a bump in the minimum wage. We need debt to go up in dollar amounts, we need debt to go down as a percent of GDP. We need to restructure the nation's total debt. Grow the debt a small amount in dollar terms and grow the economy a large percent in inflation. 2X on the economy by inflation without much increase at all in debt small positive increase.
That is OK by me.
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any thing done at all costs isn't worth the cost. We do not need to run up the national debt one dollar more than it is now.
Greece can't tax enough to cover the obligations it has. We can't do that as well. The power to tax is limited by what the economy will bear. T-bills are junk bonds. We need to devalue them by 50%. If we don't we will devalue them by 100%.
Again we do not have the Greek system. They do not have a central bank that lends money to da guberment. We do and any interest made by our central bank is returned to the treasury. Its a debt charade. If the FED buys the bonds, its interest free money which would end the liquidity trap if it actually went into the economy. The problem was they gave it to the banks to loan out. Now if the FED does not cooperate then etc then there is an issue. However my point is they could solve the liquidity trap using conventional means if they wanted to. As I said, the way the US prints money is by running deficits while the FED purchases.
Many monetary reformists fall for the myth that the FED lends money like a regular bank to the da guberment. Its a red herring.
PublicEye.org - The Website of Political Research Associates (http://www.publiceye.org/conspire/flaherty/flaherty4.html - broken link)
Though you do raise an interesting point if it is in the public interest to allow people to purchase national debt. It does allow inflation protection for the rich while the cash holding poor tend to be shut out.
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At $2,074 an oz. The old $20 gold coin would be worth $2k, the old $10 gold coin would be worth $1k. The coin laws predate the establishment of the fed.Part of the national debt is in the form of T-bills part in the form of cash. We can repay the part that is in T-bills, if you want to repay the rest then you can use coins to do it.
As I said, that genius. That and your tax on principle idea would kill the FED with no new constitutional laws .
So I think we agree on the general solution. Where we seem to disagree is on the nature of the national debt. For example, if the Federal reserve owned all of our national debt, it would be no different than printing treasury notes because all the interest is kicked back to the treasury.If there were no fractional reserves then it would represent the entire money supply. Deficits would essentially mean that more money is going out than being taxed back in. In other words deficits would grow the money supply and surpluses would shrink the money supply. Deficits would be the more usual case to slowly grow the money supply.
The solution of minting coins would end that whole facade.
Do you understand the mechanics of hyper inflation? It isn't normal inflation but fast, it is 'I don't want your money give me something of real value instead.' You don't run hyper inflation on debt you run it on cash. U.S. National Debt Clock : Real Time try buying $15 trillion worth of anything today. We have $12 trillion sitting on the sidelines doing nothing in the form of T-bills. Turn those into cash and try to do something with them. You don't need to get a loan just try and spend the cash. You have to treat our debts as real as to default on them is Weimar Republic on steroids.
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Originally Posted by gwynedd1
The solution you suggest is indeed the perfect one.
Thank you.
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Originally Posted by gwynedd1
The treasury should create money and give it to the populace especially since we are in a debt liquidity trap.
That is simply the pain killer to cover the pain of upping the minimum wage far enough to get the debt down to manageable levels.
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Originally Posted by gwynedd1
However Greece is not structured like the US. I can see why we disagree on what American debt really is. Greece owes in euros that is a completely separate entity. Greeks don't trade with Greek debt. It does not have a central bank as a buyer of last resort.
If the fed buys our debt with cash then the value of the cash will drop to zero. Tomorrow if China started to unload T-bills (All of them) then by the day after your retirement fund wouldn't buy a tank of gas.
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Originally Posted by gwynedd1
That is a real debt. In the US, when the FED buys US debt, its essentially interest free money because its profits are recycled back into the treasury. The real issue is where does the money created by the deficit go? As we agree, it would need to go to wage inflation. That would solve the debt liquidity trap. However as you point out, it still leaves the national debt tax of the debt that is purchased by the banks and the wealthy(in the form of inflation protection). However make no mistake, Greece is in a much more dire situation as was Iceland.
Their budget short fall is like ours, there imports to exports is like ours. Their savings rate is like ours. They are two years farther down the road than we are maybe less. That is all.
