Michael Hudson: Why do they call for governments to balance the budget by pushing the economy at large deeper into debt, while trying to save the banks from taking a loss? m
Minimum wage does not cause unemployment. Lack of demand does. Notice when the hosing bubble popped, we lost a ton of annual demand, and jobs were lost. And about interest rates, well we have estimates about were it will be. Assuming no bubbles (like the housing bubble) burst, and assuming we continue with more or less the same economic policies we're following, our interest payments-to-GDP will only get to about 3-4% in about 10-12 years from now. That's not crippling at all.
every economy that stopped inflation survives with zero problems. The single biggest problem we have is inflation. Inflation puts the poor to death, starving, because food is too expensive even for the next tier up to give by donation, even for soup kitchens to operate. Inflation is starvation. It is murder.
my point is that the US federal govt does not need your tax dollars. It has a central bank that can issue its own currency. And govt spending does NOT take away from your savings if that govt deficit went into productive investments. What's important is the proper distribution of that spending. There is no money if the govt doesn't spend it into existence.
Just because you are unable to convert your dollars into gold, doesn't mean the reserves are not there...FDR confiscated everyone's gold so he could adjust the amount of gold backing the dollar. Hence the gold backing changed from about $20=1 ounce, to $35=1 ounce, and it stayed at $35 till 71.
it's the truth. federal govt doesnt need your tax dollars. the fed can print money for US treasury to spend so why should the fed govt need your tax dollars? fed and treasury work together to provide money needed for govt operations. i get my sources from someone whos worked in finance industry and knows the people inside govt and fed reserve for over 40 years. Warren Mosler. Look him up.
Steve Keen demonstrates empirical evidence that: 1) Price LEVELS are correlated with / caused by CHANGES in Debt, and if we take the derivative, we find that 2) Price CHANGES (i.e. inflation) correlate with ACCELERATION in Debt. If the government started the printing presses, I'm sure this other money - rather than debt-money - would produce similar results.
i never said taxation will stop hyperinflation, i said taxation is used to manage inflation and deflation for that matter as well. Taxation creates a demand for that nation's currency. When there is a demand, then there it reduces inflation of that currency.
us solvency was no longer an issue after 1934. all nixon did was get rid of exchange or convertibility of foreigners trading their us dollars for gold. US Govt was already printing money around Nixon, that's why there was so much us dollars in the world, which was why the world wanted to trade in their dollars for gold. So now if you went to uncle sam and wanted gold for your dollars, uncle sam can tell you to take a hike thanks to Nixon. It was to prevent any more gold leaving USA.
the real rise in wages is not even half the real rise in prices. That means at some point people will work so hard for food they will die and their wages will not pay for food. You could be paid $100/hour in nominal terms but pay $1000 for a loaf of bread so in real terms you're working for poverty. IN REAL TERMS you'll work 10 hours for 1 loaf of bread.
ALSO..Paul misses the point completely at about 10:00 ...He says the government is running the risk of interest payments increasing, but that's absolutely wrong, because the FED is in control of rates. They are running the risk of inflation rising, not interest payments.
@Rob Mews "The real test of government money is allow an alternative to compete against it and see which comes out the better." There are alternative currencies, Ithaca Hours & Bitcoin being just two of many. I guess government is a success! Anyone can issue their own money, the problem is getting others to accept it. Government money will be in demand as long as it is needed to pay taxes.
You need to address the fundamentals and stick to them. They are:- stable currency, no overspending by irresponsible people like politicians. The lack of jobs is not a problem and never has been since jobs are created out of people's desire to get someone else to do the activities they don't have time to do themselves. Not by governments telling lies and promising things to just get elected with no personal responsibility for the cost blow outs. There is an over supply of housing.
Finally, where do you think money goes when it gets taxed? It doesn't sit under someones bed, it goes back into the economy. HOW DOES THAT FIX INFLATION?
my point being it wont, it has had ample opportunity. it has chosen to side with the criminals and lends it support to disarming and giving the constituents little or no recourse to escape the plunder
True. But that doesn't mean one should advocate to eliminate the program (like food stamps). One should look to strengthen the program (through political pressure from the public) while getting the private leeches (JP Morgan) OUT.
