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Your Taxes Don't Pay For Anything

Mika-El

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Actually, all if it has been refuted.

But fundamental to your argument are two real flaws, the constraint on an economy is resources and the 101's of how banks create and destroy money through loans.
No actually it hasn't been. Anything I or others mentioned was not refuted but ignored as John simply circled back and stated his original subjective opinion.

Next you again misrepresent because you can't understand so project different meanings as to what I said.

I responded to an absolute statement from John that said central backs have no limitations. central banks. You removed it from its actual context and change the reference from central bank to economy.

Then you replace the word limitation with restraint. May I suggest to you a limitation, restraint, constraint are not necessarily interchangeable as having the same meaning as you assume particularly in discussions as to fiscal policies or actual banking laws and regulations that may not be one and the same or even one carrying out the other.

I also never discussed banks destroying money through loans-that is your concept not mine.

I also never stated a bank created money you repeat that. I do not use the word creation and I explained why and it was never repudiated. I showed the money John described as being brand new in fact was not brand new but recycled, i.e., reinvested, i.e., recirculated and then interest on that money attached which brought in money but the money from interest was not brand new it too was recirculated from somewhere else.

Money accumulates in value. When it does its not brand new. Part of it is its pre-existing amount that was borrowed, part of it comes from interest payments charged on it that then attach to it causing it to grow.

All money goes from one source to another. What we see simply is transferring the amounts of money from one account to another. The account it leaves diminishes, the account its transferred increases. The transfer of money does not transfer money that magically appears from thin air and this is where your MMT theory fails miserably it ignores the fundamental principle of how debts and assets are created by the recirculation of existing money not the printing of money.

Any economy faces numerous limitations, constraints and restraints, one of them being resources available to make a product to then be able to sell that product. Next MMT does not provide any 101 of banking it denies it. You clearly do not read what you think you defend. MMT creates the concept of money appearing brand new out of thin air and not transactions that transfer the location of money from one source to another which is what Banking 101 if we must use that ridiculous term explains.

Next the person you advocate on behalf of denies now that Iceland and the European financial crisis was not driven by MMT policies since the debts in these countries were foreign dominated. That makes no sense. Each country that faced a crisis chose to spend more than it was taking in by tax. Each country thought it could print money and self finance as the debt grew and they were warned over and over to stop this and engage in fiscal restraint. They did not. Saying this was caused by foreigners is an out and out crock of shit. These decisions were based by the governments of these countries. When these countries decided to borrow money from other EU countries and through the EU or IMF it was their decision. No one forced them. They chose to do this rather than deal with domestic backlash at home by engaging in financial restraint which would have been unpopular.

To falsely state it was decided upon them by foreign countries is nonsense. They chose to borrow the money. No one forced the borrowing decision on them. As their debts rose so did the interest rates. In fact the European crisis proves empirically as you would say that MMT does NOT work and so of course I would expect John to trot out some nonsense that he can ignore this because it was caused by foreigners and not the countries who chose through their own democratic institutions to run up debts. He has no other way to admit MMT failed and all one has to do is look at Iceland, Spain, Portugal, Germany in 2022, Argentina, Chile, Brazil, Cyprus, Zimbabwe, Italy.

Your entire theory is a fantasy that people can spend more than they own without consequence, governments can spend more than they collect in taxes and that debts don't matter they can be ignored, and the interest rates from those debts which cause inflation, deflation, recessions, depressions, currency and bank collapses can be ignored and skipped over as you present your theories that have not ONE country that shows they have not caused as much damage as any good they claim to if not properly balanced with many other economic approaches.
 

JohnfrmClevelan

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I also never stated a bank created money you repeat that. I do not use the word creation and I explained why and it was never repudiated. I showed the money John described as being brand new in fact was not brand new but recycled, i.e., reinvested, i.e., recirculated and then interest on that money attached which brought in money but the money from interest was not brand new it too was recirculated from somewhere else.

You demonstrated nothing. I have provided authoritative sources to back up my claims - and in doing so, have repudiated your claims.

