Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature currently requires accessing the site using the built-in Safari browser.
I answered your question, you just don't like the answer or can't comprehend what you're reading. So what? You're failing to comprehend the answer, that's not my problem, that's yours. I don't respond to your posts to convince you of anything anyway but rather write for the sake of others who are sincerely in search of the truth. Your opinion about what I say is irrelevant and worthless.Your question reflects a misunderstanding of the relationship between government spending and GDP, as well as the temporal and structural aspects of economic measurements.
Your failure to answer my question reflects your failure.
I answered your question, you just don't like the answer or can't comprehend what you're reading. So what? You're failing to comprehend the answer, that's not my problem, that's yours. I don't respond to your posts to convince you of anything anyway, but rather I write for the sake of others who are sincerely in search of the truth. What you think about what I say is irrelevant.
GDP = C + I + G + (X-M), government spending (G) directly contributes to and increases GDP.
GDP last year was about $27.4 trillion.
If the government spends $28 trillion this year, does I (investment) and C (consumption) when added to the trade deficit, drop into negative territory?
Offensive ReboundOver 100k? That's not enough money to buy a shitty house. That's all I could leave my kid if it was up to you?
Inferior People in Superior Positions Are Never BlamedI actually agree with a lot of what you post. However you are incorrect here. The Federal Reserve is a private bank. It is no more federal than federal express.
The Costitutiton says that the Treasury has the power to coin money and CONGRESS (as if we want them to have this power lol) has the power to the currencies value.
This all changed in 1913 with the federal reserve act, which took that power away from the govt and gave it to a private for profit bank. The idea was that as a private bank it could regulate the currency better and more efficently than the government and thus avoid recessions and depressions.
Instead they made both worse. Our national debt is based on illegal currency. Actually all debt is in illegal currency if its denominated in federal reserve notes.
The issue is that our courts will not open that can of worms so we are literally stuck with it till it collapses. But if your the only issuer of currency, and your customers only source of dollars, and now theyre in debt to you, they will never not in a billion years ever escape. Why would you allow them out of such slavery?
The federal govt, and the federal reserve are two totally different entities. Maybe the federal govt should federalize the federal reserve instead?
Your failed, incoherent argument is based on a misunderstanding of how the components of GDP interact with each other and the notion that if government spending exceeds GDP, it must force the other components (I, C, and net exports) into negative territory. Let's clarify why this isn't necessarily the case as you ignorantly assert:
The assertion that government spending exceeding GDP forces I and C into negative territory oversimplifies the complex dynamics of an economy. Increased government spending, particularly when aimed at underutilized resources or sectors with high multipliers, can stimulate economic growth across various components of GDP.
- Non-Zero-Sum Dynamics: The equation GDP = C + I + G + (X-M) does not imply a zero-sum game where an increase in one component must lead to a decrease in the others. The economy isn't a fixed pie where more government spending (G) directly reduces the size available for investment (I) and consumption (C). Instead, these components can all grow in tandem, influenced by various factors including monetary policy, fiscal policy, consumer confidence, and external demand for goods.
- Multiplier Effect: Government spending can stimulate economic activity leading to increases in consumption (C) and investment (I). For instance, if the government spends money on infrastructure, it could boost employment, leading to higher income and subsequently higher consumer spending. This can also encourage businesses to invest more, anticipating higher demand. This is the essence of the multiplier effect, where the initial spending leads to further rounds of economic activity.
- Influence of Monetary Policy: The central bank can influence economic activity through monetary policy, affecting interest rates and the money supply. In a scenario where the government increases its spending, the central bank might adjust its policies to maintain economic stability, which can support growth in I and C indirectly.
- Issuing Treasuries and Managing the Economy: The US FED GOV can issue treasuries to adjust the economy's money supply and control interest rates. This process adds financial assets to the private sector, supporting economic activity by influencing overall demand. The main consideration is managing inflation and ensuring the economy operates at its productive capacity.
- Trade Balance: The trade balance (X-M) is influenced by a range of factors including exchange rates, global economic conditions, and competitive positions. An increase in G does not directly lead to a worsening trade balance. A stronger domestic economy could lead to increased imports (due to higher consumption and investment), but it could also stimulate domestic industries that export, depending on the sectors the government is investing in and the state of global markets.
- Economic Growth and Capacity Utilization: The key is the economy's ability to respond to increased demand (from higher G) without causing inflationary pressures. If there is underutilized capacity, increased government spending can lead to higher GDP without necessarily crowding out private investment or consumption. The actual impact depends on the current economic context, including whether the economy is near full employment or if there are significant output gaps.
The assertion that government spending exceeding GDP forces I and C into negative territory
To make your claim work, you need some really big negative numbers in the formula.
