Why Donald Trump Can't Balance the Budget

[Goldenages]

I seriously doubt there is a way out without pain. Central Banking policy creates a massive distortion of the whole economy, massive misinvestments, high public expenditure quota, insane debt of any kind, many artificially animated bubbles.

This cannot last forever.

For shure it is the best strategy to make an environment where real companies create real jobs and real productivity, this is what President Trump tries.

 

In Europe politicians still pretend that everything works fine - however I enjoy watching their fear whenever some reality infiltrates their brains.

Its at least some show for all the money

 

regards

Andi

 

[Nathan Metric]

Complete nonsense video.

 

First of all, the only thing this video proves is that government surpluses are bad. It doesn't prove balancing the budget is bad. The best theoretical money system would be a money system where the number of infinitely divisible dollars never changes and a slow but gradual increase in purchasing power happens over time as a result of increases in worker productivity. If deflation isn't occurring you must be doing something wrong.

Second, the only way government spending can stimulate the economy at all is if the value of private savings are reduced. So...... where is the net economic benefit????

Third, they assume that taxes to pay off the debt and interest are somehow taken "out of circulation". Nonsense. The Federal Reserve is a private bank. It's no more Federal than FedEx. The money will be taken "out of circulation" just as much as private savings accounts take money "out of circulation".

[Dylan Lawrence Moore]

Complete nonsense video.

 

I like how your arguments are assertions and therefore not arguments.

[ofd]

Of course there are other reasons why prices change, such as less or increased demand, improvement of productivity etc.

But all these effects are effects of the free market, and have nothing to do with inflation.

 

Why not? Also, even if we equate monetary inflation with inflation, who is responsible for creating money? 

[Goldenages]

 

Why not? Also, even if we equate monetary inflation with inflation, who is responsible for creating money?

 

 

Because the pricing based on supply and demand, productivity etc. also takes place when there is e.g. goldstandard money and an, at least economically, free society, as it was the case in Europe before WW I.

Its the way prices (and also wages) are determined voluntarily in a free market. Its also a way to determine what should be produced and how much, or if anything should be produced at all.

 

Centralized planning does not work because this pricing mechanisms are absent. Even the Sowjetunion had to use data from the US in order to have a clue how much and what should be produced.

 

 

Responsible for the increased volume of money is the state, respectively the Central Bank. Who else? You and me are not allowed to print money. If I print money for my benefit, I go to jail.

If the state prints money for its benefit, its economic policy.

 

The news about this topic, especially debt and inflation, are full of lies. If enough people understood how this system really worked, there would be tumult within days.

At least in Europe, if they tell that inflation is xx percent, they tell that e.g. gas is responsible, gas is the booster that causes inflation.

This is a lie.

Given the same supply and demand, rising gas prices are just an indication that inflation slammed real economics.

 

Interesting: http://ronpaulinstitute.org/archives/featured-articles/2017/march/05/arizona-challenges-the-fed-s-money-monopoly/

 

 

regards

Andi

[Nathan Metric]

What did I say that needs more of an argument?

[ofd]

Responsible for the increased volume of money is the state, respectively the Central Bank. Who else? 

 

 

There is an obvious answer to that question. Where do credits come from under fractional reserve banking?

 

[Dylan Lawrence Moore]

What did I say that needs more of an argument?

 

 

Complete nonsense video.

 

First of all, the only thing this video proves is that government surpluses are bad. It doesn't prove balancing the budget is bad. 

 

Assertions and statements. First, where did we try to prove anything? Second, if we were, how were our proofs wrong?

 

 

The best theoretical money system would be... 

 

Why are you talking about the best theoretical money system? We certainly didn't. Strawman.

 

 

Second, the only way government spending can stimulate the economy at all is if the value of private savings are reduced. So...... where is the net economic benefit????

 

I have no idea what your basis for saying this is, how it's true, or how it relates to what we talked about in the video.

 

 

Third, they assume that taxes to pay off the debt and interest are somehow taken "out of circulation". Nonsense. The Federal Reserve is a private bank. It's no more Federal than FedEx. The money will be taken "out of circulation" just as much as private savings accounts take money "out of circulation".

