Average household net worth declined 36% over 10 years.... (1 Viewer)

[Doctor Detroit]

If you were in charge of everything, how would you fix it?

I'd expand the public sector. Lots more government jobs at all levels, plus a guaranteed govt. job at minimum wage for anybody who wanted to work. That solves the unemployment problem and helps tighten up the labor market.

Change taxation, a lot. Eliminate corporate taxes, eliminate taxes on anyone earning less than, say, $50,000, raise taxes on the superrich. Tariffs punishing the use of offshoring and cheap labor.

Paid for, mostly, with deficit spending.

Unemployment at a 4 or 5 percent level is healthy for capitalism, it creates competition and ensures a tangible advantage in most sectors.

As a federal government employee, I think there is waste in the system and I think there is a lot less waste in federal than there is in state public sectors. Menial labor jobs are contracted, low paying positions involve mostly data entry and repetitive tasks that do not require education or much training. There is competition for these jobs now, there would be little reason IMO to create more of them just for the sake of reducing unemployment as a whole. If a government job created does not produce it is a waste of taxpayer dollars, and the benefit structure is way too costly to hire people at the lowest levels just to do it.

I would be fine in creating public sector intern jobs to clean highways, waterways, and repair school yard play equipment. Stuff like that. Jobs that college kids can do to earn some extra money while learning the value of service to something bigger than themselves. But handing government jobs to under-qualified and transient types is burdensome and hollow. The service sector has plenty of opportunities for these people, McDonalds always has jobs open for those seeking minimum wage work.

Why is 4-5% unemployment "healthy"? All it does is lower the cost of labor, and that's not exactly our economy's problem. Besides, when you have a minimum wage, the labor market isn't setting the wage floor.

Because lower rates are inflationary and throw a wrench into the economic engine as it pressures salaries. There is also a reasonable expectation that workers who are switching jobs, are unproductive and were fired, or that the business cycle does not allow for certain sectors to have excess employment.

Government jobs, IMO, should be "useful but not 'productive,'" meaning they should not compete with the private sector. I'm not terribly worried about efficiency, either, because the purpose of a guaranteed job at the lower end is mostly to distribute money. We have various forms of welfare to do that now, and we don't ask for anything in return. But most of those jobs wouldn't fall into that workfare category, anyway.

The key to all of this is understanding that deficit spending isn't harmful in and of itself. Waste really isn't really an issue, nor is taxation. We have tons of unused resources at our disposal that aren't being used, labor being the most important. No need to be super-efficient with labor - the whole idea is to spend until 100% of that resource is being used. Full employment alone solves most of our economic problems

.

I just don't agree with any of this, so I'll just leave it there.

 

[Doctor Detroit]

Went up here.

GB living in the very affordable South.

NYC didn't crash nearly as bad as everywhere else. The most steady (but ridiculously expensive) RE market in the world.

Not in top five in the world.

I think SF has actually passed it?

Hong Kong, Monaco, Geneva and of course London. I forget the other couple. NYC #1 in U.S.

 

[DiStefano]

The only thing that will get us out of the mess that we are in is to grow the economy faster. This is the slowest recovery from a recession ever. The thing about growth is this: If the USA had grown 1% less per year for the past 150 years, its standard of living would be below that of Mexico.

That applies both short and long term. However, many people seem to be very focused on things which, however laudable, are a drag on the economy. We could inject one trillion dollars into the economy if we encouraged multinational companies to bring money back home by significantly reducing taxation. But we are too focused on making them the enemy. We could increase our production of oil and gas on federal lands, probably enough to do away with foreign oil, but we are too focused on making Big Oil the villains. We could reduce the regressive taxation on poor people who get jobs, so that they view the increase of their standard of living as not worth the effort. We could say the heck with pouring government money into companies who produce energy at a much higher cost and focus on providing energy to our households and businesses at the lowest cost possible, so that they can become productive and efficient.

We could say: Grow, grow, grow.

Short and long term, that is the only thing which will provide jobs, restore the middle class, and set the stage for long term financial health. But we don't, because as a people, we have other agendas.

 

[JohnfrmCleveland]

If you were in charge of everything, how would you fix it?

I'd expand the public sector. Lots more government jobs at all levels, plus a guaranteed govt. job at minimum wage for anybody who wanted to work. That solves the unemployment problem and helps tighten up the labor market.

Change taxation, a lot. Eliminate corporate taxes, eliminate taxes on anyone earning less than, say, $50,000, raise taxes on the superrich. Tariffs punishing the use of offshoring and cheap labor.

Paid for, mostly, with deficit spending.

In your scenario, I guess a prospect negotiating salary would rather negotiate for $48,000 then $60,000.

How much tax should wealthy pay? The term 1% is ridiculous, it is the top .01% of that bucket taking home gigantic sums of money. Someone earning $500k in NYC (which is comfortable but far from sailing yachts) is coming home after tax (which is the bulk of the deduction ), 401k, insurance, etc. with about 55-60% of their salary, how much more should this person pay?

The purpose of taxation is to claw dollars back into the economy that would otherwise be lost to hoarding. Hear me out...

Remember that Economics 101 idea that production = consumption, and production also = income? If we have a $15 trillion economy, then people collectively have a $15 trillion income. If they spend 100% of that, the cycle continues - $15 trillion production next year, etc. If, on the other hand, $1 trillion is not spent, then there will only be $14 trillion spent on production, and the economy will contract to reflect this. In practice, the government has to deficit spend to make up this difference. If we run a $1.5 trillion trade deficit with China, that's $1.5 trillion of our income that's not being spent on American production - so new dollars are needed to pick up that slack. Same story for domestic savings (net savings) - if Bill Gates is adding $5 billion to his pile of ever-growing savings this year, that's $5 billion that has to be made up somewhere else. Some of that money can be clawed back by taxation. Or, we can simply choose to let Gates keep all of that money and increase our deficit accordingly.

So the level of taxation should be aimed at putting as many hoarded dollars back in play as possible. If you make $100,000 and spend all of it, you aren't the problem (especially if you buy American). If you make $500,000 and spend $400,000 if that, then your $100,000 in savings has to be made up for.

 

[JohnfrmCleveland]

The only thing that will get us out of the mess that we are in is to grow the economy faster. This is the slowest recovery from a recession ever. The thing about growth is this: If the USA had grown 1% less per year for the past 150 years, its standard of living would be below that of Mexico.

