Trump's desire to reduce the deficit. Can someone explain to me how this is a good thing?

There is a little under $2 trillion hard dollars floating the globe, please tell me how you will convince ANYONE to take on more debt??

This system is insane! We are $20+ trillion in debt! And that's only with the FED!

 

Then you were asking a silly question. Of course the Gov't can spend beyond what it collects in tax dollars. In that respect income is not a "direct" constraint on spending. This does not mean that it is not a constraint. The idea that congress can just spend infinitely in excess of income without bringing ruin upon the entire financial system is patent nonsense.

I am not saying you said this but ... this is what follows from saying "income is not a constraint on spending" which is the point "I think" you are trying to make.

Our spending is constrained by income. Congress is constrained by income because they realize (and if they do not they will be told like what happened during the Clinton years) that if interest hits 30% of income our ship is in danger of sinking.

Many gave Clinton kudos as being some big hero for bringing the deficit down to near zero. I suppose he deserves something but .. the reality is that Clinton and Congress had no choice. Alarm bells were going off.

You seem to want to avoid discussing the concept of "interest as a ratio of income".

You should not do this as this the most direct, and directly understandable way of figuring out where we are at from a debt perspective.

The IMF did not just wake up one morning and say >>> Gosh ... let's put the alarm bell here !

Sure we can run a certain amount of deficit as a % of GDP and do just fine. So what ? .. this does not address the question of what is too much debt. It does not even touch this question.

I know where you are trying to go with your ... deficit spending is not necessarily bad

 

It doesn't.

 

This is where double entry accounting comes in.


If the government were buying something from you for that dollar, it would deposit that dollar in your bank's reserve account at the Fed and the Fed would initiate a transfer via your bank and credit your account $1

Reserves never leave the banking system (again, unless someone withdraws cash)

Yes, it's both a debt and an asset. When the government runs a surplus, to doesn't have money, it reduces its debt.

 

I don't believe that, nor have I ever said that. I'm trying to establish with you what you think the government can spend before it creates the financial ruin you speak of.

It's not, but that's not the same as saying that you can spend all you want. Income, or more appropriately taxes/ bond sales is about not exceeding the true constraint on spending.

Obviously not, the government has spent $20 trillion more than it's collected in taxes. So income isn't a constraint.

I think running the surplus was a HUGE mistake. I think it was the beginning of what became the .com crash and ultimately the housing crash.

Because it's really nonsensical. The money the government pays in interest IS income to the non-government.

"

Yes, there are real constraints on spending, I've asked you a few times what you think that is.

Do tell....[/QUOTE]

 

Please, explain to me, in detail, how you create "value for money"? I'm interested.

You want people to collect your rubbish? You want someone to mine the raw materials, perfect manufacturing techniques, design and build a trash truck and But you want that done without money?

You can't see how money and the value it incentivizes are connected?

 

Trump has no such desire to reduce the deficit, his desire is only to spend it differently

 

Do you think reducing the deficit is a good thing?

 

Ok, there is less than $2 trillion HARD dollars floating the earth. The federal government is $20 trillion in debt. The States are in debt a sum of $1 trillion. And YOU try to claim private debt is around 300% of our GDP.

Not counting Social Security, we're looking at about $100 trillion in debt. All that Debt for less than $2 trillion floating hard US DOLLARS.

How much debt do we have to take in to improve our quality of life?

 

I have answered this question numerous times already - including in the post you are responding to. What is your problem ... Seriously. Is this disingenuous ignorance or do you have serious reading comprehension issues ??

What part of: "Alarm bells go off at the IMF when a nations interest in its debt gets to 30% of income" .... Did you not understand the first 4 times ?

This is fallacy. Non Sequitur (it does not follow). It does not follow that because a Gov't spends 20 Trillion more than it has collected in taxes that income is not a constraint. And I have explained to you why this is.

Fallacy 2 - Repetition of premise does not constitute proof of claim.

Anyone can have an opinion but, is it informed ?

 

What you're talking about are citizens who hold no oath to the Nation state. Even though these people probably earned that "private property", through the prosperity that said Nation state and it's citizens afforded them.

Capitalism is the most production for the least ammount of cost. Capitalism at it's peak is Communism. This private wealth you talk about becomes consolidated to few individuals who hold no oath to any government. Only the bottom line, which is the enslavement of all mankind. Using fake currency, for debts that can never be paid off.... This is like a reboot of the mercantile class.

No Sir. Your idea of communism is misguided.

 

I thought I squashed this already when I pointed out that in the US, interest is paid as income to the non-government. So for every 3 dollars paid in interest, 1 decreases the debt by $1, One adds to the income of the private sector and the last dollar is paid for foreign interests.

Now you don't list a source, so I can't point out that the IMF is probably referencing nations that do not have a sovereign currency, They peg their sovereign currency to another, or are nations that borrow the money of other nations....

Except, if spending is constrained by income and our nation spending has exceeded income 72 out of 82 times since 1934 (when gold redemption ended) what is the effect, what is it we're trying to avoid? How can exceeding the constraint 80% of the time, be a constraint? If it was a real constraint, shouldn't things be getting progressively worse? I mean the 50's and 60's were clearly better than 30's.

