Is "wasteful" government spending really harmful?

[JohnfrmClevelan]

This isn't a new article, but it's an interesting one. A few years back, the Chinese built a city, and (almost) nobody came. People scoffed at the wastefulness of the whole thing, and the obvious stupidity of such a project.

http://www.nytimes.com/2010/10/20/business/global/20ghost.html?pagewanted=1&_r=1&

For the sake of discussion, let's imagine that our federal government decided to fund a brand new city to be built out in the middle of nowhere, with little hope of enough people eventually filling it up and making it a useful city. The ultimate "bridge to nowhere" project.

What's the harm in an extra city or two? Or a "bridge to nowhere"?

 

[Jango]

Let's say that it is you that shells out the money for resources, manpower, upkeep, mortgage & taxes for a house that you'll never live in. Would that be harmful for your financial situation?

 

[joG]

This isn't a new article, but it's an interesting one. A few years back, the Chinese built a city, and (almost) nobody came. People scoffed at the wastefulness of the whole thing, and the obvious stupidity of such a project.

http://www.nytimes.com/2010/10/20/business/global/20ghost.html?pagewanted=1&_r=1&

For the sake of discussion, let's imagine that our federal government decided to fund a brand new city to be built out in the middle of nowhere, with little hope of enough people eventually filling it up and making it a useful city. The ultimate "bridge to nowhere" project.

What's the harm in an extra city or two? Or a "bridge to nowhere"?

It does seem odd behavior in most cases. But if there is a good reason it can work.

 

[Beaudreaux]

This isn't a new article, but it's an interesting one. A few years back, the Chinese built a city, and (almost) nobody came. People scoffed at the wastefulness of the whole thing, and the obvious stupidity of such a project.

http://www.nytimes.com/2010/10/20/business/global/20ghost.html?pagewanted=1&_r=1&

For the sake of discussion, let's imagine that our federal government decided to fund a brand new city to be built out in the middle of nowhere, with little hope of enough people eventually filling it up and making it a useful city. The ultimate "bridge to nowhere" project.

What's the harm in an extra city or two? Or a "bridge to nowhere"?

Yes, it is. At least to the few of us that actually have to pay taxes.

 

[DA60]

What's the harm in a bridge to nowhere or an extra city or two?

Ahhh, Keynesians...great spenders of other people's money.

 

[Utility Man]

....John Maynard Keynes himself offered a partial answer 75 years ago, when he noted a curious “preference for wholly ‘wasteful’ forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” Indeed. Spend money on some useful goal, like the promotion of new energy sources, and people start screaming, “Solyndra! Waste!” Spend money on a weapons system we don’t need, and those voices are silent, because nobody expects F-22s to be a good business proposition..... http://www.nytimes.com/2011/10/31/opinion/bombs-bridges-and-jobs.html?_r=1

:thinking

 

[JP Hochbaum]

"A Proposed Alternative: Government’s “Net Contribution”

Instead of a “deficit”, I would submit that the excess of spending over taxes collected represents the government’s “net contribution” to the economy. One can either expand or contract this phrase depending on the needs of the situation: it could be made more explicit by expanding it to “the government’s net monetary contribution to the growth of the economy” or shorten it to “the contribution”. “Contribution” denotes the adding of something without necessarily the subtracting of something else from someone else. The connotations would seem to apply much more accurately for work of the currency issuer in the “production” of additional monetary units. I think that it needs the word “net” for precision because spending below or at the level of taxes collected also is part of government’s “contribution” to the economy. Taxation would be the “removal of demand” from the economy by the currency issuer.

“Net contribution” also encourages us to look qualitatively at how and where government is spending and active in the economy not just to look at government spending as an amount in a ledger. Potentially the government could “contribute” to the economy in a way or at points within the economy that distorts it or undermines the public purpose as broadly defined. It could also “contribute” too much making private initiative less viable in areas where this is not desirable or spend in a way that inflated the value of critical goods and services.