That applies both short and long term. However, many people seem to be very focused on things which, however laudable, are a drag on the economy. We could inject one trillion dollars into the economy if we encouraged multinational companies to bring money back home by significantly reducing taxation. But we are too focused on making them the enemy. We could increase our production of oil and gas on federal lands, probably enough to do away with foreign oil, but we are too focused on making Big Oil the villains. We could reduce the regressive taxation on poor people who get jobs, so that they view the increase of their standard of living as not worth the effort. We could say the heck with pouring government money into companies who produce energy at a much higher cost and focus on providing energy to our households and businesses at the lowest cost possible, so that they can become productive and efficient.

We could say: Grow, grow, grow.

Short and long term, that is the only thing which will provide jobs, restore the middle class, and set the stage for long term financial health. But we don't, because as a people, we have other agendas.

The "more growth" solution assumes that we have an infinite appetite (and ability) to consume, which I don't agree with.

Right now, let's say that all demand for goods and services is being met by 60% of the labor force, with 20% working in the public sector and 20% not employed or severely underemployed. In the future, due to automation, you can expect that 60% number to continue falling as our productivity continues to increase. So jump ahead some number of years to where all demand for goods and services is being met by only 30% of the labor force. Now, if we leave the public sector at 20%, what do you do with the unemployed 50%? How can you grow your way out of unemployment when that growth also means increasing productivity, making human labor less and less necessary in the process?

The private sector is very efficient - not only do they meet all demand, but they do it with the minimum amount of labor necessary (since labor is a cost). To have growth, you need demand. Nobody is getting hired unless and until there is a perceived need for more labor.

Besides, over the past 30 years, growth hasn't gotten the 99% anywhere. Almost all gains in real income have gone to the top 1% (or top 0.1%, whatever it is) because labor has no leverage to demand a bigger share.

 

[JohnfrmCleveland]

Why is 4-5% unemployment "healthy"? All it does is lower the cost of labor, and that's not exactly our economy's problem. Besides, when you have a minimum wage, the labor market isn't setting the wage floor.

Because lower rates are inflationary and throw a wrench into the economic engine as it pressures salaries. There is also a reasonable expectation that workers who are switching jobs, are unproductive and were fired, or that the business cycle does not allow for certain sectors to have excess employment.

I guess I don't consider a high demand for American labor a bad thing. I also don't agree that higher wages are, in and of themselves, inflationary. Higher costs can lead to higher prices, but they can also just lead to lower profit margins, too. Which is what we have been seeing over the past 30 years - the cost savings of cheap foreign labor and automation haven't always led to lower prices; very often, they have just led to higher profit margins. Companies today are making record profits, and that's largely because their labor costs are very low.

Government jobs, IMO, should be "useful but not 'productive,'" meaning they should not compete with the private sector. I'm not terribly worried about efficiency, either, because the purpose of a guaranteed job at the lower end is mostly to distribute money. We have various forms of welfare to do that now, and we don't ask for anything in return. But most of those jobs wouldn't fall into that workfare category, anyway.

The key to all of this is understanding that deficit spending isn't harmful in and of itself. Waste really isn't really an issue, nor is taxation. We have tons of unused resources at our disposal that aren't being used, labor being the most important. No need to be super-efficient with labor - the whole idea is to spend until 100% of that resource is being used. Full employment alone solves most of our economic problems

I just don't agree with any of this, so I'll just leave it there.

Understandable. After 30+ years of hearing economists and politicians preaching against deficits and debt, this is a high hurdle to get over. But keep in mind that, 30+ years and what seems like a ton of debt later, our economy is doing fine, inflation is low, and interest rates are low, which means all of their predictions have been dead wrong.

 

[Politician Spock]

Politicians have been saying "deficits don't matter" for a couple decades now. Where have you been?

 

[IvanKaramazov]

Remember that Economics 101 idea that production = consumption, and production also = income? If we have a $15 trillion economy, then people collectively have a $15 trillion income. If they spend 100% of that, the cycle continues - $15 trillion production next year, etc. If, on the other hand, $1 trillion is not spent, then there will only be $14 trillion spent on production, and the economy will contract to reflect this. In practice, the government has to deficit spend to make up this difference. If we run a $1.5 trillion trade deficit with China, that's $1.5 trillion of our income that's not being spent on American production - so new dollars are needed to pick up that slack. Same story for domestic savings (net savings) - if Bill Gates is adding $5 billion to his pile of ever-growing savings this year, that's $5 billion that has to be made up somewhere else. Some of that money can be clawed back by taxation. Or, we can simply choose to let Gates keep all of that money and increase our deficit accordingly.

So the level of taxation should be aimed at putting as many hoarded dollars back in play as possible. If you make $100,000 and spend all of it, you aren't the problem (especially if you buy American). If you make $500,000 and spend $400,000 if that, then your $100,000 in savings has to be made up for.

This is completely wrong. When Bill Gates saves money, he's investing it in firms who spend it, usually on capital. That's why economists think that saving matters so much for long-run growth.

Edit: Also, trade deficits are often a sign of a strong economy while trade surpluses are a sign of a weak economy. Countries that are experiencing a boom tend to feature consumers who buy more stuff. Some of the stuff that they buy will be imported, which automatically implies a smaller trade surplus or larger trade deficit, all else equal.

 

[Bottomfeeder Sports]

If you were in charge of everything, how would you fix it?

I'd expand the public sector. Lots more government jobs at all levels, plus a guaranteed govt. job at minimum wage for anybody who wanted to work. That solves the unemployment problem and helps tighten up the labor market.

Change taxation, a lot. Eliminate corporate taxes, eliminate taxes on anyone earning less than, say, $50,000, raise taxes on the superrich. Tariffs punishing the use of offshoring and cheap labor.

Paid for, mostly, with deficit spending.

Sure there is a certain dignity in having a job and that should be a consideration. And there is plenty of infrastructure work to do so expanding spending on that is not a bad thing either. But creating jobs just for the sake of creating jobs no matter how inefficient just doesn't seem all that wise. When you reach levels of saturation where adding people doesn't add (and may even reduce) productivity it is time to pay people not to work. I'm not sure we are there but rather than creating meaningless jobs we would be far better off as a society if we adopted a guaranteed income now and then just allow market forces and individual desires decide the job market now and in the future.

 

[timschochet]

John from Cleveland, you have a lot of interesting ideas, and certainly a lot of knowledge. But intuitively, I lean toward DiStefano and always have: growth is the answer.

 

[eurotrashman]

Growth? So that more money can keep being shifted away from the middle class? The ratio of distribution is the problem.

