Economist Stephanie Kelton on The Deficit Myth

[barbos]

And physics is applied mathematics, but a mathematician saying that or figures for the planets' distances from the sun have to be wrong because he has a hunch they should be professional to the first eight primes is still spectacularly incompetent, full of themselves, and most importantly wrong.

No, everything starts with physics, mathematics is really a language of physics and subsequently language of all applied physics things such as economics.

 

[bilby]

And physics is applied mathematics, but a mathematician saying that or figures for the planets' distances from the sun have to be wrong because he has a hunch they should be professional to the first eight primes is still spectacularly incompetent, full of themselves, and most importantly wrong.

No, everything starts with physics, mathematics is really a language of physics and subsequently language of all applied physics things such as economics.

Sweet. Could you not simply apply your physics to develop a Covid-19 vaccine?

What's keeping you?

Are you really such an arsehole as to waste time arguing on an Internet discussion board, when you have all the knowledge needed to produce a vaccine and a cure?

Or are you just full of shit?

 

[Jokodo]

And physics is applied mathematics, but a mathematician saying that or figures for the planets' distances from the sun have to be wrong because he has a hunch they should be professional to the first eight primes is still spectacularly incompetent, full of themselves, and most importantly wrong.

No, everything starts with physics, mathematics is really a language of physics and subsequently language of all applied physics things such as economics.

Economy is mostly psychology. People produce stuff because they believe they can sell it. They buy stuff because they believe they benefit more from it than from keeping what they have, or buying something else instead. They accept, more in the topic of this discussion, money for payment because they believe they'll be able to buy useful stuff with it in the future. If production collapses and there's simply not enough stuff to go round, that latter belief becomes unjustified just as quickly as when the money supply explodes.

Physics is only directly relevant to determine the theoretical limit to an economy's productive capacity, if it utilises all available manpower and machinery. This means what little relevance it has during boom times, it loses in a downturn.

 

[barbos]

Did the people who lived thru World War 2 hope to die because of that debt?

I resent your comparison of debt to kill Hitler with debt to buy an iPhone.
That debt was a reason why it was invented - for actual emergencies.
Current debt was mostly wasted and stolen.

Agreed. Our current debt was built primarily to give tax cuts to the already rich, to cover the trade deficit that results from our insane desire to ship our manufacturing and its jobs to Red China, to pay for the recovery from the Great Financial Crisis and Depression, and to fight continuous wars in the Middle East started by mistake. This is not to mention the debt that we are racking up currently to fight the pandemic, a debt in both lives and money made larger through the inaction of our tragically incompetent president and his administration.

Yes, debt is fine as long it is put into a good use, it's not a loss. Problem is, it was not. It was wasted in wars, handouts to the ultra-rich. Ultra-rich can be taxed back but war money are gone. Loss of manufacturing is mostly unrecoverable. Other waste such as Big Education is a loss too.
Also, Kelton argument about economic capacity is not applicable because US is pretty much at full capacity. Unemployment is mostly people who are not productive, so if China/Japan/The rest decide to get their money back US won't be able increase production in any meaningful way - hence inflation.

 

[barbos]

And physics is applied mathematics, but a mathematician saying that or figures for the planets' distances from the sun have to be wrong because he has a hunch they should be professional to the first eight primes is still spectacularly incompetent, full of themselves, and most importantly wrong.

No, everything starts with physics, mathematics is really a language of physics and subsequently language of all applied physics things such as economics.

Economy is mostly psychology.

psychology is mostly biology, biology is applied chemistry, chemistry is applied physics, the end.

People produce stuff because they believe they can sell it. They buy stuff because they believe they benefit more from it than from keeping what they have, or buying something else instead. They accept, more in the topic of this discussion, money for payment because they believe they'll be able to buy useful stuff with it in the future. If production collapses and there's simply not enough stuff to go round, that latter belief becomes unjustified just as quickly as when the money supply explodes.

Physics is only directly relevant to determine the theoretical limit to an economy's productive capacity, if it utilises all available manpower and machinery. This means what little relevance it has during boom times, it loses in a downturn.

Yes, physics say we are well past any climate limits.

