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Fox
Joined: 04 Mar 2009
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 Posted: Fri Sep 25, 2009 7:49 pm Post subject: |
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| Kuros wrote: |
| Fox wrote: |
We can solve the financial problems we're facing without giving up [even one of] our national parks. |
Maybe, but we won't. Unless of course you think inventing money is an acceptable alternative, and many of those left of center do. |
I agree we won't, and I agree inventing money isn't an acceptable alternative. Ultimately all I can do is talk about what I think should happen, and perhaps lament what actually ends up happening.
We clearly do need to cut back spending. I just don't think national parks are the place to do it. Nor do I feel they're something to be sold off. Let's cut the waste first. |
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Fox
Joined: 04 Mar 2009
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| Posted: Fri Sep 25, 2009 7:51 pm Post subject: |
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| Pluto wrote: |
| I didn't suggest to close down the national parks and start breaking ground for Wal-Marts. I said "It's best that the government sell any land currently not being put to the best use piecemeal." The Feds own well over a quarter of the land through out the US; that is just too much.The national parks are being put to good use so I didn't even have those places in mind. |
Okay. I misinterpretted what you said. Sorry about that. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Fri Sep 25, 2009 7:58 pm Post subject: |
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| Fox wrote: |
| Let's cut the waste first. |
Cut the waste first?
Fox, our current national debt is at $11 trillion and rising. $38,000/citizen. That's about three quarters of America's total GDP. So let's cut the waste. Umm, how about we axe defense spending entirely? Oh, wait, that's only 4% of our GDP, still another 70% of our GDP to cut! What other waste can we find?
This is what I'm talking about, not many Americans have a sufficient grasp of how much debt we're carrying. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Sep 25, 2009 8:02 pm Post subject: |
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^ Dallas Fed puts the total at 99 trillion.
I'm pretty opinionated about all matters economics (you may have noticed). But I am completely at a loss on this. A debt jubilee? I'm very fond of America. I don't know how she is going to deal with this. |
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Fox
Joined: 04 Mar 2009
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| Posted: Fri Sep 25, 2009 8:10 pm Post subject: |
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| Kuros wrote: |
| Fox wrote: |
| Let's cut the waste first. |
Cut the waste first?
Fox, our current national debt is at $11 trillion and rising. $38,000/citizen. That's about three quarters of America's total GDP. So let's cut the waste. Umm, how about we axe defense spending entirely? Oh, wait, that's only 4% of our GDP, still another 70% of our GDP to cut! What other waste can we find?
This is what I'm talking about, not many Americans have a sufficient grasp of how much debt we're carrying. |
We don't need to cut out enough spending to zero our debt in a year. All we need to do is change that from $11 trillion and rising to $11 trillion and falling, and we'll be on the right path. Obviously, the more we can cut out, the better, but some things just aren't worth giving up in order to reduce the debt a tiny amount faster. National parks are one such thing. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Fri Sep 25, 2009 8:25 pm Post subject: |
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| Fox wrote: |
| Kuros wrote: |
| Fox wrote: |
| Let's cut the waste first. |
Cut the waste first?
Fox, our current national debt is at $11 trillion and rising. $38,000/citizen. That's about three quarters of America's total GDP. So let's cut the waste. Umm, how about we axe defense spending entirely? Oh, wait, that's only 4% of our GDP, still another 70% of our GDP to cut! What other waste can we find?
This is what I'm talking about, not many Americans have a sufficient grasp of how much debt we're carrying. |
We don't need to cut out enough spending to zero our debt in a year. All we need to do is change that from $11 trillion and rising to $11 trillion and falling, and we'll be on the right path. Obviously, the more we can cut out, the better, but some things just aren't worth giving up in order to reduce the debt a tiny amount faster. National parks are one such thing. |
Fine. I don't think I'm really getting my point across.
Anyway, yes, National Parks are awesome. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Sat Sep 26, 2009 12:38 am Post subject: |
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| Fox wrote: |
| Kuros wrote: |
| Fox wrote: |
| Let's cut the waste first. |
Cut the waste first?
