Obama seeks $1.2 trillion debt ceiling increase

Mind you, I have a degree in natural sciences, not economics, so my knowledge is from self-training, or extrapolation of natural sciences concepts to economics.

In my view, the money velocity is low because lots of money is sitting on the sidelines. This is the effect of too high wealth inequality, i.e. the rich have a lower marginal propensity to consume and, thus, tend to hoard money instead of spending it (i.e. when you have made it, why take on any more risks? So the objective is wealth preservation, not additional wealth generation).

Second, due to depressed wages for decades, the ability of the middle class to consume has been drastically reduced, in particular after the last recession. Thus, demand is low.

Together, this leads to a reduction in the amount times each dollar changes hands in a certain time period. Thus, money turnover goes down (money velocity goes down). In the absence of a dramatic jump in money velocity, inflation won't be a problem. What would need to happen first is that all the money on the sidelines will have to enter the economy again.

QE didn't help this scenario, because the printed money got to the bankers first, who just hoarded most of it (increased lending standards, etc). Thus, QE didn't lead to the much-feared inflation.

 

I find it culturally interesting that our 314 million US citizens simply refuse to fund the government which they are demanding. Obviously we are generally greedy and self-serving, certainly most of us thinking about ourselves and seldom about the country, but why has this become SOP? My guess is each administration's abuse of deficit spending, coupled with a disenfranchised public, with a dash of political bias and ignorance. Why should Congress and a president stop spending when the people demand it and there is no perceived punishment for deficit spending. I'll bet 95% of Americans cannot guess our current national debt and what the debt payment is each year! Why is there such a disconnect on something lots of people feel is a critical issue? My answer is it's just like the Iraq war and other military BS in the sense Americans are told to go shopping and have fun and let your government deal with these things...out of sight out of mind!! Besides, greedy Americans know if they question this stuff too much the response might be pay more taxes and they don't wish to hear this. People say go ahead and tax others, take more from the wealthy, but don't ask me for another penny of taxes. Conversely, if we try to reduce the federal government by 25%, these same people whine about the loss of economy and jobs and welfare, etc. So...the status quo seems to be just have $500+ billion deficit spending every year forever and then one day people will wonder why all the fuss when the (*)(*)(*)(*) finally hits the fan?

Bottom line; as more and more people, this means voters, have this greedy and self-serving mindset, they will demand government to spend more and more and whine about the wealthy and industry picking up the tab. But the wealthy and industry have limits so this ain't going to work much longer. The single solution to this issue is to greatly increase GDP but there's no impetus in my magic ball for this to happen. Where all this leads is far above my pay grade but no matter my limitations I'll bet anyone that the future road is going to be bumpy and ugly and painful...

 

"Printing" in the context I'm using it is creating new money. You are the one that made it physical. And already explained to you that M1 is not a good source for "newly printed money".

 

You said it is not, that does not make it so... it is, in fact, the best source... as I explained. This was the post you took issue with:

"Printing money like it is a job" is pretty (*)(*)(*)(*)ing clear that I mean actually printing money, with determination... I cannot fix comprehension.

Feel free to try to explain how M2 is a better indicator than M1 regarding "printing money".

 

Thank you for your theory. Sounds reasonable, and I lack the depth of understanding to debate it for anything but sport, so I will concede the point for now.

 

I'm talking about actual money creation. You posted an M1 graph that has other factors than the actual "printing of money". That's why M2 is the proper way to go when talking about money creation because it shows how much money is "physical" in your case and stored in liquid assets. M2 money can become M1 money. M1 money is always in M2.

There was no significant creation of money during the last economic crisis. One of the biggest reasons we continue to struggle economically.

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I'm still shock you can't state what it is you are arguing about, lol. But carry on.

 

In 2015 the US will spend ~$430 BILLION on the debt interest payments! If we don't touch the principal amount of the debt for the next 20 years, during that time US taxpayers will have paid approximately $9 TRILLION on debt interest payments and still have $17-$20 trillion in debt staring at them. https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm


If spent wisely, I can only imagine how the US will look if the government could spend this $9 trillion on the nation instead of debt interest payments. It truly is a staggering number and only gets worse as our idiots in Washington pile on more debt...

