Trump's desire to reduce the deficit. Can someone explain to me how this is a good thing?

Ok, if you're interested, let's establish some underlying facts.

Do you believe that the government is constrained in its spending by the taxes it collects?

 

Gov't spending is constrained by Congress. Congress will sometimes constrain spending on the basis of the differential between expected income and proposed spending.

 

That's not what I meant. Yes, Congress sets limits on spending, but those limits are policy limits, not actual limits.

The constraint on how fast my car can go is not the sign that says 70mph....Though that is one form of constraint, that's not what I mean. My car can go faster than 70mph. The constraints are set by the stresses that each of the major mechanical components can endure. When they fail, I've reached the limit and limit becomes the constraint. Though I'm not suggesting that you have to break something to know its limits. Engineers can estimate the stress parts can endure and those stresses become the maximum stress the part can be pushed too. That is the constraint.

Congress can decide to spend at just about any level it wishes. I'm asking you, what are the constraints on spending that Congress should observe?

 

Yes, a national debt the size of the annual GDP is a bad thing.

 

Yeah that is the point.

If we are paying people too much to do a job that we don't really need, that is the point. I think our government is far too bloated and certain cuts must be made.

You talk about government spending as being income which I vehemently disagree with. In order to pay that guy the money, we are having to take the money from tax payers.

Instead, we tax people less, don't have to hire that guy in the first place and let him find a job in the private sector.

The Government should NEVER be used as a means of employing people. It is there to set up laws that promote the best private sector opportunities as well as create and regulate our laws. This should be done as efficiently as possible and your argument basically is that we need to use the government to transfer money from tax payers to government employees.

I disagree

 

This is what I don't get, GDP determines money flow. How does GDP have any bearing about the size of the debt?

 

He is pulling half these charts off of questionable website and not citing them. The chart he is using is completely false and I've proven it.

Sometimes I think these forums are used by liberal[communist] think tanks to see what can get past the public and what can't.

Just my borrowed $.02...

 

GDP gives us an indication of total taxable resources available to a government.
The amount people are willing to lend to them is wholly dependent on the amount people think they are able to repay.

Without lenders, there is no deficit. The deficit ends when people are no longer willing to lend. cf Greece.

It does not end when governments are no longer willing to borrow, because they are always willing to borrow. It only ends when no is willing to lend.

Demand is infinite, supply is limited.
It is a straight forward power relationship.

 

Every dollar you "cut" removes at least one dollar from someone's income. Reducing income, especially at the bottom, reduces demand. It can also reduce savings and increase borrowing in the private sector.

Every dollar you tax, does the same.

The solution to "not enough" is not, steal from each other. It is supply more and demand less.

Increasing demand, does not increase supply.
Production increases supply.

If you wish to increase private sector production, do so.
If you wish to give more private sector money to your government, do so.

If you wish to make me to do it for you? Expect a violent response.

 

And this system was not voted on by any American. The US Constitution specifically states government has the power to create money. Not get it loaned to them.

I'm sorry to get off point, but this whole money system is made up. It is not constitutional.

 

Who is the government "borrowing" from?

 

It does not matter who. They are specifically suppose to create it, not loan it from ANYONE.

 

Knowing this....

Can anyone explain how GDP has any bearing to our debt level?

 

GDP is used a measure of debt worthiness. Rather like your income is used as part of the calculation for your creditworthiness when applying for a mortgage.

The US constitution? I couldn't care less about foreign dogma.


Who is the government borrowing from?
The government is borrowing from a wide variety of sources.

It issues bonds that are sold on the international market and also the domestic market.
So in order to trade in your country a bank or an insurance company must buy government debt.
It's a legal requirement.

So short answer.... they borrow from savers around the world.

 

The Constitution specifically says the Government can take on debt and repay it.

But it is not constitutional to have our whole monetary system based on debt. It is suppose to be CREATED, not LOANED.

 

Your whole monetary system is not based on debt.
It's based on trade.

Your governments finances are in large part based on debt. You government has some very significant controls over your monetary system, but by no means total control over it.

For example, printing money causes inflation.
But it is only one of a great many causes of inflation and try as it might to set inflation at 2% the government consistently fails to do so.

So while they have many levers of control over monetary systems, they are very far from being in control of them all. Too many of the rest of us are also in control of too much of it for them to able to rule it absolutely. Even in communism, private ownership still occurs.
People still take their own trade decisions.

In the end, you can always take your money abroad if you think other governments will steal less from you.
And at least some of your money should always be keep abroad in reserve. As a hedged fund against bad governance.