 

[bigfield]

Disputable? The purchase of submarines was supposed to be for defence purposes, not a job creation scheme. According to the experts, it fails to deliver in relation to defence by producing a substandard product....nor efficient or ideal as a job creation scheme. You might argue that it keeps Australian manufacturing alive but that doesn't balance the product fuck up.

Seems to do well pretty well in action:

Collins subs star in naval exercises

Collins sub shines in US war game

Keeping manufacturing alive in Australia is the positive side....pity that the powers to be didn't learn a thing from the Collins class debacle by choosing a project that was not another debacle, yet another set of sub standard submarines. One fuck up after another, billions wasted. You'd think they'd learn.

The whole Collins class project cost about $5 billion, it went over budget by about $50 million.

The claim that "billions" were wasted is a gross exaggeration. The Collins class subs are subject to a lot of exaggeration by politicians and the press, making it seem like the Collins class subs were some kind of disaster. To put it in perspective, the Abbott Government estimated that the could build the NBN MTM for about $27 billion, but the total cost has exceeded $50 billion. The Westoonnex project in Sydney was originally estimated at about $10 billion but may grow as high as $45 billion. These are fuck-ups hundreds of times worse than the wastage on the subs.

This illustrates a point Bilby made earlier in the thread: it's easy to demand an end to wasteful spending, but it's difficult to accurately identify wasteful spending.

Sinking billions on an outdated weapon

''Australia is locked in to a diesel-electric submarine capability after signing a $50 billion "framework agreement" with French shipbuilding company DCNS to build 12 Shortfin Barracuda subs in Australia. It is said to be the largest, most complex defence-acquisition project in our history.

The Australian government ruled out nuclear propulsion because of: our lack of an indigenous nuclear industry; concerns about maintenance dependence and sovereignty issues if we bought or leased a nuclear-powered sub; and likely public opposition to nuclear technology.

So the Royal Australian Navy was not given the option of considering nuclear power. It would, however, have been cheaper and more practical, because we could have bought a proven nuclear-powered vessel (such as the US Virginia class), without the need to modify it, for about $4 billion each. (Virginia-class subs are designed for a broad range of open-ocean and shallow, coastal-water missions.)''

The Government's "concerns about maintenance dependence and sovereignty issues" are reasonable, wouldn't you agree?

As far as cost is concerned, there's not much difference there. $50 billion for twelve subs is about $4.2 billion per sub, versus $4 billion each for the Virginia class. For an extra $200 million a pop, it makes more economic sense to build them locally and keep some of the money in the Australian economy.

(Mind you, I have to wonder whether we actually need twelve subs in the first place.)

 

[bigfield]

Economy is mostly psychology.

psychology is mostly biology, biology is applied chemistry, chemistry is applied physics, the end.

 

[Jokodo]

Economy is mostly psychology.

psychology is mostly biology, biology is applied chemistry, chemistry is applied physics, the end.

Which might be relevant if you had a complete model of how particle interactions lead to purchasing decisions. In which case you'd be busy becoming the first person to recieve Nobel prizes in four different disciplines for under and the same piece if research instead of posting here.

People produce stuff because they believe they can sell it. They buy stuff because they believe they benefit more from it than from keeping what they have, or buying something else instead. They accept, more in the topic of this discussion, money for payment because they believe they'll be able to buy useful stuff with it in the future. If production collapses and there's simply not enough stuff to go round, that latter belief becomes unjustified just as quickly as when the money supply explodes.

Physics is only directly relevant to determine the theoretical limit to an economy's productive capacity, if it utilises all available manpower and machinery. This means what little relevance it has during boom times, it loses in a downturn.

Yes, physics say we are well past any climate limits.

Well that's one thing we agree upon. It's not however relevant to this discussion.

 

[Canard DuJour]

The government would need to be investing its savings, [blah blah etc]

What are the government's "savings"?

I prefer to refer to equity upon further thought. I want government total assets to exceed liabilities, not the other way around. If you don't want to count cash in the bank as an asset, fine. Then savings would be acquiring hard assets like real estate, infrastructure, commodities, stock, etc.

Not without either taxing or deficit spending.

Bullshit. The private sector can create non debt assets and sell shares in those or increase corprate assets via capital investment. No need for government deficits to do that.