Fox, our current national debt is at $11 trillion and rising. $38,000/citizen. That's about three quarters of America's total GDP. So let's cut the waste. Umm, how about we axe defense spending entirely? Oh, wait, that's only 4% of our GDP, still another 70% of our GDP to cut! What other waste can we find?
This is what I'm talking about, not many Americans have a sufficient grasp of how much debt we're carrying. |
We don't need to cut out enough spending to zero our debt in a year. All we need to do is change that from $11 trillion and rising to $11 trillion and falling, and we'll be on the right path. Obviously, the more we can cut out, the better, but some things just aren't worth giving up in order to reduce the debt a tiny amount faster. National parks are one such thing. |
Didn't you know that all money in our system is created as debt? This is a fact (not my opinion, or interpretation, but a simple fact). Therefore, the debt never goes down. The more debt that is paid off, the less money there is in existence. The only way to lessen the debt is to decrease the money supply, which causes an economic collapse.
In other words the debt cannot be paid off. Never, ever. The only way to proceed is to increase the debt to "pay off" old debt + interest; or to just scrap the whole system altogether. |
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jaykimf
Joined: 24 Apr 2004
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| Posted: Sat Sep 26, 2009 7:53 am Post subject: |
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| visitorq wrote: |
Didn't you know that all money in our system is created as debt? This is a fact (not my opinion, or interpretation, but a simple fact). Therefore, the debt never goes down. The more debt that is paid off, the less money there is in existence. The only way to lessen the debt is to decrease the money supply, which causes an economic collapse.
In other words the debt cannot be paid off. Never, ever. The only way to proceed is to increase the debt to "pay off" old debt + interest; or to just scrap the whole system altogether. |
"A popular theory about the Fed and money creation in the United States is built around the notion of a "mathematical flaw" inherent in introducing money by means of "lending" as opposed to "spending." This theory starts with the observation that money in the United States (and most other countries) is placed into circulation through the purchase of interest-bearing debt.
To inject money into the economy, the Fed buys federal securities, thereby acquiring an asset that pays interest. In the second round of money creation, banks, S&Ls, and credit unions, through the fractional reserve banking system, earn interest on the loans they hold as a consequence of creating checking account money.
This means that for every dollar of money, there is a corresponding dollar of interest-bearing debt. As a consequence of this arrangement, the argument goes, there is only enough money to pay off the principal of existing debt; there can never be enough to pay the interest that accrues on that principal. If there is to be enough money to handle interest payments in the economy, the theory continues, more borrowing must occur to generate the extra money. Of course, additional borrowing under this arrangement would mean even more interest that cannot be paid out of the existing money supply.
Just to keep the money supply constant under the system, according to this line of reasoning, debt must grow by the rate of interest. Since the economy grows over time, debt must grow at even a higher rate. As compounding occurs, the result is an explosive growth of debt. Thus, the argument is, policy must actually encourage households and businesses to take on new debt just to keep the money supply from shrinking.
Allowing debt to expand is a problem, these theorists argue, because interest costs are a -- if not the -- principal cause of inflation. When the banks make loans, they charge interest. Interest represents a cost of doing business for borrowers which they pass along to consumers in the prices they charge for goods and services. Hence, it is reasoned, the more interest paid, the higher prices must be.
If debt must mushroom over time in order to keep the money supply from shrinking, according to this line of thinking, then the cost of doing business must rise faster each year, and so must prices. In short, it is argued, the money supply process demands that debt grow exponentially. As debt grows as a proportion of total production, so do interest payments. And as interest payments grow relative to the rest of real income, it is claimed, prices must rise faster as well.
This dilemma, the proponents argue, is the inherent problem that causes instability in the current banking system -- an instability that the authors believe to be responsible for the business cycle.
Most of those who advance this view believe that to correct the inherent instability in the current monetary system and simultaneously reduce inflation, the system of "debt" money must end. They argue that money must be spent into existence, or at least issued without charging interest.
