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>they are representative of a debt of the Federal Reserve NO! NO! They represent the debt of the Government. Just this misunderstanding invalidates the rest o

>they are representative of a debt of the Federal Reserve NO! NO! They represent the debt of the Government. Just this misunderstanding invalidates the rest of your argument. >If however, the Chinese government is channeling it into loans for highly effective infrastructure projects such as railways, aqueducts, etc. You're asking the government to run a more-deficit budget. 10 times more, from your previous comments. What will this money be used for? Labour and raw materials. Since there is only finite amount of these in their country, The government will essentially be paying more salaries to get the same job done, more money for the same resources. If you haven't figured it out yet, THIS IS INFLATION.

narrator 11y ago
Treasury bills and notes are debts of the government. They pay interest. Federal Reserve Notes(FRN) are debt of the Federal Reserve and they pay no interest. Do you want me to go dig out the Federal Reserve Act and quote line and verse? Debts of the government are payable in FRNs. FRNs are debts. One FRN can be redeemed for exactly one FRN. Why do people build a road or a factory? When Elon Musk builds a factory for batteries in Nevada he is doing it to lower the per unit cost of battery production due to increased efficiency. When someone paves a road to their house they are doing so to lower the cost in vehicle maintenance and time to traverse that road. Capital is created to lower costs. You fall for the Keynesian fallacy that capital investment is just "spending"; that creating capital is economically equivalent to paying people to take a whole bunch of raw materials and burn them in a bonfire. Thus, you cannot distinguish between productive capital investment ,which lowers prices, and unproductive uses of resources, which raises prices. You probably think that war is good for the economy because it increases "spending".
- mohanmcgeek 11y ago
  >One FRN can be redeemed for exactly one FRN. Seriously? Read your comment again to understand it's absurdity. I don't wish to sound belligerent, but You simply don't understand money at all. You're suggesting increased government spending on infrastructure. But you somehow think the government can do that without borrowing money either from the Central Bank or the people. If this were possible, wouldn't all governments be doing this already? If the Central Bank asks the Treasury to print more money than the amount of assets it holds, (assets = Treasury bonds), it will either be (a) no longer capable of fulfilling it's obligations or (b) effectively devaluating the currency and thereby increasing the inflation. Also, Bank notes are not "debt". They're transferable IOUs. I don't fall in any economic-theory-based fallacies as you're suggesting. You think government can make money out of thin air and I am telling you that it cannot. >You probably think that war is good for the economy because it increases "spending". Unlike you, I do not ideologically believe in some economic theory.

narrator 11y ago

Treasury bills and notes are debts of the government. They pay interest. Federal Reserve Notes(FRN) are debt of the Federal Reserve and they pay no interest. Do you want me to go dig out the Federal Reserve Act and quote line and verse? Debts of the government are payable in FRNs. FRNs are debts. One FRN can be redeemed for exactly one FRN. Why do people build a road or a factory? When Elon Musk builds a factory for batteries in Nevada he is doing it to lower the per unit cost of battery production due to increased efficiency. When someone paves a road to their house they are doing so to lower the cost in vehicle maintenance and time to traverse that road. Capital is created to lower costs. You fall for the Keynesian fallacy that capital investment is just "spending"; that creating capital is economically equivalent to paying people to take a whole bunch of raw materials and burn them in a bonfire. Thus, you cannot distinguish between productive capital investment ,which lowers prices, and unproductive uses of resources, which raises prices. You probably think that war is good for the economy because it increases "spending".

mohanmcgeek 11y ago
>One FRN can be redeemed for exactly one FRN. Seriously? Read your comment again to understand it's absurdity. I don't wish to sound belligerent, but You simply don't understand money at all. You're suggesting increased government spending on infrastructure. But you somehow think the government can do that without borrowing money either from the Central Bank or the people. If this were possible, wouldn't all governments be doing this already? If the Central Bank asks the Treasury to print more money than the amount of assets it holds, (assets = Treasury bonds), it will either be (a) no longer capable of fulfilling it's obligations or (b) effectively devaluating the currency and thereby increasing the inflation. Also, Bank notes are not "debt". They're transferable IOUs. I don't fall in any economic-theory-based fallacies as you're suggesting. You think government can make money out of thin air and I am telling you that it cannot. >You probably think that war is good for the economy because it increases "spending". Unlike you, I do not ideologically believe in some economic theory.