Saturday, September 12, 2009

Hey, deficit terrorists...keep your guilt trips to yourself!



To all those screaming about the deficit...

What you don't realize is that for every debit there is a credit; for every liability there is an asset and for every borrower there is a saver.

It's called double-entry accounting and it's the system the world went on 500 years ago because it was far superior to single-entry version, which kept most of the human race in poverty or enslaved in one form or another for thousands of years.

You and others like you still think we are on that old system or worse, you endeavor to put us back on it because of your own "guilt trips." You hate to see people comfortable and living nice lives. It is some Puritanical thing within you that wants anyone who is modestly happy and living a decent life to be punished. You believe it is all sinful and we must atone for our sins by punishment or as some of you call it, being "purged."

Why don't you go live with the fanatical muslims who deny themselves any form of pleasure and wish harm to anyone who does not subscribe to their extreme views?

Deficit terrorists, get lost!

Hey, here's an idea...why don't you go sit in a cave so you can safeguard your ignorance? Whatever you do, just keep your guilt trips to yourself. Impose them on your kids and your own family if you like, just stay away from me!!

-Mike Norman

26 comments:

Unknown said...

Hope you don't ban me .... spirited debate / intellectual discourse. :-)

mike norman said...

I won't ban you, Brantley, but I am just curious as to why you would want to debate using arguments that are outmoded? For example, would you debate that the earth is flat?

googleheim said...

FIRST HERE IS A TYPICAL EMAIL I GET:
----------------

Q. What is an Economic Stimulus payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. Only a smidgen.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn't that stimulating the economy of China ?
A. Shut up.

googleheim said...

SECOND, IS MY REBUTTAL :
------------------------

ECONOMIC STIMULUS PAYMENTS ARE NOT PRINTED NOR TAKEN FROM TAX PAYERS.

IF THIS COUNTRY WAS REQUIRED TO CREATE MONEY FLOW BY TAXATION, IT WOULD ONLY
PAY FOR THE PARKING FEE, SO TO SPEAK, WHEN GOING TO A BALL GAME AND GETTING A FULL
MEAL IN THE VIP SECTION.

STIMULUS MONEY COMES FROM THE FEDERAL RESERVE AND TREASURE WHO CREDIT COMPUTERS
ON THE ACCOUNTS OF 19 BANKS WHO ARE PART OF THE CENTRAL BANK SYSTEM.

NO TREES ARE CUT DOWN EITHER, SINCE IT IS ALL DONE ON COMPUTER.

THE MONEY IS ISSUED AS CREDITS WHICH ARE LATER PAID BACK, SOLD A T BILLS OR DEBT, OR
ISSUED AGAINST FOREX SWAP LINES OF CREDIT.

LAST OCTOBER 2008 THE FEDERAL RESERVE MADE A COOL 300 BILLION SWAPPING FOREIGN EXCHANGE SWAP LINES
ON THE INTERNATIONAL MARKET. NOT ONE PENNY CAME FROM TAX PAYERS.

DURING THE 1980'S THE SAVINGS AND LOAN CRISIS WASTE WAS BOUGHT UP BY THE RESOLUTION TRUST COMPANY
WHICH THEN HELD THE COMMERCIAL ASSETS FOR 10 YEARS AND AFTER SELLING THEM SLOWLY OVER THIS TIME PERIOD,
MADE ANOTHER COOL 200 BILLION FOR TAX PAYERS.

TAX AND SPEND IS IMPOSSIBLE GIVEN THE FEDERAL SPREADSHEET, AND DEFICIT TERRORIST IDEAS WHICH PUPPORT THAT THE TAXPAYER IS ON THE
HOOK IS A HOAX AND A SMOKE SCREEN.

