Myth:*national debt is a burden that will ruin our children’s futures

[Kimura]

[MENTION=2926]Toro[/MENTION]

RE: Argentina

Another lesson we can take from Argentina is that pegging your currency to another currency is a recipe for disaster. You effectively allow the financial sector to dollarize your economy by inundating it with foreign debt.

 

[EdwardBaiamonte]

Spain: Myth:*national debt is a burden that will ruin our children’s futures

Argentina: Myth:*national debt is a burden that will ruin our children’s futures

Germany: Myth:*national debt is a burden that will ruin our children’s futures

Spain and Germany aren't currency issuers, they're currency users, which is a different ball game. This is one of the problems with being a member of the Eurozone. EU countries operate more like US states in this context. If these country could still issue their currencies, they could have spent in a counter-cyclical fashion in we wouldn't have the problems we now see in Spain, Portugal, Ireland, Greece and Italy.

Argentina pegged the peso to the dollar which was not a wise move.

Again, at the risk of sounding redundant, in economics such a concept doesn't exist, whereby we sacrifice today's output to some date in the past, and then roll it over to generations before us. Therefore, in real terms, no such burden or share of debt exists for individual Americans, our children or grandchildren. Our children and grandchildren, just like you and I, will be able to go to work and produce and consume their real output of real goods and services regardless of how many bonds need to be rolled over.

Argentina pegged its currency to the dollar to stop hyperinflation as high as 5000% a year, which was caused by Argentina running large fiscal deficits and printing money to pay their liabilities.

In retrospect, the currency board was an unwise move. But due to economic incompetence by inept interventionist governments over the previous decades, they felt they had to do something radical.

Any system can work fine including a currency board as long as the mandate is no inflation or deflation. USA just took a tiny Republican step in that direction with the introduction of a Bill to eliminate one of the 2 Fed mandates. Democrats oppose of course because they lack the IQ to understand that the Fed cant print money to create real jobs.

 

[Kimura]

Spain and Germany aren't currency issuers, they're currency users, which is a different ball game. This is one of the problems with being a member of the Eurozone. EU countries operate more like US states in this context. If these country could still issue their currencies, they could have spent in a counter-cyclical fashion in we wouldn't have the problems we now see in Spain, Portugal, Ireland, Greece and Italy.

Argentina pegged the peso to the dollar which was not a wise move.

Again, at the risk of sounding redundant, in economics such a concept doesn't exist, whereby we sacrifice today's output to some date in the past, and then roll it over to generations before us. Therefore, in real terms, no such burden or share of debt exists for individual Americans, our children or grandchildren. Our children and grandchildren, just like you and I, will be able to go to work and produce and consume their real output of real goods and services regardless of how many bonds need to be rolled over.

Argentina pegged its currency to the dollar to stop hyperinflation as high as 5000% a year, which was caused by Argentina running large fiscal deficits and printing money to pay their liabilities.

In retrospect, the currency board was an unwise move. But due to economic incompetence by inept interventionist governments over the previous decades, they felt they had to do something radical.

Any system can work fine including a currency board as long as the mandate is no inflation or deflation. USA just took a tiny Republican step in that direction with the introduction of a Bill to eliminate one of the 2 Fed mandates. Democrats oppose of course because they lack the IQ to understand that the Fed cant print money to create real jobs.

The FED's dual mandate is to pursue both price stability and maximum employment. I don't think anyone ever said job creation could be achieved by "printing $$$$" (whatever that means nowadays). The federal government can pursue a jobs program to achieve full employment but that's a different discussion.

 

[EdwardBaiamonte]

. I don't think anyone ever said job creation could be achieved by "printing $$$$" (whatever that means nowadays).

then why does the Fed have a dual mandate? And why are Republicans opposed to it?

 

[bripat9643]

The US doesn't borrow its own fiat, genius. It doesn't borrow that which it freely issues.

The Treasury doesn't borrow from me when I buy T bonds?

Not really, you desire to save in government sector securities. The $$$$ you use to purchase those T bonds had to be spent into existence by the federal government at some point.

BWAHAHAHAHAHA!

