Explaining Why Federal Deficits Are Needed[W:5330]

[DA60]

Iam bored and it has been a while so I will delve into this nonsense again.

I encourage everyone to look at this with an open mind.
Explaining Why Federal Deficits Are Needed - New Economic PerspectivesNew Economic Perspectives

From the above linked article:

' Drive the Economy

The economy is like a car. Government spending is the accelerator. Taxes are the brakes. To keep going or speed up, press the accelerator. To slow down, ease off the accelerator or press the brakes. Driving too fast could lead to hyper-inflation, but that never happened here because the country always slowed down in time.[/quote]

What kind of a macroeconomic moron thinks this? Government spending drives the economy? No it doesn't you MMT moron. How the heck did the economy boom during the Clinton years then? How did Canada boom during 13 straight years of surpluses?
The private sector drives the economy in free market economics...DUH!!!

Reverse the Discussion

Those who oppose federal deficits should be made to answer two basic questions:

Why should the government avoid spending to meet the country’s critical needs in order to save dollars which it can create?
How could the government ever run out of dollars since it can create them by running deficits?'

a) all the critical needs of America were met during the Clinton 'surplus' years.
b) running out of dollars? What on Earth is this guy babbling about. The banks can create all the money the economy will ever need through fractional reserve banking.

I'd like to add on this doesn't include the recent clinton surplus.
How Bill Clinton's Balanced Budget Destroyed The Economy - Business Insider

I agree that surpluses take money out of the economy. However, they also instill confidence in an economy. Other countries want to invest more in a stable, growing economy run by a stable, financial government. WHen a government is paying down it's debt, it's currency generally rises, it's interest rates generally decline and a sense of optimism permeates the entire economy.
- when the currency rises, imports become much cheaper so people's money goes farther.
- when interest rates decline, debt costs for the government (and the private sector) are less expensive, thus allowing the government to tax less to generate the same amount of money.
- a positive feeling in an economy is crucial to growth - as should be easy top see over the last few years.

Now, you should not increase taxes to run a surplus. And the surpluses should be relatively small. But small surpluses derived at by sound fiscal management and low taxation are almost ALWAYS an overall positive thing for a nation's economy.

 

[JohnfrmClevelan]

Dollars are not removed dollars from the economy when the gment pays down the debt. The dollars go from the gment's pocket to the bondholders pocket.

Since the govt. sells bonds in order to deficit spend, either debt is getting rolled over, or the govt. is running a budget surplus in order to come up with the dollars to lower the amount of outstanding bonds.

Or, if the govt. is lowering their total liabilities (cash + reserves + bonds), then net dollars are definitely being removed from the economy, because govt. liabilities are private sector assets.

...The bond is torn up by the gment as being paid, and the former bondholder, now cash rich, plows the money back into the economy in some way.

Most bondholders don't cash out, they just roll over their debt; this is obviously true in a net sense, because the total debt almost never gets any smaller.

...Even by putting it in a cash account with a bank, he plows the money back into the economy, because the back takes his cash deposit and lends it to businesses to grow and expand, which boosts the economy. He does not keep it in his pocket and take it out of circulation.

Banks don't loan out your deposits. Loans are created from scratch by expanding the bank's balance sheet. Our savings don't do a thing to help the economy.

 

[JohnfrmClevelan]

Iam bored and it has been a while so I will delve into this nonsense again.

And you will lose the debate again.

What kind of a macroeconomic moron thinks this? Government spending drives the economy? No it doesn't you MMT moron. How the heck did the economy boom during the Clinton years then?

Private sector debt increased. Then, it crashed, like it always does.

How did Canada boom during 13 straight years of surpluses?

They ran trade surpluses.

The private sector drives the economy in free market economics...DUH!!!

Private sector investment and debt accounts for most of our economy. BUT, both are very sensitive to slowdowns, and are not capable of turning around a contracting economy on their own, because both are procyclical. Without government deficit spending or an influx of money from international trade, you get long, severe crashes.

a) all the critical needs of America were met during the Clinton 'surplus' years.

For a short time, due to increased private sector debt. And again, it led to an inevitable crash.

b) running out of dollars? What on Earth is this guy babbling about. The banks can create all the money the economy will ever need through fractional reserve banking.

