thasac

iTrader: (3)

you're good.



-Zach

FRT_Fun

iTrader: (19)

Gotta love how easy it is for them to just stop paying us. I'm feeling less and less motivated to serve this country. I may have volunteered to do this job, but not for free. (Oh and, "Don't worry we will back-pay you doesn't cut it".) Can't wait to see where I am on the "Priority List".

Scrappy Jack

iTrader: (2)

I wanted to come back here and revisit this thread. All of this talk of USA bankruptcy (i.e. insolvency, or inability to pay one's debts when they come due) is really bad for public discourse. The USA cannot "run out of money." For the people who say this, it is either a result of rhetorical laziness (of which I have been guilty) or a misunderstanding of the modern US monetary system (which I have also been guilty of).

China cannot "foreclose" on the USA. China sends us "stuff" (i.e. goods and services) and we send them digital 0s and 1s. Since they can't buy ports or Chevron, they use those dollars to buy US Treasuries as a more productive use.

As a sovereign currency issuer, the USA is not the same as a currency user. European member nations, US states, businesses and households are currency users. This is almost never explained in high school or even secondary Econ classes where they still use neoclassical concepts that completely ignore the operational realities of today's monetary system.

I know, because that's my background.


I would like to hear what people think would happen if the USA, while running a current account deficit, balanced its budget or ran a budget surplus starting sometime in the near future.

FRT_Fun

iTrader: (19)

Well, if this were the case I probably wouldn't have to worry about my pay being stopped once every 6 months.

Scrappy Jack

iTrader: (2)

I assume you are in the Armed Services? If so, you are right, because you would probably have been laid off as part of a reduction in military (e.g. government) spending. Think: base closures in the '90s.

FRT_Fun

iTrader: (19)

Seeing as my MOS is at about 10% strength, and given the current situation, I highly doubt I would be laid off.

I'm okay with a reduction of forces, hell, we are already doing that.

Braineack

iTrader: (62)

I wonder if Keynes ever heard of the FDIC?














the answer is no.

Scrappy Jack

iTrader: (2)

A. The FDIC was established in the 1930s. Keynes "Treatise on Money" was published in the early 1930s, if I recall correctly. He died in the mid-1940s. So, he probably would have heard of it.

B. What does Keynes and the FDIC have to do with the question?

Braineack

iTrader: (62)

(Posting from my phone.)

I don't event know what that means reig

Scrappy Jack

iTrader: (2)

This topic is probably too complex for your sweet Zack Morris phone. Come back when you are at a proper Compy386.

For those that believe a balanced budget/fiscal surplus is desirable, what do you think would happen? For example, with unemployment, private household balance sheets, the business environment, etc.

Braineack

iTrader: (62)

I dunno. let's see what happens, its been 100 years of the alternative...lets give this a shot.

UrbanFuturistic

Or we could go back to the way the founding fathers did it and avoid debt like the PLAGUE. Oh, nevermind.

JasonC SBB

When the gov't borrows money, investors loan money to the gov't instead of to private business. So private biz has to compete with the gov't when it comes to financing.

When private businesses spend money, they have to be very careful and try and make sure there will be returns. They have to repay the money, and the future of the business is on the line. They have to invest in things that will enable them to produce goods or services that customers want and will voluntarily pay for.

When gov't borrows money, they repay it by raising taxes, which you can't opt out of. When they spend the money, the will not be as careful as private businesses would, because they're spending other people's money taken by force. It will do things like destroy functional cars and effectively give the money to the car industry. (cash for clunkers)

Keynesians seem to believe that gov't spending is preferable to private business spending.

Scrappy Jack

iTrader: (2)

In other words, without any expectation of a specific result or set of results, you are hoping for a positive change? Anything has to be better than the status quo, right?

Assuming you feel a balanced or surplus fiscal budget would be positive for the USA, help me understand your answer to the question of what you think would happen or what the USA would look like if we achieved that in the near term. I would rather you were explicit than me to make assumptions based on inferences.

JasonC SBB

Much smaller gov't = more freedom. Fewer bullshit agencies and bullshit laws being enforced.
Gov't is the inverse of freedom.

Reduced "regime uncertainty" = business would be less apprehensive about the future. Right now for example, businesses aren't sure how much obamacare is gonna cost em, so it's more difficult to calculate and decide whether to hire more employees or not.

A balanced budget would mean gov't can only raise taxes to increase spending. There would far harder for gov't to grow. The reason borrowing allows growing is that the people don't feel the pain now, from gov't growth, in the form of taxes now. Borrowing allows gov't to grow while putting off the pain.

A balanced budget would mean no "stimulus spending", which lengthens recessions because gov't is interfering with the correction and market clearing which is the necessary first step in economic recovery.

Lastly a surplus would be needed to pay off the debt.

Scrappy Jack

iTrader: (2)

So, assuming a reduction in government spending sufficient to balance the budget as of 2012-01-01, you would expect the unemployment rate to begin to drop as employer's hired more?

JasonC SBB

At some point, after the economic corrections begin.

The 1921 recession was deep but short. The official history books don't mention it much because it was short. It was short because the gov't/Federal Reserve didn't intervene. It also doesn't fit Keynesian dogma.

http://en.wikipedia.org/wiki/Depress...920%E2%80%9321

Recessions tend to make prices of overprices asset classes drop to realistic market levels. Wages may also tend to fall. Keynesian dogma is that any drop in prices or wages is a bad thing. In reality dropping wages isn't bad if prices drop faster! The reason Keynesians don't like it is because it can only happen in the absence of central bank inflation of monopoly currency, which is the cornerstone of central economic control by the financial and power elite.

Braineack

iTrader: (62)

If anything a balanced budget will stop the govt from being able to spend at will. I don't believe gov't spending solves any ecomonic depressions, and I think history has done a great job of proving it over and over and over. Greece is a great example.

This sort of defecit finaincing leads to inflation, look at the value of the dollar today...and I don't own a wheel barrow.

And inflation doesn't mean growth; you do not achieve abundance, you debase the currency and go bankrupt. It's government that creates Inflation, not by the actions of us.

And by inflating the money supply, government begins to consume our investment capital, thus making production impossible.

Hope has nothing to do with it. There's no doubt in my mind the situation would get better. Our mixed ecomony needs to head back to the free market we almost achieved in our history.

What side of the wall do you want to be on, East or West? Yep, brought up that history thing again...blasted thing.

Scrappy Jack

iTrader: (2)

Let me be more specific. If the US cut government spending enough in the near term to achieve a balanced fiscal budget or slight surplus, what do you think would happen with unemployment and with GDP growth (proxies for "the economy" for most people)?

I am not sure if you are stuck in a binary thought process or if you believe I am "a Keynesian," but I think it would be more constructive to stick with the topic of what you (or any other proponents of balanced fiscal budgets or surpluses) believe would happen should we achieve them rather than try to pre-emptively counter a position no one in the discussion has taken.

You are confusing a currency issuer with a currency user. The US cannot "go bankrupt" nor can it find itself in a forced default scenario like Greece.

How does this process work?

Speaking of history, do you know how many periods in US history (since 1776) the government has run a significant budget surplus after a period of substantial debt reduction?


Thank you guys for the discussion. It's definitely instructive to me.

Braineack

iTrader: (62)

See: capital consumption.





it appears that every time it increases as a percentage of GDPI unemployement also rises.

It speaks to your last question about ressions. I dont know the answer, but this illustrates that when we invest in new, not old, the unemployement drops every time after a recession.