More stimulus?

inlet13 wrote:

markin ball wrote:

Exactly. The "market for it", be it in the present or future, actual or perceived, aka demand, is the reason goods and services are supplied, and why jobs are created to produce/perform them. And without the ability to consume, there is no real demand, and no need to produce.

Put some money in my pocket, and watch me demand goods and services, and in turn and watch suppliers respond to the new demand.

What comes first the job or the income? I say the job, you say the money. That's why I originally said it's a chicken and the egg sort of thing. I understand your argument, and I think you understand mine... but, I don't think we'll come to a consensus.

Regardless, your approach to "put money in my pocket" has holes in it, especially right now (given the debt issue... but i won't even mention that). The reason it has holes in it is simple.. that money comes from tax payers pockets. When government takes money away from one (or a group) and redistributes it to another (or another group), there's a deadweight loss associated with that action. For instance, the government needs to pay the employees and pay for their equipment (etc) who do the actual redistribution. Moreover, since in some cases we may not even have the money there in gov't, we'd have to pay interest on the money that we give to to you (or a group). My point of view is that, although you "may" be able to argue you can take it away from a group that won't necessarily spend it immediately and give it to those who would... that $1 is no longer a $1.... it's now less because of the deadweight loss or interest costs. Moreover, that money would have otherwise been saved (or invested) by that one group (increasing capital available) for those people in the private market who would take loans to start new businesses, etc.

So, I disagree because 1) the money comes from someone else 2) if it doesn't, it's borrowed 3) there's either deadweight loss or interest payments for the government associated with stimulus 4) because of this the money is reduced by going through the government 5) taking money away from those who may be saving (or investing) is effectively taking it away from capital investment (a major tool that actually grows economies).

There's more, but I don't want to continue typing....

inlet13 wrote:

markin ball wrote:

inlet13 wrote:

What comes first the job or the income? I say the job, you say the money. That's why I originally said it's a chicken and the egg sort of thing. I understand your argument, and I think you understand mine... but, I don't think we'll come to a consensus.

Regardless, your approach to "put money in my pocket" has holes in it, especially right now (given the debt issue... but i won't even mention that). The reason it has holes in it is simple.. that money comes from tax payers pockets. When government takes money away from one (or a group) and redistributes it to another (or another group), there's a deadweight loss associated with that action. For instance, the government needs to pay the employees and pay for their equipment (etc) who do the actual redistribution. Moreover, since in some cases we may not even have the money there in gov't, we'd have to pay interest on the money that we give to to you (or a group). My point of view is that, although you "may" be able to argue you can take it away from a group that won't necessarily spend it immediately and give it to those who would... that $1 is no longer a $1.... it's now less because of the deadweight loss or interest costs. Moreover, that money would have otherwise been saved (or invested) by that one group (increasing capital available) for those people in the private market who would take loans to start new businesses, etc.

So, I disagree because 1) the money comes from someone else 2) if it doesn't, it's borrowed 3) there's either deadweight loss or interest payments for the government associated with stimulus 4) because of this the money is reduced by going through the government 5) taking money away from those who may be saving (or investing) is effectively taking it away from capital investment (a major tool that actually grows economies).

There's more, but I don't want to continue typing....

I think you understand what I'm saying but I am going to spell it out. I'm saying it is possible the FED can issue more dollars, sell it to the government with interest, just like always, and invest that money in the country (infrastructure, etc.) with hopes of seeing a return on that investment in the form or increased tax revenues, that exceeds the principle and interest of the original money created.

Okay, so...how is this any different from what the private sector does all the time? They get loans from banks in hopes their profits on their ventures will exceed their loans and the costs associated with them. I feel like in the bolded section you are saying money in the private sector is somehow different in that there is not interest or deadweight costs.

Also, my proof that money/the ability to pay/demand can and often does come before jobs and supply is simply the word "loans".

The private sector is different because:

1) The money the private sector obtains is from a private bank, who obtained funds from a depositor. Not the Fed, who just prints money (and can owe money to foreign countries).
2) Also, there's no redistribution (no deadweight loss) associated with the private sector investing in capital projects. They don't need to take from one group and redistribute it to another (then pay for this to take place via capital and labor) like the govt

There's more to it... but, regardless of what I say I don't think you'll agree.

inlet13 wrote:

markin ball wrote:

1. Commercial banks, much like the government, also obtain money via the loans from the FED. Then commercial banks issue loans many times exceeding their deposits (supplied by both the FED and other depositors) to the private sector. So commercial banks essentially "print money" by doing this (in fact the majority of money in circulation is born of this process).

When a commercial bank loan is put forth... new commercial bank money is created. However, when it's paid back, that money disappears from existence. As you know, those loans happen all the time. So, in these terms, the amount of money remains somewhat steady.

And this is not the case when the FED alters the money supply (which admittedly spills downwards through the monetary institutions). They can do so by influencing the discount rate, required reserve ratios and open market operations. In doing so, the can create lasting alterations to the money supply.

My point: There's a huge difference. Pretending that there is not, is in fact pretending.

inlet13 wrote:

markin ball wrote:

Ok. Agreed. However isn't all money created at a cost? A dollar is never a dollar whether it is loaned by the FED to the government or downstream banks. That dollar always comes with interest. So let's just say for the sake of argument that when loaned to the government, it is less efficient than when loaned to the private sector. Is it still not possible for the government to invest that money to still turn a profit in the end, just like the private sector would attempt?

Ok. For the sake of discussion, I'll agree to that constraint...

I'd say, no... because government is not in the profit business. There will never be a gauge of profitability of government because their revenues are dependent on the public and their spending fluctuates. I think a better way to get at what you're saying is to say that at certain times a government could spend and get more bang for their (or our) buck. So, in other words, get more out of each dollar spent. But, the truth is that's hard (if not impossible) to quantify.