Additionally, in connotation, “net contribution” is much, much more positive than “deficit” both in the sense of a positive evaluation as well as positive in terms of “something observable, present, existent”. The positive connotations and the more accurate denotations of the new term would, if usage was widespread enough would start to outweigh the inaccuracies and negatives associated with “deficit” and “deficit spending”. From my understanding of how economies work, that they are mixed economies in almost every modern case, the positive connotations of the word “net contribution” are completely warranted. Again, the negative potential of the possibility for excessive government spending is not banished or suppressed by using the term “net contribution” but it does allow for the critical role of government within the broader matrix of the mixed economy."

Michael Hoexter:

 

[JohnfrmClevelan]

Let's say that the govt. commissions a destroyer for $1 billion, paid for by deficit spending. It gets built, steams around the world for 20 years, never seeing action, then gets decommissioned. Total cost to the govt. (just guessing here), let's say $10 billion. During that 20 years, $1 billion has been earned by the shipyard, and $9 billion has gone to pay the sailors, dock fees, fuel, upkeep, etc. And the deficit has increased by $10 billion, plus a bit of interest.

Now let's say that the destroyer had never been commissioned at all. The deficit hasn't increased, and the shipyard never earned $1 billion. 50 sailors were not sailing for the past 20 years, and nobody earned the $9 billion spent on sailors, dock fees, fuel, upkeep, etc.

Isn't the country better off in the first scenario, even though the ship wasn't really necessary?

 

[csbrown28]

Let's say that the govt. commissions a destroyer for $1 billion, paid for by deficit spending. It gets built, steams around the world for 20 years, never seeing action, then gets decommissioned. Total cost to the govt. (just guessing here), let's say $10 billion. During that 20 years, $1 billion has been earned by the shipyard, and $9 billion has gone to pay the sailors, dock fees, fuel, upkeep, etc. And the deficit has increased by $10 billion, plus a bit of interest.

Now let's say that the destroyer had never been commissioned at all. The deficit hasn't increased, and the shipyard never earned $1 billion. 50 sailors were not sailing for the past 20 years, and nobody earned the $9 billion spent on sailors, dock fees, fuel, upkeep, etc.

Isn't the country better off in the first scenario, even though the ship wasn't really necessary?

If the destroyer had never been built and presuming the money that would have been allocated to build, sail and maintain had never been spent anywhere else in the economy, and for that matter had never been used for anything, then the result would be 11 billion less dollars in the economy and 11 billion dollars less on the deficit.

Since we know that saving money on the deficit doesn't provide jobs, increase education, or put a penny in anyone's pocket, then it seems markedly unbeneficial, but wait, does not increasing the deficit save money? I think in the minds of some we would save all the money that we would have paid in interest on that 11 billion. But save it from where? It's not like the nation is constrained by a fixed pool of money. it's not like the government can't issue the currency it needs to make the necessary payments, furthermore, all of the primary and secondary industries employed by that 11 billion dollars are making less money as are the people that work for them, lowering demand for new goods. Since that 11 billion would be multiplied many times over by spending multiple times (enough to offset the interest that would be owed on that 11 billion?)....

Well the only issue here is not spending the money. The question is, is the economy capable of supplying all of the resource demands for a destroyer without causing supply shocks is...Do we really need another destroyer, wouldn't employing people to fix the nation's bridges and other infrastructure accomplish the same thing, but save money in the long run (save in the sense that putting off fixing aging infrastructure just make eventual repairs more costly).

To recap, seems to me that spending that doesn't cause price shocks due to inability to meet demand is good, the only distinction is that there is quantifiably better things to spend money on than destroyers.

 

[DA60]

If the destroyer had never been built and presuming the money that would have been allocated to build, sail and maintain had never been spent anywhere else in the economy, and for that matter had never been used for anything, then the result would be 11 billion less dollars in the economy and 11 billion dollars less on the deficit.

