5 ms·

Economists don't want to address the elephant in the room: whenever money is created, by private interests, is given to governments and society as debt. So, the

by Torai 9y ago

Economists don't want to address the elephant in the room: whenever money is created, by private interests, is given to governments and society as debt. So, the way economy is structured now, it's by design a transfer of wealth => resources => power from the public to the powerful.

JumpCrisscross 9y ago
> whenever money is created, by private interests, [it] is given to governments and society as debt The U.S. government, in 2016, issued $1.4 trillion of debt [1] and took in almost $3 trillion in taxes [2]. I'm not sure I see your point. [1] https://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_ann2016.pdf https://www.treasurydirect.gov/govt/reports/pd/feddebt/fedde... [2] http://federal-budget.insidegov.com/l/119/2016 http://federal-budget.insidegov.com/l/119/2016
- muninn_ 9y ago
  But that $3 trillion is all spent. Is it not?
  - JumpCrisscross 9y ago
    > But that $3 trillion is all spent. Is it not? And the $1.9 trillion isn't? At the micro level, economies are just transactions. People (e.g. natural persons, companies and governments) buy goods and services with money or credit. Credit creates debt. "Money" would still exist if we zeroed out debt, e.g. gold-based economies of yore, but that destroys the double-entry ledger system [1] that serves as a a distributed error-correcting mechanism. It also decouples the currency from economic growth, which produces all kinds of nasty side effects. [1] https://en.wikipedia.org/wiki/Double-entry_bookkeeping_system https://en.wikipedia.org/wiki/Double-entry_bookkeeping_syste...
  - paulpauper 9y ago
    It want to capital infusions for major banks and QE-related asset swaps. It's not like money was printed and given to people.
    - JumpCrisscross 9y ago
      > It want to capital infusions for major banks and QE-related asset swaps The $3 trillion figure is from the 2016 budget. I don't believe any capital was infused into banks à la TARP [1] last year. Also, QE refers to the Federal Reserve, instead of just buying Treasury bonds from banks, buying a broader portfolio of assets. This is done off the Fed's balance sheet and does not come out of tax proceeds. [1] https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program
- roenxi 9y ago
  The argument boils down to this: 1) The economy is a system with some amount of money in it. 2) The money is measured (see; M2 [1]). 3) The amount of money appears to be increasing extremely quickly (exponentially, in fact). 4) The new money is not being expressed in wages. The government doesn't appear to be pushing it into the economy directly because they are taking on debt instead of printing money. If you accept this frame, then the follow up is that someone is being given a lot of money, and the question is why not change the rules so that the newly created money is given no-strings-attached to the government? [1] https://www.federalreserve.gov/RELEASES/h6/Current/default.htm https://www.federalreserve.gov/RELEASES/h6/Current/default.h...
  - JumpCrisscross 9y ago
    > why not change the rules so that the newly created money is given no-strings-attached to the government? Argentina, Brazil and various countries tried this. TL; DR Politicians like to print money to hand out favors [1]. An independent central bank, governed by and reportable to elected officials at an arm's length, turns out to be a better solution. Note that flat wages with job growth doesn't comport with your fourth observation. More wages were paid in June than in May [2], and in May than in April [3], et cetera. There were just more people earning them. (I'm not suggesting stalled wage growth, especially relative to upward-marching productivity, isn't an area of concern. It's just that history shows it's better to address these issues through fiscal, versus monetary, policy.) [1] https://people.ucsc.edu/~walshc/MyPapers/cbi_newpalgrave.pdf https://people.ucsc.edu/~walshc/MyPapers/cbi_newpalgrave.pdf [2] http://www.reuters.com/article/us-usa-economy-idUSKBN18T0BT http://www.reuters.com/article/us-usa-economy-idUSKBN18T0BT [3] http://www.reuters.com/article/us-usa-economy-idUSKBN1810BZ http://www.reuters.com/article/us-usa-economy-idUSKBN1810BZ
    - roenxi 9y ago
      I'll offer a point of clarification - and I do agree that the situation is a lot more complex than 4 dot points. That said; point 4 can stand if (wages growth + unemployment drop) < (increase in the M2). I haven't checked it in America, but in Australia the M2 is growing at about 8% p.a. I'm confident assuming total wages aren't growing that fast, because it would be very visible on the ground (people getting jobs left right and centre). The new money being created is mostly going elsewhere vs wages.
- paulpauper 9y ago
  Agree... most of the concern over money printing are overblown. The M2 money supply growth is in-line with historical trends. The hyperinflation many in 2008-2010 predicted failed to happen. Look at it this way: someone who shorted the treasury bond market in 2000 anticipating debt-related inflation would have lost substantial money despite the national debt rising considerably since then. That's not an invitation for wasteful spending, but it means that concerns over the debt are almost always overblown.
  - digi_owl 9y ago
    Public debt, yes. Private debt on the other hand...
johnminter 9y ago
The last phrase is the key. The economists in the Austrian school explain: Money is simply a proxy for goods and services. It solves the "coincidence of wants" problem. When the Fed and other similar agencies print money unbacked by goods and services, they immediately devalue the currency because now each unit (dollar) represents a smaller amount of goods and services. But when this "infusion" hits the big banks, the effect has not been felt by the full market so the rich and powerful benefit before the devaluation has been felt by the market. And the general public pays for the fraud.
- tnone 9y ago
  I've long thought economics is the art of controlling an unstable feedback mechanism into spiraling out of control slow enough that generational amnesia prevents greater society from noticing.
  - tomrod 9y ago
    Not a bad take.
  - digi_owl 9y ago
    Sounds like you would find Steve Keen's work interesting then. https://en.wikipedia.org/wiki/Steve_Keen https://en.wikipedia.org/wiki/Steve_Keen

