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> Helicopter money is irreversible since it increases the monetary base of the end-users. This is inaccurate. If the government pumps $x into the economy today

by wz1000 7y ago

> Helicopter money is irreversible since it increases the monetary base of the end-users. This is inaccurate. If the government pumps $x into the economy today, tomorrow it can take $x out by levying a tax. > He also suggested that blockchain technology and digital currency opportunities allow central banks to transfer money directly to citizens’ accounts. In this case, the regulator will be technically able to limit the time during which the money can be spent. Can anyone explain what "blockchain" brings to the table here compared to traditional banking? If you want to distribute money to everyone, you want to verify real-world identities, which seems like the exact opposite of the typical use case blockchain is paraded around for.

whb07 7y ago
And a junkie can stop using drugs anytime and clean up their act. See what we both did there?
- wz1000 7y ago
  The point is that the statement in the article is just plain wrong. You are advancing quite a different argument. Some junkies do in fact clean up their act, so saying that becoming a junkie is an irreversible process is also wrong.
fbonetti 7y ago
> tomorrow it can take $x out by levying a tax. Taxes don’t take dollars out of circulation. The government spends those tax dollars immediately after collecting them. The only way the monetary base can be decreased is by the central bank unwinding its balance sheet.
- wz1000 7y ago
  Money enters the economy via government spending. Money leaves the economy through taxation. Governments don't need to tax in order to spend, they are the issuers of the currency.
  - TheSpiceIsLife 7y ago
    What do you think governments do with the dollars they acquire through taxation?
    - wz1000 7y ago
      The government doesn't need to tax you to get dollars to spend. They are the source of your dollars, they can will as many dollars into existence as they wish, subject to self-imposed limitations. Where do you think dollars come from? Why would an entity with an infinite supply of dollars need your dollars? The purpose of taxation isn't to fund government operations, its to maintain demand for dollars. https://en.wikipedia.org/wiki/Sectoral_balances https://en.wikipedia.org/wiki/Sectoral_balances
      - fbonetti 7y ago
        > The purpose of taxation isn't to fund government operations, its to maintain demand for dollars. Yes, taxation is one of the ways to create demand for an otherwise worthless fiat currency. So are legal tender laws. This still does not explain your assertion that the government destroys dollars through taxation.
      - TheSpiceIsLife 7y ago
        You didn’t answer the clear and direct question I asked.
  - fbonetti 7y ago
    > Money enters the economy via government spending. Money leaves the economy through taxation. Dollars enter the economy when the Federal Reserve creates reserves out of thin air and trades those new reserves for treasuries or other assets. Dollars are destroyed when the Federal Reserve sells off assets on its balance sheet. Taxation plays absolutely no role in this process. The Federal Reserve controls the monetary base. This would be true even if the federal government levied zero taxes. > Governments don't need to tax in order to spend, they are the issuers of the currency. Governments can earn revenue entirely from selling bonds or printing money - you're absolutely right that they don't need to tax in order to spend. However, this statement doesn't back up your assertion that governments destroy money through taxation.
generalpass 7y ago
> This is inaccurate. If the government pumps $x into the economy today, tomorrow it can take $x out by levying a tax. It is true that the statement is inaccurate, but the way to reverse is by destroying money (e.g., burning it).
- wz1000 7y ago
  That is precisely what taxation is. Taxation takes money out of the economy, government spending puts money into the economy. For all intents and purposes, government spending creates money, and taxation destroys it. The government doesn't need your tax dollars in order to spend. As the issuer of currency, it can will as much money into existence as it wants. So collecting taxes is simply a way to regulate the money supply, control inflation and provide a base level of demand for the currency.
  - generalpass 7y ago
    > That is precisely what taxation is. Taxation takes money out of the economy, government spending puts money into the economy. For all intents and purposes, government spending creates money, and taxation destroys it. > The government doesn't need your tax dollars in order to spend. As the issuer of currency, it can will as much money into existence as it wants. So collecting taxes is simply a way to regulate the money supply, control inflation and provide a base level of demand for the currency. A tax does not remove money from the money supply, it simply transfers money to the government. Taxes could be increased and government spending increased yet further, and the net result is an increase in money supply, disproving your claim because the only causal factor is what government is doing with the money supply. Similarly, in a non-fiat system, such as a gold standard or even just specie, taxation does not reduce the money supply any more than storing the money under a mattress. This is a distortion or at least a misconception of what money is. The better analysis of these considerations would be as Cantillon effects.
    - wz1000 7y ago
      The government already has an infinite supply of money for itself, by virtue of being the issuer of the currency. Money supply means the money in circulation in the non-government sector. Then by definition, taxation takes money out the economy and government spending adds money to the economy. See https://en.wikipedia.org/wiki/Sectoral_balances https://en.wikipedia.org/wiki/Sectoral_balances Discounting foreign trade, private sector surplus is exactly equal to government deficit. > Sectoral balances analysis states that as a matter of accounting, it follows that government budget deficits add net financial assets to the private sector. This is because a budget deficit means that a government has deposited more money into private bank accounts than it has removed in taxes. A budget surplus means the opposite: in total, the government has removed more money from private bank accounts via taxes than it has put back in via spending. > Therefore, budget deficits, by definition, are equivalent to adding net financial assets to the private sector; whereas budget surpluses remove financial assets from the private sector. This is represented by the identity: (G – T) = (S – I) – NX > which is > (Government sector balance) = (Private sector balance) – External sector balance > where G is government spending, T is taxes, S is savings, I is investment and NX is net exports. > The conclusion drawn from this is that private net saving is only possible when running a trade deficit if the government runs budget deficits; alternately, the private sector is forced to dis-save when the government runs a budget surplus and the trade deficit exists In the above equation, increasing T has exactly the same effect as decreasing G by the same amount.
TheColorYellow 7y ago
> Can anyone explain what "blockchain" brings to the table here compared to traditional banking? If you want to distribute money to everyone, you want to verify real-world identities, which seems like the exact opposite of the typical use case blockchain is paraded around for. Private, permissioned "blockchain"-like technologies (the kind being discussed in the enterprise market) would give you exactly the type of identity solution you need. A shared inter-bank ledger that individuals could register accounts with, which also incotporates the appropriate level of privacy and authorization, would enable seamless verification and transfer activities at scale.
- wz1000 7y ago
  Why the complexity of a "private, permissioned blockchain" compared to the traditional databases subject to periodic audits that the world already runs on, are proven to work and are conceptually much simpler? It seems like a solution in search of a problem.
  - TheColorYellow 7y ago
    It's a fair question. The answer is that systems like this - that are real in their offering and not a pipe dream - are not promoting to replace traditional databases. Blockchain is a terrible term with tons of baggage so let me describe what I mean in more detail. These solutions in my mind are better described as distributed systems that allow independent verification and audit of data and transactions from within the system itself. This is useful when the data being shared involved spans multiple entities in terms of responsibility, ownership, value, and other impacts. Rather than having to rely on other mechanisms of verification the system itself is able to provide that verifiability at scale. Essentially you're using a technology layer, which is a collection of existing concepts put together in a somewhat novel use, to disintermediate more expensive verification solutions. I think it makes a lot of sense if you examine the value chain of securities lending (from creation of the instrument, custody, to lending, custody transfer, and finally audit and compliance).

