On Government debt

[Parodite]

the dutchies had 2 destructive bubbles im aware of that are used as reference points in my country.

the first is the tulip bubble, a lovely example of irrational exuberance (or whatever they are calling it) on something that in hindsite seems absurd,... should the government go into debt to protect the people that blew their lifes work on flower bulbs ?

no, let em eat bulbs.

the second is the natural gas bubble in the 60's that is far more insidious and relevant to me and is were one single industry becomes such a massive source of easy money and employment that the rest of society is hollowed out and destroyed and even worse, the cost of living in housing and whatnot goes up because of that industries success.

What also adds to too high housing prices is that mortgages are deductible from income tax here. This drove up housing prices artificially but netto nobody is better off. Just a waste of administrative overhead. But peoples lives and expense patterns are configured around the status quo so politically it is a toughy to change things here. I decade or so ago in Sweden they just radically removed mortgages being deducible from income tax, but within two years the market reconfigured and everybody was better off than before.

Interestingly enough most resistance against change here comes from well to do people who tend to vote "liberal" and make good money. Liberal here would mean like voting right wing or libertarian/anti government in the US : less regulation, free/liberal market mechanisms, maximum capitalism. But they don't mind a socialist heritage to stay if it would hurt them a lot if it were removed.

my personal view is that government debt is a bad response to the above and tries to prop up an unrealistic and unsustainable costing structure - its far better to allow things to crash back down and get cheap so the rest of society can rebuild itself again than it is to just pile on the debt pretending its still boom time and maintaining the "hollow" economy.

Can't agree more Noddy. But as said, I think it is the nature of the beast called gvt to overspend and go into debt. And banks love debt. This symbiotic entanglement of banks pushing people to borrow too much and gvts going into debt very easily.. made me wonder of not by constitution the debt "ceiling" should not be put at ZERO. Or is that a too socialist way of thinking... to interfere with the free forces of nature. Curious what you think about that.

[noddy]

Can't agree more Noddy. But as said, I think it is the nature of the beast called gvt to overspend and go into debt. And banks love debt. This symbiotic entanglement of banks pushing people to borrow too much and gvts going into debt very easily.. made me wonder of not by constitution the debt "ceiling" should not be put at ZERO. Or is that a too socialist way of thinking... to interfere with the free forces of nature. Curious what you think about that.

in the pure abstract of language and meaning this might be a problem for some but in practical language that problem is far simpler.

tax is taking money out of the free market and putting it into the authoritarian structures - radical freemarketers hate all tax, the more dastardly moderate types like me hate high taxes and fight for better distribution of existing taxes.

debt is one step beyond that and unites moderates and radicals because its way beyond arguments about how much is being taken from society today and is actually taking money out of society tommorrow and being in debt, aka in slavery, to the loan sharks providing the debt service... about as far from "free" as one could be.

if socialists actually stopped thinking with their emotions and started using their dry reasoning they might be more worried about being in debt to the mafia and ponder if this is actually making life better for the poor people.

id rather be broke and debt free than committed to a lifetime of paying off someone elses bills, its so obvious i cant believe the magic voodoo snake oil of the neo keynesians actually sells.

[noddy]

What also adds to too high housing prices is that mortgages are deductible from income tax here. This drove up housing prices artificially but netto nobody is better off. Just a waste of administrative overhead. But peoples lives and expense patterns are configured around the status quo so politically it is a toughy to change things here. I decade or so ago in Sweden they just radically removed mortgages being deducible from income tax, but within two years the market reconfigured and everybody was better off than before.

Interestingly enough most resistance against change here comes from well to do people who tend to vote "liberal" and make good money. Liberal here would mean like voting right wing or libertarian/anti government in the US : less regulation, free/liberal market mechanisms, maximum capitalism. But they don't mind a socialist heritage to stay if it would hurt them a lot if it were removed.

we also have this rent seekers rort and are also suffering the distortion in the market it creates however i wouldnt describe it as a right/liberal thing here because its a middle class boomer thing and crosses the political boundaries - which is why its hard to get rid of.

