An economic reality check.

Hawkeye123

Over the past few years I have been thoroughly entertained by those socialists who comment on economic matters. For example, a few weeks ago there was a lady on the Joe Duffy show who harped on about the need to maintain public sector pay so that the public sector could spend in the real economy - thereby supporting jobs. The funny thing was that she really seemed to believe it! The lady`s folly lay in the fact that the government is borrowing billions to pay these public sector workers and this money has to be repaid with interest. Added to that, these public sector workers have been known to take foreign holidays, buy foreign products - all of which sends this imported money which was borrowed to pay them, back out of the country. Of course, the private sector are still landed with the bill and interest to pay back.

On the macro economic front, the European politicians are creating money to bailout the debt ridden economies of Europe. All this to support the Euro. Who do they think they are fooling. The markets are happy to play along with this charade for the time being but ultimately reality will have the final say. Essentially, the European bureaucrats are behaving like rogue traders the only difference is that instead of buying more and more shares to keep an equity high, - they are adding stimulus upon stimulus to a market that is already as high as a kite.

coolshannagh28

I agree with most of what you say ,the current borrowing should be acting as a massive stimulus to the economy but instead we have stagflation .I imagine what is happening is that people still earning decent money are saving furiously and only indulging in discressionary spending ie the saturday night blowout . This forces the trader to charge high prices for that limited spend so we end up with price inflation while the general economy refuses to grow because of the high rate of saving.

Jogathon

Hawkeye123 wrote: »

Added to that, these public sector workers have been known to take foreign holidays, buy foreign products - all of which sends this imported money which was borrowed to pay them, back out of the country. Of course, the private sector are still landed with the bill and interest to pay back.

.

Wow, the cheek of them taking foreign holidays... You wouldn't catch any private sector worker doing that!

Manach

I'm not in the public sector. Offhand though I would say, that like their private sector equivalent the majority do perform as expected and do their jobs well, so deserve their pay.
However which of their jobs are relevant is the key issue. Historically the size of the State has vastly expanded with a multitude of state and semi-state bodies coming into existence. There is a need for some forms of services and regulation in any modern state. But given the percentage of GDP this now takes, the state sector has grown too much without the checks and balances that exist in the rather harsh capital sector that prune back unproductive industries.

KyussBishop

It's simple mathematics that you need public spending, in some form or other, for money to go into the economy and be available for spending; money does not come from digging shiny yellow metal out of the ground anymore, so if government did not spend, there would be no money in the economy.

If you tax the crap out of people whilst also cutting public spending, you are removing more money from the economy than you are putting in, causing deflation, unemployment (with all the ill social/health effects that causes) and general economic destruction.

By all means, public sector inefficiency and profligacy should be harshly dealt with (where it can be objectively identified), but if we stay locked into deficit reduction, with no help from money creation within the EU (such as through debt-alleviation and a job guarantee program), we are fúcked no matter what we do, and will only be debating over the minute details of precisely how we should be fúcked.

professore

KyussBishop wrote: »

so if government did not spend, there would be no money in the economy.

This is obviously false. There might be less money, but not no money. You really believe wealth is created by government spending? No it ain't. It can provide a shot in the arm in recessionary times to kickstart things, but is a recipe for disaster if continued.

kennyb3

Jogathon wrote: »

Wow, the cheek of them taking foreign holidays... You wouldn't catch any private sector worker doing that!

I'd imagine the point was that €1 spent doesn't translate to €1 or more returned in the form of tax revenue.

KyussBishop

professore wrote: »

This is obviously false. There might be less money, but not no money. You really believe wealth is created by government spending? No it ain't. It can provide a shot in the arm in recessionary times to kickstart things, but is a recipe for disaster if continued.

I didn't say wealth is created by government spending, I said money is added to the economy by government spending.

By definition, in a fiat currency system, money in the economy comes from government spending, and when the government is taxing more than it is spending, it is reducing the amount of money in the economy; that is a recipe for disaster if continued, as can be seen by its recessionary effects on our economy.

southsiderosie

MOD NOTE:

Just so we are clear: from my reading of the OP, and despite the (ironically) Duffy-esque commentary, this is a thread about stimulus spending. It is NOT a thread about public sector workers. Posts that descend into the usual 'public sector workers are delusional/lazy/feckless/etc.' tripe will be infracted without warning.

