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U.S. Treasury Data Lab

datalab.usaspending.gov

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Re: U.S. Treasury Data Lab

#11

Post by Gabriel_Martin »

When it comes to comparing the amounts of US gov spending to US household spending (not that I could propose a better mechanism, meaning I understand the value of framing things in such a way, and fully admit I can't think of a more salient way to do it) I'm just not a fan of comparing state level spending to household or personal finance.

It leads to other examples being used that just are not true. Like: "It is similar to a person using his or her credit card for a purchase (rather than cash, check, or a debit card) and not paying the full credit card balance each month".

I cannot sell access to my debt to pay for past debts, which is how the government has paid it's debts since 1837 (probably so long ago because that the last time we sought to destroy debt and not pay for things by monetizing debt, it caused the longest depression in American history due to Jackson's monetary policy in 1835). Nor can I create credit out of thin air, by buying treasuries my member banks. Also, I most definitely do not owe 50% of my non-intergovernmental debt to my own central bank and state and local governments and their pensions. Much less, all the while operating with a currency I control.

So yeah, I don't love it, but I get it.

Re: U.S. Treasury Data Lab

#12

Post by pphysch »

aazaa wrote: post #3

> While the Department of the Treasury prints actual dollars, “printing money” is also a term that is sometimes used to describe a means of monetary policy, which is conducted by the Federal Reserve. Monetary policy involves controlling the supply of money and the cost of borrowing. The Federal Reserve uses monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates on the beha…

> Although some view the Fed's QE as a form of "money printing," it's not. It's an asset swap in which the Federal reserve buys a Treasury from a bank, issuing a reserve asset as a credit to the bank. Reserve assets thereby become "trapped" inside the banking system. They are not cash and can only be used under very restricted conditions (not unlike a laundry token) at least according to some sources.

According to the lede of [1], "[Federal Reserve Deposits] are interchangeable with Federal Reserve Notes", i.e. cash. But you are claiming the opposite. Do you have a source?

[1] - https://en.wikipedia.org/wiki/Federal_Reserve_Deposits

Re: U.S. Treasury Data Lab

#14

Post by lumost »

BobbyJo wrote: post #6
tick_tock_tick wrote: post #5

Earlier quoted context omitted.

> Private banks create a good chunk of the new money that goes into circulation by issuing loans. Even this is misleading private banks do not "create" money. They add to the supply but do not create. For every loan credit there is an equal loan debit. The total amount of money, the sum of all credits and debits, is the exact same.

> The total amount of money, the sum of all credits and debits, is the exact same. Can't banks lend something like 7X more money than they have in deposits?

That 7x that is lent will be deposited by the people it is spent on. The bank can then lend 7x that and keep fabricating money as long as there are people to profitably lend too. The rate of currency growth is then correlated to velocity for how fast it’s turned over from debt to deposit to debt minus the counter flow of debts being retired.

Re: U.S. Treasury Data Lab

#16

Post by BobbyJo »

lumost wrote: post #14
BobbyJo wrote: post #6

Earlier quoted context omitted.

> The total amount of money, the sum of all credits and debits, is the exact same. Can't banks lend something like 7X more money than they have in deposits?

That 7x that is lent will be deposited by the people it is spent on. The bank can then lend 7x that and keep fabricating money as long as there are people to profitably lend too. The rate of currency growth is then correlated to velocity for how fast it’s turned over from debt to deposit to debt minus the counter flow of debts being retired.

Yes, but doesn't that strictly invalidate:

> The total amount of money, the sum of all credits and debits, is the exact same

?

Re: U.S. Treasury Data Lab

#17

Post by legolas2412 »

pphysch wrote: post #12
aazaa wrote: post #3

> While the Department of the Treasury prints actual dollars, “printing money” is also a term that is sometimes used to describe a means of monetary policy, which is conducted by the Federal Reserve. Monetary policy involves controlling the supply of money and the cost of borrowing. The Federal Reserve uses monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates on the beha…

> Although some view the Fed's QE as a form of "money printing," it's not. It's an asset swap in which the Federal reserve buys a Treasury from a bank, issuing a reserve asset as a credit to the bank. Reserve assets thereby become "trapped" inside the banking system. They are not cash and can only be used under very restricted conditions (not unlike a laundry token) at least according to some sources. According to th…

I think they have a weird definition of creating money. Because they did say "The Federal government (through the Treasury) creates still more by issuing bonds to cover deficit spending.". So, they imagine the treasury printing the money, while the bonds are actually an IOU.

