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Old 10-19-2011, 12:38 PM
 
Location: Ohio
22,798 posts, read 16,013,961 times
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Quote:
Originally Posted by floridasandy View Post
the citizens cheat on their taxes, have an underground economy, retire too soon, demand free healthcare, and depend too much on government services ---and when the government cuts back the citizens get outraged.
Of course they cheat on their taxes and have an underground economy. That is the way of the Balkans. All Balkan countries do that. They've been doing that since the Ottoman Empire and nothing changed under the dictatorial regimes.

The only reason I bought my house is because they were running electricity through. Yeah, that's right electricity. I'm not rural by any stretch of the imagination. I live about halfway between Arad and Lipova. I installed in-door plumbing. Yeah, you have to go outside to shower and get to the bathroom, but it's only a few steps from the kitchen door. It's heated. My neighbors don' have running water. They use an out-house and the village well (it's a manual pump -- you pump water into your buckets and drag them back to your house). I usually take my horse and cart into town. Why? It's a smoother ride (I have a CJ-5 but everyone else has Dacias or Mercedes or Fiats).

That's what you get for paying taxes: Nothing. No electricity, no running water, no telephone service and really bad roads. We have cellular service and my neighbor says we have data services now too, so I won't have to go into town to an internet cafe to surf the web when I go back in a few months.

I don't know how to slaughter pigs, but the butcher does. I give him a pig and he dresses up 3 of them for me. That's 500-550 pounds of pork which will last a year. He butchers and sells the other pigs and we split the money. I grow field corn for my horse, goat, dogs, chickens and geese, and trade it to another family for onions and garlic and beans. A neighbor lady takes care of my cows and chickens and sells the raw milk. We all drink raw milk. Been drinking it for centuries. It's healthier than the stuff they sell in Mexican and claim to be milk.

Everyone knows someone. If I need something done, I go to my friend on the police force, who goes to his friends in customs or border security (there's a border crossing at Turneu) or at the bank or in some government office and we arrange it. He gets a carton of cigarettes or a bottle of Jack Daniels or Hennessy or something for arranging it.

That's how it's done in the Balkans. That's how it's always been done for centuries and centuries. It's part and parcel of the culture. You can't wave a magic wand and change things or pass a series of laws and change things (which is the same thing as waving a magic wand). It will take generations to change that mind-set.

There's a general distrust of the government, for any number of valid reasons, and in the Balkans, all governments are corrupt to some extent.

Quote:
Originally Posted by cpg35223 View Post
Yes indeed. And that's the inherent problem with the entire rotten edifice. Because we have an entire string of countries that can't possibly repay the money they're borrowing, at least as long as they cling to their governing philosophies.
They can repay it. It's just going to be very painful.

There are two opposing sides to this issue, the governments and the people. They people refuse to give up their benefits, and the governments refuse to yield any power whatsoever. The function of all governments is to expand and acquire more power and authority. They simply will not voluntarily give up any power or authority. Governments just won't fire government employees, close offices or cut budgets because that is viewed as forfeiting power and authority. And that's not true only of Greece, but of Italy and Spain and every country that is or will be experiencing economic turmoil.

You should know that from your own country. The present Administration would rather dick over 50 Million Americans on Social Security and Medicare rather than fire 50,000 government employees and close those useless offices. Why? Because your government believes it would be forfeiting power and authority to which is it "rightfully" entitled. It's seen as a sign of weakness.

So, it's going to be a painful struggle for all involved.

Quote:
Originally Posted by cpg35223 View Post
Yet the laws of sound finance have been pretty much in suspension over the past twenty years. And now the chickens are coming home to roost.
That's the beauty of Economics. You can't violate the Laws of Economics. You can bend the Laws of Economics for a time, but it eventually comes back around on you.

Quote:
Originally Posted by newonecoming2 View Post
I want to tax the principle on debt. Now that would be interesting to see.
There wouldn't be anything to see. Your economy would implode in a matter of months.

Debt is an essential part of business and life.
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Old 10-19-2011, 01:17 PM
 
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Quote:
Originally Posted by Mircea View Post


There wouldn't be anything to see. Your economy would implode in a matter of months.

