U.S. Debt is a Myth

[JohnfrmClevelan]

​

"It (the U.S.) could spend in any amount that it wants to. The only only real issue here, the only thing that we have to consider, is whether or not that spending, at some point, leads to an inflation. And the only way that's going to happen is when the governnment spends beyond the capacity of the economy to produce. In other words, when every single person in this country who is able to work is working, and when all of our resources are used up, and you spend beyond that, that's when you have a sustainable inflation. That's the real issue we should be talking about. That's the question we should be asking ourselves. And frankly, with a 9% unemployment rate, and millions of people out of work, and industrial capacity far below what our potential is, and millions of unsold homes, and all this other excess capacity that we have, what we should be doing is increasing demand, and the way that we do that in an economy where most people are trying to cut back their debt is for the government to step in and stimulate demand by spending..."


Questions for debate:

Is it possible for the U.S. government to "run out" of dollars? If so, explain how.

If the government cannot run out of dollars, does it make sense for the government to run our economy as if we were in danger of running out of dollars?

Is there any better use of the government's ability to create and spend dollars than to employ the unemployed, and otherwise spend for the benefit of its citizens?

Do you think that it would be damaging to our economy for the government to run a budget surplus? Explain why or why not.

 

[joG]

​

"It (the U.S.) could spend in any amount that it wants to. The only only real issue here, the only thing that we have to consider, is whether or not that spending, at some point, leads to an inflation. And the only way that's going to happen is when the governnment spends beyond the capacity of the economy to produce. In other words, when every single person in this country who is able to work is working, and when all of our resources are used up, and you spend beyond that, that's when you have a sustainable inflation. That's the real issue we should be talking about. That's the question we should be asking ourselves. And frankly, with a 9% unemployment rate, and millions of people out of work, and industrial capacity far below what our potential is, and millions of unsold homes, and all this other excess capacity that we have, what we should be doing is increasing demand, and the way that we do that in an economy where most people are trying to cut back their debt is for the government to step in and stimulate demand by spending..."


Questions for debate:

Is it possible for the U.S. government to "run out" of dollars? If so, explain how.

If the government cannot run out of dollars, does it make sense for the government to run our economy as if we were in danger of running out of dollars?

Is there any better use of the government's ability to create and spend dollars than to employ the unemployed, and otherwise spend for the benefit of its citizens?

Do you think that it would be damaging to our economy for the government to run a budget surplus? Explain why or why not.

The question is not, whether the government can find printed paper or not. But what will people give you for the stuff, when there is enough to wallpaper the factory with?

 

[JohnfrmClevelan]

The question is not, whether the government can find printed paper or not. But what will people give you for the stuff, when there is enough to wallpaper the factory with?

As the guy said in the video, the only real question here is the possibility of inflation.

So what would you do, joG? Spend to boost the economy and employ the unemployed, or sit around while the economy stagnates because you are worried about the mere possibility of future inflation?

 

[Renae]

As the guy said in the video, the only real question here is the possibility of inflation.

So what would you do, joG? Spend to boost the economy and employ the unemployed, or sit around while the economy stagnates because you are worried about the mere possibility of future inflation?

I think we should print 1 MILLION dollars to everyone over 18 in America right now. If you're here, you get 1 millllllion dollars from the US Government. Imagine the economic BOOM!

 

[JohnfrmClevelan]

I think we should print 1 MILLION dollars to everyone over 18 in America right now. If you're here, you get 1 millllllion dollars from the US Government. Imagine the economic BOOM!

Wow, I had never thought of that argument before! It's a totally new angle. How did you ever come up with it?

 

[Ntharotep]

This was argued to death over in another thread and though I've learned what I think might be the "creditor myths" after reading up, there is still the fact that the USD is a bleeder and nobody seems to have a real hold and relatively exact time when it will be valued at 0 and die as a dominant currency. Overspending decreases the value of the USD. If we ever bleed it to "death" we could be in trouble (or maybe not, maybe another form of U.S. currency takes its place or another system is developed).
This article is interesting, especially in the notion that taxes are not really necessary things. Some interesting theories:
Why the U.S. Dollar Has Value

 

[joG]

As the guy said in the video, the only real question here is the possibility of inflation.

So what would you do, joG? Spend to boost the economy and employ the unemployed, or sit around while the economy stagnates because you are worried about the mere possibility of future inflation?

The economy has not needed a boost lately. The recession has been over for quite some time and though we no longer had the freedom of action of the Clinton period after his excessive spending during the boom with expansionary monetary policyand his following set of bubbles. But we should have cut spending considerably more than we have. As it is, we might be sailing into troubled waters at the same time as we are highly in debt and the Fed is extended further than conventional instruments could go.

 

[David_N]

This'll be a fun thread John. Maybe you'll be able to help people see the reality. You and others convinced me. eace

 

[David_N]

The question is not, whether the government can find printed paper or not. But what will people give you for the stuff, when there is enough to wallpaper the factory with?

Why do you have such an interest with paper?

 

[fmw]

Prices and wages are 10 times what they were when I was in high school. The are almost double what they were 15 years ago. That isn't inflation?

 

[David_N]

I think we should print 1 MILLION dollars to everyone over 18 in America right now. If you're here, you get 1 millllllion dollars from the US Government. Imagine the economic BOOM!

What a brilliant argument! Notice how it is completely absurd and doesn't address any questions in the OP.

 

[Ntharotep]

What a brilliant argument! Notice how it is completely absurd and doesn't address any questions in the OP.

I've never seen a real answer as to why the Government doesn't just give its citizenry money to be fair.
Would it create a surplus close to that just before the Great Depression?

Honest question.

