Cylons and Voltron and Zombies! Oh My! (Adam Serwer & Katherine Mangu-Ward)

[Bloggingheads]

[Diane1976]

I haven't watched yet, but on Gingrich and Obama's health care plan, I saw three of the Republican debates and in two of them Gingrich was pushing the Chile pension plan.

Out of curiosity I looked it up and it seems to be based on the same idea as Obama's health care. It forces people to buy private pensions for their retirement. The pensions are managed by private companies, but under government regulations, presumably to prevent them from getting into investments that would cheat the people.

We have a compulsory pension plan in Canada that is similar except it's run by an "arms length" board, i.e. an outfit independent of the government. It did well through the financial crisis. The only problem with it is that it's too small, both benefits and payments are small. Most people think it should be increased, in payments and benefits. But, the Conservative government doesn't like the idea of it being compulsory because it's supposedly contrary to personal freedom. So they're going to do something that will involve the private insurance companies, and wont be compulsory. Sounds worse than the Chile plan.

[sugarkang]

Originally Posted by Diane1976

But, the Conservative government doesn't like the idea of it being compulsory because it's supposedly contrary to personal freedom.

Fiscal cons don't like it because they fear a huge inefficient bureaucracy that provides worse care and costs more money. Whether you like Chile's plan or not, the thing that's clear is that they do not have an impending fiscal crisis on their hands. No PIIGS problem; no America problem.

The libertarian issue is with the Commerce Clause, which essentially allows the federal government to make up any law and justify it under interstate commerce regulatory powers. This should bother everyone, not just libertarians. Adam recognizes it.

But there's another reason that Democrats should be wary of ObamaCare (which I grudgingly support). When you concentrate that much power in one agency, the hope is that you can streamline a process so that friction in transactions is reduced and we benefit from economies of scale, resulting in cheaper costs. The big downside, however, is that when one system goes, it goes for everybody. The first lesson of mitigating risk is diversification. Centralization compounds risk.

[TwinSwords]

Originally Posted by sugarkang

Fiscal cons don't like it because they fear a huge inefficient bureaucracy that provides worse care

We're not talking about anything that provides care. We're talking about pension or retirement programs that provide money.

Originally Posted by sugarkang

Whether you like Chile's plan or not, the thing that's clear is that they do not have an impending fiscal crisis on their hands.

Yeah. The American Social Security program isn't facing an impending fiscal crisis, either, unless you mean modest shortfalls decades in the future that can be fixed fairly straightforwardly -- but that's not what anyone except libertarian alarmists would call "a crisis."

From Wikipedia:

The performance of the Chilean pension funds is not very good compared with the performance of private pension funds of developed countries, but that performance is partly attributed to special factors.[14] Also the expectable amount of benefits not only depends on the performance of pension funds but also on the amount of withdrawn administrative costs. The amount of administrative costs is considered a problem of the Chilean pension system.

[...]

The number of workers who actually pay into the pension system decreased from 64% in 1980 (before the reform) to 58% by 2006 [18]According to Patricio Navia an Diego Portales University professor, most people perceive the costs of pensions and the pensions themselves as unfair. Therefore they try to evade pension contributions.

Andras Uthoff, the director of the Social Development Division of the United Nations Economic Commission for Latin America (ECLAC) states that the reformed Chilean pension system does not work with the reformed Chilean labor market because only a small percentage of workers are able to finance meaningful pensions.

And:

A big part of the Chilean population is not able to finance meaningful pensions, because many workers are not able to regularly contribute a higher amount of money. Additionally many workers have difficulties to achieve the 20 years of contributions to at least qualify for minimum pension. Since the pension funds charge high fixed administrative costs per insured person and only a small portion of the administrative costs depend on the amount of the capital account, capital accumulation by pension funds is very unprofitable for workers with lower incomes.

