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

Quid pro quo..

I asked you if you thought that banks lend out customers deposits to other people? I assume the answer is yes, but I would like you to confirm it.

Next, I never said anyone was 100's of trillions in debt. I said the private sector debt level is close to 3X national GDP.

Why do I think it will help?

It's simple.

The economy is constrained in its growth by the amount of money circulating in the economy. NOT the money that exists, but the money that is circulating in the US economy. It also matters where the money that is circulating is. If the money that exists is held by foreign interests that live outside the US (trillions of dollars), that money is not here in the US. It's not circulating in our economy and it's not putting people to work here in the US. If the money is circulating, but it's money earning money, that get's counted as GDP, but it does very, very little to put people to work and only the investor class benefits from it. Larry Elison (of Oracle fame) made $65 billion dollars in a month last year. Do you think that he went on a shopping spree because of it? The man is worth $59 billion, $65 million is nothing. That income didn't spur the creation of a single job.

Lastly, money saved is effectively out of circulation, not being spent. And that's fine, that why we need to put some more in. In that way, deficit spending is the government responding to the publics desire to save.

If there are jobs that need to be done and clearly there are, the nation needs to spend $2-$3.5 trillion to upgrade its crumbling infrastructure, and the capacity exists to do those jobs (real resources and labor), there are lots of unemployed/ under employed people and there is no widespread shortage of resources or the potential to increase output to create more, then if we create the money to do hire people to do the work that needs to be done. it increases employment, GDP, productive output and creates real wealth at the same time.

Where is the problem?

 

The problem is our money is based on debt.

Lol like wth...

 

The problem is our money is based on debt. And LOTS of it.

Lol like wth...

 

A debt is just a promise. The amount of debt isn't what's important but the capacity to meet those debts.

If I promise to help you paint your house if in return you've give me your old lawn tractor, then I have created a debt from nothing. I promised my labor in the future for something of real value now.

My capacity to make purchases on my "personal credit" is constrained by my ability to do work.

It is my capacity to be productive relative to the promises that I've made.

Now if you, in turn, were going to paint your house, but now you have time to do something else, let's say make a promise to another neighbor, then now we've layered promises. Your promise depends on my promise. Now keep it going. Everyone is making promises to everyone else. As long as they deliver there isn't a problem. People are productive and real wealth get's created.

Where does money come in? Money is a token of a promise. When you go to the movies, the ticket is a token, it's a debt. The theater owes you a seat in the theater. Subway fare card, it's a debt redeemable for a ride on a train. Arcade token, a debt redeemable for a turn on a game.

Dollars are redeemable for repayment in tax, the one debt virtually everyone has. So we've all agreed to use them as currency. The government creates more and all that matters is that the real goods and services exist that money is created to purchase.

The problem comes when the government creates money, but the goods and services that money can purchase don't exist. THAT is when there is a problem and THAT is the government's constraint on spending.

 

Nobody afforded me the money I make.
I earnt it.

And you are correct I am not a citizen in some cockamamy republic, communist or otherwise.
I am a free man in a free country. I owe no one anything.

Many lay claim to my labours. No one except me provides them however.


Capitalism may in some circumstances provide the most production for the least cost. Socialisation may in other circumstances do the same.
Here, we can use whatever method of collective co-operation which we prefer. We are all free to do so.
Equally we may choose not to co=operate collectively. We may choose to act individually.

I don't have any debts. The debts of the government of my country are not my debts.
They are it's debts. We are separate legal entities. If it goes bust, not really my problem.
I expect it to.

I pay my taxes and the government can kiss my arse. I have taken no oath to my government. I just live here. I have very little to do with them, nor they me. And I like it that way.

 

Dude, econ just one simple question can you tell me how much debt we our in the US? Both private and public please.

 

Calculate your nations wealth by the price of it's assets.
GDP is it's income. But it's wealth is immense.

So you have debts, which is essentially a trade against your income and assets.
Money today, traded against more money returned tomorrow.

Your assets more than cover the cost of your debts. So very much much more.

 

Right after your promise came in.
And not before.

