Re: The budget deficit creates wealth
- From: "The Trucker" <mikcob@xxxxxxxxxxx>
- Date: Sat, 28 Oct 2006 16:45:29 -0700
"S. Doo" <none@xxxxxxxxxxxx> wrote in message
news:ot64k2ppmkm0jsf3nij9gkltpmebphafmj@xxxxxxxxxx
On Fri, 27 Oct 2006 00:01:35 +0200, Herman Jurjus <h.jurjus@xxxxxxxxx>
wrote:
royls@xxxxxxxxx wrote:
[snip, snip, snip, snip]
Garbage .... Paying back the debt only led to the Great Depression
It did nothing of the kind.
There were many causes.
The Treasury's paying off its bonds has no effect on the money
suppply. For every $1,000 bodn it pays off it collects $1,000 in
money from taxpayers, and pays the same $1,000 to a bond holder in
exchange for the bond. Net change in money held by the public = $0.
If you assume that the $1,000 came from a tax then you are correct.
But if the money came from the Easter Bunny (created) then you
are wrong. The elected government calls money into existence
when it spends on war or whatever. The Fed creates this money
on command and charges a small interest charge which will be refunded
to the government after taxation and the sale of T-Bills are employed
to repay the short term debt. This is how BASE money is created.
The US govt's role in starting the Depression and making it ever worse
through 1933 was the Fed's repeated increasing of interest rates in
the face of increaing economic weakness -- in no small part to
maintain the gold parities required by the gold standard. The more
tightly a nation was wed to the gold standard, the worse it's
experience during the Depression.
That is probably true enough.
The Fed does not increase interest rates by having the Treasury redeem
it's debt. ;)
The Fed can increase any interest rates as it wants by selling bonds or by
increasing the discount rate.
(In fact, rather the opposite -- the Fed increases rates by selling
gov't securities *to* the public, increasing their outstanding amount,
in exchange for the money the public pays it for them, which is then
removed from circulation, reducing the money supply, making money
"tighter" and rates higher. It's called "open market operations".)
And the Fed can also do the opposite: Create clearing balances and
buy bonds or T-bills on the open market. In either case (bonds or
T-Bills) the money supply (defined as the spendable non interest bearing
debt) is increased.
One can read the whole tale from Ben Bernanke himself, whom we may
presume knows a little about the Fed and its history.
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm
Notice how he omits any mention at all of the gov't paying back its
debt.
A man aware of the current government's modus operandi.
because the US Federal Reserve money system _defines_ money as debt.
[snip, snip, snip, snip]
Not true at all. The change in my pocket sure is "US money" but is not
a debt of anyone.
It is not the debt of anyone because it is the debt of everyone. The "market"
(who is all of us) owes you some stuff for those coins.
So either the "definition" is refuted right there, or this would seem
to be one of those definitions that applies except when it doesn't.
;-)
The definition is reasonably accurate.
Moreover, the $5 "federal reserve note" bill I carry in my pocket
isn't a debt of anybody's in any meaningful sense either.
It is the debt of all.
If it was a real debt, the issuer would have an obligation to redeem
it to pay its debt off at some point -- the debt could be redeemed by
the holder of the debt instrument.
But what can we redeem our $5 bills for at the Fed? Exactly *what*
does the Fed as a debtor *owe* us holders of them on them?
Yet you can "redeem" the $5 for a hamburger or whatever else you
might want that is perceived to be worth $5 by the "seller".
If we do present our $5 bills to the Fed for redemption of the debt it
owes us represented by then, but it never, ever, pays us anything on
them in settlement of its debt, and says it never will, just refuses,
will it be in default, like a *real* debtor would be? ;-)
Actually: If you do not "redeem" some of this debt by discharging your
tax liabilities then the government will take your real stuff. The money
is "redeemed" and you pay for government services with the money.
If not, then that leaves both currency and coins out of the "money is
defined as debt" definition -- two rather singificant exceptions.
Not really.
(BTW, if anyone disagrees with these exceptions, the Fed has huge
informational and eductational presences on the web, so instead of
arguing just post the a link to a Fed web site where it gives the
particular...
Authoritarianism???
the US Federal Reserve money system _defines_ money as debt
... definition in its own words.)
Just curious: how else would you suggest they define money?
*People* define money by what they choose to use for the combined
"medium of exchange/measure of value/store of value" purpose.
Government defines money as that which it will accept in payment of
tax liabilities. Ithaca hours need not apply.
Central banks like the Fed actually have several definitions of money
(base money, MZ ... M3, etc.) used for different purposes, derived
from watching how people behave in their use of the components. The
Fed changes it use of the definitions accordingly. For instance,
lately it's pretty much abandoned M3 ....
What has actually happened is that the Fed and the Bush Republicans
are very pleased to create more fiat money and watch it settle quite
harmlessly into the bank accounts of the rich. They and their kids will
be "redeeming" this money for a long, long time.
--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org
.
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- The budget deficit creates wealth
- From: Jacques Gambu
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- Re: The budget deficit creates wealth
- From: Herman Jurjus
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- From: S . Doo
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