Banks can only create dollars through loans, so it requires people and businesses increasing their debt. Which they don't do in bad economic times. Paying off/down the national debt would require removing dollars from the economy (dollars created by private sector debt) and moving them to the pockets of bondholders. So the dollars that you and I and American businesses pay interest on (via loans) would go to bondholders such as China, so they could hold dollars while we pay interest on that debt - indefinitely.

I agree that surpluses take money out of the economy. However, they also instill confidence in an economy.

Surpluses only instill confidence in economic ignorami. Is that still a plus?

Other countries want to invest more in a stable, growing economy run by a stable, financial government. WHen a government is paying down it's debt, it's currency generally rises, it's interest rates generally decline and a sense of optimism permeates the entire economy.

Really? Why don't you provide a few examples, then? Show us how many governments pay down their SOVEREIGN debt (not foreign debt) and thereby boost the economy.

- when the currency rises, imports become much cheaper so people's money goes farther.

Also, exports become more expensive, so people lose their jobs.

- when interest rates decline, debt costs for the government (and the private sector) are less expensive, thus allowing the government to tax less to generate the same amount of money.

The govt. controls the interest rate they pay on bonds.

- a positive feeling in an economy is crucial to growth - as should be easy top see over the last few years.

Prove that. Show me where positive feelings have overcome low demand, ever.

Now, you should not increase taxes to run a surplus. And the surpluses should be relatively small. But small surpluses derived at by sound fiscal management and low taxation are almost ALWAYS an overall positive thing for a nation's economy.

Prove that, too. You are, once again, talking out of your backside, while simultaneously demanding crazy standards of proof from everybody else.

 

[Bobbaker]

Now, you should not increase taxes to run a surplus. And the surpluses should be relatively small. But small surpluses derived at by sound fiscal management and low taxation are almost ALWAYS an overall positive thing for a nation's economy.

Prove that, too. You are, once again, talking out of your backside, while simultaneously demanding crazy standards of proof from everybody else.

You are asking him to prove what is obvious and common sense. That's not how it works.

The onus is on you to prove what appears to be contrary to common sense. If you feel you've done that, then the ball is now in DA60's court to disprove what you've said, either by showing that your facts are wrong, your conclusions are wrong, or that you overweighted key assumptions, or missed them out entirely. If he is unable to do that, then you've carried the day.

Its like saying " the sun rise in the east and sets in the west". This is obvious to all. Its not valid for you to come along and say " provide proof that the sun rises in the east and sets in the west." You come along and say " the sun is not doing anything. Its the earth that is moving and giving you the impression that the sun is moving. " Then you provide physical proof. And if that can't be disputed, then you've carried the day.

 

[Bobbaker]

The reality, of course, is that the US can borrow unlimited amounts of money, use that money to rebuild its own agriculture and industries and to create a strong enough lead in military RnD, and then at some point pass a law that says " we don't have to pay these guys back on time. " The currency will crash etc etc, but the country and people (i.e. citizens) will be unhappy but fine, anyone who loses their jobs will be paid for the next 10 years by the country so no one will have to give up their bmw, and no external military will be able to force us to pay for anything.

 

[Bobbaker]

Since the govt. sells bonds in order to deficit spend, either debt is getting rolled over, or the govt. is running a budget surplus in order to come up with the dollars to lower the amount of outstanding bonds.

I'm obviously talking about running budget surpluses, and using those surpluses to pay down the debt. The surpluses are generated through taxation on an improved economy, and through budget cuts due to efficient management of the country's resources and needs.

Banks don't loan out your deposits. Loans are created from scratch by expanding the bank's balance sheet. Our savings don't do a thing to help the economy.

Then you don't understand how a regulated banking system works.

 

[JohnfrmClevelan]

You are asking him to prove what is obvious and common sense. That's not how it works.

The onus is on you to prove what appears to be contrary to common sense. If you feel you've done that, then the ball is now in DA60's court to disprove what you've said, either by showing that your facts are wrong, your conclusions are wrong, or that you overweighted key assumptions, or missed them out entirely. If he is unable to do that, then you've carried the day.

Its like saying " the sun rise in the east and sets in the west". This is obvious to all. Its not valid for you to come along and say " provide proof that the sun rises in the east and sets in the west." You come along and say " the sun is not doing anything. Its the earth that is moving and giving you the impression that the sun is moving. " Then you provide physical proof. And if that can't be disputed, then you've carried the day.