MACROECONOMIC PRINCIPLES SHOW OTHERWISE - FOR EXAMPLE THE LARGEST DEFICIT CREATED WAS UNDER REAGAN ( NOT ADJUSTED FOR INFLATION )

HOWEVER, - THE CASH FOR CLUNKERS WAS A MISTAKE BECAUSE THE PRESENT GOVERNMENT ( EXECUTIVE AND CONGRESS )
EMASCULATED THE AMERICAN AUTO INDUSTRY IN FAVOR OF SAVING BANKS THAT TRULY DO NOT ADD ANY ASSETS TO THE ECONOMY,
AND SO NOW THAT THERE IS A LACK OF CAPACITY IN THE AUTOMOTIVE INDUSTRY PRICES FOR TIRES AND CARS WILL GO UP.

SO NOW FOREIGN OWNED FACTORIES IN THE SOUTHERN USA WILL BE FILL IN THE GAPS AND MAKE JAPANESE AND GERMAN AUTOMAKERS
HAVE A HIGHER SHARE OF THIS STIMULUS. ALL SUBSIDIZED BY TAX MONIES FROM THE NORTH EASTERN USA SINCE
ALL THE SOUTHERN STATES DO NOT MAKE ENOUGH TAX REVENUES TO PAY FOR THEIR OWN FEDERAL ASSISTANCE.

Unknown said...

Two questions for you guys.

1. Why even tax U.S. citizens?
2. Why are other foreign powers now talking about creating a new basket reserve currency?

Unknown said...

You seem to be ignoring that the debits/credits are coming from/going to different people, in different generations and segments of society.

Those subjected to the taking will quite reasonably not think all is well.

There may be reasons not to fear huge & recurring deficits (I can't think of any, but that doesn't mean reasons don't exist), but your proposed reason for equanimity is oversimple to the point of absurdity.

googleheim said...

patton doesn't understand that taxes do not have anything to do with taking and giving away as per the typical republican't cry over supposed entitlements and tax payer on the hook.

how did reagan fix his deficit ? with supply side crap voodoo ?

no, supply side was a hoax to cover up the huge deficit reagan created to give reason to it's deregulation which DIRECTLY caused the savings and loan crisis.

Matt Franko said...

Brantley,

1 (Why tax?) One reason is that the fact that there are legal fed taxes to be paid is the only thing that gives the US dollar its value....ie you need to acquire $ to pay your taxes or go to jail...our current income tax system is beyond unfair, its abusive and should be eliminated and substituted by some other form of taxation...

2. (Reserve currency) Check into it and I think you will find that this talk traces back to the IMF usually. the IMF is pushing for it as it needs a new reason to exist these days....they want to manage this system of blended currency units (they call them SDRs) and take fees for the service...I look at the IMF as sort of a UN type of organization for international finance....mostly in the end just helps itself.

Unknown said...

googleheim:

I'm waiting expectantly for you to finish your obviously not-yet-complete thought.

If taxes don't have anything to do with taking, and their re-allocation to others who didn't earn the money have nothing to do with giving, then what are taxes for?

mike norman said...

Patton,

There is a "distributional" aspect when we impose a constraint such as believing that the investment has to be "paid for" in current dollars by some segment of the society. It is unfortunate that we do this, especially given how much spare capacity and idle capital we have.

The real "cost," however, comes from not utilizing all the productive capital (physical and human) that a nation has. This results in a lower standard of living to both current and future generations. That is the true legacy that is passed along. It's also the reason why the debt that our grandparents ran up to fight WWII did not impoverish us. On the contrary, it made us rich.

Of course there is also a cost in pushing beyond the limits of what our productive capital is capable of yielding, but we are nowhere near that level. In fact, this country has not been anywhere near that level for 80 years. Therefore, one can say we have been living beneath our means for all that time.

The problem you and others like you have is that you focus on the nominal price level (the money) as opposed to looking at whether or not we are using all of our resources and capital to the fullest.

An example would be a business that has the ability to earn you $1 billion per year, but you run it to produce $500 million instead, because you do not want to "spend" the money to run it at full capacity even though if you do your return is greater. That is not only bad management, it is irrational. If the business earns you $1 billion per year after costs, then a good manager would run it to maximize its output or as they say, maximize its profit.

