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Bulls gone AWOL, a sign the game is up? They've seen the writing on the wall?
Topic Started: 7 May 2014, 11:25 AM (19,780 Views)
Veritas
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b_b is clearly correct. A country that issues it's own currency cannot run out of the money that it prints itself. Seriously anyone can understand that.


Literally true but a worthless statement.

Sure, it can keep printing money but after a while they might as well use it as toliet paper.

Unless MMT rules out any possibility of currency debasement through excessive expansion of the monetary base? If so tell me how?

And if so Peter, why haven't the Governments of the world adopted the teachings of this magical school of economics? :re:

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If a government has a surplus budget that means it has taxed more from it's people than it needed to run the country, so the people have less money in their pockets and bank accounts.


So what? The whole point of running surpluses is to have the ability to spend counter cyclically when the need arises.

Do you think Sovereign Wealth funds are an example of over taxation too?

Quote:
 
Imagine that your a farmer in the mid west USA just before the depression. You have $10,000 in your bank account so you're confident that you can get through some hard times if they come.

Then your government taxes $5000 off you more than they need, but they want to have a surplus, and now you only have $5000 in your bank account. Then you have three disastrous seasons and your crops fail. You look for that backup money but now it's not enough to get you through.

How did the government surplus help you get through the depression/ Can you tell me how the governments surplus helped you?


You seem to think that I am arguing against counter cyclical fiscal spending. I'm not.

Again, I am challenging the absurd proposition that the Australian Government cannot go bankrupt and or precipitate hyperinflation through excessive expansions in the monetary base.

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What caused the problem in Ireland (and Spain) was bailing out their banks. Ireland nationalised their banks as I recall - but that meant they had to guarantee the bank debts in Euros and also borrow in Euros to fund the banks operational needs.. They couldn't just print the money. They had to borrow it.

Investors were naturally reluctant to lend to the Irish Government, so the government had to offer high interest rates to offset that higher perceived risk. that was a real cost for Ireland.

Had the government been able to print the extra that they needed then they would also have been able to set the interest rate that they paid, and the investment would have been from within Ireland and the interest paid would have remained within Ireland.

Can you not see those benefits?


Another absurd proposition. Ireland had both a debt problem (derived from the socilaisation of bank debt) and 2 a fiscal crisis derived from the fact that its tax base evaporated when the property bubble collapsed. In simple terms it was suddenly faced with current expenditure costs of 50 billion and revenue of 30 billion.

The notion that Ireland could have with its own central bank printed the debt and the deficit away is absurd.

If it were not absurd everyone would be doing it.

This is not rocket science. B_B is in thrall to fringe dogma that has no credibility in the real world. Not unlike Austrian nonsense.

And no, Japan doesn't make him right.

Edited by Veritas, 15 Oct 2014, 02:54 AM.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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miw
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Veritas
14 Oct 2014, 11:30 PM
Nonsense.

If you were PM and believed the MMTers, you wouldn't bother trying to balance the budget.

Why bother? Any deficits can be printed out of existence.

The reason why that is not policy is because the MMTers are, it would appear, regarded as being totally wrong.
You obviously don't understand MMT at all. As far as I can tell there is nothing in MMT that suggests you can just print money and not have consequences. All it says is that if you issue debt, collect tax, and spend in a current that you issue, it is not possible to run out of money, which is trivially correct. In fact, looking at money is looking in the wrong place. You should be watching production and where it is going.

And anyhow, this very statement you make concedes that MMT is a theory and not a policy.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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peter fraser
15 Oct 2014, 12:56 AM
b_b is clearly correct. A country that issues it's own currency cannot run out of the money that it prints itself. Seriously anyone can understand that.

If a government has a surplus budget that means it has taxed more from it's people than it needed to run the country, so the people have less money in their pockets and bank accounts.

Imagine that your a farmer in the mid west USA just before the depression. You have $10,000 in your bank account so you're confident that you can get through some hard times if they come.

Then your government taxes $5000 off you more than they need, but they want to have a surplus, and now you only have $5000 in your bank account. Then you have three disastrous seasons and your crops fail. You look for that backup money but now it's not enough to get you through.

How did the government surplus help you get through the depression/ Can you tell me how the governments surplus helped you?

Or if it hurt your chances of getting through, why does that fly in the face of your current beliefs about the wonder of government surplus budgets??? What would happen if the government had a surplus every year without fail - would you and the rest of the tax payers run out of money?