 

[Banger]

The problem is pretty simple:technology. It shrinks and destroys industries and has shifted many of the jobs we had here around the globe. I don't know that there is a solution.

 

[jonessed]

If you were in charge of everything, how would you fix it?

I'd expand the public sector. Lots more government jobs at all levels, plus a guaranteed govt. job at minimum wage for anybody who wanted to work. That solves the unemployment problem and helps tighten up the labor market.

Change taxation, a lot. Eliminate corporate taxes, eliminate taxes on anyone earning less than, say, $50,000, raise taxes on the superrich. Tariffs punishing the use of offshoring and cheap labor.

Paid for, mostly, with deficit spending.

In your scenario, I guess a prospect negotiating salary would rather negotiate for $48,000 then $60,000.How much tax should wealthy pay? The term 1% is ridiculous, it is the top .01% of that bucket taking home gigantic sums of money. Someone earning $500k in NYC (which is comfortable but far from sailing yachts) is coming home after tax (which is the bulk of the deduction ), 401k, insurance, etc. with about 55-60% of their salary, how much more should this person pay?

The purpose of taxation is to claw dollars back into the economy that would otherwise be lost to hoarding. Hear me out...

Remember that Economics 101 idea that production = consumption, and production also = income? If we have a $15 trillion economy, then people collectively have a $15 trillion income. If they spend 100% of that, the cycle continues - $15 trillion production next year, etc. If, on the other hand, $1 trillion is not spent, then there will only be $14 trillion spent on production, and the economy will contract to reflect this. In practice, the government has to deficit spend to make up this difference. If we run a $1.5 trillion trade deficit with China, that's $1.5 trillion of our income that's not being spent on American production - so new dollars are needed to pick up that slack. Same story for domestic savings (net savings) - if Bill Gates is adding $5 billion to his pile of ever-growing savings this year, that's $5 billion that has to be made up somewhere else. Some of that money can be clawed back by taxation. Or, we can simply choose to let Gates keep all of that money and increase our deficit accordingly.

So the level of taxation should be aimed at putting as many hoarded dollars back in play as possible. If you make $100,000 and spend all of it, you aren't the problem (especially if you buy American). If you make $500,000 and spend $400,000 if that, then your $100,000 in savings has to be made up for.

No, it's not. Where did you come up with that?

In a working economy that's money that would be invested. Hoarding it would be a net negative (unless there is deflation).

I can guarantee you Bill Gates is not hoarding money. He's not nearly that stupid.

 

[Christo]

Growth? So that more money can keep being shifted away from the middle class? The ratio of distribution is the problem.

Why?

 

[fantasycurse42]

If you were in charge of everything, how would you fix it?

I'd expand the public sector. Lots more government jobs at all levels, plus a guaranteed govt. job at minimum wage for anybody who wanted to work. That solves the unemployment problem and helps tighten up the labor market.

Change taxation, a lot. Eliminate corporate taxes, eliminate taxes on anyone earning less than, say, $50,000, raise taxes on the superrich. Tariffs punishing the use of offshoring and cheap labor.

Paid for, mostly, with deficit spending.

In your scenario, I guess a prospect negotiating salary would rather negotiate for $48,000 then $60,000.

How much tax should wealthy pay? The term 1% is ridiculous, it is the top .01% of that bucket taking home gigantic sums of money. Someone earning $500k in NYC (which is comfortable but far from sailing yachts) is coming home after tax (which is the bulk of the deduction ), 401k, insurance, etc. with about 55-60% of their salary, how much more should this person pay?

The purpose of taxation is to claw dollars back into the economy that would otherwise be lost to hoarding. Hear me out...

Remember that Economics 101 idea that production = consumption, and production also = income? If we have a $15 trillion economy, then people collectively have a $15 trillion income. If they spend 100% of that, the cycle continues - $15 trillion production next year, etc. If, on the other hand, $1 trillion is not spent, then there will only be $14 trillion spent on production, and the economy will contract to reflect this. In practice, the government has to deficit spend to make up this difference. If we run a $1.5 trillion trade deficit with China, that's $1.5 trillion of our income that's not being spent on American production - so new dollars are needed to pick up that slack. Same story for domestic savings (net savings) - if Bill Gates is adding $5 billion to his pile of ever-growing savings this year, that's $5 billion that has to be made up somewhere else. Some of that money can be clawed back by taxation. Or, we can simply choose to let Gates keep all of that money and increase our deficit accordingly.

So the level of taxation should be aimed at putting as many hoarded dollars back in play as possible. If you make $100,000 and spend all of it, you aren't the problem (especially if you buy American). If you make $500,000 and spend $400,000 if that, then your $100,000 in savings has to be made up for.

So the person spending all of their income either:

A) Works until death

B) Has a drastic change of lifestyle at retirement

 

[Bottomfeeder Sports]

So the person spending all of their income either:

A) Works until death

B) Has a drastic change of lifestyle at retirement

Which is exactly what the average American faces. Especially since starving Social Security out of existence has been policy for 30+ years.

 

[JohnfrmCleveland]

Politicians have been saying "deficits don't matter" for a couple decades now. Where have you been?

Even Darth Cheney wouldn't have said those words if he had to be elected to office. After him, what other pols are tooting that horn?

 

[DiStefano]

So the person spending all of their income either:

A) Works until death

B) Has a drastic change of lifestyle at retirement

Which is exactly what the average American faces. Especially since starving Social Security out of existence has been policy for 30+ years.

That's an interesting view. Particularly since it has been a Ponzi scheme from the beginning, where the benefits which are paid to retirees far outweigh the contributions which have been made by those retirees, and the difference has been made up by new contributors. If it had been a private business, the administrators would be in jail.

 

[Politician Spock]

Politicians have been saying "deficits don't matter" for a couple decades now. Where have you been?

Even Darth Cheney wouldn't have said those words if he had to be elected to office. After him, what other pols are tooting that horn?

From 2004: http://www.businessweek.com/stories/2004-12-26/what-killed-off-the-gop-deficit-hawks

Last month, I posed a rhetorical question: Whatever happened to fiscally prudent Republicans? The question deserves a proper answer. In the early 1990s the bipartisan, business-led Concord Coalition made the accumulated Reagan-Bush deficits a major public issue. George H.W. Bush had to break a pledge and raise taxes because of mounting concerns in financial markets. H. Ross Perot put the deficit center stage in the 1992 election, helping to defeat Bush I and elect Bill Clinton. He made fiscal responsibility his signature issue.

