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Does governnent spending produce economic growth?

Does governnent spending produce economic growth?

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imagep said:
Interest rates don't have to rise. The government has a lot to do with the control of wholesale interest rates.

Interest is the price of money. Things that are in plentiful supply and which can be produced inexpensively aren't expensive. Money can be produced in unlimited quantity at virtually no cost, there is no reason for it to be expensive.
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Right. That explains why interest rates everywhere have always been and always will be zero%
 
Fletch said:
Right. That explains why interest rates everywhere have always been and always will be zero%
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Not zero, but low.

Prior to 1971, our money supply was constricted by the gold standard. Unfortunaty, they forgot to re-write economic textbooks when we went off of the gold standard.
 
imagep said:
This lie:
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That is what is called a fact. Or are you not aware that governments engage in a practice known as taxation? Sorry, I tend to assume a certain level of knowledge when discussing this sort of thing...
 
Fletch said:
So you were referring to deficit spending more than just government spending then.
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Not necessarily, although deficit spending qualifies.

Fletch said:
Well, sure. There is no way for a government to spend a trillion dollars of debt in a single year and not stimulate significant economic activity.
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Yep. That's the point.

Fletch said:
The question is how long it can do that sort of thing before it starts to do more damage to the value of the currency and to future debt obligations than it does good.
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Agreed. It can do it as long as the supply of money does not reach the quantity demanded.

Fletch said:
Right now, while interest rates on our debt are at historic lows, it makes short term sense to run up debt to fuel growth.
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Yep that's why need to spend more on infrastructure and education. Those are very good investments instead of using the power to make war on others.

Fletch said:
The problem will come when those interest rates rise and payment on that debt sucks ever more money out of the economy. At that point you will be wishing we hadn't spent as much as we did.
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First of all the government pays practically no interest on the bonds that are owned by the Federal Reserve. What happens is that the government makes interests payments to the Fed, who then returns that money minus operating costs back to the government. Next of all like I said before, as long as the quantity of money is less than the quantity demanded, the debt can be rolled over infinitely. In other words as long as people keep wanting dollars, the Fed can keep printing money.
 
Fletch said:
That is what is called a fact. Or are you not aware that governments engage in a practice known as taxation? Sorry, I tend to assume a certain level of knowledge when discussing this sort of thing...
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It's already been explained to you that the government can also borrow and print.
 
Fletch said:
That is what is called a fact. Or are you not aware that governments engage in a practice known as taxation? Sorry, I tend to assume a certain level of knowledge when discussing this sort of thing...
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What you said had some truth to it, but it was not the whole truth. Not only that, confiscation is a bit of a distortion though not entirely inaccurate.
 
MildSteel said:
What you said had some truth to it, but it was not the whole truth. Not only that, confiscation is a bit of a distortion though not entirely inaccurate.
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The government gets its money form two primary sources: taxes and borrowing. Taxation is exactly as my first post says--the government spending money it has taken/confiscated from the public. If it takes a trillion and spends a trillion, how is that better than leaving that trillion where they got it? That was my only point. Borrowing is different and I addressed that in my second post.
 
Fletch said:
The government gets its money form two primary sources: taxes and borrowing. Taxation is exactly as my first post says--the government spending money it has taken/confiscated from the public. If it takes a trillion and spends a trillion, how is that better than leaving that trillion where they got it? That was my only point. Borrowing is different and I addressed that in my second post.
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Fair enough, and I understand what you are saying. As far as your question goes, we need government and government needs money to cover it's operating costs. I totally agree that the government should not overtax because that is certainly counterproductive. That said, as others have pointed out in this thread, IF the government takes the money from someone or something that is merely hoarding it AND put it to a productive use like properly educating its citizens or improving or creating NEEDED infrastructure, that is better because it increases economic activity and creates more revenue for the government itself.
 
MildSteel said:
Actually there are a number of factors which have contributed to the dollar's strength despite the QE and TARP. These include:

1. Banks hoarding the money
2. The yen carry trade. Big investors borrow yen at a low rate. They convert it to dollars to buy U.S. Treasuries and profit from the spread. The result is an increase in demand for dollars.
3. The China carry trade (for lack of a better term). What I mean is that big investors borrow dollars at a low rate and invest in Chinese infrastructure projects and property and profit on the spread. The result is an increase in demand for dollars. The same happens with other emerging markets as well.
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Banks don't " hoard " money.....ridiculous.

And QE hasn't devalued the value of the dollar becacause over 80 percent of all that new money is sitting stagnant on the books of the FED marked as " Excess reserves ".

The money never entered the economy because the economy sucks after 6 years of Hope and Change and there's no substantial demand for credit among Middle Class consumers.
 
Fenton said:
Banks don't " hoard " money.....ridiculous. And QE hasn't devalued the value of the dollar becacause over 80 percent of all that new money is sitting stagnant on the books of the FED marked as " Excess reserves ". The money never entered the economy because the economy sucks after 6 years of Hope and Change and there's no substantial demand for credit among Middle Class consumers.
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One could certainly call depositing that money with the fed "hording", although I agree that there simply isn't the demand for that money.
 
imagep said:
Obviously there are public sector expenditures, but they are spent into the private sector economy.

