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| William F Hummel |
 Posted: Mon Oct 31, 2005 11:56 am |
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On Mon, 31 Oct 2005 10:47:57 -0500, "tonyp" <tonyp@world.std.com>
wrote:
[quote:0ef87e0066]
"William F Hummel" <wfhummel@comcast.net> wrote
The question itself Illustrates a fundamental misunderstanding about
the basics of national debt. The government can always redeem the
debt it has issued denominated in the very currency it creates.
Furthermore, if the public concluded that purchasing additional
interest-earning bonds from the government was a losing proposition,
that would imply that the non-interest earning currency it holds is
worthless -- an obvious inconsistency.
Another name for the "currency it holds is worthless" is ... INFLATION.
[/quote:0ef87e0066]
Yes, by definition.
[quote:0ef87e0066]Are you denying that inflation ever happens if "government can always redeem the
debt it has issued denominated in the very currency it creates"?
[/quote:0ef87e0066]
The two are not automatically related. Inflation is a characteristic
of any fiat money system. But as long as long as the government
enforces tax collection and maintains a monopoly on the issue of its
currency, its so-called debt is not a factor. |
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| tonyp |
| Posted: Mon Oct 31, 2005 1:01 pm |
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"William F Hummel" <wfhummel@comcast.net> wrote
[quote:3c906c93e9]The two are not automatically related. Inflation is a characteristic
of any fiat money system. But as long as long as the government
enforces tax collection and maintains a monopoly on the issue of its
currency, its so-called debt is not a factor.
[/quote:3c906c93e9]
This is absurd. "So-called debt"? Do _you_ own any "so-called" bonds?
-- TP |
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| William F Hummel |
| Posted: Mon Oct 31, 2005 2:13 pm |
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On Mon, 31 Oct 2005 13:01:03 -0500, "tonyp" <tonyp@world.std.com>
wrote:
[quote:031521c8df]
"William F Hummel" <wfhummel@comcast.net> wrote
The two are not automatically related. Inflation is a characteristic
of any fiat money system. But as long as long as the government
enforces tax collection and maintains a monopoly on the issue of its
currency, its so-called debt is not a factor.
This is absurd. "So-called debt"? Do _you_ own any "so-called" bonds?
Yes, absurd for those who don't understand. That so-called debt[/quote:031521c8df]
represents net savings of the private sector.
What _is_ absurd is the notion that the so-called debt must some day
be retired in its entirety. Government bonds are basically the
equivalent of term deposits of government currency.
It is the private sector that needs the government's currency to pay
its taxes, not the other way around. The government has a monopoly on
the issue of that currency and can therefore control the price of it
(otherwise known as the short term interest rate). That's why the
inflation rate is decoupled from the quantity of securities issued by
the government. |
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| Guest |
| Posted: Tue Nov 01, 2005 12:17 am |
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On Mon, 31 Oct 2005 11:13:09 -0800, William F Hummel
<wfhummel@comcast.net> wrote:
[quote:056b362024]On Mon, 31 Oct 2005 13:01:03 -0500, "tonyp" <tonyp@world.std.com
wrote:
"William F Hummel" <wfhummel@comcast.net> wrote
The two are not automatically related. Inflation is a characteristic
of any fiat money system. But as long as long as the government
enforces tax collection and maintains a monopoly on the issue of its
currency, its so-called debt is not a factor.
This is absurd. "So-called debt"? Do _you_ own any "so-called" bonds?
Yes, absurd for those who don't understand. That so-called debt
represents net savings of the private sector.
What _is_ absurd is the notion that the so-called debt must some day
be retired in its entirety.
[/quote:056b362024]
<yawn> Same old strawman.
[quote:056b362024]Government bonds are basically the
equivalent of term deposits of government currency.
[/quote:056b362024]
Nope.
[quote:056b362024]It is the private sector that needs the government's currency to pay
its taxes, not the other way around. The government has a monopoly on
the issue of that currency and can therefore control the price of it
(otherwise known as the short term interest rate). That's why the
inflation rate is decoupled from the quantity of securities issued by
the government.