A decade later, Republican deficit hawks have all but vanished. "It's pretty astonishing," I was told by Robert L. Bixby, executive director of the Concord Coalition. "We used to get a lot of Democrats saying: 'You're just a Republican front group.' Now it's almost the reverse. The change in the Republican Party has been astounding." Are we on the record? I asked. "Absolutely," he replied. "The Republicans are now the ones making excuses for big deficits."

The indefatigable Peter G. Peterson, a coalition mainstay, has become the remnant of an endangered species -- the fiscally responsible Republican. He has just a few allies in Congress, such as Senators John McCain (R-Ariz.), Olympia J. Snowe (R-Me.), and, on a good day, Finance Committee Chairman Charles E. Grassley (R-Iowa).

HOW DID THIS SHIFT HAPPEN? Conversations with more than a dozen senior business leaders, including board members of the Concord Coalition, point to this progression: Since Ronald Reagan, a majority of Republican politicians have gradually come to conclude, as Vice-President **** Cheney famously told former Treasury Secretary Paul H. O'Neill, that "deficits don't matter." What's interesting and alarming, however, is that different Republican factions believe deficits don't matter for opposite and incompatible reasons.

Supply-siders believe deficits don't matter because tax cuts so boost investment and productivity that the economy grows its way out of debt. The opposite, "starve the beast" faction, epitomized by tax tactician Grover Norquist, hope tax cuts will indeed create deep deficits that will then force spending cuts. But both things can't be true.

Under George W. Bush, the merry ideology calls for tax cuts in all seasons for all reasons. Spending has increased faster than under Clinton, and deficits have ballooned, yet tax cutting marches on. This privately scares many Republican business leaders. But very few are speaking out, either because they don't want to burn bridges to the White House or because they are too pleased with their tax cuts.

There is one other group worth noting. A decade ago fiscally conservative Democrats, mostly Southern, often worked with Republicans to serve as a brake on fiscal excess. The near-extinction of Democrats in the mold of former senators Sam Nunn, Paul Tsongas, Fritz Hollings, and Representative Charles Stenholm, who was gerrymandered out of a job, has removed a crucial legislative counterweight to Republican recklessness. The days of bipartisan budget caps and pay-as-you-go rules are over. "Moments like the balanced-budget provision of Newt Gingrich's Contract with America were aberrational," says Steven Rattner, an influential Wall Street Democrat on the Concord Coalition board.

Inside the Administration, former deficit hawks have trimmed their views. Three senior economic officials are all men once well-known in private life as deficit critics. Stephen Friedman, who is stepping down as head of the President's economic council, was a Concord Coalition leader. Chief economist N. Gregory Mankiw, whose textbook correlates big deficits with higher interest rates, is leaving. Treasury Secretary John W. Snow, who once spoke out against fiscal imbalances, is keeping his job, barely.

Two factors could provoke Republican opposition to fiscal irresponsibility. The first is the risk of a dollar crash, directly related to big deficits. The second is the White House plan to borrow an additional $2 trillion to finance Social Security privatization. The Administration story is that borrowing $2 trillion in the short run will save the system up to $11 trillion in unfunded liabilities over the next 75 years. The problem is that the supposed shortfall is hypothetical, while $2 trillion of additional borrowing will affect real money markets now.

"I remain a Republican," Pete Peterson said, "but the Republicans have become a far more theological, faith-directed party, not troubling with evidence."

It was the republican adoption of "deficits don't matter" that paved the way for the tea party.

 

[JohnfrmCleveland]

Remember that Economics 101 idea that production = consumption, and production also = income? If we have a $15 trillion economy, then people collectively have a $15 trillion income. If they spend 100% of that, the cycle continues - $15 trillion production next year, etc. If, on the other hand, $1 trillion is not spent, then there will only be $14 trillion spent on production, and the economy will contract to reflect this. In practice, the government has to deficit spend to make up this difference. If we run a $1.5 trillion trade deficit with China, that's $1.5 trillion of our income that's not being spent on American production - so new dollars are needed to pick up that slack. Same story for domestic savings (net savings) - if Bill Gates is adding $5 billion to his pile of ever-growing savings this year, that's $5 billion that has to be made up somewhere else. Some of that money can be clawed back by taxation. Or, we can simply choose to let Gates keep all of that money and increase our deficit accordingly.

So the level of taxation should be aimed at putting as many hoarded dollars back in play as possible. If you make $100,000 and spend all of it, you aren't the problem (especially if you buy American). If you make $500,000 and spend $400,000 if that, then your $100,000 in savings has to be made up for.

This is completely wrong. When Bill Gates saves money, he's investing it in firms who spend it, usually on capital. That's why economists think that saving matters so much for long-run growth.

Edit: Also, trade deficits are often a sign of a strong economy while trade surpluses are a sign of a weak economy. Countries that are experiencing a boom tend to feature consumers who buy more stuff. Some of the stuff that they buy will be imported, which automatically implies a smaller trade surplus or larger trade deficit, all else equal.

Think about where "invested" dollars really go. Dollars spent in the secondary stock market don't go to companies, only IPOs do. And dollars saved in banks go straight to reserves, which are not loaned out - they don't help the economy, either. So unless Bill Gates is taking his billions and directly buying buildings and equipment with them, he's not really "investing" in anything. He's just trading paper with some other rich guy.

Consumer spending is what drives the economy. Savings are overrated. The system provides all needed capital through the banking system. What helps a company more, $1 million in investment, or $1 million in sales? (Remember that they are expected to pay those investors back, with interest.)

Yes, trade deficits are a sign of a strong currency, as in our case. That doesn't change my point, which was merely to point out the math behind trade deficits and government deficits. It all has to balance out on the ledger. When dollars leave the country, our government needs to make some new dollars and run a deficit, or else those dollars are coming out of our pockets.

 

[Politician Spock]

Remember that Economics 101 idea that production = consumption, and production also = income? If we have a $15 trillion economy, then people collectively have a $15 trillion income. If they spend 100% of that, the cycle continues - $15 trillion production next year, etc. If, on the other hand, $1 trillion is not spent, then there will only be $14 trillion spent on production, and the economy will contract to reflect this. In practice, the government has to deficit spend to make up this difference. If we run a $1.5 trillion trade deficit with China, that's $1.5 trillion of our income that's not being spent on American production - so new dollars are needed to pick up that slack. Same story for domestic savings (net savings) - if Bill Gates is adding $5 billion to his pile of ever-growing savings this year, that's $5 billion that has to be made up somewhere else. Some of that money can be clawed back by taxation. Or, we can simply choose to let Gates keep all of that money and increase our deficit accordingly.

