Re: Bush busts Social Security with massive deficits

From: Igor (jjweatherby_at_houston.rr.com)
Date: 10/03/04 

Date: Sun, 03 Oct 2004 19:14:31 GMT

William F Hummel wrote:

>>Crowding out refers to bonds sales used to finance
>>deficits pushing up interest rates. This happens because the supply of
>>bonds in increased. This causes bond market prices to drop which implies
>>interest rates rise. Essentially financing a deficit raises interest
>>rates. The argument is called crowding out because so economist argue
>>this weakens the stimulus from fiscal policy. As interest rise
>>investment is depressed. In other words, Government investment crowds
>>out private investment. This offsets the rise in consumption.
>
>
> No. "Crowding out" refers to the government preempting loanable funds
> by offering its own debt securities. In principle, that would create
> a shortage of loanable funds within the private sector economy.
> However it doesn't occur to any noticeable extent because the Treasury
> sells its debt securities in small amounts frequently rather than
> large amounts infrequently.
>

You can make up your own terms all you want. Don't expect trained
economist to agree with you. When you speak of loanable funds you speak
of a completely different model. Any one trained in economics knows
this. Any trained economist would know you are speaking of a completely
different model.

> The additional supply of Treasury bonds, if sold in long-term
> maturities could temporarily increase long-term interest rates, but
> would not effect on short-term rates.

You really think the price of Bonds has no effect on the interest rate?

>Your scenario about the
> deficit raising interest rates is simply not consistent with the
> facts. In truth, crowding out in financial terms is a myth, the kind
> of dogma that pervades so much of academic economics.

Prove it is a myth. Don't show me a simple correlation and assume it
implies causation. Any statistics prof will teach a student on day one
correlation does not imply causation. Show me how you have corrected for
bias. Show me what data you used to find the correlation. Prove you used
the correct data and used the right method. You just can't throw up a
number and say it disproves something. Without references, I do not even
know if you are making up the correlation or simply misunderstood
something you read.

There is no dogma. The statements are based on well thought out models
and we review the evidence. Economist are trained how to collect and
analyze data. We do realize when the evidence really disproves
something. The simple correlation you provided does not do this. I can
not even begin to evaluate your statements about the theory being
disproven. I do not know your methods or the data you used. You give no
reference to any journal where the results are published.

Relevant Pages

  • Re: Back to the Moon
    ... >most money, yes. ... >>economics you'd know that the Smoot-Hawley Tariff was, ... >>>You are running an enormous deficit in your balance of payments. ... Dude, you've inadvertently taken the right-wing position. ...
    (misc.writing)
  • Re: Chinese to dump their dollars
    ... I've never taken a course in economics. ... Assume the US dollar is valued right but the currency ... Then let's say the Chinese start buying up US treasury bonds like there's no ...
    (rec.crafts.metalworking)
  • Re: Chinese to dump their dollars
    ... I've never taken a course in economics. ... Assume the US dollar is valued right but the currency ... Then let's say the Chinese start buying up US treasury bonds like there's no ...
    (rec.crafts.metalworking)
  • Re: Budget deficits and GDP
    ... international economics courses, so ... of the deficit is a major concern and WHY there is a deficit. ... transfers assets from the middle class to the very wealthy. ... discretion, the remedy is not to take it from ...
    (sci.econ)
  • Re: Tax Cuts and economic growth and annual federal deficit (Investors Business Daily)
    ... understands economics to take any of this seriously? ... Let's just start with the calculation of the deficit. ... it doesn't include the Social Security surplus that is used to offset the ... I believe the annual surplus from social security tax has been ...
    (rec.music.artists.springsteen)
Quantcast