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What about a 'consolidated non-govt' as part of this?
ie, once the govt issues a 10-yr bond, SOMEBODY in the non-govt has to agree to save the amount of the issue for 10 years...
This matters too imo.
I'm not sure this fits in with JKH's issues/concerns that JKH points out from the perspective of the "private" side of the "private-public partnership" wrt interest rate risk... but as a 'consolidated sector', as long as we have bond issuance to provision the TGA in order to maintain a positive balance in the TGA before the govt can spend, then this would seem to matter as what the govt is doing is requiring the consolidated non-govt to save an offsetting amount before it will spend....
So when we say "the govt has to increase the deficit" is this helpful as by definition, somebody in the non-govt (as a consolidated sector) has to save the amount of the deficit for the term of the securities that the 'consolidated govt' issues. ie the 'consolidated' non-govt sector has agreed to leave the $ "in the savings account" for the specified terms of the issue....
ie if we are going to "consolidate" in our analysis, should we have to "consolidate" both sectors in our analysis?
Trying to disprove the "Laffer Curve" under present arrangements... "trickle down" so-called...
ie testing: "Tax cuts work" as far as "stimulus"...
I dont see how they do from a consolidated sector analysis standpoint as if the govt sector is already in deficit, any tax cut at that point increases the deficit and requires a prior increase in bond issuance cet par and as we all know, bond issuance is "the savings account" and savings is a leakage, etc... so the tax cut goes right to savings and doesnt help...
consolidated non-govt sector has to take previously issued $NFA and first agree to save them for the term of the bonds before the govt spends the amount equal to the tax cut...
ie "tax cuts dont work" cet par... not saying I'm right just testing this via "consolidated sector" type analysis...
I think what may be happening is that any historic "Laffer" style tax cuts are also accompanied by some sort of increase in govt spending on "G + xfers" and then with the increase in govt spending, the non-govt can "take that to the bank" and increase bank credit which in the end is what really does the trick...
ie real increases in govt $NFA xfers to the non-govt allows the non-govt to increase indebtedness rather than the "tax cuts" is what helps the economy... the tax cuts have to be saved by the consolidated non-govt..
3 comments:
What about a 'consolidated non-govt' as part of this?
ie, once the govt issues a 10-yr bond, SOMEBODY in the non-govt has to agree to save the amount of the issue for 10 years...
This matters too imo.
I'm not sure this fits in with JKH's issues/concerns that JKH points out from the perspective of the "private" side of the "private-public partnership" wrt interest rate risk... but as a 'consolidated sector', as long as we have bond issuance to provision the TGA in order to maintain a positive balance in the TGA before the govt can spend, then this would seem to matter as what the govt is doing is requiring the consolidated non-govt to save an offsetting amount before it will spend....
So when we say "the govt has to increase the deficit" is this helpful as by definition, somebody in the non-govt (as a consolidated sector) has to save the amount of the deficit for the term of the securities that the 'consolidated govt' issues. ie the 'consolidated' non-govt sector has agreed to leave the $ "in the savings account" for the specified terms of the issue....
ie if we are going to "consolidate" in our analysis, should we have to "consolidate" both sectors in our analysis?
rsp,
once the govt issues a 10-yr bond, SOMEBODY in the non-govt has to agree to save the amount of the issue for 10 years...
If the consolidated non-govt doesn't won't hold it, the consolidated govt will, passing from treasury to fed via the primary dealers.
gee,
Trying to disprove the "Laffer Curve" under present arrangements... "trickle down" so-called...
ie testing: "Tax cuts work" as far as "stimulus"...
I dont see how they do from a consolidated sector analysis standpoint as if the govt sector is already in deficit, any tax cut at that point increases the deficit and requires a prior increase in bond issuance cet par and as we all know, bond issuance is "the savings account" and savings is a leakage, etc... so the tax cut goes right to savings and doesnt help...
consolidated non-govt sector has to take previously issued $NFA and first agree to save them for the term of the bonds before the govt spends the amount equal to the tax cut...
ie "tax cuts dont work" cet par... not saying I'm right just testing this via "consolidated sector" type analysis...
I think what may be happening is that any historic "Laffer" style tax cuts are also accompanied by some sort of increase in govt spending on "G + xfers" and then with the increase in govt spending, the non-govt can "take that to the bank" and increase bank credit which in the end is what really does the trick...
ie real increases in govt $NFA xfers to the non-govt allows the non-govt to increase indebtedness rather than the "tax cuts" is what helps the economy... the tax cuts have to be saved by the consolidated non-govt..
rsp,
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