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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 (19,777 Views)
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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.
There is a limit, a limit to which it no longer has any effect, hence the arrival of the GFC. If there is no limit to money printing, then why are we facing all the economic problems we are ? Why don't we just print million after million and give everybody one million each. Which is in effect what we have virtually done over a number of decades.

To see the bigger picture, and ultimately where it will lead, Imagine what would happen if the government gave one million dollars to everybody over 18. What would the initial effects be ? And then what would happen eventually ?

The limit is when pay packets of the average Joe no longer support or sustain the prices and debt levels needed to support them.

And while you all want to sit here and argue about wheather or not there is a limit to money printing, or money printing in a country that has its own currency,like the US, the answer is this.

The truth is, there is no limit, not since removing themselves from the gold standard completely in the early 70s,thanks to president Nixon ,who promised us on that day, that the value of the currency would remain strong. I think gold was $30 an ounce when he said this, has the value of the dollar remained strong since he said this,promised this.

The reason they removed the standard, was it allowed them to go on a never ending spending spree, as have many governments and countries around the world.

So while there is in fact no limit to printing money, there is a limit to its effects. Hence the arrival of the gfc.The limit is the average Joe. A shop owner can only afford to pay an employee so much as can other employers, but these wages no longer support the debt levels or prices we have reached, thanks to the government using every measure possible to pump house prices while at the same time have been driveting all this money away from the real economy and jobs.

So there is no limit, but there is a limit to its effects, the arrival of the GFC proves this to us, and the fact that over six years later the world is still decling with rates at zero all this time with trillion after trillion of stimulus thrown in, proves that it no longer has any effect.

Hope this clears up the arguments for you.

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szokolay
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The amount of money created is limited only by the willingness of people to borrow it, and their ability to service it. Both of which are almost at there limit. All we need for the wheels to begin flling off the debt house of cards is a slowdown in the economy and falling wages. Hang on... We have that don't we.

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Veritas
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peter fraser
18 Oct 2014, 09:22 AM
It's like a player not knowing the rules of the game and then saying that the game is rigged.

Good players on the other hand know the rules and use them to their advantage.
If these are the rules of the game Peter, countries would run these massive deficits.

They don't unless they absolutely have no choice.

Why do you think this is?

You are not in on a little secret the rest of us don't understand.

BTW: you have back pedaled from your original "sovereigns cant go bankrupt" position quite significantly.

Edited by Veritas, 18 Oct 2014, 05:16 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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peter fraser
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Veritas
18 Oct 2014, 05:14 PM
If these are the rules of the game Peter, countries would run these massive deficits.

They don't unless they absolutely have no choice.

Why do you think this is?

You are not in on a little secret the rest of us don't understand.

BTW: you have back pedaled from your original "sovereigns cant go bankrupt" position quite significantly.
They can't run out of what they can print, but no one ever said they should print fearlessly or run massive deficits unless it's become the only option.

Do you think that Japan is broke with public debts of around 240% of GDP?

If I bought a Ferrari that could drive at 350 Kph there is no argument about it's ability to drive at that speed, but there is a natural question over whether it's appropriate to drive at that speed on roads used by the public.

Glad that you are now on board.
Edited by peter fraser, 18 Oct 2014, 05:53 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Veritas
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peter fraser
18 Oct 2014, 05:51 PM
They can't run out of what they can print, but no one ever said they should print fearlessly or run massive deficits unless it's become the only option.

Do you think that Japan is broke with public debts of around 240% of GDP?

If I bought a Ferrari that could drive at 350 Kph there is no argument about it's ability to drive at that speed, but there is a natural question over whether it's appropriate to drive at that speed on roads used by the public.

Glad that you are now on board.
Word play Peter. And you are still back pedaling.

I have already agreed with you that it is literally impossible to run out of money. Its just that it wont be worth anything. And that's the point. That's the reason why debt and deficits are important.

That's the reason why Ireland and Spain, for example, even if they had their own currencies could not have just printed their way out of trouble.

MMT is crank economics; if it wasnt crank economics it would be taken seriously by the people who are actually in charge.

You have jumped on a band wagon driven by headbangers Peter.

Your point about Japan is a total obfuscation. Japan is running a massive defecit but it also has a massive economy. The markets continue to lend Japan money, its inflation rate is under control. That could change.

The MMT position is that it cannot for: they can just print the money they need.

Quacks the lot of them.

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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peter fraser
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Veritas
18 Oct 2014, 06:28 PM
Japan is running a massive defecit but it also has a massive economy. The markets continue to lend Japan money, its inflation rate is under control. That could change.

Then we agree.

Spain and Ireland would be in a much better position if they issued their own currency, their borrowing rates would not have spiked they way they did.

I'm really not interested in the rest of your argument that is argument for the sake of argument about points that I have never made.