Since we know that saving money on the deficit doesn't provide jobs, increase education, or put a penny in anyone's pocket, then it seems markedly unbeneficial, but wait, does not increasing the deficit save money? I think in the minds of some we would save all the money that we would have paid in interest on that 11 billion. But save it from where? It's not like the nation is constrained by a fixed pool of money. it's not like the government can't issue the currency it needs to make the necessary payments, furthermore, all of the primary and secondary industries employed by that 11 billion dollars are making less money as are the people that work for them, lowering demand for new goods. Since that 11 billion would be multiplied many times over by spending multiple times (enough to offset the interest that would be owed on that 11 billion?)....

Well the only issue here is not spending the money. The question is, is the economy capable of supplying all of the resource demands for a destroyer without causing supply shocks is...Do we really need another destroyer, wouldn't employing people to fix the nation's bridges and other infrastructure accomplish the same thing, but save money in the long run (save in the sense that putting off fixing aging infrastructure just make eventual repairs more costly).

To recap, seems to me that spending that doesn't cause price shocks due to inability to meet demand is good, the only distinction is that there is quantifiably better things to spend money on than destroyers.

Really...we know this?

And how exactly do we know this, please (keeping in mind that to 'know' something means that one has unbiased factual proof that it is so...not could be or believe to be or probably is, but IS)?

Are you sure a more accurate statement is not you 'believe' that...?

 

[csbrown28]

Really...we know this?

And how exactly do we know this, please (keeping in mind that to 'know' something means that one has unbiased factual proof that it is so...not could be or believe to be or probably is, but IS)?

Are you sure a more accurate statement is not you 'believe' that...?

How does saving money, i.e. not spending it, provide jobs? Please correct me.....Seems like common sense to me.....Maybe you know something I don't....

Conversely, it seems like , $11 billion spent over 20 years is a lot more likely to create jobs, then not spending it.

 

[DA60]

How does saving money, i.e. not spending it, provide jobs? Please correct me.....Seems like common sense to me.....Maybe you know something I don't....

Conversely, it seems like , $11 billion spent over 20 years is a lot more likely to create jobs, then not spending it.

I have two problems with your statement.

The first is literal. You said 'we know'. It is not possible to know what you are saying because you would have to know how every single job was ever created in America. And since you cannot know that, then you cannot know the reason for every single created job.
Quite apart from whether your statement is reasonable or not...it is impossible to confirm. Thus, it is impossible for you to be able to accurately state that you 'know' it. You can guess, believe ,surmise, deduce or hope...but you cannot know.
You seem an intelligent and relatively/remotely open-minded fellow - I would think you would already know this (if I thought you a dunderhead I would probably not bother bringing it up as the effort would probably be wasted).


The second problem I have with it is theoretical.

If the budget is balanced, this breeds confidence in America's future and the government's fiscal responsibility. This confidence could convince companies/corporations that were on the fence to go ahead with new factories/expansion projects now...thus creating jobs that otherwise might not be. Even if reducing the deficit convinces only one business owner to hire one extra person because of anticipated increase demand...then - with respect - that proves your statement erroneous. And it is impossible to prove what I just said has never happened.

And that is just one example off of the top of my head.


Plus...well, I will let someone else explain it:

'We have to live within our means, reduce our deficit, and get back on a path that will allow us to pay down our debt. And we have to do it in a way that protects the recovery, and protects the investments we need to grow, create jobs, and win the future.

Now, before I get into how we can achieve this goal, some of you might be wondering, “Why is this so important? Why does this matter to me?”

Here’s why. Even after our economy recovers, our government will still be on track to spend more money than it takes in throughout this decade and beyond. That means we’ll have to keep borrowing more from countries like China. And that means more of your tax dollars will go toward paying off the interest on all the loans we keep taking out. By the end of this decade, the interest we owe on our debt could rise to nearly $1 trillion. Just the interest payments.

