Why We Need a National Deficit & Why Austerity is Killing Greece

[Dylan Lawrence Moore]

 

Dylan Moore and Nima Mahjour discuss why modern nations need national debt through the lens of Modern Monetary Theory (MMT), and what function it performs in society.

 

Main points of discussion in the video:

 

The vocab of MMT and why words like budget, surplus, debt, and deficit have completely opposite meanings of what we've been lead to think they do, 

 

Why Weimar Republic Germany and Zimbabwe's hyperinflation wasn't due to excess printing, it was due to political factors destroying productive output. We also take a look at why a country like Venezuela is experiencing inflation while overprinting, when countries like the US are not. Again, we find that the lens to view these economics systems through is the political lens, not the economic lens. While both countries continue to print deficits, Venezuela has plundered its own productive capabilities, while the US has not.

 

Lastly, we take a look at Greece and the Eurozone as a whole, and why austerity and budget surpluses is the absolute worst thing that can happen economically for Greece. We also look into the bizarre situation of the forced deficit spending the EU has demanded upon its member states, and why this is causing some states to flourish (Germany) and others to crash and burn (Greece).

 

It will most assuredly ruffle some feathers around the Austrian economics crowd!

[john cena]

Go ahead and issue your currency. Tell people up front you're going to steal some of it through inflation. Do you think the consumer when faced with a choice would buy into such a scheme? I certainly wouldn't. How can this even be conceived to work except in a statist environment? The consumer/wage earner wants money to be as deflationary as possible, so that their savings buy more and more over time. 

In the specific case of the USA.. Yes, we do benefit from the debt in some ways. That certainly would not ruffle my Austrian feathers! We are printing worthless dollars and the Chinese are handing over products like mad for them. We are selling bonds that will never be repaid for real goods and services. So yes, in effect, the lazy unproductive masses get free stuff, just because other countries think our dollar will be strong in the future and the debt will be repaid.

There is already a name for this method the video describes, and it is called a ponzi scheme. The foreigners will wise up, and when that happens, we will have no factories left to produce products we need, only methods of consumption. That is when the evil of such a system is fully displayed. 

You cannot eat money. 

[Dylan Lawrence Moore]

How can this even be conceived to work except in a statist environment?

 

When did either Nima or I suggest anywhere in our conversation about this working outside of a statist environment?

[Nima]

Do you think the consumer when faced with a choice would buy into such a scheme? I certainly wouldn't. 

 

Do you hold any dollars or other fiat currency?

[Goldenages]

 

... and why austerity and budget surpluses is the absolute worst thing that can happen economically for Greece.

 

So don´t worry. There never was austerity and budget surplus in Greece since they got rid of the Ottoman Empire.

But Greece went bankrupt for 3 or 4 times then.

 

regards

Andi

[Dylan Lawrence Moore]

So don´t worry. There never was austerity and budget surplus in Greece since they got rid of the Ottoman Empire.

But Greece went bankrupt for 3 or 4 times then.

 

regards

Andi

 

If you're not going to look with curiosity at what we're talking about to understand concepts which we've elucidated on two different videos now, why bother responding at all?

[Goldenages]

Some facts to Greece: The aim of less than 3% new debt was never reached in Greece (and many other EU countries). Meanwhile Greece received 248 billions Euro as help to restart economics.(Remember, population in Greece is only 11 million). Greece is a corrupt state ever since, if you want to buy property its not even shure who is the right owner because of a lack of land registry. The truth is that Greece is an oligarchy, reigned by a few families such as the Varoufakis or Onassis.

So all the money vanished somewhere, it was never, or only to a small extent, used for economic investment.

 

So it was not any kind of misterious austerity, and it never was the lack of money that keeps Greece to the bottom. Its is keeping a whole country on welfare that worsens things - economy in Greece has declined over the last years.

 

This is no Greece bashing, I love Greece and been there many times. But as usual, socialism does never good to anybody.

 

 

Yes Germany has a surplus in exports. But: More or less all southern countries in Europe borrow crazy amounts of cheap money from the EZB (European central bank) and pay with that money.  And the one held liable for this debt is - correct, Germany (and a few others, but Germany ist the greatest economy). So thats the kind of Vodoo economics that is ment to create a united Europe: One member produces, the others lend money from the one who produces, and the very same one will have to pay all the bills at a day most likely not too far away. So all what holds this construction together ist the believe that someday, when Alice and the Wonderland will be real, the debtors like Italy and Spain and Greece and France etc. etc. will pay their debt.