[Mr. Perfect]

The magority solidly support debt. The left have been celebrating debt for years now (see Krugman).

[noddy]

many dont care about debt because money is just an abstract joke to them, feh, its just printed nonsense with no meaning, might aswell exploit it till it pops and then write it all off and start again, its all about today baby.

those who exploit are perfectly happy with this and use that sillyness to turn funny money into real assets and power.

its only the minority a suckers who arent the above who dont like it.

[Mr. Perfect]

Well let's put it this way, we aren't running 30% deficits because of bankers.

[Mr. Perfect]

P, you;re making the fallacy again of capitalism being fast and loose, capitalism says sometimes leverage is justified sometimes it is not, but the government is not clairvoyant and therefore gives an illusion of security when it dictates things like leverage limits. There is more work do be done here.

[Parodite]

Well guys, the boomers, the bums, the banks, the bubblediboob bolsterers, the bad boys and girls in gvt.. debt junkies or all whoever those f*ckers and s*ckers are. I have not heard an argument against making zero debt for gvts a constitutional obligation. I see evidence all over the place every day that it should though. Now what. I don't care about republicats or demodogs so much or the blame junkies. Occupy here, tea party there. People screaming symptoms. Rep dem blame junkies.

Mr. P., me and capitalism are best friends. I'm trying to save it from those not understanding it. You read things between the lines when I mention capitalism that are not there because your perceptions are rigged against what you perceive are your enemies.

And let me be frank with you Mr.P. There is a huge inconsistency meaning hypocrisy in what you are doing. On the one hand you blame people in gvt (demodogs or whoever) that do terrible things. Your moral bar is firmly placed right on high. You feel you are justified to hold them accountable and here on this forum they deserve your eternal scorn. Yet when banks take a bite and start trading the sub-prime dogshit to any sucker available bying it.. you just say and I will rephrase: "Well... that's what happens..when you throw money in the air.. there will be folks grabbing it. If not me, than somebody else will do. That's the nature of it". Why not hold those people accountable and to the same standard as your hated gvt officials? This to me proves you are indeed merely engaging in some sort of anti dem propaganda here.

[noddy]

well the thing with laws is that in any good democracy they are set by the magority will and the wisdom of the masses, we dont have stupid religious laws "just because" mythology and dinasour relics holding us back from progresss and innovative solutions with science.

as such, you are still avoiding that somewhat tedious problem of your wonderful law not meaning much if it doesnt have magority backing and maintain magority backing - it is but one pork barrel away from being irrelevant, ask an american how their debt ceiling laws turned out.

[Mr. Perfect]

Ok P you're halfway, but we have a way to go.

There is no hypocrisy on my part. It's a lack of knowledge on your part. When people throw money into the air, where does the money come from? Why doesn't it run out:

Answer, the Fed prints more. I don't have time to explain how the Fed does that, I would recommend some educational youtubes. For the purposes of this discussion the interest rate utility acts as a money printer not even taking QE into account, and so when a central bank holds interest rates below a market value a bubble of some kind is unavoidable. The money will go somewhere.

At any rate, the ultimate point is the Fed and people interested in a capitalist engine toward social goals or however you say it see high interests as racist, homophobic, anti woman and so forth so if there is any indication that interest rates are causing any discomfort at all they lower them and the bubble blows up. If interest rates start rising the leftists screech that the Fed Chairman is a filthy racist and of course he doesn't want to be a filthy racist so he lowers interest rates.

In a free market commodity based currency if resources are being converted to say stocks or RE or whatever, the cash funneled to a forming bubble drives up interest rates and interest rates will then make investing more risky. We used to call that "market discipline" and it's a very real thing and it's destroyed by things like the Fed or Freddie and Fannie and any number of government activities.

In this case, banks aren't really market entities, they are agents of the government taking orders from the government implementing government policy. The root causes are government.

Take the depression for example. Margin rates were 90% at that time. The market screamed and you didn't have any problem buying on 90% margin. How is that possible? Where does the money come from? It comes from the newly formed Fed. Capitalist engine with social whatevers.