[/quote:056b362024]
?? Of course. Any monetization of debt (inflation) is going to
reduce security issues by the same amount.
-- Roy L |
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| Ron Peterson |
| Posted: Tue Nov 01, 2005 10:52 am |
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tonyp wrote:
[quote:29bf522bed]Where _do_ you get this idea that anybody wants to retire the national debt
in its entirety? All we have to do is _service_ it. So I ask again: is
there _any_ fraction of GDP which is too much to devote to debt service?
[/quote:29bf522bed]
Obviously, if debt service after inflation exceeds GDP, somebody is
going to suffer. The real limitation is probably considerably less than
that.
I think that increasing debt versus taxing doesn't cause much economic
impact for small amounts of change, but there is probably a second
order effect as the national debt increases way before debt service
approaches GDP.
--
Ron |
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| tonyp |
| Posted: Tue Nov 01, 2005 11:29 am |
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"Les Cargill" <lNOcargill@cfl.Arr.com> wrote
[quote:8a01f75911]I don't know what the lay of the land for an
upper limit is. I'd wager that nobody knows. But
so long as the bonds have a demonstrated demand,
we're good.
[/quote:8a01f75911]
And the whole question is how long "so long as" is. All of William's
chicken-before-the-egg vs. egg-before-the-chicken arguments boil down to
this: it's better to borrow than tax, for reasons that are inate to the
definition of " financial wealth of the private sector", and not related to
any quantitative facts like the ratio of debt to GDP.
Unless he (or you) can give even a ballpark number that sets the upper limit
of validity for this argument, I conclude you don't believe there's _any_
limit. Debt-to-GDP can grow forever, and always correspond to increased
"financial wealth of the private sector".
If you _are_ willing to suggest a limit, we can discuss why you think the
limit is what you say it is, rather than something higher or lower. Those
might be useful discussions.
-- TP |
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| tonyp |
| Posted: Tue Nov 01, 2005 12:43 pm |
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"Ron Peterson" <ron@shell.core.com> wrote
[quote:402c167857]I think that increasing debt versus taxing doesn't cause much economic
impact for small amounts of change, but there is probably a second
order effect as the national debt increases way before debt service
approaches GDP.
[/quote:402c167857]
And I think you're absolutely right.
Now, for William's benefit, can we take a stab at what the 2nd-order effect
might be?
-- TP |
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| Les Cargill |
| Posted: Tue Nov 01, 2005 10:42 pm |
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tonyp wrote:
[quote:beb0203e2f]"Les Cargill" <lNOcargill@cfl.Arr.com> wrote
I don't know what the lay of the land for an
upper limit is. I'd wager that nobody knows. But
so long as the bonds have a demonstrated demand,
we're good.
And the whole question is how long "so long as" is. All of William's
chicken-before-the-egg vs. egg-before-the-chicken arguments boil down to
this: it's better to borrow than tax, for reasons that are inate to the
definition of " financial wealth of the private sector", and not related to
any quantitative facts like the ratio of debt to GDP.
Unless he (or you) can give even a ballpark number that sets the upper limit
of validity for this argument, I conclude you don't believe there's _any_
limit.
[/quote:beb0203e2f]
Being unable to set an exact limit is different from denying
the existence of such a limit.
[quote:beb0203e2f]Debt-to-GDP can grow forever, and always correspond to increased
"financial wealth of the private sector".
If you _are_ willing to suggest a limit, we can discuss why you think the
limit is what you say it is, rather than something higher or lower. Those
might be useful discussions.
[/quote:beb0203e2f]
There obviously has to be *some* upper limit - it cannot
go on literally infintely.
I think that any limit is primarily a psychological limit - once
the demand for such bonds drops off because of the perception
that existing debt is too much, then you'd be able to project
a sort of asymptope.
But I don't know how we'd caluclate that limit sitting here, and
I'm not sure what the various sensitivies might
also be. War, the Dow, emplyment would probably
all figure into it.