Debt is an essential part of business and life.

Mircea,

Your out of context comment is much like bringing a raw catfish to a recipe for banana cream pie.

In another context, is it any more absurd than tax breaks for going into debt via the mortgage interest deduction?

Of course it would implode when all money is created at a debt, which in his model, would not even exist.
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Old 10-20-2011, 12:15 PM
 
2,515 posts, read 1,824,913 times
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Quote:
Originally Posted by Mircea View Post
There wouldn't be anything to see. Your economy would implode in a matter of months.

Debt is an essential part of business and life.
Yes it is but we live on an exponential debt curve and we are due for a reset. Also if you taxed the principle at say 0.5%. Then this would have the effect of having the prime go up by the same amount. But the government would collect the money instead of the banks. It would do interesting things to NPAs as well.

Last edited by newonecoming2; 10-20-2011 at 01:22 PM.. Reason: fixing spelling
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Old 10-20-2011, 12:36 PM
 
2,515 posts, read 1,824,913 times
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Quote:
Originally Posted by gwynedd1 View Post
LOL, now I see what you are getting at. Coins are produced by the US treasury? So they can mint some million dollar coins then.
$1k coins would do. 3 per person in the US.
Quote:
Originally Posted by gwynedd1 View Post
That was the general idea. With a tax holiday, labor would have more money.
It is a matter of ratio. To keep the prices of houses from falling from the peak of the last bubble you needed 50% more income. To make the Ninja loans good you needed a lot more bottom end income. A $30hr minimum wage would accomplish both of those things.
Quote:
Originally Posted by gwynedd1 View Post
That would have been another way though its a bit less conventional. Not collecting the SS withholding is basically the same thing more conventionally.
Not a large enough ratio. You needed 50% more income. The labor market has been contracting from 1999 on, we need to replace the income in the economy from the wages lost to outsourcing.
Quote:
Originally Posted by gwynedd1 View Post
Though you are right, wage inflation by any means would have done something to reverse the financial swindle.
Though I disagree about raising interest rates. The idea is to shut off carry trade and loose loans.
Yes that is the idea and how to raise the interest rates without raising the interest rates. Also we need to expand the tax base. So Tax the principle on debt. The government keeps the money not the banks.
Quote:
Originally Posted by gwynedd1 View Post
Large deficits would create the new money for liquidity instead.
We need to balance the budget in the worst possible way. Put a freeze on government spending and then inflate the economy 200%. For the increased liquidity start a national savings plan. Put the money in banks and they can loan it out.
Quote:
Originally Posted by gwynedd1 View Post
Our government only pretends to borrow when they are really just printing money.
Back door monetization.
Quote:
Originally Posted by gwynedd1 View Post
Not really sure what the right number is but again I agree, wage inflation is needed.
I did the ratio on house plus a margin to have a new sustainable mini bubble to carry us over the transition to a manufacturing economy again.
Quote:
Originally Posted by gwynedd1 View Post
If there is the legal frame work to mint coins right out of the treasury, I agree. It would be rather amusing too.
As I understand it there is.
Quote:
Originally Posted by gwynedd1 View Post

That is because of the cost of land rents are driven up by demand and limited supply. That means housing and factory space costs are driven up. If labor needs to pay $ a month with another $ a month on office or factory space, while a 100 miles away both are half that price, then the price of goods and services will be reflected in the difference. Must be a term for it somewhere under land rents.
It also has to do with the availability of money. With a large population and high density, you have more wealthy people in a small space so you can have more, high end stuff. It is easy to get money and lots of it in big cities. It is hard to get money on a farm in the middle of nowhere. Money is cheap in cities and expensive on farms and the farther you get away from the US economically the more valuable our currency becomes. People will work hard all day for a dollar US in some parts of the world.
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Old 10-20-2011, 01:10 PM
 
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Quote:
Originally Posted by newonecoming2 View Post
Yes it is but we live on an exponential debt curve and we aver due for a reset. Also if you taxed the principle at say 0.5%. Then this would have the effect of having the prime go up by the same amount. But the government would collect the money instead of the banks. It would do interesting things to NPAs as well.

