Senate Dems Release Text Of $3.5 Trillion "Stimulus" Budget Resolution https://www.zerohedge.com/political/senate-dems-release-text-35-trillion-stimulus-budget-resolution Investigating Missing Details In the Democrat's $3.5 Trillion Anti-Poverty, Climate Plan https://www.zerohedge.com/political...mocrats-35-trillion-anti-poverty-climate-plan
There has never been a problem paying for either of these Democrat-sponsored initiatives -- the one passed by the Senate today and the Reconciliation bill coming up. The critical issue is how do we do this without causing unacceptable inflation now, or in the future. This can be done, but it requires taxing high incomes -- Biden has said > 400K -- and possibly Corporation profits to a small extent. The reason we need this additional tax revenue is not to pay for these initiatives, but to reduce the probability of future inflation. When we spend in deficit we print money and spend it into the economy. This printed money is called "outside money". It's the seed money for credit money or "inside money", which accounts for the bulk of money in circulation. One cause of inflation is too much money circulating in the economy relative to the goods and services available for purchase in an economic climate of high demand. Typically the Treasury issues securities in the amounts of it's deficit spending. This gives the impression of borrowing, and we call it borrowing, but of course it is not borrowing, since by the time we "borrow" we have already printed and spent into the economy the money we appear to be borrowing. What we are really doing is exchanging an interest paying form of money, a bond, for a non-interest paying, readily spendable form. This ersatz borrowing has two useful purposes : 1) it decreases the amount of money in bank reserve accounts, which are the accounts that day to day banking transactions clear through, and 2) It provides the bonds used by the Central Bank in carrying out monetary policy. We can summarize the overall role of the Treasury's ersatz borrowing as being one of temporarily "sidetracking" money in the form of securities that might otherwise circulate in the economy in the form of readily spendable money that could cause inflation if there is too much of it. We can summarize the Central banks method of carrying out its monetary policy as regulating the ratio of sidetracked money to money readily available for spending. We know that the Central Bank is charged with preventing excessive inflation and fostering full employment -- a difficult task according to some mid Twentieth Century economic theory! The Central bank tries to do this, by increasing the amount of readily spendable money relative to sidetracked money when demand is lower and doing the opposite when demand is higher. Unfortunately Treasury Bonds that result from deficit spending represent potential future inflation when they are in the hands of the private sector, and once the central bank has converted them back to bank reserves they represent potential current inflation. It's the equivalent of converting potential future inflation to potential current inflation. Therefore, to the extent we pay for the democrat initiatives by taxing in a way that reduces the amount of new, printed money spent into the economy and consequently the amount of new Treasuries issued, we should be both reducing the potential for both current and future inflation. An equally important consideration is the rate of new spending into the economy. If it causes demand for resources -- labor, commodities, equipment, etc. -- to increase faster than the supply of resources can accommodate, inflation is sure to follow. These considerations tell us that it would be best to pay for the Democrat initiatives with a combination of deficits and new taxes on high incomes, and that the rate of new spending into the economy needs to be synchronized with the availability of resources. It seems this is exactly what is planned. How well we carry this off will be measured by future inflation.
Can't be borrowing if you already spent. Brilliant! Gotta try that tomorrow. Ask a stranger to borrow a dollar, spend it quick right away and tell them who me I didn't borrow it ..... because I already spent it. Then run.
Sorry but your example is not analogous. To be analogous you must first print the dollar you use to buy a thing costing 1 dollar. Then you borrow the dollar back from the merchant who made the thing you bought, giving the merchant an IOU for the dollar. Then you use the dollar you borrowed, which is the same dollar you printed, to pay back the merchant and retrieve the IOU which you burn. You end up with 1 thing, and the merchant ends up converting his productivity into 1 dollar which you printed. (Of course in real life it doesn't have to be the exact same physical dollar, because money is fungible.) If you can understand this, than you can understand why the U.S. does not borrow. If you can't, than you can't understand why the U.S. doesn't borrow. But it's OK either way. I'm guessing that most Walmart shoppers will not be able to understand this. So if you can't, you won't be alone.
I think the DJIA would go a lot higher if the committee would just replace some of the old economy stocks with new ones. IBM & INTC are dieing companies that should be replaced with NVDA & AMZN/GOOG (of course it would have to split its stock at least 10:1).
currently, the DOW30 lacks representation of the Internet and things economy like Google, Amazon, FB, NVDA... they could add these four companies to the index to reflect the change in the nature of US econ. and make it the DOW34. does AMZN employ 1 out of 120 workers in the US? then I think that would make Relentless too happy, and we wouldn't want to do that nowadays, I rarely watch TV, but youtube (I think I've watched about 1 hour of TV at home since last year when covid started except when I was on a trip).