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View Diary: How much longer can the Austerians and their puppets go on with their failed policies and lies? (125 comments)

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  •  Point 2 is rather absurd. (1+ / 0-)
    Recommended by:
    Sparhawk

    Why precisely do we want the private sector to run a surplus?  High private savings don't correlate well with times of prosperity.

    •  It only seems absurd to those (3+ / 0-)
      Recommended by:
      aguadito, katiec, limpidglass

      who don't understand macroeconomics. Do yourself a favor, look up Twin Deficit Hypothesis or Sectoral Balance or read The Predator State by James Galbraith. Here's a quote from Galbraith:

            There is a basic relationship in macroeconomics, as fundamental as it is poorly understood, that links the internal and the international financial position of any country. A country's internal deficit, that is, its "public" deficit and its "private" deficit - the annual borrowing by companies and households - will together equal its international deficit.

      The free market is not the solution, the free market is the problem.

      by Azazello on Tue Jan 29, 2013 at 02:01:53 PM PST

      [ Parent ]

      •  Nice try. (1+ / 0-)
        Recommended by:
        Sparhawk

        There's more than two terms in the equation unless you're completely discounting international trade.

        •  What ? (2+ / 0-)
          Recommended by:
          aguadito, dorkenergy

          You still didn't get it. I don't have time to explain it to you now, but I wrote a diary on this two years ago. ☛ The Federal Budget Can't Be Balanced

          The free market is not the solution, the free market is the problem.

          by Azazello on Tue Jan 29, 2013 at 02:45:09 PM PST

          [ Parent ]

          •  Even that formulation is three terms... (1+ / 0-)
            Recommended by:
            Sparhawk

            ...and really depends on a constant and immutable "value" to get three basic terms.

            Historically, we've had balanced federal budgets for large parts of our national history.

            •  Sheesh, I give up. Good luck. (1+ / 0-)
              Recommended by:
              aguadito

              The free market is not the solution, the free market is the problem.

              by Azazello on Tue Jan 29, 2013 at 03:04:38 PM PST

              [ Parent ]

              •  why don't you go back to the basics, occasionally? (2+ / 0-)
                Recommended by:
                Sparhawk, hmi

                In the end, it's not about money.

                The whole thing is about goods and services the US goverment either wishes to consume itself or to distribute to others.

                If those goods and services would be created entirely by its own citizens, while those citizens also create enough for themselves to have a cumulatively satisfactory propserity, that would be called a balanced budget.

                But that's not the case - the us government keeps consuming more goods and services than its citizens are willing to give to it in form of taxes, and privately those citizens do the same.

                The difference is made up by those net exporters, places like, say, China or Germany.

                Dou you really think Chinese and German people wish (and are going) to work their butts off for your prosperity for all eternity?

                ______
                "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

                by cris0000 on Tue Jan 29, 2013 at 03:18:36 PM PST

                [ Parent ]

                •  I can't "go back to basics" because (4+ / 0-)
                  Recommended by:
                  limpidglass, dorkenergy, aguadito, mrkvica

                  it's not basic. We are no longer on a gold standard and are likely to run foreign trade deficits for many years to come. That is why, absent lots of private sector borrowing, the Federal budget can't be balanced. We can't Fix the Debt.

                  The free market is not the solution, the free market is the problem.

                  by Azazello on Tue Jan 29, 2013 at 03:28:40 PM PST

                  [ Parent ]

                  •  So does that mean... (2+ / 0-)
                    Recommended by:
                    Sparhawk, hmi

                    .. to take up my last question, does that mean that you DO expect Chinese and Germans and other such ###### to supply goods and services for American's prosperity without compensation for all eternity?

                    ______
                    "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

                    by cris0000 on Tue Jan 29, 2013 at 03:44:27 PM PST

                    [ Parent ]

                    •  No, that's not at all what I mean. (3+ / 0-)
                      Recommended by:
                      aguadito, mrkvica, katiec

                      I would looove for the US to have more domestic manufacturing. What I am trying to say, and what the diarist is trying to say, is that the deficit hawks are being disingenuous. They know damned well that the budget can't be balanced right now. They just want to gut what little is left of our social safety net and the corporate media are helping them. And, by the way, what is this prosperity of which you speak ?

                      The free market is not the solution, the free market is the problem.

                      by Azazello on Tue Jan 29, 2013 at 03:52:21 PM PST

                      [ Parent ]

                      •  So, in other words, yes (0+ / 0-)

                        For the foreseeable future, at least, you expect net exporters like Germany and China to continue to ship us goods and services without compensation.