This will never happen.

And it does not, as mentioned in the video, help if one double or triple the amount of money. The 3% rule was never achieved by most countries anyway. The money is consumed, it just vanishes, in the same way as the number of recipients in a welfare state is growing and growing, the debt is rising and rising.

 

regards

Andi

[oaksdave]

Is it or is it not the case that the main issue with Greece is that the ECB is loaning Greece money to pay debt service?  I am not an expert in finance by any stretch of the imagination, but if your formula to pay back your debt is to borrow money, I think it is safe to say austerity is not the biggest problem.

[Dylan Lawrence Moore]

Goldenages/Andi, I'm not sure who or what you're addressing, because it's certainly not what we were talking about in the video.

 

 

Is it or is it not the case that the main issue with Greece is that the ECB is loaning Greece money to pay debt service?  I am not an expert in finance by any stretch of the imagination, but if your formula to pay back your debt is to borrow money, I think it is safe to say austerity is not the biggest problem.

 

This is the issue we worked with clarifying at the beginning of the video: money that originals from a central bank isn't a "loan". They call it that, but it's not functionally not true. ECB creates money out of nothing and doesn't need it back, so the formula does not involve either borrowing money or paying back a debt. This is why the austerity is bullshit; Greece is expected to "balance their budget", which removes currency out of the system, in order to pay money to an organization that can create money at will.

[Goldenages]

 

This is the issue we worked with clarifying at the beginning of the video: money that originals from a central bank isn't a "loan". They call it that, but it's not functionally not true. ECB creates money out of nothing and doesn't need it back, so the formula does not involve either borrowing money or paying back a debt. This is why the austerity is bullshit; Greece is expected to "balance their budget", which removes currency out of the system, in order to pay money to an organization that can create money at will.

 

 

Thats what is claimed in the video, and thats what was already wrong in first one, see my posts there. My answer was exactly about this topic, and why this socialistic idea does not work in practice.

 

regards

Andi

[oaksdave]

Further, isn't "austerity" actually a decrease in the rate of increase of state spending annually, not an actual scarcity of state spending?

[Bilderberg CEO]

Further, isn't "austerity" actually a decrease in the rate of increase of state spending annually, not an actual scarcity of state spending?

 

Austerity is always for the people, not the government. The future will bring high taxes with nothing in return.

[Dylan Lawrence Moore]

Thats what is claimed in the video, and thats what was already wrong in first one, see my posts there. My answer was exactly about this topic, and why this socialistic idea does not work in practice.

 

regards

Andi

 

Your posts there are just as confusing as your posts here. You have to show me why I'm wrong, not just repeat over and over that I am. 

Further, isn't "austerity" actually a decrease in the rate of increase of state spending annually, not an actual scarcity of state spending?

 

I have no idea what this means.

[Nima]

So don´t worry. There never was austerity and budget surplus in Greece since they got rid of the Ottoman Empire.

But Greece went bankrupt for 3 or 4 times then.

 

regards

Andi

 

It doesn't have to be a budget surplus, it could also be deficits that are simply too small. And there absolutely are such requirements imposed upon Greece, so the government is working towards achieving them. In other words, the impetus is in a direction that starves the private sector of net private saving, in particular since Greece has a chronic current account deficit.

Some facts to Greece: The aim of less than 3% new debt was never reached in Greece (and many other EU countries). Meanwhile Greece received 248 billions Euro as help to restart economics.(Remember, population in Greece is only 11 million). Greece is a corrupt state ever since, if you want to buy property its not even shure who is the right owner because of a lack of land registry. The truth is that Greece is an oligarchy, reigned by a few families such as the Varoufakis or Onassis.

So all the money vanished somewhere, it was never, or only to a small extent, used for economic investment.

 

So it was not any kind of misterious austerity, and it never was the lack of money that keeps Greece to the bottom. Its is keeping a whole country on welfare that worsens things - economy in Greece has declined over the last years.

 

This is no Greece bashing, I love Greece and been there many times. But as usual, socialism does never good to anybody.

 

 

Yes Germany has a surplus in exports. But: More or less all southern countries in Europe borrow crazy amounts of cheap money from the EZB (European central bank) and pay with that money.  And the one held liable for this debt is - correct, Germany (and a few others, but Germany ist the greatest economy). So thats the kind of Vodoo economics that is ment to create a united Europe: One member produces, the others lend money from the one who produces, and the very same one will have to pay all the bills at a day most likely not too far away. So all what holds this construction together ist the believe that someday, when Alice and the Wonderland will be real, the debtors like Italy and Spain and Greece and France etc. etc. will pay their debt.