Idbatterim

If this is the case, surely paying them more will be the end of our problems :rolleyes: I reckon up to 25-30k for single people etc, that they wont have much if any saving capacity. The problem is the lack of confidence and knowing there are 3 more austere budgets on the way. We also have the issue of 1. do you slowly bring the deficit into line 2. have a sharper correction. Both have their pro's and cons, but 1. if far easier politically...

bbsrs

Where will it end , Austerity isn't working and I don't think it has ever worked anywhere from what I understand. FF are down and out and should stay that way , FG/LAB will get it in the neck in the next general election whisch doesn't really matter as FF , FG or LAB are so similar in policy there is no choice so who gets in next time SF / IND's ? Maybe we should get a governmant of technocrats and dispence with the voting so decisions can be made based on long term good for the country rather than the parties always having one eye on reelection and the other on keeping europe happy because we arent getting anywhere .

timbyr

KyussBishop wrote: »

By definition, in a fiat currency system, money in the economy comes from government spending

Odd. I thought that money creation was the remit of central banks. And distributed through lenders. Outside of the direct control of government.

In this case government is the debtor not a money creator.

And another point. Does this kind of direct spending lead to a stable economy or is it just pushing things further along the road, or worse creating mini bubbles.
Whereas real growth could come from private industry and real demand rather than manufactured demand arising from capital spending.

Hawkeye123

Idbatterim wrote: »

If this is the case, surely paying them more will be the end of our problems :rolleyes: I reckon up to 25-30k for single people etc, that they wont have much if any saving capacity. The problem is the lack of confidence and knowing there are 3 more austere budgets on the way. We also have the issue of 1. do you slowly bring the deficit into line 2. have a sharper correction. Both have their pro's and cons, but 1. if far easier politically...

You have raised a point here that is worth picking up on. The government want people i.e. citizen`s to have the confidence to spend. What they should be doing is trying to win the confidence of investors (foreign and domestic) to invest in business. To do this, these investors must be satisfied that Ireland is solvent as an economic entity, in other words it must minimally be able to balance the books without borrowing. Sadly, our government have aspirations to one day reaching a 3% deficit - hardly conducive to economic confidence.

Icepick

bbsrs wrote: »

Austerity isn't working

And the alternative is?

not yet

Hawkeye123 wrote: »

Over the past few years I have been thoroughly entertained by those socialists who comment on economic matters. For example, a few weeks ago there was a lady on the Joe Duffy show who harped on about the need to maintain public sector pay so that the public sector could spend in the real economy - thereby supporting jobs. The funny thing was that she really seemed to believe it! The lady`s folly lay in the fact that the government is borrowing billions to pay these public sector workers and this money has to be repaid with interest. Added to that, these public sector workers have been known to take foreign holidays, buy foreign products - all of which sends this imported money which was borrowed to pay them, back out of the country. Of course, the private sector are still landed with the bill and interest to pay back.

On the macro economic front, the European politicians are creating money to bailout the debt ridden economies of Europe. All this to support the Euro. Who do they think they are fooling. The markets are happy to play along with this charade for the time being but ultimately reality will have the final say. Essentially, the European bureaucrats are behaving like rogue traders the only difference is that instead of buying more and more shares to keep an equity high, - they are adding stimulus upon stimulus to a market that is already as high as a kite.[/QUO

Just so I'm clear.....

You have a problem with some who works in the PS spending money aboard but choose to ignore billions sent to countries of people working here.

zootroid

bbsrs wrote: »

Where will it end , Austerity isn't working and I don't think it has ever worked anywhere from what I understand. FF are down and out and should stay that way , FG/LAB will get it in the neck in the next general election whisch doesn't really matter as FF , FG or LAB are so similar in policy there is no choice so who gets in next time SF / IND's ? Maybe we should get a governmant of technocrats and dispence with the voting so decisions can be made based on long term good for the country rather than the parties always having one eye on reelection and the other on keeping europe happy because we arent getting anywhere .