Do you think that government employees only shop at government owned stores?
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What is a public expenditure?
 
MildSteel said:
The problem is not with the counter. Although what you have said with respect to the dollar representing value, your implication that an increase in supply will reduce demand
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....is nonexistent, since that is not what I am saying. I am saying that an increase in supply reduces value, although cost can still rise if demand rises faster.

Example: a Gallon of Gas is worth $3.50. Then supply increases, and the price falls to $2.00. Then supply decreases, and the price rises to $2.50. The fact that we are still a dollar off of the original price does not mean that the later reduction in supply did not have an upward effect on the price of gas. If you increase the amount of dollars by 20%, but demand for dollars rises by 30%, then a 10% (back of napkin math, I realize) increase in the price of the dollar does not mean that increasing the supply did not reduce it's value - it reduced it from 30% higher to 10% higher. It's a wealth tax.
 
MildSteel said:
Actually there are a number of factors which have contributed to the dollar's strength despite the QE and TARP. These include:

1. Banks hoarding the money
2. The yen carry trade. Big investors borrow yen at a low rate. They convert it to dollars to buy U.S. Treasuries and profit from the spread. The result is an increase in demand for dollars.
3. The China carry trade (for lack of a better term). What I mean is that big investors borrow dollars at a low rate and invest in Chinese infrastructure projects and property and profit on the spread. The result is an increase in demand for dollars. The same happens with other emerging markets as well.
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You are simply describing various reasons for demand.

That's right which goes to show you that printing money does not necessarily result in a decline in value.
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That is incorrect. It does not necessarily result in a net decline in value.

There are other factors involved.
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Which are capable of having greater effects. Which do not mean that the effect of devaluation is not still present, only that it can be greater or less than others.
 
Fenton said:
Banks don't " hoard " money.....ridiculous.
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It may sound ridiculous but it is true. Here's what I am talking about

JPMorgan Chase has a problem: It’s taking in money faster than it can lend it out.

As long as this trend continues, the biggest bank in America by assets will drift further away from a commercial bank’s core social and economic role of lending.

At the end of the third quarter, the bank was lending out just 56 cents for every dollar it had in deposits, according to earnings results released on Tuesday.
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JPMorgan Seems Less And Less Interested In Lending Money

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Fenton said:
And QE hasn't devalued the value of the dollar becacause over 80 percent of all that new money is sitting stagnant on the books of the FED marked as " Excess reserves ".

The money never entered the economy because the economy sucks after 6 years of Hope and Change and there's no substantial demand for credit among Middle Class consumers.
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You half know what you are talking about here. What you did was prove my point. Banks are hoarding the money. Where you are wrong is that the 80% figure that you referenced is the amount that is in private banks. And that's what I am talking about. Banks are hoarding the money. Thanks for proving my assertion.
 
cpwill said:
You are simply describing various reasons for demand.
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That is correct. I did that because in a previous post you pointed out that dollars represent a stores of value that fluctuate with demand.

Here's what you said back in post #119

dollars do not have intrinsic value - they are representative stores of value for which demand fluctuates
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Since what we are discussing is the value of money, the point is relevant.

cpwill said:
That is incorrect. It does not necessarily result in a net decline in value.
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No it is correct. It is correct because the net effect is the result. It's just like when I purchase inventory for my business, a superficial observation would be that I have lost money. But that observation is superficial only because what I have done is to profit from the difference in what I paid for the merchandise and what I sold it for. So what I said is correct and your observation proves my point.

cpwill said:
Which are capable of having greater effects. Which do not mean that the effect of devaluation is not still present, only that it can be greater or less than others.
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No there is no effect of devaluation when such activity is partly responsible for the greater effects. In other words if the government did not print the money and instead just let the entire economy collapse, which is what Hank Paulson scared the hell out of people with, then the money would have no value at all.
 
cpwill said:
....is nonexistent, since that is not what I am saying. I am saying that an increase in supply reduces value, although cost can still rise if demand rises faster.
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I see what you are saying, but my point is that you are wrong because the printing of the money in itself CAN be PARTLY responsible for the rise in demand.
 
cpwill said:
What is a public expenditure?
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When the government spends money of stuff like the military, roads, etc.

That money ends up in the private sector.
 
MildSteel said:
It may sound ridiculous but it is true. Here's what I am talking about



JPMorgan Seems Less And Less Interested In Lending Money

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You half know what you are talking about here. What you did was prove my point. Banks are hoarding the money. Where you are wrong is that the 80% figure that you referenced is the amount that is in private banks. And that's what I am talking about. Banks are hoarding the money. Thanks for proving my assertion.
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You DON'T know what your'e talking about, at all.

Banks will LEND when there's a demand for credit. There's no demand because the economy after 6 years STILL SUCKS.