Two more:

Money accumulates in value. When it does its not brand new. Part of it is its pre-existing amount that was borrowed, part of it comes from interest payments charged on it that then attach to it causing it to grow.

None of that explains how the money supply increases in your world.
All money goes from one source to another. What we see simply is transferring the amounts of money from one account to another. The account it leaves diminishes, the account its transferred increases. The transfer of money does not transfer money that magically appears from thin air and this is where your MMT theory fails miserably it ignores the fundamental principle of how debts and assets are created by the recirculation of existing money not the printing of money.

The transfer of money doesn't increase the money supply, and I never claimed that it did. Strawman. Also, transfers do not create debts or assets.

You are still unable to explain how the money supply grows.

Any economy faces numerous limitations, constraints and restraints, one of them being resources available to make a product to then be able to sell that product. Next MMT does not provide any 101 of banking it denies it. You clearly do not read what you think you defend. MMT creates the concept of money appearing brand new out of thin air and not transactions that transfer the location of money from one source to another which is what Banking 101 if we must use that ridiculous term explains.

Neither MMT nor I have neglected to explain banking. But simple transfers are just that, simple. They really don't need a lot of explaining, especially in the context of this thread, which is not even about transfers.
Next the person you advocate on behalf of denies now that Iceland and the European financial crisis was not driven by MMT policies since the debts in these countries were foreign dominated. That makes no sense....

You need to read up on both Iceland's crisis and the differences between Euro nations and countries sovereign in their own currency.


 

fmw

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Where is your source for this "majority economic opinion?"
I hear what I state everywhere and hear what you say only a couple of times. Common sense also plays in. You have a minority economic opinion. It's OK. Economics is nothing but opinions.
 

JohnfrmClevelan

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I hear what I state everywhere and hear what you say only a couple of times. Common sense also plays in. You have a minority economic opinion. It's OK. Economics is nothing but opinions.

So what you are saying is that your "majority economic opinion" is really a majority of laymen, then?

At various points in history, the majority believed that the Earth was flat, the sun revolved around the Earth, and bloodletting cured illness.
 

OrphanSlug

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I hear what I state everywhere and hear what you say only a couple of times. Common sense also plays in. You have a minority economic opinion. It's OK. Economics is nothing but opinions.

That is one way to entirely run away from the question I asked.
 

fmw

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So what you are saying is that your "majority economic opinion" is really a majority of laymen, then?
Of course. I pay no attention to economists. They just argue about opinions. I prefer to deal with the way things actually happen. If your view of economics were what actually happens we wouldn't have lost 90% of the dollar's value over my lifetime. But it has so I reject your economic opinions. You claim that money is only accounting entries. It is far more complicated than that. You know that is true.
At various points in history, the majority believed that the Earth was flat, the sun revolved around the Earth, and bloodletting cured illness.
True. Perhaps economists can learn to agree on something without politics. Well, there is the law of supply and demand. At least they agree on that.
 

Mika-El

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You demonstrated nothing. I have provided authoritative sources to back up my claims - and in doing so, have repudiated your claims.

Two more:



None of that explains how the money supply increases in your world.


The transfer of money doesn't increase the money supply, and I never claimed that it did. Strawman. Also, transfers do not create debts or assets.

You are still unable to explain how the money supply grows.



Neither MMT nor I have neglected to explain banking. But simple transfers are just that, simple. They really don't need a lot of explaining, especially in the context of this thread, which is not even about transfers.


You need to read up on both Iceland's crisis and the differences between Euro nations and countries sovereign in their own currency.


You are talking in circles.

I specifically addressed how money supplies are increased to directly repudiate your absurd attempt to say money magically appears.

Your continued attempt to say lack of sovereignty of one's one currency is why there was a financial crisis in Iceland and other countries is bullshit. Sheer bullshit.

As you are well aware the decisions to run up debts they could not pay back were not decisions made by people outside Iceland or the other countries that run up debts they could not pay back. How you would try suggest the decisions to run up the debts was imposed on these countries from outsiders is just absolute falsehood. The very reason these countries ON THEIR OWN decided to run up their debts to beyond their capacity to pay them back was caused by their belief in the very theory you champion.

