Gerald O'Hara: Do you mean to tell me, Katie Scarlett O'Hara, that Tara, that land doesn't mean anything to you? Why, land is the only thing in the world worth workin' for, worth fightin' for, worth dyin' for, because it's the only thing that lasts. Not sure about the "dyin" part, but ol' Gerald hit the nail on the head with regards to inflation. Or you could buy BTC I guess. So they say.
Ha ha ha, I wasn't planning on responding to this nice thread, but now you've made we feel obligated. And i don't mind one bit. There is a little misunderstanding, but the fault is all mine. You have obviously been reading my posts, as I read yours and appreciate them. My major point has been that government finances are nothing like our individual private finances; so to the extent we try to judge government spending the way we would our own, we are leading ourselves astray. What I haven't emphasized enough is that because it's how much we spend that we care about most in our personal finances we mistakenly dwell on the amount we spend when it comes to Government spending. I have maintained, and consistently so, that the U.S. does not have any debt in at all the sense that we private citizens have debt. I don't recall having ever said, “ [government] debt really doesn't matter." If I did say that, it would have been in the sense that government debt doesn't matter because the government has no debt. (Not the U.S. anyway.) The total of government securities held in the private sector does matter, of course, because of servicing costs, which is non-discretionary spending. That might crowd out necessary discretionary spending if it were allowed to get too high. What I have tried to say is that the concept of "debt", as we in our private lives know it, doesn't exist for a nation such as the U.S. -- never mind that we erroneously think it does. Where I have really failed miserably is in not emphasizing enough that there is at least one way that private finances are nearly the same as government finances. And that is that what money is spent on, and what it isn't, is an important consideration for government, just as it is for ourselves. In fact, it is a much more important consideration for government, as I will argue below. We personally have one fundamental constraint that our Government doesn't. We are constrained by how much money we have to spend. For us, the amount of credit we can access controls the the upper bound of what we can spend. Our Government, on the other hand, has no need to access credit, and therefore it doesn't borrow money; thus the conventional concept of debt doesn't exist for our Government. Though issuing of bonds by the Government creates the illusion of borrowing, the bonds it issues serve entirely different purposes than raising money; purposes not at all transparent to we citizens. It's clear that in the past even our Government officials did not understand this. Fortunately that is rapidly changing, and now many in Government are becoming more enlightened. I could write an entire essay on how that came about, but I will spare you. Suffice it to say that during the Twentieth Century the fundamental nature of government issued money was no different under the cumbersome Gold Standard than under a fiat money regime.* The true nature of the money our Government issues seems to have not been understood until after 1971. Our Government does not have any constraint on how much money it has to spend other than what our representatives in government impose. Certainly the amount of money our Government spends is in no way affected by credit. Government is free to decide what to spend money on, and how much, without outside constraints. The quality of those decisions is what matters. And that's were politics enters. Is there an important conclusion here. Yes there is! We should stop listening to any politician that says “we can't do it, it costs to much“, or more deviously, “I'm really in favor of this, but we simply can't afford it. We'd burden generations to come with too much debt.”** Instead, we should insist that our politicians give us the real reason why they don't want to spend on this or that. There are plenty of logical reasons, some very self serving of course. Let's stop listening to the illogical. _________________ *This is not evident until one answers the question, “Where did gold come from, and how did the government obtain it?” **For those truly interested in this fascinating topic see the works of Lord Skidelsky. I find especially thought provoking Skidelsky's public remark that, “Those that own the debt pay the debt”, in reference to so-called public “debt” of the great nations.
Most knowledge worth knowing requires reading more than a few sentences. Guessing you're not in any knowledge based profession?
