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Old 07-07-2019, 05:01 PM
 
634 posts, read 490,452 times
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A carpenter will always have enough inches to measure any job, and a government can always print enough dollars to pay for any project. That seems to be what the teacher is saying.
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Old 07-07-2019, 07:03 PM
 
Location: Ohio
19,929 posts, read 14,245,993 times
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Quote:
Originally Posted by QuakerBaker View Post
My teacher, she used this to help explain the Modern Monetary Theory....

"The carpenter can't run out of inches
The stadium can't run out of points
The airline can't run out of FF miles
And the USA can't run out of dollars"


I tried to ask my teacher some questions and she kind of shut me down, so I would like someone to explain it to me in better detail of possible.
She out-right lied to your face.

A lie of omission is still a lie, which makes her a liar and you can tell her I said that and invite her here to discuss.

So long as the US has electricity, trees and oil, it can keep the printing presses running indefinitely. Even without electricity, so long as there's paper and oil (because the special inks and dyes are made from oil) the government can operate some of the manual printing presses in museums and in storage.

She intentionally neglected to tell you there are negative consequences.

There's nothing inherently evil about borrowing or debt. People have engaged in both for 11,000 years that we know, maybe even longer than that.

Like most all things, excess is bad, so excessive borrowing or excessive debt is bad for people, business and governments. Moderation is good. Abstinence can actually cause harm.

Monetary Inflation occurs when you have too many dollars (or any currency) chasing too few goods.

That makes the price of your guitar or TV or crop of soy beans increase in price.

Because it's worth more? No, because the dollar is worth less.

When $10 = $10 and a bushel of soy beans is worth $10 on the market, then the price you charge is $10.

But, when $10 = $7.50 and a bushel of soy beans is worth $10 on the market, you can't charge $10, because $10 is only worth $7.50.

So, you have to increase the price to $12.50 to offset the lower value of the currency and make up the $2.50 difference.

When you have Monetary Inflation, the price of everything rises. Literally. Every thing. As in every single thing. Look around the room you're in: that includes the price of curtains, curtain rods, door hinges, door handles, doors, electrical outlet covers, carpet, furniture, TV & appliances, clothing, food...everything...even wages.

Yes, your wages will rise. Unfortunately, you're behind the curve-ball and you stay behind the entire time.

Employers are reluctant to give large raises during an inflationary cycle, and they wait until the last possible minute, so you get soaked all year, and then your wage increases, but so do prices, so you're still behind, you're always behind, and when the inflationary cycle finally ends, you never get that last pay raise, so you lose your shirt.

Social Security recipients got COLA increases of 9%, 14%, 11% and such because that's how high Monetary Inflation was during the last period.

So, why don't you have Monetary Inflation?

When government spends more than it collects in revenues in a given month, the deficit for that month is packaged by the Treasury Department as marketable securities in the form of treasury bills, notes and bonds and then auctioned off.

Foreign central banks, foreign governments, foreign businesses, foreign banks, US banks, States, counties, cities, townships, public and private pension funds, insurance companies, businesses, non-profits and sometimes people will buy them and hold them to collect the interest.

That's why you don't have Monetary Inflation.

What your teacher omitted to tell you is that US debt is greater than 25% of World GDP and approaching 35% of World GDP.

She forgot to tell you that between 2040 and 2045, US debt will be 50% of World GDP.

Not too long after that, your debt will equal World GDP.

If your debt equals World GDP, who's going to buy your debt?

Does your teacher seriously believe that foreign countries are going to starve their citizens to death in order to be able to buy US debt?

Because not only is your teacher a liar, she is certifiably insane if she believes that will happen.

And, none of that matters, because this problem is going to manifest itself long before your debt equals 100% of World GDP.

Right now, you have maybe 36 countries that can even buy US debt. What about the other 160-odd countries? They don't have the money.

Take a country like Spain. Their GDP is about $1.3 TRILLION. Does that mean Spain can buy $1.3 TRILLION of US debt? No. Best case scenario is Spain can buy maybe $10 Billion a year.

Worse than that, 2 dozen of those countries have incredible problems with unfunded liabilities, meaning the amount the owe in future social security payments and healthcare services.

Italy owes 300% of its current GDP. It doesn't matter how high Italy raises taxes, it can't pay for it. It will have to tax the snot out of people and slash pensions and healthcare benefits and those people are going to be very, very angry.

Spain owes 250% of its GDP, Germany 270%, the Netherlands, too, the Belgians are at 225% and same story for nearly all of them.

Doesn't matter how high they raise taxes, they can't pay for it. They have to slash pensions and deny people healthcare.

The French are still fuming, because France raised the retirement age, forces people to work 7 years longer than Americans and slashed the pension from 50% to 37.5%.

A French worker earning 80,000 Euros/year who thought he'd get a pension of 40,000 Euros/year got screwed. He'll be damn lucky if he gets 20,000 Euros/year.

You think those countries are going to have the money to buy US debt?

No, they aren't.