Then, as the Baby Boomers start to retire and health care costs continue to rise, the situation will get even worse. By 2025, the amount of taxes we currently pay will only be enough to finance our health care programs, Social Security, and the interest we owe on our debt. That’s it. Every other national priority – education, transportation, even national security – will have to be paid for with borrowed money.

Ultimately, all this rising debt will cost us jobs and damage our economy. It will prevent us from making the investments we need to win the future. We won’t be able to afford good schools, new research, or the repair of roads and bridges – all the things that will create new jobs and businesses here in America. Businesses will be less likely to invest and open up shop in a country that seems unwilling or unable to balance its books. And if our creditors start worrying that we may be unable to pay back our debts, it could drive up interest rates for everyone who borrows money – making it harder for businesses to expand and hire, or families to take out a mortgage.'

Barack Obama
April 13, 2011

Text of Obama Speech on the Deficit - Washington Wire - WSJ

 

[JohnfrmClevelan]

I have two problems with your statement.

The first is literal. You said 'we know'. It is not possible to know what you are saying because you would have to know how every single job was ever created in America. And since you cannot know that, then you cannot know the reason for every single created job.
Quite apart from whether your statement is reasonable or not...it is impossible to confirm. Thus, it is impossible for you to be able to accurately state that you 'know' it. You can guess, believe ,surmise, deduce or hope...but you cannot know.
You seem an intelligent and relatively/remotely open-minded fellow - I would think you would already know this (if I thought you a dunderhead I would probably not bother bringing it up as the effort would probably be wasted).

Here is my problem with your reasoning here: we're talking about economics. There is very little that can be nailed down for sure, and we all know this. Yet you take issue with the way people word their posts. If you want to talk about things that can be nailed down with 99.9% certainty, go start a science thread and talk about math. To join an economics thread, then reject every argument out of hand because there is no "unbiased facts and/or data" is just a waste of everybody's time. If you want to exercise your brain, then join in the debate and think about what people have to say. Otherwise, get out and stop wasting our time.

Besides - you do the same friggin' thing.

The second problem I have with it is theoretical.

If the budget is balanced, this breeds confidence in America's future and the government's fiscal responsibility. This confidence could convince companies/corporations that were on the fence to go ahead with new factories/expansion projects now...thus creating jobs that otherwise might not be. Even if reducing the deficit convinces only one business owner to hire one extra person because of anticipated increase demand...then - with respect - that proves your statement erroneous. And it is impossible to prove what I just said has never happened.

And that is just one example off of the top of my head.

Show me some unbiased facts and/or data that supports this. (See how easy that was to dismiss an idea that may have some merit?)

There are business owners who get some or all of their dollars from federal contracts, and they understand that if the government cuts back on spending (I assume you want the govt. to reduce the deficit by cutting spending and not taxing more) they will probably lose some of their income. Those dollars, btw, can be traced - any business that serves the government gets paid by the govt., and that right there is unbiased proof that some businesses directly benefit from government spending. Everybody that cashes a check from the U.S. Treasury benefits directly from government spending. Period. And you seem to think that the owner of Joe's Grocery is basing his business decisions on the federal deficit, while what he's really worried about is the Army base down the street being closed down, or the seniors that shop at his store having their SS checks cut back.

Plus...well, I will let someone else explain it:

........
Barack Obama
April 13, 2011

If you think that Barack Obama speaks for us on this issue, you are sadly mistaken. Complete waste of time there. (With respect, of course.)

 

[imagep]

A good while back I learned to avoid using absolutes, because nothing is ever absolute. By doing this, I am able to reduce the number of people who will provide a rare or unlikely scenario which is contrary to my statement.

Like instead of saying "never", I will now use "rarely", or "almost never"

Instead of saying "impossible" I will say "highly unlikely"

Instead of saying "this proves it" I say "this indicates that" or "this is evidence of"

Instead of saying "always" I can say "almost always"

There are almost always exceptions to nearly everything.