[Parodite]

Interestingly enough most resistance against change here comes from well to do people who tend to vote "liberal" and make good money. Liberal here would mean like voting right wing or libertarian/anti government in the US : less regulation, free/liberal market mechanisms, maximum capitalism. But they don't mind a socialist heritage to stay if it would hurt them a lot if it were removed.

we also have this rent seekers rort and are also suffering the distortion in the market it creates however i wouldnt describe it as a right/liberal thing here because its a middle class boomer thing and crosses the political boundaries - which is why its hard to get rid of.

Yup, its a non-partisan problem across the spectrum.

[Parodite]

well the thing with laws is that in any good democracy they are set by the magority will and the wisdom of the masses, we dont have stupid religious laws "just because" mythology and dinasour relics holding us back from progresss and innovative solutions with science.

I would add that the thing with laws is also that the wisdom of the masses is not a very much informed wisdom. A lot is also habitual dogma.

as such, you are still avoiding that somewhat tedious problem of your wonderful law not meaning much if it doesnt have magority backing and maintain magority backing - it is but one pork barrel away from being irrelevant, ask an american how their debt ceiling laws turned out.

Majority backing is certainly crucial in a democracy. Not avoiding that fact...

[Parodite]

Ok P you're halfway, but we have a way to go.

There is no hypocrisy on my part. It's a lack of knowledge on your part. When people throw money into the air, where does the money come from? Why doesn't it run out:

Answer, the Fed prints more. I don't have time to explain how the Fed does that, I would recommend some educational youtubes. For the purposes of this discussion the interest rate utility acts as a money printer not even taking QE into account, and so when a central bank holds interest rates below a market value a bubble of some kind is unavoidable. The money will go somewhere.

You are right, it is obvious that what the FED does has the effect of what you say it has.

My point is that banks did and so things that are equally idiotic, and in many cases if not idiotic it is calculated and morally reprehensible. All you do is avoiding that fact because it suits you better to focus on the wrong doings of gvts and the fed.

At any rate, the ultimate point is the Fed and people interested in a capitalist engine toward social goals or however you say it see high interests as racist, homophobic, anti woman and so forth so if there is any indication that interest rates are causing any discomfort at all they lower them and the bubble blows up. If interest rates start rising the leftists screech that the Fed Chairman is a filthy racist and of course he doesn't want to be a filthy racist so he lowers interest rates.

It is not "the ultimate point", it is just one of the mechanisms that acerbate the problem of gvt debt. And I am not as convinced as you are that those who embrace the capitalist engine and are OK with taxes used for social ends (you like taxes too bro.. a flat 10% tax rate for all if I recall correctly), are all that stupid as you like to portray them. In fact I know you are dead wrong there.

In a free market commodity based currency if resources are being converted to say stocks or RE or whatever, the cash funneled to a forming bubble drives up interest rates and interest rates will then make investing more risky. We used to call that "market discipline" and it's a very real thing and it's destroyed by things like the Fed or Freddie and Fannie and any number of government activities.

No disagreement here. However the FED is not the only one disturbing market discipline. Forces within the market are trying to do the same. Reread the Financial scams thread.. lot of good stuff there to illustrate my point.

In this case, banks aren't really market entities, they are agents of the government taking orders from the government implementing government policy. The root causes are government.

Banks embrace gvt policies freely when they can make more money: where "they" is not necessarily the bank itself, but the private bank accounts of the managers running those banks. Best example is subprime mortage lavender. Free will in action.

Take the depression for example. Margin rates were 90% at that time. The market screamed and you didn't have any problem buying on 90% margin. How is that possible? Where does the money come from? It comes from the newly formed Fed. Capitalist engine with social whatevers.

Bubbles are part of reality, sure. But they also occur without gvt interference. They occur when the people managing the financial systems, ie bankers, behave irresponsibly and sell lavender to unaware people as long as it gives them a short term extra profit. They can also form monopolies and under the radar rig the system artificially keeping interest rates too high or too low. The criminal/selfish/autistic mindset loves any market Mr.P. The Sopranos do business wherever they can. And they also hate gvt. Go figure.