Austerity is simply the process of increasing revenue and cutting expenditure in order to reduce the current budget deficit. Because our current budget deficit has reduced then surely austerity has worked?

The goal of austerity is reduce the deficit so that we don't have to borrow, simply because we can't afford to borrow. In other words, there is no money, so there is no alternative.

For some people, it's not austerity itself that frustrates, it's the detail of it. I would prefer to see reduced taxes, and reduced expenditure. But I also think that services have been cut too much, so the only option is to deliver services at a lower cost, which would entail paycuts. I think it's immoral that the government cuts services, while there are some who earn too much and are protected.

I don't think there are any easy fixes for the economy, but reducing taxes to increase people's disposable incomes would be a first step, but this would only be possible by further reductions in expenditure.

ezra_pound

KyussBishop wrote: »

I didn't say wealth is created by government spending, I said money is added to the economy by government spending.

By definition, in a fiat currency system, money in the economy comes from government spending, and when the government is taxing more than it is spending, it is reducing the amount of money in the economy; that is a recipe for disaster if continued, as can be seen by its recessionary effects on our economy.

OK. First thing : what you Said is that no government spending= no money in economy

That is just so misunderstood.

Secondly I have no idea what you're saying about fiat currencies but it seems confused.

Thirdly we are not taxing more than we are spending. OK? Got that? Thats the reason for the austerity. Ok?

Finally this recession was not caused by excessive taxes and low spending. Austerity obviously is having a negative impact on growth but this recession was not caused by it.

ezra_pound

Icepick wrote: »

And the alternative is?

Ah. The harsh reality. It really is not occurring to many people yet that there is no alternative. We can have less austerity maybe, and make a longer adjustment but there just isn't any alternative to austerity.

I find the whole anti austerity thing bizarre. If you are spending more than you earn then you need to budget. And if you don't then you will have to eventually when there its no money and nobody trusts you with their money to pay them back. A lot of people just don't seem to get this.

KyussBishop

timbyr wrote: »

Odd. I thought that money creation was the remit of central banks. And distributed through lenders. Outside of the direct control of government.

In this case government is the debtor not a money creator.

And another point. Does this kind of direct spending lead to a stable economy or is it just pushing things further along the road, or worse creating mini bubbles.
Whereas real growth could come from private industry and real demand rather than manufactured demand arising from capital spending.

If the economy were based solely on money lent out from banks, everyones profits will be equally based on another persons debt, and the debt would become inherently unsustainable because it's a zero-sum game where there would not be enough money to go around to pay off debts.

Where would the money come from to pay for the interest on such debt either? What will add money to the economy, in order to fund the interest payments? (more debt?)


Private industry does not have money without government, so government enables private industry to function, by putting money in the economy.

Just think about if for two seconds: If the government taxes more than they spend, they are removing more money from the economy than they are putting; where is the shortfall in money going to come from?

KyussBishop

Icepick wrote: »

And the alternative is?

Debt writedowns (public and private), a limited debt jubilee to help the worst off, and a job guarantee program; the EU is perfectly capable of funding this through money creation.

The job guarantee also inherently manages inflation through adjusting fiscal/monetary policy (tightening it when there are signs of inflation), so if you're going to engage in hyperinflation scaremongering, explain precisely how the inflation will happen.

ezra_pound

KyussBishop wrote: »

If the economy were based solely on money lent out from banks, everyones profits will be equally based on another persons debt, and the debt would become inherently unsustainable because it's a zero-sum game where there would not be enough money to go around to pay off debts.

Where would the money come from to pay for the interest on such debt either? What will add money to the economy, in order to fund the interest payments? (more debt?)


Private industry does not have money without government, so government enables private industry to function, by putting money in the economy.

Just think about if for two seconds: If the government taxes more than they spend, they are removing more money from the economy than they are putting; where is the shortfall in money going to come from?

Each post you write gets more and more confused.