 

I don't know what "taxes and interest taken out of circulation" means, not do I know why the private/public nature of the Fed has anything to do with what we talked about in the video, and you didn't explain why here. Taxation certainly takes money out of circulation. If this is what you meant, nothing you wrote explains why that is nonsense.

 

I'm wondering if you actually watched the video, because you don't seem to be talking about anything that was discussed in it. Would you like to watch it again?

 

[Goldenages]

Yes fractional Reserve Banking does its contribution, no doubt about that. But once a credit is paid back, this money cease to exist again.

 

regards

Andi

[ofd]

Yes fractional Reserve Banking does its contribution, no doubt about that

 

How big is that contribution compared to the Central Bank?

[Dylan Lawrence Moore]

Fractional reserve banking turns out not to add much. When someone gets a loan from a bank, that's debt that actually does have to get paid back. Thus, when credit is extended by a bank, a liability is simultaneously created, which will eventually be paid off (assuming the borrowing doesn't default).

 

Central bank "credit" doesn't need to be paid back, so it's just out there. That's why the net private sector savings is so dependent on spending from the federal government. There simply isn't any other place to get the money.

[Goldenages]

Dylan, what you actually say - if I got that correct - is, that citizens should accept a certain inflation in order to avoid a complete financial desaster.

While it is very honourable to think about ways of avoiding the financial breakdown, it is not possible to achieve a state free society while accepting central banking.

Thats not moving the goalposts, its kicking the ball in the wrong direction

 

Privat savings are indeed very important. But it is a wrong conclusion that private savings are dependent on spending from the federal government.

First, the government can only print money. But the value that is represented by money is created by productive work. Actually you do not need any money at all to create value.

All you need are commodities and the demand for them.

It is socialistic thinking to believe that money is the important part of the free market, and it is socialistic thinking to believe that distributing money could cure any economic problems.

 

Second, when it is - perfectly correct - stated that private savings are important, it is a contradiction to say that inflation should be accepted, cause inflation robs private savings. It does not matter wether taxes or inflation are raised or even just accepted - both have the same effect, i.e. less spending power for citizens. Inflation is nothing else than a masked tax.

 

Karl Marx came up with the idea for central banking, during his lifetime there was a goldstandard used in Europe. It is the very idea of central banking to grab as much value as possible from the productive and transfer it to the state.

 

And third, if Ludwig v. Mises is right, and there is good evidence he is, there is no way out: "There is no way to avoid the final collapse of a boom through credit expansion. The only question is whether the crisis should come earlier through the voluntary task of ending expansion, or later and with a total disaster of the monetary system".

 

 

regards

Andi

[Dylan Lawrence Moore]

Dylan, what you actually say - if I got that correct - is, that citizens should accept a certain inflation in order to avoid a complete financial desaster.

While it is very honourable to think about ways of avoiding the financial breakdown, it is not possible to achieve a state free society while accepting central banking.

 

This is where you're entirely missing the point. Nima and I are not discussing how to achieve a state free society. We're discussing how to avoid economic collapse under the current statist system.

[Notsuper]

So I watched the video and read through this entire great wall of text topic.

 

I thought the video was an interesting introduction, but it really only talked about the role of a national tax in establishing value in a nation's currency, not maintaining it, which is where the topic here seems to have shifted. Or maybe I'm just not connecting the dots, since I don't really know anything about economics. Either way, it'd be neat if you made another video explaining more about how this should turn out in the long-term, and how some real world examples compare, if you haven't already (it sounds like you've made multiple videos on similar topics).

 

Third, they assume that taxes to pay off the debt and interest are somehow taken "out of circulation". Nonsense. The Federal Reserve is a private bank. It's no more Federal than FedEx. The money will be taken "out of circulation" just as much as private savings accounts take money "out of circulation".

 

I was going to bring this up too, as it seems like a problem to me. Assuming the government is trustworthy, I don't see why it's not okay for it to create debt to itself endlessly as needed, because there's no actual need to pay it off. However, if the government is instead accumulating debt to a separate entity which isn't under its control (like the 'Federal' Reserve), doesn't that mean they forfeit the ability to safely build up debt as needed? (Or am I overestimating the power of the Federal Reserve?)