Hi newonecoming2,

I am impressed. Essentially it would take a constitutional majority to override the FED. However here, it would be a simple majority that could essentially raise interest rates. Your detractors have simply exposed their lack of sophistication.
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Old 10-20-2011, 01:29 PM
 
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Quote:
Originally Posted by newonecoming2 View Post
We need to balance the budget in the worst possible way.

I still don't get this. In the current conventions of the system, its the only way of creating new money outside the commercial banks which either are not lending or collecting the interest tax. Its how it is spent that matters. Spending it on tax cuts and useful public works would do that. Again, its a matter of government credit, in the current debt based system, or just treasury created money. The current budget deficit was spent saving the banks so they could buy up bonds in Greece , Brazil etc.


That is why Brazil defended itself.
Brazil raises IOF tax on bonds to 6 pct | Reuters

That is the reason behind the stagflation too. With dollars being stuffed in international markets, any international commodity is going up in price while no one hires anyone at home. That was exactly not how to have a budget deficit unless you are a criminal on Wall Street.
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Old 10-21-2011, 11:00 AM
 
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Quote:
Originally Posted by gwynedd1 View Post
I still don't get this. In the current conventions of the system, its the only way of creating new money outside the commercial banks which either are not lending or collecting the interest tax.
We need to change the current way the system is used. Forever running deficits is unsustainable. Back in the day, before the Fed was set up we use to repay our national debts. The world didn't come to an end when we did this. The need for new money can be met other ways.
Quote:
Originally Posted by gwynedd1 View Post
Its how it is spent that matters. Spending it on tax cuts and useful public works would do that. Again, its a matter of government credit, in the current debt based system, or just treasury created money. The current budget deficit was spent saving the banks so they could buy up bonds in Greece , Brazil etc.
The Greek banks were encouraged to buy up Greek debt. This was done after the Greek people made a run on the Greek banks. We are doing the same thing. Back door monetization. The Greek economy needs to be restructured. They need to downsize their government and increase their tax base. They can't do what we can do and simply have large scale wage price inflation with a freeze on government spending in place.


OK I see what you are saying. We need new money and the banks aren't creating it. Hence we are having deflation. The reason that the banks aren't creating new money is we have too much debt to the level of income that we have. The last time we had this kind of macroeconomic situation was in the 1930's. There were two effective ways to deal with it: one was to get a dictator and the other was to get WWII.


You need enough wage price inflation to reset the debt to income ratio before you can get strong economic growth. Or you need to write off a whole bunch of debt. Or you can have a Great depression followed by WWIII. Or you can get yourself a dictator.


The creation of new money needs assets to be priced lower than wages can by them, then as the asset prices go up new money is created.
Quote:
Originally Posted by gwynedd1 View Post


That is why Brazil defended itself.
Brazil raises IOF tax on bonds to 6 pct | Reuters
We didn't do this. We had a housing bubble that was financed by the foreign banks printing money and buying US consumer debt with it. Well they loaned it to people that bought debt with it. Charging a tax on the principle on debt would tend to put a stop to this. What we need is the international prime lending rate to be set at say 0.75% and then each country enacts a tax on the principle on debt the meets its local needs for inflation and bubble protection. All countries have the same prime lending rate and it is set to meet the needs of the worst country out there. This would be a far more functional system.
Quote:
Originally Posted by gwynedd1 View Post

That is the reason behind the stagflation too. With dollars being stuffed in international markets, any international commodity is going up in price while no one hires anyone at home.
Too much debt and not enough income. Reset that ratio and then you will get domestic hiring. Not to mention that there is an expectations that wages will be dropping so why should they spend their money on labor now when if they can sit on it for a bit and get a better return? Upping the minimum wage should encourage people to spend their money on labor before it goes up.
Quote:
Originally Posted by gwynedd1 View Post
That was exactly not how to have a budget deficit unless you are a criminal on Wall Street.
The system is going to crash.




