151–160 of 234 posts
Government spending is an investment in civil society, which is repaid thru taxation. If everyone paid their fair share of taxes, there would be no problem.
It’s not always a good return on investment. When you spend someone else’s money you aren’t going to penny pinch or bargain hunt like you need to.
Earlier quoted context omitted.
Which gold standard? There are many. Is everything backed by gold? So no loans, debt, or bonds? This is deflationary because the total value of stuff grows but the monetary base stays the same. Is there a fiat currency backed by gold? How will you avoid the monetary base growing larger than the total quantity of gold in the world? How is this functionally different from today?
The following one: simply remove the fiat, and let the market take over again. I.e. the same way commerce was carried out everywhere for approximately forever. It's presumed a gold standard would return in that scenario, but could be something else. I assume this is how it'll end up naturally though. No one will end up willing to take the other country's currency in cross border trade, so that's where hard currency w…
You should look into what the US financial system was like before the Civil War. It was wild. The government issued gold coins. But most people's day-to-day currency was paper money issued by individual banks. Each bank issued its own notes, with their own design. In theory they were redeemable for gold, but in that era of low/no bank regulation, banks often failed, leaving the currency worthless.
People issued books detailing the design of each of the banknotes and estimates of the solvency of each bank. Counterfeits were a huge problem.
Of course, news traveled more slowly in those days, so the further you got from an issuing bank, the less anyone could trust the notes. If you tried to spend your home bank's notes out of state, you'd get pennies on the dollar.
Seems like an incredibly inefficient system to go back to. And one which still wouldn't stop the federal government from borrowing.
He's wrong. The US debt is just the amount of savings in US dollars that the non-government sector has accumulated from government spending that hasn't yet been paid back in taxes. In other words it is a component of the money supply that allows people to save safely for the future. The problem is the idea that this saving has to be rewarded in some way. It doesn't. The saving will happen anyway for status and insura…
Does this correctly factor in that currently the US is the western worlds de facto military, more or less? Because as long as we hold that position I don’t imagine the US government will be shut out of the debt markets at all. This is part of the problem I wager is there is still enormous incentive to keep the scheme afloat by other nations too
It didn't help the Soviet Union. I think people over-estimate the value of the military in this context. A default will dissolve the military as you can no longer pay its members. The Western world is mostly united behind the US because it's getting free defense (who doesn't want free stuff?). If you remove that, I highly doubt they'll align as much with the US.
I'd argue the US can do the same, but our domestic economy - at least on paper - is more functional the Soviet Unions ever was and can provide for its citizenry and is an important market for nations all over the world.
That's a major difference than with the Soviet Union, and a key one.
The USA can continue overspending, lending and making payments, all while taxing minimally - for a limited time only. Eventually, that equation will need to change. The choices are tighten the belt and/or increase taxes, war and the appropriation of resources, and/or renege on debt and start printing money. All choices and consequences (in some cases dire) sadly left to the next and future generations.
You know I have been hearing this and its many incarnation debt related doom scenario for atleast 20+ years, when I first started following it. Probably longer. Every few years, when debt related doomed future story pops, I feel lile no one really knows what is going on, or even worse what they are talking about.
Earlier quoted context omitted.
Take a look at Zeihan's video where he shows in a graph how US debt level compares to other major economies. https://youtu.be/mcZPOuI-vcU?t=939 . US is in the middle of the pack. US is going to be ok. Also, watch until 20:38. You will see how screwed up some countries are when it comes to debt.
I started watching and couldn't stop until the end. Now the only question I have is how much should I believe Zeihan? He makes a lot of bold assertions, what's his track record?
In China, where people aren't allowed to take money out of the country easily and there is no huge government debt market, people must invest in something that could possibly not turn out well and which is likely to increases the capital stock of the country in terms of factories, housing, infrastructure, etc. if it does. In the U.S it's just dumb money getting billions for exercising no creativity and risk-taking ability.
He's wrong. The US debt is just the amount of savings in US dollars that the non-government sector has accumulated from government spending that hasn't yet been paid back in taxes. In other words it is a component of the money supply that allows people to save safely for the future. The problem is the idea that this saving has to be rewarded in some way. It doesn't. The saving will happen anyway for status and insura…
If not interest rates, what would you advise the Fed to use for controlling inflation? Please don’t say there’s no need to control inflation. That will wipe out any savings anyone has. Your money will be worth We’ve seen its ill effects time and again. Argentina has 211% inflation right now. It is a vibrant economy, crippled by inflation. People cannot save. Either spend all you have (it will be worth 1/4th in a year…
It's a shame however that taxation isn't used for monetary policy due to the political system just not being set up that way.
He's wrong. The US debt is just the amount of savings in US dollars that the non-government sector has accumulated from government spending that hasn't yet been paid back in taxes. In other words it is a component of the money supply that allows people to save safely for the future. The problem is the idea that this saving has to be rewarded in some way. It doesn't. The saving will happen anyway for status and insura…
If not interest rates, what would you advise the Fed to use for controlling inflation? Please don’t say there’s no need to control inflation. That will wipe out any savings anyone has. Your money will be worth We’ve seen its ill effects time and again. Argentina has 211% inflation right now. It is a vibrant economy, crippled by inflation. People cannot save. Either spend all you have (it will be worth 1/4th in a year…
GP's post is just a rather convoluted way of saying the US needs to increase taxes.
Not sure whether they actually intended this, but it seemed the only logical conclusion. Unless they really were advocating for a zero interest rate environment... to which I agree with your points.
We owe a bit more than 1 year's GDP. Most families that own a house owe substantially more than 1 year's income. Last time we reduced the annual deficit to zero, the usual debt hawks all reversed their position and said "this is terrible". We've demonstrated in my lifetime that we can do this. The fact that "we" don't want to right now has more to do with Republican attitudes towards taxation than anything else. MMT…
> MMT says we don't need to think about this the way we think about personal and corporate debt. I thought the recent inflation surge has debunked MMT (something which I almost bought, myself). Or is that not enough inflation?
Whether you agree with that identity or not, we've certainly seen a lot of both during the pandemic (government subsidies, tax breaks etc.), which is where the current inflation pretty uncontroversially originates.