Republicans are not worried about the "debt" ceiling.
Why is it that "cascading" effects on the "banking system" can be appreciated, but a even more dire, "cascading" effect on the US Middle Class isn't taken seriously?
Given so much semantic confusion, let's try to sort out a simple message for newcomers.
What kind of electorate and "leaders" think that zero increase in public initiative is a good thing?
Yet that is exactly what our politicians all agree upon.
Public initiative means fiat
which means selective actions,
which are denominated with fiat currency when and as needed.
So, a "balanced" fiat currency budget means no increase in currency supply for a nation that can't stop it's organic growth.
That means everyone that actually needs more currency, probably won't be able to get enough of it. That's a heckuva monkey wrench to throw into the wheels of national commerce!
What kind of country wants LESS for it's citizens?
Apparently, we're about to find out.
Many argue - and assume - that we can cut out all the waste, and not cut anything essential.
That's true, in theory.
Yet in practice, if we actually COULD do that, we WOULDN'T be having this discussion in the first place!
So if we negotiate cutting everything "fairly," whether essential or not ... it could get VERY ugly, very quickly. And, we'll still have the same confused people, before, during and after the whole, arbitrary exercise. Physiological shock can trigger an uncontrollable shutdown spiral and bodily demise. Cultural and market shock can do the same to our economy. This is NOT the sort of thing we want to try on a whim.
Warnings are that the USS Stupid is going down!
Warnings are that the USS Stupid is going down!
3 comments:
Eh, you have to be careful with the basic economic theory. When you're talking about fixed currency you are probably thinking about currency based on gold or other asset. Such currency does indeed impose limits on growth but it's not like it's static: first you can mine gold to add to your reserves, and secondly and more importantly you can increase GDP, sell stuff and buy more gold.
Most economists agree that 100% gold based currency is counterproductive (the historical judgement is that we refused to suffer on the 'cross of gold'). Conservative countries. like Switzerland, have a policy of partial gold reserve---I believe the Swiss target a gold reserve covering 20% of their currency. This is a neat political-psychological trick: it doesn't shackle their monetary policy while still enforcing significant discipline.
Even in a bullion-based monetary system there is still credit. The initial "paper" in the West was the bills issued by merchants for trade purposes. They became negotiable instruments guaranteed by the parties involved.
As long as there is credit, there is no "pot of gold" in that economic factors are variable. A bullion-based system is more restrictive than a fiat system or even a fractional reserve banking system in a fixed rate convertible system like the gold standard. Neither have stopped credit extension in the past, which raises risk due to increased leverage.
The fixed factor model taught in Econ 101 is a stylized model that is only a teaching aid. Extending it to real economies is a mistake of gigantic proportions.
In the simplest teaching model, you introduce all variables as constant and then either pick an independent variable and show the change in dependent variable relative to changes in the independent variable. You introduce a new variable to the model like government into the private sector with fixed factors only model. If the new factor doesn't introduce any contributions, it draws from the closed system in the initial model. I can see taking a day or two to explain how models work using such an approach and saying that historically economists used to think that way until they learned better, only they still haven't.
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