So, which ones? How big?
Let's try a simple example.
GDP = C + I + G + (X-M),
GDP is $40, consumption is $28, Investment is $4, Gov is $10, trade balance (X-M) is -$2
$40=$28+$4+$10-$2
Now, plug in some numbers that work for G, government spending, is larger than GDP
Todd's insistence on the impossibility of government spending exceeding GDP, and the consequent requirement for other components of the GDP equation to fall into negative territory, fundamentally misrepresents how economies operate, especially in the context of a sovereign currency issuer like the United States.
First, let's address the misconception directly: Government spending (G) exceeding GDP does not necessitate negative values for other GDP components (C, I, or X-M). This misunderstanding stems from a static view of economic variables, ignoring their dynamic interrelationships and the capacity of the economy to expand.
Todd's argument against government spending exceeding GDP under a sovereign currency system like the USD misunderstands both the operational realities of fiscal policy and the dynamic nature of economic variables. The U.S. government's capacity to spend in support of economic objectives is not constrained in the same way as a household, business, or non-sovereign currency user. This capacity, when used judiciously, can enhance economic growth, stability, and well-being without necessitating negative impacts on consumption, investment, or the trade balance.
- Government Spending and Economic Capacity: The government, as a sovereign currency issuer, can spend more than GDP without "borrowing" in a traditional sense. When the government issues treasuries, it's not borrowing from a finite pool of resources but rather offering financial instruments that adjust the private sector's liquidity and savings preferences. This action doesn't subtract from a static economic pie; it can catalyze economic activity, leveraging underutilized resources.
- Dynamic Impact on Components: An increase in G can lead to increases in C and I, contrary to the assertion that they must decrease. This is due to the multiplier effect where government spending boosts economic activity, increases income, and stimulates further spending and investment. For example, infrastructure projects not only employ people (increasing C through wages) but also encourage businesses to invest (increasing I) in response to improved logistics and potential market expansions.
- Adjusting the Example with Realistic Dynamics:
- Original Equation: $40 GDP = $28 C + $4 I + $10 G - $2 (X-M).
- Adjusted for Increased G: Let's say G increases to $12 (a hypothetical increase to illustrate the point), potentially reflecting additional infrastructure spending or social programs.
- The immediate reaction might be an increase in GDP, as this spending boosts economic activity. For simplicity, if we hold other variables constant (which, in reality, would also likely increase due to the multiplier effect), the new equation could be $42 GDP = $28 C + $4 I + $12 G - $2 (X-M), reflecting a direct increase in GDP through government spending alone. This simplification illustrates that G can increase without forcing other components into negativity.
- Real-world economics, however, would likely show C and I also rising due to the reasons mentioned earlier (multiplier effect, increased economic activity), potentially leading to an even higher GDP.
- Economic Growth and Utilization: The critical factor is the economy's response to increased spending. If there are idle resources or the economy is operating below its potential output, increased G can stimulate growth without causing inflationary pressure or requiring other components to shrink. The economy is not a zero-sum game; it's a dynamic system where various forms of spending and investment interact and influence each other.
- Fiscal Policy and Economic Health: The strategic use of fiscal policy, including government spending exceeding GDP in certain periods, can be a powerful tool for addressing economic slack, stimulating growth, and ensuring the public good or "social welfare". The assertion that such spending requires "really big negative numbers" elsewhere in the economy ignores the expansive effect fiscal policy can have on economic output and productivity.
Todd is just going to conveniently ignore the points that I made and continue repeating his error, over and over again, deluding himself into thinking he's "winning" something. Quite sad.
First, let's address the misconception directly: Government spending (G) exceeding GDP does not necessitate negative values for other GDP components (C, I, or X-M).
Still can't do the math, eh comrade?
Original Equation: $40 GDP = $28 C + $4 I + $10 G - $2 (X-M)
the new equation could be $42 GDP = $28 C + $4 I + $12 G - $2 (X-M)
Excellent! 2 equations in which government spending is less than GDP.
Now post one in which government spending is more than GDP. Feel free to use dynamic interrelationships and the capacity of the economy to expand.
Real-world economics, however, would likely show C and I also rising due to the reasons mentioned earlier (multiplier effect, increased economic activity), potentially leading to an even higher GDP.
Even better!!
Post one in which government spending is more than GDP with C and I also increasing.
Todd is just going to conveniently ignore the points that I made
I am not going to ignore your basic math errors.
