Since I study economics, I get a lot of questions from random friends about all this **** despite having no idea what is going on. I study micro and know **** all about anything related to macroeconomics or finance. When I say **** all I mean **** all. I probably know more than the average guy on the street but I'd guess I'm in like the 20th percentile of regular posters in this thread on the subject, if that high.

Here are a few thoughts I've had lately that maybe people here can answer - I surely cannot.

Is the government running a ponzi scheme? I don't understand how it's possible to be running at a deficit every year. There was apparently a surplus for a bit when Clinton was in there, although I guess some don't believe that but it's the commonly held belief, but it's not like that really helped the debt situation. I vaguely remember reading something about paying it down later during a period of growth or in a boom period, but other than the Clinton period just discussed how does this work if even in huge periods of growth and record taxes coming in there are still huge deficits? Similarly, I have heard the expression "inflating away the debt" but it would seem like the inflation rate would have to be quite high to combat a large government deficit tacking onto the debt.

I guess the real question I'm asking is what, if anything at all, does the government's debt situation have in common with a guy that has a lot of credit card debt repeatedly opening up new cards to pay off old ones?

On a similar note, are there other countries that don't have a lot of a valuable resource (OPEC) or an exploding, in a good way, economy (China) that have no debt and consistently run on surpluses? What's the debt situation in Western Europe? I could just look up numbers here, so I guess I'm looking for a little more in terms of what differences there would be between such countries and others like the US that has a massive debt.

I believe that one or both of Australia and New Zealand run at no or little debt. This is based on a vague memory, not research, so make of it what you will.

Alberta also runs with no debt, but a lot of that is oil money.

Heh.

I have a close friend from Vancouver and when we talk about Canadian politics he bitches about Alberta because Albertans tend to be conservative and think they are a lot better off because of that when really they won the resource lottery. Sort of like Alaska in the US, though all the Alaskans I know went to school in Oregon and are liberal.

Alberta did pay off their debt in a down period for resources, with a very conservative premier. They also have the highest healthcare costs and worse service in Canada, which is a massive hint that nobody in Canada besides me seems to understand.

http://www.guardian.co.uk/environmen....ethicalliving

Meat rationing in the UK imo

same reason the govt is closed on christmas. It is not a violation of separation of church and state to close for a holiday, as long as the reason you are closing is that you could not operate in a successful manner if you stayed open .. ie lots of reps would nto be there

The government still finds a way to release certain reports on Christmas day

I've been thinking about this. We've been pretty objective with regard to Democratic/Republican fairness, and REALLY, REALLY BAD at being objective on whether this bailout is needed or not. All I've heard is "They have to do something or it's a big fat failure." Well, what if actually doing this is really the big fat failure? What if the people adamantly AGAINST the bailout are right? That's where the media has fallen short. The arguments against the bailout have not been put forth in an ojective manner nearly as much as the arguments for it, or rather the fear of doing nothing. That bothers me.

I'm not sure if it's a case of media members not doing their jobs intentionally, or if we've come to a point where we simply don't know how to do our jobs right at all. Unintentional, terrible journalism. What a mess.

Why would that be? Money is simply a commodity just like other commodities. The only difference is that the main value of a money comes from the fact that it can be exchanged.

If I know that my house will be worth twice what it is now in one year I can sell it then. I see no problem with this. I give up my chance to own something other than my house now for a hopefully better deal next year.

It is not just a barter item. Go back to why the market picked that commodity as the money of choice. It needs to be originally usefull for something else besides exchanging it or otherwise the money will never become used in the first place.

The people that are against hoarding need to explain to me why exactly. Also, is hoarding in general bad or is there a certain amount you are allowed to hoard?
If there is, how did you arrive at that amount?
Maybe it is limited to certain commodities only? If so what commodities and how did you arrive at those?

It is a serious issue, but essentially the inflation answer is the right one. In the uk we paid lip service to the idea of being debt neutral over the cycle, but then took out a massive loan in the good times and drank it all. You keep increasing the money supply, and the relative importance of yesterday's debt shrinks. Also, the trade deficit is a big point. A lot of the funding is coming from china and the far east. Fortunately, the $ is going to get ****ed, and that will screw the asians over good and proper.

Australia, iirc, could have run debt free, but ended up issuing some bonds simply to provide an underlying government bond market to allow the corporate bond market to operate more freely.