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Originally Posted by gwynedd1
That would help because it would lower interest rates, but so long as the world thinks the US is a safe haven it would still be a problem. You would need a capital control like a tax. That is essentially what Brazil has done to stop the "hot money".
The printing pres is its own capital control. They print the money to buy our debt with and we print the money to pay it back with. Fare enough? We've got a bigger printing press than they do.
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Originally Posted by gwynedd1
The buyer would actually take money in the economy to buy the national debt which would essentially keep down interest rates.
Carry trade, if you buy debt at 4% higher interest rate than you paid for the money you borrowed you double your money each year with a 20X leverage. How you shut this down is with the tax code. You put in a flat tax on the bottom 99% and a tax on the top end that is a function of the total debt. At 200% of GDP as total debt the top tax rate is functionally 100%, at 0% of GDP it is zero. This would probably solve the Triffin's dilemma as well.
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Originally Posted by gwynedd1
That would still represent consideration because they are paying cash. I certainly don't like the system, but I believe it would not solve a thing unless we stop fractional reserve lending. They will just pound the $30 minimum wage into the ground again. We need to keep them from making money out of nothing when they "loan", to the public.
You set the minimum wage as a function of the top compensation and the price of houses. When the top CEO gets a raise then the minimum wage goes up as well. The ratio of median house price to median household income as well would be fixed. If we start another housing bubble then the minimum wage just turns it into inflation.
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Originally Posted by gwynedd1
That is OK by me.
Again we do not have the Greek system. They do not have a central bank that lends money to da guberment. We do and any interest made by our central bank is returned to the treasury. Its a debt charade. If the FED buys the bonds, its interest free money which would end the liquidity trap if it actually went into the economy. The problem was they gave it to the banks to loan out. Now if the FED does not cooperate then etc then there is an issue. However my point is they could solve the liquidity trap using conventional means if they wanted to. As I said, the way the US prints money is by running deficits while the FED purchases.
Many monetary reformists fall for the myth that the FED lends money like a regular bank to the da guberment. Its a red herring.
PublicEye.org - The Website of Political Research Associates (http://www.publiceye.org/conspire/flaherty/flaherty4.html - broken link)
Though you do raise an interesting point if it is in the public interest to allow people to purchase national debt. It does allow inflation protection for the rich while the cash holding poor tend to be shut out.
More than that if you buy the debt on margin you can make insane profits.
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Originally Posted by gwynedd1
As I said, that genius. That and your tax on principle idea would kill the FED with no new constitutional laws .
So I think we agree on the general solution. Where we seem to disagree is on the nature of the national debt. For example, if the Federal reserve owned all of our national debt, it would be no different than printing treasury notes because all the interest is kicked back to the treasury.If there were no fractional reserves then it would represent the entire money supply. Deficits would essentially mean that more money is going out than being taxed back in. In other words deficits would grow the money supply and surpluses would shrink the money supply. Deficits would be the more usual case to slowly grow the money supply.
The solution of minting coins would end that whole facade.
Thank you. I've been at this one for a bit. And all of this is so that I can get a job at McDonald's. No joke.
Do you understand the mechanics of hyper inflation? It isn't normal inflation but fast, it is 'I don't want your money give me something of real value instead.' You don't run hyper inflation on debt you run it on cash. U.S. National Debt Clock : Real Time try buying $15 trillion worth of anything today. We have $12 trillion sitting on the sidelines doing nothing in the form of T-bills. Turn those into cash and try to do something with them. You don't need to get a loan just try and spend the cash. You have to treat our debts as real as to default on them is Weimar Republic on steroids.
Hi newonecoming2,
Easy does it. You would need to pay off the debt slowly, but for now that is what you want anyway. It has the same effect of turning bonds into money that the FED is doing now only this would be through the treasury. Once inflation shows up, they would need to up reserve requirements to keep moping up money. This is basically what would need to be done to get off the Federal Reserve system anyway.
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Thank you.
You are welcome.
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That is simply the pain killer to cover the pain of upping the minimum wage far enough to get the debt down to manageable levels.
If the fed buys our debt with cash then the value of the cash will drop to zero. Tomorrow if China started to unload T-bills (All of them) then by the day after your retirement fund wouldn't buy a tank of gas.
Again, same solution as above. You can't just turn it all into money immediately.
