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Thread: Explaining Why Federal Deficits Are Needed[W:5330]

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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    Quote Originally Posted by JP Hochbaum View Post
    I think JOhn and David are pretty open minded. The issue I typically see is when people don't actually argue against their points, but they argue against points they aren't making. Ie (unlimited spending, Weimar type inflation, bigger government etc...). And other mythical things like the Lost Decade or a prolonged Depression from government spending, etc....

    I got someone in the other thread to type out that Japan grew at a rate 1% less than the US in the 90's (during a tech boom). And yet they still wouldn't own up to the fact that Japan never had a Lost Decade, even after admitting that it nearly matched the US in growth during a boom period!
    Open minded? In what way is anyone able to change their minds, ever? I have yet to see it. They are as closed minded as you can get. Their lights were turned off long ago. Their only agendas are to convince others that they are right about everything.

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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    Quote Originally Posted by JP Hochbaum View Post
    I think JOhn and David are pretty open minded. The issue I typically see is when people don't actually argue against their points, but they argue against points they aren't making. Ie (unlimited spending, Weimar type inflation, bigger government etc...). And other mythical things like the Lost Decade or a prolonged Depression from government spending, etc....

    I got someone in the other thread to type out that Japan grew at a rate 1% less than the US in the 90's (during a tech boom). And yet they still wouldn't own up to the fact that Japan never had a Lost Decade, even after admitting that it nearly matched the US in growth during a boom period!
    Take away concerns about unlimited spending and Weimar type inflation and David is not saying anything of importance, IMO. Most of us understand that small deficits can be helpful sometimes. Most of us understand that too quickly reducing spending can hurt. I don't think that small deficits are what MMT people are considering.

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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    I'm not an economist, but I'm starting to understand aspects of global trade alot better and how such impacts our national debt and deficit.

    I think the simplest way to explain it is like this:

    Our deficit would really be a problem IF America really didn't produce anything domestically that wasn't in high demand abroad AND we didn't have a surplus of same. Let's take apples, for example. Everyone loves apples. Let's say we grow more apples that can be consumed domestically. What do we do with the surplus? We sell them, of course, to foreign buyers. Here's where things get alittle tricky because the deficit comes into play here.

    Some time ago, someone asked me "What is America's #1 commodity? What exactly do we trade the most? The answer: The U.S. Dollar! It's why there's so much emphasis on keeping it strong AND ensuring that the dollar remains the world's #1 reserve currency.

    So, we trade (sell) U.S. securities (U.S. Treasury Notes/Bonds) to foreign investors (countries), pay the interest on those securities and foreign governments purchase U.S. goods and materials, some of which are used in foreign manufacturing. This list of not only the top 10 U.S. Exports along with a breakdown of what items are purchased from the U.S. by various countries around the world should make this global trade alittle bite more clear. Notice how machinery equipment, cars, medical equipment, aircrafts and spacecrafts, and electronics are on every list for foreign trade.

    Now, that's not to say that the deficit couldn't come back and bite us in the butt. The deficit does matter, but only in the context as to whether or not we can't sell U.S. made products abroad OR we borrow more than we can repay over time. But, using the deficit as a political football is rather foolish. While fair to debate the merits of a trade imbalance, it's foolish to use the deficit as a wedge issue without first understanding whether or not we really do have a glut of U.S. surplus goods we can't get rid of either by domestic consumption or by exporting abroad.
    "A fair exchange ain't no robbery." Tupac Shakur w/Digital Underground

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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    Quote Originally Posted by Eric7216 View Post
    Take away concerns about unlimited spending and Weimar type inflation and David is not saying anything of importance, IMO. Most of us understand that small deficits can be helpful sometimes. Most of us understand that too quickly reducing spending can hurt. I don't think that small deficits are what MMT people are considering.
    The size of the deficit is determined by the size of demand leakages. Federal deficits are there to fill the demand gap.
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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    after the CRAZINESS of this OP, Reagan deserves an apology.

    reagan.jpg


    I am the President

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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    Quote Originally Posted by Objective Voice View Post
    I'm not an economist, but I'm starting to understand aspects of global trade alot better and how such impacts our national debt and deficit.

