The Tea Party are Economic Terrorists

[Iseree22]

The idea of a balanced budget amendment is absurd. The Tea Party wants America to endure a long lasting deflation. This clearly shows that the Tea Party has no idea of how the American economy works. The balanced budget amendment will result in the savings of private citizens being taken unnecessarily. In fact any politician that argues America or any other nation with a Sovereign currency, needs to reduce its debt, wants private citizens to have less savings.

[1714772339]

1714772339

[1714772339]

1714772339

[1714772339]

1714772339

[Anonymous]

I'll bite. If the government is running at a surplus, how does this devalue the currency?

[Hawker]

I'll bite. If the government is running at a surplus, how does this devalue the currency?

Whatever you do, don't mention China.  Just don't say a word about their huge private saving rate and their government surplus. 

[AyeYo]

I'll bite. If the government is running at a surplus, how does this devalue the currency?

Whatever you do, don't mention China.  Just don't say a word about their huge private saving rate and their government surplus. 

 The op is confusing private saving with simple money supply. Substitute money supply for wherever he says savings and what he's saying does have some merit.

[BombaUcigasa]

This clearly shows that the Tea Party has no idea of how the American economy works.

Yup, clearly the American economy works... 

[Iseree22]

I'll bite. If the government is running at a surplus, how does this devalue the currency?

I said it will reduce the amount of savings people have, nothing about its value. To achieve a reduction in national debt, the State will need to spend less and tax more. This will cause a net flow of cash from the private sector to the public sector. Consequently this will cause deflation. If you want to see if your money is still valuable after a depression, then good luck.

I'll bite. If the government is running at a surplus, how does this devalue the currency?

Whatever you do, don't mention China.  Just don't say a word about their huge private saving rate and their government surplus. 

http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt

China has public debt of approx. 18.9% of GDP.

This clearly shows that the Tea Party has no idea of how the American economy works.

Yup, clearly the American economy works... 

Lol, no comment

[Anonymous]

I'll bite. If the government is running at a surplus, how does this devalue the currency?

I said it will reduce the amount of savings people have, nothing about its value. To achieve a reduction in national debt, the State will need to spend less and tax more. This will cause a net flow of cash from the private sector to the public sector.

Isn't our debt issue a matter of inefficiency and wasteful spending rather than not enough revenue? Couldn't a balanced budget feasibly just include spending cuts?

[FirstAscent]

Isn't our debt issue a matter of inefficiency and wasteful spending rather than not enough revenue? Couldn't a balanced budget feasibly just include spending cuts?

Without jumping on your libertarian high horse, what are your suggestions for reducing wasteful spending and spending cuts?

[Anonymous]

Isn't our debt issue a matter of inefficiency and wasteful spending rather than not enough revenue? Couldn't a balanced budget feasibly just include spending cuts?

Without jumping on your libertarian high horse, what are your suggestions for reducing wasteful spending and spending cuts?

Eliminating federal entitlements and services and leaving such things up to the states would be a start and actually constitutional. Ending our unconstitutional wars would also solve most of our problem as well.

[Iseree22]

Isn't our debt issue a matter of inefficiency and wasteful spending rather than not enough revenue? Couldn't a balanced budget feasibly just include spending cuts?

Firstly there is no debt issue. The only way that the private sector can have Dollars is if the State spends first. Unfortunately, the process to create money is convoluted, and requires issuing debt and then selling to the market in exchange for cash. This debt is issued in Dollars, which America is the sole-issuer of and therefore can create money via the FED to pay back the debt. This has been the process since atleast the 1940s.

The creation of money is similar to Bitcoin. Imagine one miner(the state), but instead of creating BTC the miner creates Treasuries denominated in BTC. Whenever the Miner wants to spend(education, war) they sell the Treasury to the market in exchange for BTC. The price is unfair the BTC Central Bank(a new entity, symbolizes the FED) steps in and creates new BTC and purchases the Treasury. This is basically how Modern Money works.