Like I said before we are not taxing more taxing more than we spend.

What is your obsession with money supply anyway? Is money supply an issue with the Irish economy right now? No. Is the budget deficit a problem? Yes. Are the government sorting it out? thery have no choice.

Does private industry depend entirely on government for funding? no. Where do you get your facts from?

KyussBishop

zootroid wrote: »

Austerity is simply the process of increasing revenue and cutting expenditure in order to reduce the current budget deficit. Because our current budget deficit has reduced then surely austerity has worked?

The goal of austerity is reduce the deficit so that we don't have to borrow, simply because we can't afford to borrow. In other words, there is no money, so there is no alternative.

For some people, it's not austerity itself that frustrates, it's the detail of it. I would prefer to see reduced taxes, and reduced expenditure. But I also think that services have been cut too much, so the only option is to deliver services at a lower cost, which would entail paycuts. I think it's immoral that the government cuts services, while there are some who earn too much and are protected.

I don't think there are any easy fixes for the economy, but reducing taxes to increase people's disposable incomes would be a first step, but this would only be possible by further reductions in expenditure.

Austerity is self-perpetuating, so it is massively destructive; with the government taking more money out of the economy than they are putting in, they are decimating demand (alongside the debt-deflation caused by excessive debt), and this forces a private industry slowdown, with people losing jobs, with less wages, forcing demand down further and requiring more austerity, hence it being self-perpetuating.

With more and more people going unemployed, and wages going down, tax income decreases, worsening the deficit; austerity does not solve the deficit, it causes massive damage to the economy and to society, pushing loads of people into unemployment, debt, some into poverty and some into homelessness, for no reason other than the EU says we need to balance the deficit.

The EU is perfectly capable of taking up the slack with money creation, so there absolutely is an alternative, funding programs to bring the economy back up to speed without requiring austerity (only requiring fiscal/monetary tightening to deal with inflation when it pops up).


The US has been on a slow road to recovery, solely through their deficit, and you'll see what happens to them after they start massive cuts to meet the artificial fiscal cliff (which is a totally meaningless arbitrary limit, there is no reason for it): they will fall right back into a recession, and will join the EU in that.

KyussBishop

ezra_pound wrote: »

OK. First thing : what you Said is that no government spending= no money in economy

That is just so misunderstood.

Secondly I have no idea what you're saying about fiat currencies but it seems confused.

Thirdly we are not taxing more than we are spending. OK? Got that? Thats the reason for the austerity. Ok?

Finally this recession was not caused by excessive taxes and low spending. Austerity obviously is having a negative impact on growth but this recession was not caused by it.

No it is not, where do you think money comes from? It comes from government.

I didn't say "if government stop spending tomorrow, there will be no money in the economy", I said, if they take more money out than they are putting in, they will be removing ever larger amounts of money from the economy.

This recession is being worsened by excessive taxes and low spending; I never said it was caused by it.

sock puppet

KyussBishop wrote: »

up).


The US has been on a slow road to recovery, solely through their deficit, and you'll see what happens to them after they start massive cuts to meet the artificial fiscal cliff (which is a totally meaningless arbitrary limit, there is no reason for it): they will fall right back into a recession, and will join the EU in that.

What do you mean when you say the fiscal cliff is an arbitrary limit?

KyussBishop

ezra_pound wrote: »

Ah. The harsh reality. It really is not occurring to many people yet that there is no alternative. We can have less austerity maybe, and make a longer adjustment but there just isn't any alternative to austerity.

I find the whole anti austerity thing bizarre. If you are spending more than you earn then you need to budget. And if you don't then you will have to eventually when there its no money and nobody trusts you with their money to pay them back. A lot of people just don't seem to get this.

It's bullshít to suggest there is no alternative, that is a total myth being perpetuated to keep countries locked in to the crisis (with a lot of people reaping serious profits from the economic destruction it causes).

You don't run the economy like a household, spending in good times, saving in bad times; that is not how a fiat currency system works, in a fiat currency system it is possible to create money.

KyussBishop

ezra_pound wrote: »

Each post you write gets more and more confused.

