for those that think we can just print our way out of debt...

Discussion in 'Economics & Trade' started by kazenatsu, Jul 7, 2017.

  1. kazenatsu

    kazenatsu Well-Known Member

    Joined:
    May 15, 2017
    Messages:
    1,519
    Likes Received:
    423
    Trophy Points:
    83
    And I see that this discussion is drifting off topic.

    Can we all agree the government can't print its way out of debt? That that's not really a viable option?
    Every time I have brought up that debt is something we need to worry about, there has always been some stupid poster that says "no need to worry, the government can just print its way out of debt".
     
    Last edited: Jul 12, 2017
  2. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    if there is enough support they have to do it or lose their seats. Do you understand?
     
  3. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    they increase debt because their was not enough support to do otherwise. Make sense now?
     
  4. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    to get out of debt they will need to print money, raise taxes, reduce spending, wait for boomers to die off, grow the economy, and elect more Republicans and Libertarians.
     
    Last edited: Jul 12, 2017
  5. kazenatsu

    kazenatsu Well-Known Member

    Joined:
    May 15, 2017
    Messages:
    1,519
    Likes Received:
    423
    Trophy Points:
    83
    Many people don't know this but this was one of the reasons why there were many Republican lawmakers who wanted more immigration. They thought a bigger population would mean a bigger tax base that would be able to help pay down the debt.

    What they would not realize until many years later is that the tax base does not automatically rise in proportion to the size of the population, and in many cases having more people just becomes more of a liability (when there's not enough good paying jobs to go around for all and the unemployment rate goes up). But again, these politicians didn't think about this.
     
    Last edited: Jul 13, 2017
  6. Distraff

    Distraff Well-Known Member

    Joined:
    Feb 4, 2011
    Messages:
    3,560
    Likes Received:
    1,035
    Trophy Points:
    113
    Well Republicans have never actually made the effort when they were in power in fact they have done the complete opposite. I guess if there is enough support then they will try to get it passed but they have never tried so you know what that means.
     
  7. Distraff

    Distraff Well-Known Member

    Joined:
    Feb 4, 2011
    Messages:
    3,560
    Likes Received:
    1,035
    Trophy Points:
    113
    So when there isn't enough support to ban the debt even when they wanted to they then decide the only other option is to double it instead? How does this make any sense?
     
  8. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    it makes sense for a politician to do what keeps him in office. If there was enough support for a debt ceiling cap at current levels politicians could do it tomorrow. Got it now??
     
  9. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    wrong of course. Newt passed BBA in House and it fell one short in Senate. In end they got blamed for govt shutdowns debt ceiling caps etc so backed way off because support was not there. Make sense now?
     
  10. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    if you have evidence of that I will pay you $10,000. Bet?
     
  11. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,196
    Likes Received:
    215
    Trophy Points:
    63
    There is sooo much wrong here.....


    You can't "print" your way out of debt in this economy. It's literally impossible.

    When the Treasury creates $1, that dollar is offset by $1 in debt. Creating $20 trillion dollars would increase the debt to $40 trillion.

    You can't create the dollar without the debt. Chocolate chip cookies without the chocolate chips aren't chocolate chip cookies. Dollars created without debt, aren't dollars. Unless your plan is to fundamentally change the way the system works.



    I'm guessing you are assuming that increasing the number of dollars automatically creates inflation. That's not how inflation is calculated. Inflation is based on the rate of change of the price of goods and services, not on the number of dollars in existence.

    But let's say the Treasury created $20 trillion dollars, just by printing up the dollars, not by selling securities and it didn't record the $20 trillion it created as a debt. Then it used the $20 trillion to repay all the treasury securities in existence.

    So....

    This is a screen cap from the daily Treasury statement from June 17:
    [​IMG]


    See the part that I've highlighted?

    If you created dollars and used them to repay the debt, those $5.4 trillion dollars would vanish. They literally would cease to exist. The government, in order to create those dollars, went -$5.4 trillion, thus adding $5.4 trillion would equal zero meaning that money would vanish.

    Now if you held a $1 treasury and the government used its newly printed money to buy it back Treasuries in circulation (the measure of "debt"), the government would simply convert treasury liabilities into dollars, adding $14.1 trillion dollars to the economy, a net gain of $9 trillion.

    Thus the government would be "debt free" and the economy would gain $8 trillion dollars ($28t).

    Given the fact that the economy added about that much between 2008 through today, if you phased in that $9 trillion over 8 years, I doubt you see much inflation at all. Certainly NOTHING like the 2000% you predict.

    Remember that after repaying itself (which would result in the destruction of $5.4 trillion), the private sector would hold $14 trillion. If your government added $14 trillion more to the economy to pay off outstanding Treasuries, $14t+$14t=$28t not $40t

    See, here you want it both ways.

    You want to create money independent of the debt obligation that backs it (all money is created from debt), then you want to claim that the government has to borrow from the private sector and would therefore be subject to interest rates.