MMT of course fails to recognize the limitations necessarily inherent in running up debts to finance anything whether it be with banks, central banks, or other institution.



In a nut shell:

"To an outsider, it appears as if by recording an asset account entry connected to the buyer and by recording a corresponding deposit entry, the bank has created money out of nothing; this is the illusion of the bank having created money.

But this is only the prima facie appearance and not the truth of the matter because the outside observer has neglected to acknowledge that the deposit value records the value-for-value exchange conducted through an underlying transaction. In reality, the seller no longer has a house and the buyer now has a house."

source: https://www.weforum.org/agenda/2015/06/do-banks-really-create-money-out-of-thin-air/


Stop telling me what I need to read. Its patronizing and it simply makes you sound like a snot nose trying to pose as superior in opinions and beliefs.

Because you are now just circling back to your original statements and providing nothing new to support them I have no further responses thank you.

I do not wish to follow you as you repeat the same one trick pony theory pretending anything that repudiates it does not apply because you say so or lol, because failures with MMT did not occur it was lack of sovereignty over currency that caused the banking collapses.

Please run along and create money out of thin air and I will pay off my debts.

Have a nice day.
 

JohnfrmClevelan

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I specifically addressed how money supplies are increased to directly repudiate your absurd attempt to say money magically appears.

Could you point out exactly where you explained how money supplies are increased? Because I have only seen unsupported rantings about how I am wrong.

Your continued attempt to say lack of sovereignty of one's one currency is why there was a financial crisis in Iceland and other countries is bullshit. Sheer bullshit.

Care to expand on that erudite observation?

As you are well aware the decisions to run up debts they could not pay back were not decisions made by people outside Iceland or the other countries that run up debts they could not pay back. How you would try suggest the decisions to run up the debts was imposed on these countries from outsiders is just absolute falsehood. The very reason these countries ON THEIR OWN decided to run up their debts to beyond their capacity to pay them back was caused by their belief in the very theory you champion.

That's not what monetary sovereignty means. This would be a much more productive debate if you just understood some simple definitions, or just listened long enough when they were explained to you.

Monetary sovereignty is when a government has control over their own currency, meaning they can issue their own currency and therefore meet obligations in that currency. That's it. It's not whether they are free to decide whether or not to go into debt; that was a ridiculous guess, tailored to support the point you want so badly to make.

For crissakes, Iceland's debt problems were the fault of commercial banks, not the government. That has zero to do with monetary sovereignty, or this thread.

MMT of course fails to recognize the limitations necessarily inherent in running up debts to finance anything whether it be with banks, central banks, or other institution.

That is absolutely untrue. You don't know enough about MMT to make such a claim.


This article backs up my version of things. Do you not bother to read articles before you cite them, just looking at the title and thinking it supports you?


In a nut shell:

"To an outsider, it appears as if by recording an asset account entry connected to the buyer and by recording a corresponding deposit entry, the bank has created money out of nothing; this is the illusion of the bank having created money.

But this is only the prima facie appearance and not the truth of the matter because the outside observer has neglected to acknowledge that the deposit value records the value-for-value exchange conducted through an underlying transaction. In reality, the seller no longer has a house and the buyer now has a house."

This article backs me up as well. Thanks for the help! Maybe you should read these things....


This guy is just incorrect. He has his accounting wrong. He fails to understand that when a bank "gets involved" in a transaction, the available money between all parties increases. An embarrassing blunder on his part.

Stop telling me what I need to read. Its patronizing and it simply makes you sound like a snot nose trying to pose as superior in opinions and beliefs.

Then stop being so incorrect, and I won't have to.

Because you are now just circling back to your original statements and providing nothing new to support them I have no further responses thank you.

I do not wish to follow you as you repeat the same one trick pony theory pretending anything that repudiates it does not apply because you say so or lol, because failures with MMT did not occur it was lack of sovereignty over currency that caused the banking collapses.

