To all those 'Federal deficits are no problem' Krugmanites/Keynesians:

ludin · Jul 18, 2017

countryboy said:
Yeah no.

https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory

that has been posted more times than I can count and they just ignore it.

MrWonka · Jul 18, 2017

countryboy said:
Yeah no.

https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory

The FACT that we have an unlimited capacity to pay for things does not mean that it would be a good idea to try, and that it would cause NO problems. Again, you seem to be failing to understand what you're being told.

MrWonka · Jul 18, 2017

ludin said:
no we know what MMT'ers say and every economic model out there says it doesn't work.

sure the US government can issue as much currency as it wants to, but doing so has consequences.
this has been brought to light by other countries that attempted to do this.

they tanked their currency and their economy.

the dollar has value based on the US government ability to be responsible and act in good faith.

So as long as people view us as responsible, and as the most stable economy on earth we can continue to push or limits, and if we push to far we can always back things off a bit. Sorry, but again you're failing to understand what you're being told.

MrWonka · Jul 18, 2017

ludin said:
that has been posted more times than I can count and they just ignore it.

No, you boys just fail to understand it each time. We can print unlimited funds. That is a fact. That doesn't necessarily mean it would be a good idea. What MMT are saying is that until we see actual evidence of these supposed negative consequences there's no rational reason to fear them. Furthermore even if we do begin to see these supposed negative consequences there is nothing preventing us from backing off. It's not like there is this cliff out there and once we drive off it we die. We can back up, until we find just the right balance.

ludin · Jul 18, 2017

MrWonka said:
So as long as people view us as responsible, and as the most stable economy on earth we can continue to push or limits, and if we push to far we can always back things off a bit. Sorry, but again you're failing to understand what you're being told.

So how is just printing a bunch of money responsible? Ol yea it isn't but that is what mmt says.
No I understand it perfectly and so do economists that have stated that mmt is not a responsible monetary policy.

ludin · Jul 18, 2017

MrWonka said:
No, you boys just fail to understand it each time. We can print unlimited funds. That is a fact. That doesn't necessarily mean it would be a good idea. What MMT are saying is that until we see actual evidence of these supposed negative consequences there's no rational reason to fear them. Furthermore even if we do begin to see these supposed negative consequences there is nothing preventing us from backing off. It's not like there is this cliff out there and once we drive off it we die. We can back up, until we find just the right balance.

We understand it just fine it is right there in black and white.
That is not what mmt says. In fact as economic critics have pointed out it purposely ignores devaluation and inflation risks.

It isn't about backing off it is the needed steps to correct the issue. It is better not to cause the problem to begin with than to take the drastic steps to fix it.

No it isn't like backing off. Once the money is out here it is out there.
Not much can be done about it. The damage is done. To pull it back out is way harder.

MrWonka · Jul 18, 2017

ludin said:
We understand it just fine it is right there in black and white.
That is not what mmt says. In fact as economic critics have pointed out it purposely ignores devaluation and inflation risks.

No, it does not. It just forces you to demonstrate evidence of devaluation and inflation rather than simply running around like a chicken with your head cut off telling everyone the sky is falling.

ludin said:
It is better not to cause the problem to begin with than to take the drastic steps to fix it.

No it isn't, because we won't need drastic steps to fix it. If you can print a dollar than you can rip up a dollar. It's not that complicated.

Secondly, MMT isn't really even suggesting we just go ahead and print money like crazy. It's just pointing out the reality that we can so you people stop freaking out about a deficit that's not all that important.

ludin said:
No it isn't like backing off. Once the money is out here it is out there.
Not much can be done about it. The damage is done. To pull it back out is way harder.

HAHA!!! Nope, sorry, but if you can create money out of thin air then there's no reason you can't destroy it just as easily.

ludin · Jul 18, 2017

MrWonka said:
No, it does not. It just forces you to demonstrate evidence of devaluation and inflation rather than simply running around like a chicken with your head cut off telling everyone the sky is falling.

Since no one does that now you are wrong. You have to demonstrate that we can just print money. So far MMT has failed to do that.
It has also failed to show that deficits and debt don't matter.

No it isn't, because we won't need drastic steps to fix it. If you can print a dollar than you can rip up a dollar. It's not that complicated.
Secondly, MMT isn't really even suggesting we just go ahead and print money like crazy. It's just pointing out the reality that we can so you people stop freaking out about a deficit that's not all that important.

unless you think that government confiscation is a good thing getting the money back that has been distributed is going to be hard to do.
http://www.thomaspalley.com/docs/articles/macro_theory/mmt.pdf

HAHA!!! Nope, sorry, but if you can create money out of thin air then there's no reason you can't destroy it just as easily.

it is all based on economic need not the whims of MMT.
you simply can't just print 1 trillion dollars and issue it then destroy it without consequences.