If not why not?

.............................................................................................................................

What caused the problem in Ireland (and Spain) was bailing out their banks. Ireland nationalised their banks as I recall - but that meant they had to guarantee the bank debts in Euros and also borrow in Euros to fund the banks operational needs.. They couldn't just print the money. They had to borrow it.

Investors were naturally reluctant to lend to the Irish Government, so the government had to offer high interest rates to offset that higher perceived risk. that was a real cost for Ireland.

Had the government been able to print the extra that they needed then they would also have been able to set the interest rate that they paid, and the investment would have been from within Ireland and the interest paid would have remained within Ireland.

Can you not see those benefits?
Peter, its your very ideas and concepts that have lead the western world on a path to economic ruin.

If I was signed up Peter, I would have a few more desciptive words for you.

Remember how you all ran for the hills from ted bullpit, frank a special. Ted could do that at a time when the economy was looking much much much better than it is now, Ted would find it much easier now with iron ore prices collapsing, unemployment at twelve years highs, record building, vacancy rates surging and rentsfalling. Did I mention falling wages, the collapse of the motor industry or the rise of Interest only loans, not to mention the debt levels they are at. Some of these things did not even exist last time ted posted Peter, and these are but a few of many. The levels of economic decline and job losses was clearly explained like interest rates were to you many many years ago Peter. All happened or happening just as explained, no rocket science was ever needed, but the uneducated make it appear that way. :bl:
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John Frum
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miw
15 Oct 2014, 07:20 AM
You obviously don't understand MMT at all. As far as I can tell there is nothing in MMT that suggests you can just print money and not have consequences. All it says is that if you issue debt, collect tax, and spend in a current that you issue, it is not possible to run out of money, which is trivially correct. In fact, looking at money is looking in the wrong place. You should be watching production and where it is going.

And anyhow, this very statement you make concedes that MMT is a theory and not a policy.
I think the main principle with MMT is that yes, you can print money, but it's not a 'get out of jail free' card. There are consequences - such as reduced foreign investment, higher borrowing costs, a devalued currency, and in extreme cases the possibility of civil/international conflict.

I don't think any modern MMT adhering govt believes they can print their way out of debt. Although having said that I think the US dollar is to a large extemt propped up by people's infallible belief that its a stable currency, and this and its sheer size has allowed it to be surreptitiously devalued.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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miw
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John Frum
15 Oct 2014, 07:47 AM
I think the main principle with MMT is that yes, you can print money, but it's not a 'get out of jail free' card. There are consequences - such as reduced foreign investment, higher borrowing costs, a devalued currency, and in extreme cases the possibility of civil/international conflict.

I don't think any modern MMT adhering govt believes they can print their way out of debt. Although having said that I think the US dollar is to a large extemt propped up by people's infallible belief that its a stable currency, and this and its sheer size has allowed it to be surreptitiously devalued.
Agree.

Money that gets into the govt hands, whether by taxation, borrowing or sheer printing without borrowing only gets into the economy when the money is spent by said govt. If there is nothing to spend it on (i.e. no production) then said money is just toilet paper. Nothing in MMT denies this. MMT suggests that it would be a bad thing if a government kept spending money when spending the money did not create extra production because it would be just spinning its wheels and devaluing the currency (inflation). I think absolutely everyone gets this. What MMT also suggests, which I think far fewer gets, is that if the economy is in a state where you get dollar for dollar extra production for money spent (e.g. when there is huge slack in the economy because the private sector has no money) then a govt would be mad not to spend more in order to stimulate that production.

I'd say many of the people who view the world through the MMT lens are a bit too sanguine about the impact of confidence in your currency of people who normally use other currencies on your economy. But that is a problem with those people, not of MMT itself.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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peter fraser
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Veritas
15 Oct 2014, 02:48 AM


Literally true but a worthless statement.

Sure, it can keep printing money but after a while they might as well use it as toliet paper.

Unless MMT rules out any possibility of currency debasement through excessive expansion of the monetary base? If so tell me how?

And if so Peter, why haven't the Governments of the world adopted the teachings of this magical school of economics? :re:




So what? The whole point of running surpluses is to have the ability to spend counter cyclically when the need arises.

Do you think Sovereign Wealth funds are an example of over taxation too?




You seem to think that I am arguing against counter cyclical fiscal spending. I'm not.

Again, I am challenging the absurd proposition that the Australian Government cannot go bankrupt and or precipitate hyperinflation through excessive expansions in the monetary base.




