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U.S. Treasury Data Lab

datalab.usaspending.gov

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Re: U.S. Treasury Data Lab

#31

Post by jkhdigital »

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?

This is where it’s important to get pedantic about the technical details of what precisely we mean by “money” and “lending”. If money only refers to cash in vaults or reserves at the Fed, then a commercial bank loan doesn’t create money. But it does create a claim on money, which is (more or less) perfectly convertible to money on demand and thus all economic agents treat it as money.

In theory a bank could create an infinite amount of money claims, at least up to the point where nobody wants any more at the interest rate offered. However, the bank is also subject to capital requirements which determine how much risk it can take relative to the amount of equity it has (this used to be called the “reserve ratio” but that is an outdated concept).

Re: U.S. Treasury Data Lab

#32

Post by Gabriel_Martin »

lend000 wrote: post #19
Gabriel_Martin wrote: post #9

Earlier quoted context omitted.

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, cont…

The run-proof nature of an 'approaching-cashless society', is a facet of this I'd never considered, I suppose the point is that it'd be infinitely propped-up thanks to be so detached from any real world asset. I'll have to learn more about the other points and their relationships to money creation and supply though. I'd never thought about the reversibility of money, outside of normal means of destroying it, and I'm not completely sure if I understand it well enough to agree or disagree. That said I feel like if there's a context for these creations (or maybe realizations) that reminds me of a kind of monetary inertia and that puts me on the fence still. Always so much to learn about this kind of stuff :)

Re: U.S. Treasury Data Lab

#33

Post by jkhdigital »

darawk wrote: post #28
Gabriel_Martin wrote: post #27

Earlier quoted context omitted.

These are the exact sentiments I believe personal/household finance analogies evoke, and basically why I oppose their use. It evokes comparisons to some kind of possibility of something happening analogous to bankruptcy when in fact: "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan So yeah, it's just my opinion but to me…

> "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan While this is partially true: 1. Sovereign nations absolutely can and do default. See, Russia in the 1990s and the LTCM fiasco. 2. Even though they do not have to default and can always print money to pay their debts, doing so causes inflation. How much inflation it cause…

And the line between “acceptable consequences” and “catastrophic consequences” is basically unknowable, so it’s not a bad idea to err on the side of caution.

Re: U.S. Treasury Data Lab

#34

Post by jkhdigital »

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 problem with unconstrained government deficit finance is not inflation, it is cronyism and corruption. When 638 individuals decide how $3 trillion gets spent, almost any amount of lobbying expense will yield a positive NPV.

Re: U.S. Treasury Data Lab

#35

Post by xxpor »

darawk wrote: post #28
Gabriel_Martin wrote: post #27

Earlier quoted context omitted.

These are the exact sentiments I believe personal/household finance analogies evoke, and basically why I oppose their use. It evokes comparisons to some kind of possibility of something happening analogous to bankruptcy when in fact: "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan So yeah, it's just my opinion but to me…

> "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan While this is partially true: 1. Sovereign nations absolutely can and do default. See, Russia in the 1990s and the LTCM fiasco. 2. Even though they do not have to default and can always print money to pay their debts, doing so causes inflation. How much inflation it cause…

Point 2 is extremely debatable, especially if you're a reserve currency. The balance of payments also matters.

Re: U.S. Treasury Data Lab

#36

Post by jkhdigital »

SubiculumCode wrote: post #20
phkahler wrote: post #18

Earlier quoted context omitted.

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.

Government debt does not exist in a vacuum: it comes into existence because the government spent more money than it took in. What did it spend that money on? Ask the lobbyists.

Re: U.S. Treasury Data Lab

#37

Post by sega_sai »

darawk wrote: post #28
Gabriel_Martin wrote: post #27

Earlier quoted context omitted.

These are the exact sentiments I believe personal/household finance analogies evoke, and basically why I oppose their use. It evokes comparisons to some kind of possibility of something happening analogous to bankruptcy when in fact: "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan So yeah, it's just my opinion but to me…

> "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan While this is partially true: 1. Sovereign nations absolutely can and do default. See, Russia in the 1990s and the LTCM fiasco. 2. Even though they do not have to default and can always print money to pay their debts, doing so causes inflation. How much inflation it cause…

Sovereign nations can default if the debt is nominated in a different currency (which was the case of Russia, but is not the case for US)

Re: U.S. Treasury Data Lab

#38

Post by dragonwriter »

jkhdigital wrote: post #36
SubiculumCode wrote: post #20

Earlier quoted context omitted.

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

Government debt does not exist in a vacuum: it comes into existence because the government spent more money than it took in. What did it spend that money on? Ask the lobbyists.

> Government debt does not exist in a vacuum: it comes into existence because the government spent more money than it took in.

No, it exists because government issued commitments to pay people money in the future. A government that creates its own currency has no need to do this to spend more than it takes in in revenue, and even a government that doesn't create its own currency is free to issue such commitments without a deficit.

Re: U.S. Treasury Data Lab

#39

Post by jkhdigital »

legolas2412 wrote: post #17
pphysch wrote: post #12

Earlier quoted context omitted.

> 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). Essentiall…

You’re missing a key detail: the Fed returns profits, but not loan principal. If the Fed keeps a T-bill until maturity and doesn’t roll it over, then the Treasury must actually pay the principal so the money is destroyed. It is only if the Fed actually cancels government debt that we could call it outright printing.

When the base money is itself an IOU, then debt issued by the privileged party is indeed printing money, albeit money with an expiration date.

Re: U.S. Treasury Data Lab

#40

Post by darawk »

sega_sai wrote: post #37
darawk wrote: post #28

Earlier quoted context omitted.

> "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan While this is partially true: 1. Sovereign nations absolutely can and do default. See, Russia in the 1990s and the LTCM fiasco. 2. Even though they do not have to default and can always print money to pay their debts, doing so causes inflation. How much inflation it cause…

Sovereign nations can default if the debt is nominated in a different currency (which was the case of Russia, but is not the case for US)

No, they can default even when it is denominated in their own currency, which is what Russia did.

https://en.wikipedia.org/wiki/1998_Russian_financial_crisis

Most countries just choose not to do this. They weren't forced to default. They could have chosen to monetize their debt. They just didn't choose to do that.

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