This analysis is deficient on four counts. First, the banking system does not behave as presented above. The payment of interest on debts that arise through the money creation process will neither contract the money supply nor result in the growth of debt relative to the money supply. Second, there is no reason for the money supply to equal the sum of debt and interest. Third, debt is such a common and essential part of an economy, there is always plenty of it available for money creation without any need to encourage the creation of more. (The fourth reason, that interest costs are not the cause of inflation, is discussed in another section).
The crucial error made by the above arguments lies in the proposition that once interest is paid by the government to the Fed, money is "extinguished". If the interest earnings were simply put away into a vault until they were lent out again, the authors would be correct. But in fact, the money is spent back into existence.
The part of the Fed's income used for its own expenses and the dividend paid to member banks is, of course, spent back into existence. The rest the overwhelming majority of all of the income earned by the Federal Reserve -- that which is remitted back to the U.S. Treasury, is also spent. Thus, "lending money" into existence does not mean that debt has to constantly increase to make up for the money that is paid in interest and removed from circulation. It is not removed from circulation; interest payments to the Fed re-enter circulation as they are paid for expenses, as they are paid in dividends, and most significantly as they are paid over to and spent by the Treasury.
The argument has similar problems with its claim that money disappears from circulation as interest is paid back to commercial banks. Like the Fed, commercial banks have expenses. They must pay these out of their earnings -- spending them into existence. They also must pay dividends to their stockholders -- again spending them into existence. Most important among their expenses is interest on their deposits. Whether in the form of explicit interest paid to depositors or implicitly paid as free services (such as check-clearing, balance reporting, etc.), these funds are also spent into existence. Even those sums retained to increase the capital of the bank do not have to be lent, but can be used to purchase expansion of the facilities. There is no requirement in the system that interest earnings must be lent back into existence through new loans.
Since the amount of dollars represented by the interest payment is returned to the spending stream and the money supply, there is no need for banks to lend continuously a sum equal to the interest payment to keep the money supply constant. Hence, there is no force causing debt to grow continuously relative to the available money supply. The current system is not inherently unstable.
Nor is there any reason why there must be enough money outstanding to pay off all outstanding debt. The money needs of the economy are much smaller than an economy's total debt. Money circulates; it gets used repeatedly in the course of a year. Transactions take little time. As soon as money is used in one transaction, it is available for use in another. Consequently, the money stock need only be a fraction of the total transactions that take place in a year.
An economy only needs enough money to complete the transactions that occur in the course of normal business -- not a sum related to total debt. And the total amount of money needed is less than the total value of the transactions because the money is used more than once.
Finally, debt is not created because of a need for money. Every economy - even those without money -- has debt. Debt is a necessity in any modern economy. Indeed, debt pre-dates money in that it exists even in barter economies. It comes in a variety of forms and does not consist exclusively of bank loans. It exists because some people do not consume all that they produce, and are in the position to place some of their goods temporarily in the hands of those who need more goods than they have. Resources are not always in the hands of those who can best employ them. Hence, the lending of resources is common and even necessary for economic progress.
Consequently, debt is always present in private affairs. Healthy economies can always be expected to have private debt equal to many times the amount of money that they need. Even as some borrowers repay their loans, still others are ready to borrow. Money creation, therefore, does not drive the creation of debt; the debt is already there regardless of how money is created. It is always there. There is plenty of debt to be used by the banking system for the purpose of money creation with plenty more left over. This is true everywhere there are market systems. Debt does not exist because of a need to create money.
In short, there is no mathematical flaw. And paying money directly out of the Treasury would have exactly the same economic effect as having the Fed create it by "lending." http://home.hiwaay.net/~becraft/FRS-myth.htm#hd25 |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Sep 26, 2009 8:41 am Post subject: |
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Ok. Enough.