Another absurd proposition. Ireland had both a debt problem (derived from the socilaisation of bank debt) and 2 a fiscal crisis derived from the fact that its tax base evaporated when the property bubble collapsed. In simple terms it was suddenly faced with current expenditure costs of 50 billion and revenue of 30 billion.

The notion that Ireland could have with its own central bank printed the debt and the deficit away is absurd.

If it were not absurd everyone would be doing it.

This is not rocket science. B_B is in thrall to fringe dogma that has no credibility in the real world. Not unlike Austrian nonsense.

And no, Japan doesn't make him right.
Mate I can't help you. You are determined to refuse to accept what is logically so. As miw has told you the currency is backed by production. Any money printing may devalue the currency marginally but it can never become worthless while the country is productive.

I would have thought that this would be intuitive for you as you like to think out of the box. Frankly I think that you understand it but refuse to accept what your mind is telling you because it spoils the narrative that you want to believe.

There is nothing in it for me to labouriously try to convert you. You either understand it or you don't and it matters little to me except that people who understand the basics have an easier time understanding what is and will happen.

It's up to you, I really don't care and I have no intention of arguing about it.
Any expressed market opinion is my own and is not to be taken as financial advice
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Bardon
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John Frum
15 Oct 2014, 07:47 AM
I think the main principle with MMT is that yes, you can print money, but it's not a 'get out of jail free' card. There are consequences - such as reduced foreign investment, higher borrowing costs, a devalued currency, and in extreme cases the possibility of civil/international conflict.


You missed the most important consequence of all which is that defined in accordance with Ricardo's law of economic rent. Every time a government respond to a land price led downturn, as has occurred recently, by making more money to firstly prevent banks collapsing, increase asset prices, bolster economic growth and increase infrastructure spending then this new money will find its way into the land value.

It happens every time and probably will after the next bust as well, with our current land ownership and monetary system. The main and ultimate consequence is that all this newly created money must find its way into the economic rent, which means that land prices must go higher and create an even bigger real estate cycle than the last one. That's why this cycle and its must have future boom will be bigger than the last one.
Edited by Bardon, 15 Oct 2014, 08:33 AM.
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Dr Watson
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miw
15 Oct 2014, 08:01 AM
I'd say many of the people who view the world through the MMT lens are a bit too sanguine about the impact of confidence in your currency of people who normally use other currencies on your economy. But that is a problem with those people, not of MMT itself.
I agree. It's the psychological dimension associated with expansion of the monetary base that's being overlooked. People are fickle and one can't assume that they'll behave the same when there's rampant debasement of the currency.
Edited by Dr Watson, 15 Oct 2014, 10:38 AM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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propertymogul
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peter fraser
15 Oct 2014, 08:14 AM
Mate I can't help you. You are determined to refuse to accept what is logically so. As miw has told you the currency is backed by production. Any money printing may devalue the currency marginally but it can never become worthless while the country is productive.

I would have thought that this would be intuitive for you as you like to think out of the box. Frankly I think that you understand it but refuse to accept what your mind is telling you because it spoils the narrative that you want to believe.

There is nothing in it for me to labouriously try to convert you. You either understand it or you don't and it matters little to me except that people who understand the basics have an easier time understanding what is and will happen.

It's up to you, I really don't care and I have no intention of arguing about it.
Peter I'm still not sure I buy your argument that a government running surpluses means that the private sector wealth is decreasing, and vice versa. Are you saying that if a government runs a surplus that private sector wealth decreases by the amount of the surplus? During the boom 2002 - 2007 the Aus government was mainly running surpluses and during that time private sector wealth was also increasing rapidly. It seems the two happened simultaneously. Also, while the government is currently running big deficits I doubt that private sector wealth is increasing. In the US there are huge deficits while simultaneously the private sector is struggling massively. Perhaps I'm misinterpreting what you are saying, but you seem to be always arguing that surpluses are bad, deficits are good.
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Dr Watson
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propertymogul
15 Oct 2014, 10:41 AM
Peter I'm still not sure I buy your argument that a government running surpluses means that the private sector wealth is decreasing, and vice versa.
Apparently it's not so simple. When governments are running deficits they're also withdrawing money from the economy when they issue bonds. When they're running surpluses, they're adding money to the economy when they buy bonds back.
Edited by Dr Watson, 15 Oct 2014, 11:12 AM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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