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Old 09-22-2011, 10:24 PM   #21
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Originally Posted by Scrappy Jack View Post
I am not sure what you were going for, but you actually just described a very important aspect of modern, free-float sovereign monetary systems quite elegantly.
I meant people buying what others produce.

I was not advocating theft in order to payroll bad ideas.
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Old 09-22-2011, 10:59 PM   #22
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He's got great points! He chose poor ways to make them :(. Quite honestly, lying via omission pisses me the **** off.
I still can't figure out if people like Schiff use hyperbole ("China is rich and we are broke!" Treasuries going to zero, etc.) as a rhetorical shortcut or if they really do not understand the modern US monetary system.

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1. If there was no money behind the demand, the product will not be created.

2.
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Originally Posted by Braineack View Post
I meant people buying what others produce.

I was not advocating theft in order to payroll bad ideas.
I still don't think I am getting your point... I feel like I have the dumb today. Can you expound?

Schiff seems to be operating under the belief that there is "no money" to be lent. That is demonstrably false on multiple levels.




Sorry; I have monetary systems on the brain. When you said "no money behind the demand," you meant that "if there was no expectation of profit." I am with you now.

However, there can be expectation of profit and creation of product without actual demand. Again, it's nuance but worth disentangling.
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Old 09-22-2011, 11:10 PM   #23
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or simply lying via omission (My biggest problem being the last).
You must hate reading the mainstream news media then, like me. I constantly see lies by omission.
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Old 09-23-2011, 08:16 AM   #24
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Sorry; I have monetary systems on the brain. When you said "no money behind the demand," you meant that "if there was no expectation of profit." I am with you now.
poorly worded on my part.
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Old 09-23-2011, 09:48 AM   #25
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I still can't figure out if people like Schiff use
Schiff seems to be operating under the belief that there is "no money" to be lent. That is demonstrably false on multiple levels.
He believes that since the interest rates are so low, that when they are finally raised, the banks will fail.
"It was bad enough that the Fed held rates far too low, but at least a fig leaf of uncertainty kept the most brazen speculators in partial paralysis. But by specifically telegraphing policy, the Fed has now given cover to the most parasitic elements of the financial sector to undertake transactions that offer no economic benefit to the nation. Specifically, it will simply encourage banks to borrow money at zero percent from the Fed, and then use significant leverage to buy low yielding treasuries at 2 to 4 percent. The result is a banker’s dream: guaranteed low risk profit. In other words it will encourage banks to lend to the government, which already borrows too much, and not lend to private borrowers, whose activity could actually benefit the economy"

He is saying that banks are borrowing money from the gov't at a low rate, then turning around and buying treasuries and making a guranteed profit from the same vessel they borrow from. If this practice stops, how will the banks have any profit since they've stopped lending to the ecomony. They are simply being propped up by debt and printing presses. This is hurting the recovery and benefiting a few at the cost of many.


I like hyperboles. I will point out more form video:
“One of the riskiest things you can do in America is hire someone.”
“Demand doesn’t come from things that aren’t produced.”
“Regulations substantially increase the cost of employing people.”
“Infrastructure spending drains the economy of resources.”

“You can always see . . . the jobs government creates. What you can’t see are the jobs they destroy.”

“All the government can do is rearrange the resources, it doesn’t create any wealth.”

I think this sums up the video nicely:

"Republican presidential candidates would be wise to watch the video of Schiff’s Congressional testimony. They could help put an end to the idea that government simply needs to pick the right winners and losers, and more importantly that more money is what this country needs. Stimulus is great for those who get to play with other people’s money, earned through hard work, creativity, efficiency, ingenuity, and innovativeness. It’s easy to sit on a committee and take wealth from the places that produce the most of it and pass it out to your cronies or dependent constituents, and then threaten to cut the services people rely on most, like police and fire departments, as soon as someone suggests cutting the size of government"

Last edited by Braineack; 09-23-2011 at 10:16 AM.
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Old 09-23-2011, 11:50 AM   #26
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I think Schiff has a lot of broad concepts correct and I don't dispute his banking concept in its entirety, but he either glosses over (via rhetorical laziness) or misunderstands some critical elements of the way the current USMS actually works. From what I gather, he seems to think that bond auctions and taxes fund government spending.
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Old 09-27-2011, 10:25 AM   #27
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Another lier that hates America:


Coca-Cola chief criticises US tax rules
http://www.ft.com/intl/cms/s/0/071f9...#axzz1Z9usaTGu
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Old 09-27-2011, 05:54 PM   #28
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Old 09-27-2011, 06:05 PM   #29
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From what I gather, he seems to think that bond auctions and taxes fund government spending.
??? Pls. explain why you don't think this is correct.
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Old 09-27-2011, 07:29 PM   #30
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Originally Posted by Scrappy Jack View Post
I think Schiff has a lot of broad concepts correct and I don't dispute his banking concept in its entirety, but he either glosses over (via rhetorical laziness) or misunderstands some critical elements of the way the current USMS actually works. From what I gather, he seems to think that bond auctions and taxes fund government spending.
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??? Pls. explain why you don't think this [bolded] is correct.
When we enacted the Bush Tax Cuts or went to war in Iraq and Afghanistan, we didn't send China, Japan or US pension funds a budget for their line-item veto. We just spent the money.