The federal reserve controls the money supply for this reason.
they do this buying and selling notes as appropriate.

Conaeolos · Jul 18, 2017

The thing I hate most about those (in power) that talk about the debt as not a massive problem is they that are talking a partial truth, its not an immediate problem & there are ways to mitigate that problem going forward yet then go off into further policy in other areas which they knowingly know throws gasoline on this fire in what seem like a faith in the future that based in a rosey paradise of wealth and opportunity via startrek(?).

So what predictions about future negative economic conditions might we guess?

Public health care spending is going to get more expensive for awhile and likely not peak for about 25 years.
Social security is going to cost greater and greater subsidy from other tax revenue to a peak in about 25 years.
Net-worth is going to crash as it tied into house prices equality where supply outpaces demand [barring immigrant influx] in about 10-12 years. Interest rate meanwhile will return to higher as they are artificially low.
Public debt has paced household debt, meaning taxable revues have been shrinking
Wage trends are flatlining meaning taxable transactions are flat limiting the ability of the government to capture the economic activity
the economy money supply has had a 7 fold increase since 1980, which assume that growth in economic activity, meanwhile the economy has only absorbed a 2x increase in inflation meaning the other 5 doublings has to be accounted for by economic growth otherwise the is delayed inflation hidden by market bubbles
Market valuation is distorted compared to other valuation methods. What is more valuable a cell-phone design company or a vertically integrated company that can design, finance and manufacture a vast array of products from personal appliances to power generation plants? Answer according to a market value comparison, the cell phone company is worth 3x the value of the latter. Adj-Book value comparison meanwhile is 500:1 in favour of the latter. Meanwhile a sole finance company (bank) providing nothing but transactional worth is valued 2:1 against the latter despite an adj-book value difference of 100,000,000:1. Adj-book value mean removing holdings, brand value and other forms of non-tangiable asset wealth.
Tax revenue to GDP look to have a maximum of 50%. The us sits at 25%.
Intreat rates can not be kept artificially low, so they will be higher or it going to come out in inflation
Oil prices will rise -> which are connected to food prices 20:1 (ratio of production with or without petroleum based agriculture)
Capital maintenance cost of American infrastructure is set the raise every year and lower in comparative efficiency [an economic advantage of the United States]
The education divide now favours the foreign markets
One pathogen outbreak has shown to be able to shut down world-trade for a fair amount of time; increasing in chances of a event are now 300:1 in any given year: economic cost 3x lost production.
Risk of devastation from climate change (place at whatever you wish) will lead to increase cost of disaster mitigation

So, yes it’s true we have both the assets and time to deal with our public deficit and debt, but if you don’t think the risks of what is coming in the future are higher than the current climate your smoking optimist crack. One thing is for sure our current level of debt and deficit leaves our children hand-tied at a level unseen by any generation in modern history and is matching the level of war reparations.

It is truly the public policy mirror of the 60 year old with two kids, both personally racked in student loan debt, each with a mortgage set to absorb a good 20-40% of their income from the next 30 years, each with two kids of their own. And these parents though still rich on the balance sheet with their “home equity” have saved a mere $100,000 outside of it for a 30 year retirement plan…Thanks, mom and dad :-| That 3 million estimated retirement cost is totally not going to fall on me and my flat or declining wages and new employment insecurity but thanks for the $10,000 bailout when I couldn't find a job after university.

A few sources:
https://www.cia.gov/library/publications/the-world-factbook/graphics/population/US_popgraph 2016.bmp

https://tradingeconomics.com/united-states/interest-rate

https://tradingeconomics.com/united-states/households-debt-to-gdp

http://4.bp.blogspot.com/-RHk84Mq9_...s1600/U.S.+Housing+Price+Index+Since+1900.jpg

http://poisoned-fruit.org/wp-conten...-age-cost_of_healthcare_graph-male-female.png

https://www.fool.com/investing/gene...al-american-has-this-much-in-home-equity.aspx

http://www.financialsamurai.com/the-average-net-worth-for-the-above-average-person/

http://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS

MrWonka · Jul 18, 2017

ludin said:
Since no one does that now you are wrong. You have to demonstrate that we can just print money.

We have done that, by doing it already. We did in fact print a lot of money, and we did in fact run high deficits during the recession. None of the predictions of inflation and devaluation that people like yourself made came true. MMT was proven correct.

ludin said:
It has also failed to show that deficits and debt don't matter.

First, again, nobody is saying that they don't matter at all, just that they're not a big problem, and that we have much bigger problems.