Another example would be watching a football game and thinking that the points on the scoreboard decide the game, when in fact it is the teams on the field and the game play that dictates the score, which ultimately decides the game.

If there were no game, just two teams sitting on the sidelines and the scorekeeper put a score of 20-7 on the scoreboard, had there been a game? No.

On the other hand if there had been a game and the score were 20-7, but the scoreboard was broken, a game still took place with a real outcome. The scoreboard is just a convenience; the game is what's of true importance.

Unknown said...

Mike:

Thanks for your response, but I get the impression you're talking about one game and measuring the results of another.

In an absolute sense, there is an observable effect, in the present day, of excessive deficits.

Claiming that it all works out over a long period of time is a way of kicking the can down the road.

To use an analogy, since you seem to like those, if I receive a margin call from my the OCC, I have to address it, and I can't explain to them that they should relax, because it's just me utilizing all the resources at my temporary disposal. That would be bad business on my part, of course, and would result in the liquidation of my account.

Claiming that deficits don't matter is bad business, likewise. It doesn't matter how long the situation that caused the deficits has existed, and it doesn't matter (within a broader $ range) how much happy-talk a country gives its lenders - at some point, the lending stops, because nobody likes to play the fool.

In a world where debtors choose not to pay their debts, your thinking on this makes sense. Here on Earth, however, in a necessarily global economy, it makes considerably less.

Anonymous said...

This is the worst argument for ignoring deficits that I have ever seen. Look at the price of gold over the past 40 years and tell me our currency hasn't been destroyed. Cost of living continues to rise disproportionally to incomes and our middle class is being destroyed. I can't believe I'm commented on this worthless drivel. Go back to fox news where the IQ level can't see through your bs.

mike norman said...

Scottjoyster:

Who cares what the dollar fetches in terms of some foreign currency, or even gold for that matter. You can't eat gold. Why are you so hung up on that?

What matters are the real things we need to live a quality life: food, housing, consumer goods, education, health care, energy, transportation, etc.

We have most of that in abundance here in America, even more so than we did prior to 1971, when we went off a gold standard.

You "Schiff-ites" are guilt-ridden to the extreme. You are like Muslim extremists with your warped views of the world. You see everything through a prism of America as a failed and impoverished nation. It's just not so.

Jim Baird said...

Patton -

There are no "lenders" to currency issuer. How can there be? When you can create as much of something as you want, at will, how can anyone "lend" it to you?

If I went up to a representative of the NYC subway and said "Hey, I have some extra credit on my Metrocard. I hear you guys are in a bad way, so how about if I lend it to you to tide you over?" , what do you think he'd say?

Unknown said...

jimbo:

There are no lenders to a currency issuer?

Wow. That should make the Chinese feel a lot better, because they'd gotten the impression they were about to be inflated out of their holdings.

It appears you're being too literal in your thinking on the matter. It also appears that all arguments of the type "deficits don't matter" are focused on a moment in time, rather than on the extreme effects that "Argentina-ing" your lenders will have in the future.

Matt Franko said...

Patton,
Do you think finance should ever be used? If so, what metric/ratio would you use as guidance or as a limit of that financing and are we above or below it?

At the Fed/State/Local govt levels we have been setting our limits too low IMO, remember, a Gov't or a Corporation is an eternal entity, they are legal structures that do not have a finite lifespan like we as people do. We as individuals like to pay off our long term debt before retirement typically as our incomes and earnings power are greatly limited towards end of life....but we CANT expect to run our Govt or Corporations that way...THAT would truly be unfair to our next generation as it does not allow the creation of the assets that the next generation can use to enhance their living standards...see Mikes post above: its about the game on the field not the scoreboard.

mike norman said...