[Mr. Perfect]

You are right, it is obvious that what the FED does has the effect of what you say it has.

My point is that banks did and so things that are equally idiotic,

No, your point can only be that some banks did idiotic things, guess what they were the banks that were implementing government directives. You should look at the TARP banks and see how many Democrats were on those boards. It will really educate you.

and in many cases if not idiotic it is calculated and morally reprehensible. All you do is avoiding that fact because it suits you better to focus on the wrong doings of gvts and the fed.

I go for the root cause. Government. When government has power to do certain things in the economy they will always find someone who will implement that policy for them.

It is not "the ultimate point", it is just one of the mechanisms that acerbate the problem of gvt debt. And I am not as convinced as you are that those who embrace the capitalist engine and are OK with taxes used for social ends (you like taxes too bro.. a flat 10% tax rate for all if I recall correctly),

I like zero taxes, but my way of getting there is flat tax, 10% sounds good I guess to start, but then lower it to 8, then 6, then 4 and so on.

are all that stupid as you like to portray them. In fact I know you are dead wrong there.

I've been dealing with the Harvard Democrat my whole life and they are a threat to humanity. If it's because they're stupid or hubristic or whatever, it doesn't matter to me, but they are destroying us all, and people seem to really like it.

No disagreement here. However the FED is not the only one disturbing market discipline. Forces within the market are trying to do the same. Reread the Financial scams thread.. lot of good stuff there to illustrate my point.

I wonder why no one starts a government scam thread, I wonder...

Banks embrace gvt policies freely when they can make more money: where "they" is not necessarily the bank itself, but the private bank accounts of the managers running those banks. Best example is subprime mortage lavender. Free will in action.

Err, that was completely government in action. This subject matter may not be for you P. Subprime Mortgages were a Democrat central planning op, top to bottom. A failure of those seeking social ends.

And as always p, "some banks". Not "banks".

Bubbles are part of reality, sure. But they also occur without gvt interference.

Not very often. Hardly at all.

They occur when the people managing the financial systems, ie bankers, behave irresponsibly and sell lavender to unaware people as long as it gives them a short term extra profit.

They can also form monopolies and under the radar rig the system artificially keeping interest rates too high or too low.

In novels and stuff but not in reality. The greatest monopoly of all is government, and government has actually been in the business of keeping artificial interest rates for nearly a century now. You simply don't live in reality. If you oppose monopoly and artificial interest rates you have to oppose the fed and government.

I'm starting to think you can't grasp this subject matter. The monopoly gov't has been controlling interest rates for a century, not imaginary monopoly banks.

The criminal/selfish/autistic mindset loves any market Mr.P. The Sopranos do business wherever they can. And they also hate gvt. Go figure.

It's an interesting imaginary tale. Us vs a vague them politics it seems. I live in reality, I can't afford fantasy worlds, and having multi decadal professional experience in these fields I've benefited from understanding reality and watched people that indulge these fantasies suffer a lot financially. I don't want to suffer financially.

[Parodite]

Something to think about

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[Mr. Perfect]

So you went pro debt that quickly.

The kid isn't very smart. Combination of Captain Obvious and Underqualified (capital borrowing doesn't show up as an earnings loss). No one said China can "call in their debt", they can merely dump their bonds and we'd be SOL.

[Typhoon]

So you went pro debt that quickly.

The kid isn't very smart. Combination of Captain Obvious and Underqualified (capital borrowing doesn't show up as an earnings loss). No one said China can "call in their debt", they can merely dump their bonds and we'd be SOL.

If China were to "dump" their debt, then it would quickly drive down the price of that debt and they would end up taking a massive haircut.

China would have to unwind their holdings carefully to avoid a "bank run".

[Typhoon]

Given that every mature industrialized state is in debt, it makes me wonder it is simply too expensive to maintain such societies.

In other words, it ends up being a lot cheaper to build an industrial state, than it does to maintain it.

Little to do with ideology, rather a losing battle against entropy.