Like I said before we are not taxing more taxing more than we spend.

What is your obsession with money supply anyway? Is money supply an issue with the Irish economy right now? No. Is the budget deficit a problem? Yes. Are the government sorting it out? thery have no choice.

Does private industry depend entirely on government for funding? no. Where do you get your facts from?

Did I say private industry depends on government for funding? No.

Private industry depends on government putting money into the economy, so there is actually money to spend, and so there is not deflation; you would run an economy entirely based on unsustainable bank debt?

KyussBishop

sock puppet wrote: »

What do you mean when you say the fiscal cliff is an arbitrary limit?

It is a law saying that when the US hits 'x' amount of public debt, they can't increase debt any further; it is totally arbitrary/artificial, the law can be discarded and the deficit/debt can go as high as they like; it doesn't matter, so long as the interest is payable.

sock puppet

KyussBishop wrote: »

It is a law saying that when the US hits 'x' amount of public debt, they can't increase debt any further

No it isn't.

ezra_pound

KyussBishop wrote: »

It's simple mathematics ... so if government did not spend, there would be no money in the economy.

That is what you said.

KyussBishop

sock puppet wrote: »

No it isn't.

The Budget Control Act of 2011 was enacted as a compromise to resolve a dispute concerning the public debt ceiling. Deficit spending previously appropriated by Congress was bringing the federal government's total debt close to the statutory ceiling. Republicans in Congress refused to approve an increase in the ceiling unless there were deep spending cuts. The Budget Control Act included an immediate increase in the debt ceiling, along with a mechanism for facilitating two additional increases. It also provided for automatic spending cuts to begin on January 1, 2013.

https://en.wikipedia.org/wiki/United_States_fiscal_cliff

It's essentially tied to the debt ceiling, even if it begins cutting at an arbitrary date.

KyussBishop

ezra_pound wrote: »

That is what you said.

Yes; that does not mean if the government stops spending there will be no money in the economy, it means that money in the economy originates from government spending.

You have additional money from loans, but the debt from that is not a sustainable way to run the economy (that's immediately obvious just by looking at interest payments), so you need government spending.

sock puppet

KyussBishop wrote: »

https://en.wikipedia.org/wiki/United_States_fiscal_cliff

It's essentially tied to the debt ceiling, even if it begins cutting at an arbitrary date.

Politically tied maybe, but congress would have wanted these cuts debt-ceiling or no debt-ceiling.

ezra_pound

KyussBishop wrote: »

It's bullshít to suggest there is no alternative, that is a total myth being perpetuated to keep countries locked in to the crisis (with a lot of people reaping serious profits from the economic destruction it causes).

You don't run the economy like a household, spending in good times, saving in bad times; that is not how a fiat currency system works, in a fiat currency system it is possible to create money.

Oh yes. Thats right we saved in the boom! I forgot now we don't need austerity.

Oh no wait a minute that was the pension thing we've already spent that. Oh well we've got a large debt which is growing faster year by year. Thats OK lets get Europe to print more money and we'll just run up a debt until noone will lend to us. Oh wait thats already happened.

OK wait we've run out. Uh oh. No money. No social welfare payments etc. Etc.

bbsrs

ezra_pound wrote: »

Oh yes. Thats right we saved in the boom! I forgot now we don't need austerity.

Oh no wait a minute that was the pension thing we've already spent that. Oh well we've got a large debt which is growing faster year by year. Thats OK lets get Europe to print more money and we'll just run up a debt until noone will lend to us. Oh wait thats already happened.

OK wait we've run out. Uh oh. No money. No social welfare payments etc. Etc.

Oh wait we gambled massively on property during the boom , we lent ridiculous ammounts of money to developers .Oh wait that wasn't us but hey we'll pay back the billions in debt because Europe says that's for the best.

It's such a load of BS it is infuriating.

Hawkeye123

not yet wrote: »

Just so I'm clear.....

You have a problem with some who works in the PS spending money aboard but choose to ignore billions sent to countries of people working here.