DA and I have been over this stuff many, many times before.

And, like your sunrise analogy, what is "obviously good" and common sense in economics is anything but.

I'm obviously talking about running budget surpluses, and using those surpluses to pay down the debt. The surpluses are generated through taxation on an improved economy, and through budget cuts due to efficient management of the country's resources and needs.

OK, so you should understand that when the government runs a surplus, the taxpayers are running a deficit. Explain how that is good for an economy, because now you are on the wrong side of common sense.

Then you don't understand how a regulated banking system works.

And what is your background in economics, then? Econ major? Banker?

 

[Bobbaker]

DA and I have been over this stuff many, many times before.

And, like your sunrise analogy, what is "obviously good" and common sense in economics is anything but.

When you're doing the arguing.

OK, so you should understand that when the government runs a surplus, the taxpayers are running a deficit. Explain how that is good for an economy, because now you are on the wrong side of common sense.

Running a surplus consistently only makes sense in the CONTEXT (something you're challenged to integrate in arguments) of a preexisting national debt. You do this so that the servicing costs on that debt, which are a deficit on the taxpayer, will decrease and ultimately stop when said debt is paid off. The taxpayer ultimately benefits.

After that, if you run a surplus, at the end of the financial year, you allocate 25% of the excess to your sovereign fund - you know, for a rainy day (it happens) - and you return 75% back to the people. Mail them all equal checks or something. Or you offset your next budget accordingly.

And what is your background in economics, then? Econ major? Banker?

I am a money launderer. lol

You have evaded the point I made earlier about how regulated banks participate in the lending business.

 

[JohnfrmClevelan]

Running a surplus consistently only makes sense in the CONTEXT (something you're challenged to integrate in arguments) of a preexisting national debt. You do this so that the servicing costs on that debt, which are a deficit on the taxpayer, will decrease and ultimately stop when said debt is paid off. The taxpayer ultimately benefits.

The govt. could change a few laws and stop issuing debt tomorrow. It is not necessary to issue debt in order for a government to create and spend its own fiat currency.

But back to your point - running a surplus consistently means eventually running government liabilities down to zero. Is that your goal, or do you have a different number in mind?

After that, if you run a surplus, at the end of the financial year, you allocate 25% of the excess to your sovereign fund - you know, for a rainy day (it happens) - and you return 75% back to the people. Mail them all equal checks or something. Or you offset your next budget accordingly.

Governments do not need a "rainy day fund," because they cannot "save" in their own currency in any meaningful sense of the word. Either you are limited in creating your own currency, or you aren't, and if you aren't (which is the correct answer), running a surplus in 2016 will not make it any more possible to run a deficit in 2017.

I am a money launderer. lol

My point being that, unlike chemistry or physics, economics is, for some reason, a field where people with zero training or experience will nonetheless adopt, and adamantly defend, a position based on little or no foundation. You jumped to the wrong conclusion earlier.

You have evaded the point I made earlier about how regulated banks participate in the lending business.

Yeah, I'm just getting a little sick and tired of repeating myself. Not your fault, you can't be expected to read the last two years' worth of threads on the same subject. So I will leave you with two links that explain how banks actually create money.

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf

https://www.kreditopferhilfe.net/docs/S_and_P__Repeat_After_Me_8_14_13.pdf

 

[DA60]

I'm obviously talking about running budget surpluses, and using those surpluses to pay down the debt. The surpluses are generated through taxation on an improved economy, and through budget cuts due to efficient management of the country's resources and needs.


Then you don't understand how a regulated banking system works.

There is a lot JohnfrmClevelan does not understand about economics, but getting him to see that is nigh impossible.

He lives in his own macroeconomic world.

 

[Moderate Right]

When you're doing the arguing.



Running a surplus consistently only makes sense in the CONTEXT (something you're challenged to integrate in arguments) of a preexisting national debt. You do this so that the servicing costs on that debt, which are a deficit on the taxpayer, will decrease and ultimately stop when said debt is paid off. The taxpayer ultimately benefits.

After that, if you run a surplus, at the end of the financial year, you allocate 25% of the excess to your sovereign fund - you know, for a rainy day (it happens) - and you return 75% back to the people. Mail them all equal checks or something. Or you offset your next budget accordingly.