And:

Chile's social security system requires deep reforms in all sectors, because half of Chileans have no pension coverage, and of those who do, 40 percent are going to find it hard to reach the minimum level. This has to be confronted now, and we agree with Michelle Bachelet and will, I hope, join forces behind this large undertaking.
— Sebastián Piñera in a televised debate with Michelle Bachelet in 2006

[sugarkang]

Originally Posted by TwinSwords

We're not talking about anything that provides care. We're talking about pension or retirement programs that provide money.

Look above. There was a reference to health care as well as the Chilean pension system.

Yeah. The American Social Security program isn't facing an impending fiscal crisis, either, unless you mean modest shortfalls decades in the future that can be fixed fairly straightforwardly

By modest shortfalls, do you mean raise the retirement age a few years? Sounds simple enough. Maybe this is what you meant by modest shortfalls being fixed fairly straightforwardly.



That's the face of moving the retirement age to 66 in year 2018.

With regard to the Chilean pension system, it's true that it isn't perfect. It's only ranked 7th. USA by comparison? 10th.



2011 Mercer Index.

[stephanie]

Originally Posted by sugarkang

The libertarian issue is with the Commerce Clause, which essentially allows the federal government to make up any law and justify it under interstate commerce regulatory powers. This should bother everyone, not just libertarians. Adam recognizes it.

Oh, I wish Operative were still here, as he would disagree with this.

The Commerce Clause argument doesn't seem to me a particularly "libertarian" issue. It's an issue of Congressional powers and federalism. And, of course, if the Commerce Clause allowed the federal government to legislate on anything a state could, there'd be no argument. The question is how expansive the rights of Congress have become (in the early '90s the CC justified everything, then the SC started cutting it back, but then they seemed to abandon the effort) and, of course, how much that matters.

The "libertarian" issue -- and one reason Romney's position may not be so satisfying to some opponents of the mandate -- isn't so much about states vs. feds as about governmental power. At least, that's what the libertarians I know say and it's the position Operative took. (I defended Romney, or at least pointed out that his position was coherent.) Indeed, IME with libertarians, they often are extremely expansive in their notions of what the Constitution provides with respect to limitations on the states. This view is not supported by original intent theories, of course.

[TwinSwords]

Originally Posted by Diane1976

I haven't watched yet, but on Gingrich and Obama's health care plan, I saw three of the Republican debates and in two of them Gingrich was pushing the Chile pension plan.

At the time that Bush was pushing something similar to the Chile plan, there was reporting, including in the New York Times, indicating that the overhead costs were no less than 25% and reach as high as 40%. This goes for things like commissions to the private investment bankers who would manage the funds.

You can see why the private schemes appeal so much to politicians who are in thrall to the banks and other monied interests: They will get rich skimming off the top. And, of course, relative to a public model, the skimming is a wealth transfer program, taking 25% to 40% of the money people pay in and giving it to the wealthiest people in New York City.

Social Security, as I understand, spends less than 1% on administrative overhead, and the overhead does not go the line the pockets of bankers.

[Parallax]

Last time she was here, she said US federal government spent a trillion dollars and did not have anything to show for it. In a post I explained how her claim was simply wrong. Now she is saying that US spent more than a trillion dollars and did not get anything. Which is a bigger lie than the original one. I don't what to say, either she thinks we (her audience) are so dumb she can get away with it or working in reason magazine (the irony) has made her immune to reality.

I hope Bob & co. make sure Ms. Mangu-Ward issues a correction.

Originally Posted by Parallax

Last time she was here, she said US federal government spent a trillion dollars and did not have anything to show for it. In a post I explained how her claim was simply wrong. Now she is saying that US spent more than a trillion dollars and did not get anything. Which is a bigger lie than the original one. I don't what to say, either she thinks we (her audience) are so dumb she can get away with it or working in reason magazine (the irony) has made her immune to reality.

I hope Bob & co. make sure Ms. Mangu-Ward issues a correction.

Republicans commonly refer to all the funds appropriated by the stimulus bill as "spending". Yes, it's hypocritical, because they generally protest it when cutting taxes are referred to as spending, but her main point, I think, is that the stimulus bill had no effect. Certainly, the aid to the states was moronic - as those jobs would be lost later on anyway.