Simplified Economic Scenario
Starting with an economy's baseline figures from the previous year:
- GDP = 100 (in arbitrary units for simplicity)
- Consumption (C) = 40
- Investment (I) = 20
- Government Spending (G) = 30
- Net Exports (X - M) = 10, leading to the calculated GDP = 100
Scenario: Government Spending Increase
I propose a scenario where government spending increases significantly to stimulate economic growth, aiming to boost both consumption and investment through the multiplier effect and increased economic activity:
- Increased Government Spending = 110, which exceeds the previous year's GDP
- Assuming this increase leads to higher consumption and investment due to increased demand and improved infrastructure:
- Increased Consumption = 50, as higher employment and income raise consumer spending
- Increased Investment = 30, as businesses expand operations anticipating higher demand
Recalculating GDP
With these adjustments, the new GDP calculation incorporates the updated figures:
- New GDP = Increased Consumption + Increased Investment + Increased Government Spending + Net Exports
- New GDP = 50 + 30 + 110 + 10 = 200
Analysis and Correction
This scenario illustrates that government spending can indeed exceed the previous year's GDP figure of 110, contrary to the assumption that it's not feasible. Despite the substantial rise in government spending, both consumption and investment also increase, reflecting a dynamically growing economy. This results in a new, higher GDP of 200.
Conclusion
The concern that government spending exceeding GDP is incorrect overlooks the economy's dynamic nature and the positive impacts of fiscal policy:
This scenario underscores that with strategic government spending, it's possible to stimulate economic growth, leading to an expanded economy with increased consumption and investment, contrary to the static view that such spending necessarily detracts from other economic components.
- The multiplier effect signifies that increased government spending can enhance consumption and investment.
- The economy operates as a dynamic system where increased spending can stimulate overall growth.
- Strategic fiscal policy, particularly during periods of underutilization, serves as a crucial tool for economic expansion.
You misinterpreted what I said.Increased Government Spending = 110, which exceeds the previous year's GDP
That wasn't your claim. Try again?
New GDP = 50 + 30 + 110 + 10 = 200
That's weird, government spending in this new year is still less than GDP.
You misinterpreted what I said.
What do you think I said? Define it. Likewise, define what you mean by "The government can't spend more than the nation's GDP"? How do you define "government spending", and "more than GDP"? Maybe we're defining all of the aforementioned terms differently within the context of macroeconomics.Unless you showed that the government can spend more than GDP, and I missed it, I interpreted your errors just fine.
Goldbugs Are Being Trapped in a Roach MotelWhy pay taxes if the government can just print money?
That makes taxes punitive, instead of 'paying for stuff'
What do you think I said? Define it. Likewise, define what you mean by "The government can't spend more than the nation's GDP"? How do you define "government spending", and "more than GDP"? Maybe we're defining all of the aforementioned terms differently within the context of macroeconomics.
What do you think I said?
This...
There will be no hyperinflation provided the US Fed Gov limits its budget below the nation's GDP, which is now approximately 26 trillion dollars. 26 TRILLION DOLLARS!!!!
Do you believe there is any way, mathematically, that the government could spend more than GDP?
If so, show your math. If not, then your above statement makes even less sense.
Likewise, define what you mean by "The government can't spend more than the nation's GDP"?
GDP = C + I + G + (X-M)........
GDP-G =C + I + (X-M) If G is larger than GDP, then GDP-G is a negative number,
Under what circumstance is consumption + investment + trade deficit a negative number?
Maybe we're defining all of the aforementioned terms differently within the context of macroeconomics.
Based on your confusion, it's possible all your definitions are incorrect.
Your argument hinges on a misunderstanding of how government spending and GDP interact, particularly within the framework of a sovereign currency issuer like the United States.
Firstly, the assertion that government spending (G) cannot exceed GDP without making other components (C, I, X-M) negative misinterprets the nature of GDP calculation and the role of fiscal policy. GDP is calculated as the sum of Consumption (C), Investment (I), Government Spending (G), and Net Exports (X-M). It's not a static limit but a measure of economic activity.
When suggesting that if G were larger than GDP, leading to a negative remainder (GDP - G), this overlooks the fact that GDP is an outcome, not a predefined cap. If the government decides to increase spending, this directly boosts GDP through the G component and indirectly stimulates C and I due to increased demand, employment, and income, which is part of the multiplier effect of government spending.
Your formula adjustment to GDP - G = C + I + (X-M) misrepresents the dynamic interplay between these components. In practice, increased government spending, particularly in times of economic slack, can lead to an overall increase in GDP, without necessitating that C, I, or (X-M) become negative. Government spending is part of the economic activity that constitutes GDP, not an external factor subtracted from it.