This is all based on your lack of understanding of MMT. Don't blame me for that, I'm trying to help.
 

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“...[with an] inconvertible currency, a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue… It follows that our Federal Government has final freedom from the money market in meeting its financial requirements… All federal taxes must meet the test of public policy and practical effect. The public purpose which is served should never be obscured in a tax program under the mask of raising revenue.”

Beardsley Ruml, former Chairman of the Federal Reserve Bank of New York, 1946

Mr. Ruml's point here is that the government - even in 1946, when we were on the gold standard - can create and spent its own currency, so they don't need tax receipts to fund their operations. Rather, taxation is used for other things - driving policies, such as encouraging homeownership and investment, and creating fiscal space into which the government can spend (reducing potential private sector demand so that the domestic economy is able to meet (government + private sector) total demand. Even FICA taxes were a concession; FDR calculated that the idea of people paying into a fund would make it more difficult for Republicans to scrap the program in the future.

So we aren't paying for wars; even during WWII, when the economy was producing at or near capacity, privates sector demand was kept in check by taxation, war bonds, rationing, and price controls, so inflation did not become a problem. Our taxes also won't pay for student loan forgiveness, bank bailouts, PPP loan forgiveness, interest on the national debt, or aid to Ukraine. Government spending pays for all of these things, and deficit spending in particular.

Here's another way to look at it - if you take the central bank and the government together, like a black box, government spending increases government liabilities, while tax receipts extinguish some of those same government liabilities. Tax receipts are extinguished upon receipt, much like M1 is extinguished when loan payments are made.

Discuss.
The OP, IMO, doesn't make a lot of sense.
Taxes DO pay for some of government spending, with the remainder paid for by sale of government bonds.
Taxes DO pay the interest on the Federal debt, but except for a very few times in the past none of the principle.
What spending done by government that exceeds tax revenue collected becomes part of the governments debt, and inflation helps reduce the demand to reduce the debt. Just imagine if the debt interest was allowed to become greater than the total tax revenue collected each year.
How many here can recall living relatively comfortable with an annual income under $1,000?
 

JohnfrmClevelan

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The OP, IMO, doesn't make a lot of sense.

Ruml is pointing out that the federal government is completely capable of funding itself, and does not need tax receipts at all. They simply issue and spend liabilities (bonds or dollars), which are assets to the private sector.
Taxes DO pay for some of government spending, with the remainder paid for by sale of government bonds.

This depends on how you look at it.

The dollars you use to pay your taxes are government liabilities; they existed before your tax burden, so they were obviously created by the government and spent into the economy before you ever earned them. Seen this way, the government spends first, then taxes back some of those dollars later.

People prefer to think that their sacrifice is a necessary thing and pays for stuff, but from the government's perspective, they have no idea how much tax revenue they are going to get before they pass budgets and spending bills. They spend whatever money they spend, issue bonds as needed, and the level of tax revenues isn't that important.
Taxes DO pay the interest on the Federal debt, but except for a very few times in the past none of the principle.

You can assign tax revenues to interest, or SS, or defense, or nothing at all. It doesn't matter. Interest is just another budget item, and it is paid for like any other budget item - the government, via the central bank, marks up bank accounts of payees. The important point is that the debt never gets any smaller, so it is never getting paid down/extinguished.

What spending done by government that exceeds tax revenue collected becomes part of the governments debt, and inflation helps reduce the demand to reduce the debt. Just imagine if the debt interest was allowed to become greater than the total tax revenue collected each year.

Inflation doesn't help the government with debt. I know the argument, but inflation only helps debtors when it also drives up the wages of debtors; wages increase, debt stays nominally the same, so it's easier to pay off. That doesn't hold for governments, though. Inflation doesn't make it easier, nor does it make it harder; the government can always meet its obligations in its own currency, no problem, no matter the interest rate.
 

OscarLevant

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“...[with an] inconvertible currency, a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue… It follows that our Federal Government has final freedom from the money market in meeting its financial requirements… All federal taxes must meet the test of public policy and practical effect. The public purpose which is served should never be obscured in a tax program under the mask of raising revenue.”