Frankly, I am quite unsure why foreign countries buy
the bonds to begin with. My hypothesis is that they
simply have no other option, and that the relative
stability of the dollar is valued.
but we've had another quarter point increase, so
maybe somebody's trying to tell us something...
[quote:beb0203e2f]-- TP
[/quote:beb0203e2f]
--
Les Cargill |
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| Guest |
| Posted: Mon Nov 07, 2005 2:14 pm |
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On Mon, 7 Nov 2005 10:07:42 -0800, "The Trucker" <mikcob@verizon.net>
wrote:
[quote:0597ab451d]royls@telus.net> wrote in message
news:4367c5d8.27940540@news1.qc.sympatico.ca...
On Mon, 31 Oct 2005 14:07:15 -0800, William F Hummel
wfhummel@comcast.net> wrote:
On Mon, 31 Oct 2005 15:54:21 -0500, "tonyp" <tonyp@world.std.com
wrote:
"William F Hummel" <wfhummel@comcast.net> wrote
Yes, absurd for those who don't understand. That so-called debt
represents net savings of the private sector.
Of course it does: "savings" are what private people use to buy government
bonds with.
Yes, but I don't think you get it. Private people buy bonds with the
funds they receive from government deficits.
Flat false.
You are correct in most of your stuff. But this time Hummel is
correct. (Hummel 1, Roy 10).
[/quote:0597ab451d]
1000.
[quote:0597ab451d]Government spends the money
into existence (it is money created in the Treasury accounts by
the Fed). The money hits the helicopter blades and is disbursed
over the economy coming to rest in the bank accounts of the
wealthy people who do not live hand to mouth. This excess
money is then used to buy T-Bills and bonds.
[/quote:0597ab451d]
TWo problems with this: first, it defines money as government deficit,
so not only government bonds but _everything_ is "bought with
government deficits," and the claim becomes vacuous. Second, the
statement is misleading, because it implies the bonds are being bought
with the _current_ deficit, and in fact it could have been a deficit
that occurred decades before.
[quote:0597ab451d]It's a matter of
simple logic that the government must deficit spend before the people
can save its currency.
Flat false. It need merely issue such currency. There is absolutely
no requirement that it run a deficit in order to do so, unless the
currency is _defined_ as government deficit.
But it _IS_ defined as government deficit. At first it was
gold certificates. Now it is nothing more than government
issued (and spent into the economy) dollars.
[/quote:0597ab451d]
But that is just a contingent institutional arrangement that could be
changed if we wanted to change it, not a law of economics that we have
to abide by whether we like it or not.
-- Roy L |
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| The Trucker |
| Posted: Mon Nov 07, 2005 10:06 pm |
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<royls@telus.net> wrote in message
news:436fa548.26116866@news1.qc.sympatico.ca...
[quote:9336d53a69]On Mon, 7 Nov 2005 10:07:42 -0800, "The Trucker" <mikcob@verizon.net
wrote:
royls@telus.net> wrote in message
news:4367c5d8.27940540@news1.qc.sympatico.ca...
On Mon, 31 Oct 2005 14:07:15 -0800, William F Hummel
wfhummel@comcast.net> wrote:
On Mon, 31 Oct 2005 15:54:21 -0500, "tonyp" <tonyp@world.std.com
wrote:
"William F Hummel" <wfhummel@comcast.net> wrote
Yes, absurd for those who don't understand. That so-called debt
represents net savings of the private sector.
Of course it does: "savings" are what private people use to buy government
bonds with.
Yes, but I don't think you get it. Private people buy bonds with the
funds they receive from government deficits.
Flat false.
You are correct in most of your stuff. But this time Hummel is
correct. (Hummel 1, Roy 10).
1000.
[/quote:9336d53a69]
Probably more than 10.
[quote:9336d53a69]Government spends the money
into existence (it is money created in the Treasury accounts by
the Fed). The money hits the helicopter blades and is disbursed
over the economy coming to rest in the bank accounts of the
wealthy people who do not live hand to mouth. This excess
money is then used to buy T-Bills and bonds.
TWo problems with this: first, it defines money as government deficit,
so not only government bonds but _everything_ is "bought with
government deficits," and the claim becomes vacuous.