                        (-5.50,-6.67): Left Libertarian
                        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

                        by Sparhawk on Tue Jan 29, 2013 at 05:24:50 PM PST

                        [ Parent ]

                •  as long as their economies remain export-based, (4+ / 0-)
                  Recommended by:
                  aguadito, whoknu, mrkvica, Azazello

                  they have a big incentive to "keep working their butts off."

                  Sure, we couldn't afford to immediately stop buying their exports and produce our own. But neither can they afford to stop selling immediately, either.

                  If they do, there won't be enough domestic domand to soak up domestic production, and their economy would soon go into crisis because they wouldn't have a market for their goods. Production would fall, companies would close down and lay off workers. People wouldn't have enough income to spend, and it would cause a depression.

                  Far from the picture you paint, sometimes the exporter nations have resorted to extreme measures to open markets. The Opium Wars (a part of Anglo-Chinese history that is often not taught in America) were about just that--forcing a importer nation to buy in order to sustain the exporter nation's economic growth.

                  The trade deficit has to do with the fact that we don't nurture domestic industries that make the best use of our resource. We could rectify this with an intelligent national industrial policy, which our politicians, weaned on free-market non-interventionism, instinctively shy away from. To implement it would require deficit spending on the part of the government. Balancing the budget would stop us from doing that.

                  You seem to be implicitly calling for autarky here:

                  those goods and services would be created entirely by its own citizens, while those citizens also create enough for themselves to have a cumulatively satisfactory propserity, that would be called a balanced budget.
                  That's not possible, it's too inefficient in this day and age. America certainly couldn't do it. Other nations might try it, but it would be so expensive in terms of resources, and would require massive government intervention to force domestic demand to equal domestic production.

                  What's really needed is a globally coordinated trade policy to manage these problems. Otherwise, we can expect more trade wars--worse than the Opium Wars--and market shocks that result from importer nations developing into exporter nations, and vice-versa.

                  Balancing the domestic budget doesn't address any of these issues.

                  "In America, the law is king." --Thomas Paine

                  by limpidglass on Tue Jan 29, 2013 at 04:06:39 PM PST

                  [ Parent ]

                  •  given the monetary involvement (0+ / 0-)

                    I was not arguing for autarky but for balance.

                    ______
                    "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

                    by cris0000 on Tue Jan 29, 2013 at 04:29:21 PM PST

                    [ Parent ]

                    •  sorry, I don't see what you're getting at (3+ / 0-)
                      Recommended by:
                      mrkvica, aguadito, Reston history guy

                      Perhaps I'm mistaken (I am far from an expert), but I thought that the trade balance was measured by taking the value of total domestic production and subtracting the value of total imports.

                      What does that have to do with balancing the government's budget? Will cutting government spending in and of itself cause domestic production to increase, or imports to decrease?

                      "In America, the law is king." --Thomas Paine

                      by limpidglass on Tue Jan 29, 2013 at 05:22:54 PM PST

                      [ Parent ]

                      •  I'm afraid you are in error here. (2+ / 0-)
                        Recommended by:
                        katiec, Azazello

                        The trade balance  is the difference between the monetary value of exports and imports. The current accounts balance also factors in unilateral cash transfers (e.g local workers sending money abroad to their families) and capital income.

                        The argument with the balanced budget is that with a negative current accounts balance foreign debt is rising. So somebody has to take hat debt - either the state (then you have a budget deficit) or the private sector.  The diarist's assumption is that since the private sector will not be able to asorb much more debt, it is necessarily the public sector (the state) who will have to maintain a budget deficit for the foreseeable future.

                        ______
                        "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

                        by cris0000 on Wed Jan 30, 2013 at 12:03:08 PM PST

                        [ Parent ]

                        •  In application... (1+ / 0-)
                          Recommended by:
                          limpidglass

                          ....for all intents and purposes you can just say trade deficit = current account deficit,  at least in the US.

                          So rhetorically you are right to distinguish them, but in a policy discussion (magnitude and effects on balance of other figures) it makes no real difference.

              •  With some people, you just gotta make the effort (2+ / 0-)
                Recommended by:
                Azazello, katiec

                And then if they just won't get it, you gotta give up and let them go.

                Don't think of it as giving up.

                Think of it as the intellectual equivalent of shooting a wounded horse to put it out of its misery.

                Letting him bask in his ignorance keeps him sane and thinking he's got the system understood to avoid the depressing reality.