So the level of taxation should be aimed at putting as many hoarded dollars back in play as possible. If you make $100,000 and spend all of it, you aren't the problem (especially if you buy American). If you make $500,000 and spend $400,000 if that, then your $100,000 in savings has to be made up for.

This is completely wrong. When Bill Gates saves money, he's investing it in firms who spend it, usually on capital. That's why economists think that saving matters so much for long-run growth.

Edit: Also, trade deficits are often a sign of a strong economy while trade surpluses are a sign of a weak economy. Countries that are experiencing a boom tend to feature consumers who buy more stuff. Some of the stuff that they buy will be imported, which automatically implies a smaller trade surplus or larger trade deficit, all else equal.

Think about where "invested" dollars really go. Dollars spent in the secondary stock market don't go to companies, only IPOs do. And dollars saved in banks go straight to reserves, which are not loaned out - they don't help the economy, either. So unless Bill Gates is taking his billions and directly buying buildings and equipment with them, he's not really "investing" in anything. He's just trading paper with some other rich guy.

Consumer spending is what drives the economy. Savings are overrated. The system provides all needed capital through the banking system. What helps a company more, $1 million in investment, or $1 million in sales? (Remember that they are expected to pay those investors back, with interest.)

Yes, trade deficits are a sign of a strong currency, as in our case. That doesn't change my point, which was merely to point out the math behind trade deficits and government deficits. It all has to balance out on the ledger. When dollars leave the country, our government needs to make some new dollars and run a deficit, or else those dollars are coming out of our pockets.

There are a lot of investments companies get from capital firms before they go IPO. Guys like Gates fund these capital firms.

 

[Bottomfeeder Sports]

So the person spending all of their income either:

A) Works until death

B) Has a drastic change of lifestyle at retirement

Which is exactly what the average American faces. Especially since starving Social Security out of existence has been policy for 30+ years.

That's an interesting view. Particularly since it has been a Ponzi scheme from the beginning, where the benefits which are paid to retirees far outweigh the contributions which have been made by those retirees, and the difference has been made up by new contributors. If it had been a private business, the administrators would be in jail.

What private business can tax virtually every employee and employer? Calling Social Security a "Ponzi scheme" is just stupid but effective talking point of those that have raided Social Security to pay for tax cuts as part of the overall "starve the beast" policy. Even today's Tea Partiers call SS an essential program so the politics of killing it has needed to be to make it appear unaffordable. I guess you have been snookered into believing such nonsense, or you are one of the liars selling it. Or both!

 

[JohnfrmCleveland]

It was the republican adoption of "deficits don't matter" that paved the way for the tea party.

But they certainly aren't advertising that stance. When Democrats are the ones doing the spending, deficits matter again. Nobody running for office, in either party, is publicly saying that deficits don't matter. They can't - they'd get crushed at the polls. People aren't ready to hear it yet. When I try to explain deficits and debt in these forums, lots of people get absolutely angry. (FBG, on the other hand, has been a surprisingly pleasant experience.) I think if I had the same conversations in public, I'd risk a punch in the nose.

 

[Bottomfeeder Sports]

... When Bill Gates saves money, he's investing it in firms who spend it, usually on capital. ...

OK, I cut too much away so this seems out of context, but I don't think it really is...

Where did the Bill Gates of the world's money go when the top tax rates were 70 or 90%? I assume you agree they largely didn't go to taxes. Where did they go?

 

[timschochet]

John I want to understand you when you argue that deficits don't matter. Right now about 16% of our annual federal spending goes to servicing the debt. If the debt keeps going up, then that percentage will continue to rise. Doesn't it concern you if that percentage gets too high?

 

[JohnfrmCleveland]

Remember that Economics 101 idea that production = consumption, and production also = income? If we have a $15 trillion economy, then people collectively have a $15 trillion income. If they spend 100% of that, the cycle continues - $15 trillion production next year, etc. If, on the other hand, $1 trillion is not spent, then there will only be $14 trillion spent on production, and the economy will contract to reflect this. In practice, the government has to deficit spend to make up this difference. If we run a $1.5 trillion trade deficit with China, that's $1.5 trillion of our income that's not being spent on American production - so new dollars are needed to pick up that slack. Same story for domestic savings (net savings) - if Bill Gates is adding $5 billion to his pile of ever-growing savings this year, that's $5 billion that has to be made up somewhere else. Some of that money can be clawed back by taxation. Or, we can simply choose to let Gates keep all of that money and increase our deficit accordingly.

So the level of taxation should be aimed at putting as many hoarded dollars back in play as possible. If you make $100,000 and spend all of it, you aren't the problem (especially if you buy American). If you make $500,000 and spend $400,000 if that, then your $100,000 in savings has to be made up for.

This is completely wrong. When Bill Gates saves money, he's investing it in firms who spend it, usually on capital. That's why economists think that saving matters so much for long-run growth.

Edit: Also, trade deficits are often a sign of a strong economy while trade surpluses are a sign of a weak economy. Countries that are experiencing a boom tend to feature consumers who buy more stuff. Some of the stuff that they buy will be imported, which automatically implies a smaller trade surplus or larger trade deficit, all else equal.

Think about where "invested" dollars really go. Dollars spent in the secondary stock market don't go to companies, only IPOs do. And dollars saved in banks go straight to reserves, which are not loaned out - they don't help the economy, either. So unless Bill Gates is taking his billions and directly buying buildings and equipment with them, he's not really "investing" in anything. He's just trading paper with some other rich guy.

Consumer spending is what drives the economy. Savings are overrated. The system provides all needed capital through the banking system. What helps a company more, $1 million in investment, or $1 million in sales? (Remember that they are expected to pay those investors back, with interest.)

Yes, trade deficits are a sign of a strong currency, as in our case. That doesn't change my point, which was merely to point out the math behind trade deficits and government deficits. It all has to balance out on the ledger. When dollars leave the country, our government needs to make some new dollars and run a deficit, or else those dollars are coming out of our pockets.

There are a lot of investments companies get from capital firms before they go IPO. Guys like Gates fund these capital firms.

Sure, there is some actual investment going on. But people think that every dollar they put into the bank or spend on stock is helping the economy, and that's just not correct.

