True or False: "Quantitative easing has massive advantages when done correctly." ??

[LovePrevails]

https://www.youtube.com/watch?feature=player_embedded&v=sLP3wKU99do

 

 

"This is so populist and emotive and oversimplified. Parts of it are true, parts are half true, and parts are just false. And he is all over the place. I can't take him seriously. Quantitative easing has massive advantages when done correctly. He simply shows a lack of understanding with his summary of the Keynesian perspective as well. It is not as simple as just calling it stealing from the future since that will affect the future. If stealing from the future will give you resources to build an even better future then it is no longer stealing but instead it is a present. Of course that makes little sense, but that is the only way to explain it within his perspective and that is what you get when you oversimplify. This is what is known as a time-inconsistency problem in economics. Whilst it is true that there are negative consequences of borrowing from the future (because it is borrowing, not stealing), there are also positive ones too. That borrowed resources can be used for investment. Although initially it will reduce investment, since the whole goal is shifting resources from investment to consumption, that additional consumption can prevent a severe shock to aggregate demand. A shock to demand can do even more harm to investment in the medium term as producers will not be able to rely on demand for their products. There has been a demand shock of massive proportions recently and mitigation of that is highly desirable.Quantitative Easing is actually preferable to interest rate cuts since it works retrospectively as well. Bear in mind, it is a tax on wealth. Well there is a lot of wealth which has accumulated due to unreasonable leverage due to low central bank base interest rates. Quantitative Easing would unwind that since it is the opposite of that. If you also allow pay rises, and therefore protect wages, particularly for those at the bottom (who also have the highest fiscal multipliers) then all you are doing is taking back what was unreasonably earned. This is not stealing, if anything, it is the opposite.

 

Robin Hood was also a thief!"

 

 

Rebuttals?

 

 

[ribuck]

... Whilst it is true that there are negative consequences of borrowing from the future (because it is borrowing, not stealing ...

 

It's stealing. Borrowing from the future means that the (violently-enforced) repayment obligation will fall onto our children and their as-yet-unborn children. With their permission, it would be borrowing. Without their permission, it's stealing.

[wdiaz03]

...If stealing from the future will give you resources to build an even better future then it is no longer stealing but instead it is a present....

 

Rebuttals?

 

I'm sure politicians do this all the time too...Because they have the interest of future generations in mind at all times.

[Anjin-san]

"True or False: "Quantitative easing has massive advantages when done correctly." ??

 

True.  I don't know what "correctly" means in this sentence, but "quantitative easing" has massive advantages.  The only question is: for whom?

[pretzelogik]

My mind reels every time I hear the phrase "borrowing from the future".  We cannot borrow from the future, unless I am unfamiliar with the lastest innovations in time travel transportation and distribution.  Everything that is ever "borrowed" from the future is here and in exsitence, in the present.  Those who did not use those resources may be required to relinquinsh their resources at some time in the future.  But would that not be more like a thief robbing someone and using the justification that it was for a meal he ate last week?

[PatrickC]

I'd say any kind of rebuttal here is futile (probably). This person has bought into lock, stock and barrel the concept of Keynesian thinking. He is thinking in abstractions, hence the verbiage. His thinking makes a lot of assumptions, such as paving a way for an improved future for future generations (how? and examples?). The idea that consumption trumps investment (which is insane btw for those that know about investing). The idea that QE can actually protect those on low pay. Just look at the stagnation in wages over the past 40 years.

 

Of course we have a lot of history that shows this kind of thinking has led from one recession to the next. The trouble is, most Keynesian's believe this to be quite a normal cycle of economic events. Take them back to the 1800's and they will see quite a different picture of course, if they bothered to look at the facts, rather than the Marxist/statist history that has been written about it.

 

You could ask him to provide examples for his claims. Although I imagine you will be returned with yet more verbiage. These types like nothing more than things to be complex and unknowable. It makes them sound clever to the average person. Particularly when that someone is defending outright theft which no one can do much about. He's an anxiety reliever for them.

[ribuck]

My mind reels every time I hear the phrase "borrowing from the future".