Historically, depressions have ALWAYS followed large sustained surpluses. Can you explain why that is?

Here is a list:

1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1998-2001: U. S. Federal Debt reduced 9%. Recession began 2001
2004-2008: Deficit Growth reduced 40%. Recession began 2008.

As you can see 1998-2001 wasn't large and it wasn't sustained, but it was followed by a recession. Curious your explanation for this phenomenon.

You mentioned several times this "nations interest in its debt gets to 30% of income"

Then you claimed it was almost there in 2000, I came back and pointed out it was actually 13% a point you conveniently avoided.

So I ask again, what is the constraint on Federal Deficit spending. When that constraint is exceeded what are the effects we see in the economy?

 

Before I correct you, let me be sure I know what you mean.

Sorry, "hard dollar"?

I've heard the term in reference to brokerages so I Googled it and this is what I got.

Yes. I'm trying to get solid sources for you. Mr Keen, a noted economist put out that graph, I've contacted him and will do my best to follow up on it. Honestly, I appreciate you challenging me on it. This is one of those things I will learn from and be better prepared next time I'm asked.

Is this the so called "unfunded liabilities claim"?

If so, unfunded liabilities aren't "debt" until they are funded. Period.

And I'm going to wait for your definition of a "hard dollar" before I respond here.

That's a great question, but before we can answer it, I think we better cover the more foundational aspects of this debate.

 

Sure i'll answer your question, I've posted it many times

"All told, anyone looking for all of theU.S. dollars in the world in July 2013 could expect to find approximately $10.5 trillion in existence, using the M2 money supply definition. If you just want to count actual notes and coins, there are about U.S. $1.2 trillion floating around the globe."

Now when you figure out this debt number, which if your claims hold true, is VERY large. What I am wondering. How will adding to this already very large debt help us?

There must be some sort of disconnect here, and you must think this economy is in tip top shape. While the fact is average Americans have had low wage growth and stagnation. Adult children are living at home again like colonial times.

 

Let me ask you this question because I think it will help you understand.

When you go into a bank to buy a car or a house, where does the bank get the money it lends you to make the purchase?

Oh, and can you source any of your claims?

And, can you explain why all but one of the nations surpluses were followed by depression?

 

Sure. This is where I'm getting my info; https://www.federalreserve.gov/releases/h6/20130711/

Sure. This is how banks work.

 

Yeah, because terrible men control the finances.

 

You provide something people want for less than they can do it themselves.

Simples.

Do I want people to collect my rubbish?
Not at any price. No.

I work for four months a year to pay for my rubbish collection.
I don't do this by choice. I do this because, ultimately, men with guns will come for me if I don't.

 

OMG, reserve banking in pictures.
Simpleton's take note.

Occupying Wall Street is not big and it's not clever.

 

I guess these would be more up to date statistics; https://www.federalreserve.gov/RELEASES/h6/Current/default.htm

My points still stand.

And yes, pictures are worth 1,000 words. Don't forget it.

 

You did not squash anything .. and nor does what you say make any sense.

Anyone on the Planet can own a T-Bill. Non US citizens receiving interest payments are not counted as income. Further, the international financiers who are US based have all kinds of ways to reduce the taxable amount on that income.

Given that the top tax rate on interest income is 33%. The max amount of money going back into the system from 3 dollars in interest paid out (assuming no foreigners hold T-Bills and no means of tax avoidance or reduction) would be 1 Dollar.

How then do you come up with 2 Dollars ? 1 Dollar decreasing the debt and 1 dollar into the private sector as income ?

Forgive me but this is naive and mathematically challenged.

Introducing some facts into the discussion ... here are the foreign nations that hold US Treasury Securities http://ticdata.treasury.gov/Publish/mfh.txt

This alone is over 6 Trillion. This list does not include international financiers ... as this is not public info but, call it 4 Trillion which would be half of the total interest payments which not a single penny is counted as income.

 

You like.That is what is called a post hoc fallacy, question begging, assuming the conclusion....and the list goes on.

You haven't linked "terrible men" to a cause, you've merely asserted it.

What did "terrible men" do that cause the depressions that, ironically have only occurred after the government engaged in some combination of reduced spending/ increased tax in order to pay down the government's debt?

 

That's called fractional reserve banking.

Can I assume then that you believe that banks lend out other peoples deposits?

 

Dude I'm having a hard time listening to you when you believe Private debt is 300% of GDP.

I want to ask you a question. If we are in 100s of trillion in debt. What do you think the current economic situation is in America? Why do you think adding to the debt will help?

 

I would like to clear this up. It is based on debt. I'll show you, like I'm trying to show Econ4.

We have to figure out how many US dollars there are in the world. Be it digital or hard currency. As of this August the Fed is claiming our M2 is at $13.62 trillion. They did away with M3 in 2006, because like I said these are terrible men. They do not want the info out there for HUMANITY to decide.

Anyway... So our M2 is at $13.62 trillion. We just need to know how much debt we're in. We take the $20 trillion of government debt.... that already covers M2... we then add private debt... which some say is 300% of GDP... We come out with a HUGE number... on the side of debt.

Sir, our money is backed on debt after debt after debt....

https://www.federalreserve.gov/RELEASES/h6/Current/default.htm