It can do neither unless someone spends existing dollars or borrows new dollars.

Sure, the private sector can - mostly does - create new assets without govt money. Great! But they become increasingly difficult to monetise unless the money supply expands. That could theoretically happen entirely through commercial lending but, in practice, growth then stalls in debt deflation cycles which can get stuck in deflation. Net spending by govt - "deficits" - stabilise this because only the govt can act countercyclically. If it doesn't, the debt ends up on the govt's books anyway when people lose jobs and a distressed financial system needs bailing out.

So the idea that govt surpluses are a sign of prudent economic management is naive at best. If we want stable growth, the govt should mostly run deficits - as they do in most rich, stable countries.

 

[Canard DuJour]

The stark truth is that the government could be saving tens of billions, and be getting more reliable vessels by instead shutting down Australia's (uncompetitive) ship/sub building industry, and buying the superior overseas product at much lower cost.''

Which is a good example of why govt budget deficits/surpluses don't tell you whether real resources are being used efficiently.

If the govt spends $10 bn on a submarine built overseas, there is a net outflow $10 bn.

If the govt spends $11 bn on a submarine built at home, it will return to govt via taxes on successive transactions, minus any saved by households and firms.

Your preferred, less wasteful, option results in a higher govt deficit.

 

[laughing dog]

https://en.wikipedia.org/wiki/Hyperinflation#Causes :

Printing money is a forced response to hyperinflation, not a cause of it.


Nobody is advocating uncontrolled money printing.

I agree, Alan Greenspan is fucking nobody.

Wikipedia isn't a reliable source of information on anything even vaguely contentious.

How convenient. I am sorry but it's not contentious. Not outside of this thread at least.

Congratulations, you have proven that most people haven't a clue about macroeconomics. Well done - it's almost as though that were somehow news.

And of course you are not most people.

Following up with an unfounded slander of Alan Greenspan was unnecessary, but certainly in keeping with your general kack of actual knowledge of this subject.

Kack of actual knowledge is all yours. Greenspan did advocate for money printing solution (if necessary of course)

Stick to physics. Perhaps you're not totally fucking incompetent in that field.

Physics includes everything, even such thing as "economics" which is applied physics.
And it is you who is incompetent.

If economics is applied physics, why are physicists so ignorant and incompetent about economics?

 

[Horatio Parker]

https://en.wikipedia.org/wiki/Hyperinflation#Causes :



I agree, Alan Greenspan is fucking nobody.

Wikipedia isn't a reliable source of information on anything even vaguely contentious.

How convenient. I am sorry but it's not contentious. Not outside of this thread at least.

Congratulations, you have proven that most people haven't a clue about macroeconomics. Well done - it's almost as though that were somehow news.

And of course you are not most people.

Following up with an unfounded slander of Alan Greenspan was unnecessary, but certainly in keeping with your general kack of actual knowledge of this subject.

Kack of actual knowledge is all yours. Greenspan did advocate for money printing solution (if necessary of course)

Stick to physics. Perhaps you're not totally fucking incompetent in that field.

Physics includes everything, even such thing as "economics" which is applied physics.
And it is you who is incompetent.

If economics is applied physics, why are physicists so ignorant and incompetent about economics?

Dont forget his Greek boss. He's got that going for him, too.

 

[Rhea]

.
.

To keep the conversation in this place fruitful and interesting to users, please remember to address the argument, and not the person.

 

[Loren Pechtel]

''Australia is locked in to a diesel-electric submarine capability after signing a $50 billion "framework agreement" with French shipbuilding company DCNS to build 12 Shortfin Barracuda subs in Australia. It is said to be the largest, most complex defence-acquisition project in our history.

The Australian government ruled out nuclear propulsion because of: our lack of an indigenous nuclear industry; concerns about maintenance dependence and sovereignty issues if we bought or leased a nuclear-powered sub; and likely public opposition to nuclear technology.

So the Royal Australian Navy was not given the option of considering nuclear power. It would, however, have been cheaper and more practical, because we could have bought a proven nuclear-powered vessel (such as the US Virginia class), without the need to modify it, for about $4 billion each. (Virginia-class subs are designed for a broad range of open-ocean and shallow, coastal-water missions.)''