If you can borrow in one country and then invest in another country with a far higher interest rate then you can make a lot of money. But doing this just blows bubbles. And bubbles destroy wealth not create them.
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Old 10-21-2011, 02:23 PM
 
19,346 posts, read 17,002,157 times
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Quote:
Originally Posted by newonecoming2 View Post
We need to change the current way the system is used. Forever running deficits is unsustainable. Back in the day, before the Fed was set up we use to repay our national debts. The world didn't come to an end when we did this. The need for new money can be met other ways.
Hi newonecoming2,

Again we don't disagree as long as we essentially abandon the Federal Reserve System and create simple treasury notes. I think the most important thing of all is that people would actually understand this system. At a fundamental level, how can you have a democracy with no understanding?


Quote:
The Greek banks were encouraged to buy up Greek debt. This was done after the Greek people made a run on the Greek banks. We are doing the same thing. Back door monetization. The Greek economy needs to be restructured. They need to downsize their government and increase their tax base. They can't do what we can do and simply have large scale wage price inflation with a freeze on government spending in place.
Indeed yes, but the banks have to purchase that with euros and they have no central bank to print them. If it were a Greek currency then exchange rates and inflation would have paid as they go. They just created a huge debt bomb in Greece because they alone could not weaken the euro. It really just moved the ring in the tub. Greek debt is very real. American debt is simply expressed as inflation or higher interest rates in the present. Its truly pay as you go.

Quote:
OK I see what you are saying. We need new money and the banks aren't creating it. Hence we are having deflation. The reason that the banks aren't creating new money is we have too much debt to the level of income that we have. The last time we had this kind of macroeconomic situation was in the 1930's. There were two effective ways to deal with it: one was to get a dictator and the other was to get WWII.
All money = "da guberment" debt (if its not obvious, this is the only term I see fit to use) + business debt + consumer debt.

Most of our money supply was created through housing. Banks made our homes into money and charged us interest on it. Since 80% of bank loans are essentially for housing, and we no long make loans for sub prime, we had a huge demonetization event. Now only da guberment can take on debt, and it does this by running deficits. These deficits should have been directed to create wage inflation.

Its the same reason why we must run trade deficits, because in order to grow the world economy and create liquidity for those who trade in dollars, we must owe more and more. Its why I almost always lose my lunch when reading finance articles about our trade deficits. As long as the USD is the reserve currency, we must import more than we export.

Quote:
You need enough wage price inflation to reset the debt to income ratio before you can get strong economic growth. Or you need to write off a whole bunch of debt. Or you can have a Great depression followed by WWIII. Or you can get yourself a dictator.
Its really even worse than Japan. At least public works made some sad little effort at wage inflation. The problem was Japanese don't take on debt. Sort of a problem in a credit based monetary system. The irony is the debt to GDP ratio seen as such a "disaster". Well, if Japanese don't go into debt then the ratio of public debt circulating as money is going to be quite high.

JapanDebt.png (image)

USDebtToGDP.png (image)

Its a comical tragedy people don't understand this. If the private sector does not take on debt, then the amount of Japanese government debt is going to be at a much higher ratio since the entire economy will be measured in total money supply. It will show a big nominal amount with no real meaning. All it means is that a much larger portion of currency was created by government debt rather than from commercial banks with their usurious terms. Its so unlike a foreign debt like in the case of Greece, its not even funny. Japanese just get scrwed with Yen carry trade. Japanese work and other people buy things with Yen and weaken the buying power of the worker.

Simply compare my mortgage debt to owing myself a trillion gwynedds and then using those as units of trade for my beer drinking buddies. If you wan't, I'll owe you 10 trillion gwynedds.


Quote:
The creation of new money needs assets to be priced lower than wages can buy them, then as the asset prices go up new money is created.
We didn't do this. We had a housing bubble that was financed by the foreign banks printing money and buying US consumer debt with it.
Well they loaned it to people that bought debt with it. Charging a tax on the principle on debt would tend to put a stop to this. What we need is the international prime lending rate to be set at say 0.75% and then each country enacts a tax on the principle on debt the meets its local needs for inflation and bubble protection. All countries have the same prime lending rate and it is set to meet the needs of the worst country out there. This would be a far more functional system.
An excellent explanation of the imbalance.