Also, you actually think you're going to get a correction, even if your point is correct? Good luck with that.

[Parallax]

Originally Posted by apple

Republicans commonly refer to all the funds appropriated by the stimulus bill as "spending". Yes, it's hypocritical, because they generally protest it when cutting taxes are referred to as spending, but her main point, I think, is that the stimulus bill had no effect. Certainly, the aid to the states was moronic - as those jobs would be lost later on anyway.

It is no hypocritical it is simply wrong! This is not a matter of debate even, it is simply falsifying an event that happened less than 4 years ago. It would be like claiming that the GOP controlled the House in 2007 and then arguing a point on that basis.

Also, you actually think you're going to get a correction, even if your point is correct? Good luck with that.

In these situations I always do this even if the chances are slim. It eliminates the I did not know and nobody asked me to excuses later.

[TwinSwords]

Originally Posted by Parallax

Last time she was here, she said US federal government spent a trillion dollars and did not have anything to show for it. In a post I explained how her claim was simply wrong. Now she is saying that US spent more than a trillion dollars and did not get anything. Which is a bigger lie than the original one. I don't what to say, either she thinks we (her audience) are so dumb she can get away with it or working in reason magazine (the irony) has made her immune to reality.

Sadly, her megaphone is much bigger than yours, and for that reason, plus one other*, she can, in fact, get away with it. It's a lie she tells in concert with many others on the right, including Fox News and AM talk radio. The lie has probably been told half a million times by different conservatives on radio and television since 2009.

But thank you for telling the truth, nevertheless.

*The other reason, apart from her big megaphone, is that her audience has been trained to be especially pliant and manipulable. They're a group of people who will dismiss anything they hear that doesn't come from an approved source. You can repeat your truth 'till you're blue in the face and all you'll get from the GOP base is blinking, blank stares, and a shrug of the shoulders. They lost interest in the truth about 30 years ago, and whatever part of the brain would have allowed them to hear you atrophied a long, long time ago. They now only respond to stimulus that is pitched in the voice of Rush Limbaugh or one of his dopplegangers.

Originally Posted by Parallax

I hope Bob & co. make sure Ms. Mangu-Ward issues a correction.

I love and greatly appreciate Bob and his staff, but I suspect the most they will consider doing is reprimanding you for using the "L" word (lie). Bob has explained on many occasions that the "L" word is unacceptable discourse.

[Parallax]

Originally Posted by TwinSwords

Sadly, her megaphone is much bigger than yours, and for that reason, plus one other*, she can, in fact, get away with it. It's a lie she tells in concert with many others on the right, including Fox News and AM talk radio. The lie has probably been told half a million times by different conservatives on radio and television since 2009.

Bhtv was supposed to be different from Fox News and others, no? If you don't have a simple fact checking then people (specially those ideologically committed) will start to disagree on reality which is horrible to watch and then you get outlets who only show you their own version of reality ...

I love and greatly appreciate Bob and his staff, but I suspect the most they will consider doing is reprimanding you for using the "L" word (lie). Bob has explained on many occasions that the "L" word is unacceptable discourse.

Well if that were to happen I would be very disappointed but not very surprised. It kind of fits with Bob's worldview: actual existing evil is to be tolerated but the word evil should not be used, actually lying can be overlooked but using the word lie is not permitted.

@Bob: in case I am going to get a reprimand I would say that the first time around I gave her the benefit of the doubt and explained in detail why she was wrong. The second time around she just doubled down, what do you do? How do you argue with someone that denies reality, without calling them a liar?

[Florian]

Originally Posted by Parallax

How do you argue with someone that denies reality, without calling them a liar?

Call her delusional. That will exculpate both of you.

[Parallax]

Originally Posted by Florian

Call her delusional. That will exculpate both of you.

But that sounds like I am insulting someone I disagree with. No?

[sugarkang]

Originally Posted by Parallax

But that sounds like I am insulting someone I disagree with. No?

People with principles don't like to be accused of lying without the slightest shred of evidence. Calling someone delusional is equally insulting, but, in the end, just a rude opinion.

