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On October 14 2014 23:17 WhiteDog wrote:
So yeah, search for the philosopher stone, I'll stand behind the idea that there are limit to our growth on this earth.
I fully agree. I don't think we will stick around on only this earth as time passes though. Long term you have to take things like orbital elevators, micro gravity production and asteroid/earth core resources into account.
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On October 14 2014 21:45 Rassy wrote:
In my opinion Germany is doing fine and the zero deficit is a fine target.
Think everyone agrees that it is impossible to run a growing deficit forever (well it is perfectly possible as it is just accounting that has nothing to do with making the pie but I wont go into that rabbithole now) so at one point we have to have a zero deficit or a surplus.
When would be a good time to do so? Well basicly never...people will always find good reasons for spending more money then comes in.
There was this idea of stimulus when economy contracts and then pushing the brakes when the economy acceleraters,but all we do is stimulus and run deficits, we almost never push the brakes and run a surplus. This has been going on for decades now,it is the norm.
The simple characterization of Keynesian economics is that of "deficits during busts, surplus during booms." However, even that isn't the complete story. If you believe private markets are better than public (until proven otherwise), then a government budget surplus is bad at all times. Like deflation, there really isn't a good reason it should occur in a healthy government and economy.
Funding government always removes resources from the economy. Whether it's through bonds or taxes, it creates a drag on private sector growth. By running a surplus, the government is excessively taking resources out of the economy. Instead, the surplus should be used to shore up the shortcomings of the private sector, usually in areas of infrastructure, education, health care, defense, etc. If all those things are relatively "well off," then tax cuts are a good alternative. In the end, the forfeiture of the surplus should accelerate growth and erode the debt faster, even if it becomes a deficit.
+ Show Spoiler [**note**] +
This assumes modern economies that have access to floating currencies not pegged to anything and have influence on monetary policy.
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This thread is a good illustration of the failures that are causing the current problems in Europe. There are plenty of little problems that are fixable in the here and now. But people are too fixated on distilling the past 6000 years of human civilization into one neat, tidy, little theory that they can apply to the next 6000 years and onwards.
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On October 15 2014 00:43 aksfjh wrote:
Funding government always removes resources from the economy. Whether it's through bonds or taxes, it creates a drag on private sector growth. By running a surplus, the government is excessively taking resources out of the economy.
If the government is not actually burying the money that makes no sense. In fact the governments actually never safe money so the rate at which they're spending it is at least equal or bigger compared to the private sector. The criticism of public vs. private spending usually resolves around the questions whether you should tax more "than you need" or whether public institutions are more prone to corruption. But you are definitely not "taking money out of the economy".
For all it matters you could have one omniscient being managing all the transactions in an economy, that wouldn't mean money would vanish. So in that sense tax cuts can never stimulate growth, because you never have more or less money in the economy because it doesn't matter who spends it.
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On October 15 2014 02:33 Nyxisto wrote:Show nested quote +On October 15 2014 00:43 aksfjh wrote:
Funding government always removes resources from the economy. Whether it's through bonds or taxes, it creates a drag on private sector growth. By running a surplus, the government is excessively taking resources out of the economy.
If the government is not actually burying the money that makes no sense. In fact the governments actually never safe money so the rate at which they're spending it is at least equal or bigger compared to the private sector. The criticism of public vs. private spending usually resolves around the questions whether you should tax more "than you need" or whether public institutions are more prone to corruption. But you are definitely not "taking money out of the economy". For all it matters you could have one omniscient being managing all the transactions in an economy, that wouldn't mean money would vanish. So in that sense tax cuts can never stimulate growth, because you never have more or less money in the economy because it doesn't matter who spends it.
He is in effect saying that public investment create a crowding effect. I don't agree with this idea but nobody can really discard it because many people believe it does and from an empirical standpoint it seems to (altho the crowding effect is low, most likely inferior to the multiplicator).
Meanwhile that tax cut at the right time can favor investment considering that prior to the cut, there is an atmosphere that discourage investment - the effective demand, which is the aggregation of the anticipations on the state of the future demand, is low, and thus firm don't invest. It's basic keynesianism.
You're point about money is almost metaphysic to me.
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On October 15 2014 02:53 WhiteDog wrote:Show nested quote +On October 15 2014 02:33 Nyxisto wrote:On October 15 2014 00:43 aksfjh wrote:
Funding government always removes resources from the economy. Whether it's through bonds or taxes, it creates a drag on private sector growth. By running a surplus, the government is excessively taking resources out of the economy.