[/quote:9336d53a69]
That may not be to our liking, but in the current scheme
of things it is as I have stated. The Bush regime can
create money until the Bush regime is removed from office
or until such time as people refuse to accept the dollars.
The Fed is quite sterile in this endevour.
[quote:9336d53a69]Second, the
statement is misleading, because it implies the bonds are being bought
with the _current_ deficit, and in fact it could have been a deficit
that occurred decades before.
[/quote:9336d53a69]
That "could be". But the money to buy bonds will have
come from deficit spending in any case and the people
who have this money will be those who do not live
from hand to mouth.
[quote:9336d53a69]It's a matter of
simple logic that the government must deficit spend before the people
can save its currency.
Flat false. It need merely issue such currency. There is absolutely
no requirement that it run a deficit in order to do so, unless the
currency is _defined_ as government deficit.
But it _IS_ defined as government deficit. At first it was
gold certificates. Now it is nothing more than government
issued (and spent into the economy) dollars.
But that is just a contingent institutional arrangement that could be
changed if we wanted to change it, not a law of economics that we have
to abide by whether we like it or not.
[/quote:9336d53a69]
Unfortunately, it is the law whether we like it or not UNTIL
we have the political power/will to change it. And the
only way I can see that happening is by doing what I
have professed at GreaterVoice.org.
--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org |
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| Guest |
| Posted: Tue Nov 08, 2005 11:42 pm |
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On Mon, 7 Nov 2005 19:06:48 -0800, "The Trucker" <mikcob@verizon.net>
wrote:
[quote:f27dfb6c2c]royls@telus.net> wrote in message
news:436fa548.26116866@news1.qc.sympatico.ca...
Second, the
statement is misleading, because it implies the bonds are being bought
with the _current_ deficit, and in fact it could have been a deficit
that occurred decades before.
That "could be". But the money to buy bonds will have
come from deficit spending in any case and the people
who have this money will be those who do not live
from hand to mouth.
[/quote:f27dfb6c2c]
But in any case, monetizing a deficit is entirely different from
borrowing to cover a deficit. The latter is the issue. Not the
former.
-- Roy L |
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| Ron Peterson |
| Posted: Wed Nov 09, 2005 12:47 am |
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Guest
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tonyp wrote:
[quote:423bcc0d2f]"Ron Peterson" <ron@shell.core.com> wrote
I think that increasing debt versus taxing doesn't cause much economic
impact for small amounts of change, but there is probably a second
order effect as the national debt increases way before debt service
approaches GDP.
And I think you're absolutely right.
Now, for William's benefit, can we take a stab at what the 2nd-order effect
might be?
[/quote:423bcc0d2f]
The increased concentration of capital in the hands of the wealthy will
reduce the bargaining power of workers resulting in lower wages.
--
Ron |
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| The Trucker |
| Posted: Wed Nov 09, 2005 4:07 pm |
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Guest
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<royls@telus.net> wrote in message
news:43717dc9.39410449@news1.qc.sympatico.ca...
[quote:fee99f1bdc]On Mon, 7 Nov 2005 19:06:48 -0800, "The Trucker" <mikcob@verizon.net
wrote:
royls@telus.net> wrote in message
news:436fa548.26116866@news1.qc.sympatico.ca...
Second, the
statement is misleading, because it implies the bonds are being bought
with the _current_ deficit, and in fact it could have been a deficit
that occurred decades before.
That "could be". But the money to buy bonds will have
come from deficit spending in any case and the people
who have this money will be those who do not live
from hand to mouth.
But in any case, monetizing a deficit is entirely different from
borrowing to cover a deficit. The latter is the issue. Not the
former.
[/quote:fee99f1bdc]
I don't think I have a problem with that: Monetization in this
case would simply be the Treasury and the Fed NOT offering
any T-Bills or bonds for sale. That would probably cause
"inflation" making the current money holders less wealthy.
It is a proper course because it is the money holders who are
causing the deficit spending by virtue of their non payment
of taxes and their hawkish "patriotism".
--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org |
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