There is a thread or 10 specifically about the Fed. Visitorq, dude, I'm on your team. I do not like the current monetary arrangements. But every thread now becomes an anti-fed thread. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Sat Sep 26, 2009 8:43 am Post subject: |
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| Quote: |
| The crucial error made by the above arguments lies in the proposition that once interest is paid by the government to the Fed, money is "extinguished". If the interest earnings were simply put away into a vault until they were lent out again, the authors would be correct. But in fact, the money is spent back into existence. |
Wrong. The proposition is that if the debt is paid off, the money is extinguished. And the interest can only be paid off by borrowing more money (since all money is debt).
| Quote: |
| The part of the Fed's income used for its own expenses and the dividend paid to member banks is, of course, spent back into existence. The rest the overwhelming majority of all of the income earned by the Federal Reserve -- that which is remitted back to the U.S. Treasury, is also spent. |
This is so altogether bogus I actually lol'd. Last time you posted a link stating that the Treasury received a paltry $29 billion back from the Fed (on the trillions upon trillions of debt it has). So the ridiculous, and demonstrably false explanation given by your bogus "fed myths" article is that that $29 billion is "spent" back into existence, thereby stabilizing our money supply? (which amounts in the multi-trillions, all of which was created as debt).
LOL |
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visitorq
Joined: 11 Jan 2008
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| Posted: Sat Sep 26, 2009 8:45 am Post subject: |
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| mises wrote: |
Ok. Enough.
There is a thread or 10 specifically about the Fed. Visitorq, dude, I'm on your team. I do not like the current monetary arrangements. But every thread now becomes an anti-fed thread. |
Well it all comes back to the Fed... what do you suggest I do? Pretend otherwise? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Sep 26, 2009 8:51 am Post subject: |
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| Well, you and Jaykim are following each other around arguing about one topic. Why not keep it on one of the many (or even a new) Fed thread? |
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Pluto
Joined: 19 Dec 2006
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| Posted: Sat Sep 26, 2009 9:03 am Post subject: |
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| visitorq wrote: |
| mises wrote: |
Ok. Enough.
There is a thread or 10 specifically about the Fed. Visitorq, dude, I'm on your team. I do not like the current monetary arrangements. But every thread now becomes an anti-fed thread. |
Well it all comes back to the Fed... what do you suggest I do? Pretend otherwise? |
Vistorq, I think the people are trying to say you've made your point. Debt based fiat money that is inflationary by nature, the Federal Reserve, Chairman Bernanke suck. They all suck. Honestly, I think many here agree with such sentiment.
There is not a need to bring up the fed and its shenanigans in a thread about the government selling off pubic lands. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Sat Sep 26, 2009 9:07 am Post subject: |
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| mises wrote: |
| Well, you and Jaykim are following each other around arguing about one topic. Why not keep it on one of the many (or even a new) Fed thread? |
I was just discussing the nature of our debt...
Anyway, I know what you mean (it also annoys me having to rehash the same old argument for people like jaykim, who just don't get it). He just seems to like to spring that same old "fed myths" article on me - which I've debunked every time. I generally avoid interacting with said poster, however.
EDIT: actually, I checked the first page - and I did indeed bring up the Fed...
Guess I just got the Fed on my brain, sorry folks  |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Sep 26, 2009 9:29 am Post subject: |
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| visitorq wrote: |
| mises wrote: |
| Well, you and Jaykim are following each other around arguing about one topic. Why not keep it on one of the many (or even a new) Fed thread? |
I was just discussing the nature of our debt...
Anyway, I know what you mean (it also annoys me having to rehash the same old argument for people like jaykim, who just don't get it). He just seems to like to spring that same old "fed myths" article on me - which I've debunked every time. I generally avoid interacting with said poster, however.
EDIT: actually, I checked the first page - and I did indeed bring up the Fed...
Guess I just got the Fed on my brain, sorry folks |
Ok, I actually agree with you that it is not possible to separate the current financial problems and the foundations of the monetary/financial economy. And it isn't at all inappropriate to mention the foundations in a discussion like this. But if there is a disagreement on how the system operates then take it to a Fed thread. That's all. |
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