 

The net interest payment will be like half of that, consistent relative to revenue for the last century. Absolutely nothing about interest payments is alarming right now is alarming.

 

M2 is NOT money, M1 is literally the stock of money in existence. M2 does include money, and near money, and assets... etc. M2 has (*)(*)(*)(*) all to do with printing money. The reason the charts are so disparate is because mine shows money, and yours shows money and values of things that could be converted to money, which have LESS value than they would in an up economy. Of course yours seems to be the same for the last 60 years on a trend line, because that is how supply and demand works. You have lost your MIND if you think M2 is a more accurate representation of money stock than the money stock metric.

We have reached the point in the argument where you are wrong, and will not admit it. You are trying to change the definition of "printing money" and then act as if somehow assets relate to it. You won't stop yammering, but your argument has been put to bed.

 

http://www.voxeu.org/article/net-interest-payments-federal-debt-flawed-measure

http://www.washingtonpost.com/wp-dyn/content/article/2011/02/16/AR2011021606897.html

 

A business might transfer $10,000 from a money market account to its checking account. This transfer would increase M1, which doesn’t include money market funds, while keeping M2 stable, since M2 contains money market accounts.

So...M2 is a broader money classification than M1, and even though it includes assets that are not cash...they are highly liquid and can be converted in very short order.

Whether you use M1 or M2 depends precisely on what you are trying to achieve...

 

Figuring out how much money the government has been printing since 1960.

 

Seems to me you must look at all cash and assets since in order to have assets cash was needed...

 

It's already been explained to you, you're just not understanding it. An apology would be helpful at this point for wasting my time with this nonsense.

 

Asssets are ageless. That cash you trade for assets goes into accounts, which are in M1. Money is money, wherever it is. Asset value is subjective. Your argument, for instance, has a value of 0.

 

Your argument has been run through. As for an apology, I'm sorry you lack the comprehension to continue. Your conceding the argument is duely noted.

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Your argument has been run through. As for an apology, I'm sorry you lack the comprehension to continue. Your conceding the argument is duely noted.

 

I have a car dealership. You come buy a car from me. Your cash goes into my business account. According to you, money has just been printed.

As to asset, value, it is presumed you will drive this car off my lot. The moment you do, according to you, money has been destroyed as it loses its value for having done so.

(*)(*)(*)(*)ing ludicrous.

 

If I buy an asset for $10K, and the seller places that $10K in a money market, if you're using M1 it won't show my asset or the $10K...so how are YOU going to account for the missing $10K? Yes the $10K existed at one time in M1 cash but in this example it no longer exists and will only be accounted for in M2...

 

Originally Posted by OldManOnFire View Post
A business might transfer $10,000 from a money market account to its checking account. This transfer would increase M1, which doesn’t include money market funds, while keeping M2 stable, since M2 contains money market accounts.

So...M2 is a broader money classification than M1, and even though it includes assets that are not cash...they are highly liquid and can be converted in very short order.

Whether you use M1 or M2 depends precisely on what you are trying to achieve...

Nothing in my post above in italics can be construed as you have posted above?? Try again...

 

If your contention were that a significant portion of newly printed money went into monemarket accounts... at least enough to overbalance the duplication of asset/cash described above... your argument value might be worth a dollar... somehow though I do not believe you will make that assertion, falsely inflating its value.

You are taking the exception to make a non-sequitur defence of an already lost position.

What percent of newly printed cash goes into money market accounts do you guess?

Btw, were your theory correct, our competing graphs would be inversely applied. As it sits... it clearly shows we have been printing money like its a job... not stuffing it in money market accounts.

 

Your argument that M1 represents how much money has been printed is shared by no one but yourself. M2 is clearly the more logical representation of how much money there is as OldManOnFire is trying to explain to you.

Sometimes admitting you are wrong goes a long way in establishing your credibility.

 

Nope, you are just misunderstanding the argument. M2 money can become M1 money. M1 money will always be represented in M2. So unless m2 increases, there has been no increase in the money supply (theoretically).

And as you can see, there was plenty of money in M2 that now shows up in M1.

 

I didn't make any contention or talk about the amount of money in whatever fund...either you wanted to know facts or you just want to validate what you prefer and it seems the latter. Makes no difference how much is in money markets and other stuff excluded by M1...