[Parallax]

Originally Posted by sugarkang

People with principles don't like to be accused of lying without the slightest shred of evidence. Calling someone delusional is equally insulting, but, in the end, just a rude opinion.

I have presented plenty of evidence above it is not an accusation it is just a matter of checking the record.

[sugarkang]

Originally Posted by Parallax

I have presented plenty of evidence above it is not an accusation it is just a matter of checking the record.

Okay, I'll reserve judgment as this doesn't concern me. However, I don't know Harry to be a liar. I do know that I've been called a liar multiple times by various people on here, with not a single person coming up with the slightest justification. And just by the deluge of agreement, this noise beats out truth most of the time.

I don't mind being called a liar. I don't mind people accusing other people of lying. However, I do mind people making false accusations.

[Parallax]

Originally Posted by sugarkang

Okay, I'll reserve judgment as this doesn't concern me. However, I don't know Harry to be a liar. I do know that I've been called a liar multiple times by various people on here, with not a single person coming up with the slightest justification. And just by the deluge of agreement, this noise beats out truth most of the time.

I don't mind being called a liar. I don't mind people accusing other people of lying. However, I do mind people making false accusations.

Who is Harry?

[Florian]

Originally Posted by Parallax

But that sounds like I am insulting someone I disagree with. No?

Less insulting than calling someone a liar, it seems to me, because delusion implies lack of self-awareness. Liars are conscious of what they are doing. Being deluded about something is a common fault of ideologues. Libertarians have a worldview, an ideology, that makes them impervious to reality* and thus eager to substitute fantasy for it.


*"Impervious to reality" may be a polite substitute for delusional.

[Parallax]

Originally Posted by Florian

Less insulting than calling someone a liar, it seems to me, because delusion implies lack of self-awareness. Liars are conscious of what they are doing. Being deluded about something is a common fault of ideologues. Libertarians have a worldview, an ideology, that makes them impervious to reality* and thus eager to substitute fantasy for it.

*"Impervious to reality" may be a polite substitute for delusional.

Well if you put it that way then no delusional does not make the cut. She can't be ignorant f the composition and the structure of the stimulus. And even then I wrote a long comment in her last diavlog detailing why she was wrong. This time she came back with an even bigger claim that was false!

[badhatharry]

Originally Posted by Parallax

Last time she was here, she said US federal government spent a trillion dollars and did not have anything to show for it. In a post I explained how her claim was simply wrong. Now she is saying that US spent more than a trillion dollars and did not get anything. Which is a bigger lie than the original one. I don't what to say, either she thinks we (her audience) are so dumb she can get away with it or working in reason magazine (the irony) has made her immune to reality.

I hope Bob & co. make sure Ms. Mangu-Ward issues a correction.

you said:

Poking holes in her argument aside, the goal of expansionary fiscal policy is not to create jobs directly as such. The goal is to shift the total debt burden from households to the federal government. When households have repaired their balance sheets the aggregate demand will return to a normal level and we will see falling unemployment, for example cutting payroll tax by 2% does not create jobs directly but it helps people to pay down their mortgages and student loans and credit card debts slightly faster. Moreover given that housing bubble specially really hurt the average American household's balance sheet and that the federal government can borrow money at negative real rates such a shift is a no brainer.

So $10 dollars more in your paycheck every week ($500 per taxpayer) was supposed to repair balance sheets and pay down mortages and student loans and credit cards?

[Parallax]

Originally Posted by badhatharry

So $10 dollars more in your paycheck every week ($500 per taxpayer) was supposed to repair balance sheets and pay down mortages and student loans and credit cards?

When did I talk about $10 per week or $500 per year??

[miceelf]

Originally Posted by Parallax

When did I talk about $10 per week or $500 per year??

The more interesting question is whether there's an understanding of what you meant when you said "slightly"

[badhatharry]

Originally Posted by miceelf

The more interesting question is whether there's an understanding of what you meant when you said "slightly"

slightly abstruse don'tcha think, miceelf?