 

[jonessed]

Remember that Economics 101 idea that production = consumption, and production also = income? If we have a $15 trillion economy, then people collectively have a $15 trillion income. If they spend 100% of that, the cycle continues - $15 trillion production next year, etc. If, on the other hand, $1 trillion is not spent, then there will only be $14 trillion spent on production, and the economy will contract to reflect this. In practice, the government has to deficit spend to make up this difference. If we run a $1.5 trillion trade deficit with China, that's $1.5 trillion of our income that's not being spent on American production - so new dollars are needed to pick up that slack. Same story for domestic savings (net savings) - if Bill Gates is adding $5 billion to his pile of ever-growing savings this year, that's $5 billion that has to be made up somewhere else. Some of that money can be clawed back by taxation. Or, we can simply choose to let Gates keep all of that money and increase our deficit accordingly.

So the level of taxation should be aimed at putting as many hoarded dollars back in play as possible. If you make $100,000 and spend all of it, you aren't the problem (especially if you buy American). If you make $500,000 and spend $400,000 if that, then your $100,000 in savings has to be made up for.

This is completely wrong. When Bill Gates saves money, he's investing it in firms who spend it, usually on capital. That's why economists think that saving matters so much for long-run growth.

Edit: Also, trade deficits are often a sign of a strong economy while trade surpluses are a sign of a weak economy. Countries that are experiencing a boom tend to feature consumers who buy more stuff. Some of the stuff that they buy will be imported, which automatically implies a smaller trade surplus or larger trade deficit, all else equal.

Think about where "invested" dollars really go. Dollars spent in the secondary stock market don't go to companies, only IPOs do. And dollars saved in banks go straight to reserves, which are not loaned out - they don't help the economy, either. So unless Bill Gates is taking his billions and directly buying buildings and equipment with them, he's not really "investing" in anything. He's just trading paper with some other rich guy.

Consumer spending is what drives the economy. Savings are overrated. The system provides all needed capital through the banking system. What helps a company more, $1 million in investment, or $1 million in sales? (Remember that they are expected to pay those investors back, with interest.)

Yes, trade deficits are a sign of a strong currency, as in our case. That doesn't change my point, which was merely to point out the math behind trade deficits and government deficits. It all has to balance out on the ledger. When dollars leave the country, our government needs to make some new dollars and run a deficit, or else those dollars are coming out of our pockets.

I'm at a complete loss as to where you get this stuff from. It's completely false.

 

[JohnfrmCleveland]

John I want to understand you when you argue that deficits don't matter. Right now about 16% of our annual federal spending goes to servicing the debt. If the debt keeps going up, then that percentage will continue to rise. Doesn't it concern you if that percentage gets too high?

Deficits are where dollars come from. In America's history, the total of our many deficits and few surpluses is exactly equal to our national debt + dollars now in existence, about $18 trillion (much of that is held by the govt.). (This doesn't account for bank credit, just govt. dollars, or high-powered money.)

Fiat dollars cost nothing to produce, so the interest costs nothing to pay. There is no way the government can run out of dollars, so the only real concern is inflation. But the $17 trillion or so dollars that have been converted into bonds don't really get spent. Bonds are safe, but they have a low yield - if there was anything better to put your dollars into, you would do it. But bonds are for those people/countries/institutions that just want to park their dollars, risk-free. They aren't going to be spent, not anytime soon. So the total number of dollars out there really isn't an issue, as far as inflation goes.

As for the idea that a high debt-to-GDP ratio hurts your economy, that has been pretty thoroughly debunked. The same data, with better logic, says that slowing economies are what lead to higher deficits/debt, because tax receipts go down.

Anyway, it's a pretty huge topic to digest all at once. I wrote this article a while back, if you care to read it.

 

[JohnfrmCleveland]

Think about where "invested" dollars really go. Dollars spent in the secondary stock market don't go to companies, only IPOs do. And dollars saved in banks go straight to reserves, which are not loaned out - they don't help the economy, either. So unless Bill Gates is taking his billions and directly buying buildings and equipment with them, he's not really "investing" in anything. He's just trading paper with some other rich guy.Consumer spending is what drives the economy. Savings are overrated. The system provides all needed capital through the banking system. What helps a company more, $1 million in investment, or $1 million in sales? (Remember that they are expected to pay those investors back, with interest.)

Yes, trade deficits are a sign of a strong currency, as in our case. That doesn't change my point, which was merely to point out the math behind trade deficits and government deficits. It all has to balance out on the ledger. When dollars leave the country, our government needs to make some new dollars and run a deficit, or else those dollars are coming out of our pockets.

I'm at a complete loss as to where you get this stuff from. It's completely false.

http://www.standardandpoors.com/spf/upload/Ratings_US/Repeat_After_Me_8_14_13.pdf

http://www.economonitor.com/lrwray/2013/08/15/banks-dont-lend-reserves-who-knew-mmt-thats-who/

 

[timschochet]

Thank you. I've heard of MMT before but didn't really understand what it was. I note that in the Wiki page that you referenced in your article, Paul Krugman is critical of MMT because increased debt creates inflation, which you acknowledge, but downplay.

It's a lot to digest. But again, intuitively, I have a very tough time accepting the notion that we can just keep increasing the debt and not worry about it at all.

 

[jonessed]

Think about where "invested" dollars really go. Dollars spent in the secondary stock market don't go to companies, only IPOs do. And dollars saved in banks go straight to reserves, which are not loaned out - they don't help the economy, either. So unless Bill Gates is taking his billions and directly buying buildings and equipment with them, he's not really "investing" in anything. He's just trading paper with some other rich guy.

Consumer spending is what drives the economy. Savings are overrated. The system provides all needed capital through the banking system. What helps a company more, $1 million in investment, or $1 million in sales? (Remember that they are expected to pay those investors back, with interest.)

Yes, trade deficits are a sign of a strong currency, as in our case. That doesn't change my point, which was merely to point out the math behind trade deficits and government deficits. It all has to balance out on the ledger. When dollars leave the country, our government needs to make some new dollars and run a deficit, or else those dollars are coming out of our pockets.

I'm at a complete loss as to where you get this stuff from. It's completely false.

http://www.standardandpoors.com/spf/upload/Ratings_US/Repeat_After_Me_8_14_13.pdf

http://www.economonitor.com/lrwray/2013/08/15/banks-dont-lend-reserves-who-knew-mmt-thats-who/

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

 

[JohnfrmCleveland]

Thank you. I've heard of MMT before but didn't really understand what it was. I note that in the Wiki page that you referenced in your article, Paul Krugman is critical of MMT because increased debt creates inflation, which you acknowledge, but downplay.

It's a lot to digest. But again, intuitively, I have a very tough time accepting the notion that we can just keep increasing the debt and not worry about it at all.

I don't know if it's intuitively difficult; I just think that we've been taught a certain way for so long that it's hard to discard it and start over.