Man, you kill me!

You mean government couldn't issue securities before the Federal Reserve began issuing Federal Reserve notes? How did the government borrow money before 1914?

Do you ever think about the idiocies you post?

 

[Kimura]

. I don't think anyone ever said job creation could be achieved by "printing $$$$" (whatever that means nowadays).

then why does the Fed have a dual mandate? And why are Republicans opposed to it?

Most Republicans view monetary policy like a toilet. What monetary policy achieves with the dual mandate is that it gives politicians a way out by not acting, or adopting destructive fiscal policies.

Our way out of the current is mess is through fiscal policy, not just monetary policy, which why we such have such stagnant growth, in terms of lost output and labor participation.

 

[Kimura]

The Treasury doesn't borrow from me when I buy T bonds?

Not really, you desire to save in government sector securities. The $$$$ you use to purchase those T bonds had to be spent into existence by the federal government at some point.

BWAHAHAHAHAHA!

Man, you kill me!

You mean government couldn't issue securities before the Federal Reserve began issuing Federal Reserve notes? How did the government borrow money before 1914?

Do you ever think about the idiocies you post?

We were on a gold standard back then. It was a different ball game from an operational standpoint, especially give the real constraints imposed by a gold standard. We don't even need Treasuries at this point. Literally.

The US could stop the issuance of Treasuries if it wanted. All that would occur is the deficit spending would accrue as excess reserve balances at the Federal Reserve. It makes zero sense continuing to issue Treasuries at this point, especially with a floating f/x regime and non-convertible currency. Treasuries basically function as a way to support the term structure at higher levels than they'd naturally be at. Longer term rates are the result of investment while higher rates only distort the prices of real goods and services.

 

[westwall]

Not really, you desire to save in government sector securities. The $$$$ you use to purchase those T bonds had to be spent into existence by the federal government at some point.

BWAHAHAHAHAHA!

Man, you kill me!

You mean government couldn't issue securities before the Federal Reserve began issuing Federal Reserve notes? How did the government borrow money before 1914?

Do you ever think about the idiocies you post?

We were on a gold standard back then. It was a different ball game from an operational standpoint, especially give the real constraints imposed by a gold standard. We don't even need Treasuries at this point. Literally.

The US could stop the issuance of Treasuries if it wanted. All that would occur is the deficit spending would accrue as excess reserve balances at the Federal Reserve. It makes zero sense continuing to issue Treasuries at this point, especially with a floating f/x regime and non-convertible currency. Treasuries basically function as a way to support the term structure at higher levels than they'd naturally be at. Longer term rates are the result of investment while higher rates only distort the prices of real goods and services.

Wow, where the hell do they make people like you? Your knowledge of the real world is astoundingly low.... to the point I'm wondering if you are a computer program set up to post this nonsense.

 

[Kimura]

BWAHAHAHAHAHA!

Man, you kill me!

You mean government couldn't issue securities before the Federal Reserve began issuing Federal Reserve notes? How did the government borrow money before 1914?

Do you ever think about the idiocies you post?

We were on a gold standard back then. It was a different ball game from an operational standpoint, especially give the real constraints imposed by a gold standard. We don't even need Treasuries at this point. Literally.

The US could stop the issuance of Treasuries if it wanted. All that would occur is the deficit spending would accrue as excess reserve balances at the Federal Reserve. It makes zero sense continuing to issue Treasuries at this point, especially with a floating f/x regime and non-convertible currency. Treasuries basically function as a way to support the term structure at higher levels than they'd naturally be at. Longer term rates are the result of investment while higher rates only distort the prices of real goods and services.

Wow, where the hell do they make people like you? Your knowledge of the real world is astoundingly low.... to the point I'm wondering if you are a computer program set up to post this nonsense.

And why is that?

 

[CrusaderFrank]

Not really, you desire to save in government sector securities. The $$$$ you use to purchase those T bonds had to be spent into existence by the federal government at some point.

BWAHAHAHAHAHA!

Man, you kill me!

You mean government couldn't issue securities before the Federal Reserve began issuing Federal Reserve notes? How did the government borrow money before 1914?