Second, we have already demonstrated that the current deficits and debt have not mattered. The United States today has the strongest economy in the entire world. We recovered faster and better than almost all of our Austerity favoring European friends. We have full employment, and have more job openings available in this country today than at any point in history. In fact just today Trump had to allow 15,000 extra work visa's because he realized we don't have enough American workers to do the jobs that are available. All of this despite our deficits and debt continuing to remain high. The proof is in the pudding.

The only question is how much higher can they go before we start seeing negative effects, but given how high confidence currently is in our economy there's no reason to think we're close. In fact I'd say Trump by himself has done more to hurt confidence in American than any other thing.

ludin said:
it is all based on economic need not the whims of MMT.

Well if by need you mean demand, then you are correct, but demand for U.S. Dollars is still very high, and showing no signs of slowing down.

ludin said:
you simply can't just print 1 trillion dollars and issue it then destroy it without consequences.

Why not? The net effect would be the same total number of dollars we have today. If you think the number of dollars printed is so important than there should be no consequences at all.

ludin said:
The federal reserve controls the money supply for this reason.
they do this buying and selling notes as appropriate.

So you agree with me that we're already doing essentially this exact same thing? What's the problem? Why is this so hard for you to understand?

Conaeolos · Jul 18, 2017

MrWonka said:
None of the predictions of inflation and devaluation that people like yourself made came true. MMT was proven correct.

Only if you disclude the part of the warning that explains how it all happens with things like “market bubbles” being later triggered for the correction.

nobody is saying that they don't matter at all, just that they're not a big problem, and that we have much bigger problems.

I agree but like what? because a lot of low priorities seem to be jumping the line.

we have already demonstrated that the current deficits and debt have not mattered.

7x increase since 1980, 2x inflation, 40% population growth….you honestly saying you believe the current economy is 5 times 1980 levels?

We recovered faster and better than almost all of our Austerity favoring European friends.

The word you looking for is slightly better. "Austerity" btw of a less free system.

We have full employment

Not reflected in market qualitative research. Why?

and have more job openings available in this country today than at any point in history.

Practice of advertising non existent jobs in a effort to mine for qualified applicants?

In fact just today Trump had to allow 15,000 extra work visa's because he realized we don't have enough American workers to do the jobs that are available.

“Temporary or seasonal work” does appeal more to foreigner workers. True.

All of this despite our deficits and debt continuing to remain high.

Because we are not facing enough supply pressure, yet….as long as people trust our credit we can continue to use the card. Does that make the problem better or worse?

The only question is how much higher can they go before we start seeing negative effects, but given how high confidence currently is in our economy there's no reason to think we're close.

Oh really? So tell me, do you know of a nation that went 120% debt to GDP without some kind of economic miracle like say an age of innovation and competitors devastated by a war?

So 1945 American to 1980 America:
Population 61% increase.
Deficit as % of GDP: -1-4%
Monetary growth 15x, Inflation 4x
Result debt % of GDP: 100% -> 30%

1980 america to Current America
Population 40% increase.
Deficit as % of GDP: -1-30%
Monetary growth 7x, Inflation 2x
Result debt % of GDP: 30% -> 120%

Current deficit/GDP: 3.2%. by GDP, 30% by budget [in good times?]

Well if by need you mean demand, then you are correct, but demand for U.S. Dollars is still very high, and showing no signs of slowing down.

Driven by the fact there are few better alternatives or underlaying economic conditions?

Why not? The net effect would be the same total number of dollars we have today. If you think the number of dollars printed is so important than there should be no consequences at all.

Why not? Because money supply is suppose to reflect the amount of economic transactions and when it doesn’t the market is being manipulated and must at some point correct.

If we took the entirety of the value of transactions conducted in 1776 spit it into fair units and then tried to use it for the transactions in America today…a single units value would be so indivisible as to worth it would restrict and prevent commerce. Hence for an ever growing economy, we use an ever growing money supply.

However, when that money supply is significantly different in value for the quantity of commercial transaction or the rate of change in that money supply gets enough out of sync with the natural expansion rate you begin to get over valuation. This can be prevented by natural inflation and deflation. We prevent deflation…and control and stimulate inflation.

So situation over-valuation, the money held by an investor is in such disproportionate value to the commercial resale of direct-trade, monetary value to an investor becomes a kind of Monopoly money and is invested as such. This promotes uneven distribution of goods valuation based on return. Leaving some goods highly undervalued(over true value) due to low margin [think food] and some goods highly overvalued by high margin [think banking,insurence, housing product].