 

[Xerographica]

Here is my problem with your reasoning here: we're talking about economics. There is very little that can be nailed down for sure, and we all know this.

So what can be nailed down? Let's see...

You are a limited resource. I think we can nail this down...can't we? Or do you want to argue that you are an unlimited resource? Perhaps you can be in two places at the exact same time?

If you happen to agree that we can, indeed, nail down the fact that you are a limited resource...then what else can we nail down? Can we nail you down? If not, then why not? My guess is that perhaps...maybe...you perceive that it would be a waste of you, a limited resource, to be nailed to...say...a cross.

But...but...we'd have to employ somebody to nail you to a cross. That's a good thing right? And, before you could be nailed to a cross, we'd have to have a cross in the first place. This means that we'd need to hire somebody to cut down a tree, and then we'd have to hire somebody else to build the cross. Plus...I think we'd need a hole to stick the cross into...so we'd also have to hire somebody to dig the hole. How many people is that? At least four? This is quite a labor intensive endeavor! Nailing you to a cross would, therefore, stimulate the economy.

Hmmm...do we really need to nail you to the cross though? Maybe we could nail a frog to the cross instead? We'd still have to hire at least four people. Except, I don't think we'd be able to charge as much for admission. Unless the frog was a prince. A tiny prince frog nailed to a giant cross.

Not sure if people would believe us though that the frog was a prince. But do we really care whether people are willing to pay to see a tiny frog nailed to a giant cross? Not really right? The economy isn't about using resources to create value for consumers. The economy is about using resources to stimulate the economy.

It really doesn't matter how resources are used...what matters is that we use them. This is why it doesn't really matter whether we nail you or a frog to a cross. You and a frog are perfect substitutes. You and a cross are perfect substitutes. We can nail the frog to you...and vice versa.

Actually, you and Napoleon are perfect substitutes...

This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes. - Frédéric Bastiat, What Is Seen and What Is Not Seen

Maybe some illustrations would help?










Maybe learning about opportunity cost would help?

 

[imagep]

So what can be nailed down? Let's see...

You are a limited resource. I think we can nail this down...can't we? Or do you want to argue that you are an unlimited resource? Perhaps you can be in two places at the exact same time?

If you happen to agree that we can, indeed, nail down the fact that you are a limited resource...then what else can we nail down? Can we nail you down? If not, then why not? My guess is that perhaps...maybe...you perceive that it would be a waste of you, a limited resource, to be nailed to...say...a cross.

But...but...we'd have to employ somebody to nail you to a cross. That's a good thing right? And, before you could be nailed to a cross, we'd have to have a cross in the first place. This means that we'd need to hire somebody to cut down a tree, and then we'd have to hire somebody else to build the cross. Plus...I think we'd need a hole to stick the cross into...so we'd also have to hire somebody to dig the hole. How many people is that? At least four? This is quite a labor intensive endeavor! Nailing you to a cross would, therefore, stimulate the economy.

Hmmm...do we really need to nail you to the cross though? Maybe we could nail a frog to the cross instead? We'd still have to hire at least four people. Except, I don't think we'd be able to charge as much for admission. Unless the frog was a prince. A tiny prince frog nailed to a giant cross.

Not sure if people would believe us though that the frog was a prince. But do we really care whether people are willing to pay to see a tiny frog nailed to a giant cross? Not really right? The economy isn't about using resources to create value for consumers. The economy is about using resources to stimulate the economy.

It really doesn't matter how resources are used...what matters is that we use them. This is why it doesn't really matter whether we nail you or a frog to a cross. You and a frog are perfect substitutes. You and a cross are perfect substitutes. We can nail the frog to you...and vice versa.

Actually, you and Napoleon are perfect substitutes...




Maybe some illustrations would help?

Maybe learning about opportunity cost would help?

Money is not a limited resource, more of it can be printed at any time, thus from the standpoint of macroeconomics, it can never be wasted.

