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It Looks Like We're Headed To A US Government Shutdown
Topic Started: 29 Sep 2013, 07:54 AM (8,857 Views)
Strindberg
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miw
4 Oct 2013, 06:57 PM
Just because governments, by and large, don't just spend money into existence doesn't mean they could not in a fiat money system. (Except that it is also now not legal in most places, hence the whole debt ceiling thing.)

As you say, when money is issued, sterilised or not, it is a government liability one way or the other.
Suggesting that they could spend money into existence if they made it legal is an admission that governments do not operate money as described by MMT.

MMT is described in all its pamphlets as the system in fiat based domains. There are an infinite multitude of possible fiat systems and none of the major countries operate the MMT system. It is true that countries could operate as described by MMT if they wished and if they changed the laws and regulations. But that is like saying that paedophilia crimes could be eliminated if the law was changed and the age of consent was reduced to zero. The legal prevention of governmental spending of money into existence is a fundamental constraint protecting the value of money. It cannot be ignored and dismissed as a mere optional detail.

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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Massive
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Strindberg
4 Oct 2013, 07:25 PM
The legal prevention of governmental spending of money into existence is a fundamental constraint protecting the value of money. It cannot be ignored and dismissed as a mere optional detail.
Not to mention it protects the lifestyle and assets of our future generations from being spent by those who believe they need it more now..

Its beyond reprehensible how willing many are to take from our children and unborn grandchildren to fund their own lives today - trying to fool everyone they are not thinking about their own hip pocket first..

Fake money / captial gurus that worship the debt spiral kill me inside .. Professional / Business psychopaths is the current terminology i believe
Edited by Massive, 4 Oct 2013, 07:39 PM.
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GloomBoomDoom
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Strindberg
4 Oct 2013, 07:25 PM
Suggesting that they could spend money into existence if they made it legal is an admission that governments do not operate money as described by MMT.

MMT is described in all its pamphlets as the system in fiat based domains. There are an infinite multitude of possible fiat systems and none of the major countries operate the MMT system. It is true that countries could operate as described by MMT if they wished and if they changed the laws and regulations. But that is like saying that paedophilia crimes could be eliminated if the law was changed and the age of consent was reduced to zero. The legal prevention of governmental spending of money into existence is a fundamental constraint protecting the value of money. It cannot be ignored and dismissed as a mere optional detail.
That's what I meant to say. ;)
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miw
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Andrew Judd
4 Oct 2013, 07:22 PM
Do you have a reference to support the idea the US has been spending money into existance in the last 100 years?<br /><br />You claim seems very unlikely to me.
Andrew Judd
4 Oct 2013, 07:22 PM
Do you have a reference to support the idea the US has been spending money into existance in the last 100 years?

You claim seems very unlikely to me.
Well, Any history of the Johnson years and on to the collapse of Bretton woods refers to fairly rampant money printing during the Johnson years - "guns and butter", "The Grand Society", and of course funding the Vietnam war.

But it looks like the printing was not technically debt free. Spending into existence was accompanied by the issuance of a bond which was immediately bought by the Central bank in open market operations. The effect was the same. Sort of like having QE at a time when GDP growth was 4%+.

From Return to Bretton Woods:
Posted Image
Strindberg
4 Oct 2013, 07:25 PM
Suggesting that they could spend money into existence if they made it legal is an admission that governments do not operate money as described by MMT.
I tend to agree with you on that. At least in that particular respect.
Edited by miw, 4 Oct 2013, 08:27 PM.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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UPDATE FROM THE SYDNEY MORING HERALD TODAY.

http://www.smh.com.au/business/worse-than-2008-20131004-2uy1k.html


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Elastic
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The question with government bonds still remains though. Is it generating any new money or is it just swapping existing money for a bond?
i.e If a commercial bank or China purchases a bond, then presumably they are using money that already exists.
Only a rat can win a rat race.

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miw
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Elastic
4 Oct 2013, 08:51 PM
The question with government bonds still remains though. Is it generating any new money or is it just swapping existing money for a bond?
i.e If a commercial bank or China purchases a bond, then presumably they are using money that already exists.
My, perhaps naiive view of it is:

a) Govt spends $100 -> There is $100 more in private hands.
b) Govt issues $100 bond --> There is now $100 less in private hands (nett $0)
c) Central bank prints $100 and buys the bond ----> There is now $100 more in private hands. (nett +$100)

You can look at it as either increasing the amount of money or decreasing the price of money - either way it is inflationary if anyone actually wants to spend that money on goods and services.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Andrew Judd
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miw
4 Oct 2013, 08:25 PM

Well, Any history of the Johnson years and on to the collapse of Bretton woods refers to fairly rampant money printing during the Johnson years - "guns and butter", "The Grand Society", and of course funding the Vietnam war.

But it looks like the printing was not technically debt free. Spending into existence was accompanied by the issuance of a bond which was immediately bought by the Central bank in open market operations. The effect was the same. Sort of like having QE at a time when GDP growth was 4%+.

From Return to Bretton Woods:
Posted Image

I tend to agree with you on that. At least in that particular respect.
You are persisting with your claim, but now you have modified it to say that money was spent into existance and then mopped up by the fed in open market operations.

Where do you get that idea from?
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Elastic
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miw
4 Oct 2013, 09:12 PM
My, perhaps naiive view of it is:

a) Govt spends $100 -> There is $100 more in private hands.
b) Govt issues $100 bond --> There is now $100 less in private hands (nett $0)
c) Central bank prints $100 and buys the bond ----> There is now $100 more in private hands. (nett +$100)

You can look at it as either increasing the amount of money or decreasing the price of money - either way it is inflationary if anyone actually wants to spend that money on goods and services.
I agree with you MIW on the effect of QE and the fact it is adding money to the supply.
I guess my question refers to a scenario where we don't have QE. Where have the commercial banks got the money to buy bonds in the first place given that total loans should equal total deposits. I will start a thread on the entire system starting from scratch because there are many holes in my knowledge.

Only a rat can win a rat race.

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miw
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Andrew Judd
4 Oct 2013, 09:15 PM
You are persisting with your claim, but now you have modified it to say that money was spent into existance and then mopped up by the fed in open market operations.

Where do you get that idea from?
Read it again. It was regurgitated again by the fed in open market operations. Hint: what OMO activity increases the monetary base?
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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