by wz1000 7y ago

whb07 7y ago

And a junkie can stop using drugs anytime and clean up their act. See what we both did there?

wz1000 7y ago
The point is that the statement in the article is just plain wrong. You are advancing quite a different argument. Some junkies do in fact clean up their act, so saying that becoming a junkie is an irreversible process is also wrong.

fbonetti 7y ago

> tomorrow it can take $x out by levying a tax. Taxes don’t take dollars out of circulation. The government spends those tax dollars immediately after collecting them. The only way the monetary base can be decreased is by the central bank unwinding its balance sheet.

wz1000 7y ago
Money enters the economy via government spending. Money leaves the economy through taxation. Governments don't need to tax in order to spend, they are the issuers of the currency.
- TheSpiceIsLife 7y ago
  What do you think governments do with the dollars they acquire through taxation?
  - wz1000 7y ago
    The government doesn't need to tax you to get dollars to spend. They are the source of your dollars, they can will as many dollars into existence as they wish, subject to self-imposed limitations. Where do you think dollars come from? Why would an entity with an infinite supply of dollars need your dollars? The purpose of taxation isn't to fund government operations, its to maintain demand for dollars. https://en.wikipedia.org/wiki/Sectoral_balances https://en.wikipedia.org/wiki/Sectoral_balances
    - fbonetti 7y ago
      > The purpose of taxation isn't to fund government operations, its to maintain demand for dollars. Yes, taxation is one of the ways to create demand for an otherwise worthless fiat currency. So are legal tender laws. This still does not explain your assertion that the government destroys dollars through taxation.
    - TheSpiceIsLife 7y ago
      You didn’t answer the clear and direct question I asked.
- fbonetti 7y ago
  > Money enters the economy via government spending. Money leaves the economy through taxation. Dollars enter the economy when the Federal Reserve creates reserves out of thin air and trades those new reserves for treasuries or other assets. Dollars are destroyed when the Federal Reserve sells off assets on its balance sheet. Taxation plays absolutely no role in this process. The Federal Reserve controls the monetary base. This would be true even if the federal government levied zero taxes. > Governments don't need to tax in order to spend, they are the issuers of the currency. Governments can earn revenue entirely from selling bonds or printing money - you're absolutely right that they don't need to tax in order to spend. However, this statement doesn't back up your assertion that governments destroy money through taxation.