Do you ever think about the idiocies you post?

We were on a gold standard back then. It was a different ball game from an operational standpoint, especially give the real constraints imposed by a gold standard. We don't even need Treasuries at this point. Literally.

The US could stop the issuance of Treasuries if it wanted. All that would occur is the deficit spending would accrue as excess reserve balances at the Federal Reserve. It makes zero sense continuing to issue Treasuries at this point, especially with a floating f/x regime and non-convertible currency. Treasuries basically function as a way to support the term structure at higher levels than they'd naturally be at. Longer term rates are the result of investment while higher rates only distort the prices of real goods and services.

So we should print dollars instead of selling bonds

 

[Kimura]

BWAHAHAHAHAHA!

Man, you kill me!

You mean government couldn't issue securities before the Federal Reserve began issuing Federal Reserve notes? How did the government borrow money before 1914?

Do you ever think about the idiocies you post?

We were on a gold standard back then. It was a different ball game from an operational standpoint, especially give the real constraints imposed by a gold standard. We don't even need Treasuries at this point. Literally.

The US could stop the issuance of Treasuries if it wanted. All that would occur is the deficit spending would accrue as excess reserve balances at the Federal Reserve. It makes zero sense continuing to issue Treasuries at this point, especially with a floating f/x regime and non-convertible currency. Treasuries basically function as a way to support the term structure at higher levels than they'd naturally be at. Longer term rates are the result of investment while higher rates only distort the prices of real goods and services.

So we should print dollars instead of selling bonds

They're both the same thing, except bonds are a less liquid version of cash. Think about it, we're talking dollars deposits over at the FED that simply accrue some interest. They basically function as a mechanism to drain excess reserves from banking system at the end of the day.

Oh yeah, if it were up to me, I’d also make it policy for the Treasury NOT to buy any financial assets. This should only be done by the FED. When the Treasury purchases financial assets, the political class tends to have fits over such things due to their ignorance about monetary operations. They misinterpret these operations as a form of deficit spending which they inaccurately believe as affecting fiscal policy.

 

[Toro]

I know.

The currency board scheme put a straight jacket on their monetary and fiscal policy arrangements. Think about it: the Argentinian central bank could only issue pesos only if they were backed by dollars. There was a some slack allowed but WTF with such a terrible policy. Basically, US dollars had to be acquired by net exports which would allow domestic policy to increase.

The right wing douches then went into overdrive with massive privatization schemes, cuts to pensions, deregulation, etc ad nauseum you know the playbook. The loss of monetary sovereignty handed the country over to foreigners for pennies on the dollar. What a total fucking shit show down there. This is what occurs when ideology becomes a pathology.

I agree. Hyper-Keynsianism lead to hyperinflation! Huge deficit financing, nationalizations, populism and money printing led to an economy which caused capital flight and quadruple-digit inflation.

It's fascinating to study the economic histories of Canada and Argentina. Both were agrarian-based, natural resource new world countries of roughly the same size and wealth 100 years ago. One turned outward, embracing the global economy and is today one of the richest places in the world. One turned inward and is now a deadbeat second-world basket case being sued in court.

(I'm rooting for Elliot BTW.)

[MENTION=2926]Toro[/MENTION]

RE: Argentina

Another lesson we can take from Argentina is that pegging your currency to another currency is a recipe for disaster. You effectively allow the financial sector to dollarize your economy by inundating it with foreign debt.

Currencies should float. When the US dollar soared, the peso became uncompetitive, and it wasn't unsurprising what happened next. They should have floated the peso.

However, I understood their reluctance not to do so. They feared inflation would return. It should be noted that for the first half of the 90s, they experienced faster economic growth than they had since the 1920s. They tamed inflation which was destroying their society. They thought they were a success.

 

[Wry Catcher]

It is sad to see how so many people, unable to articulate thoughts of their own, simply resort to posting links to ideological websites. According to the "rationale" of these sites, we should simply guarantee everyone an annual income of $100k, regardless of how much money we would have to borrow to do that. On second thought, why not make it $1 million?

