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Beware of the magic wand approaches. We are inundated with quick fix ideas. Change mark to market accounting and all our ills go away. Nonsense! If it was so easy as gov spending money to keep economy out of recession, we would never have recessions in the first place.
The more Barry, Nancy, Harry, and little Timmy tell us what they plan (or tell us what they hope to plan some day when they actually plan), the more the markets tank. Funny thing...it seems like whenever the politicians tell us how they plan to "save" us, the worse things get.
There is simply no reason to accept these cycles as simply the way it is. Cycles have a cause. What is the cause of these economic cycles? The moon causes tides and the seasons cause a change in temperature but are all explainable. Strangely in economics it just goes up and down. The tropics do not tend to have these extreme cycles because they do not have the cause. The reason economics has booms and busts is because of, typically, monetary manipulation that has been documented for 100s of years.
Even regression has cause. Condor populations certainly have a natural level but we cannot expect regression to remove lead from the environment. Someone who noticed populations going up and did not know about removing the lead would simply call it regression. However we know. When anyone accepts the mean in statistics class, it means you don't have a clue. I do know the cause, and its monetary manipulation. We allow banks to grow the money supply with fractional reserves which becomes fuel for booms and busts.
If people make bad loans in a full reserve system then anyone not involved in these transactions would be unaffected. In that case, person A or person B has the money. With what we are doing now is money is retired as debt disappears and all people are affected by the disappearance of money.
We have to create debt. Its impossible to get out of debt as a society because all money is debt. We could have monetized sea shells, rocks, pizza, goats, cattle, what ever, but in this society we have monetized debt. If you monetize pizza, what happens when you eat it? A depression must occur after the pizza party. It means we need more pizza than we would normally need to eat. Since we have monetized debt, less of it means a depression. If I live in a boat house I go up and down with the waves. Do houses on dry land do the same? We go up and down in boom and bust because we grow the money supply with debt backed by durable assets. This drives up the price of durable assets which in turn serves to create even more money to drive it up further. Thats the boom bust cycled engineered by money as debt.
The lesson form Japan is not what most people think it is. Japan's public debt isn't debt, its the money. Without a large Japanese public debt there would be few Yen since Japanese do not take on personal debt. They have the same idiotic system we do but they did not take the debt bait. So to grow the money supply, public debt was all there was. Even with this, Japan is better off with a huge public debt. If 1 trillion in M2 existed and 500 billion was public debt silly brain washed Americans would consider it a blessing to rather have 1 trillion in money supply and only 100 billion in public debt. The problem is that would mean 900 billion is private debt all at interest to a bank. Since this represents the entire principle the only way to pay the interest is more debt.
We don't have a debt problem; we have a money problem. We have monetized debt so we must have it. If you monetize garbage no matter how bad it is you cannot haul it away. You can try to kill the rats and put up with the stench but we need the trash when we decide to use it as money. The same goes with debt. So long as your salary is paid and contracted and expanded by mortgages and car loans, its pointless. Until we reform the money system to not use money as debt instruments, tax payers will be bled for nothing. We will perpetually have debt and boom bust cycles over and over again because the financial system has designed it that way against the public interest and for the interest of usury.
In this system the solution is simple. Simply replace the contracting private credit with public credit. To do this with without wealth transfer or central planning simply cut taxes which will grow public debt(the money) to counter the shrinking public credit. If inflation returns , raise taxes. Most of all, we need to replace federal reserve notes with treasury notes and stop calling it debt. Its our money. Then we need to go to full reserve banking and not allow the money supply to grow with debt.
it sounds as if you are advocating having the government take over the private sector debt, but the government is funded by the taxpayers. if you have slow growth or no growth you would defeat the purpose. you can call federal reserve notes treasury notes if you want but either way it is still debt.
it sounds as if you are advocating having the government take over the private sector debt, but the government is funded by the taxpayers. if you have slow growth or no growth you would defeat the purpose. you can call federal reserve notes treasury notes if you want but either way it is still debt.
Hi floridasandy,
The public debt is not debt, its basis of the money supply only in that case its interest free money rather than created by banks at interest. I am at a loss to make it anymore clear than this. If the Federal government had no "debt" no one would have any money at all, not even a dollar.
“In numerous years following the Civil War the government ran a heavy surplus. It could not however pay off its debts or retire its securities, because to do so meant there would be no bonds to back the national bank notes. To pay off the debt was to destroy the money supply.â€
- John Kenneth Galbraith
Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them. Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933.