Lets also say that the BTC miner can create Treasuries according to a debt-ceiling. Therefore the number of BTC Treasuries created will continue to increase indefinitely.

Whenever the BTC Miner spends, then this creates the opportunity for the private sector to save. The amount of money circulating also supports prices.

So if the BTC Miner wanted to reduce the number of outstanding Treasuries then they would need to stop selling Treasuries, and purchase some amount from the Market. Todo so taxes(BTC miner can tax also) collected would need to be higher than money spent. The net effect is decreasing the number of BTC in circulation which is deflationary.

So the debt is not an issue, in fact it is essential for a properly functioning economy, ideally any form of government debt should be removed and the money printed as needed.

[Rassah]

The idea of a balanced budget amendment is absurd. The Tea Party wants America to endure a long lasting deflation. This clearly shows that the Tea Party has no idea of how the American economy works. The balanced budget amendment will result in the savings of private citizens being taken unnecessarily. In fact any politician that argues America or any other nation with a Sovereign currency, needs to reduce its debt, wants private citizens to have less savings.

Wait, the Tea Party has a coherent specific goal? When did that happen!? I just thought it was just a bunch of old white christian republican rednecks being just angry in general?

[AyeYo]

Isn't our debt issue a matter of inefficiency and wasteful spending rather than not enough revenue? Couldn't a balanced budget feasibly just include spending cuts?

Firstly there is no debt issue. The only way that the private sector can have Dollars is if the State spends first. Unfortunately, the process to create money is convoluted, and requires issuing debt and then selling to the market in exchange for cash. This debt is issued in Dollars, which America is the sole-issuer of and therefore can create money via the FED to pay back the debt. This has been the process since atleast the 1940s.

The creation of money is similar to Bitcoin. Imagine one miner(the state), but instead of creating BTC the miner creates Treasuries denominated in BTC. Whenever the Miner wants to spend(education, war) they sell the Treasury to the market in exchange for BTC. The price is unfair the BTC Central Bank(a new entity, symbolizes the FED) steps in and creates new BTC and purchases the Treasury. This is basically how Modern Money works.

Lets also say that the BTC miner can create Treasuries according to a debt-ceiling. Therefore the number of BTC Treasuries created will continue to increase indefinitely.

Whenever the BTC Miner spends, then this creates the opportunity for the private sector to save. The amount of money circulating also supports prices.

So if the BTC Miner wanted to reduce the number of outstanding Treasuries then they would need to stop selling Treasuries, and purchase some amount from the Market. Todo so taxes(BTC miner can tax also) collected would need to be higher than money spent. The net effect is decreasing the number of BTC in circulation which is deflationary.

So the debt is not an issue, in fact it is essential for a properly functioning economy, ideally any form of government debt should be removed and the money printed as needed.

Why do you continually over look the main method of money creation, which is direct fed loans to banks and the ensuing fractional reserve practices. This money window to private banks us the primary method of money creation. The state DOESN'T NOT have to spend for the private sector to get more money.

[FirstAscent]

The idea of a balanced budget amendment is absurd. The Tea Party wants America to endure a long lasting deflation. This clearly shows that the Tea Party has no idea of how the American economy works. The balanced budget amendment will result in the savings of private citizens being taken unnecessarily. In fact any politician that argues America or any other nation with a Sovereign currency, needs to reduce its debt, wants private citizens to have less savings.

Wait, the Tea Party has a coherent specific goal? When did that happen!? I just thought it was just a bunch of old white christian republican rednecks being just angry in general?

Pretty much. Not just old, though. Old, middle aged, and young.

[JeffK]

I'll bite. If the government is running at a surplus, how does this devalue the currency?

I said it will reduce the amount of savings people have, nothing about its value. To achieve a reduction in national debt, the State will need to spend less and tax more. This will cause a net flow of cash from the private sector to the public sector.