This will never happen.

And it does not, as mentioned in the video, help if one double or triple the amount of money. The 3% rule was never achieved by most countries anyway. The money is consumed, it just vanishes, in the same way as the number of recipients in a welfare state is growing and growing, the debt is rising and rising.

 

regards

Andi

 

"Meanwhile Greece received 248 billions Euro as help to restart economics."

 

That's not how you restart an economy, in this instance in particular, Greece is being given the money in the form of IMF/EU loans that they have to repay, in a currency that they don't have sovereign discretion to create, only the ECB does, and only to buy bonds.

 

It is certainly true that Greece has a large welfare state and corruption etc., but so does Germany and other countries. And of course that produces economic inefficiencies etc., but it doesn't explain an outright Depression.

 

Arguing that the 3% rule was "never" achieved is factually simply wrong. But even if that was true, it still doesn't mean that deficits are large enough to supply the private sector sufficient net saving.

Is it or is it not the case that the main issue with Greece is that the ECB is loaning Greece money to pay debt service?  I am not an expert in finance by any stretch of the imagination, but if your formula to pay back your debt is to borrow money, I think it is safe to say austerity is not the biggest problem.

 

You are hitting on part of the problem. This is a symptom. Greece has to borrow money from the EU and the IMF etc., because its own government doesn't have the legal permission to spend it into existence, since they are bound by the underlying impossible budgetary constraints. If they had their own central bank and their own sovereign treasury they would not be under this constraint. Of course that wouldn't automatically mean that they would have a prosperous booming economy, but it's a necessary precondition long term.

Further, isn't "austerity" actually a decrease in the rate of increase of state spending annually, not an actual scarcity of state spending?

Austerity is a targeted attempt to reduce the government's debt or at least slow down its growth (in other words to starve the private sector of net saving), without taking other factors into consideration.

Austerity is always for the people, not the government. The future will bring high taxes with nothing in return.

 

Yes, austerity makes the private sector poor and so by necessity it makes those with guaranteed income from the public sector wealthier and more powerful.

[Goldenages]

 

 

That's not how you restart an economy, in this instance in particular, Greece is being given the money in the form of IMF/EU loans that they have to repay, in a currency that they don't have sovereign discretion to create, only the ECB does, and only to buy bonds.

 

It is certainly true that Greece has a large welfare state and corruption etc., but so does Germany and other countries. And of course that produces economic inefficiencies etc., but it doesn't explain an outright Depression.

 

Arguing that the 3% rule was "never" achieved is factually simply wrong. But even if that was true, it still doesn't mean that deficits are large enough to supply the private sector sufficient net saving.

 

 

Greece cheatet with its budget to join the EU, everbyody knew that already back then. The politicians pretended not to see it because they wanted Greece to join, backed up by Goldmann Sachs who made another perfect deal.

 

The whole point of this MMT is that there is no need to pay back money borrowed from the FED (or any other Central Bank).

And as already said, yes its true that never all the money can be paid back, because if, there would be no more money left. Fiat money is debt, and when all debts are paid, no money exists any more.

 

But it is wrong to conclude that this debt does not exist in reality, or only exists in a computer. 

Public debt, national and external, is held by real persons expecting interest. China holds 1,2 trillion Dollar of US government bonds. It would be very interesting to tell China, well guys, come on, thats no real debt. We won´t repay one more single Cent from now on.

 

The argument, that a Central Bank can print the money, and repay debt, is true, but that does not mean that nobody pays for it. If debt is paid with the printing press, inflation does the job that is normally done by taxes. You need no hyperinflation to reduce the value of money, any inflation does that exactly to its percentage. Hyperinflation only shows it very obviously: If somebody has 3 million mark in his pushcart and several billions at home, according MMT there is no shortage of the private sector, right? But the sheer numbers do not count, because if 1 loaf of bread costs 3 million there actually is a shortage of the private sector. And yes the unavailability of goods play an important role, but this role can never be replaced with money.

And here we have the reason why any money given to Greece is waisted - they only consume money on debt, but are not productive enough to match the value of the Euro.

 

Paying debt with the printing press, i.e. with inflation, even with only 1 or 2 percent, is very comfortable for a state, because most people don´t notice.

Nevertheless this adds over the years, and is in fact deprivation.