Now, as long as people play along we just get more and more unrealistic valuations, until the farmer or the manufacture says I am not selling you my entire year supply for a F-ing low rate banking product. This is madness…

So you agree with me that we're already doing essentially this exact same thing? What's the problem? Why is this so hard for you to understand?

The problem is no one seem to be trying to ever offset the manipulations. And we have harder times ahead adjusting to higher seniors and lower housing prices.

MrWonka · Jul 19, 2017

Conaeolos said:
Only if you disclude the part of the warning that explains how it all happens with things like “market bubbles” being later triggered for the correction.

Ahhh yes, the constant cry of the chicken littles.....Just wait for it....it's a coming.

I apologize as you appear to put a lot of time into you reply. I skimmed it, but this is the only thing I found worth replying to.

Conaeolos said:
Oh really? So tell me, do you know of a nation that went 120% debt to GDP without some kind of economic miracle like say an age of innovation and competitors devastated by a war?

Take the words nation, and GDP and replace them with Household and Income.

It is perfectly normal for a household to accrue debt of much more than 120% of their combined yearly income. Hell just last year I was pre-approved for a $200k mortgage while only making a little more than $70k, and that's on top of the fact that I still had other student loan debt out there. That's more than 200% of my own personal "GDP."

Conaeolos · Jul 19, 2017

MrWonka said:
Ahhh yes, the constant cry of the chicken littles.....Just wait for it....it's a coming.

I apologize as you appear to put a lot of time into you reply. I skimmed it, but this is the only thing I found worth replying to.

No worries, topics like these are why I come to debate politics. I enjoy when I get to spend a little extra time writing replies.

I am reminded when you bring up “chicken little” of New Orleans and the levee breaks. Or the 100 year flood my home town decided to ignore. I admit that is how it might seem but can we admit that the fundamentals need to match the reality?

2008 to today our money supply reflects a doubling of economic activity with only 13% cumulative inflation. Does that not seem odd to you? Again smarter people than us monitor these things so one with possible explanations but admittedly something deserving of questions, yes?

Take the words nation, and GDP and replace them with Household and Income.

I wish more people did so…it a great way to put it in perspective although GDP should be tax revunue.

It is perfectly normal for a household to accrue debt of much more than 120% of their combined yearly income. Hell just last year I was pre-approved for a $200k mortgage while only making a little more than $70k, and that's on top of the fact that I still had other student loan debt out there. That's more than 200% of my own personal "GDP."

Absolutely and this is why in concept I agree with you. If you look at the assets of united states government, the flexibility and options she has to pay. She could tackle this mountain of debt, as long as it remains the kind of scenario your referring to where in that debt was an investment in future prosperity or absorbing a necessary loss. The problem I see is a deficit problem not a direct debt problem.

To utilize your analogy one has prospect the next thirty years. In your scenario your taking two major risks based on historic trends, risks you bank agree are calculated & rational, housing prices will go up & income level will likely raise. Now you probably think by a lot and the bank tends to estimate conservative but you both agree those are the trends so you can make that voluntary transaction. (the student loan will pay back in increased income)

What if you were 55 and in an industry where you’ve hit the income ceiling and in a town where there about to be a glut of housing as seniors die off and their estates sell-off. The bank is likely still going to lend, as they look at you as a number and a trend. Only you can see your unique prospects. Take those same risks?

The problem we have is to avoid temporary pain we made the crisis down the line worse. We were already looking at hard times. And high debt & low interest rates have one big guarantee: our tools to navigate the next crisis are more limited.

To put it in household terms, the guy with great credit keeps running a deficit. Instead of addressing his life style choices he puts it on a low-intrest credit card deal with a unlimited limit and an indefinite low interest terms. He racks up problems and he pays to get better a few times but come the next crisis he double in from where he was last crisis. He says the problem is a minor one.

To deal with this debt no matter your view on austerity, we need very low deficit spending 1-2% of GDP or 1-5% budget or surplus. Economic growth will then kill the problem over time. That's proven. Instead our deficit spending ranges higher and higher(currently: 3% / 30%). Tax increases are so attached to new spending there a non-starter solution and most often talked about government policy leads to higher spending then the predicted rate of grow in tax revunues.

So what is so high priority its more important then returning us to being financially solid?

RAMOSS · Jul 25, 2017

Crovax said:
The govt should never be running a surplus. All that is money that is being held out of the economy.

The government should only be using the surplus to pay off the debt.. until the debt is close to zero.

Crovax · Jul 25, 2017

RAMOSS said:
The government should only be using the surplus to pay off the debt.. until the debt is close to zero.

The debt will never be paid off and it will never be a penny lower than it is today. Not because no one wants to pay it off but because it would be a waste of money. The way to get rid of the debt is to grow the economy so that the debt to GDP ratio is very small.