Edited by peter fraser, 18 Oct 2014, 06:58 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Veritas
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peter fraser
18 Oct 2014, 06:54 PM
Then we agree.

Spain and Ireland would be in a much better position if they issued their own currency, their borrowing rates would not have spiked they way they did.

I'm really not interested in the rest of your argument that is argument for the sake of argument about points that I have never made.
Sure you made it, you said the irish government could just print the money, problem solved.

Anyway, whatever.
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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peter fraser
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Veritas
18 Oct 2014, 07:14 PM
Sure you made it, you said the irish government could just print the money, problem solved.

Anyway, whatever.
The point was that because they could print the investors would know that they could always pay back debts, and therefore their interest rates would not spike. rates didn't spike with any currency issuers but they did with currency users who got into trouble.

I don't believe I ever suggested that they should or would print irresponsibly.

Edited by peter fraser, 18 Oct 2014, 07:30 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Strindberg
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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.
I agree with much of what you have written on this subject Veritas.

The subject of MMT comes up often on this forum and I'll not re-engage in another ping-pong session, but regurgitate some of my previously expressed thoughts.

MMT as preached, by Mosler Mitchell et al, ignores or deliberately hides the fact that no western economy adopts MMT. All western economies impose double accounting obligations on their governments which nullify any correspondence to MMT as preached. MMT is therefore not a description of the modern monetary system. Rather it is a description of a monetary system which socialists would like to be implemented so as to achieve more government spending on the stuff they love.

MMT propagandists have managed to hoodwink many people into believing that governments who control their own currency can never be forced into default on their debts. With the current laws in most (or all) first world countries this is totally and absolutely false.

Countries like the US, the UK and Australia have laws which require both the Treasury and its CB arm to each maintain balanced books. Such governments can only spend money into the private sector which they have previously extracted from the private sector through taxes (and similar revenues) and debt issuance. QE provides no escape from this constraint.

If government tax revenues fall and that government wishes to maintain spending they are forced, by the law of the land, to obtain more money by issuing debt. They cannot, by law, simply print money to pay their debts as falsely claimed by MMT salesmen. But the interest on the debt (old and new) must be paid and promised debt redemptions must be paid - by law. Eventually, if such a situation persists, there will be insufficient government revenue to meet debt obligations. The government must then default.

An MMTphile, when he's not pretending that there is no law stopping the government paying its debts with newly printed money, might acknowledge the current laws requiring double accounting on the Treasury and CB. He may then suggest that such laws are a minor detail and can easily be dispensed with. Well, lots of laws could be changed but the first country to dispense with its double accounting (printing without debt issue) would find its currency immediately worthless.

It is not simply the requirement for double accounting which places a distance between current money practices and MMT as preached. The US for example has legal limitations on its debt as was discovered with lots of surprise in the recent past. The US money system is not MMT as preached.

MMT salesmen are full of absolute made up crap. In his widely read SEVEN DEADLY INNOCENT FRAUDS OF ECONOMIC POLICY fantasy pamphlet, Mosler writes the following crap:
Quote:
 
And what happens if you were to go to your local IRS office
to pay your taxes with actual cash? First, you would hand over
your pile of currency to the person on duty as payment. Next,
he’d count it, give you a receipt and, hopefully, a thank you for
helping to pay for social security, interest on the national debt,
and the Iraq war. Then, after you, the tax payer, left the room,
he’d take that hard-earned cash you just forked over and throw
it in a shredder.
Yes, it gets thrown it away. Destroyed! Why? There’s no
further use for it.

....
Can you now see why it makes no sense at all to think that
the government has to get money by taxing in order to spend?
In no case does it actually “get” anything that it subsequently
“uses".

Another MMTer who's also worshipped is Bill Mitchell. He writes similar crap targetted at his socialist audience:
Quote:
 
Taxpayers do not fund anything
At times some document from the past is discovered that no-one much has read or paid any attention to but which offers fundamental insights into the options facing governments operating a monetary system based on a fiat currency. We have available now one such document which I will discuss in some detail. The essential insight can be summarised by the title of the blog – taxpayers do not fund anything.

Both of the absurdities above ignore the reality governments are required to maintain accounts rather than operate on a fictitious MMT basis.

b_b well understands MMT as preached and seems to imagine that the distance between MMT as preached and current government money practices to be minor. I disagree. Peter Fraser has been shown to be an ignoramous wrt MMT. When shown his statements about MMT to be contradicted by Mosler and Mitchell he simply denies that he follows either Mosler or Mitchell like the slippery shark he is.
Edited by Strindberg, 18 Oct 2014, 07:43 PM.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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GloomBoomDoom
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Lol classic post Strindberg. :D

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Edited by GloomBoomDoom, 18 Oct 2014, 09:20 PM.
MSE
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