If the government is not actually burying the money that makes no sense. In fact the governments actually never safe money so the rate at which they're spending it is at least equal or bigger compared to the private sector. The criticism of public vs. private spending usually resolves around the questions whether you should tax more "than you need" or whether public institutions are more prone to corruption. But you are definitely not "taking money out of the economy". For all it matters you could have one omniscient being managing all the transactions in an economy, that wouldn't mean money would vanish. So in that sense tax cuts can never stimulate growth, because you never have more or less money in the economy because it doesn't matter who spends it. He is in effect saying that public investment create a crowding effect. I don't agree with this idea but nobody can really discard it because many people believe it does and from an empirical standpoint it seems to (altho the crowding effect is low, most likely inferior to the multiplicator). Meanwhile that tax cut at the right time can favor investment considering that prior to the cut, there is an atmosphere that discourage investment - the effective demand, which is the aggregation of the anticipations on the state of the future demand, is low, and thus firm don't invest. It's basic keynesianism. You're point about money is almost metaphysic to me.
Exactly. I think we're a LONG way away from any significant "crowding out" effects, but I also think that public investment needs a generous increase. That would mean a surplus is ultimately bad as well in this environment, since government is neglecting to increase needed public investment and is instead contributing "inefficiently" to the savings pool. I cannot think of a situation in which government running a surplus is the best option, or even a good option.
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On October 15 2014 03:27 aksfjh wrote:Show nested quote +On October 15 2014 02:53 WhiteDog wrote:On October 15 2014 02:33 Nyxisto wrote:On October 15 2014 00:43 aksfjh wrote:
Funding government always removes resources from the economy. Whether it's through bonds or taxes, it creates a drag on private sector growth. By running a surplus, the government is excessively taking resources out of the economy.
If the government is not actually burying the money that makes no sense. In fact the governments actually never safe money so the rate at which they're spending it is at least equal or bigger compared to the private sector. The criticism of public vs. private spending usually resolves around the questions whether you should tax more "than you need" or whether public institutions are more prone to corruption. But you are definitely not "taking money out of the economy". For all it matters you could have one omniscient being managing all the transactions in an economy, that wouldn't mean money would vanish. So in that sense tax cuts can never stimulate growth, because you never have more or less money in the economy because it doesn't matter who spends it. He is in effect saying that public investment create a crowding effect. I don't agree with this idea but nobody can really discard it because many people believe it does and from an empirical standpoint it seems to (altho the crowding effect is low, most likely inferior to the multiplicator). Meanwhile that tax cut at the right time can favor investment considering that prior to the cut, there is an atmosphere that discourage investment - the effective demand, which is the aggregation of the anticipations on the state of the future demand, is low, and thus firm don't invest. It's basic keynesianism. You're point about money is almost metaphysic to me. Exactly. I think we're a LONG way away from any significant "crowding out" effects, but I also think that public investment needs a generous increase. That would mean a surplus is ultimately bad as well in this environment, since government is neglecting to increase needed public investment and is instead contributing "inefficiently" to the savings pool. I cannot think of a situation in which government running a surplus is the best option, or even a good option.
A government paying off debt is running a surplus. If they can no longer get loans at decent interest rates due to no trust then they can verify no trust by defaulting or start paying off debt.
I personally advocate the default in that case. Which means you no longer can take loans at all and have to run a small surplus/print money to pay for stuff.
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On October 15 2014 04:15 Yurie wrote:Show nested quote +On October 15 2014 03:27 aksfjh wrote:On October 15 2014 02:53 WhiteDog wrote:On October 15 2014 02:33 Nyxisto wrote:On October 15 2014 00:43 aksfjh wrote:
Funding government always removes resources from the economy. Whether it's through bonds or taxes, it creates a drag on private sector growth. By running a surplus, the government is excessively taking resources out of the economy.
If the government is not actually burying the money that makes no sense. In fact the governments actually never safe money so the rate at which they're spending it is at least equal or bigger compared to the private sector. The criticism of public vs. private spending usually resolves around the questions whether you should tax more "than you need" or whether public institutions are more prone to corruption. But you are definitely not "taking money out of the economy". For all it matters you could have one omniscient being managing all the transactions in an economy, that wouldn't mean money would vanish. So in that sense tax cuts can never stimulate growth, because you never have more or less money in the economy because it doesn't matter who spends it. He is in effect saying that public investment create a crowding effect. I don't agree with this idea but nobody can really discard it because many people believe it does and from an empirical standpoint it seems to (altho the crowding effect is low, most likely inferior to the multiplicator). Meanwhile that tax cut at the right time can favor investment considering that prior to the cut, there is an atmosphere that discourage investment - the effective demand, which is the aggregation of the anticipations on the state of the future demand, is low, and thus firm don't invest. It's basic keynesianism. You're point about money is almost metaphysic to me. Exactly. I think we're a LONG way away from any significant "crowding out" effects, but I also think that public investment needs a generous increase. That would mean a surplus is ultimately bad as well in this environment, since government is neglecting to increase needed public investment and is instead contributing "inefficiently" to the savings pool. I cannot think of a situation in which government running a surplus is the best option, or even a good option. A government paying off debt is running a surplus. If they can no longer get loans at decent interest rates due to no trust then they can verify no trust by defaulting or start paying off debt. I personally advocate the default in that case. Which means you no longer can take loans at all and have to run a small surplus/print money to pay for stuff.