[badhatharry]

Originally Posted by Parallax

When did I talk about $10 per week or $500 per year??

That's what the tax cut in the stimulus amounted to.

[Parallax]

Originally Posted by badhatharry

That's what the tax cut in the stimulus amounted to.

On a per capita basis the $288 billion tax cut actually amounts to $1000 per person. But the tax cut was made up of many small, temporary tax credits. I think the numbers should have been much bigger, Obama should have drastically simplified the tax code and left room for more fiscal expansion ...

But how is this related to the fact that the US government did NOT spend more $1000 billion dollars like Mangu-Ward says??

[badhatharry]

Originally Posted by Parallax

On a per capita basis the $288 billion tax cut actually amounts to $1000 per person. But the tax cut was made up of many small, temporary tax credits. I think the numbers should have been much bigger, Obama should have drastically simplified the tax code and left room for more fiscal expansion ...

But how is this related to the fact that the US government did NOT spend more $1000 billion dollars like Mangu-Ward says??

I'm not sure where $1000 comes from but I'll take your word for it and I'm not sure what this means: how is this related to the fact that the US government did NOT spend more $1000 billion dollars like Mangu-Ward says

Here's what you said: The goal [of fiscal policy] is to shift the total debt burden from households to the federal government. When households have repaired their balance sheets the aggregate demand will return to a normal level and we will see falling unemployment, for example cutting payroll tax by 2% does not create jobs directly but it helps people to pay down their mortgages and student loans and credit card debts slightly faster.

So here you seem to be saying that $1000 or $500 in a tax cut will do all kinds of wonderful things for a familiy's budget. You imagine that these people will dutifully apply their $50 per month to the principal on their credit cards or their student loans. I think that's a wise thing to do and I would encourage anyone to reduce their debt but it seems that the amount is very small and certainly won't substantially repair household balance sheets.

[Parallax]

Originally Posted by badhatharry

I'm not sure what this means: how is this related to the fact that the US government did NOT spend more $1000 billion dollars like Mangu-Ward says

Huh? You replied to my comment on Mangu-Ward, you actually quoted it. But there is no logical connection between what you are talking about and my original comment.

Here's what you said: The goal [of fiscal policy] is to shift the total debt burden from households to the federal government. When households have repaired their balance sheets the aggregate demand will return to a normal level and we will see falling unemployment, for example cutting payroll tax by 2% does not create jobs directly but it helps people to pay down their mortgages and student loans and credit card debts slightly faster.

So here you seem to be saying that $1000 or $500 in a tax cut will do all kinds of wonderful things for a familiy's budget. You imagine that these people will dutifully apply their $50 per month to the principal on their credit cards or their student loans. I think that's a wise thing to do and I would encourage anyone to reduce their debt but it seems that the amount is very small and certainly won't substantially repair household balance sheets.

I never said $1000 per person per year would do wonderful things. I don't think I ever said anything that would seem like it either ($6000 per person per year plus major tax reform would actually do wonderful things). Fiscal expansion shifts the debt from households to the federal government and any small amount helps to cut the duration of the households repairing their balance sheets.

Like I said above this has nothing to do with my original post about Mangu-Ward. Not every fiscal expansion is spending and while the entire stimulus bill was less than $800 billion she claims (a) we spent more than $1000 billion, and (b) we have nothing to show for it. Note that if the government tried to balance the budget in the middle of the recession the difference with what happened would have been a lot more than $1000 per person per year.

[badhatharry]

Originally Posted by Parallax

Huh? You replied to my comment on Mangu-Ward, you actually quoted it. But there is no logical connection between what you are talking about and my original comment.

I guess I have gone pretty far afield of your original thought. Sorry.

So your main complaint is the trillion she mentioned rather than the 787 billion you are calling the stimulus.
Here's a graphic that addresses her point, I guess (but I won't swear to it).

But in my defense I still don't think this makes any sense: how is this related to the fact that the US government did NOT spend more $1000 billion dollars like Mangu-Ward says

What does more $1000 billion mean? And please don't say that a thousand billion is the same as a trillion because more trillion wouldn't make any sense either.