The government bond market, as it exists today, is a monetary tool used to control interest rates. We spend first, then issue bonds to affect the level of reserves. I do understand there is a Congressional mandate which utilizes this as an accounting tool, but operationally, under the current US monetary system, it is not a funding tool.

Likewise, taxes serve to regulate aggregate demand not as a fiscal funding mechanism. Again, we spend first and tax later.


I will try to come back to cite some specific primary sources for this.
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Old 09-28-2011, 11:42 AM   #31
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Lol, we spend first huh? With what money?
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Old 09-28-2011, 12:05 PM   #32
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Lol, we spend first huh? With what money?
The money created by the keystrokes of the government. The USA today (and other sovereign monopoly fiat currency issuers like Japan, Australia, Canada, the UK) does not operate like a household, a business or other currency users (like the EMU countries or the US states) or an asset-linked or currency-pegged monetary system (like the gold standard days). These governments spend by crediting bank accounts.

They spend first and then bonds are issued to drain reserves.


When a currency user wants to spend money, they either use savings or credit which is obtained first. If you (as a currency user) want to buy a car with a bank loan, you have to obtain the credit first. You fund first, then spend.

The loan creates a deposit. which is a liability for the bank and the loan is an asset. You have an asset (the deposit) and a corresponding liability (the loan). Net new financial assets? Zero.

The USA does not operate the same. It's the difference between vertical and horizontal money creation.

When the USA spends, the Treasury credits bank accounts (transferring reserves from their account at the Federal Reserve to the recipient's bank). There is no corresponding liability at this point. This is an increase in net financial assets.

We do not ask China to approve our spending. We spend first. With China, Japan, et al, they send us real goods and services and we send them electronic 0s and 1s.

Last edited by Scrappy Jack; 09-28-2011 at 12:19 PM. Reason: Added emphasis and additional detail
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Old 09-28-2011, 12:07 PM   #33
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AKA monopoly money:

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Old 09-28-2011, 12:32 PM   #34
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AKA monopoly money:
If the government forced you to pay taxes only in monopoly money, it would be comparable. The main difference is that most of the money used and created today is now electronic rather than paper.
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Old 09-28-2011, 12:37 PM   #35
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No $100 trillion banknote for us? how are we going to give the Zimbabwean dollar a run for its money.
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Old 09-28-2011, 12:53 PM   #36
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Originally Posted by Scrappy Jack View Post
When a currency user wants to spend money, they either use savings or credit which is obtained first. If you (as a currency user) want to buy a car with a bank loan, you have to obtain the credit first. You fund first, then spend.

The loan creates a deposit. which is a liability for the bank and the loan is an asset. You have an asset (the deposit) and a corresponding liability (the loan). Net new financial assets? Zero.

The USA does not operate the same. It's the difference between vertical and horizontal money creation.

When the USA spends, the Treasury credits bank accounts (transferring reserves from their account at the Federal Reserve to the recipient's bank). There is no corresponding liability at this point. This is an increase in net financial assets.
The phrases I bolded are my biggest problem with your explanation.

To claim that printing more currency (via electronic deposits) actually increases financial assets is misleading. No wealth is being created.
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Old 09-28-2011, 01:06 PM   #37
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No wealth is being created.
But Bernanke told me that the remedy for a burst bubble that was originally brought about by inflated fiat currency is more inflated fiat currency.
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Old 09-28-2011, 01:51 PM   #38
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The government doesn't create wealth.
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Old 09-28-2011, 02:04 PM   #39
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No $100 trillion banknote for us? how are we going to give the Zimbabwean dollar a run for its money.
The way to get to the Zimbabwean dollar or any other currency that has been rejected involves: dramatic regime change (i.e. representative democracy falling in a military coup being replaced with an autocratic dictator), owing debt denominated in something other than the fiat currency of which you are the monopoly issuer (such as gold-linked assets, or Weimar bonds denominated in Francs or Pounds or Belarussian dollar-denominated bonds) or a massive loss of productive capacity (such as France being nearly wiped out by Germany).

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The phrases I bolded are my biggest problem with your explanation.

To claim that printing more currency (via electronic deposits) actually increases financial assets is misleading. No wealth is being created.
Sorry; do not confuse the technical term "net financial assets" with "wealth." Printing/keystroking money does not create wealth. If the government produces money (spends) significantly in excess of productive capacity, you get inflation. That devalues your purchasing power, making the money less valuable.

However, if the government does not spend the money in to existence first, there is no money for tax collection, bond purchases, etc.
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Old 09-28-2011, 02:10 PM   #40
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Which brings us right back to the issue of an unbalanced budget and deficit spending: either the debt obligations are not met, or we inflate the currency in order to do so.
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