Only true if you look at money in a purely nominal sense without any regard for its purchasing power. However, "money" is not "money". As soon as you factor in inflation, government spending is profoundly constrained, obviously by the resources it can siphon from the private sector, which are limited. It's the private sector that produces goods and renders services; this economic output is finite. Only what is produced can be consumed or redistributed, not more. Any and all government spending is taxation. It can be in a) the honest and explicit form, as in levying explicit taxes. Or in b) the dishonest and implicit form, as in spending printed money and inflation. In both cases, the government inevitably deprives the private sector of limited resources that the government redistributes and often misallocates. As for the quality of allocation decisions, let's look at two scenarios: 1. A private business owner allocating his own resources, and bearing the consequences of misallocation for his own and his family's livelihood. 2. A career politician who likely came to power through negative selection (as he was the best to lie, cheat, and oust intra-party rivals) now looking to stay in power by redistributing other people's resources. Who's going to do a better job? The capitalist answers 1. for everything but the truly essential common good, as in some common security by military/police, some common infrastructure etc. On the other hand, the Keynesian answers 2. as he believes in a centrally planned economy, free money trickery and contrived bookkeeping arguments at odds with common sense.
Bingo. No disrespect but did you suddenly come to this realization? Or does 23 trillion do that to a person?
Obviously inflation is a consideration that might cause "...our representatives in government" to impose a contraint on spending. I believe my statement is correct as written. I believe this is profoundly incorrect, though it is commonly believed to be true. To understand why it is incorrect one only has to consider that nowadays all money is "printed", and how much money would be available to carry on commerce in the private sector without any government spending at all. Spending is not taxation because no taxation is needed for government spending. Government spending puts money into the economy. The Government requires no taxation at all to create new money and spend it into the economy. In fact, it does this every time it deficit spends. Taxation, on the other hand, removes money from the private sector. There can be no taxation without prior spending. Taxation and spending are to separate processes. This is an opinion, and while it is interesting to me, I'll not comment further because it is not closely related to the topic of my post. I nearly always learn something from your posts, except those in which we simply mirror each other's thinking. If you haven't read L. Randall Wray's, treatise on "Understanding Modern Money," I could highly recommend it to you as someone who might find it fascinating, and also as someone who would seem to have the knowledge to read it critically. There is what amounts to a second addition available with a slightly altered title perhaps. The first edition is the one I would recommend. Wray was a protege of Minsky, it depends heavily on Lerner, Minsky and others. If you want a much easier read based on the same fundamental concepts, economist Stephanie Kelton's book is Wray lite, or perhaps very lite, but a good read nevertheless.
Couldn't have been said it any better. It amazes me how someone can argue with any of this. What you have here is practically a mathematical equation. If someone tries to argue with what you're saying, they will be trying to show how 2+2 doesn't equal 4.
While its true that the government can pass a 3 trillion dollar infrastructure bill, and that money will in fact be put in someone's pocket, if you follow the entire arc of what this spending does, you would see how short sighted it is. If what you're saying is true, and in the spirit of the above statement, which makes it sound like a good thing, then why on earth doesn't the government put even more money into the economy? Surely more is even better if a few trillion is fine.
May I call your attention to the word, "inherent." Of course there are practical constraints that arise in the course of any government affairs. But for a government like that of the U.S.A. there is no inherent constraint. And this is why I ended my long post above with this: "We should stop listening to any politician that says “we can't do it, it costs to much“, or more deviously, “I'm really in favor of this, but we simply can't afford it. We'd burden generations to come with too much debt.”** Instead, we should insist that our politicians give us the real reason why they don't want to spend on this or that. There are plenty of logical reasons, some very self serving of course. Let's stop listening to the illogical." Did you notice that Manchin has repeatedly objected to Biden's BBB Bill as costing to much? To his credit he has, of late, specifically mentioned current inflation, as to suggest that he believes passing the BBB bill would fuel further inflation. Oddly he wasn't at all concerned about inflation when he voted for Defense Authorization, which on a per annum basis is considerably more than the proposed BBB spending. In any case, he doesn't seem to fully grasp what is causing the current inflation, which goes way beyond just spending alone. The detailed analysis seems out of reach for him.