 

No need to reel. The phrase is just a convenient short-hand for the following:

 

1. The government borrows from those who choose to invest in its treasuries/gilts/etc.

2. The government spends the borrowed money.

3. When the repayment (of principal plus interest) falls due, the government either borrows even more, or...

4. The government makes a repayment by forcefully taking money from future taxpayers.

 

The net result is that the money spent on today's entitlees is taken by force from others in the future. That's why it's colloquially referred to as "borrowing from the future".

[pretzelogik]

The net result is that the money spent on today's entitlees is taken by force from others in the future. That's why it's colloquially referred to as "borrowing from the future".

So, another euphemism to camouflage the violence and corruption.  Got it.  It's always fun to hear them talk about "borrowing from ourselves", as well..

[Kevin Beal]

I'm not an economist by any stretch, but, as I understand it, a currency that is subject to inflation in the way that federal reserve notes are is totally fine and even beneficial in some respects. The problem with federal reserve notes is that they are forced upon us with the threat of violence, and being that they can be inflated and people aren't going to leave it because of that means that they can distort the money supply all they want. And being that so few people understand how fractional reserve banking works, they can pretend that it's the shop owner who is screwing the poor.

 

The same thing is true to the corporate status. It's not that companies are corporations that shield themselves from legal accountability that is the problem, it's that we have corporate welfare.

 

The products themselves aren't bad, it's the incentives in place when there is a monopoly on violence in the center of society. Nobody is going to try and preserve the value of the dollar who works for the federal reserve or wants to buy votes or is first in line for the issuing of these new notes.

 

Theoretically there are short term advantages to quantitative easing much like the Keynesians say, but the reality in a violent monopoly is very different. Which is why Keynesian economists are so keen on avoiding the moral problem.

[kirk paolinelli]

False, if you are talking on a macroeconomic scale. The only advantages would be similar to the advantages a counterfeiter gets when he creates money. I don't think quantitative easing steals from the unborn, as far as I understand inflation only directly steals from holders of federal reserve notes.

 

How I got here.

Money is a medium of exchange not an end good. So if 2 men were on an island and they had 5 dollars each. the sum total of all goods and services would be worth $10. There would be no way of borrowing from the future by adding $10 to man #1 reserves. What did happen, the total goods and services prices doubled in dollars. Man #2 now can buy with $5 what before he could buy with $2.50. Because Man #1 can out bid him. Even though his original $5 lost half its value he added (quantitatively eased)$10 more dollars to him self. So with $15 dollars he now has a original purchasing power of $7.50.

 

I think we know where Man #2's value went.

 

Where I think the myth of short term benefit's comes from is two fold.

 

1. GDP is measured in dollars spent! So the lower the value of the dollar the more dollars that need to be spent to purchase the same amount of goods.

 

2. The fed generally uses the newly created money to buy long term debt of the US government. This depresses interest rates.

Low interest rates decrease the time preference of people and encourages spending in the now. Which short term increases GDP.

 

The buying of government bonds with the money is what I think Stefan is talking about, when he mentions selling off the unborn.

 

Keynesianism is just another fancy way of telling people they can something for nothing. People are swindled by wanting something for nothing all the time.

 

I think every economic system should have to be explained on how it would work for 2 people. I was talking to a guy trying to get him to explain an RBE with 2 people. Other than a free market everything just sounds wrong.

 

Side note

 

If one were wanting to measure GDP in a free market system. How would you do it?

 

I was thinking the measurement would be something like the decrease of CPI in a stable currency.

 

If anyone who does think there are benefits to Quantitative Easing or Keynesianism. I would love to hear how it would work with 2 people.

[Hugh Akston]

Quantative Easing does not steal from the future, that is clearly impossible.  It steals resources in the here and the now.  It results in the transfer of resources in the here and now to those receiving the "easing".  The problem is not merely malinvestment, but the fact is that it artificially increases the prices of capital goods and property (residential housing being an important item in this regard).  This results in a great deal of indebtedness of the people to the banksters receiving all of the "easing".  This is slavery carefully constructed.