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bronco
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Registered: 05/31/04
Posts: 563
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Re:What Does Any of It Mean Anymore
Friday, July 28 2017 @ 06:26 PM CDT


"Debt occurs when the government sells treasury notes, bonds, and securities. The largest shares of federal debt are owed to foreign investors ($6.3T) and to the social security fund ($2.8T). "

Okay you repeat something I have already said but still ignore the main points I keep bringing up. The question was not how does the government create debt now but how much debt we would have if the Fed had not been created and our currency was still Treasury notes and not Federal Reserve Notes. The answer which you avoid even discussing is we wouldn't have any debt.

So since you refuse to play by the game and actually respond to what I write, I think I am done here. You have characterized me as a conspiracist, my hair being on fire and misquote me constantly. And I suppose you can find many sources on the internet that have different numbers as to who we owe the debt to. Here is a source from May of 2016 http://money.cnn.com/2016/05/10/news/economy/us-debt-ownership/ that has much different numbers than you produce. CNN says our debt is held by the USA 12.9 Trillion, China 1.3 trillion, Japan 1.3 trillion, other entities 3.8 trillion.
chikoppi
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Registered: 04/02/04
Posts: 1969
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Re:What Does Any of It Mean Anymore
Friday, July 28 2017 @ 08:50 PM CDT

Quote by: bronco
The question was not how does the government create debt now but how much debt we would have if the Fed had not been created and our currency was still Treasury notes and not Federal Reserve Notes. The answer which you avoid even discussing is we wouldn't have any debt.


Well, you'll have to explain that to me in simple terms. As far as I can calculate, deficits require the assumption of debts.

“Ya, that idea is dildos.” Skwisgaar Skwigelf
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bronco
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Registered: 05/31/04
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Re:What Does Any of It Mean Anymore
Saturday, July 29 2017 @ 01:27 AM CDT

"
Well, you'll have to explain that to me in simple terms. As far as I can calculate, deficits require the assumption of debts."

If the US still created it's own currency instead of giving that right to the Fed then Congress would authorize the US Treasury to create as much new money as needed to make up the deficit and we would have a balanced budget. Since we created the new money out of thin air there is no debt created.

The only difference between that and how things are done now is that the only way to get any of the new money that the Fed produces is to borrow it. It is the Fed's money, not ours. There is a limit to how much debt we can have that Congress votes on just as there used to be a limit to the money supply and Congress voted on that as well. Of course, aside from a little political posturing from time to time, they always vote to increase the debt limit.
chikoppi
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Registered: 04/02/04
Posts: 1969
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Re:What Does Any of It Mean Anymore
Saturday, July 29 2017 @ 08:13 AM CDT

Creating money out of thin air is what leads to hyperinflation and is exactly why the federal government shouldn't have authority over monetary policy. "Borrowing" (by auctioning Treasury notes) vs. printing is what retains the value of the dollar.

Cowan and Tabarrok are covering reserve banking and the money supply right now. Their next video, due probably next week, is to cover the Fed specifically.






“Ya, that idea is dildos.” Skwisgaar Skwigelf
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bronco
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Re:What Does Any of It Mean Anymore
Saturday, July 29 2017 @ 12:49 PM CDT

Well you have done it once again. I answer your question completely and then somehow you twist that around as if I hadn't answered it or you go over material already covered. As I previously pointed out, the Fed creates their money out of thin air also. So their money somehow magically does not create inflation because borrowing gives it value? Wow, that is going to be news to a great many economists.

Inflation is not necessarily created by the addition of new money. It is the "velocity" of that money, how many times it changes hands in our economy that creates inflation. This explains two things about the huge amounts of money created by the Fed to "fix" our economic problems. It is not circulating in our economy because it is being held by those you call the "investor" class. Instead it has gone into the stock market and paper commodity market where the prices have not represented true value.

Regular folks tend to spend most of the new money we get in our hands. New houses, cars, dishwashers, improved central air, fancy clothes, jewelry and on and on. The ten percenters already have as much of that as they can possibly consume so all their new money goes into investments.

Thus we have a stagnant economy where the rich get richer and the poor get poorer. Inflation will not be a problem until we the majority get some of it in our hands. That seems more and more unlikely as time goes on.

