Reply With QuoteInevitably this is where the conversation would lead.Originally Posted by mkm5
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Went out to the beach to celebrate the Fourth of July today. Beautiful weather and nice cool water!
My daughter and her friend and I walked up the road to get some lunch.
12 chicken wings, 1 burger, and 1 order of fish and chips. They each had one drink.
The bill with tip was $120...
Thanks bidenomics.
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Inevitably this is where the conversation would lead.
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I agree with this statement. Humans have lived for vast amounts of time without 2% inflation being a must. Bust/Boom is baked into the market so rich people can use leverage to rob wealth, labor, and natural resources for their subordinates. A population boom and nicer things is a not a good explanation as to why we should defend this system. You know as well as I that the state, democracy, and capitalism is nothing more than smoke and mirrors used by the powerful to persuade you into giving up what you cherish most...time.
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I think the conversation is much broader than that; but it can't be denied Yellen is either senile, economically incompetent, corrupt, or just plain stupid. Probably a combination.
The "transitory" inflation comment she made was an insult to the 100s of millions of people who are experiencing inflation from 25% to 50% or more for essential goods.
Many retirees live on a "fixed" income that does not get adjusted for cumulative inflation. Their dollars are just worth a lot less. A whole lot less.
When the Fed and finance officials applaud a lower inflation rate and give each other pats on the back and raises for a job well done, the sheep don't realize inflation didn't reset at the lower rate, it just went up by a lesser amount than before, and it keeps adding up quickly.
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Humans have lived for all of time with markets.
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This is a maddeningly consistent play by politicians across the board. "See, we cut spending for you" is another example, when they actually take a planned spending increase, make that increase sligthly smaller, then wave their hands, and proclaim it to be a spending cut.
The maddening part is not so much that the pols say it, mind you, but that it gets believed and parroted so unquestioningly by everyone else.
TMPHBITEU
As long as there has been Division of Labor, i.e. someone making something that somebody else wants, and vice versa, there have been markets. Markets are how we naturally organize the distribution of goods and services. Communism is what happens when markets are eliminated.
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Yes, I meant to elaborate to 3rd coast but I had a baby on my lap.
Statements like this "Bust/Boom is baked into the market so rich people can use leverage to rob wealth, labor, and natural resources for their subordinates" are false, at worse they are buying into the Marxist framing that "the market" which is a natural phenomenon is somehow a system that was created by a central authority and called "capitalism" and thus can be changed. It's really just step 1 of Marxist revolution, you have to codify, decodify and problematise. That means create a target, even if you have to draw a circle around the biggest cluster of bullet holes on the side of a barn and call it a target.
Booms and busts are natural, to a crab a high tide is a boom and a low tide is a bust. Migrations of Zebra's cause a boom and bust for Lions that hunt them. I agree that rich people leverage them, but that's just because of knowledge and ability to react to it.
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I'm a bit late to the party, but just in case, let me try to answer that.
Gustav, Dick, Franz, and their families, dwell in a completely isolated village in the middle of nowhere.
Each family owns 100 tokens, which they use to conduct their economic exchanges.
Because of the village isolation, no new tokens can enter from the outside. This means that, at the end of each year, the deficit/surpluses of the three families of the village balance out; or, in other terms:
G + F + D = 0
where G is Gustav's deficit/surplus at the end of the year, F is Franz's and D is Dick's.
If at the end of the year Gustav has a surplus of 10 tokens, than Franz and Dick need to have a corresponding deficit, so the number of tokens remains 300 for the whole village.
Now, let's assume that each family has absorbed the very reasonable idea that you should never spend more than you earn. As a consequence, every family ends the year with a balanced budget, but no better than that. Indeed, given the identity above, for a family to show a surplus, at least one of the other families needs to show a deficit, which is against the assumptions. If nobody can run a deficit, then nobody can run a surplus either. This conclusion is a result of the identity above combined with the no-deficit rule, regardless of the nature of the tokens, be they pieces of paper printable at will, grains of precious metals extracted with great effort or a limited-supply of dematerialised hash keys on a computer. If no deficits are allowed, no surpluses are possible. For every credit, there must be a debt.
Hence, in order to allow some families of the village to accumulate tokens, at least one family needs to run deficits.
But why should families want to accumulate at all? After all, they can live with their 100 tokens each, so why should they want more (echoes of Jenni's predictably thoughtful question here)? The answer to that, imho, is that as long as there are three families, there is indeed no need to accumulate. But imagine the number of families starts to grow (imagine Franz's son marrying Dick's daughter); where would these new families get the tokens they need to live? Either someone gives them part of the existing tokens (this means a deficit for the giver); or some new tokens will have to be issued. Or both.
A subject for another post, maybe.
Back to our world and to the question we started from.
The village is the world.
The tokens are dollars. No dollars are coming in from outer space.
G is the US Government.
D is the US Domestic sector.
F is the US Foreign sector (i.e. everyone who is not the USA).
The deficit/surplus of the government is equivalent to the surplus/deficit of the domestic and foreign sector, combined.
The sum of all government deficits/surpluses ever (that's the US national debt) is equivalent to the sum of all surpluses/deficits ever for the Domestic/Foreign sector (that's the deposits of everyone in the world who has some dollars in a bank, or in their pocket).
To lower the US national debt, the government needs to run a surplus; this would correspond to a deficit in the Domestic/Foreign sector. That would mean that US citizens or/and foreign nationals will have to spend more dollars than they earn.
Does this justify the figure of 35Tn? I don't know; I think it just explains why someone having a debt is a logical consequence of accounting rules. And if it's necessary, it's better, I would almost say logical, that the entity who can issue money (as opposed to all other entities that simply use it) should be in debt.
IPB
Member
Excellent. I had to read this a few times to really appreciate it.
Somehow, IPB's post made me think of George Bailey and their
small town savings and loan company and the run on the bank in that classic old movie. Back when people had more trust in each other and the "system," until they didn't.
Unfortunately, fractional reserve banking has gone out of control.
The fed hasn't helped the situation either by bailing out the "too big to fail" banks at taxpayer expense, whether it be from direct taxation, or inflation, the result is the same. We're all much poorer than we were a few years ago.
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