It takes a fiat currency to sustain full employment. And a fiat currency, like the US dollar and the euro, includes the certainty of debt and taxes. Taxation is required to allow the government to spend its otherwise worthless currency. And 'debt' -- some entity spending more than its income -- is required to 'offset' any entity's desire to spend less than its income. These desires to not spend are known as demand leakages.That means, at full employment, either a private sector entity or the government will be spending more than its income to offset the demand leakages.
Private sector spending is, operationally, revenue constrained. It is limited by income and credit worthiness. Public sector spending in a currency it issues is not revenue constrained. The private sector, the user of the currency, must first obtain funds before it can spend. The public sector, the issuer of its currency, must, from inception, spend or lend first, before it can 'collect' taxes and/or borrow.
The private sector is necessarily pro-cyclical. In a downturn, the private sector loses credit worthiness and therefore is limited in its ability to spend more than its income. That leaves only the public sector to spend more than its income to fill any residual output gap and sustain full employment.
Those claiming the problem with the economy is too much debt -- private sector and public sector -- are entirely missing the point. That includes everyone in Congress, President Obama and Candidate Romney. Those now pushing for federal deficit reduction are, again, entirely missing the point. There is not federal solvency problem, short term or long term, with any size deficit.
What there could be is a long term inflation problem. However, I have seen no credible, professional long term forecasts of substantial inflation. That includes the Fed, the CBO and the forecasts of the largest financial institutions, as well as the inflation rates implied by the long term inflation indexed US Treasury securities.
Last year the pre-debt ceiling war cry from all sides was that immediate deficit reduction was imperative to keep us from becoming the next Greece. That fell by the wayside after the US credit downgrade that was supposed to cause interest rates to spike, and find the US, Greece-like, on its knees before the IMF, instead caused rates paid by the US Treasury to dramatically fall. The difference, as now widely acknowledged, is the US government is the issuer of the US dollar, while Greece is but a user of the euro.
So seems to me in this economy federal deficit reduction should be off the table, and the burden of proof of a sufficiently high long term inflation risk be on those who want to put the deficit back on the table.
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The point of the statistics is to show that it may be related to genes as to how debt may accrue for some families. On the other hand it can all be due to environment. There are many who have to help out their families, so spending money on credit cards may not be the better way to go for them. Rather, using cash can be more helpful.
It may be that some are paid cash for second jobs. The point is that there are a lot of reasons why certain individuals may use technology over not using technology to deal with paying bills.
If you find yourself in a debt situation then you may have to consider how you can use debt consolidation or other debt relief plans to get out of debt. After you get out of debt you may be more inclined to carry only cash rather than using credit ever again.Get out of debt - http://thedebtsreliefreviews.com
In theory.
Or, in a meaningless term, 'operationally' speaking.
The public sector spending is done through the Treasury.
Since its inception, it is legally prevented from "spending" money that it does not have.
The public sector is revenue constrained.
The public sector (Treasury) must borrow (or tax) the money that it spends.
The public sector is a "user" of the currency, which is privately created.
The private sector includes the banking system.
The private sector bankers create "purchasing power", a.k.a. currency or money, and rent that currency to all of us - including the public sector - without first acquiring the funds that it is renting.
The private sector bankers are not revenue constrained.
The private bankers are currency issuers.
Just saying.
If Congress decides to spend and it's own laws get in its way it can immediately change them at will. But the no over draft rule you are referring to has never been an obstacle to deficit spending. The treasury has set up a group of what it calls of primary dealers who agree to buy all new tsy securities at auctions, where the dealers bid for them at prices the dealers believe will be profitable. Furthermore, the dealers are allowed to sell short in advance, and they have access to funding for their purchases.
In any case, 'congress' is the public sector for purposes of this discussion, and the fact that it constrains its agents, the fed and the tsy, does not mean the public sector is revenue constrained.
I get the sense that the currency of Warren’s anecdotes is losing its purchasing power here.
Here’s a good joke by Warren:
Congress is the boss of the FR bankers. (And the Treasury, as if the Treasury was not part of the Executive Branch).
Funny how the consensus among the Congresspeople (as shown so obviously by the Dimons of the World) is that the bankers run this town(DC).
Then of course he goes on to say that it's Congress' fault that it doesn’t KNOW it is the boss of the nation’s money system, and of the private bankers of the world who have outright bought and own our government.
So, let’s pretend that NOW Congress is the boss of the bankers, so that we do not need to reform the banking and currency system so that Congress IS the boss of the bankers and we are the boss of the Congress, and we can again own our money system.