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Their budget short fall is like ours, there imports to exports is like ours. Their savings rate is like ours. They are two years farther down the road than we are maybe less. That is all.
Its not. We cannot agree on this. The Lisbon and Maastrict treaties differ significantly from the Federal Reserve system. Greece cannot weaken their currency or create liquidity with their own local currency. Greeks cannot even help Greeks. Its like an island with no medium of exchange. Even worse is that the buying power of the euro when given loans masks any local weakness. They have the same buying power even as they take on debt because its the buying power of Europe when they receive new loans. When the FED buys bonds, it weakens buying power in real time and stops consumption. Prof Micheal Hudson explained this very well. However its inevitable. As you mentioned the more you get into the hinterlands of trading blocks the more scare the currency becomes. Thats the problem with the PIIGS. They are fools to use euros because they are essentially Europe's hinterlands.
What I am talking about is the effects of a run on the dollar. We could see an inflation rate of 1000% a day starting tomorrow if people started dumping T-bills. The repayment of the debt should be done out of taxes collected.
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Originally Posted by gwynedd1
You would need to pay off the debt slowly, but for now that is what you want anyway. It has the same effect of turning bonds into money that the FED is doing now only this would be through the treasury.
The mechanics of switching from fed owned money to government owned money is not what I've been talking about. What I've been talking about is the effects of a loss of faith in the dollar. The tax holiday you proposed mint do this. What I am proposing mint as well because as we stand now we are in deep do do.
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Originally Posted by gwynedd1
Once inflation shows up, they would need to up reserve requirements to keep moping up money. This is basically what would need to be done to get off the Federal Reserve system anyway.
If you print a trillion dollars and up the reserve requirements for the banks by $1 trillion dollars then you get no inflation. Selling bonds and then spending the money does most of the same thing. If you want government spending to cause inflation in a liquidity trap you need to print the money and spend it. We are in very different shape than Japan was and is. We are more like Greece. We have tools they don't but...
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Originally Posted by gwynedd1
You are welcome.
Again, same solution as above. You can't just turn it all into money immediately.
The problem that I was talking about is how to stop this from happening. The Fed will buy up bonds to keep the bond market from crashing. The cash has to go somewhere.
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Originally Posted by gwynedd1
Its not. We cannot agree on this. The Lisbon and Maastrict treaties differ significantly from the Federal Reserve system. Greece cannot weaken their currency or create liquidity
We are having trouble weakening our currency. The liquidity we create runs away to greener pastures.
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Originally Posted by gwynedd1
with their own local currency. Greeks cannot even help Greeks. Its like an island with no medium of exchange. Even worse is that the buying power of the euro when given loans masks any local weakness.
Triffen's dilemma... The mechanics are different but the result is the same.
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Originally Posted by gwynedd1
They have the same buying power even as they take on debt because its the buying power of Europe when they receive new loans. When the FED buys bonds, it weakens buying power in real time and stops consumption.
Unless the carry trade overpowers the fed. This is in refference to the fed upping the interest rates back in what was it 2005 and this not slowing the sub prime lending down.
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Originally Posted by gwynedd1
Prof Micheal Hudson explained this very well. However its inevitable. As you mentioned the more you get into the hinterlands of trading blocks the more scare the currency becomes. Thats the problem with the PIIGS. They are fools to use euros because they are essentially Europe's hinterlands.
Also they didn't have a high enough savings rate. Greece needs a different prime lending rate than Germany does. Set the prime at 1% and then let each country set the tax on debt above this where it is needed.
I am thinking that there needs to be a cash return on savings from the government if they are going to tax debt. Run the ratio at 1:0.75 for ever 1% tax on debt you get a 0.75% return on savings. The exact ratio should be set so that the tax is a net revenue generator but not excessively so. Lots of savings and not much debt get you a low return, lots of debt and not much saving gets you a very high return.
What I am talking about is the effects of a run on the dollar. We could see an inflation rate of 1000% a day starting tomorrow if people started dumping T-bills. The repayment of the debt should be done out of taxes collected.
The mechanics of switching from fed owned money to government owned money is not what I've been talking about. What I've been talking about is the effects of a loss of faith in the dollar. The tax holiday you proposed mint do this.
Hi newonecoming2,
Just to focus on this, faith in the dollar. That is complicated. Is faith dollar strength or dollar stability?