    I think the simplest way to explain it is like this:

    Our deficit would really be a problem IF America really didn't produce anything domestically that wasn't in high demand abroad AND we didn't have a surplus of same. Let's take apples, for example. Everyone loves apples. Let's say we grow more apples that can be consumed domestically. What do we do with the surplus? We sell them, of course, to foreign buyers. Here's where things get alittle tricky because the deficit comes into play here.

    Some time ago, someone asked me "What is America's #1 commodity? What exactly do we trade the most? The answer: The U.S. Dollar! It's why there's so much emphasis on keeping it strong AND ensuring that the dollar remains the world's #1 reserve currency.

    So, we trade (sell) U.S. securities (U.S. Treasury Notes/Bonds) to foreign investors (countries), pay the interest on those securities and foreign governments purchase U.S. goods and materials, some of which are used in foreign manufacturing. This list of not only the top 10 U.S. Exports along with a breakdown of what items are purchased from the U.S. by various countries around the world should make this global trade alittle bite more clear. Notice how machinery equipment, cars, medical equipment, aircrafts and spacecrafts, and electronics are on every list for foreign trade.

    Now, that's not to say that the deficit couldn't come back and bite us in the butt. The deficit does matter, but only in the context as to whether or not we can't sell U.S. made products abroad OR we borrow more than we can repay over time. But, using the deficit as a political football is rather foolish. While fair to debate the merits of a trade imbalance, it's foolish to use the deficit as a wedge issue without first understanding whether or not we really do have a glut of U.S. surplus goods we can't get rid of either by domestic consumption or by exporting abroad.
    What you says has a lot of truth but again deficit is being used where debt should be used.
    Deficit is revenue/receipts minus spending/outlays. There can and are some receipts from treasury notes and bonds but its a very small slice of the economy. around 4% of total receipts. And as far as spending the whole Dept of Treasury comprises maybe 12% of our spending.

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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    Quote Originally Posted by JohnfrmClevelan View Post
    The Clinton surpluses were followed by a recession. The private sector wasn't overspending; people were playing the stock market, especially dot.com stocks. Those surpluses happened because people were paying taxes on their stock gains; then, the dot-com stocks tanked, because there was no business behind them that could justify their price.
    Clinton only ran surpluses on paper. IntraGovernmental debt rose (money we owe ourselves) vs issuing debt (T-bills and Bonds).
    Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats. It is inaccurate to say that I hate everything. I am strongly in favor of common sense, common honesty, and common decency. This makes me forever ineligible for public office. H.L Mencken

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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    Quote Originally Posted by austrianecon View Post
    Clinton only ran surpluses on paper. IntraGovernmental debt rose (money we owe ourselves) vs issuing debt (T-bills and Bonds).
    What does intragovernmental debt have to do with deficits and surpluses?
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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    Quote Originally Posted by Master PO View Post
    after the CRAZINESS of this OP, Reagan deserves an apology.

    reagan.jpg
    LOL. It's ironic.. Reagan does exactly what they want.. and Reagan is seen as a nightmare to them.
    Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats. It is inaccurate to say that I hate everything. I am strongly in favor of common sense, common honesty, and common decency. This makes me forever ineligible for public office. H.L Mencken

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    re: Explaining Why Federal Deficits Are Needed[W:5330]

    Quote Originally Posted by JohnfrmClevelan View Post
    What does intragovernmental debt have to do with deficits and surpluses?
    If you have to ask, you know less then what you pretend to say you know.

    Intragovernmental debt is borrowing from different Intragovernmental holdings (think trust funds). There is $5t of this debt is part of the national debt. Agencies can borrow against these trust funds as a way to keep budget increases off the "official" budget. So when the "official" budget during the Clinton years were showing surpluses.. they were raiding trust funds to keep previous funding levels. Did it in the Bush and Obama admin as well.
    Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats. It is inaccurate to say that I hate everything. I am strongly in favor of common sense, common honesty, and common decency. This makes me forever ineligible for public office. H.L Mencken

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