Isn't our debt issue a matter of inefficiency and wasteful spending rather than not enough revenue? Couldn't a balanced budget feasibly just include spending cuts?

It is pretty much wasteful spending AND not enough revenue, not one or the other. However, it seems revenue cuts are happening much faster than spending cuts, and the most expensive and wasteful programs (e.g., money for "defense"/Homeland Security) seems to be last on the chopping block.

[zer0]

US should just do a general default, and start over.
There is no example in history of a country paying off an enormous debt and creating prosperity

There are however unlimited examples of countries defaulting (Solon of Athens, Mexico, numerous European countries throughout history) and ushering in an age of unprecedented prosperity

1,000yrs ago the lenders were either exiled or executed if the King couldn't pay off debts. The UK and Rome didn't build their empires by honoring all it's loan agreements with the Dutch or Spain. They simply said fuck you

Mexico is at least a modern version of defaulting on debt (remember when the peso was worth nothing?).. at first every Chicago school technocrat claimed disaster but low and behold it all worked out. I hope Obama does the same. It's all imaginary abstract inflation anyways, just wipe it clean

[Rassah]

The idea of a balanced budget amendment is absurd. The Tea Party wants America to endure a long lasting deflation. This clearly shows that the Tea Party has no idea of how the American economy works. The balanced budget amendment will result in the savings of private citizens being taken unnecessarily. In fact any politician that argues America or any other nation with a Sovereign currency, needs to reduce its debt, wants private citizens to have less savings.

Wait, the Tea Party has a coherent specific goal? When did that happen!? I just thought it was just a bunch of old white christian republican rednecks being just angry in general?

Pretty much. Not just old, though. Old, middle aged, and young.

From what I understand, the young ones, like libertarians and objectivists students and such, have said, "f*ck this, we're out of here" a long time ago :/

[Anonymous]

The only young teapartiers that are left are the overtly-religious youth groupies.

[Iseree22]

Isn't our debt issue a matter of inefficiency and wasteful spending rather than not enough revenue? Couldn't a balanced budget feasibly just include spending cuts?

Firstly there is no debt issue. The only way that the private sector can have Dollars is if the State spends first. Unfortunately, the process to create money is convoluted, and requires issuing debt and then selling to the market in exchange for cash. This debt is issued in Dollars, which America is the sole-issuer of and therefore can create money via the FED to pay back the debt. This has been the process since atleast the 1940s.

The creation of money is similar to Bitcoin. Imagine one miner(the state), but instead of creating BTC the miner creates Treasuries denominated in BTC. Whenever the Miner wants to spend(education, war) they sell the Treasury to the market in exchange for BTC. The price is unfair the BTC Central Bank(a new entity, symbolizes the FED) steps in and creates new BTC and purchases the Treasury. This is basically how Modern Money works.

Lets also say that the BTC miner can create Treasuries according to a debt-ceiling. Therefore the number of BTC Treasuries created will continue to increase indefinitely.

Whenever the BTC Miner spends, then this creates the opportunity for the private sector to save. The amount of money circulating also supports prices.

So if the BTC Miner wanted to reduce the number of outstanding Treasuries then they would need to stop selling Treasuries, and purchase some amount from the Market. Todo so taxes(BTC miner can tax also) collected would need to be higher than money spent. The net effect is decreasing the number of BTC in circulation which is deflationary.

So the debt is not an issue, in fact it is essential for a properly functioning economy, ideally any form of government debt should be removed and the money printed as needed.

Why do you continually over look the main method of money creation, which is direct fed loans to banks and the ensuing fractional reserve practices. This money window to private banks us the primary method of money creation. The state DOESN'T NOT have to spend for the private sector to get more money.