Jimbo,

Or imagine if the MTA still used tokens and somebody said to them, "I hear you're in a bad way. I'll lend you some tokens."

The MTA creates tokens; the idea that someone is "lending" them their own tokens is absurd.

Great as alwasy, Jimbo!

-Mike

Unknown said...

Matt:

Clearly, finance has valid uses.

Just as clearly, there are limits to one's ability, in normal markets, to use it to excess. As an example (again, in normal markets), I'd point to the limitations on LTV in a mortgage transaction.

I'd agree with your contention that limits are sometimes set too low, such as those states which prohibit deficits constitutionally. This makes sense in keeping a check on government's tendencies, but can be willfully ignorant of economic cycles.

Those state/local extremes are nothing like what I see as the fearless deficit building underway right now. I felt the same way under the last administration, so this isn't a partisan concern on my part.

I think I see the disconnect here (and goodness knows, I'm trying hard to find that disconnect) - there's a variety of uses for the "proceeds" of deficit spending.

I like to think of it in the way that Gordon Brown *claimed* to deal with expenditure during his days as chancellor in the UK, his so-called "Golden Rule" of fiscal policy.

Rank expenditure in deficit is different than investment in assets that will actually exist or will have generated societal benefit at the time when the bill comes due.

Deficit spending under the (largely imaginary, in practice so far) Golden Rule would trouble me little to not at all.

That's not what we're seeing in the US over the past decade or so. Instead, deficit spending is used to bribe portions of the populace into thinking it doesn't matter, as long as they "get theirs". And the problem is that it's impossible for everyone to "get their" bribes.

This, I have a problem with.

Matt Franko said...

Patton,
Thanks for your comments.
Look, it seems that you disagree with the policies that dictate where the spending (deficit or otherwise) goes, but OPERATIONALLY you seem to be in some agreement with Mike and his community here.

Largely, Mike argues just the operational aspects of his vision for public fiscal and monetary policy here, we all have to trust the representative Govt to decide how to allocate and I'm sure from reading between your lines that you and I would be in much agreement on priorities wrt allocations! But that is a separate (political) fight.

Couple things (operational):
1. Fiscal stimulus can be done with tax cuts vice spending. Best idea Ive heard is to cut taxes to the point that fiscal deficit STAYS at around 6% GDP or so, if it falls below this level, send out prorated tax rebate checks to sustain the economy.

2. Consider: The Govt (operationally) does NOT have to issue Treasuries to get money to spend (does not borrow from the Chinese). The Laws (self imposed) could be changed so that once the appropriation was made by Congress, the Treausry could just directly credit the bank accounts of the lawful recipients of the spending and that's it. The Fed would set policy rates directly by paying interest on reserve balances. What they have been doing to date is simultaneously draining the reserves created by the spending by selling Treasury bills so the Treasury spending has a sort of a "monetary nuetral" effect on monetary policy, do you see how the present course is needlessly over complicated with auctions and such? The Chinese would just have to literally put their US $ in the bank like the rest of us if they sold us something instead of presently parking it in T-Bills (its FDIC insured anyway). If you dont understand the reserve accounting of what was just described I can point you to sources here and elsewhere if you are interested. My own investigations over the last couple of years into understanding the operational aspects of the Fed and Treasury have been enlightening for me.
Matt

mike norman said...

Patton:

The example of Argentina is often used but incorrect. Argentina borrowed in a foreign currency and/or utilized a currency board (effective peg to a foreign currency). Neither situation applies to the U.S. or any other sovereign currency issuer that spends in its own currency.

Unknown said...

Matt:

"But that is a separate (political) fight."

You are correct, sir, and our disconnect is that you folks aren't addressing that at all. I believe I've reached an understanding of your (and others') points.

I'm quite concerned about the political side of things, but when I ignore that, I don't disagree horribly with the concepts you espouse.

A hypothetical & intentional 6% structural deficit, though, makes me wonder - what happens to the flow of credit in such an environment, presuming for convenience that all debt is extended and repaid in dollars?