The only people "living off the backs of others" are the ones in charge of private power (especially goldman sachs, citibank, jp morgan, etc). On debt we live in a state capitalist system (like it or not), and in such a system, in a moment like the one we're in now (collapse of the housing bubble), we need to run higher deficits to create/keep jobs. And within today's state-capitalist system in the US, there exists NO debt crisis. So if we care about people, we run bigger deficits to get jobs.
I'm glad we both want to avoid unemployment and stagnant or decreasing wages. So do I. This is why I want a higher minimum wage (higher than the weak proposal by Obama), and I want MORE spending in order to lower the unemployment rate. Right now, our deficit is sustaining employment, and if you lower the debt now, you will have higher unemployment. The debt is NOT a problem, it's not a danger, and it's a good thing right now. Unemployment and wages are the real issue.
Margaret Thatcher "There is no Public Money" Well Marge if there is no Public Money, how can there be Public Debt? "There is nothing to prevent the Federal Government from printing as much money as it wants and giving it to someone, the problem is are the Goods and Services available which those funds would be used to purchase. The Cash is there which is nice, but it has to be in balance with the resources to purchase." ~Alan Greenspan Under Oath refuting Paul Ryan's attempts to Justify privatizing Social Security.
fractional reserve lost most of its powers, effectiveness, and usefulness in 1934. For all practical purposes, fractional reserve banking ended in 1934 when we went off the gold standard. Today’s banking is not reserve constrained. -- warren mosler
I agree & would love to keep in touch with you. With my wife & I, tax law as I recall benefited us to sell after 5 years. We sold. Bought another house just before "the crash of 08". I left the system, lost my house, wife, two kids, everything worth working for. I am not alone. The insanity continues. The only way to fight is in fight club, if you know what I mean.
taxation causes people to work. the 99% can reduce their debts with the free money. nobody is saying free money for life, just a one time large cash injection. taxation causes demand for dollars, which makes it strong, otherwise if a govt can't tax, then nobody will do anything and we will have hyperinflation. Taxation is the key to prevent inflation. It's a fiscal policy govt has that's just as powerful as monetary policies.
What a great answer. Next time refute anything by saying the answer lies somewhere within a library of books. It's complicated and there. You go read them all and come back. He had a good point and you answered with garbage. We have 300+ countries with central banks for 50+ years. ONE of them would have shown continued success directly b/c of this. If Hudson's statements were true. Most countries w/o central banks showed much better track records making the converse true.
Why would anyone bother working, or doing productive work? I mean the banks already show this behavior with the bailouts. Imagine if everyone behaved as recklessly as the banks did knowing they'd get bailed out no matter what happened? What an awesome solution. If a small gang is running around robbing and looting with impunity, you don't ask if you can be a part of it. You ask how you can STOP it.
what the government should do is not the question, what the government will do is nothing. what the people and victims of this thievery CAN do is the only discussion of any merit.
I think you missed the point. #1. Sure, you may argue it creates demand WITHIN the US, but like I said, the value of the US dollar is determined in a WORLD market. Taxation will not change the WORLD demand for the US dollar. This is important because the US IMPORTS it's goods. Weak dollar=higher prices #2. When money sits in a bank account, IT DOES NOT JUST SIT THERE. Banks lend that money out. It comes back into the system in the form of loans(investments).
Of course there is lack of demand - no good asking a politician what to produce. The lack is because too many baled out big government backed businesses don't produce the right products. Nobody want irrelevant goods produced but politicians don't know that or care and they don't have responsibility for what happens. People want efficient cheap cars but US baled out factories don't produce them and why would they the government bales the out when they don't make the right cars like imports.
There is No institution on earth for which debt is not a problem at any time. Yes, debt IS less a problem if it is countered by income and profit but it causes others to risk assess the organisation and charge higher interest to them. Debt for the USA is a reason why capital inflows are lower. Same for you when you tell your creditors debt is not a problem. Try it. There is no way around it. Another huge problem is government price control of minimum wages which causes unemployment.
the Fed doesn't control rates, the fed INFLUENCES rates. They can't just set a rate, they actually have to print money to buy bonds to force rates down while the market tries to push rates up. Once printing is too risky for hyperinflation the rates WILL rise & probably to 6% then 10 then 15% then more. OR you can keep printing & that will raise bread to $10 then 50 then 100 dollars per loaf
so the point is how is this going to end, wall st have pretty much shown that their will is law, they have gained and maintain this power through credit. how is this not a credit problem for the honest, hard working, defenseless general population
@Rob Mews "It certainly is not if the government abuses the proper managerial concepts that result in a stable currency. EG Zimbabwe." The primary cause of inflation in Zimbabwe was the loss of productive capacity.
debt isn't a bad thing for the govt. debt means savings for you and I. Fed govt should't have a balanced budget, it would mean there is less money and savings for all of us, and it's deflationary and recession causing. Right now the fed govt isn't getting into enough debt. It needs to create a new works project similar to the new deal.