Regarding the claim that the government cannot spend more than GDP, this perspective does not account for the unique position of the government as the issuer of a sovereign fiat currency. As such, the government does not "borrow" in the conventional sense when it spends more than its revenue; it uses its sovereign currency-issuing capacity to finance spending. This is a critical aspect of understanding fiscal policy's role in managing economic activity, not constrained by the same principles that apply to households or businesses.
The concern that spending beyond GDP could lead to hyperinflation is misplaced when considering the context of underutilized economic capacity. So long as there are idle resources and labor, increased government spending can stimulate economic activity without causing inflationary pressures. It's about matching spending with the economy's productive capacity.
In essence, your argument fails to appreciate that government spending is a dynamic component of GDP, capable of stimulating further economic activity across C, I, and potentially improving (X-M). The capability of a sovereign currency issuer to manage its spending relative to GDP should be seen as a tool for economic stabilization and growth, rather than a mathematical limitation constrained by the sum of its parts.
In conclusion, your assertion rests on a static and narrow interpretation of economic relationships, overlooking the broader and more dynamic role of fiscal policy in influencing economic outcomes. The government, as a sovereign currency issuer, has both the capacity and responsibility to manage its spending in a way that supports economic health, growth, and stability, without being artificially constrained by a misunderstanding of GDP components.
Firstly, the assertion that government spending (G) cannot exceed GDP without making other components (C, I, X-M) negative misinterprets the nature of GDP calculation and the role of fiscal policy. GDP is calculated as the sum of Consumption (C), Investment (I), Government Spending (G), and Net Exports (X-M). It's not a static limit but a measure of economic activity.
Show me then.
Show me a formula where you've got positive numbers and where G is larger than GDP.
When suggesting that if G were larger than GDP, leading to a negative remainder (GDP - G), this overlooks the fact that GDP is an outcome, not a predefined cap.
I'm not predetermining a thing.
You are.
You said G can be larger than GDP.
In conclusion, your assertion rests on a static and narrow interpretation of economic relationships, overlooking the broader and more dynamic role of fiscal policy in influencing economic outcomes.
Baloney.
Your bad math has nothing to do with the dynamic role of fiscal policy in influencing economic outcomes.
Todd, let's dissect your challenge with clarity and correct some fundamental misunderstandings about government spending, GDP, and the assertions made.
First off, the demand for a formula where G (government spending) is larger than GDP and still results in positive numbers for C (consumption), I (investment), and (X-M) (net exports) seems to misapprehend how these components interact within an economy. It's crucial to understand that GDP is not just a tally of transactions but a measure of economic activity within a specific period.
To address your challenge directly: Asking for a formula where G exceeds the entire GDP and expecting other components to remain positive misunderstands the framework. GDP includes G, so when we discuss G exceeding "GDP," it's within the context of fiscal years or specific spending initiatives, not in the instantaneous equation GDP = C + I + G + (X-M).
However, for the sake of argument, let's conceptualize an example within a hypothetical economy over two fiscal periods to illustrate how increased G influences GDP dynamically, rather than statically:
Fiscal Period 1:
GDP = 100 (arbitrary units)
C = 40, I = 20, G = 30, X-M = 10
Here, G is not larger than GDP.
Fiscal Period 2 (with aggressive government stimulus):
Let's say G increases to 120, aiming to counteract economic downturns or invest in significant infrastructure, a policy choice reflective of a sovereign currency issuer's capabilities.
Assuming this stimulus effectively boosts economic activity, we might see C increase to 70 and I to 40 due to improved employment, consumer confidence, and business investment opportunities, facilitated by the government's spending.
Resulting GDP for Fiscal Period 2:
New GDP = C + I + G + (X-M) = 70 + 40 + 120 + 10 = 240
In this simplified example, G in the second period has technically "exceeded" the previous GDP (100) but is part of a new, higher GDP (240), demonstrating how strategic fiscal policies can stimulate economic growth, leading to increases in all components, including G.
Your critique, Todd, seems rooted in a static interpretation of these relationships. The dynamic role of fiscal policy yes, despite your dismissal as "baloney" is about leveraging government spending to influence economic outcomes positively. It's not "bad math" but a fundamental principle of how fiscal policy operates, especially under a framework that recognizes the government's unique financial capabilities as a sovereign currency issuer.
Asserting that G cannot be larger than GDP without causing negative implications elsewhere is to overlook the nuanced and multifaceted reality of economic management. It's not about predetermining limits but understanding the capacity for fiscal policy to drive economic growth and stability.
In short, Todd, the challenge is not in the math but in the interpretation and application of economic principles to fiscal policy. The "bad math" claim misses the mark it's about understanding the broader, dynamic context in which these numbers operate. And yes, this perspective is rooted in a comprehensive understanding of how economies function, not a narrow, static view that fails to capture the complexities of modern fiscal policy.