This is how I see it. Treasury makes new treasuries, and the Federal reserve buys them (through a bank, but it is a middle man only). Essentially, Federal reserve created money and loaned it to the government, holding the treasuries as IOU. This is further complicated as the Federal reserve is also mandated to give all profits to the treasury. So, essentially, the treasury did not create the money, only got a loan, but its loan payments are going to come back to itself.

I personally find it easier to dispel with the illusion of an independent fed, and just say the government (which includes both fed and treasury) prints money.

Re: U.S. Treasury Data Lab

#18

Post by phkahler »

Gabriel_Martin wrote: post #11

When it comes to comparing the amounts of US gov spending to US household spending (not that I could propose a better mechanism, meaning I understand the value of framing things in such a way, and fully admit I can't think of a more salient way to do it) I'm just not a fan of comparing state level spending to household or personal finance. It leads to other examples being used that just are not true. Like: "It is sim…

The analogies are good to help people see that government debt is bad. When a person is in over their head, they can possibly file for bankruptcy. When a government gets in over their head bad things happen too, up to and including wars. Comparing government debt to personal debt is just a way to make it more comprehensible how bad the situation is.

Re: U.S. Treasury Data Lab

#19

Post by lend000 »

Gabriel_Martin wrote: post #9
lend000 wrote: post #8

Earlier quoted context omitted.

As the other commenter implied, in a fractional reserve banking system (where banks lend any amount > 0, and are not just acting as vaults), banks do indeed create money [0]. Printed dollars are necessary in an amount proportional to economic activity, and the sum of printed dollars is only loosely related to the total money supply as it affects the macroeconomy (and is becoming less relevant every year). [0] https:/…

From your link, wouldn't: "the multiplier being the maximum amount of commercial bank money created by a given unit of central bank money" be interpreted to mean that as soon as central bank monetizes it's debt, i.e. the money is initially created, it inherently is equal to a certain amount of commercial bank money, as long as it doesn't remain unlent? So it's not really the new creation of money, but rather the real…

I'm not sure if I'm interpreting you correctly, but I think the answer is no. It's best to think of it as the creation of new money, which cannot significantly be reversed. The way the Fed prints money is by buying Treasuries, which increases the money supply in two ways:

1. It allows the government to spend more money, which ends up going to a bunch of places that can't be "unspent" (government worker salaries, contractors, equipment, etc.). That money goes into various banks and ends up getting irreversibly multiplied.

2. In order to fill bids for Treasuries, the Fed front-runs other market participants with artificially low interest rates (below market), forcing other major Treasury participants (like banks) to lower their commercial interest rates in order to do something with their deposits, resulting in more borrowing.

It should also be noted that the Fed sets the Fed Funds Rate, but my understanding is that this has a less pronounced effect. And it sets the minimum fractional reserve ratio, which as of COVID, is ZERO (infinite multiplier potential, although most big banks are pretty conservative with their reserves. Although IMO they do not need to be, since the odds of a run on the bank in an approaching-cashless society is nil).

Re: U.S. Treasury Data Lab

#20

Post by SubiculumCode »

phkahler wrote: post #18
Gabriel_Martin wrote: post #11

When it comes to comparing the amounts of US gov spending to US household spending (not that I could propose a better mechanism, meaning I understand the value of framing things in such a way, and fully admit I can't think of a more salient way to do it) I'm just not a fan of comparing state level spending to household or personal finance. It leads to other examples being used that just are not true. Like: "It is sim…

The analogies are good to help people see that government debt is bad. When a person is in over their head, they can possibly file for bankruptcy. When a government gets in over their head bad things happen too, up to and including wars. Comparing government debt to personal debt is just a way to make it more comprehensible how bad the situation is.

Government debt is not bad. Government debt is a net private surplus.
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