T
tands
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"Both Bernanke and Geithner have pointed out that if every other country is going to save in dollars, the U.S. has to run a deficit in dollars."
I do understand all of this, the debts get transferred to obscure institutions and the government simply buys the debt by printing money (electronic transfers). This happened with Q.E." However, a government that is sovereign with respect to its own fiat currency bears no resemblance at all to a household. Such a government creates the money we all use, either physically on a printing press or, more importantly, electronically in the accounts of financial institutions.
Licence to print money
JohnRoberts said:While we are on a bad trajectory wrt spending, we can't cut our way to growth. We need to promote GDP growth, and not with Keynesian borrowing and spending (while infrastructure spending appears to be on the menu). I am optimistic about stopping the growth of regulation and tax reform. Both of these could help GDP growth. GDP growth will increase tax revenue to reduce deficits and debt.
The second time was during Reagan beginning in 1981:For starters, economic development was facilitated by a supportive culture—one which placed confidence in industrialists and businessmen and refused to permit government to interfere in their efforts. Most Americans embraced the principles of laissez faire economics, which argued that economic forces should be allowed to work themselves out with maximum freedom and minimal government interference...State laws that attempted to regulate the workplace, such as restrictions on work hours and safety requirements, were repeatedly struck down by state courts with the argument that they violated the rights of employers and employees to enter into contracts freely.
In particular, these approaches fail to reveal the impact of this particular form of economic growth on those at the bottom of the economic ladder... The same economy that gave Carnegie, Rockefeller, and Morgan the opportunity to amass the largest fortunes in the history of the world also required unskilled industrial laborers to work an average of 60 hours per week for 10 cents an hour.
The period's label, "Gilded Age," comes close to capturing the juxtaposition of enormous wealth alongside crushing poverty.
If anything, the data since WW2 shows that GDP growth is most strongly correlated to periods where the progressive tax rates and spending are higher.Hence, what evidence there is suggests there to be a correlation between lower taxes and LOWER revenues, not HIGHER revenues as suggested by supply-siders. There may well be valid arguments in favor of tax cuts. But higher tax revenues does not appear to be one of them.
According to the graph and second table, the GDP reached a high 10-year growth rate of 36.4% from 1983 to 1993. However, it reached higher highs of 37.9 from 1991 to 2001, 47.3% from 1947 to 1957, and 50.3% from 1959 to 1969. In fact, the above graph shows that the 10-year growth rate in the GDP has been relatively stable since 1965 to 1975 though it began to drop in 2008 and is projected to stay weak through 2021. Hence, these figures don't provide any strong evidence that the Reagan tax cuts permanently affected the GDP one way or the other.
Increases for infrastructure spending will have a relatively large multiplier as well, exactly because these are expenditures for goods and services. To the extent that most of the input (concrete, labor) is domestically sourced, then on the first round impact, the increase in GDP is almost dollar for dollar (I’ve suppressed the marginal propensity to import in the above calculations to simplify the algebra and to provide the clearest intuition).
The government borrows the money to pay debt service. They in fact want more inflation than we are getting so printing more money would be an easy way to create inflation, but could have other unintended consequences.DaveP said:I do understand all of this, the debts get transferred to obscure institutions and the government simply buys the debt by printing money (electronic transfers). This happened with Q.E.
What I was referring to were the debt repayments the US makes Quote:-
In 2015, the U.S. spent $223 billion, or 6 percent of the federal budget, paying for interest on the debt. In recent years, interest rates have been at historic lows. As they return closer to normal levels, the amount the government spends on interest will rise substantially.
I would be interested to know if this gets paid from Tax returns or by printing money.
DaveP
DaveP said:In 2015, the U.S. spent $223 billion, or 6 percent of the federal budget, paying for interest on the debt. In recent years, interest rates have been at historic lows. As they return closer to normal levels, the amount the government spends on interest will rise substantially.
I would be interested to know if this gets paid from Tax returns or by printing money.
DaveP
DaveP said:The UK has a stricter approach to borrowing for the deficit, as far as I know, they only print money/Q.E. in times of crisis like the credit crunch. If we were to print money all the time, then the currency would collapse. I guess the US can get away with it because your economy is that much larger.
DaveP
The UK has a stricter approach to borrowing for the deficit, as far as I know, they only print money/Q.E. in times of crisis like the credit crunch. If we were to print money all the time, then the currency would collapse. I guess the US can get away with it because your economy is that much larger.
Time has told Japan that QE (first pillar) is rather unsuccessful if not accompanied by massive public spending (second pillar). And it has pretty much failed so far because governments can't possibly force companies to invest or raise wages (third pillar). The typical remedy for the last pillar is corporate taxation, which is one of the highest inCountries all around the world have done this - Europe, Japan.
Time will tell how it works out.
The traditional task of central banks is to print just enough new money to support the GDP growth (low single digit). Too much money we get inflation as more money chases the same goods, not enough money we get deflation as less money for the same amount of goods causes prices to drop. Economic activity can fall off as people wait, expecting prices to fall further (this is called the deflationary spiral).DaveP said:The UK has a stricter approach to borrowing for the deficit, as far as I know, they only print money/Q.E. in times of crisis like the credit crunch. If we were to print money all the time, then the currency would collapse. I guess the US can get away with it because your economy is that much larger.
DaveP
DaveP said:When debt repayments get very large you end up servicing them rather than spending on essentials.
DaveP said:What the international audience saw was some very nasty rioting ( I understand that the worst of this was caused by the Anarchist movement which seems to exist in every country). Windows smashed with pre-prepared concrete blocks carried in their back packs (sky news). A car set on fire and way too many journalists and photographers carefully recording it all. Do you not think that the rioters are using this naive professional audience?
DaveP said:From what I've read in this forum, the American system of Congress and Senate has so many checks and balances that they act as a safeguard. As this President has upset so many on both sides of the house, I think this must limit his more extreme options.
DaveP said:Listing all these issues is not evidence that the US is taking the world to hell in a handcart, it is evidence of liberal unease sure, but other points need to be mentioned for balance. The most important issue is the confrontation of China and this again may be part of a deal making strategy, but its too early to say as yet.
DaveP
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