 

regards

Andi

[Dylan Lawrence Moore]

The whole point of this MMT is that there is no need to pay back money borrowed from the FED (or any other Central Bank).

 

We have been saying that the money does not have to be paid back, this is true.

 

 

And as already said, yes its true that never all the money can be paid back, because if, there would be no more money left. Fiat money is debt, and when all debts are paid, no money exists any more.

 

But it is wrong to conclude that this debt does not exist in reality, or only exists in a computer. 

Public debt, national and external, is held by real persons expecting interest.

 

Sure, and they are able to create that interest out of nothing. "Debt" has a different meaning when you don't have to earn money to pay it back.

[Goldenages]

 

Sure, and they are able to create that interest out of nothing. "Debt" has a different meaning when you don't have to earn money to pay it back.

 

Yes, they create the interest out of nothing, i.e., the Central bank fixes the key interest rate.

The bank does not have to work to pay anything, because we are the debtors, and not the bank

 

Thats what this whole fraudulent and exploitative Central bank system is about: The Central bank swings the baton and the citizens must p(l)ay.

It serves only the state. The state and the Central bank thus can control and especially extract as much money as they can out of the productive work of the citizens.

 

regards

Andi

[oaksdave]

This looks like a "get ready for default" piece dressed up as a human interest article:

 

http://www.independent.co.uk/voices/editorials/the-greek-debt-disaster-isn-t-just-a-financial-issue-it-is-a-humanitarian-one-a7600636.html

[Dylan Lawrence Moore]

Thats what this whole fraudulent and exploitative Central bank system is about: The Central bank swings the baton and the citizens must p(l)ay.

It serves only the state. The state and the Central bank thus can control and especially extract as much money as they can out of the productive work of the citizens.

 

Of course that's what it does. What we're saying is it swings the baton differently from what we thought it did, and if we're going to defend ourselves against it, we better learn how they actually are swinging it.

[mgggb]

 

 

Dylan Moore and Nima Mahjour discuss why modern nations need national debt through the lens of Modern Monetary Theory (MMT), and what function it performs in society.

 

Main points of discussion in the video:

 

The vocab of MMT and why words like budget, surplus, debt, and deficit have completely opposite meanings of what we've been lead to think they do, 

 

Why Weimar Republic Germany and Zimbabwe's hyperinflation wasn't due to excess printing, it was due to political factors destroying productive output. We also take a look at why a country like Venezuela is experiencing inflation while overprinting, when countries like the US are not. Again, we find that the lens to view these economics systems through is the political lens, not the economic lens. While both countries continue to print deficits, Venezuela has plundered its own productive capabilities, while the US has not.

 

Lastly, we take a look at Greece and the Eurozone as a whole, and why austerity and budget surpluses is the absolute worst thing that can happen economically for Greece. We also look into the bizarre situation of the forced deficit spending the EU has demanded upon its member states, and why this is causing some states to flourish (Germany) and others to crash and burn (Greece).

 

It will most assuredly ruffle some feathers around the Austrian economics crowd!

 

It's impossible to say definitively one way or another without being an expert in many different fields such as economics, history, mathematics, etc. If my opinion is x I can find an expert to quote who supports x. If my opinion is y I can find an expert to quote who supports y, even though x and y are the opposite of each other.

 

This is why it is so important to work from principles rather than effect. Theft is wrong, fiat money steals from savers by inflating a currency's value, therefore fiat money wrong. Theft is wrong, taxation is theft, therefore taxation is wrong. Coercion is wrong, deficit spending is money that is spent now and paid by those not yet born, therefore deficit spending is wrong.

[Dylan Lawrence Moore]

It's impossible to say definitively one way or another without being an expert in many different fields such as economics, history, mathematics, etc. If my opinion is x I can find an expert to quote who supports x. If my opinion is y I can find an expert to quote who supports y, even though x and y are the opposite of each other.

 

This is why it is so important to work from principles rather than effect. Theft is wrong, fiat money steals from savers by inflating a currency's value, therefore fiat money wrong. Theft is wrong, taxation is theft, therefore taxation is wrong. Coercion is wrong, deficit spending is money that is spent now and paid by those not yet born, therefore deficit spending is wrong.

 

I haven't got the slightest clue what you're trying to say to me.

[mgggb]

I haven't got the slightest clue what you're trying to say to me.

Work from principles, rather than effect.

[Dylan Lawrence Moore]

Work from principles, rather than effect.

 

Therefore... something to do with my post?