    Your premise contradicts itself.


    All of this is based on your misunderstanding of what debt acctually is.
     
    Last edited: Jul 14, 2017
  12. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,196
    Likes Received:
    215
    Trophy Points:
    63
    Neither.....

    Since holding a dollar gives you no claim whatsoever on the assets held by the US government or the Fed, unquestioningly, the value of the dollar is based only what you can buy in US dollars relative to how hard they are to acquire.

    Again, you are looking only at the asset side. The Fed has liabilities as well, subtract the two and you get the Fed's acctual capital:

    [​IMG]

    The deficit is the difference between what the government collects in revenues and what it spends. The Fed does not "buy it up". The Fed has purchased trillions in private sector debt, not public sector debt (see the portion in the budget statement above that says "mortgage backed securities").
     
  13. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    More importantly see the portion in the budget statement above it says US government securities .
     
  14. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,196
    Likes Received:
    215
    Trophy Points:
    63
    I rethought this and I'm totally wrong. I said that creating $20 trillion to repay $20 trillion would create $40 trillion in debt. That's not correct.

    First, the government holds $5.4 trillion already, so repaying $5.4 trillion with another $5.4 trillion wouldn't change the amount owed that the government holds itself. All it would do is shift who owes the money internally from whatever agency had the debt to the US Treasury.

    As evidenced by the treasury statement above, the non-government holds $14.2 trillion. Assuming everyone that held treasuries agreed to sell them, the government's intragovernmental holdings would increase by $14 trillion to $20 trillion. What would change is who holds the debt. ALL debt would become non-government debt. The government would literally owe $20 trillion to itself.

    But, more interestingly, I've always maintained that Treasuries sold to the US private sector aren't to fund the government but prevent inflation. This exercise proves that point. If the government purchased back all gov debt than the private sec would lose all the treasures it held and in its place would be $14 trillion dollars.

    Given that most people hold treasuries as a vehicle for savings, I'd guess that the markets would look for other places to save causing MASSIVE asset, stock, and other investments to inflate wildly.
     
  15. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    Actually if the govt printed $14 trillion it would cause inflation; if they taxed it it would not. Econ 101
     
  16. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,196
    Likes Received:
    215
    Trophy Points:
    63
    You still have no credibility James. You make wild claims and are unwilling to substantiate them when asked. Do I need to post the screenshots again?
     
  17. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    not wild claim: If the govt printed $14 trillion it would cause inflation; if they taxed it it would not. Econ 101
     
  18. Woolley

    Woolley Well-Known Member

    Joined:
    May 6, 2014
    Messages:
    2,991
    Likes Received:
    316
    Trophy Points:
    83
    I never said that was a problem, in fact it is the benefit of a fiat currency. All of us labor under illusions created over time that money represents an intrinsic value by itself. It comes from our collective myopia about fiat currency. Fiat currency is the reason why we have so much wealth today. The creation of money through lending is the key to increasing wealth for those who issue the debt. Those who owe the debt must have offsetting income in order to be solvent. That income is again ultimately sourced by someone's debt. It may seem like an asset to you but in the macro economy, every asset ends up having a corresponding liability somewhere down the line. Double entry accounting folks, we cannot escape it.
     
  19. Woolley

    Woolley Well-Known Member

    Joined:
    May 6, 2014
    Messages:
    2,991
    Likes Received:
    316
    Trophy Points:
    83
    Wonderful example. Say the government created 14 trillion in dollars by not issuing any debt instruments at all, they just "printed" it in the fashion most of us think it is done. We would have an extra 14 trillion instantly. Now say they gave it to me and then slapped me with a 100% tax. It would magically disappear the second they taxed it and I paid it. The net affect would be zero. But what if during the interim I took a loan out with Vinnie the Shark for 14 trillion backed by that 14 trillion the government gave me. I would owe Vinnie interest plus principal. But after paying the tax, I no longer have the 14 trillion let alone money to pay the interest. But I bought 500 Mar Lagos with that loan Vinnie gave me so I sell them all for 15 trillion, pay Vinnie the principal and 1 trillion in interest and again the net affect on the macro money supply is zero. I got the extra trillion from my savings account. Or I find another source of money to pay Vinnie, keep the 500 Mar Lagos but the source I used was my savings and stocks. I liquidated everything but the 500 Mar Lagos and paid off Vinnie. Again, the macro event is a wash. Just keep doing this over and over again until you find the ultimate source for all the money and as the MMT folks keep saying, it all starts with the government making money and then spending it or giving it away while demanding we pay them in taxes using the same currency.
     
    Last edited: Jul 27, 2017
  20. james M

    james M Well-Known Member

    Joined:
    Jul 10, 2014
    Messages:
    5,204
    Likes Received:
    388
    Trophy Points:
    83
    total inane gibberish given that nobody is trying to escape it
     

Share This Page