Yup; A nuclear powered sub would have been by any measure the best option; But in Australia 'nuclear' is still synonymous with 'evil'.

So the irrationality of the electorate demanded that the government waste a shit-ton of money.

That's not an economic or financial issue; It's just another case of too much democracy, giving power to the ignorant but vocal.

Nuke isn't automatically the best. Diesels are superior when the mission is home defense in littoral waters. A lurking diesel is a lot quieter than a lurking nuke and they make phenomenal ambush predators, they just can't chase.

 

[Loren Pechtel]

https://en.wikipedia.org/wiki/Hyperinflation#Causes :

Printing money is a forced response to hyperinflation, not a cause of it.

And uncontrolled money printing is a solution suggested by resident and not "economists"
So you might use your own advice and read before you hit the button.

Nobody is advocating uncontrolled money printing.

I agree, Alan Greenspan is fucking nobody.

Wikipedia isn't a reliable source of information on anything even vaguely contentious.

Congratulations, you have proven that most people haven't a clue about macroeconomics. Well done - it's almost as though that were somehow news.

Following up with an unfounded slander of Alan Greenspan was unnecessary, but certainly in keeping with your general kack of actual knowledge of this subject.

Stick to physics. Perhaps you're not totally fucking incompetent in that field.

You persist in denying that the printing press causes hyperinflation. Using the printing press increases the money supply, it does nothing to the available goods/services. Under normal conditions how can that not cause inflation? (Note: We do have situations where the money supply is too small, normally caused by a low velocity of money, in which printing money helps the economy--because it's bringing the money supply back to what it should be.)

 

[bilby]

https://en.wikipedia.org/wiki/Hyperinflation#Causes :

Printing money is a forced response to hyperinflation, not a cause of it.


Nobody is advocating uncontrolled money printing.

I agree, Alan Greenspan is fucking nobody.

Wikipedia isn't a reliable source of information on anything even vaguely contentious.

Congratulations, you have proven that most people haven't a clue about macroeconomics. Well done - it's almost as though that were somehow news.

Following up with an unfounded slander of Alan Greenspan was unnecessary, but certainly in keeping with your general kack of actual knowledge of this subject.

Stick to physics. Perhaps you're not totally fucking incompetent in that field.

You persist in denying that the printing press causes hyperinflation.

Yes I do. Because it has never happened.

Every instance of hyperinflation in history has a clear cause, and in no case was the cause the printing of money.

Hyperinflation is caused by a massive collapse in productivity, or by debts in a foreign currency (or a commodity, such as gold).

Using the printing press increases the money supply, it does nothing to the available goods/services. Under normal conditions how can that not cause inflation? (Note: We do have situations where the money supply is too small, normally caused by a low velocity of money, in which printing money helps the economy--because it's bringing the money supply back to what it should be.)

Note: Hyperinflation is not just inflation. I have bolded your goalposts, so we can more clearly see how they have been moved.

Increasing money supply does have an inflationary effect, and in many situations, that's a good thing.

 

[Jason Harvestdancer]

View attachment 27523​

"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." - Alan Greenspan, then Fed Chairman.

I guess it depends on how you define a government defaulting on its debt.

If the government devalues the currency and then pays back the same numerical amount but far less than purchasing power, I would consider that a default. But then that isn't the technical definition of default.

Or if the government borrows in one form of currency, promises to pay in that form of currency, and repays in a different form, I would consider that to be a form of default. But then that isn't the technical definition of default.

In the 20th Century, the US government "defaulted" twice.

 

[DBT]

Seems to do well pretty well in action:

Collins subs star in naval exercises

Collins sub shines in US war game



The whole Collins class project cost about $5 billion, it went over budget by about $50 million.

The claim that "billions" were wasted is a gross exaggeration. The Collins class subs are subject to a lot of exaggeration by politicians and the press, making it seem like the Collins class subs were some kind of disaster. To put it in perspective, the Abbott Government estimated that the could build the NBN MTM for about $27 billion, but the total cost has exceeded $50 billion. The Westoonnex project in Sydney was originally estimated at about $10 billion but may grow as high as $45 billion. These are fuck-ups hundreds of times worse than the wastage on the subs.