 

Ok, so we've established the government creates, from thin air, debt instruments. It sells those instruments to people wishing to save in US dollars.

Since the government's debt instruments, treasuries can only be purchased in dollars it creates, the government would have had to create the dollars and circulate them before it could sell debt.

Treasuries and dollars are BOTH debts of the US federal government. Dollars are more liquid and are therefore more like your checking account, where bonds are less liquid, thus are more like your savings account.

The government buys and sells Treasuries to increase or decrease liquidity, not so it can "have" money.

When the government deficit spends, it's creating new money that isn't collected via taxes or via the sale of Treasuries.

The government does create its own money. Everything you see is how it manipulates liquidity to prevent inflation/ deflation.

 

You are obsessed with creating money.

Learn instead to create value for money. Become a productive member of society instead of just a thief.

I do not want my government to create inflation or deflation.

I want it to collect my rubbish. To turn up outside my house once a week with a big old truck and take away my refuse for cheaper than I can dispose of it myself.

 

You guys are arguing from the stand point of keeping this system going. I don't think we'll ever agree.

I don't think the American people are going to have $1.5 trillion hard currency floating the globe, with a $20+ trillion debt.

It is not constitutional, nor is it ethical,moral or intelligent. A completely new system must come out of this old system.

 

I'm not looking to argue with you or agree,
I'm not looking to end any monetary system or start a new one.

I am looking to understand it more so that I can better protect myself from abuse or even, heaven forbid, use it to my best advantage.

I certainly agree that it is neither moral, ethical nor intelligent.
But regardless, it still exists.
And I don't think I can change it. And even if I did, I don't think what could replace it would turn out to be much different.

So I am simply trying to predict it. To keep one step ahead of those who would steal from me.

Economics is the study of human behaviour. Trend spotting.
Not, the manipulation of human behaviour. Rulership.

 

Here is the problem.

When the government creates a dollar, it records the creation of that dollar as "debt" because it accounts for the creation by notating a -$1.

This is significant and it's how government debt differs from the debt you and I have.

The government creates money from nothing, it starts at zero and when it creates and spends, it goes -$1. The private sector starts with nothing and when the government spends money the private sector goes positive $1

This chart illustrates this fact:


Can you see how private sector GDP (liquidity) increases when the government's share goes increasingly negative?

See how they balance out? The foreign sector throws off the balance, but if you added the foreign sector and private sector (non-government sector) they would match.

So the government goes -$1 in order to create $1. All debt is equaled by a dollar it spent into the non-government (literally any entity that isn't the government).

US dollars created by the government are held in the banking system as reserves.

Banks hold reserves and created dollar denominated credit. Reserves can only leave the US banking system when customers withdraw cash. The Fed manipulates the availability of reserves (pre-200 as a way to increase or decrease interest rates.

Reserves generally don't circulate, again, unless someone withdraws physically cash.

 

With respect, you don't understand how the system actually works. That's all I'm trying to explain to you. I don't care if you think it's Constitutional, moral or right (nor am I insisting that it is or isn't), I'm just not sure how you can make that decision when you don't even know what it means when the government is in "debt" because it's not like when you or I or Amazon or the city or the states are in debt. It's different and until you understand that difference you can't speak intelligently to it.

I'm not saying you will love it if you understand what I'm telling you, you may still not like it, that's cool, but at least you'll be making a well-informed decision.

 

When a government (central bank) creates a Dollar, why do you feel that it accounts for this Dollar created as "a debt".
It does not. It accounts for it as a credit.
As +1 Dollar.

It then lends that money out, or spends it in some other way.

It does not ever repay the money it has created to anyone. It is not a debt.

 

Yeah, I guess I feel foolish for not noticing. There are a HUGE amount of those types on all sides, you learn who to ignore and I should ahve learned about this guy sooner

 

What are you guys not understanding about this? Your numbers aren't adding up. Nor do they look good enough to convince the American people to take on more debt...

"All told, anyone looking for all of theU.S. dollars in the world in July 2013 could expect to find approximately $10.5 trillion in existence, using the M2 money supply definition. If you just want to count actual notes and coins, there are about U.S. $1.2 trillion floating around the globe."

"U.S. debt jumped more than $300 billion Thursday, the first day the federal government was able to borrow money under the deal President Obama and Congress sealed last week. Debt now equals $17.075trillion, according to figures posted online by the Treasury Department on Friday.Oct 18, 2013"