generalpass 7y ago

> This is inaccurate. If the government pumps $x into the economy today, tomorrow it can take $x out by levying a tax. It is true that the statement is inaccurate, but the way to reverse is by destroying money (e.g., burning it).

wz1000 7y ago
That is precisely what taxation is. Taxation takes money out of the economy, government spending puts money into the economy. For all intents and purposes, government spending creates money, and taxation destroys it. The government doesn't need your tax dollars in order to spend. As the issuer of currency, it can will as much money into existence as it wants. So collecting taxes is simply a way to regulate the money supply, control inflation and provide a base level of demand for the currency.
- generalpass 7y ago
  > That is precisely what taxation is. Taxation takes money out of the economy, government spending puts money into the economy. For all intents and purposes, government spending creates money, and taxation destroys it. > The government doesn't need your tax dollars in order to spend. As the issuer of currency, it can will as much money into existence as it wants. So collecting taxes is simply a way to regulate the money supply, control inflation and provide a base level of demand for the currency. A tax does not remove money from the money supply, it simply transfers money to the government. Taxes could be increased and government spending increased yet further, and the net result is an increase in money supply, disproving your claim because the only causal factor is what government is doing with the money supply. Similarly, in a non-fiat system, such as a gold standard or even just specie, taxation does not reduce the money supply any more than storing the money under a mattress. This is a distortion or at least a misconception of what money is. The better analysis of these considerations would be as Cantillon effects.
  - wz1000 7y ago
    The government already has an infinite supply of money for itself, by virtue of being the issuer of the currency. Money supply means the money in circulation in the non-government sector. Then by definition, taxation takes money out the economy and government spending adds money to the economy. See https://en.wikipedia.org/wiki/Sectoral_balances https://en.wikipedia.org/wiki/Sectoral_balances Discounting foreign trade, private sector surplus is exactly equal to government deficit. > Sectoral balances analysis states that as a matter of accounting, it follows that government budget deficits add net financial assets to the private sector. This is because a budget deficit means that a government has deposited more money into private bank accounts than it has removed in taxes. A budget surplus means the opposite: in total, the government has removed more money from private bank accounts via taxes than it has put back in via spending. > Therefore, budget deficits, by definition, are equivalent to adding net financial assets to the private sector; whereas budget surpluses remove financial assets from the private sector. This is represented by the identity: (G – T) = (S – I) – NX > which is > (Government sector balance) = (Private sector balance) – External sector balance > where G is government spending, T is taxes, S is savings, I is investment and NX is net exports. > The conclusion drawn from this is that private net saving is only possible when running a trade deficit if the government runs budget deficits; alternately, the private sector is forced to dis-save when the government runs a budget surplus and the trade deficit exists In the above equation, increasing T has exactly the same effect as decreasing G by the same amount.

TheColorYellow 7y ago

> Can anyone explain what "blockchain" brings to the table here compared to traditional banking? If you want to distribute money to everyone, you want to verify real-world identities, which seems like the exact opposite of the typical use case blockchain is paraded around for. Private, permissioned "blockchain"-like technologies (the kind being discussed in the enterprise market) would give you exactly the type of identity solution you need. A shared inter-bank ledger that individuals could register accounts with, which also incotporates the appropriate level of privacy and authorization, would enable seamless verification and transfer activities at scale.

wz1000 7y ago
Why the complexity of a "private, permissioned blockchain" compared to the traditional databases subject to periodic audits that the world already runs on, are proven to work and are conceptually much simpler? It seems like a solution in search of a problem.
- TheColorYellow 7y ago
  It's a fair question. The answer is that systems like this - that are real in their offering and not a pipe dream - are not promoting to replace traditional databases. Blockchain is a terrible term with tons of baggage so let me describe what I mean in more detail. These solutions in my mind are better described as distributed systems that allow independent verification and audit of data and transactions from within the system itself. This is useful when the data being shared involved spans multiple entities in terms of responsibility, ownership, value, and other impacts. Rather than having to rely on other mechanisms of verification the system itself is able to provide that verifiability at scale. Essentially you're using a technology layer, which is a collection of existing concepts put together in a somewhat novel use, to disintermediate more expensive verification solutions. I think it makes a lot of sense if you examine the value chain of securities lending (from creation of the instrument, custody, to lending, custody transfer, and finally audit and compliance).