Fractional Reserve in the U.S is a myth. Banks do not just create loans based solely on the deposits they have. A bank issues a loan and then sources the reserve requirements from other banks. If they can't source the reserve amount, then the FED will lend them the money.  The gap between the loan amount and the reserve amount represents credit money. It implies that Private banks can create an unlimited amount of  credit money. Since you are asserting that Credit money is the main source of money then the supply of credit money must be growing continuously to match the growth in the Real economy, otherwise deflation will occur. However where does the money that pays for interest on the loans come from ?? Remember that the supply of credit money must continue to grow otherwise deflation will occur, but if this is so, then the total interest on all loans throughout the economy will also continue to grow. So obviously there needs to be another primary source of money, to at-least pay the interest on all loans throughout the economy. This money can must in one form or another come from the State.

Exchanging Real money for Credit money ; Imagine there is a BTC Bank, they receive some deposit and for each deposit they choose to issue 10x as many BTCCredits. These BTCCredits behave in the Real economy like normal BTCs. That is they are inflationary, causing prices to rise. For some reason the BTCBank becomes insolvent, which destroys BTCCredits. This is deflationary. So prices in the Real economy can no longer be supported because all of the BTCCredits no longer exist. However the Central Bank decides this is bad and decides to purchase BTCCredits in exchange for BTCs. This would prevent a deflation and is exactly what occurred during QE1, the FED purchased MBS. In this instance the State via the Central Bank has 'injected money' into the economy. IMO however, if the State is going to create money to offset a contraction in Credit Money, it should not be giving it to people that irresponsibly inflated credit money in the first place.

So in one form or another the State must spend in order for the Private Sector to save in USD(or any other currency).

[hugolp]

I will assume you are not trolling and you are just confused:

Firstly there is no debt issue. The only way that the private sector can have Dollars is if the State spends first.

Thats not true. Theoretically you can have a stable money supply. You will say that then there will be price deflation which is true and its completely fine.

Unfortunately, the process to create money is convoluted, and requires issuing debt and then selling to the market in exchange for cash. This debt is issued in Dollars, which America is the sole-issuer of and therefore can create money via the FED to pay back the debt. This has been the process since atleast the 1940s.

Correct (mostly) but only with the present monetary system that has been going on only 40 years. Other monetary system operate in very different ways.

The creation of money is similar to Bitcoin. Imagine one miner(the state), but instead of creating BTC the miner creates Treasuries denominated in BTC. Whenever the Miner wants to spend(education, war) they sell the Treasury to the market in exchange for BTC. The price is unfair the BTC Central Bank(a new entity, symbolizes the FED) steps in and creates new BTC and purchases the Treasury. This is basically how Modern Money works.

Correct (mostly). This is call monetization of government debt and is a very old concept, dating from 1700 in the modern central bank form.

Lets also say that the BTC miner can create Treasuries according to a debt-ceiling. Therefore the number of BTC Treasuries created will continue to increase indefinitely.

Whenever the BTC Miner spends, then this creates the opportunity for the private sector to save. The amount of money circulating also supports prices.

So if the BTC Miner wanted to reduce the number of outstanding Treasuries then they would need to stop selling Treasuries, and purchase some amount from the Market. Todo so taxes(BTC miner can tax also) collected would need to be higher than money spent. The net effect is decreasing the number of BTC in circulation which is deflationary.

So the debt is not an issue, in fact it is essential for a properly functioning economy, ideally any form of government debt should be removed and the money printed as needed.

If this is true and efficient, how do you explain that everytime this system has been tried it has ended quickly into hyperinflation?

Fractional Reserve in the U.S is a myth. Banks do not just create loans based solely on the deposits they have. A bank issues a loan and then sources the reserve requirements from other banks. If they can't source the reserve amount, then the FED will lend them the money.  The gap between the loan amount and the reserve amount represents credit money. It implies that Private banks can create an unlimited amount of  credit money.

Not true. They are limited by the amount of securities accepted at the central bank they can create.