What the Germans choose to do with there own money is none of our concern.

ezra_pound

bbsrs wrote: »

Oh wait we gambled massively on property during the boom , we lent ridiculous ammounts of money to developers .Oh wait that wasn't us but hey we'll pay back the billions in debt because Europe says that's for the best.

It's such a load of BS it is infuriating.

. We shouldn't have bailed out Anglo but we had voted in monkies to run the country. It's so frustrating that we have socialized so much privatedebt but thats a different problem. This is the budget deficit not the bank debt. Even without that wed still need austerity to sort it out.

KyussBishop

sock puppet wrote: »

Politically tied maybe, but congress would have wanted these cuts debt-ceiling or no debt-ceiling.

Maybe, I agree with you in that sense, still artificially politically tied though, when it doesn't need to be.

bbsrs

ezra_pound wrote: »

. We shouldn't have bailed out Anglo but we had voted in monkies to run the country. It's so frustrating that we have socialized so much privatedebt but thats a different problem. This is the budget deficit not the bank debt. Even without that wed still need austerity to sort it out.

Without the bank debt would we need such austere budgets , would we be talking severe austerity or just a correction via some cuts in expenditure and some revenue increases? No doubt we are spending too much but if we didn't have so much debt would confidence in Ireland be higher and the economy be performing better therefore reducing government expenditure and increasing revenue?

KyussBishop

ezra_pound wrote: »

Oh yes. Thats right we saved in the boom! I forgot now we don't need austerity.

Oh no wait a minute that was the pension thing we've already spent that. Oh well we've got a large debt which is growing faster year by year. Thats OK lets get Europe to print more money and we'll just run up a debt until noone will lend to us. Oh wait thats already happened.

OK wait we've run out. Uh oh. No money. No social welfare payments etc. Etc.

When the EU prints money, they don't need to load it on as debt. They can even pay off some of the debt (or its interest) with printed money if they like (not saying I advocate that, just showing how meaningless the debt is in the end).

You don't need to save in a boom, or cut in an economic downturn; that is outdated economic thinking, from the time when there was a gold standard.

Now it should be all about managing production, and efficiency of production, while avoiding inflation; making sure private industry has the money available to undertake production, while not causing price inflation through too much demand, and that we have full employment (because it's massively inefficient, not to mention damaging to the economy/society and people in general, to have such high unemployment).

We don't principally need anyone to lend to us, since the EU can create money; in fact, the government is doing private interests a favour through buying from them and marking that in the public debt, because the government pays back interest. It is a risk-free investment.

ezra_pound

KyussBishop wrote: »

When the EU prints money, they don't need to load it on as debt. They can even pay off some of the debt (or its interest) with printed money if they like (not saying I advocate that, just showing how meaningless the debt is in the end).

You don't need to save in a boom, or cut in an economic downturn; that is outdated economic thinking, from the time when there was a gold standard.

Now it should be all about managing production, and efficiency of production, while avoiding inflation; making sure private industry has the money available to undertake production, while not causing price inflation through too much demand, and that we have full employment (because it's massively inefficient, not to mention damaging to the economy/society and people in general, to have such high unemployment).

We don't principally need anyone to lend to us, since the EU can create money; in fact, the government is doing private interests a favour through buying from them and marking that in the public debt, because the government pays back interest. It is a risk-free investment.

We don't need to borrow money alright. We can just print more and more money as we like it. Got you.

Why isn't everyone doing this? It sounds great. Oh wait, isn't that what Zimbabwe have done.

Recipe for disaster.

ezra_pound

bbsrs wrote: »

Without the bank debt would we need such austere budgets , would we be talking severe austerity or just a correction via some cuts in expenditure and some revenue increases? No doubt we are spending too much but if we didn't have so much debt would confidence in Ireland be higher and the economy be performing better therefore reducing government expenditure and increasing revenue?

Back of envelope:
The cost of servicing our debt is about 7bn. About half of our debt is from the banking bailout. Therefore about3.5 billion a year cost. Current deficit 13 bn a year.Therefore there Would be a difference but wed still have essentially the same adjustment. Wed currently have a deficit of about 10bn as opposed to 13.