I am a money launderer. lol

You have evaded the point I made earlier about how regulated banks participate in the lending business.

You're talking to a liberal brick wall who believes that not only can we keep adding onto the debt but that it is actually necessary to because it grows the economy and that if we were to ever stop adding to the debt the economy would collapse. So, the best thing we can do is continually add to the debt and never stop and we will never have to worry about it because not only will the economy grow forever but, if we need to, we can always print the money to pay the debt anyway because the US can print all the money it wants. You're wasting your time thinking you can convince him otherwise. His doors and windows were rusted shut a long time ago.

 

[jdog]

I encourage everyone to look at this with an open mind.
Explaining Why Federal Deficits Are Needed - New Economic PerspectivesNew Economic Perspectives

I'd like to add on this doesn't include the recent clinton surplus.
How Bill Clinton's Balanced Budget Destroyed The Economy - Business Insider



I look forward to some interesting discussion.

Your entire premise is based on the fallacy that he private sector economy is dependent on Federal spending. First you need to prove that, but you cannot because the private sector economy could survive just fine without the Federal Government at all.

 

[JohnfrmClevelan]

Your entire premise is based on the fallacy that he private sector economy is dependent on Federal spending. First you need to prove that, but you cannot because the private sector economy could survive just fine without the Federal Government at all.

The private sector economy is not dependent on Federal spending - theoretically. In reality, it is extraordinarily difficult for private debt to deal with savings and trade deficits over the long run. Plus, the economy would be far more unstable, without that source of exogenous money in down times.

 

[JohnfrmClevelan]

There is a lot JohnfrmClevelan does not understand about economics, but getting him to see that is nigh impossible.

It's impossible when your arguments stink and you don't have any evidence to back up your stinky arguments. And also when your go-to source for news is ZeroHedge.

 

[Kushinator]

My favorite DA60 quote:

If most of you people do not want to believe what I (and people like Jim Rogers, Marc Faber, Peter Schiff) have to say about gold/silver?

Fine.

The price of gold right now is $1628.90.

Gold Price History


The price of silver right now is $28.79.

Silver Price History


I am heavily invested in both - have been for a long time.

And I say neither is anywhere near a bubble and will not be until U.S. interest rates rise substantially.

But let's see from today onwards (over the coming months/years) if I was right or wrong about the price.

 

[DA60]

My favorite DA60 quote:

Ummm...this post must be from years ago. WOW...what I think must really mean a LOT to you if you keep this quote of mine for ALL this time.

Gold and silver are doing terrible lately thanks to the 'Trump Boom' and over the last few years thanks to economic over-hype and the Fed's idiocy that has stagnated the economy. But all his talk of lowering taxes, raising spending and even protectionism bode EXTREMELY well for the future for precious metals.

So long as the fundamentals continue to suck and Keynesianism/Krugmanism nonsense is still King... the future for PM's is EXTREMELY good. But one must be patient..it is a roller coaster when you own gold/silver.

Oh, and btw, I am still WAAY up on my precious metals investments since I bought them back around September 2007...much to your great disappointment, no doubt.

Gold has roughly doubled and silver is up about 60%.

BTW - the DOW and the S&P 500 during that time is up less than 50%.

 

[Bobbaker]

You're talking to a liberal brick wall who believes that not only can we keep adding onto the debt but that it is actually necessary to because it grows the economy and that if we were to ever stop adding to the debt the economy would collapse. So, the best thing we can do is continually add to the debt and never stop and we will never have to worry about it because not only will the economy grow forever but, if we need to, we can always print the money to pay the debt anyway because the US can print all the money it wants. You're wasting your time thinking you can convince him otherwise. His doors and windows were rusted shut a long time ago.

But.....this is true except that you can't print money to pay for debt (that would devalue the dollar), but you can borrow and borrow endlessly. The problem is actually China. They have too many dollars. They can't do anything else with it except finance us. What do you buy with 2 trillion bucks ? The moment you try, the price of the thing goes up - such is the price altering effect of such high demand. You can only buy debt.

This plays into our scam (described above by Mod Right_)...they are our true enablers.

The way they can cripple our economy, is to scrap the Renminbi and use USdollars in their country. No one would buy our debt, we would print more money which would devalue our dollar, making imports more expensive and causing economic chaos for the poor, but making exports cheaper and boosting the economy, and permanently getting us out of this scam that reflects zero integrity on our part (just because we can do it doesn't mean we should).