This illustrates a point Bilby made earlier in the thread: it's easy to demand an end to wasteful spending, but it's difficult to accurately identify wasteful spending.

Sinking billions on an outdated weapon

''Australia is locked in to a diesel-electric submarine capability after signing a $50 billion "framework agreement" with French shipbuilding company DCNS to build 12 Shortfin Barracuda subs in Australia. It is said to be the largest, most complex defence-acquisition project in our history.

The Australian government ruled out nuclear propulsion because of: our lack of an indigenous nuclear industry; concerns about maintenance dependence and sovereignty issues if we bought or leased a nuclear-powered sub; and likely public opposition to nuclear technology.

So the Royal Australian Navy was not given the option of considering nuclear power. It would, however, have been cheaper and more practical, because we could have bought a proven nuclear-powered vessel (such as the US Virginia class), without the need to modify it, for about $4 billion each. (Virginia-class subs are designed for a broad range of open-ocean and shallow, coastal-water missions.)''

The Government's "concerns about maintenance dependence and sovereignty issues" are reasonable, wouldn't you agree?

As far as cost is concerned, there's not much difference there. $50 billion for twelve subs is about $4.2 billion per sub, versus $4 billion each for the Virginia class. For an extra $200 million a pop, it makes more economic sense to build them locally and keep some of the money in the Australian economy.

(Mind you, I have to wonder whether we actually need twelve subs in the first place.)

Never mind that they'll be obsolete by the time they are operational?

As for the Collins class, as a money sink in repairs and modifications they may have performed well enough in their time....when they actually worked;

Quote;
''It has been 20 years since its one and only export contract, the Australian Collins-class. The Swedish shipyard is hounded by the reputation of its product and 20 years of an endless ordeal.

''Australian Defense Minister Christopher Pyne* is currently managing the renewal of the country’s submarine fleet, after 20 woeful years. The relatively small fleet of hunters has been plagued with such a flurry of technical and management problems that Australia has outright decided to re-brand the entire class, along with the change of models, with the unimaginative name: Attack-class. Tom Lewis, a former intelligence analyst for the Australian navy, writes “The Collins though wasn’t just a Swedish design assembled here. It was fiddled with; more capability was needed for one thing. It had to go further and stay there longer. And not having built submarines before – more complex machines than spaceships – we had a lot of problems.” And that’s putting it lightly. ''

The point is that expert advice says that proven nuclear off the shelf submarines would have been the better option in terms of capability and effectiveness, and saved a lot of money. So the bottom line is that the Government wasted a lot of money by taking the option they did. Money that could have been spent on more productive projects, manufacturing, infrastructure, etc.

 

[Canard DuJour]

View attachment 27523​

"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." - Alan Greenspan, then Fed Chairman.

I guess it depends on how you define a government defaulting on its debt.

If the government devalues the currency and then pays back the same numerical amount but far less than purchasing power, I would consider that a default. But then that isn't the technical definition of default.

Or if the government borrows in one form of currency, promises to pay in that form of currency, and repays in a different form, I would consider that to be a form of default. But then that isn't the technical definition of default.

In the 20th Century, the US government "defaulted" twice.

Then there patently isn't the supposed relation to the govt's so-called "borrowing costs" by either re-definition. That's because the govt doesn't really need to issue bonds at all.

 

[laughing dog]

View attachment 27523​

"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." - Alan Greenspan, then Fed Chairman.

I guess it depends on how you define a government defaulting on its debt.

If the government devalues the currency and then pays back the same numerical amount but far less than purchasing power, I would consider that a default. But then that isn't the technical definition of default.

Or if the government borrows in one form of currency, promises to pay in that form of currency, and repays in a different form, I would consider that to be a form of default. But then that isn't the technical definition of default.

In the 20th Century, the US government "defaulted" twice.

Then there patently isn't the supposed relation to the govt's so-called "borrowing costs" by either re-definition. That's because the govt doesn't really need to issue bonds at all.

First, Alan Greenspan's claim is false, because just because the Federal gov't could print the money to pay any debt, it does mean it would necessarily do so, so there is not a zero probability of default.

Second, there are normal usage definition of default and then there are "wonderland" definitions to fit someone's ideology.