Let's not forget that some private debt can be made to zero or very small using bankruptcy. This further blocks people from using the credit system which is good long-term. You can't get in trouble with credit when you're not allowed to use it. Then you'll learn life is 10x cheaper without credit.
US dollar is not trash. there is nothing wrong with fiat money. if the world doesnt want us treasuries, then the fed will buy em and finance us govt spending.
actually if u look at a graph, private sector savings is identical to govt deficit spending. just do a google image search "us sector financial balances graph". so govt needs to run a deficit in order for there to be money and for investments and enterprise to happen, resulting in savings. taxation is about inflation control. when the super rich dont pay enough, then it's inflationary.
I understand the problem with the banks they should be liquidated. But the problems with social security was their before bank bailout. Isn’t printing money just a tax without actually taxing.
i dont doubt for a minute that theres things the government can do to improve the economy for all. the question is what they will do. and in my long experience the always complicate, legislate, and create systems that are ineffective and expensive. the reason for this is they live of other peoples earnings therefore have no respect for their spending and tend to favor their cronies with it. there is no mystery here, they are deficient to their task and obsolete.
I agree. But your prescription is another big gift to private power and the banks. Private power is working overtime to try to get people to think about the debt (when there is no problem with it), in order to fool them into allowing cuts to Social Security, Medicare, and all the few good social programs that the public FOUGHT HARD to have.
The debt has now in 2022 increased to by 20 trillion USA dollars since 2008 crisis. Whopping 20 trillion dollars. The debt stands at 30 trillion dollars in 2022. The USA can get away with this because of petro dollar. Once nations start using the euro and other currencies then the USA will get in trouble sooner than later. Russia has become a threat to the USA because they are working with other nations to rid themselvs of the dollar. Khaddafi tried also to do it shortly before he died.
opposite of fact - and I'll prove it. The higher the government debt is the more I will starve to pay it. The only escape I have is to work less so I am less starved before I am taxed, or to hide my work so I am not taxed at all. Deflation is the only way poor people will afford food - inflation will even close the doors to soup kitchens. CERTAINLY it will end the food banks.
"The only way to produce circulatory inflation (or traditionally defined inflation) is to borrow more than the value of the related wealth, and/or to pay less than the value of the related wealth, despite a monetary obligation further comprised of interest. The first is not allowed, and the latter is impossible because we have to pay both the value of the wealth (principal) and interest out of the circulation." ~ Mike Montagne, Creator of Mathematically Perfected Economy™ Therefore, it is the interest that creates both price inflation and systemic failure of the *fiat* money system.
Personal Conspiracy Theory: Banks want people to take out mortgages/loans/creditcard debt that they will pay for but never finish paying off so the money keeps coming in and if they can foreclose on the home/business being mortgaged, that's more capital for the banks.
pm in theory a foreclosure only gets the lender the loan back. though they cheat on everything it is sort of that way. The bank does not want the house. They want interest forever until you pay for the house again and again but still do not own it.
So there is no need for FED. Government can issue currency "and amount of it is not a problem". Its sad that people think debt as a significant part of money supply is not e problem. We should have sound money to preserve our buying power. Main street need safe harbor, we are not speculators and never should be.
China has a printing press and has the same size an economy as ours with eighty times as much currency In circulation as we do. They have used this money for vast investment which means there economy at ten percent but this also takes money away from household sector by inflating the currency. Money from household sector is transferred to investment sector. Our households hold it up through them saying exports to us. When this fell short in 2008 they went on their own private lead debt credit boom. Now people are fleeing with there money so they have mass capital controls. So how do you inflate the currency without capital controls. If the government didn’t spend the money for productive purposes I don’t see how this would work. Social security wouldn’t go bankrupt if you printed money to keep it solid but would the money buy anything.