Your teacher conveniently forgot to tell you that as soon as the US runs out of other people's money to buy US debt, the party's over.

You'll have rampant, maybe even hyper-Monetary Inflation until your government starts balancing the budget every year.
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Old 07-07-2019, 07:21 PM
 
Location: Backwoods of Maine
7,116 posts, read 8,160,025 times
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First of all, the government isn't the entity that prints - the Federal Reserve is. The Federal Reserve is not federal, and it has no reserves. It is owned by a private banking cartel, not the government. It was started in 1913, and a "dollar" today is only worth about 2 cents compared to a 1913 dollar. Over time, inflation tends to become more evident.

While it's technically true that the Fed could just monetize our debt (print money to cover it), they are generally reluctant to do so. There is no way to hide that action nowadays, and those holding our debt (China and other countries) would be aware of it, and would dump their dollar holdings onto the world markets, where it would depress the dollar's value.
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Old 07-07-2019, 07:42 PM
Status: "Re-edit status" (set 20 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,184 posts, read 1,906,934 times
Reputation: 3211
OP, you teacher was right to shut you down. 1) She probably couldn't teach it very well. 2) whether it it's true or not is contenious, hence a theory. 3) Wars were made and political systems formed, destroyed, reformed..
GL
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Old 07-13-2019, 12:30 PM
 
6,227 posts, read 6,379,313 times
Reputation: 2861
Quote:
Originally Posted by Listener2307 View Post
In order for me to become wealthier, I do not need to take anyone else's wealth away from them.
I could buy stock in a company that does well. That way by stock may appreciate and in time I may become very wealthy - but at no one's expense.


Take the case of Walmart. If I had recognized Walmart's potential in 1985 and bought $50,000 worth of Walmart stock, I could have begun to withdraw my original investment out every year, and as far as I can see I would withdraw $50,000 per year for as long as I live.
(You would have a total of $15M that has never been taxed)


I became very wealthy. And took no one's money.


The above example will show how growth of the US system is EVERYTHING. If there were no growth the whole system would collapse. So what seems like a huge debt today, becomes a small debt in the future.
When you buy a stock, and sell, you have to take someone else's money, in exchange for the stock, and it has to be more than you paid for it.

As for Walmart, they have to sell items ala, take other peoples money, and keep more for themselves ala not pay their workers or their own vendors more.

Walmart like any store has to horde more money for itself to become wealthy.

Quote:
Originally Posted by liveurdream View Post
Basically our government can't go broke because we print our own currency and it has no impact on your ability to become rich (the national debt).

We had tax cuts in 2017 with a little over a trillion dollars added to the economy. The government could have spent that same trillion into the economy for infrastructure, etc. Same end result for the economy but most people are not smart enough to realize it. The deficit was the same in the end.
The private banks print our money.

Quote:
Originally Posted by RationalExpectations View Post

It does not follow that the US need not worry about deficits, and may happily borrow tens of trillions to finance all sorts of spending. Borrow $50 trillion or so. When bondholders revolt, print money to pay off the bonds. When this results in inflation, raise taxes to soak up the money. OK, but this latter step is exactly raising taxes to pay off the bonds. Moreover, if bondholders see that the plan is to pay off bonds with printed money, they refuse to buy or roll over bonds in the first place and the inflation can happen right away.
.
If our government can print out our own money, they should not owe anyone. Our government should only print money to pay for its own necessary functions and nothing more, and especially not for profit. No need for an emergency fund either because you can just print out as you go along. Even if that creates inflation, its a better inflation than created by bankers and their speculations.
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Old Today, 02:27 AM
 
Location: Beaverton, OR
5,591 posts, read 5,923,696 times
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I still don’t really understand how it’s never seemingly any priority to either political party to balance the budget. I get it’s extremely unexciting but someone needs to go in there, slash most of these government bureaus or combine them with other ones, massively cut costs, and figure out how to balance the budget. A good start would be the fair tax or a system of taxation even a VAT where it’s simple and doesn’t require a massive IRS and huge accounting industry that’s frankly a drag on business. Sure, these people would need new jobs but over the decades I can’t see that being a negative thing for small business owners or people. Way too much government, doesn’t need to be so big, or expensive.
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Old Today, 09:00 AM
 
8,888 posts, read 3,939,487 times
Reputation: 1726
Quote:
Originally Posted by JonathanLB View Post
I still donít really understand how itís never seemingly any priority to either political party to balance the budget. I get itís extremely unexciting but someone needs to go in there, slash most of these government bureaus or combine them with other ones, massively cut costs, and figure out how to balance the budget. A good start would be the fair tax or a system of taxation even a VAT where itís simple and doesnít require a massive IRS and huge accounting industry thatís frankly a drag on business. Sure, these people would need new jobs but over the decades I canít see that being a negative thing for small business owners or people. Way too much government, doesnít need to be so big, or expensive.
I don't think that you have to go any farther than growth or no growth of an economy. Our people want more stuff, and no party wants to own the resultant recession.
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