Actually, Congress CANNOT immediately change the problem laws at will BECAUSE the bankers own the Congress. That doesn’t mean we shouldn’t identify those laws and the changes needed.
Nobody really cares about the Primary Dealers. They’re not part of the real economy, rather the leading cadre of Bankers-Run-Amok.
It’s a hard sell, Warren. The fact that the laws constrain the government from spending at will DOES in fact mean that the government sector is revenue constrained. By definition.
banks are designated agents of govt/congress. They require govt charters, are subject to govt regulation and supervision, which includes regulators who can replace bank management for non compliance with regulations. Banks are also public/private partnerships as their liabilities can be their private capital plus fdic insured deposits which are generally 90% or more of most bank's liabilities. Govt sets capital requirements, asset/loan requirements and limits, liquidity requirements, and matched funding requirements. there isn't much left for the 'private' aspect of banks to do except price risk and market and promote their ability to promote what govt allows them to do. It is also Congress that has decided that bank liabilities- what we call bank deposits and, in general, 'money'- are acceptable for payment of taxes.
Yes, banks make loans, and the corresponding bank liabilities, called deposits, which are also most often called 'money'. But those deposits, in the first instance, belong to the borrower, not the bank. In other words, if you borrow 100,000 from a bank, you get the 100,000 to spend, so in that sense it is borrowers that always create the assets and liabilities.
Let me add that if the politicians recognized that banks are largely public sector agents, it would be the republicans trying to shut them down and the democrats trying to expand them...
;)
Banks are agents of the Congress.
Bankers own this town
Who’s zooming who here?
Sorry, but government deposit insurance FOR THE DEPOSITORS does not make a public-private partnership. It’s more like putting the bankers’ hand in the taxpayers pocket.
FDIC insurance is another tool for socializing banker losses associated with changes in markets, also incompetence and chicanery.
The implication is given that banks are like cuddly public entities because there are requirements that they maintain certain capital in relation to the holdings of their loan portfolio.
GIVEN that it is the inability of the private bankers to provide “circulating media” for the growth of the national economy that causes massive unemployment, that only makes sense. If banks cannot make loans, we have no means for exchange.
And as to who owns what, the bankers created the loan out of thin air – they did not lend either their own, or other depositors’, money.
They lent something they didn’t have.
That’s why it’s called The Legalized Crime of Banking in Adams’ book by that name.
The bankers OWN the money system.
And we NEED to take it back.
For the Money System Common.
Secondly, let's also hear more from Randy Wray.
That the government is not fiscally constrained, that government debt is radically different from household debt is something too radical for most voters to digest at this point, and unfortunately most likely too radical for any politician to get behind anytime soon - it's not a "safe" position to take. But Warren and Randy are doing all they can.
Please vote for Warren next half-term.
You're right when you say it's too condensed, but consider the material he has to cover! I've tried summarizing this stuff in an accessible way and it's incredibly difficult. I think that's a huge part of the problem in getting it more widely understood. We need an organized effort to simplify this stuff down to an easily digested form. For example, I like to say "a currency-issuing govt no more needs to borrow its own money than an alchemist needs to borrow gold", and ask "from where would you get the dollars to pay your tax bill if the govt hadn't already spent some into the economy?" (the answer, of course, being "from a crooked bank" ;)), but those obviously only cover a tiny part of the reality of the monetary system. We desperately need to find a replacement for the printing press metaphor, because it leads to all kinds of incorrect thinking.
It takes an audacious public initiative and agile policy to reach for the stars, and be all we can be.
After that, it takes a fiat currency to adequately provision an electorate fully employed at executing public purpose.
That key concept – fully engaging our national agility – is the obvious, taboo gorilla in the room that most avoid. Other fields just call it “mobilization.”
Why can’t we mobilize? Because a complacent population is easily distracted?
We went off the gold std to a fiat-std, to achieve agile policy.
Now, we need fiat policy itself. If there’s too much bureaucracy in the way, the solution is to OpenSource Fiat Policy.
There’s an app for that, of course, but it’ll only be effective after enough group practice.
Fiat currency is a necessary but not sufficient tool used in fiat policy. It takes constant practice to leverage all the potential of a tool.
We’ve basically trained our population to be demand leakers! Gotta both give ‘em their currency back AND get ‘em more practice at using it, rather than sitting on it.
One pattern of not spending is a POTENTIALLY good thing – it means for a given size govt we can enjoy another pattern of lower taxes, but that’s good ONLY if we actively explore options and make adaptive selections, fast enough. Necessary but not sufficient.