The words "crimped & expensive" come to mind, but I'm open hearing other interpretations.

Mike:

Point taken, you are of course correct, and the situation is not identical.

Barring complete economic self-sufficiency on the part of the US, however, mightn't the introduction of a replacement reserve currency (as China, Russia, and various EU members have bandied about) put us in the same boat?

My hypothetical above doesn't make my original comment valid, so please don't consider that hypothetical a challenge to respond or an attempt to paper over my error.

mike norman said...

Patton:

Why? Would the U.S. suddenly become a borrower of the newly issued IMF currency or whatever the new currency was? Doubtful. Japan spends in its own currency and has a debt more than twice the size of the U.S. Not a problem.

Furthermore, it is very important to understand that for a currency to be the main reserve currency of the world, the issuing nation,or entity, has to be willing to supply sufficient quantities to meet the demand of those who want to hold it.

The U.S. has been willing to do this because we run large and sustained trade deficits. ARe the Europeans going to do that? Will the IMF just "print" their currency to supply sufficient reserves and will the world accept that when there is not an exchange of real goods that goes along with it? (The IMF doesn't consume anything.) That is REALLY printing money.

I don't see any of that happening.

On the other hand, because we are implementing policies designed to turn our country into an export-driven economy, partially on the mistaken idea that we need to address "imbalances," WE are undermining our own currency's status as reserve because we are basically saying to the world that we will no longer supply it in sufficient quantities.

Who knows? One day the renminbi could be the world's reserve currency. We are basically handing that to them.

bubbleRefuge said...

Patton, et al,
A couple of points that the main stream does not understand:

1) Taxes do not fund government in
the modern non-convertible fiat
money regimes that most of the world uses today.

2)Debt does not fund government. Federal debt is probably the most misunderstood instrument in the mainstream eco-politico debate. Its sole purpose is interest rate maintenance. It should be abolished because there are less confusing(and politically harmful) ways to implement interest rate policy.

3) As a consequence of 1) and 2) it is the government that funds us via deficit spending.

Why do we need taxes for? As Matt alluded to, to create demand for money as a medium of exchange and thus keep the monetary system flowing.

Since the government funds us, they have control of the level of aggregate demand in the economy by increasing or decreasing the size of the deficit (fiscal policy). We cannot say that 6% is the right or wrong number. Its a moving target and is dependent upon the private sectors marginal propensity to consume.

googleheim said...

Argentina artificially pegged their peson 1:1 to the dollar.

They borrowed heavily from outside countries.

They defaulted on their debt. The rich stole the money. Kirchener took all the savings of his province ( before he was pres ) and stuffed 500 million Euros in Luxembourg before the bank crash in Argentina. He knew what was going on.

Now, take a look at China. THEY ARE TRYING TO ARGENTINA THE USA.

THEY ARE ARTIFICALLY PEGGING THEIR CHINESE CURRENCY LOWER THAN THE USD ON PURPOSE.

THEY ARE MAKING IT HARD FOR USA TO PAY THEM THEM BACK.

CHINA'S SAVINGS GLUT AND THEIR ARTIFICAL PEG SHOULD BE IN DIRECT VIOLATION OF THE WTO.

PUNT CHINA IF YOU ARE A USA PATRIOT !!!!!

bubbleRefuge said...

Googleheim, China's policys are to our benefit. I hope they keep doing what they are doing. The only hostile thing I've heard from China is talking about indexing US debt to inflation which we should never allow. Exports are a cost imports are a benefit. Where am I wrong?

Mike Sandifer said...

Mike, you posted:

"There is a "distributional" aspect when we impose a constraint such as believing that the investment has to be "paid for" in current dollars by some segment of the society. It is unfortunate that we do this, especially given how much spare capacity and idle capital we have."

I am reminded of the FDR quote during his first inaugural: "...plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply..."

I think that sums up your point well.