Consider this: with a fiat currency, debt is not even necessary. There is no operational need to issue debt at all, we could just issue currency directly and be done with it. Intuitively, the whole idea of debt doesn't make sense. But you have to get past a lifetime of bad information first.

 

[JohnfrmCleveland]

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

No, it's true. If you deposit cash, it immediately becomes vault cash, which counts as reserves (although it doesn't earn interest). Banks adjust their vault cash so as not to have too much on hand, because it bears no interest. They deposit extra vault cash with the Fed, in their reserve accounts.

If you deposit a check or electronic transfer, the banks get nothing tangible, but they settle up with the other bank by transferring reserves through their reserve accounts at the Fed. So these deposits become reserves as well.

 

[DiStefano]

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

No, it's true. If you deposit cash, it immediately becomes vault cash, which counts as reserves (although it doesn't earn interest). Banks adjust their vault cash so as not to have too much on hand, because it bears no interest. They deposit extra vault cash with the Fed, in their reserve accounts.

If you deposit a check or electronic transfer, the banks get nothing tangible, but they settle up with the other bank by transferring reserves through their reserve accounts at the Fed. So these deposits become reserves as well.

So when a bank loans out money, where do they get it from? The manager's piggy bank?

There is so much disinformation in your posts I don't even know where to start.

 

[jonessed]

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

No, it's true. If you deposit cash, it immediately becomes vault cash, which counts as reserves (although it doesn't earn interest). Banks adjust their vault cash so as not to have too much on hand, because it bears no interest. They deposit extra vault cash with the Fed, in their reserve accounts.

If you deposit a check or electronic transfer, the banks get nothing tangible, but they settle up with the other bank by transferring reserves through their reserve accounts at the Fed. So these deposits become reserves as well.

No. It's not true. It actually doesn't even make sense. The required reserve rates are relatively small. Banks aren't just stuffing all of their deposits in reserves for the hell of it.Deposits are fungible. Trying to trace where a particular deposit goes is pointless. When money comes in from one customer that frees up other money to loan, invest , pay out, etc.

 

[JohnfrmCleveland]

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

No, it's true. If you deposit cash, it immediately becomes vault cash, which counts as reserves (although it doesn't earn interest). Banks adjust their vault cash so as not to have too much on hand, because it bears no interest. They deposit extra vault cash with the Fed, in their reserve accounts.

If you deposit a check or electronic transfer, the banks get nothing tangible, but they settle up with the other bank by transferring reserves through their reserve accounts at the Fed. So these deposits become reserves as well.

So when a bank loans out money, where do they get it from? The manager's piggy bank?

There is so much disinformation in your posts I don't even know where to start.

When a bank loans out money, it does so electronically. Transfers are made between banks using their reserve accounts. When you get a car loan, do you walk out of the bank with a gym bag full of cash?

Loans create deposits. A bank "expands their balance sheet" by creating a loan and a corresponding deposit. An asset and a matching liability. The bank loans you $30,000 for a car: they transfer $30,000 to the car dealer's bank via their reserve accounts, and they show the $30,000+ that you owe them as an asset on their books. Aside from the dollars that move between reserve accounts at the Fed, no dollars move at all. The car dealer's account is marked up $30,000, $30,000 moves from your bank's reserve acct. to the car dealer's bank's reserve account, and you owe your bank $30,000+. And $30,000 new dollars have been created by the bank loan. They will cease to exist once the loan is paid off.

 

[JohnfrmCleveland]

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

No, it's true. If you deposit cash, it immediately becomes vault cash, which counts as reserves (although it doesn't earn interest). Banks adjust their vault cash so as not to have too much on hand, because it bears no interest. They deposit extra vault cash with the Fed, in their reserve accounts.

If you deposit a check or electronic transfer, the banks get nothing tangible, but they settle up with the other bank by transferring reserves through their reserve accounts at the Fed. So these deposits become reserves as well.

No. It's not true. It actually doesn't even make sense. The required reserve rates are relatively small. Banks aren't just stuffing all of their deposits in reserves for the hell of it.Deposits are fungible. Trying to trace where a particular deposit goes is pointless. When money comes in from one customer that frees up other money to loan, invest , pay out, etc.

Read those two links I provided. One is by the Chief Global Economist at Standard & Poor's. It's a very good explanation of how banking works, and it's not just coming from some schmo on the internet. The other is by an economics professor. Search "banks don't lend out reserves," and you will get a bunch more articles saying the same thing.

You may have also heard the phrase, "banks are not reserve-constrained." This means that banks are not limited by their reserves when they make loans. Banks can (and do) make loans without even looking at their current reserves, because they have a three day float in which they can adjust their reserves after the fact. They can borrow excess reserves on the interbank market, or they can borrow reserves from the Fed itself. But it's not the level of reserves that enables loans to be made, Rather, the amount of loans is what determines the level of reserves. (At least, they did, before QE flooded banks with excess reserves.)

 

[jonessed]

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

No, it's true. If you deposit cash, it immediately becomes vault cash, which counts as reserves (although it doesn't earn interest). Banks adjust their vault cash so as not to have too much on hand, because it bears no interest. They deposit extra vault cash with the Fed, in their reserve accounts.

If you deposit a check or electronic transfer, the banks get nothing tangible, but they settle up with the other bank by transferring reserves through their reserve accounts at the Fed. So these deposits become reserves as well.

No. It's not true. It actually doesn't even make sense. The required reserve rates are relatively small. Banks aren't just stuffing all of their deposits in reserves for the hell of it.Deposits are fungible. Trying to trace where a particular deposit goes is pointless. When money comes in from one customer that frees up other money to loan, invest , pay out, etc.

Read those two links I provided. One is by the Chief Global Economist at Standard & Poor's. It's a very good explanation of how banking works, and it's not just coming from some schmo on the internet. The other is by an economics professor. Search "banks don't lend out reserves," and you will get a bunch more articles saying the same thing.

I don't have an issue with what's in those articles. I am taking issue with how you are trying to apply/explain it.I'll just leave it at that. This is a rabbit hole I don't want to go down. There are some pretty fundamental disconnects in the practical application of what's going on here.

 

[Zegras11]

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

No, it's true. If you deposit cash, it immediately becomes vault cash, which counts as reserves (although it doesn't earn interest). Banks adjust their vault cash so as not to have too much on hand, because it bears no interest. They deposit extra vault cash with the Fed, in their reserve accounts.