Because your credit rating with me, is piss poor.

For you, cash in advance. And if you use funny money, your cash won't be accepted. You will have to trade your labour and your goods to get some of mine.

 

We are talking about a huge number here...

Something NO ONE voted on.. the only thing congress gets to choose is either raise the debt ceiling or shut down the government. Those are not choices, this is not right!

 

The problem is your economy of scale.
You think too large.

The more you complicate, the more you get wrong.

The national economy is the sum of every individual economy.
And each of those economies is best managed individually.
And so the national economy is micro managed.

It is not one economy at all. It millions of economies.

 

Count yourself lucky. Most governments don't offer these kinds of checks and balances.

 

Don't worry we will take this beast down! Together!

 

Well said.

It is the fear that the government's debt are your debts that drive most people to think like GT.

Yes the debts are the governments and if you hold the government's currency it's because the government created a debt, but I'm not sure how, if the government goes bust, that isn't a problem for you.

Well, you pay your taxes and I assume that you are productive in your work and that is enough.

 

By and large, the answer to that one is yes, the banks are ultimately lending out peoples deposit's
Please consult the above posted diagram, if you do not understand what I mean by this.

I consider this to be a fact. And all points you make to the contrary will go undebated.

The exception to the rule, perhaps is Quantative Easing, in which the original money deposited in some banks, was deposited by the mint. By the government. The central bank.
This difference from the norm here is that the depositor printed his deposit not traded for it.

This is when a government intervenes in the market.
This has been recently occuring on a massive scale, but even on this historic scale, money printing is unlikely to be lending to banks more than a tiny fraction of what banks depositors are currently lending them.

It would be an error for example to misrepresent all bank loans to be funded by money printing. That's not how it works.
In the banking crisis government printed money to lend to banks to insure them against any shortfall they might experience. They lent them the shortfall and not... the entire banks net assets. So we know we are only dealing with a small fraction of their total lendable assets and we also know that this only applies to some of the banks and not all of them.

 

I don't hold the government's currency.
All the currency I hold is my own.

The Queens head is on those notes in my pocket, but they aren't hers. She has plenty currency of her own.
The ones in my pocket, I traded for and they are mine. She has no say in this whatsoever. She was not a party to that trade.

 

I don't feel any need or desire to take these people or any other people down.

I have other things to do.

They are doing an absolutely grand job of taking themselves down and indeed anyone who stands next to them.
It entertains me greatly.

If the American economy collapses... does an Amish give a ****?


So collapse away you prats. I won't miss you.
You are a replaceable part. Very replaceable. A fifth wheel in my economy.

They aren't a threat to me mate. They only a threat to themselves.

 

Banks don't lend their deposits to customers, only within the banking system.

The fractional reserve model in the picture ended in 1934 when dollars stopped being redeemable for gold. Sadly this model is still taught, but it still appears to comport with reality. It's easier to understand and more intuitive, but it's not how things work anymore.

Some light reading on the topic.....

One more....

Demand deposits are simply held as bank reserves. Reserves are used to settle transactions between banks.

As a whole, the pile of reserves determines the amount of money that can be lent across the entire banking system (this is why the illustration you talk about is sort of correct) and the CB manipulates the supply of reserves (pre-2008 ) in order to influence rates and ultimately the amount that people borrow.

The only way reserves leave a bank is when customers withdraw cash. Which is why banks hate it when people ask for huge quantities of cash.

QE 1 was simply a method to swap assets whose value was going to go below the price paid for it for CB cash. The government simply swapped MBS' for liquid cash. This assured that liabilities held by banks would not exceed a bank's assets and drive them into bankruptcy en-mass.

Later versions of QE, at least in the US, were about increasing liquidity in the banks. The thought was that as the quantity of lendable funds increased so would the borrowing. It didn't because banks don't lend reserves to customers, only to other banks. WHen the quantity of reserves increased ALL banks had huge excesses of reserves so there was no longer a need to lend them. This drove interest rates to zero and the Fed had to devise a new method for raising the rate above zero, I give you IoR.

But you're done, I forgot.