Even if it was in a fixed quantity, like if we were constrained by the gold standard, it can still circulate over and over and over again, and is never destroyed.

Manpower is a limited resource, so if we don't utilize our manpower to create something, the manpower is wasted. At worst, building one more aircraft carrier is neutral, because if we didn't build it, the manpower resources would have otherwise been wasted by people sitting at home unemployed. At best, we might actually find that we needed that extra aircraft carrier, and thus the utilization of that manpower would have created quite a bit of value.

That's all that can be "nailed down".

 

[Ockham]

Money is not a limited resource, more of it can be printed at any time, thus from the standpoint of macroeconomics, it can never be wasted.

Not sure if you are speaking figuratively or basing this on reality. If the latter, it's a major flaw. Money is not an infinite resource as at some point given unlimited spending and astronomical debt, inflation will render the money worthless. Money must be backed up by someone or something. Unlimited resources would assume and unlimited supply of backing. If for example, the US spent and had the ability to print, 795 Decillion dollars (1033) and could print and spend 500 Duodecillion dollars (1036) every year after that for 100 years, you believe that is sustainable?

Wanna buy a bridge cheap?

 

[Xerographica]

Manpower is a limited resource, so if we don't utilize our manpower to create something, the manpower is wasted. At worst, building one more aircraft carrier is neutral, because if we didn't build it, the manpower resources would have otherwise been wasted by people sitting at home unemployed. At best, we might actually find that we needed that extra aircraft carrier, and thus the utilization of that manpower would have created quite a bit of value.

That's all that can be "nailed down".

Seriously? So in your world the options look like this...

A. People sitting at home unemployed
B. People building an aircraft carrier

An aircraft carrier is the only thing that the government can pay those people to build?

How long have you been participating in this forum and you still don't grasp the opportunity cost concept?

Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. This is, I repeat, the best way of life to be found on the road the world has been taking. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron...Is there no other way the world may live? - Dwight D. Eisenhower

There's an infinite amount of things that the government can pay people to do. And no two things will provide the same amount of value. Some things are more valuable than other things. Unless you think that crucifying frogs will create as much value as building schools?

In order to determine which uses are the most valuable...we have to know what the demand is. Is there more demand for an additional aircraft carrier...or more demand for a pyramid...or more demand for a golden statue of Obama? In your bizarre fantasy world of liberal economics demand is entirely irrelevant. As long as we're employing people it doesn't matter whether they are committing genocide or building clinics.

 

[imagep]

Not sure if you are speaking figuratively or basing this on reality. If the latter, it's a major flaw. Money is not an infinite resource as at some point given unlimited spending and astronomical debt, inflation will render the money worthless. Money must be backed up by someone or something. Unlimited resources would assume and unlimited supply of backing. If for example, the US spent and had the ability to print, 795 Decillion dollars (1033) and could print and spend 500 Duodecillion dollars (1036) every year after that for 100 years, you believe that is sustainable?

Wanna buy a bridge cheap?

Money is backed by the goods and services that it can purchase. Nothing more, nothing less.

When we print money and use it to pay people for creating goods and services which have value, then that money is fully backed.

Paying people to sit at home (welfare, unemployment benefits, etc) doesn't directly result in the production of goods, and although it may indirectly result in the production of goods, it's debateable as to whether or not the indirect production is suffecient to back the value of the dollar, thus it's entirely possible that it may be somewhat inflationary.

When we pay people to build something of value (roads, bridges), or for services which are valuable (education, security), then it is fairly clear that the money spent resulted in an increase in wealth which fully backs the newly created money.

Regardless, moderate inflation is stimulatory to our economy, thus it's not necessarally bad, it's just inconvenient. If you had a bag of extra money, and we were experiencing deflation, you wouldn't be rushing out to spend it, or to invest it would you? Why spend your excess money when it's only going to be more valuable tomorrow? Why take the risk of investing it when it's going to be worth more tomorrow without having to take that risk? But if we were experiencing inflation, you would have an incentive to spend or invest it immediately, because if you don't, it's gonna be worth less tomorrow.