Beardsley Ruml, former Chairman of the Federal Reserve Bank of New York, 1946

Mr. Ruml's point here is that the government - even in 1946, when we were on the gold standard - can create and spent its own currency, so they don't need tax receipts to fund their operations. Rather, taxation is used for other things - driving policies, such as encouraging homeownership and investment, and creating fiscal space into which the government can spend (reducing potential private sector demand so that the domestic economy is able to meet (government + private sector) total demand. Even FICA taxes were a concession; FDR calculated that the idea of people paying into a fund would make it more difficult for Republicans to scrap the program in the future.

So we aren't paying for wars; even during WWII, when the economy was producing at or near capacity, privates sector demand was kept in check by taxation, war bonds, rationing, and price controls, so inflation did not become a problem. Our taxes also won't pay for student loan forgiveness, bank bailouts, PPP loan forgiveness, interest on the national debt, or aid to Ukraine. Government spending pays for all of these things, and deficit spending in particular.

Here's another way to look at it - if you take the central bank and the government together, like a black box, government spending increases government liabilities, while tax receipts extinguish some of those same government liabilities. Tax receipts are extinguished upon receipt, much like M1 is extinguished when loan payments are made.

Discuss.


Yes, this is what the MMT folks claim.

Taxes do ultimately pay for part of it. Inflation (deficit financing) pays the rest, which is paid for by those who cannot hedge.

If fiat currency is created, an equal amount has to be removed from circulation, hence taxation.

It's just a backwards way of taxation. Print first, then tax to keep the money supply from expanding to prevent inflation. They'll have to destroy the taxed funds, of course.

Now, that is what the MMT (modern monetary theorists) folks claim how it works. I do not know this for a fact.

However, MMT claims that fiat currency doesn't cause inflation. Well, the two Stimulus bills, one by Trump, the other by Biden, prove that theory wrong.
 

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Yes, this is what the MMT folks claim.

Taxes do ultimately pay for part of it. Inflation (deficit financing) pays the rest, which is paid for by those who cannot hedge.

If fiat currency is created, an equal amount has to be removed from circulation, hence taxation.

It's just a backwards way of taxation. Print first, then tax to keep the money supply from expanding to prevent inflation. They'll have to destroy the taxed funds, of course.

Now, that is what the MMT (modern monetary theorists) folks claim how it works. I do not know this for a fact.

However, MMT claims that fiat currency doesn't cause inflation. Well, the two Stimulus bills, one by Trump, the other by Biden, prove that theory wrong.

Lots of unsupported assumptions here. The biggest being your assumption that deficit spending creates inflation, an argument that doesn't hold up very well when you look at most of the past 40 years of low inflation. The second being expansion of the money supply causing inflation (CPI). You can look, but you won't find any correlation.

There are a lot of good, sound reasons why prices go up. Focusing on deficit spending completely disregards them. What about the COVID shutdown? What about oil prices and the war in Ukraine? What about record profits by big companies with pricing power? Do those things not count?
 

OscarLevant

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Lots of unsupported assumptions here. The biggest being your assumption that deficit spending creates inflation, an argument that doesn't hold up very well when you look at most of the past 40 years of low inflation. The second being expansion of the money supply causing inflation (CPI). You can look, but you won't find any correlation.

There are a lot of good, sound reasons why prices go up. Focusing on deficit spending completely disregards them. What about the COVID shutdown? What about oil prices and the war in Ukraine? What about record profits by big companies with pricing power? Do those things not count?

Inflation isn't prices going up, per se, nor is deflation prices going down, per se.

INflation is the ultimate result of fiat currency creation faster than the GDP can absorb the dollars, creating a condition of 'too much money chasing too few goods'.

Deflation is the reverse.

Without that, there will be only price fluctuation caused by physical factors of supply and demand. Inflation is the upward trend in excess of fluctuation, and that is the ultimate results of money supply expansion faster than GDP growth.