 

[justabubba]

Wow, I had never thought of that argument before! It's a totally new angle. How did you ever come up with it?

actually, it's an intriguing prospect to ponder
that would definately level the playing field for the 96.5% of households that have less than a million dollar net worth
a near-total re-set of the economy would ensue
there would be no "poor"
96% of the population would be middle class (at least, initially)
real estate values would escalate
as would essential wages
not sure what would happen to non-essential wage earners - like many of those in government
risk insurance would be in a quandary after an initial nation-wide windfall would diminish their exposure
maybe the financial industry would be worst off, since its inventory value just got decimated and most creditors would be in a position to satisfy all of their outstanding debt obligations
also wonder how long it would take until the population again became stratified based on economic wealth

 

[JohnfrmClevelan]

The economy has not needed a boost lately. The recession has been over for quite some time and though we no longer had the freedom of action of the Clinton period after his excessive spending during the boom with expansionary monetary policyand his following set of bubbles. But we should have cut spending considerably more than we have. As it is, we might be sailing into troubled waters at the same time as we are highly in debt and the Fed is extended further than conventional instruments could go.

How can you say that the economy doesn't need a boost when so many people are unemployed or underemployed? Our economy is certainly capable of producing more - why not produce more? We are perfectly capable of feeding, sheltering, and otherwise meeting the basic needs of everybody in the country, but we don't, for fear of inflation - inflation that we are trying desperately to induce, btw.

Why do you say that we should have cut spending more than we already have? Government spending is a component of GDP - when the government cuts back on spending, the economy feels it, and jobs are lost. What, specifically, are these "troubled waters" that you are worried about? Do you think that the government's ability to create and spend dollars is somehow constrained today because of it's actions yesterday?

 

[JohnfrmClevelan]

This was argued to death over in another thread and though I've learned what I think might be the "creditor myths" after reading up, there is still the fact that the USD is a bleeder and nobody seems to have a real hold and relatively exact time when it will be valued at 0 and die as a dominant currency. Overspending decreases the value of the USD. If we ever bleed it to "death" we could be in trouble (or maybe not, maybe another form of U.S. currency takes its place or another system is developed).
This article is interesting, especially in the notion that taxes are not really necessary things. Some interesting theories:
Why the U.S. Dollar Has Value

This is generally a good article, except for the author's unsupported claims about inflation. But I suppose he had to say something dire as a prerequisite for having his article published on a website that deals in scare headlines. But he gets the mechanics right.

 

[JohnfrmClevelan]

Prices and wages are 10 times what they were when I was in high school. The are almost double what they were 15 years ago. That isn't inflation?

Yes, that's inflation. But what is it caused by? If you are trying to imply that inflation is caused by government spending and not a bunch of other factors, you need to make your case.

 

[jaeger19]

First question:


1. Do we have inflation in the US currently? If so.. why if inflation only occurs when we have run out of resources etc.

 

[Critter7r]

Prices and wages are 10 times what they were when I was in high school. The are almost double what they were 15 years ago. That isn't inflation?

You were in high school in the 40's?

 

[Renae]

What a brilliant argument! Notice how it is completely absurd and doesn't address any questions in the OP.

The OP starts from the absurd notion that money is magical, I merely took it to it's better conclusion.

 

[joG]

How can you say that the economy doesn't need a boost when so many people are unemployed or underemployed? Our economy is certainly capable of producing more - why not produce more? We are perfectly capable of feeding, sheltering, and otherwise meeting the basic needs of everybody in the country, but we don't, for fear of inflation - inflation that we are trying desperately to induce, btw.

Why do you say that we should have cut spending more than we already have? Government spending is a component of GDP - when the government cuts back on spending, the economy feels it, and jobs are lost. What, specifically, are these "troubled waters" that you are worried about? Do you think that the government's ability to create and spend dollars is somehow constrained today because of it's actions yesterday?

The economy doesn't need industrial policy and employment programs to increase jobs. Quite the opposite. We need less debt, better regulation and less intervention.
So yes. We should have cut spending more than we did. We would already be better off, had Clinton done so.

 

[David_N]

Prices and wages are 10 times what they were when I was in high school. The are almost double what they were 15 years ago. That isn't inflation?

I don't think you understand.

 

[JohnfrmClevelan]

I've never seen a real answer as to why the Government doesn't just give its citizenry money to be fair.
Would it create a surplus close to that just before the Great Depression?

Honest question.

I have answered this one about a hundred times on this site alone.

Giving away too much money would cause inflation. Our economy couldn't meet that much demand, and prices would go up. On the other hand, when Bush gave everybody $400 back in 2001, it barely caused a blip in the graphs. So there is obviously some level that could be helpful, and would increase demand in a healthy way. Lots of countries are considering a BIG (Basic Income Guarantee) of a few thousand/year. Not enough for people to quit work, and not so much that our economy would be swamped by the demand.

Also - what pre-Depression surplus are you referring to?

 

[Gimmesometruth]

I think we should print 1 MILLION dollars to everyone over 18 in America right now. If you're here, you get 1 millllllion dollars from the US Government. Imagine the economic BOOM!

Reagan did half that ($130B in DoD increases, 1986 population was 240M, @ $540K per), and we all know, military spending has a low multiplyer.

 

[David_N]

I've never seen a real answer as to why the Government doesn't just give its citizenry money to be fair.
Would it create a surplus close to that just before the Great Depression?

Honest question.

You're talking about a basic income guarantee which is being experimented with, and which will ultimately be necessary due to productivity, automation.. (Some time in the future, not anytime soon.)

 

[David_N]

The OP starts from the absurd notion that money is magical, I merely took it to it's better conclusion.

What are you taking about? The us government can create all the dollars it wants. This isn't debatable.