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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 (19,779 Views)
peter fraser
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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. 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.
b_b or miw will probably give you a more sophisticated answer, but here goes.

The surplus isn't stored and used later, it's just gone, probably used to repay debts so it's not money available to the economy any longer, although you could make a case that if the funds were used to repay a "local" debt the money will still be in the system. If you look at that 2002 - 2007 period when our federal government ran surplus budgets, private borrowing increased rapidly, so what was the real benefit of that surplus apart from forcing the private sector to borrow more heavily. Debt is still debt regardless of which sector holds it.

I don't believe that either a large surplus or a large deficit is a good thing, although there is a case for larger than normal deficits when the economic times are tough. I don't think that long term any government can allow deficits to grow beyond a reasonable ratio of debt to a measure of real production. GDP is used although there are probably better measures.

Although the deficit in the USA is indeed huge, it's not really caused by the government spending money into the economy where everyday people would benefit from that spending, it's really asset purchases by government and those will be unwound eventually. I guess I'm speculating, but had the US spent more into the broader economy they probably would have come out of the recession stronger and faster IMHO.
Edited by peter fraser, 15 Oct 2014, 10:59 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Elastic
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When a government runs a surplus there is no reason why that surplus can't be used to buy back bonds and return the money back to the private sector. The money isn't lost.

Ask yourself this question.
What is the difference between a state government running a deficit and a federal government running a deficit?
Do they operate a different mechanism with their bond selling to fund their deficits?

If a state government runs a surplus then they have taken net money from the private sector, no different to the Federal government.



Only a rat can win a rat race.

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skamy
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Guest
15 Oct 2014, 07:26 AM
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:
Talking yourself up there tad MMM :0
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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Veritas
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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.
You clearly have no intention of answering the question either.

B_B position (which you agree with) is that a State that prints its own currency cannot go bankrupt.

If that is true, why bother trying to balance budgets at all?

Do you believe that Ireland and Spain, had they had monetary independence, printed their way out of the debt and deficits they faced in 09/10?

Lets be clear here: this would involve paying civil servants with money that the central bank just printed to make up for the shortfall in exchequer revenue.
miw
15 Oct 2014, 08:01 AM
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.
All economic/Government policy is backed by theory.

When Government acts in a certain way (policy) it does so based on certain beliefs about how the world works ( theory)

B_B is suggesting that MMT ( theory) be used to determine Government decisions (policy)

Edited by Veritas, 15 Oct 2014, 12:12 PM.
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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zaph
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Is there a limit to printing, or bond selling under MMT? What is it?
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Veritas
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zaph
15 Oct 2014, 12:18 PM
Is there a limit to printing, or bond selling under MMT? What is it?
Yes, that's what I would like to know too.
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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zaph
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Veritas
15 Oct 2014, 12:20 PM
Yes, that's what I would like to know too.
I suspect you and you're friends are arguing opposite sides of the same coin.
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Dr Watson
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zaph
15 Oct 2014, 12:18 PM
Is there a limit to printing, or bond selling under MMT? What is it?
There is no limit. You just print an infinite amount of money and everyone gets rich beyond their wildest dreams and we all become more confident in the system as a result.
Edited by Dr Watson, 15 Oct 2014, 12:26 PM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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zaph
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Dr Watson
15 Oct 2014, 12:25 PM
There is no limit. You just print an infinite amount of money and everyone gets rich beyond their wildest dreams and we all become more confident in the system as a result.
That's fantastic. I'll PM you my address and you can deliver an infinite amount of money. As long as I can afford it, I'll send you a box of chocs as thanks.
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Veritas
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zaph
15 Oct 2014, 12:25 PM
I suspect you and you're friends are arguing opposite sides of the same coin.
Don't get you.

I agree that history has shown us that State's can run massive deficits and expand the monetary base without going bankrupt or causing hyperinflation.

I agree that State's must sometimes take on even more debt by spending while consumers and business is deleveraging to ameliorate recessions.

But there are limits.

If there were no limits then there would be no reasons to even try and run surpluses.
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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