Money can be anything. Currency is usually the legal tender of a nation state. Your assertion that a government has to issue more money before it can tax more is absurd. Are you saying that the government cant raise taxes without issuing more money. There is no reason or logic in that. If excise tax on alcohol is increased the government does not have to follow it with increased money supply. Do they decrease money supply when taxes reduce? Where ? when? No! That's false in reality.
Hudson states "no government can become insolvent if it's debt is owed in its own currency" This is interesting in view of the Zimbabwe situation where printing of their own currency (government deficit) resulted in virtual insolvency. He just doesn't understand that government are organisations like people are. If everyone printed their own money and did so at a greater rate than they produced wealth by working then the money would be worth less and less. Same for governments.
9:21 So is Michael Hudson saying that the treasury "creating" the "money" (does the treasury really "print" new money?) will not cause inflation and it is not the taxpayer, who gets hit by inflation and has to pay with higher prices for goods and services?
The alternative you propose is similar to the Fiat money problem we have now. Same ith any other similar scheme. The problem is essentially the government which issues money has no real constraints on it. This is a real problem where you have politicians controlling money which is every country. They run rampant whenever they see a political advantage with something (like loose money control or loose accounting) no matter what the real consequences are.
You never actually bothered to look at the fed's balance sheet. The fed IS NOT the "number 1 holder of treasuries". They currently hold 15% of marketable treasuries. The largest holder is US citizens through a variety of organizations, such as pension funds, 401Ks, mutual funds, and of course, banks. In fact, even with all the QE, the Fed's balance sheet is just now returning to its 2000 percentage of marketable treasuries on it's balance sheet, roughly 15%. You just got exposed....
Before 2000, the value of the dollar v. other currencies was primarily determined by the strength of the US economy and differences in interest rates. High interest rates in the US coincided with high dollar like in the early 80s. Same with high growth rates in the 90s. But now, with no prospects for growth and even interest rates throughout the developed nations, the dollar remains dangerously weak. It is foreseeable that the dollar is going to crash within 5 years - as if engineered to do so.
and the fed pays any profits over to the treasuries, so the fed is a money making institution for the US govt. The US govt does own the printing press, and can tell the fed what to do. THe US president can hire and fire the chairman of the fed if he sees fit. The chairman of the fed works under the pleasure of the US president.
What markets are those? The gold market? Silver market? Oil market? Consumer staples? If you are looking at the CORRECT markets the US dollar is trash. If you are looking at OTHER trash; YEN and EU specifically. Then it won't look so bad, but why compare our currency to those, when the YEN recently came out saying the Yen is too high? and the EU is trying to support everyone via the ECB?
Let's not argue semantics here, my point is still 100% valid. However, I do disagree with your statement, regarding rates rising. Do you truly believe with the level of US consumer indebtedness that the FED would allow rates to rise at any time in the near future? I take the stance of Kyle Bass - We are below the zero lower bound, never to return to normal rates, because of the risks of a new banking crisis. If rates were to rise, we would have another S&L type crisis.
Debts and deficits are good. Budget surpluses and fiscal austerity are bad for the economy based on consumption. Federal income taxes are used to control inflation, boost the currency value, and service off the debt/ accumulated compound interest. abraham Lincoln proposed a debt/ interest free currency called the greenbacks,. The US Empire is monetarily sovereign.
"Libertarians" (a word incorrectly used by them by the way) know next to ZERO on economics. This video wipes the floor with them. Besides, there is no debt crisis. Interest rates on 10 year bonds are now at 1.93%, with the U.S. having a current interest-to-GDP ratio of about 1.3%, with a net interest burden (if you count the fed's refund to the treasury) of 0.8% of GDP. With those numbers, there exists no way we're even near a debt crisis.
a loan officer at a bank who authorizes a home loan mortgage is literally creating money digitally out of thin air. Creating money the banks never had to begin with. Car/ home loans and credit card loans are just contractual obligations between borrower and lender.
i have and my preference is libertarianism, it promotes personal ownership of the individuals wealth and financially supporting only what the individual wishes to support.
you assume of course that the current system where governments need to borrow for their spending. when in effect the governments as a sovereign can print is own currency for its purposes, and the sovereignty is shared rather than the debt
I am just posing ideas here But what if your aging population no longer what to buy a bunch of junk and drive 50 miles round trip to work 60 hours a week. Come home to a home that costs too much to buy and maintain? Or your youth no longer want to work because it means putting most of the money toward a student debt and paying tax to a corrupt political system?