[Parodite]

So you went pro debt that quickly.

Not really just trying to figure out things.

The kid isn't very smart. Combination of Captain Obvious and Underqualified (capital borrowing doesn't show up as an earnings loss). No one said China can "call in their debt", they can merely dump their bonds and we'd be SOL.

SOL=?

Anyways what seemed to me good points of kid: debt is not deficit, although related. And that a gvt borrowing from same gvt is a lesser problem than borrowing from an external. Also that the real risk is US$ interest rates going up when the international context stops trusting the dollar. Suppose this is but one of the risks.

[Parodite]

Given that every mature industrialized state is in debt, it makes me wonder it is simply too expensive to maintain such societies.

In other words, it ends up being a lot cheaper to build an industrial state, than it does to maintain it.

Little to do with ideology, rather a losing battle against entropy.

Still makes me wonder. To borrow money, having a deficit, is great when you start from scratch as long as you "soon enough" go into a no deficit situation, able to save money etc. But once things are up and running and the deficit continues or gets worse.. the slippery slope is there, ie where we are now. Drowning today or tomorrow. Proper regulations I think can still keep the whole thing from slamming into an iceberg.

Glass-Steagall was unthoughtfully dismantled for starters. Wonder where we would be now of it was not, or replaced by something of better design.

hOJLWtSfKks

[Nonc Hilaire]

Given that every mature industrialized state is in debt, it makes me wonder it is simply too expensive to maintain such societies.

In other words, it ends up being a lot cheaper to build an industrial state, than it does to maintain it.

Little to do with ideology, rather a losing battle against entropy.

If a government can create bonds (debt) it can also create debt free currency. It is this unnecessary debt and the fractional reserve system which separate modern financial capitalism from free enterprise.

[Simple Minded]

Given that every mature industrialized state is in debt, it makes me wonder it is simply too expensive to maintain such societies.

In other words, it ends up being a lot cheaper to build an industrial state, than it does to maintain it.

Little to do with ideology, rather a losing battle against entropy.

Complexity requires maintenance, which is expensive.

I have long been of the same opinion, but prefer to couch it in terms of the emotions of optimism and pessimism. During the optimistic/drunken sailor spending eras, everything is a necessity. During a normal or pessimistic/retrenching stage, the previous necessities are revealed to be luxuries and allowed to decay.

More than a few buy high and sell low.

The US northeast contains wonderful architecture from the late 1800s/early 1900s that has decayed since 1930 and experienced a period of refurbishment in the 1990s.

Then of course there is the battle against competition FOAK products are infinitely more expensive that NOAK products. Jurisdiction X prospers due to FOAK product to manufactures, builds expensive infrastructure, but as completion enters the picture and profits falls, costly infrastructure destroys competiveness.

[noddy]

Given that every mature industrialized state is in debt, it makes me wonder it is simply too expensive to maintain such societies.

In other words, it ends up being a lot cheaper to build an industrial state, than it does to maintain it.

Little to do with ideology, rather a losing battle against entropy.

no, this makes no sense at all when some of the ideologies actually acknowledge the entropy and dont want debt being used to deny it.

[noddy]

as some of you may know australia recently voted out the left wing coalition of greens and labour who where spending up a frenzy and replaced them with the right wing fiscal conservative liberal party.

first move is to raise the debt ceiling from 300 billion to 500 billion.. oh teh irony, it hurtz... scaled to american size its 5 trillion and this is for a country that missed the gfc due to a once in a lifetime resources boom to china.

http://www.abc.net.au/news/2013-10-22/j ... ls/5038314

you were saying something about legal limits on government debt parodite ? the people that set the legal limits, limiting themselves ?

pardon moi cynicism.

[Mr. Perfect]

Given that every mature industrialized state is in debt, it makes me wonder it is simply too expensive to maintain such societies.

In other words, it ends up being a lot cheaper to build an industrial state, than it does to maintain it.

Little to do with ideology, rather a losing battle against entropy.

Err the Biden intiative of "Spending your way out of bankruptcy" is 100% ideological.