"On second thought"? Maybe you ought to think first and consider the comment and not resort to an "ideological" construct?

 

[Wry Catcher]

ok then I'm going to deduct from my taxes the amount used to pay back the national debt because an idiot liberal has just assured me that it doesn't have to be paid back!!

Your tax $$$ is destroyed, it doesn't really go anywhere. That's not how functional finance operates.

if it doesn't go anywhere I wont bother sending it to IRS then!!

Please don't, I don't want my taxes to pay for your prosecution and later room and board.

 

[EdwardBaiamonte]

Your tax $$$ is destroyed, it doesn't really go anywhere. That's not how functional finance operates.

if it doesn't go anywhere I wont bother sending it to IRS then!!

Please don't, I don't want my taxes to pay for your prosecution and later room and board.

typical liberal without IQ for substance

 

[hipeter924]

Not sure about that website, but what I do know is that nations with high debt to GDP ratios tended to put on more debt to build infrastructure or build up the military and put money into healthcare, education and so on - hence escaped whatever scenario where debt overwhelms the country.

Instead America spends all its money on bailouts, subsidies to corporations, and wasted the rest on wars. So now America is stuck with all this debt, and it has only two real choices now either:

a) America cuts all subsidies to corporations, cuts the military budget, ends public healthcare, ends social services funding where possible, and privatizes all the areas it can't fund - and basically tries to cut its way out of debt. This is not the GOP strategy, just what Friedman the rest of the free market economists demand the US do to fix the economy. Pretty sure they think very poorly of the rationale of bailouts, subsidies, stimulus, social welfare, and high military spending.

b) Decides that this debt will continue for at least the next 50 years, and diverts all the money it can to building infrastructure, and funding education and healthcare, whilst using the military-industrial complex to create employment (in more of a national service role as opposed to using the military to actually engage in conflicts). Basically the New Deal 2.0, but with more of an emphasis on saving money and rebuilding the crumbling Middle Class.

There are two more options, but they will both end in disaster for America:
a) Adopt the GOP plan.
b) Continue as America is doing now, with partisan squabbles and failing to tackle the economic problems.

 

[EdwardBaiamonte]

Not sure about that website, but what I do know is that nations with high debt to GDP ratios tended to put on more debt to build infrastructure or build up the military and put money into healthcare, education and so on - hence escaped whatever scenario where debt overwhelms the country.

Instead America spends all its money on bailouts, subsidies to corporations, and wasted the rest on wars. So now America is stuck with all this debt, and it has only two real choices now either:

a) America cuts all subsidies to corporations, cuts the military budget, ends public healthcare, ends social services funding where possible, and privatizes all the areas it can't fund - and basically tries to cut its way out of debt. This is not the GOP strategy, just what Friedman the rest of the free market economists demand the US do to fix the economy. Pretty sure they think very poorly of the rationale of bailouts, subsidies, stimulus, social welfare, and high military spending.

b) Decides that this debt will continue for at least the next 50 years, and diverts all the money it can to building infrastructure, and funding education and healthcare, whilst using the military-industrial complex to create employment (in more of a national service role as opposed to using the military to actually engage in conflicts). Basically the New Deal 2.0, but with more of an emphasis on saving money and rebuilding the crumbling Middle Class.

There are two more options, but they will both end in disaster for America:
a) Adopt the GOP plan.
b) Continue as America is doing now, with partisan squabbles and failing to tackle the economic problems.

best plan is to switch to a capitalist economy so the economy will boom to generate enough revenue to easily pay the debt.

 

[Rozman]

Then why don't we drive it up to $ 20 trillion....
Oh wait...We are!!!

 

[EdwardBaiamonte]

Then why don't we drive it up to $ 20 trillion....
Oh wait...We are!!!

Odd, no liberals are coming forward to explain why the debt doesn't matter, not even the liberal who started the thread? I guess we chalk up yet another victory for conservatives.

 

[regent]

America paid off its debt just once, and that by a Democratic president. So how did the payoff effect America, what happened to our economy, our way of life; did Americans rejoice in the streets buy new stuff? Well one result of the debt elimination was an economic depression.