[Parallax]

Originally Posted by badhatharry

So your main complaint is the trillion she mentioned rather than the 787 billion you are calling the stimulus.

I repeat myself but it is important: not all of stimulus was spending.

Here's a graphic that addresses her point, I guess (but I won't swear to it).

A new low for CNN. Except for the auto bailout which is about $0.09 trillion the rest of the $3.9 trillion stealth stimulus in the graphic is monetary stimulus and not fiscal. And again not every fiscal stimulus is spending either ...

But in my defense I still don't think this makes any sense: how is this related to the fact that the US government did NOT spend more $1000 billion dollars like Mangu-Ward says

What does more $1000 billion mean? And please don't say that a thousand billion is the same as a trillion because more trillion wouldn't make any sense either.

I said that because you had gone pretty far afield of my original thought. And there is a than missing so it should read more than $1000 billion.

[badhatharry]

Originally Posted by Parallax

A new low for CNN. Except for the auto bailout which is about $0.09 trillion the rest of the $3.9 trillion stealth stimulus in the graphic is monetary stimulus and not fiscal. And again not every fiscal stimulus is spending either ...

Thanks for bearing with me. So you don't agree with the CNN characterization. A couple of questions: Why would financial industry bailouts be considered monetary stimulus? same with the other two...housing and credit.

Here's what I found about monetary stimulus:

it involves the manipulation of the available money supply

1) Alter the reserve Ratio: Reserve ratio is the percentage of assets that commercial banks have to keep on deposit with a Central Bank (Fed in US, RBI in India). Lower the Reserve ratio, more money the institutions can flow out in market

2) Lowering Discount Rates: These are the rates at which financial institutions loan money from Central Banks (Fed in US). Lowering discount rates will encourage borrowing and more flow of money in market

[Parallax]

Originally Posted by badhatharry

Thanks for bearing with me. So you don't agree with the CNN characterization. A couple of questions: Why would financial industry bailouts be considered monetary stimulus? same with the other two...housing and credit.

Here's what I found about monetary stimulus:

it involves the manipulation of the available money supply

1) Alter the reserve Ratio: Reserve ratio is the percentage of assets that commercial banks have to keep on deposit with a Central Bank (Fed in US, RBI in India). Lower the Reserve ratio, more money the institutions can flow out in market

2) Lowering Discount Rates: These are the rates at which financial institutions loan money from Central Banks (Fed in US). Lowering discount rates will encourage borrowing and more flow of money in market

There are several issues with CNN's info graphic:

1. The word stealth; as far as I see all of things they call stealth stimulus were known publicly. So why not use another less negative and more descriptive word for it?

2. A good chunk of the stealth stimulus is Fed buying securities, Now Fed used to do that all the time! How else do you think Fed sets interest rates?? The new thing is that now Fed is buying longer term treasuries, MBS and agency debt something it did not do back then.

3. When was this graphic created? The cost of TARP is said to be $205 billion, when you Read More it says $58.6 billion and the final cost of banking side of TARP was actually $25 billion in the end. Same goes for the cost of bailing out Bear Stearns, the $29 billion was a non-recourse loan from Fed to JP Morgan Chase so they would take over Bear Stearns. If all the collateral has no value then the Fed will lose the amount it loaned. But those assets have a value and the actual loss is much smaller.

[badhatharry]

Originally Posted by Parallax

2. A good chunk of the stealth stimulus is Fed buying securities, Now Fed used to do that all the time! How else do you think Fed sets interest rates?? The new thing is that now Fed is buying longer term treasuries, MBS and agency debt something it did not do back then.

So here you are saying that the Fed bailing out the financial industry, the credit markets and housing was essentially business as usual for the Fed. They were just buying securities and therefore this money cannot be counted as stimulus. Has this ever been done on this scale before?

As far as how the Fed sets interest rates...usually this is done by buying and selling short term bonds (this affects the money supply, yes?) but when the Fed buys longer term treasuries, this is called quantitative easing, correct? and the idea behind that is that short term interest rates are so low that the Fed wants to boost the economy by buying longer term treasuries and injecting more money into the system. But you say this is different than stimulus. How so?