 

To put it (somewhat) in the terms used in the video, if the Fed prints money, and taxes the government for using this money, doesn't this mean that the national debt is actually a substantial amount owed to someone, rather than just an insignificant portion of a supposed infinity?

[Goldenages]

 

Assuming the government is trustworthy..

 

 

Yes, that was a good one

 

It works like this: The state needs money, either for infrastructure or war or welfare. So the state borrows money from the FED. The debt for this is sold in form of government bonds. Everybody can buy this government bonds, other governments and private people. All those expect interest, the more thrustworthy a country the less interest.

 

Now taxes are used to pay back this government bonds+interest.

 

 

Normally, at least in the EU, it is forbidden that the FED (or the EZB) buys back their own government bonds (instead of other governments or private people). This is done to let the market decide wether a country is still thrustworthy or not, and it is a brake to prevent (hyper)inflation. In the EU, this rule is already abandoned. Not officially, its bypassed crabwise.

As far as I know the FED still sticks to this rule. California and Minnesota are nearly bankrupt, but the FED does not help out.

 

Now the MMT recommends that the FED actually should buy their own bonds. And yes, then in a way it is true that this money does not need to be paid back. But what will occur is, that the tiny rest of connection from fiat money to a real market is cut, and in any case inflation will rob value of the money - which has the same effect as taxes.

Furthermore, when there is no more connection from money to the market, sooner or later thrustworthyness of a currency will suffer.

Its the old idea that central planning has the power to create value, the old idea that all economic problems, from corrupt states to lazy people, can be covered with money.

 

And there is more than enough evidence that this is wrong.

 

 

regards

Andi

[Dylan Lawrence Moore]

So I watched the video and read through this entire great wall of text topic.

 

I thought the video was an interesting introduction, but it really only talked about the role of a national tax in establishing value in a nation's currency, not maintaining it, which is where the topic here seems to have shifted. 

 

Thank you for making an effort to address what was actually in the video!

 

 

Either way, it'd be neat if you made another video explaining more about how this should turn out in the long-term, and how some real world examples compare, if you haven't already (it sounds like you've made multiple videos on similar topics).

 

We agree! Making videos is tougher than I originally thought, so they come out at the speed that I can handle.

 

 

I was going to bring this up too, as it seems like a problem to me. Assuming the government is trustworthy, I don't see why it's not okay for it to create debt to itself endlessly as needed, because there's no actual need to pay it off. However, if the government is instead accumulating debt to a separate entity which isn't under its control (like the 'Federal' Reserve), doesn't that mean they forfeit the ability to safely build up debt as needed? (Or am I overestimating the power of the Federal Reserve?)

 

To put it (somewhat) in the terms used in the video, if the Fed prints money, and taxes the government for using this money, doesn't this mean that the national debt is actually a substantial amount owed to someone, rather than just an insignificant portion of a supposed infinity?

 

This is the thing, the Fed actually IS under the government's control. The Fed exists entirely through statute, and Congress could take it away simply by voting on it. Now, as an agency set up under statute, it is able to control interest rates without any oversight, which is one of the reasons why it's such a massive pain in the dick.

 

The Fed doesn't "tax" the federal government. Neither the Fed nor the Federal Government need money, because they can just create it, so one taxing the other doesn't make sense. Furthermore, because the federal government never has nor doesn't have money, they don't need it in order to pay for anything. What this means: federal government bonds don't pay for anything.

 

As Nima puts it, they are simply an easy way for rich people to make lazy money. When someone cashes in a treasury bond, it's not like the US Treasury or the Fed needs to take money from somewhere else in order to pay the bondholder their interest, they simply write a new digital number into their account. Money created out of nothing.

 

Here is something that helped me understand:

 

In reality, you cannot use something that does not exist. I can't eat a loaf of bread that hasn't been baked.

In fantasy, I can do whatever I want. I can have a magic pouch that produces infinite loaves of bread.

 

To most people, money exists in reality. We can only spend what we have or can borrow from someone else.

To the government, money exists in fantasy. They can snap their fingers to create or destroy it.

 

The government makes its fantasy money real to most people with the usage of violence, a.k.a. taxation. "Act like it's real, or else."