As of now there is a group of people creating money on their key boards and buying everything up. However to create money, they need a promise to pay. People will not promise to pay for nothing so they had to make people think they were getting something. Thus we have counterfeiting without the usual hassle of the secrete service Its the international bankers against the world's citizenry. Right now they happen to be using the dollar. Before the euro was their favorite battering ram to create excess credit here. The USD is a great racket for them because they can ignore the usual rules of interest rates because of the safety factor. Inflate with credit and skim, crash economy, wait for bail out and buy it up cheap. Right now, someone is creating money on key boards to buy Libya just like Egypt. They think they just got rid of their dictators....au contraire mon frere, they will now deal with the bankers.

Quote:
Too much debt and not enough income. Reset that ratio and then you will get domestic hiring. Not to mention that there is an expectations that wages will be dropping so why should they spend their money on labor now when if they can sit on it for a bit and get a better return? Upping the minimum wage should encourage people to spend their money on labor before it goes up.
The system is going to crash.
It is all locked up. The erzatz "solution" is to get Americans borrowing again. The tea party wants to balance the budget, and help business grow their profits( who will see no reason to borrow because they can finance things themselves for their one customer they will win this year). That leaves only one entity to grow the money supply. I wonder why no one is paying attention?

Personal Debt - Money 101, Lesson 9 - Money Magazine
How can economic growth recover if American consumers are busy saving and paying off debts? | The Conference Board

When will people see the debt paradox?



Quote:
If you can borrow in one country and then invest in another country with a far higher interest rate then you can make a lot of money. But doing this just blows bubbles. And bubbles destroy wealth not create them.
Yep. We are in the aftermath, and they are using our low interest rates to do it elsewhere. The USD being the reserve currency is a slightly different animal. People still buy treasuries at any interest rate because of the "safety". That is why we get flooded with easy credit all the time no matter the interest rate. For the USD, look for world chaos instead of interest rates.

Last edited by gwynedd1; 10-21-2011 at 02:35 PM..
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Old 10-21-2011, 05:32 PM
 
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Quote:
Originally Posted by gwynedd1 View Post
Indeed yes, but the banks have to purchase that with euros and they have no central bank to print them. If it were a Greek currency then exchange rates and inflation would have paid as they go. They just created a huge debt bomb in Greece because they alone could not weaken the euro. It really just moved the ring in the tub. Greek debt is very real. American debt is simply expressed as inflation or higher interest rates in the present. Its truly pay as you go.
The US national debt is very real. It currently exists mostly as T-bills that aren’t very liquid. We don’t have the tax base to cover the debt obligations represented by those T-bills. When everyone figures that out then they will be converted into currency. That will be first order hyper inflation and it could happen in hrs not day or weeks that the price of gas at the pump could hit hundreds of dollars a gallon. People sell their T-bills, the fed buys the T-bills with cash and the cash has to go somewhere.
Quote:
Originally Posted by gwynedd1 View Post

All money = "da guberment" debt (if its not obvious, this is the only term I see fit to use) + business debt + consumer debt.
Not a bad definition.
Quote:
Originally Posted by gwynedd1 View Post

Most of our money supply was created through housing. Banks made our homes into money and charged us interest on it. Since 80% of bank loans are essentially for housing, and we no long make loans for sub prime, we had a huge demonetization event. Now only da guberment can take on debt, and it does this by running deficits. These deficits should have been directed to create wage inflation.
Just up the minimum wage. You get wage inflation. Mint coins no additional debt, and you have room for more personal debt. The government has too much debt. We can’t raise the interest rates as the deficit would explode.
Quote:
Originally Posted by gwynedd1 View Post