Over 80 percent of all the new money created by QE is sitting idle on the books of the FEDERAL RESERVE marked as " excess reserves ".

It hasn't made it out into the economy because despite what the Obama administration says out economy is still on life support.
 
Fenton said:
You DON'T know what your'e talking about, at all.

Banks will LEND when there's a demand for credit. There's no demand because the economy after 6 years STILL SUCKS.

Over 80 percent of all the new money created by QE is sitting idle on the books of the FEDERAL RESERVE marked as " excess reserves ".

It hasn't made it out into the economy because despite what the Obama administration says out economy is still on life support.
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Actually you are the one who doesn't know what he is talking about. This can be very easily demonstrated by the fact that you keep repeating that 80% figure which is, in fact, THE EXCESS RESERVES OF PRIVATE BANKS. IT IS NOT THE FED'S EXCESS RESERVES. So what you are doing, in fact by repeating it, is proving my point that BANKS ARE HOARDING MONEY. In fact, some have suggested that the Fed stop paying the banks interest for the excess reserves they have on deposit at the Fed to force them to loan out the money instead of parking it at the Federal Reserve in this way. There is demand for credit, it's just that the banks have made it much more difficult to obtain credit.
 
MildSteel said:
Actually you are the one who doesn't know what he is talking about. This can be very easily demonstrated by the fact that you keep repeating that 80% figure which is, in fact, THE EXCESS RESERVES OF PRIVATE BANKS. IT IS NOT THE FED'S EXCESS RESERVES. So what you are doing, in fact by repeating it, is proving my point that BANKS ARE HOARDING MONEY. In fact, some have suggested that the Fed stop paying the banks interest for the excess reserves they have on deposit at the Fed to force them to loan out the money instead of parking it at the Federal Reserve in this way. There is demand for credit, it's just that the banks have made it much more difficult to obtain credit.
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Yes, 80 percent of all the new money created by QE never made it out into the economy.

Your left wing and childish assessment is that the banks are being " greedy ", that they're hoarding.

Lets see how much you really know. How much are the banks getting paid in interest on those excess reserves ?

And NO, the banks didn't make it more difficult to obtain credit, the DEMOCRATS did.

Look up Dodd Frank and educate yourself.
 
MildSteel said:
Actually you are the one who doesn't know what he is talking about. This can be very easily demonstrated by the fact that you keep repeating that 80% figure which is, in fact, THE EXCESS RESERVES OF PRIVATE BANKS. IT IS NOT THE FED'S EXCESS RESERVES. So what you are doing, in fact by repeating it, is proving my point that BANKS ARE HOARDING MONEY. In fact, some have suggested that the Fed stop paying the banks interest for the excess reserves they have on deposit at the Fed to force them to loan out the money instead of parking it at the Federal Reserve in this way. There is demand for credit, it's just that the banks have made it much more difficult to obtain credit.
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I suspect that they just can't find enough credit worthy customers.

Many large corporations have lots of money on hand, so they might not have a need to borrow, and the Great Recession ruined a lot of peoples credit.

I think that we are just now getting to the point where deliquencies and foreclosures may start to fall off peoples credit report soon, so hopefully home and car sales will start to pick up during the next few years as individual credit scores start to heal themselves.
 
Fenton said:
Yes, 80 percent of all the new money created by QE never made it out into the economy.

Your left wing and childish assessment is that the banks are being " greedy ", that they're hoarding.
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No its not a childish assessment. The problem is that you have had a right wing lobotomy that does not permit certain things to register in your brain. What is not registering in this case is the fact that THE MONEY IS THE EXCESS RESERVES OF PRIVATE BANKS THAT THEY HAVE VOLUNTARILY CHOSEN TO PARK AT THE FEDERAL RESERVE INSTEAD OF LENDING IT. THAT IS A FORM OF HOARDING. Now I pity that because of your lobotomized condition you cannot understand that. But don't worry, even the lobotomized can be useful in that their behavior serves as a negative example that should be avoided.

Fenton said:
And NO, the banks didn't make it more difficult to obtain credit, the DEMOCRATS did.

Look up Dodd Frank and educate yourself.
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Dodd Frank says that banks can only lend to people who can repay the loan, something they should have been doing in the first place.
 
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imagep said:
I suspect that they just can't find enough credit worthy customers.

Many large corporations have lots of money on hand, so they might not have a need to borrow, and the Great Recession ruined a lot of peoples credit.

I think that we are just now getting to the point where deliquencies and foreclosures may start to fall off peoples credit report soon, so hopefully home and car sales will start to pick up during the next few years as individual credit scores start to heal themselves.
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Banks have leeway in determining who is credit worthy and who is not. As far as I know there are no laws that say what credit scores a person has to have to get a loan. Some corporations like Apple have plenty of cash, and I don't think they would have a problem getting financing if they wanted it. My point is that lending institutions have, in general, tightened the conditions under which they will grant credit. That is a decision they have made. That is why they hoard money at the Federal Reserve.
 
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