This is theory but in reality there is so much money that the debt level is not threatening for investor who have nothing better to do with their money.
Na the only reason to have a surplus is to prevent an inflation level at an anormous level (above 10 % I'd say).
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Cayman Islands24199 Posts
crowding out is not really the mechanism but govt outlay will create dependency and private tissue that cator specifically to capturing govt contracts. their efficiency can be questionable due to govt buyer not really being impartial, sort of a dependency-monopoly.
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So Greece is burning and Spain looks to be joining them.
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On October 15 2014 10:19 oneofthem wrote:
crowding out is not really the mechanism but govt outlay will create dependency and private tissue that cator specifically to capturing govt contracts. their efficiency can be questionable due to govt buyer not really being impartial, sort of a dependency-monopoly.
Dependency exist without the state, that's called society.
This crusade against monopoly is not wrong tho : better to make public than to give a state monopoly.
Not only Greece and Spain : all financial markets are going down, with the DAX losing 6% in the last few days, the CAC 40 at his lowest since the end of the crisis, etc. It's because bankers were making money out of an easy monetary policy, but now that it is obvious that the monetary policy is not enough, considering the stupidity of our budgetary policy (and the euro), they are betting on a crisis of the euro zone.
Germany itself is going down, exporting more than china with 82 million people, until the demand crisis is starting to be obvious - but the german illusion is still going strong considering how some people respond in this thread.
What's sad is that we now have to wait for the financial market, the irrational exuberance, to react to our situations.
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Stock markets tend to overrespond in the short term though. The forex market is probably a better indicator for economic expectations.
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On October 16 2014 06:20 RvB wrote:
Stock markets tend to overrespond in the short term though. The forex market is probably a better indicator for economic expectations.
No they don't overrespond, they just don't follow the "laws of economics", mythified existence nowhere to be found in reality. But when the overall indicator, in europe, are in the red, with Germany in a recession, and most of the south with more than 10 % unemployment, there is a moment where the financial markets will react and bet on a crisis, because there is money to be found in there too.
You can still watch somewhere else to continue believing in your german/european/ordo liberal dream if you want tho.
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Greek rate at +8%
Selloff on financial markets.
Panic.
Apearently the markets are slightly disappointed with the outcome of the latest ecb meeting.
Would expect draghi to do something,if not now then the next month at the latest but he has to wait for the germans. (and other northern countrys)
Or would they let it all collapse already? Seems a bit early to me.
Should be a great moment to buy,if not now then tomorrow at 4 pm cet.
Or would there be crash on Monday? scary but you have to take some risks to make some money.
edit:aqr this weekend,wonder if there will be any suprises.
Personally I think it will be a disappointment,the recent selloff might be a prelude to this.
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German Public Debt in percentage of GDP:
![[image loading]](http://upload.wikimedia.org/wikipedia/de/thumb/9/96/Staatsschuldenquote_in_DE.pdf/page1-800px-Staatsschuldenquote_in_DE.pdf.jpg)
The rate of increase from 1990 until 2010 was clearly unsustainable, there simply is no sane alternative to stopping the increase in debt, considering Germany's aging population makes another century of large economic growth highly unlikely.
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On October 24 2014 18:24 Maenander wrote:German Public Debt in percentage of GDP: The rate of increase from 1990 until 2010 was clearly unsustainable, there simply is no sane alternative to stopping the increase in debt, considering Germany's aging population makes another century of high economic growth highly unlikely.
There are plenty of sane alternative : inflation, growth. It's true that Germany's intern growth will be "unlikely" in the next years, but that's not the case for europe - if only germany didn't kill any potential growth by forcing others to reduce their deficit at the worst time. The problem of germany is that it cannot play collective, and by playing personnal it is killing europe. By the way, the "unsustainable" increase in debt since 1990 is perfectly normal : it is the cost of the reunification, a cost that the rest of europe paid in part, through their increasing demand (especially France, none of Schröder's reform would be possible without a growing France and an increasing demand in France at the same time, it's the different in inflation that matter, not the decreasing labor cost alone).
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EPT