Or maybe the point you are making is there is a vast difference between fiscal and monetary stimulus and that Ward and CNN are incorrectly lumping the two together.

[Don Zeko]

Originally Posted by badhatharry

As far as how the Fed sets interest rates...usually this is done by buying and selling short term bonds (this affects the money supply, yes?) but when the Fed buys longer term treasuries, this is called quantitative easing, correct? and the idea behind that is that short term interest rates are so low that the Fed wants to boost the economy by buying longer term treasuries and injecting more money into the system. But you say this is different than stimulus. How so?

Parralax and I seem to be mostly in agreement on this, so I'll tell you.

Originally Posted by badhatharry

Or maybe the point you are making is there is a vast difference between fiscal and monetary stimulus and that Ward and CNN are incorrectly lumping the two together.

Bingo! The problem is that Mangu-Ward is lumping together fiscal stimulus, which is money that we have simply spent to buy things, make transfer payments, or failed to collect in tax revenue, with monetary stimulus. This money has to be paid through larger deficits now, meaning higher taxes or lower spending at some point in the future. Monetary stimulus, on the other hand, consists of the Fed creating money out of thin air and loaning it out to banks, so it doesn't increase the deficit. So when people add these loans that must be paid back by the borrowers to spending that must eventually be paid for by the taxpayer that wrongly implies that the government is spending far more money on stimulus than it actually is, since monetary stimulus by the Fed isn't government spending at all.

[badhatharry]

Originally Posted by Don Zeko

Monetary stimulus, on the other hand, consists of the Fed creating money out of thin air and loaning it out to banks, so it doesn't increase the deficit. So when people add these loans that must be paid back by the borrowers to spending that must eventually be paid for by the taxpayer that wrongly implies that the government is spending far more money on stimulus than it actually is, since monetary stimulus by the Fed isn't government spending at all.

Well, I'm glad I was able to spot the difference between fiscal and monetary stimulus. And certainly one should be distinguished from the other but doesn't the Treasury borrow from the Fed to finance the debt? And who will be paying that back? Aren't the taxpayers the borrowers in this case? So you're definitions aren't quite so black and white.

But other than that, this monetary stimulus sounds like a win-win. Make money out of thin air, juice the economy and have someone else pay for it! No down-side at all.

However, as someone quite revered once said:

The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

So, according to this guy, in apparently lots of ways, the taxpayer does end up eventually paying for monetary expansion.

[Don Zeko]

Originally Posted by badhatharry

Well, I'm glad I was able to spot the difference between fiscal and monetary stimulus. And certainly one should be distinguished from the other but doesn't the Treasury borrow from the Fed to finance the debt? And who will be paying that back? Aren't the taxpayers the borrowers in this case? So you're definitions aren't quite so black and white.

Would you care to explain to me how, exactly, the government borrowing from itself instead of borrowing from others increases the future burden on the taxpayer? This isn't that complicated. When the government is running a deficit, it sells bonds in order to make up that difference. If it sells them to the Fed, then it has to service and repay that debt, and if it sells them to other parties it has to service and repay that debt as well. This has nothing to do with quantitative easing. When the fed thinks that the money supply is too small, it prints money and uses it to buy US securities, and when it thinks that the money supply is too large it sells those securities that it is holding. You can run a deficit without the Fed buying treasuries and vice versa. The Fed doesn't put money into or take money out of the treasury with open market operations or with quantitative easing.

Originally Posted by badhatharry

But other than that, this monetary stimulus sounds like a win-win. Make money out of thin air, juice the economy and have someone else pay for it! No down-side at all.

When you're in Depression monetary conditions, then yes, that's exactly right. The problem here is that the money supply is too small because of changes in how private businesses and citizens are borrowing and lending, so there isn't enough money in circulation to allow the economy to function efficiently. As a result, we have productive resources sitting idle. When human failures prevent us from maintaining an adequate money supply, then those free market shibboleths about free lunches don't apply.