As far as what inflation does to harm people on fixed income, there really are no one on a fixed income. Usually when we refer to someone as being on a fixed income, that means they are living on a pension and or social security, and or investment income. When we have inflation, their incomes go up. When we have inflation, even wages tend to rise at about the same amount as inflation does.

The only people who are harmed by inflation are those who keep large amounts of cash in a cookie jar, and all they have to do to protect themselves from inflation is to invest that money into something they believe which will either maintain it's value or even increase in value. Thats EXACTLY what people need to do in order to stimulate our economy, they need to either invest, or just spend their excess money. I understand that you believe inflation to be a hidden tax, but the intent of it is to be an incentive for people to do what they need to do to keep our economy going. If they prefer to hord money in a cookie jar, then they will just have to pay the tax of inflation, it's their perogative. When they do keep their excess cash in a cookie jar, that just helps to reduce inflation for everyone else, and allows the government to print more money so the government doesn't have to tax income as much (or alternatively has a lower inflation adjusted debt). so it's all good.

The feds target goal of 2-3% inflation is dead on correct.

 

[Ockham]

Money is backed by the goods and services that it can purchase. Nothing more, nothing less.

When we print money and use it to pay people for creating goods and services which have value, then that money is fully backed.

My extreme point in the previous post was to show money and therefore spending is not infinite.

As far as what inflation does to harm people on fixed income, there really are no one on a fixed income. Usually when we refer to someone as being on a fixed income, that means they are living on a pension and or social security, and or investment income. When we have inflation, their incomes go up. When we have inflation, even wages tend to rise at about the same amount as inflation does.

I don't think I referenced fixed income I stated it in general.

The only people who are harmed by inflation are those who keep large amounts of cash in a cookie jar, and all they have to do to protect themselves from inflation is to invest that money into something they believe which will either maintain it's value or even increase in value. Thats EXACTLY what people need to do in order to stimulate our economy, they need to either invest, or just spend their excess money. I understand that you believe inflation to be a hidden tax, but the intent of it is to be an incentive for people to do what they need to do to keep our economy going. If they prefer to hord money in a cookie jar, then they will just have to pay the tax of inflation, it's their perogative. When they do keep their excess cash in a cookie jar, that just helps to reduce inflation for everyone else, and allows the government to print more money so the government doesn't have to tax income as much (or alternatively has a lower inflation adjusted debt). so it's all good.

At an extreme level, inflation can devalue money to the point it's worthless. Agree with you on investment.

 

[JohnfrmClevelan]

How long have you been participating in this forum and you still don't grasp the opportunity cost concept?

It is a mistake to cling to one idea so tightly that you disregard all other ideas in defense of the first. That is a true "opportunity cost."

You have to think about the assumptions that go into concepts like opportunity cost. For one, there is a true opportunity cost when you are subtracting from one thing to add to another. But what opportunity is lost when we put otherwise unused resources to work? What are you subtracting from?

 

[JohnfrmClevelan]

Not sure if you are speaking figuratively or basing this on reality. If the latter, it's a major flaw. Money is not an infinite resource as at some point given unlimited spending and astronomical debt, inflation will render the money worthless.

There is no limit on the number of dollars that the government can create. That is the unlimited thing. Our ability to produce enough to meet demand is limited. The idea is that it is not the availability of dollars that limits us, the limit is in the production; and the take-home lesson from this is that some new (or redistributed old) dollars in the hands of people that would spend them will elicit new production, as long as we aren't running out of whatever raw materials we need to produce stuff.

Money must be backed up by someone or something. Unlimited resources would assume and unlimited supply of backing.