Or they should only sell their goods to us in Renminbi. And insist on the oil trade being denominated in R, or Euro....anything but the dollar. Now, that will be fun.

They have nuclear weapons. We won't dare attack them over this the way we did Saddam.

 

[Kushinator]

Hey brainiac...when was this posted?

The post means nothing without context...DUH.

You mean the other posts in that thread where i eviscerated your poorly articulated positions? Since that date, gold has fallen more than 25%. You were wrong about the price, and wrong about the fundamentals, and you have always been wrong with your predictions.

Gold and silver are doing terrible lately thanks to the 'Trump Boom'. But all his talk of lowering taxes, raising spending and even protectionism bode EXTREMELY well for the future for precious metals.

Uh huh.

So long as the fundamentals continue to suck and Keynesianism/Krugmanism nonsense is still King... the future for PM's is EXTREMELY good. But one must be patient..it is a roller coaster when you own gold/silver.

One must forgo stronger investment strategies in order to realize gains from gold. Got it!:lol:

Oh, and btw, I am still WAAY up on my precious metals investments since I bought them back around September 2007...much to your great disappointment, no doubt.

Cool story bro.

Gold has roughly doubled and silver is up about 80%.
BTW - the DOW during that time is up less than 50% in that time.

I can cherry pick time frames as well, doing so is just a sign of being desperate.

Though what I think obviously means a lot to you to have this post on file as I do not even remember posting it.

It's called the search function. Keep this in mind before making any more of your famous predictions... they are here for all to see. Should i post more of your success? :2razz:

 

[Kushinator]

The way they can cripple our economy, is to scrap the Renminbi and use USdollars in their country. No one would buy our debt, we would print more money which would devalue our dollar, making imports more expensive and causing economic chaos for the poor, but making exports cheaper and boosting the economy, and permanently getting us out of this scam that reflects zero integrity on our part (just because we can do it doesn't mean we should).

WTF are you even talking about? A Chinese strategy to cripple our economy by using dollars for their domestic translations? :lamo

Or they should only sell their goods to us in Renminbi. And insist on the oil trade being denominated in R, or Euro....anything but the dollar. Now, that will be fun.

Or they should only sell their goods to us in Yen... or wait, cheese! And insist on the oil trade being denominated in Mexican pesos, or anything but the dollar. Fun!

 

[DA60]

I can cherry pick time frames as well, doing so is just a sign of being desperate.

No cherry picking...I have stated many times over the years that I liquidated my stock portfolio in September 2007 and then later purchased (among other things) gold and silver.

And since that time, my gold and silver investments have gone up roughly 100% and 80% respectively...both of which have outperformed the S&P 500.

And that is with PM's in a down cycle.

(do I wish I had bought PM's in 2001? You BETCHA. But I did not know much about them at that time.)

You don't believe me...guess how much I care?


Now, this is WAY off topic...if you want to discuss this further, I have a gold/silver thread for that. Though I strongly suspect you know as little about PM's as you did about the 'Obama Boom' and Abenomics.

http://www.debatepolitics.com/economics/161407-gold-bull-market-over.html


We are done here.

Have a VERY nice day.

 

[Moderate Right]

I can cherry pick time frames as well

Finally, you confess that you are indeed a cherry picker.

 

[Kushinator]

We are done here.

Have a VERY nice day.

We've only just begun. The second you decided to post an opinion of another members understanding of economics, you opened yourself up for criticism. Unfortunately for you, this forum is littered with the ignorant rants and predictions of DA60.

:lol:

 

[Kushinator]

Finally, you confess that you are indeed a cherry picker.

Reading comprehension is fundamental. You should delete your account.

 

[Moderate Right]

Reading comprehension is fundamental. You should delete your account.

There we go again with the insults. It's obvious when you have a losing argument when you want the other side to delete their account. I'll take that as a compliment. Don't you get tired of being on the losing end?

 

[DA60]

There we go again with the insults. It's obvious when you have a losing argument when you want the other side to delete their account. I'll take that as a compliment. Don't you get tired of being on the losing end?

Yup...it's a classic.

People that are confident of their argument are calm and stick to the topic.

People that are not, resort to bullying/insults.