as you wish, perhaps you may wish to take a close look at geo political trends and the reserve currency status of the us dollar, real cashflow and the real economic growth required to service this debt, fractional reserve lending and its relationship to counterfeit, the proven fraud that has not been prosecuted in the financial markets since 2008 including libor, naked short selling in the gold and silver markets, if you wish to factor these in to the official figures you may find a debt prolem
The debt is NOT a problem (incredibly low interest rates). The problem is UNEMPLOYMENT and LOW WAGES (something you internet "libertarians" never talk about). Right now, we need AT LEAST a 15 dollar minimum wage. We need a bigger stimulus to replace lost demand from the housing bubble. We need a weaker dollar to get jobs back. Those issues I listed above are way more important than the debt (which is irrelevant right now).
Firstly, taxation is not a way to deal with inflation. You are thinking of the US as a closed off society. The US is apart of a global market, that imports a large majority of the goods they consume. Taxation won't change the monetary base. Secondly, I don't know if you went to school for economics/finance, but your professors should be fired if you did. There is NO SUCH THING AS HORDING MONEY IN A BANK. It's called indirect finance.
This guy is wrong from the start. He says governments own the printing presses. Well the U.S. does not own the printing presses. The U.S. dollar is privately owned by the Federal Reserve, a private bank. The U.S. Treasury buys these dollars from the Federal reserve.
All paper fiat currency are debt. US treasury bonds and federal reserve notes are instruments of debt. Money expansion is inflationary and creates more debt. The more debt there is. The more money there is. The money there is. The more debt there is. The continuous monetary/ debt circulation in the economy is what keeps capitalism from collapsing.
I know what all those are. And What does that have to do with any of the things I originally mentioned? What point are you trying to make? The goal of govt deficit spending is to stimulate the economy since the private sector is paying down debts. This has nothing to do with nominal and real. That's a complete different subject.
"Buddy, the debt is irrelevant" Famous last words. I hope you also noticed all the US treasuries on the FED balance sheet, seeing as they are the number 1 holder of treasuries. Strange isn't it? You can say investors love treasuries so much, but then why is the FED buying so many?
There's always nominal and real terms. Nominal means if I am paid $11 this year and $8 in 1999 I am making $3/hour more but it means in real terms I am losing 10 minutes of every hour worked to additional inflation. Now everything I could by for 50 minutes in 1999 costs me the full hour of work for 2013. I actually work harder to get less. that's real terms.
actually the libertarianism i support supports personal power as in the word liberty. while there may well be an opportunity for private power to develop, the libertarianism i subscribe to is founded on the us constitution which for the most part works to limit the power of governments as the founding fathers were aware that the marriage of government and private power would lead to tyranny, and the war of independence was a war against the tyranny of the same corruption from england
your right, but its academic, i want to see real employment, real opportunity's, and real wealth for those that earn it. the only solution as i see it is to physically poses what you personally earn, spend it on your personal responsibilities and welfare, and starve the parasites from the economy.
i said taxation is key to prevent inflation. Where is the hyperinflation? you need to learn how to read son. if nobody has to tax, THEN there will be hyperinflation in the form of absolutely no demand for that currency.
i'm afraid, i dont share your optimisms for political resolutions any more. even through public pressure. my experience has always been that it becomes a long drawn out affair with some insipid token change accepted by the public and a reinstatement of the same scheme under a different guise and justification. i personally feel the only way to stop this nonsense is for the public to realize their is no way any power other than their own is going to make responsible, fair and just decisions
I agree, money can be anything. It varies from time to time and from circumstance to circumstance. But government taxes are expressed as a percentage of money in legal tender.- US dollars in USA. When barter operations occur accountants must legally express them in Currency ( e.g US dollars) so tax can be applied. Company and other taxes cannot be paid in bananas or potatoes although they could be used to settle a commercial debt at times. Money ($) is a way of quantifying comparative values.
Your theory is not correct. The error is assuming the government issues money to create wealth. If that were the case why couldn't anyone issue money to create wealth. Government is no special institution. It is only a group of people with a printing press and legislature carrying out a task, all to often not very well. In the US it issues money (excess currency) & runs big deficits taking goods and services out of the economy when competing for labour and materials with the private sector.