Its the same reason why we must run trade deficits, because in order to grow the world economy and create liquidity for those who trade in dollars, we must owe more and more. Its why I almost always lose my lunch when reading finance articles about our trade deficits. As long as the USD is the reserve currency, we must import more than we export.
OK I don’t see why we need to supply the world with money. We can run trade surpluses and collect all the money in the world. That is what China is doing. That is what we did just before The Great Depression. We can just write the world checks so that they money to spend. Print the money we can loan them the money to buy our products with. But it is long term unsustainable. The entire system is. Trade neutral is the only long term sustainable way to go.
Quote:
Originally Posted by gwynedd1 View Post

Its really even worse than Japan. At least public works made some sad little effort at wage inflation. The problem was Japanese don't take on debt. Sort of a problem in a credit based monetary system. The irony is the debt to GDP ratio seen as such a "disaster". Well, if Japanese don't go into debt then the ratio of public debt circulating as money is going to be quite high.

JapanDebt.png (image)

USDebtToGDP.png (image)

Its a comical tragedy people don't understand this. If the private sector does not take on debt, then the amount of Japanese government debt is going to be at a much higher ratio since the entire economy will be measured in total money supply. It will show a big nominal amount with no real meaning. All it means is that a much larger portion of currency was created by government debt rather than from commercial banks with their usurious terms. Its so unlike a foreign debt like in the case of Greece, its not even funny. Japanese just get scrwed with Yen carry trade. Japanese work and other people buy things with Yen and weaken the buying power of the worker.

Simply compare my mortgage debt to owing myself a trillion gwynedds and then using those as units of trade for my beer drinking buddies. If you wan't, I'll owe you 10 trillion gwynedds.


An excellent explanation of the imbalance.

As of now there is a group of people creating money on their key boards and buying everything up. However to create money, they need a promise to pay. People will not promise to pay for nothing so they had to make people think they were getting something. Thus we have counterfeiting without the usual hassle of the secrete service Its the international bankers against the world's citizenry. Right now they happen to be using the dollar. Before the euro was their favorite battering ram to create excess credit here. The USD is a great racket for them because they can ignore the usual rules of interest rates because of the safety factor. Inflate with credit and skim, crash economy, wait for bail out and buy it up cheap. Right now, someone is creating money on key boards to buy Libya just like Egypt. They think they just got rid of their dictators....au contraire mon frere, they will now deal with the bankers.

It is all locked up. The erzatz "solution" is to get Americans borrowing again.
You can’t get Americans borrowing again until they have exces income to leverage. http://www.bearishnews.com/wp-conten...l-debt-gdp.jpg
You have to have the total debt come down before it can come back up again. Negative amortization loans only work if the price of houses is going up. We are at 45% of the money being spent as new debt for the government.
Quote:
Originally Posted by gwynedd1 View Post
The tea party wants to balance the budget, and help business grow their profits( who will see no reason to borrow because they can finance things themselves for their one customer they will win this year). That leaves only one entity to grow the money supply. I wonder why no one is paying attention?
The government can’t be the borrower of last resort if no one will buy the new debt.

We are in a liquidity trap and no one has figured out how to get out of one yet. When new debt makes the economy contract instead of growing how do you grow the economy? You don’t use new debt to do it. You mint coins and give them to everyone to spend. You up the minimum wage so that you have un-leveraged income. And you save so that you have more exports than imports. It is not our obligation to the world to run trade deficits. It is also not our obligation to the world to supply them with money. They have their own money they can use it as they see fit.
Jewish law and years of jubilee. 700 BCE.
Quote:
Originally Posted by gwynedd1 View Post
Yep. We are in the aftermath, and they are using our low interest rates to do it elsewhere. The USD being the reserve currency is a slightly different animal. People still buy treasuries at any interest rate because of the "safety". That is why we get flooded with easy credit all the time no matter the interest rate. For the USD, look for world chaos instead of interest rates.
We are in a liquidity trap. Back in 2009 I was talking to a MBA he was into economics. He explained to me what a liquidity trap was and I said to him we are in one. QE doesn’t get more debt to be taken on as we have more debt than we can service, transferring the debt from privet to public won’t work because we have too much debt to service with our tax base as well. As you have said we are very likely to continue to run trade deficits. I don’t agree with you that we have any obligation at all to do so. There are two ways out of a liquidity trap. One is to write off or pay back enough debt so that there is room for more debt. This is deflation and it sucks. It sucks worse than inflation. The other way to get out of a liquidity trap is inflation. The trap is that you can’t get inflation by loaning out more money. You can get inflation by increasing the minimum wage (a lot). You can only get stagflation by increasing the money in circulation. You need more wages to leverage than you had before. And the other part of the trap is the downwards pressure on wages from the collapsing debt.

