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And debt is an intergenerational tax that fully offsets your argument. The young didn’t run deficits.
by dd36 8y ago
And debt is an intergenerational tax that fully offsets your argument. The young didn’t run deficits.
- WalterBright 8y agoWith a fiat money system, there's no requirement to ever pay it off. It isn't like credit card debt. The central bank just issues more money.
- jimnotgym 8y agoExcept in the UK we have a government who think that you need to run the economy like a household budget. They have been trying to cut spending to reduce debt since 2010. This has decimated public services, yet the debt is still there and deepening! A course on Modern Monetary Theory wouldn't go amiss...
- dd36 8y agoYes it is like a credit card. You have to make payments and it reduces your cash flow. The Federal Reserve prints money not the government. And payments aren’t made with printed money.
- WalterBright 8y agoIn modern fiat money, the money isn't printed. It's created by issuing bonds and then counting those bonds as an asset. The money is created when the bank loans out money based on those bond assets. If you believe it needs to be ever paid back, it hasn't been paid back since 1914. It just grows ever larger. The initial 1914 version pegged the fiat money to gold. Like all pegging systems, they eventually collapse catastrophically, and this one did in 1929.
- dd36 8y agoI disagree with the theory that we can grow our debt forever without consequence. I never advocated pegging to anything. Private banks create money through lending, correct. Lending is constrained by the supply of creditworthy customers. Money is not issued by decree by the Federal Reserve or the government.
- crdoconnor 8y agoDeficits are not an intergenerational tax. They are funded by issuing bonds, which are assets that will get passed down through the generations. There is not really any such thing as an inter-generational wealth transfer. There are transfers from poor to rich that the rich are (successfully) scapegoating old people for.
- dd36 8y agoThe bonds/loans are spent and have to be repaid with future revenue. A bond is a liability to the issuer not an asset. There is a transfer and it’s current rich from future rich.
- crdoconnor 8y ago>A bond is a liability to the issuer not an asset. From the issuer's (government) perspective it is a liability. From society's perspective it is both a liability and an asset.
- dd36 8y agoIf it’s used to invest then whatever is purchased is the offsetting asset. Sadly, it’s being used to fund current operations which has no offsetting asset. The offset is retained earnings. That can and needs to be fixed. It’s how state governments run and they do a lot of investing.
- crdoconnor 8y agoThere's nothing sad about using it to heal the sick, house or feed the poor. Moreover, there's not necessarily anything "good" about having taxes pay for operational costs if those operational costs are cluster bombs on yemeni children. There's not even necessarily anything intrinsically good about paying back those bonds in dollars that are of equal or greater value. Sometimes (e.g. in times of great wealth inequality) letting inflation eat huge chunks out of the value of outstanding bonds is the best course of action for society as a whole.
- hn0 8y agoIt doesn't fully offset it. Avoiding debt by not investing leads to lower future growth prospects, resulting in opportunity loss. Debt is contractual and can be restructured.
- dd36 8y agoDebt isn’t being used to invest. It’s being used to fund current operations. Otherwise, yes, using debt to finance investment is a good thing. That isn’t what’s happening at Federal level.