- United States Department of the treasury.
What we use as money is debt. When debt is paid off it does not go back into circulation. The money is removed or destroyed. However when the government borrows, it is like essentially a treasury note since they do not pay any real interest to the Federal Reserve because Federal Reserve profits are returned to the treasury. No real debt is created at this point. Its just money creation.
The Federal government is not directly funded by tax payers. You can see how evident this is by a comparison of state government and their desperate scramble for funds. States are funded primarily through taxation while the Federal government is funded primarily by money creation. Any Federal tax is in reality a measure to keep down inflation(They just vote up the maximum debt).
Real debt is created when the Fed sells bonds which is also anti-inflationary because when people buy bonds from the Fed they take dollars in circulation and place them into the Federal Reserve bottomless pit/infinite pile. The last thing we want during a depression is for anyone to buy government bonds.
The problem with government spending(debt, printing or what ever alias one chooses) is what it is spent on. Its simply printing paper and driving up a nominal value and nothing more if distributed equitably. The reason to do this is simple.
1. Banks created lots of fractional reserve money at interest. This created inflation in housing as prices continually went up in price. It also increased the equity share of the banks in these houses. If some retired couple who owned their house sold it to someone who financed it with 5% down then equity ownership is reduced 95% in that asset.
2. The resulting implosion they caused has now caused the debt in real terms to go up. Lenders win with depression as long as those in debt service the debt. Why would we want to banks to increase the value of their debt in real terms on a catastrophe they engineered?
3. The bailouts have filled in the default gap. Banks can't loose.They sit tight , get bailed out for the bad loans and continue to collect on those who are left solvent.
4. The next phase of this is as they sit on huge reserves is banks will be able to completely flood the money supply where financed ownership will completely crowd out equity ownership. Thus even more of what anyone "owns" is a bank asset backing loans at interest which we can't event try to pay off without yet another depression.
So in order to drive down real debt to banks we need to drive back up the money supply directly to American citizens to drive down the effective debt owed to banks. Tax cuts and direct stimulus is the best way to do this. I would even prefer that this money would be used to retire commercial debt but then the banksters would go through the roof as interest free treasury debt is swapped out directly for their usurious fractional reserve.
So giving hundreds of billions of dollars to irresponsible elites and bankers who lost money on risky investments is the way to stabilize our nation's economy?
I was wrong when I thought Reagan had the monopoly on voodoo economics!
You've seen Reaganomics, now get ready for Obamaomics!
Things will turn around eventually, anyway. Maybe the stimulus will help, maybe it won't. The sky is not falling, and I don't think the world is going to end anytime soon. It's really sad that so many people are being laid off. And I do feel bad for people that are planning to retire anytime soon, because now is just not a good time to do that. But spending another $780 billion on whatever isn't going to solve everything. I don't really care if it passes. Even though I'm an Obama supporter, I kind of hope it doesn't. I don't think future generations should have to pay for our mistakes. It probably will pass, though.
Eventually is the key word, but alot of people(myself included) cannot wait for that day. People need jobs TODAY. Not a few months from now, not a year from now, but NOW. I took a crap telemarketing job to try and save up to move out of my parents home(no one else would hire me). It didn't work because the pay was dismal. Now even people who might hire at this time will have a finer-tooth comb to who they hire. This means the choppier your job history, the less likely you'll have a job. Add the fact that whenever a position opens up, people swarm to it like flies on rotten meat. It also doesn't help that alot of people who were laid off from skilled positions are looking for jobs in retail. I look at the stimulus plan from this perspective. Even with so many sales, people are still buying less. People are not confident about the economy. Some people just don't have the money. If a business goes out of business now, sure, it's easy to say "let them go". One problem:That is a few more jobs we won't have. What about the unemployed? The laissez-faire approach won't work because it will cost alot of people. What happens when businesses fail at this time? It doesn't mean one less store. It means less and less jobs. Something needs to be done NOW in order to get people back to work.
They seem awfully intent on hurrying something through just to get it through. Almost like something really bad is about to unfold and they want to be able to say " We tried". That and the secret closed door meetings and negotiations. Its almost as if they were trying to placate somebody, and not necessarily the american people.
More and more I see the US citizen and tax payer being burdened with propping up world financial globalization efforts and now that we are on the brink of backing off and refusing to do it, there's a panic. Somebody is twisting Obama's arm.
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