KyussBishop

ezra_pound wrote: »

We don't need to borrow money alright. We can just print more and more money as we like it. Got you.

Why isn't everyone doing this? It sounds great. Oh wait, isn't that what Zimbabwe have done.

Recipe for disaster.

You haven't actually presented any argument against it here, just rhetoric, straw men, and hyperinflation scaremongering.

Explain, precisely, how inflation will happen? You probably don't even have a concept of how inflation works.

Bits_n_Bobs

ezra_pound wrote: »

Back of envelope:
The cost of servicing our debt is about 7bn. About half of our debt is from the banking bailout. Therefore about3.5 billion a year cost. Current deficit 13 bn a year.Therefore there Would be a difference but wed still have essentially the same adjustment. Wed currently have a deficit of about 10bn as opposed to 13.

Not quite. We're not currently repaying much of the bank-debt. Most of the repayments relate to sovereign debt.

Fundamentally the country can't continue borrowing money because no-one will lend to us. While some of our borrowing is used to repay existing debt the vast majority is to find year-to-year expenditure/tax shortfalls.

The relevant question at the moment is how we choose to split the expenditure decreases and tax increases. The banking debt for the next couple of budgets won't have much effect one way or the other (with the caveat of the 3bn to Anglo which was long fingered last year and will presumably be long fingered again this year and the year after that).

ezra_pound

Bits_n_Bobs wrote: »

Not quite. We're not currently repaying much of the bank-debt. Most of the repayments relate to sovereign debt.

Fundamentally the country can't continue borrowing money because no-one will lend to us. While some of our borrowing is used to repay existing debt the vast majority is to find year-to-year expenditure/tax shortfalls.

The relevant question at the moment is how we choose to split the expenditure decreases and tax increases. The banking debt for the next couple of budgets won't have much effect one way or the other (with the caveat of the 3bn to Anglo which was long fingered last year and will presumably be long fingered again this year and the year after that).

How does this disagree with my post. I think you're agreeing with me.

ezra_pound

KyussBishop wrote: »

You haven't actually presented any argument against it here, just rhetoric, straw men, and hyperinflation scaremongering.

Explain, precisely, how inflation will happen? You probably don't even have a concept of how inflation works.

OK. Look up inflation in wikipedia.

It says this:

Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.

And this:

The adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Since then, huge increases in the supply of paper money have taken place in a number of countries, producing hyperinflations – episodes of extreme inflation rates much higher than those observed in earlier periods of commodity money. The hyperinflation in the Weimar Republic of Germany is anotable example.


This is very basic monetary economics and if you don't get that then your opinion on creating money should not be taken seriously.

P.s. What do strawmen have to do with the topic?

Pps if you want some evidence for my point about Zimbabwe look up http://en.m.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe#section_2

Quote:Crucial to both components is discipline over the creation of additional money. However, the Mugabe government was printing money to finance involvement in the Democratic Republic of the Congo and, in 2000, in the Second Congo War, including higher salaries for army and government officials. Zimbabwe was under-reporting its war spending to the International Monetary Fund by perhaps $22 million a month. [9]

Another motive for excessive money creation has been self-dealing.

everdead.ie

Just a few things please let me know if this is a bit incoherent.

1) The Government has a high spending low tax issue which is why we have a deficit. You can't say the Government is low spend high Tax, Certainly higher tax to the individual but in relation to our current spending and where our tax take was to where it is now the tax take is damn low.

2) Printing money causes inflation due to the fact that it diminishes the value of the current money in circulation because there is no real value behind the currency.

3)Money comes into the country not through government which is just recycling money already in the economy (unless we run at a deficit where we borrow money to bridge the gap) but through business' that export goods to other countries at a profit.

KyussBishop

ezra_pound wrote: »

The adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Since then, huge increases in the supply of paper money have taken place in a number of countries, producing hyperinflations – episodes of extreme inflation rates much higher than those observed in earlier periods of commodity money. The hyperinflation in the Weimar Republic of Germany is anotable example.