-Cheers

 

Like I said. A whole monetary system, doesn't really matter which nation, backed by debt.

We're creating citizens, that no Nation State can hold accountable. A economic system where if a country has to play, it's people has to be in debt. So that reserve banks, a few elite, pick and chooses who succeeds. While they only take and add nothing to the economy.

 

I don't necessarily disagree with you, we may, however, disagree on why that's the case.

 

When you get an overdraft, or use your credit card, or get a mortgage or a business loan.
That is your bank lending someone else's deposit to you. Not to another bank, to you.

As well as lending to you, banks may also lend to other peoples and indeed other groups of people. Football teams, governments, companies, charities and even.. you guessed it, .. other banks.

And all the money that banks are lending each other has all been deposited in those banks.
It's real money. It belongs to real people. And when you **** with it, you **** with them.

And not all of them are "Mr Big", Dr evil from the illuminati. The vast bulk of them are just ordinary people around the world, cashing their pay checks or saving for their rent day or saving for Christmas presents or school fees, a new house or old age.
And you think it's big game to mess with inflation and print away the value of their life's efforts. To cheat them out of their labours.
So you refuse to draw that direct connection, because the instant that you do, you have to quit all this.
Because it is wrong to steal and you know it.

And if you don't, I can't use you. There is no opportunity for mutual benefit here.
Who would lend you money?

Who is going to pay for your deficit?

Not me.

 

So create your own economy.
No problem. Sub culture is allowed here.

Use Bitcoins or barter or foreign money or whatever the hell you can come up with. Be a commune.
Be like the Ammish. Whatever.
There is room for all.

If some fat lazy person is richer than you. Good luck to him.
I'mma get me fat and lazy myself.

I'm not taking anything of yours, wish me well.

Yes elites pick and choose who succeeds in the economies they control. But not in your economy they don't. In your economy, you do.

And while this is not true in absolute, it's true enough.
I'll be honest with you, "Eat the rich?". I prefer racists to that.
Class warrior = suck.

 

It hasn't been that way since the creation of money was constrained by gold. What you are talking about ended in 1934.

Here is how modern banking works.

 

You're obviously not looking at what is going on. The countries of the world are nationalizing. Saudi Arabia owns the US' largest oil refinery! Private citizens can not compete against governments, nor should ANY private individual have that much power.

You're living in a fantasy world.

 

Then don't burst my bubble.

I don't care what Saudi's own and don't own. Or where.
I'm not trying to compete with them. I feel no hostility towards them in any way.

I do compete against my government. Loads of people do.
Government doesn't have an absolute monopoly here or anywhere else.
Plenty of jobs I do, the government does too. I do them better. So people pay me in preference.

Every individual should have the power to live independently of others.
Your dreams of a mighty and all powerful government to rule us all, will remain just that. A dream.

I appreciate that some individuals have more power than others. A government a corporation, two methods of co-operation that people use to provide themselves with greater power. No biggie.
Can't compete with that, can't co-operate with others yourself? Don't worry.
Drop out.

 

The part your diagram misses out is of course the single most critical part of the operation, before anything in that diagram happens, a person makes a deposit in the bank.
And until you are willing to recognise that, you will always be attempting to misrepresent the economics.


Banks don't add assets to any economy. They are a middle man service that connects lenders with borrowers for a fee.

It is a system of wealth redistribution.



Your fantasies about banks creating money and then lending it out, a justification for theft. Nothing more.
After all if it's not real peoples money, it's OK for you to confiscate it right?

Wrong.
It's real money it belongs to real people, and in the end, all crimes must be accounted for.


This is the aim of your con. To steal.
That's it.

All thieves can justify theft.
The only question is, will you get away with it?
And the answer is always, not for long.

It's an arms race. You mess with the value of money, I change the price of my labour to match.
You confiscate my goods, I buy goods in places you have no control over or I buy no goods at all.
You don't repay your debts to my satisfaction, I don't lend to you again.

Typically, If I perceive you to be dishonest, I just cease trading with you entirely.

And all you have left then, is violence. Force.
And that is an arms race too.