by Torai 9y ago

JumpCrisscross 9y ago

> whenever money is created, by private interests, [it] is given to governments and society as debt The U.S. government, in 2016, issued $1.4 trillion of debt [1] and took in almost $3 trillion in taxes [2]. I'm not sure I see your point. [1] https://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_ann2016.pdf https://www.treasurydirect.gov/govt/reports/pd/feddebt/fedde... [2] http://federal-budget.insidegov.com/l/119/2016 http://federal-budget.insidegov.com/l/119/2016

muninn_ 9y ago
But that $3 trillion is all spent. Is it not?
- JumpCrisscross 9y ago
  > But that $3 trillion is all spent. Is it not? And the $1.9 trillion isn't? At the micro level, economies are just transactions. People (e.g. natural persons, companies and governments) buy goods and services with money or credit. Credit creates debt. "Money" would still exist if we zeroed out debt, e.g. gold-based economies of yore, but that destroys the double-entry ledger system [1] that serves as a a distributed error-correcting mechanism. It also decouples the currency from economic growth, which produces all kinds of nasty side effects. [1] https://en.wikipedia.org/wiki/Double-entry_bookkeeping_system https://en.wikipedia.org/wiki/Double-entry_bookkeeping_syste...
- paulpauper 9y ago
  It want to capital infusions for major banks and QE-related asset swaps. It's not like money was printed and given to people.
  - JumpCrisscross 9y ago
    > It want to capital infusions for major banks and QE-related asset swaps The $3 trillion figure is from the 2016 budget. I don't believe any capital was infused into banks à la TARP [1] last year. Also, QE refers to the Federal Reserve, instead of just buying Treasury bonds from banks, buying a broader portfolio of assets. This is done off the Fed's balance sheet and does not come out of tax proceeds. [1] https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program
roenxi 9y ago
The argument boils down to this: 1) The economy is a system with some amount of money in it. 2) The money is measured (see; M2 [1]). 3) The amount of money appears to be increasing extremely quickly (exponentially, in fact). 4) The new money is not being expressed in wages. The government doesn't appear to be pushing it into the economy directly because they are taking on debt instead of printing money. If you accept this frame, then the follow up is that someone is being given a lot of money, and the question is why not change the rules so that the newly created money is given no-strings-attached to the government? [1] https://www.federalreserve.gov/RELEASES/h6/Current/default.htm https://www.federalreserve.gov/RELEASES/h6/Current/default.h...
- JumpCrisscross 9y ago
  > why not change the rules so that the newly created money is given no-strings-attached to the government? Argentina, Brazil and various countries tried this. TL; DR Politicians like to print money to hand out favors [1]. An independent central bank, governed by and reportable to elected officials at an arm's length, turns out to be a better solution. Note that flat wages with job growth doesn't comport with your fourth observation. More wages were paid in June than in May [2], and in May than in April [3], et cetera. There were just more people earning them. (I'm not suggesting stalled wage growth, especially relative to upward-marching productivity, isn't an area of concern. It's just that history shows it's better to address these issues through fiscal, versus monetary, policy.) [1] https://people.ucsc.edu/~walshc/MyPapers/cbi_newpalgrave.pdf https://people.ucsc.edu/~walshc/MyPapers/cbi_newpalgrave.pdf [2] http://www.reuters.com/article/us-usa-economy-idUSKBN18T0BT http://www.reuters.com/article/us-usa-economy-idUSKBN18T0BT [3] http://www.reuters.com/article/us-usa-economy-idUSKBN1810BZ http://www.reuters.com/article/us-usa-economy-idUSKBN1810BZ
  - roenxi 9y ago
    I'll offer a point of clarification - and I do agree that the situation is a lot more complex than 4 dot points. That said; point 4 can stand if (wages growth + unemployment drop) < (increase in the M2). I haven't checked it in America, but in Australia the M2 is growing at about 8% p.a. I'm confident assuming total wages aren't growing that fast, because it would be very visible on the ground (people getting jobs left right and centre). The new money being created is mostly going elsewhere vs wages.
paulpauper 9y ago
Agree... most of the concern over money printing are overblown. The M2 money supply growth is in-line with historical trends. The hyperinflation many in 2008-2010 predicted failed to happen. Look at it this way: someone who shorted the treasury bond market in 2000 anticipating debt-related inflation would have lost substantial money despite the national debt rising considerably since then. That's not an invitation for wasteful spending, but it means that concerns over the debt are almost always overblown.
- digi_owl 9y ago
  Public debt, yes. Private debt on the other hand...

johnminter 9y ago

The last phrase is the key. The economists in the Austrian school explain: Money is simply a proxy for goods and services. It solves the "coincidence of wants" problem. When the Fed and other similar agencies print money unbacked by goods and services, they immediately devalue the currency because now each unit (dollar) represents a smaller amount of goods and services. But when this "infusion" hits the big banks, the effect has not been felt by the full market so the rich and powerful benefit before the devaluation has been felt by the market. And the general public pays for the fraud.

tnone 9y ago
I've long thought economics is the art of controlling an unstable feedback mechanism into spiraling out of control slow enough that generational amnesia prevents greater society from noticing.
- tomrod 9y ago
  Not a bad take.
- digi_owl 9y ago
  Sounds like you would find Steve Keen's work interesting then. https://en.wikipedia.org/wiki/Steve_Keen https://en.wikipedia.org/wiki/Steve_Keen