When the money supply shrunk in 2008 we got dollar strength but not dollar stability. They needed to print more of the monetary base to offset the loss in fractional reserve created leverage which would both weaken the dollar but also keep it stable, essential replacing consumer debt with da guberment debt. . Unfortunately they did nothing to change the fundamental problem that nothing went into the real economy.
What is absolutely outrageous is the zero interest rates. This weakens the dollar with no economic benefit of economic output. All it does is flood the world with dollar credit. It would have ended the liquidity trap running deficits while the FED purchased the "debt". Low interest rates are banker tax cuts. Doing both certainly would wreak havoc on the dollar, but a high interest rate would have supported it.
Which stream of dollars will undermine it more? Banks loaning money in the third world or US citizens returning to work with more dollars circulating?
Its real simple really. A tax cut to labor while running a deficit makes new money and places it in the hands of the real economy. Low interest rates is a banker tax cut. Its completely outrageous what is going on and even an MBA trained in vanilla economics should see it.
Anyway as I said in another thread, they essentially want to print money for themselves at no interest to buy things overseas. If their loans fail then they will send in the IMF, World Bank and then finally the US military.
Just to focus on this, faith in the dollar. That is complicated. Is faith dollar strength or dollar stability?
When the money supply shrunk in 2008 we got dollar strength but not dollar stability.
http://boombustblog.com/BoomBustBlog...untrywide.html Just on an aside this article has a graph that shows the home price vs. actual cost of making it. It said that the gap would have to have closed by 50% just to equal the largest spread sense the post US gold rush price cost gap. Increasing the cost of making houses would have been far less destructive to the economy than having the price of houses fall to a place where it was more in line with where things should be.
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Originally Posted by gwynedd1
They needed to print more of the monetary base to offset the loss in fractional reserve created leverage which would both weaken the dollar but also keep it stable, essential replacing consumer debt with da guberment debt. . Unfortunately they did nothing to change the fundamental problem that nothing went into the real economy.
Back in the great depression we did a debt transfer from privet and corporate to public. Just looking at graphs it looked like the peak % of total debt that was government debt was close to 90%. In today's economy that would equate to a government debt of over 300% of GDP. Has any Government ever run that high a debt load? The only way to sustain that kind of debt load is with zero prime forever. Zero prime is economically unsustainable. Loss of faith. We are in an unsustainable position. Option one let the banks fail and write off at least 50% of the total debt in the US (more like 90% of the privet and corporate debt). Option two inflate the economy by at least 200% with a freeze on government spending as you do it. With a freeze on government spending and a 200% inflation in GDP then you have more than doubled our tax base and that means a balanced budget and then we can start repaying the national debt. Government spending is a large part of GDP so in order to get a 200% inflation in GDP you need the non-government spending driven part of the economy to expand farther than 200%. If you want faith in the USD then pick option one or option two, if you don't pick then there is nothing to have faith in.
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Originally Posted by gwynedd1
What is absolutely outrageous is the zero interest rates. This weakens the dollar with no economic benefit of economic output. All it does is flood the world with dollar credit. It would have ended the liquidity trap running deficits while the FED purchased the "debt". Low interest rates are banker tax cuts. Doing both certainly would wreak havoc on the dollar, but a high interest rate would have supported it.
China's peg with the USD. We need to brake it.
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Originally Posted by gwynedd1
Which stream of dollars will undermine it more? Banks loaning money in the third world or US citizens returning to work with more dollars circulating?
Its real simple really. A tax cut to labor while running a deficit makes new money and places it in the hands of the real economy.
But the total debt in the US is to high for it to work like it did in The Great Depression. That option is nonviable.
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Originally Posted by gwynedd1
Low interest rates is a banker tax cut. Its completely outrageous what is going on and even an MBA trained in vanilla economics should see it.
The banks have loaned out more money than can be repaid. They don't want to admit this. They think that they can manipulate the markets well enough to keep reality from catching up with them.
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Originally Posted by gwynedd1
Anyway as I said in another thread, they essentially want to print money for themselves at no interest to buy things overseas. If their loans fail then they will send in the IMF, World Bank and then finally the US military.
I think that what they really want is one world government. Another Great Depression is the perfect excuse, 'See you need us to clean up the mess we made at your request.'
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