Since you are asserting that Credit money is the main source of money then the supply of credit money must be growing continuously to match the growth in the Real economy

Not true. A well functioning economy works under price deflation.

otherwise deflation will occur. However where does the money that pays for interest on the loans come from ??

This is a big fallacy I see repeated again and again all over the Internet. You can return a total credit of $10.000 with a total money supply of $5.000. Money circulates. The reason for the credit crunches that we see when a bubble pops is not lack of money in circulation.

Remember that the supply of credit money must continue to grow otherwise deflation will occur, but if this is so, then the total interest on all loans throughout the economy will also continue to grow. So obviously there needs to be another primary source of money, to at-least pay the interest on all loans throughout the economy. This money can must in one form or another come from the State.

Exchanging Real money for Credit money ; Imagine there is a BTC Bank, they receive some deposit and for each deposit they choose to issue 10x as many BTCCredits. These BTCCredits behave in the Real economy like normal BTCs. That is they are inflationary, causing prices to rise. For some reason the BTCBank becomes insolvent, which destroys BTCCredits. This is deflationary. So prices in the Real economy can no longer be supported because all of the BTCCredits no longer exist. However the Central Bank decides this is bad and decides to purchase BTCCredits in exchange for BTCs. This would prevent a deflation and is exactly what occurred during QE1, the FED purchased MBS. In this instance the State via the Central Bank has 'injected money' into the economy. IMO however, if the State is going to create money to offset a contraction in Credit Money, it should not be giving it to people that irresponsibly inflated credit money in the first place.

So in one form or another the State must spend in order for the Private Sector to save in USD(or any other currency).

Your premises are false (for the reasons stated above) therefore your conclussions (the gov must print) are wrong.

You have been influenced by the chartalists (which have rebranded themselves as MMT, very fancy name). Chartalism is a long discredited theory. Just because they have updated their credit theory (which is mainly correct) does not mean that the underlying theories are right. They were wrong and continue to be wrong.

[Iseree22]

I will assume you are not trolling and you are just confused:

Thanks for your approval.

Firstly there is no debt issue. The only way that the private sector can have Dollars is if the State spends first.

Thats not true. Theoretically you can have a stable money supply. You will say that then there will be price deflation which is true and its completely fine.

Sure, I would love to live through the Great Depression.

Lets also say that the BTC miner can create Treasuries according to a debt-ceiling. Therefore the number of BTC Treasuries created will continue to increase indefinitely.

Whenever the BTC Miner spends, then this creates the opportunity for the private sector to save. The amount of money circulating also supports prices.

So if the BTC Miner wanted to reduce the number of outstanding Treasuries then they would need to stop selling Treasuries, and purchase some amount from the Market. Todo so taxes(BTC miner can tax also) collected would need to be higher than money spent. The net effect is decreasing the number of BTC in circulation which is deflationary.

So the debt is not an issue, in fact it is essential for a properly functioning economy, ideally any form of government debt should be removed and the money printed as needed.

If this is true and efficient, how do you explain that everytime this system has been tried it has ended quickly into hyperinflation?

This is exaggeration. Hyperinflation occurs occasionally under such a system, and results from a disconnect between the issuer of the currency and the capacity of the real economy. BTW inflation in the U.S is still around 3%.

Since you are asserting that Credit money is the main source of money then the supply of credit money must be growing continuously to match the growth in the Real economy

Not true. A well functioning economy works under price deflation.

otherwise deflation will occur. However where does the money that pays for interest on the loans come from ??

This is a big fallacy I see repeated again and again all over the Internet. You can return a total credit of $10.000 with a total money supply of $5.000. Money circulates. The reason for the credit crunches that we see when a bubble pops is not lack of money in circulation.

These two facts are irreconcilable. Hypothetically, yes $5 can be used to pay back a $10 loan, and relies upon circulation. But if prices are falling then circulation diminishes. The state must intervene and increase circulation. It can do this by taxing and spending, and/or print money to drive inflation.