Now then, why this happens is where it gets complicated. The Big Banks collude with the fed on this, let's be sure about that, and it's the Fed that drives the beast, via lowering interest rates and other factors which fuel fiat currency creation. But, there is a more basic prime mover, and that's government programs creating the need for the fed to create fiat currency to finance the deficit such programs create because taxation and bond sales cannot take up the entire burden. In short, we've created a beast so big, including the military industrial complex, so vast, no one knows how to get a handle on it. one of these days it's going to crash and there will be a lot of finger pointing going on, for sure. But, we're all guilty, really.

Oil prices in Ukraine is a supply/demand fluctuation, it's artificial. It will come back down. Inflation is the above.

Think of fluctuation as the up and down waves in a populated swimming pool. Think of inflation as filling the pool water level to a higher level. The higher level cannot be achieved without more water, without which there can only be up and down fluctuation caused by the people in the pool. this is a perfect analogy of inflation versus price fluctuation.

This is the academic view on the ultimate cause of inflation, as I've been studying the subject for some 55 years. Granted, there are weeds and more complicated factors involved, but this is it, in it's essence.
 
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JohnfrmClevelan

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Inflation isn't prices going up, per se, nor is deflation prices going down, per se.

INflation is the ultimate result of fiat currency creation faster than the GDP can absorb the dollars, creating a condition of 'too much money chasing too few goods'.

Deflation is the reverse.

Without that, there will be only price fluctuation caused by physical factors of supply and demand. Inflation is the upward trend in excess of fluctuation, and that is the ultimate results of money supply expansion faster than GDP growth.

Now then, why this happens is where it gets complicated. The Big Banks collude with the fed on this, let's be sure about that, and it's the Fed that drives the beast, via lowering interest rates and other factors which fuel fiat currency creation. But, there is a more basic prime mover, and that's government programs creating the need for the fed to create fiat currency to finance the deficit such programs create because taxation and bond sales cannot take up the entire burden. In short, we've created a beast so big, including the military industrial complex, so vast, no one knows how to get a handle on it. one of these days it's going to crash and there will be a lot of finger pointing going on, for sure. But, we're all guilty, really.

Oil prices in Ukraine is a supply/demand fluctuation, it's artificial. It will come back down. Inflation is the above.

Think of fluctuation as the up and down waves in a populated swimming pool. Think of inflation as filling the pool water level to a higher level. The higher level cannot be achieved without more water, without which there can only be up and down fluctuation caused by the people in the pool. this is a perfect analogy of inflation versus price fluctuation.

This is the academic view on the ultimate cause of inflation, as I've been studying the subject for some 55 years. Granted, there are weeds and more complicated factors involved, but this is it, in it's essence.

Couple of notes on your post...

One problem with believing that supply and demand don't inflate prices on their own is that some things are in truly limited supply, such as real estate. The demand for RE will always go up with population growth, but the supply is fixed. Another problem is monopolistic pricing power; companies are making record profits right now, and that has nothing to do with supply and demand. Gas recently was costing a lot more than the last time oil was at the same price.

Two, you won't find a correlation between any measure of the money supply and CPI. It just isn't there.

Three, deficit spending doesn't create dollars. It creates bonds; the dollars stay the same. Any change in the number of dollars is due to the Fed effecting monetary policies and banks creating loans. Deficit spending is paid for by bond issuance, and the increased demand leads to increased production, so by monetarist math, the same amount of dollars are chasing more goods, which should be deflationary.

Four, where is savings factored into this? Income is lost to savings every year, and savings just sit there - they are not used for loans. Demand needs to be created just to offset savings.
 

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Couple of notes on your post...

One problem with believing that supply and demand don't inflate prices on their own is that some things are in truly limited supply, such as real estate. The demand for RE will always go up with population growth, but the supply is fixed.
But, without money supply expansion occuring at an ever increasing rate surpassing the GDP growth's ability to aborb dollars, creating a situation where too many dollars are chasing too few goods, it would be impossible for a home, priced in 1856, at $2k, to rise to $2,000,000 without the fiat currency (money supply) expansion. Oh, it the housing prices will rise to what the public will bear, but wtihtout more money in circulation, what was once $2k might rise to $4k, or so, but not $2,000,000 You see, the gradual trend line increasing is the result of currency expansion happening faster than GDP growth, over time.