Money is backed up by production. Your dollar is worth something because it can buy some production. If you had a gold-backed dollar, it was worth something not because it was backed by gold, but because it could buy something. And, if you were the nervous type, you probably took comfort in the idea that you could trade in your dollar for a bit of gold, and then buy something with the gold. It has always been production that has backed money, even gold-convertible money or gold coins. Because gold is worthless when you are starving or cold and there is no food or shelter to buy.

Nowhere in here is anybody advocating printing up and spending an infinite amount of dollars. But there is headroom to print and spend more than we do now, and the extra demand is a good thing for the economy.

 

[votemout]

There is no limit on the number of dollars that the government can create. That is the unlimited thing. Our ability to produce enough to meet demand is limited. The idea is that it is not the availability of dollars that limits us, the limit is in the production; and the take-home lesson from this is that some new (or redistributed old) dollars in the hands of people that would spend them will elicit new production, as long as we aren't running out of whatever raw materials we need to produce stuff.



Money is backed up by production. Your dollar is worth something because it can buy some production. If you had a gold-backed dollar, it was worth something not because it was backed by gold, but because it could buy something. And, if you were the nervous type, you probably took comfort in the idea that you could trade in your dollar for a bit of gold, and then buy something with the gold. It has always been production that has backed money, even gold-convertible money or gold coins. Because gold is worthless when you are starving or cold and there is no food or shelter to buy.

Nowhere in here is anybody advocating printing up and spending an infinite amount of dollars. But there is headroom to print and spend more than we do now, and the extra demand is a good thing for the economy.

Our government doesnt create a single dollar now. The federal reserve does and they are a private banking institution but they sound like a .gov institution.
You need to research this more. Remember every dollar they create we have to pay back at interest.

Federal Reserve Act - Wikipedia, the free encyclopedia

The Federal Reserve Act created a system of private and public entities; there were to be at least eight, and no more than 12, private regional Federal Reserve banks

you can thank that progressive woodrow wilson for this treason.

The last president that tried to take back this power to give it back to the .gov was JFK and you saw how that worked out.

https://www.youtube.com/watch?v=p-0BPMwgKNA

All wars are bankers war, here is a history lesson WATCH IT.

 

[votemout]

There is no limit on the number of dollars that the government can create. That is the unlimited thing. Our ability to produce enough to meet demand is limited. The idea is that it is not the availability of dollars that limits us, the limit is in the production; and the take-home lesson from this is that some new (or redistributed old) dollars in the hands of people that would spend them will elicit new production, as long as we aren't running out of whatever raw materials we need to produce stuff.



Money is backed up by production. Your dollar is worth something because it can buy some production. If you had a gold-backed dollar, it was worth something not because it was backed by gold, but because it could buy something. And, if you were the nervous type, you probably took comfort in the idea that you could trade in your dollar for a bit of gold, and then buy something with the gold. It has always been production that has backed money, even gold-convertible money or gold coins. Because gold is worthless when you are starving or cold and there is no food or shelter to buy.

Nowhere in here is anybody advocating printing up and spending an infinite amount of dollars. But there is headroom to print and spend more than we do now, and the extra demand is a good thing for the economy.

This is not true at all. We have a petro dollar system because until recently people could only buy OIL in dollars. This system was created because we promised to protect Saudi Arabia with our military. In return saudi only excepted Dollars for oil forcing all countries to need dollars to buy oil, all opec nations also agreed to this deal.

So our dollar is more military backed then anything else. no worries Countries world wide are abandoning using the dollar. Hope you are prepared accordingly.

 

[JohnfrmClevelan]

This is not true at all. We have a petro dollar system because until recently people could only buy OIL in dollars. This system was created because we promised to protect Saudi Arabia with our military. In return saudi only excepted Dollars for oil forcing all countries to need dollars to buy oil, all opec nations also agreed to this deal.

So our dollar is more military backed then anything else. no worries Countries world wide are abandoning using the dollar. Hope you are prepared accordingly.

I've got my tinfoil hat ready to go.