Debt free cash is what is needed now, about $1 trillion, $3k to everyone.

http://blogs.reuters.com/rolfe-winkl...ow-vs-gold.jpg

See the shape of the curve after 1929? Compare it to the shape of the curve after 1999. We haven’t even hit bottom yet.
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Old 10-21-2011, 09:08 PM
 
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Originally Posted by newonecoming2 View Post
The US national debt is very real. It currently exists mostly as T-bills that aren’t very liquid. We don’t have the tax base to cover the debt obligations represented by those T-bills. When everyone figures that out then they will be converted into currency. That will be first order hyper inflation and it could happen in hrs not day or weeks that the price of gas at the pump could hit hundreds of dollars a gallon. People sell their T-bills, the fed buys the T-bills with cash and the cash has to go somewhere.
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. 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. 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.

Quote:
Not a bad definition. Just up the minimum wage. You get wage inflation. Mint coins no additional debt, and you have room for more personal debt. The government has too much debt. We can’t raise the interest rates as the deficit would explode. OK I don’t see why we need to supply the world with money.
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.

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We can run trade surpluses and collect all the money in the world. That is what China is doing. That is what we did just before The Great Depression. We can just write the world checks so that they money to spend. Print the money we can loan them the money to buy our products with. But it is long term unsustainable. The entire system is. Trade neutral is the only long term sustainable way to go.
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.

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You can’t get Americans borrowing again until they have exces income to leverage. http://www.bearishnews.com/wp-conten...l-debt-gdp.jpg
You have to have the total debt come down before it can come back up again. Negative amortization loans only work if the price of houses is going up. We are at 45% of the money being spent as new debt for the government.
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.

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The government can’t be the borrower of last resort if no one will buy the new debt.
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.

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.

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We are in a liquidity trap and no one has figured out how to get out of one yet. When new debt makes the economy contract instead of growing how do you grow the economy? You don’t use new debt to do it.
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.

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You mint coins and give them to everyone to spend. You up the minimum wage so that you have un-leveraged income. And you save so that you have more exports than imports. It is not our obligation to the world to run trade deficits. It is also not our obligation to the world to supply them with money. They have their own money they can use it as they see fit.
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.

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Jewish law and years of jubilee. 700 BCE.
We are in a liquidity trap. Back in 2009 I was talking to a MBA he was into economics. He explained to me what a liquidity trap was and I said to him we are in one. QE doesn’t get more debt to be taken on as we have more debt than we can service, transferring the debt from privet to public won’t work because we have too much debt to service with our tax base as well. As you have said we are very likely to continue to run trade deficits. I don’t agree with you that we have any obligation at all to do so. There are two ways out of a liquidity trap. One is to write off or pay back enough debt so that there is room for more debt. This is deflation and it sucks. It sucks worse than inflation. The other way to get out of a liquidity trap is inflation. The trap is that you can’t get inflation by loaning out more money. You can get inflation by increasing the minimum wage (a lot). You can only get stagflation by increasing the money in circulation. You need more wages to leverage than you had before. And the other part of the trap is the downwards pressure on wages from the collapsing debt.
Again this is no obligation. Its market forces that create Tiffin's dilemma.

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....

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Debt free cash is what is needed now, about $1 trillion, $3k to everyone.

http://blogs.reuters.com/rolfe-winkl...ow-vs-gold.jpg

See the shape of the curve after 1929? Compare it to the shape of the curve after 1999. We haven’t even hit bottom yet.
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.


Federal Reserve earned $45 billion in 2009
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.


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.
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