The only other way that we will have inflation is if for some reason the multi rich decide to manipulate the price of something for reasons of their own. Since they own just about everything they also can set the price of just about anything they want to through either monopoly or collusion with others.
chikoppi
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Registered: 04/02/04
Posts: 1969
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Re:What Does Any of It Mean Anymore
Saturday, July 29 2017 @ 02:49 PM CDT

Quote by: bronco
Well you have done it once again. I answer your question completely and then somehow you twist that around as if I hadn't answered it or you go over material already covered. As I previously pointed out, the Fed creates their money out of thin air also. So their money somehow magically does not create inflation because borrowing gives it value? Wow, that is going to be news to a great many economists.


The difference is that the Fed doesn't create reserve deposits out of thin air and credit isn't a gift (when you pay something with credit you still have to reimburse the creditor). When the Fed buys bonds it increases the money supply by increasing banking reserves. When it sells those bonds it decreases the money supply, thereby removing supply from the economy. The market determines the value of bonds, based on faith in the Treasury and valuation of the economy.

M, Y, and V (the monetary supply, real GDP, and velocity) are relatively stable over the medium term. That wouldn't be the case if the Treasury simply printed more and more money to pay bills.

I don't know what to tell you at this point. Tabarrok and Cowen are both well-respected and influential libertarian economics professors and authors. Maybe their next video will better clarify the distinction than I've been able.

Quote by: bronco
Regular folks tend to spend most of the new money we get in our hands. New houses, cars, dishwashers, improved central air, fancy clothes, jewelry and on and on. The ten percenters already have as much of that as they can possibly consume so all their new money goes into investments.

Thus we have a stagnant economy where the rich get richer and the poor get poorer. Inflation will not be a problem until we the majority get some of it in our hands. That seems more and more unlikely as time goes on.


Here we can mostly agree. Investment earnings are not taxed equivalent to wages and though the income tax rate is progressive it still disadvantages those of us who are wage earners.

I'm expecting a lot of nonsense when the tax reform debate ramps up, none of it good.

“Ya, that idea is dildos.” Skwisgaar Skwigelf
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bronco
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Registered: 05/31/04
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Re:What Does Any of It Mean Anymore
Sunday, July 30 2017 @ 11:43 AM CDT

"I'm expecting a lot of nonsense when the tax reform debate ramps up, none of it good."


Chikoppi, on this we can agree and should just leave it there. But I can't help one last observation. If the Fed doesn't create money out of thin air, where does it come from? Do they manufacture products, till the soil to raise crops, operate gold mines? Yes they get some income from loaning money to other banks but where do they get the money to loan? Even the Fed doesn't dispute where their money comes from.

http://www.investopedia.com/articles/investing/081415/understanding-how-federal-reserve-creates-money.asp

The Fed is responsible for creating or destroying several billion dollars every single day.

Despite being colloquially charged with running the printing press for dollar bills, the modern Federal Reserve no longer simply runs new paper bills off of a machine. Some real dollar printing does still occur (with the help of the U.S. Department of the Treasury), but the vast majority of the American money supply is digitally debited and credited to major banks. The real money creation takes place after the banks loan out those new balances to the broader economy.
*******************
As several Senators and Representatives have found out, huge loans in the half a trillion range have gone out to foreign central banks as well as banks in the US. Whether these loans are ever paid back and at what interest rate is never disclosed. This is those transactions that I spoke of before that a true audit would exam in detail and not just except that they are on the Fed's balance sheet. The money loaned out is all created out of thin air.


bronco
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Registered: 05/31/04
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Re:What Does Any of It Mean Anymore
Sunday, July 30 2017 @ 11:51 AM CDT

 
chikoppi
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Registered: 04/02/04
Posts: 1969
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Re:What Does Any of It Mean Anymore
Sunday, July 30 2017 @ 02:25 PM CDT

Quote by: bronco
The real money creation takes place after the banks loan out those new balances to the broader economy.


Yes, I think this is exactly correct. The banks create debt, which is paid back by future earnings. The money that pays for your car loan is created by you.

Quote by: bronco
As several Senators and Representatives have found out, huge loans in the half a trillion range have gone out to foreign central banks as well as banks in the US. Whether these loans are ever paid back and at what interest rate is never disclosed. This is those transactions that I spoke of before that a true audit would exam in detail and not just except that they are on the Fed's balance sheet. The money loaned out is all created out of thin air.


This seems like a fair line of inquiry, although, as you note above, a debt is not equivalent to a payment. As Bernanke states in the video, the loans to other central banks were made following the financial crises. I don't know enough detail to comment on the prudence of that decision.


“Ya, that idea is dildos.” Skwisgaar Skwigelf
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