If you deposit a check or electronic transfer, the banks get nothing tangible, but they settle up with the other bank by transferring reserves through their reserve accounts at the Fed. So these deposits become reserves as well.

No. It's not true. It actually doesn't even make sense. The required reserve rates are relatively small. Banks aren't just stuffing all of their deposits in reserves for the hell of it.Deposits are fungible. Trying to trace where a particular deposit goes is pointless. When money comes in from one customer that frees up other money to loan, invest , pay out, etc.

Read those two links I provided. One is by the Chief Global Economist at Standard & Poor's. It's a very good explanation of how banking works, and it's not just coming from some schmo on the internet. The other is by an economics professor. Search "banks don't lend out reserves," and you will get a bunch more articles saying the same thing.

I don't have an issue with what's in those articles. I am taking issue with how you are trying to apply/explain it.I'm not going to get into it with you though. You contradict yourself often and somehow end up writing a lot without actually saying much.

Must be a Tim alias

 

[JohnfrmCleveland]

I don't have an issue with what's in those articles. I am taking issue with how you are trying to apply/explain it.

I'm not going to get into it with you though. You contradict yourself often and somehow end up writing a lot without actually saying much.

Where have I contradicted myself?

 

[jonessed]

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

No, it's true. If you deposit cash, it immediately becomes vault cash, which counts as reserves (although it doesn't earn interest). Banks adjust their vault cash so as not to have too much on hand, because it bears no interest. They deposit extra vault cash with the Fed, in their reserve accounts.

If you deposit a check or electronic transfer, the banks get nothing tangible, but they settle up with the other bank by transferring reserves through their reserve accounts at the Fed. So these deposits become reserves as well.

No. It's not true. It actually doesn't even make sense. The required reserve rates are relatively small. Banks aren't just stuffing all of their deposits in reserves for the hell of it.Deposits are fungible. Trying to trace where a particular deposit goes is pointless. When money comes in from one customer that frees up other money to loan, invest , pay out, etc.

Read those two links I provided. One is by the Chief Global Economist at Standard & Poor's. It's a very good explanation of how banking works, and it's not just coming from some schmo on the internet. The other is by an economics professor. Search "banks don't lend out reserves," and you will get a bunch more articles saying the same thing.

I don't have an issue with what's in those articles. I am taking issue with how you are trying to apply/explain it.I'm not going to get into it with you though. You contradict yourself often and somehow end up writing a lot without actually saying much.

Must be a Tim alias

I don't think Tim has an alias, but there definitely seems to be some of the same risks. Better to just agree to disagree .

 

[StrikeS2k]

Of course they don't lend out reserves. That's why they are reserves. That's not what you said though.

You said "dollars saved in banks go straight to reserves." That's simply not true.

No, it's true. If you deposit cash, it immediately becomes vault cash, which counts as reserves (although it doesn't earn interest). Banks adjust their vault cash so as not to have too much on hand, because it bears no interest. They deposit extra vault cash with the Fed, in their reserve accounts.

If you deposit a check or electronic transfer, the banks get nothing tangible, but they settle up with the other bank by transferring reserves through their reserve accounts at the Fed. So these deposits become reserves as well.

No. It's not true. It actually doesn't even make sense. The required reserve rates are relatively small. Banks aren't just stuffing all of their deposits in reserves for the hell of it.Deposits are fungible. Trying to trace where a particular deposit goes is pointless. When money comes in from one customer that frees up other money to loan, invest , pay out, etc.

Read those two links I provided. One is by the Chief Global Economist at Standard & Poor's. It's a very good explanation of how banking works, and it's not just coming from some schmo on the internet. The other is by an economics professor. Search "banks don't lend out reserves," and you will get a bunch more articles saying the same thing.

I don't have an issue with what's in those articles. I am taking issue with how you are trying to apply/explain it.I'm not going to get into it with you though. You contradict yourself often and somehow end up writing a lot without actually saying much.

Must be a Tim alias

I don't think Tim has an alias, but there definitely seems to be some of the same risks. Better to just agree to disagree .

Apparently Tim has about 5 aliases, only including the ones that he's owned up to. I was surprised as well when I found out, but in hindsight not so much.

 

[mr roboto]

This exchange is fascinating to me. I know just enough to know I don't really know, you know?

 

[timschochet]

I haven't used any aliases in years. And I'm not nearly that smart, guys. I don't know #### about economics, (though I'd like to learn).

John from Cleveland is discussing a highly controversial theory called Modern Monetary Theory (MMT). I don't understand it very well, and it appears to go completely against the grain of what I've been taught to believe- but it IS a legitimate theory.

 

[Milkman]

Why can't we lower the standard work week to 30 hours hire 25% more employees give everybody a raise to make up the difference. Then set up a minimum pay that is more in line with reality say like 40k/yr and a maximum pay let's say 5 million/yr. Add cost of living raises every year that coincide with inflation. Then flat tax everybody 10%.

EZ game.

 

[JohnfrmCleveland]

I haven't used any aliases in years. And I'm not nearly that smart, guys. I don't know #### about economics, (though I'd like to learn).

John from Cleveland is discussing a highly controversial theory called Modern Monetary Theory (MMT). I don't understand it very well, and it appears to go completely against the grain of what I've been taught to believe- but it IS a legitimate theory.

It's just fiat currency economics, which is very different than the economics of our old gold-convertible currency. The econ textbooks haven't changed much since before we went fiat, but they should have.

 

[Milkman]

The scary thing is it's almost certainly to late. Nothing is going to be changed that hurts the top 1% financially because they are the government. The only way to get anything changed is to convince them they will be better off being poorer. Good luck with that. We're ####ed yo.

 

[Paulymaggs]

it's going extremely well for the 1%

 

[BigSteelThrill]

The scary thing is it's almost certainly to late. Nothing is going to be changed that hurts the top 1% financially because they are the government. The only way to get anything changed is to convince them they will be better off being poorer. Good luck with that. We're ####ed yo.

We certainly do have some politicians and organizations trying to get more resources into the hands of the middle and lower class. Careful though, if you support them you will get name-called.

 

[Milkman]

The scary thing is it's almost certainly to late. Nothing is going to be changed that hurts the top 1% financially because they are the government. The only way to get anything changed is to convince them they will be better off being poorer. Good luck with that. We're ####ed yo.

We certainly do have some politicians and organizations trying to get more resources into the hands of the middle and lower class. Careful though, if you support them you will get name-called.

Excuse my pessimism BST but this has been going on for 40 years. It's getting worse not better too. The crazy people we're dealing with think unlimited greed is actually good for the country.