Another problem is monopolistic pricing power; companies are making record profits right now, and that has nothing to do with supply and demand.

Supply and demand includes how greed factors in within that context.

Gas recently was costing a lot more than the last time oil was at the same price.
Please reread my post. Supply and demand do cause price fluctuations, and in some circumstances, it might be sustained because of a sustained demand owing to factors, uch as a continued demand on a finite resource, such as land. Technically speaking, price fluctuation isn't inflation, per se. Inflation is the result of the money supply increasing at a rate faster than the GDP can absorb the dollars, resulting in decrease in purchasing power, a situating where there are too many dollars chasing too few goods. Overall, and in most circumstances, excluding the real estate example, price fluctuations will level out.


Two, you won't find a correlation between any measure of the money supply and CPI. It just isn't there.
So Trump's $2T stimulus and Biden's $2T stimulus, totalling an influx of $4 trillion in fiat bucks, wasn't responsible for the inflation we are seeing now?

It was responsible. You don't get that much 'something' for nothing. There is a correlation. There are times when it didn't correlate, there were 3 major QE's in the last two decades that didn't result in a big inflation, but the fiat currency (quantitative easing) didn't reach the economy fast enough, it was parked somewhere and it wasn't distributed fast enough that the GDP wasn't able to absorb it.


Three, deficit spending doesn't create dollars. It creates bonds; the dollars stay the same. Any change in the number of dollars is due to the Fed effecting monetary policies and banks creating loans. Deficit spending is paid for by bond issuance, and the increased demand leads to increased production, so by monetarist math, the same amount of dollars are chasing more goods, which should be deflationary.

Four, where is savings factored into this? Income is lost to savings every year, and savings just sit there - they are not used for loans. Demand needs to be created just to offset savings.


This is right from the Federal Reserve of St Louis's website:


Inflation is caused when the money supply in an economy grows at faster rate than the economy’s ability to produce goods and services.



ANd don't tell me that the fed reserve, who are the prime movers of inflation, do not know what causes inflation. They cause it, in cahoots with the big banks.
 
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bomberfox

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Yes, this is what the MMT folks claim.

Taxes do ultimately pay for part of it. Inflation (deficit financing) pays the rest, which is paid for by those who cannot hedge.

If fiat currency is created, an equal amount has to be removed from circulation, hence taxation.

It's just a backwards way of taxation. Print first, then tax to keep the money supply from expanding to prevent inflation. They'll have to destroy the taxed funds, of course.

Now, that is what the MMT (modern monetary theorists) folks claim how it works. I do not know this for a fact.

However, MMT claims that fiat currency doesn't cause inflation. Well, the two Stimulus bills, one by Trump, the other by Biden, prove that theory wrong.
MMT doesnt claim that growing the money supply cant cause inflation. You dont need to remove an equal amount when fiat currency is created, that would lead to there being 0 money in the economy.
 

OscarLevant

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MMT doesnt claim that growing the money supply cant cause inflation. You dont need to remove an equal amount when fiat currency is created, that would lead to there being 0 money in the economy.

Well, the MMT gal I've been arguing with says so, I dunno, really. Not that knowledgeable about MMT.

If there is $100 in circulation, and it is increased to $110 by fiat, and $10 is removed by taxes (and destroyed like the MMTers say), what's left is $100, not 0.
 

MTAtech

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Then why have a budget? Just spend as the current party in power sees fit, eh?

Oh...wait...that's what's happening now, isn't it? No real budget and spend, spend, spend.

But...one thing not mentioned is that the more money that is created out of thin air, the lower the value of that money.

btw, taxation for political purposes seems to me to be wrong. Maybe it's because I just don't like the federal government doing things for political purposes. Seems corrupt to me.
I don't see where that is historically true.
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