Best political system (and how to get there).

[Canard DuJour]

You are rebutting yourself from a few pages ago when you thought govt had to tax or borrow in order to spend. Your understanding remains too rudimentary to make any other judgement.

Really? That certainly doesn't follow from anything I've said. Plenty of economists - left and right - think otherwise. So-called "open market operations" have predictable effects on interest rates but there's precious little evidence that interest rates have the macroeconomic effects they're supposed to have vs fiscal policy.


It has the same effect in terms of govt obligations but utterly different effects on the economy. Money taxed is gone, end of story. Govt bonds are highly liquid private sector assets which have the opposite effect on aggregate demand (ultimately the driver of inflation absent growth).

But bonds require ever increasing amounts of money to fund the interest payments. Try to run your government that way and you'll get a spiral.

Exactly, thus contradicting your previous guess ("Debt issuance extracts the extra money from the economy. Without it you get inflation").

As people have been telling you since back when you thought the purpose was simply to fund spending, debt issuance is an historical legal artefact from gold standard days, now used to target interest rates.

Stop guessing and do some reading.

 

[Loren Pechtel]

You are rebutting yourself from a few pages ago when you thought govt had to tax or borrow in order to spend. Your understanding remains too rudimentary to make any other judgement.

Really? That certainly doesn't follow from anything I've said. Plenty of economists - left and right - think otherwise. So-called "open market operations" have predictable effects on interest rates but there's precious little evidence that interest rates have the macroeconomic effects they're supposed to have vs fiscal policy.


It has the same effect in terms of govt obligations but utterly different effects on the economy. Money taxed is gone, end of story. Govt bonds are highly liquid private sector assets which have the opposite effect on aggregate demand (ultimately the driver of inflation absent growth).

But bonds require ever increasing amounts of money to fund the interest payments. Try to run your government that way and you'll get a spiral.

Exactly, thus contradicting your previous guess ("Debt issuance extracts the extra money from the economy. Without it you get inflation").

As people have been telling you since back when you thought the purpose was simply to fund spending, debt issuance is an historical legal artefact from gold standard days, now used to target interest rates.

Stop guessing and do some reading.

If you try to fund it only with bonds you'll eventually reach the point where you need so much money to pay the interest that you can't sell your bonds anymore. Your fantasies about being able to avoid tax don't work.

 

[Canard DuJour]

Loren Pechtel, WHAT THE FUCK ARE YOU ON ABOUT? What is "IT" and who's talking about funding it only with bonds? Who has fantasies about being able to avoid tax.

AGAIN : given spending, absent growth, the govt must tax in order to avoid inflation. Not issue interest-bearing bonds, but TAX.

 

[Loren Pechtel]

Loren Pechtel, WHAT THE FUCK ARE YOU ON ABOUT? What is "IT" and who's talking about funding it only with bonds? Who has fantasies about being able to avoid tax.

AGAIN : given spending, absent growth, the govt must tax in order to avoid inflation. Not issue interest-bearing bonds, but TAX.

It certainly seemed like you were saying the opposite--that you could fund it with bonds.

 

[Canard DuJour]

Loren Pechtel, WHAT THE FUCK ARE YOU ON ABOUT? What is "IT" and who's talking about funding it only with bonds? Who has fantasies about being able to avoid tax.

AGAIN : given spending, absent growth, the govt must tax in order to avoid inflation. Not issue interest-bearing bonds, but TAX.

It certainly seemed like you were saying the opposite--that you could fund it with bonds.

Only if you think bonds do not fund spending means bonds fund spending

Again : govts that issue their own fiat currencies do not need to tax or "borrow" in order to spend in that currency. Taxation and "borrowing" serve other purposes (discussed ITT). Unfortunately one of them is frightening people into thinking OMG there isn't enough money!

 

[Loren Pechtel]

Loren Pechtel, WHAT THE FUCK ARE YOU ON ABOUT? What is "IT" and who's talking about funding it only with bonds? Who has fantasies about being able to avoid tax.

AGAIN : given spending, absent growth, the govt must tax in order to avoid inflation. Not issue interest-bearing bonds, but TAX.

It certainly seemed like you were saying the opposite--that you could fund it with bonds.

Only if you think bonds do not fund spending means bonds fund spending

Again : govts that issue their own fiat currencies do not need to tax or "borrow" in order to spend in that currency. Taxation and "borrowing" serve other purposes (discussed ITT). Unfortunately one of them is frightening people into thinking OMG there isn't enough money!

I'm getting more and more confused about your position.

Now, you once again seem to be saying we can fund government with the printing press without causing trouble.

 

[Canard DuJour]

Only if you think bonds do not fund spending means bonds fund spending

Again : govts that issue their own fiat currencies do not need to tax or "borrow" in order to spend in that currency. Taxation and "borrowing" serve other purposes (discussed ITT). Unfortunately one of them is frightening people into thinking OMG there isn't enough money!

I'm getting more and more confused about your position.

For the same reason you're so confused about how the monetary system works.

Now, you once again seem to be saying we can fund government with the printing press without causing trouble.

I have at no time said that..

The constraint would be inflation -not "public monies"- at which point gov't would cut spending and/or raise taxes (and whatever tinkering central banks want to do with interest rates).

So TBC, I'm advocating a functional finance model

Lerner postulated that government's fiscal policy should be governed by three rules:[1]

1. The government shall maintain a reasonable level of demand at all times. If there is too little spending and, thus, excessive unemployment, the government shall reduce taxes or increase its own spending. If there is too much spending, the government shall prevent inflation by reducing its own expenditures or by increasing taxes.
2. By borrowing money when it wishes to raise the rate of interest and by lending money or repaying debt when it wishes to lower the rate of interest, the government shall maintain that rate of interest that induces the optimum amount of investment.
3. If either of the first two rules conflicts with principles of 'sound finance' or of balancing the budget, or of limiting the national debt, so much the worse for these principles. The government press shall print any money that may be needed to carry out rules 1 and 2

.

Unlike a household or firm, the govt does not need to balance the budget, it needs to balance the economy, and already has the tools to do so. The real constraint is inflation - ultimately productive capacity - not money.

...etc umpteen times already ITT. Stop guessing and do some reading.