We're not Germany under the Weimar Republic, having to pay down truly massive war reparations, through converting our currency to gold or other foreign currencies.

Once Germany ran out of gold, they were utterly screwed, because they had no choice but to convert their currency into foreign currency to meet the massive (non-negotiable) reparation payments imposed by the UK and France, causing spiraling hyperinflation.

That's not a job guarantee program is it?

ezra_pound wrote: »

OK. Look up inflation in wikipedia.

It says this:

Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.

And this:

The adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Since then, huge increases in the supply of paper money have taken place in a number of countries, producing hyperinflations – episodes of extreme inflation rates much higher than those observed in earlier periods of commodity money. The hyperinflation in the Weimar Republic of Germany is anotable example.


This is very basic monetary economics and if you don't get that then your opinion on creating money should not be taken seriously.

If an increase in the money supply means an automatic increase in inflation, then why did we not see significant inflation, through the ECB printing over €1 trillion over the course of the crisis?
If that did not create appreciable inflation, then how much money has to be created, before you do see hyperinflation? 2 trillion? 10 trillion? How much?

You have not explained in any way, how inflation actually works, you've just asserted (the easily debunked claim) that money creation automatically leads to inflation.
To explain how inflation works, you need to explain what happens with the created money, to cause inflation; how and where it enters the economy, how it affects wages, demand or supply in industry; you're missing the entire set of arguments needed to link money creation to inflation.


I already know how inflation works, and have provided arguments as to how a job guarantee minimizes inflation; you have not provided any actual arguments, just assertions, as to how you think inflation will happen.

KyussBishop

ezra_pound wrote:

P.s. What do strawmen have to do with the topic?

Pps if you want some evidence for my point about Zimbabwe look up http://en.m.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe#section_2

Quote:Crucial to both components is discipline over the creation of additional money. However, the Mugabe government was printing money to finance involvement in the Democratic Republic of the Congo and, in 2000, in the Second Congo War, including higher salaries for army and government officials. Zimbabwe was under-reporting its war spending to the International Monetary Fund by perhaps $22 million a month. [9]

Another motive for excessive money creation has been self-dealing.

Your Zimbabwe example here, and the Weimar example, are both strawmen; they are not comparable to money creation in a job guarantee.

Your post there on Zimbabwe, also precisely explains how that is nothing like monetary spending in a job guarantee.

KyussBishop

everdead.ie wrote: »

2) Printing money causes inflation due to the fact that it diminishes the value of the current money in circulation because there is no real value behind the currency.

The value of money does not change in proportion with the money supply (that is empirically disproven), so it is not inherently linked to the money supply; you need to describe how (the mechanisms that cause) the prices of assets/goods change to describe inflation.

everdead.ie wrote: »

3)Money comes into the country not through government which is just recycling money already in the economy (unless we run at a deficit where we borrow money to bridge the gap) but through business' that export goods to other countries at a profit.

You are talking about assets, not money; if the government stopped printing money and stopped spending, and kept taking money out of the economy through taxes, where is the actual money, the currency, going to come from?

ezra_pound

KyussBishop wrote: »

Your Zimbabwe example here, and the Weimar example, are both strawmen; they are not comparable to money creation in a job guarantee.

Your post there on Zimbabwe, also precisely explains how that is nothing like monetary spending in a job guarantee.

What is your argument about job guarantee? Provide some source explaining this job protection and significance in monetary expansion and inflation.

I don't understandv its significance and have never heard argument before. Any references?

ezra_pound

everdead.ie wrote: »

Just a few things please let me know if this is a bit incoherent.

1) The Government has a high spending low tax issue which is why we have a deficit. You can't say the Government is low spend high Tax, Certainly higher tax to the individual but in relation to our current spending and where our tax take was to where it is now the tax take is damn low.

2) Printing money causes inflation due to the fact that it diminishes the value of the current money in circulation because there is no real value behind the currency.

3)Money comes into the country not through government which is just recycling money already in the economy (unless we run at a deficit where we borrow money to bridge the gap) but through business' that export goods to other countries at a profit.

Pretty much my understanding of the facts.