Originally Posted by badhatharry

However, as someone quite revered once said:



So, according to this guy, in apparently lots of ways, the taxpayer does end up eventually paying for monetary expansion.

Badhat, if you don't understand that monetary policy should change in response to the situation in which we find ourselves, then I can't make you. Certainly those bad consequences Keynes describes occur in countries whose currencies are actually being debased, like Weimar Germany or the Confederacy in 1864. But we are not them, and Keynes well knew that any deflation at all can be just as ruinous as runaway inflation. And today, we don't have a debased currency.We have a core inflation rate of 2.15%, along with persistent high unemployment and a huge private debt overhang. If you look at these facts and start screaming about Weimar and debased currencies, that means you aren't willing to see what's in front of your eyes.

[sugarkang]

Originally Posted by Don Zeko

Certainly those bad consequences Keynes describes occur in countries whose currencies are actually being debased, like Weimar Germany or the Confederacy in 1864. But we are not them, and Keynes well knew that any deflation at all can be just as ruinous as runaway inflation. And today, we don't have a debased currency.We have a core inflation rate of 2.15%, along with persistent high unemployment and a huge private debt overhang. If you look at these facts and start screaming about Weimar and debased currencies, that means you aren't willing to see what's in front of your eyes.

Looks like someone's been reading more economics, but still can't see the forest from the trees. Some questions you ought to ask yourself:

1. What does it mean for a currency to be debased?
2. Why is the dollar the exception?
3. Will we always be the exception?

[Don Zeko]

Originally Posted by sugarkang

Looks like someone's been reading more economics, but still can't see the forest from the trees. Some questions you ought to ask yourself:

1. What does it mean for a currency to be debased?
2. Why is the dollar the exception?
3. Will we always be the exception?

If you want to have a conversation about this, why don't you tell me what you actually think and what's wrong with my argument instead of snottily asserting your intellectual superiority? Until you do that, I don't see much point in answering your random questions.

[sugarkang]

Originally Posted by Don Zeko

If you want to have a conversation about this, why don't you tell me what you actually think and what's wrong with my argument instead of snottily asserting your intellectual superiority? Until you do that, I don't see much point in answering your random questions.

My questions weren't random. I'm sorry you thought my questions "snotty," but it seems that my crime was to overestimate your intelligence despite the fact that you habitually underestimate mine.

1. Paper money is fiat. Originally, paper served as receipts for gold. We had this conversation months ago. If the amount of gold stays the same, but the number of dollars goes up, then each dollar is worth less.

2. Since we went off the gold standard and the Saudis accepted dollars as if they were still backed by gold, and Asia accepted dollars as the trade currency, fiat became "as good as gold." The reason we aren't Weimar is because people accept our dollars. If the people believe the emperor wears clothes, it's true. Recent footage of North Korea is proof. People are just as delusional here; the difference is in the manifestations.

3. China sees that we're debasing our currency. And if that's not the reason for the recent move, then it knows that we're quite likely to do so. Our massive debt necessitates it. Do you think the agreement with Japan was just a coincidence? Dollar's fine! Nothing to see!

Of course, your news sources will tell you that China is a currency manipulator. Give me a fucking break. Economics is symmetrical. There are debits and credits, and rising values on one side means falling values on the other. The news only gives you half the information so you have to fill in the blanks. China holds $1 trillion of our debt. A strong dollar makes them richer. So, if they are weakening their yuan to boost exports, it also makes their US debt holdings worth less. This is all bullshit politics and you will suck on whatever teat Charles Foster Kane wishes upon you.

Try reading Jon Huntsman's China related Wikileaks.

[miceelf]

Originally Posted by sugarkang

1. Paper money is fiat. Originally, paper served as receipts for gold. We had this conversation months ago. If the amount of gold stays the same, but the number of dollars goes up, then each dollar is worth less.

Isn't gold also fiat? Why would the worth of dollars have to be measured in how much gold it can buy rather than (say) how much bread or oil, or gunpowder?