            •  not true, it has just been done seven times (8+ / 0-)

              in the entire history of the US, and each time, a depression followed soon after, as Michael Hudson points out:

              Government budget deficits pump money into the economy. Conversely, running a budget surplus retires the public debt or currency outstanding. This deflationary effect occurred in the late 19th-century, causing monetary deflation that plunged the U.S. economy into depression. Likewise when President Bill Clinton ran a budget surplus late in his administration, the economy relied on commercial banks to supply credit to use as the means of payment, charging interest for this service.

              As Stephanie Kelton summarizes this historical experience:
              The federal government has achieved fiscal balance (even surpluses) in just seven periods since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, 1920-30 and 1998-2001. We have also experienced six depressions. They began in 1819, 1837, 1857, 1873, 1893 and 1929.

              Do you see the correlation? The one exception to this pattern occurred in the late 1990s and early 2000s, when the dot-com and housing bubbles fueled a consumption binge that delayed the harmful effects of the Clinton surpluses until the Great Recession of 2007-09.

              Remember also that FDR gave in to the deficit hawks in 1937 and tried to balance the budget and cut back on New Deal spending. It led to a recession, and he soon reversed himself and asked Congress for more spending.

              "In America, the law is king." --Thomas Paine

              by limpidglass on Tue Jan 29, 2013 at 03:04:48 PM PST

              [ Parent ]

            •  6 Times, each followed by a recession. (3+ / 0-)
              Recommended by:
              dorkenergy, aguadito, mrkvica
            •  Where did you get this from? (2+ / 0-)
              Recommended by:
              aguadito, Azazello
              we've had balanced federal budgets for large parts of our national history.
              See federal "deficit" from 1900-2016 from usgovernmentdebt.us.

              Evidence for your assertion?

              United We Understand — e MMT unum

              by dorkenergy on Tue Jan 29, 2013 at 08:08:46 PM PST

              [ Parent ]

      •  the absurd part is ... (1+ / 0-)
        Recommended by:
        Sparhawk

        ... the claim that a current accounts deficit is unavoidable, or forced by the fact that the US$ is the world's reserve currency.  It's neither .

        Now an argument could be made that both kinds of current accounts imbalance are unsustainable in the long run.  But that doesn't make the US's position any better, it only shines a light at the fact the China's or Germany's positions (high current accounts surplus) aren't that enviable either.

        ______
        "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

        by cris0000 on Tue Jan 29, 2013 at 03:03:49 PM PST

        [ Parent ]

    •  If we were to balance the budget... (3+ / 0-)
      Recommended by:
      dorkenergy, mrkvica, Azazello

      ...while maintaining the reserve currency status, it mathematically necessitates a perpetual private sector deficit. Are you willing to say that is optimal?

      Balancing the budget is what is absurd when you consider the consequences.

      •  No, it doesn't. (1+ / 0-)
        Recommended by:
        Sparhawk

        As I posted above, there's multiple terms in the equation.

        Even the graph at the top shows three sectors, which I guess is how most MMT quacks prefer to organize things in an attempt to completely write inflation, monetary policy, and trade deficits out of the picture.

      •  can you cite ANY kind of rational explanation ... (1+ / 0-)
        Recommended by:
        Sparhawk

        ... for that?

        Why is a current accounts deficit unavoidable?

        ______
        "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

        by cris0000 on Tue Jan 29, 2013 at 03:05:04 PM PST

        [ Parent ]

        •  It's unavoidable in the current policy structure (2+ / 0-)
          Recommended by:
          mrkvica, Azazello

          of the system. Until we develop the SDR system or other alternative methods, it will live on.

          I won't explain myself beyond that, because you're a hostile individual (I saw your other rude comment), so I'll point you to some sources so you can choose to educate yourself:

          Low-brow (Reuters):

          Global imbalances and the Triffin dilemma

          http://blogs.reuters.com/...

          High-brow, detailed (National Bank of Belgium);

          On the origins of the Triffin dilemma :
          Empirical business cycle analysis and
          imperfect competition theory

          www.nbb.be/doc/oc/repec/reswpp/wp240En.pdf

          Enjoy and best of luck on your quest for the truth.

          •  Godly (1+ / 0-)
            Recommended by:
            Sparhawk

            the Reuters article is pretty frank and supports my point of view. To quote

            The United States has run larger budget and current account deficits than most other countries simply because as the issuer of the principal reserve currency it can.
            That's exactly what I've been noting in my "hostile" comments. The fatal policy of current accounts/trade deficits is not a necessity, it is a choice. And it's a choice that can only end in disaster.

            Bute Keynsians, for all their merits, are less bothered by that. "In the long run,", their spiritus rector once noted, "we are all dead".

            ______
            "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

            by cris0000 on Tue Jan 29, 2013 at 03:39:13 PM PST

            [ Parent ]

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