But if the supply of money (aka gold) is (relatively) fixed, or grows at a rate slower than the rate of growth in other commodities/population/productive capacity, it inevitably becomes more valueable, right, because it is more scarce?

In a deflationary environment, in which prices are falling, there is an incentive to not spend on apples today, because you can buy more apples with your gold tomorrow. If this becomes too prevalent a phenomenon, then economic activity actually slows, because consumers are holding off buying stuff, and the economy shrinks in real terms. Moreover, because the nominal interest rate has a floor at 0%, in a deflationary environment the real rate often ends up being too punitive (4% deflation + 0% nominal rate => 4% real rate) and this, too prevents economic activity, the so-called liquidity trap.

This is deflation 101; amp's article attempted to argue that this is not the case under a gold standard, but it was not clear to me it provided any real reason why. Perhaps the article was right, atm i see no reason why.

Moreover, you never answered my question about where the government gets its extra gold from? Does it nationalize the gold mines? Does it have to run at a profit and buy gold to back increases in money?

Of course my argument is that no government is needed. Goldmining is a business activity like any other which ties in with the fact that gold is a commodity.

Even if we assume the existance of a government for arguments sake, government should not control the money. Maybe I didn't get that point across. The banks will all be private institutions, the minting of coin is privatized. The government is not involved in the slightest.

Ah yes, bad memories of university come back looming. Since you seem to subscribe to this model can I assume you are using a Keynesian/Hicks framework when analyzing economic problems?
So basically his argument is:
"To induce new investment the rate of return over cost must exceed the rate of interest."
Or basically rate of profit (RP) must be > interest rate (IR) for investment to happen. Then when investment happens, investment opportunities are reduced and the RP falls and approaches the IR.

Even more simplified:
When investment rises, profit falls, and when investment falls, profit rises is the basic assumption of this model.
Which is exactly what I do not agree with.

You're going to have to expand on the statement, because as it stands, it's unilluminating at best.

(2) is not a simplified version of (1), or even a fundamental assumption underlying it. It's possibly a corollary of it, but it doesn't actually pertain to my argument at all.

Do you think that people will invest their resources in situations in which they expect to make a loss? Do you think that they won't invest them in the opportunity they judge to be the most profitable (or to give them the most utility, i guess).

Perhaps mentioning the liquidity trap was a mistake. All my argument about interest rates requires is that people invest where they expect to make the greatest (risk and utliity adjusted) return. Thus if they can hold gold that is increasing at a rate equal to the rate of falling prices, rather than invest it in situations where they expect to make less than that, they will. I would have thought that would appeal to the praexologist in you.

The idea that the relation between profits and investment is negative is one of the cornerstones of the Keynes/Hicks model. That is why the IS curve in the IS/LM model is sloping downwards.

I can agree with this. I will hold on to my money now because I rank the possibility of future investment it provides to me now higher than any item I could buy with it now.
And I will let go of the money if the ranking (assuming for simplicities sace that those are my only two entries in my value scale) is reversed.
The problem is that while yes 1 unit of (for example) meat may be "cheaper" in the future if I hold on to my money having meat now may be worth more than having meat later. The economy is not static.

I'm having trouble determining the advantage to a gold backed money system.

Does the argument for it revolve around the fact that:

a) It's not (inherently) Government controlled, so allows for a free market
b) Because of a, it is difficult or impossible to manipulate the value

Is that the gist of it?

let's forget high falutin models for now. All i'm interested in is opportunity cost.

If the rate of deflation is 4% (=expected return on gold) why would i invest at an expected real return of 3%?

its so your money doesn't get inflated away

the gold standard puts a check on inflation

(I don't believe fiat money is inherently bad btw, but going back to the gold standard would certainly be better than what we have now)

inflation has been called a hidden tax. If inflation is %20 and you have 100 dollars in the bank, in one year even you still have $100, its actually only worth $80 now because of what it gets you.

Under the current system they just keep pumping money into the economy and inflating the value of the money away- and this is whats happening now and is the underlying cause of all the problems facing the economy.

The United States used to be on the gold standard but was taken off of it in 1974.

*edit- not really the underlying cause but close enough

I should also note that it definitely works to screw the poor > the rich for all sorts of reasons. Its a flat tax- the rich are able to diversify and invest, wages aren't keeping up, etc

Zurvan, you are about right. The main reasons why I favour a gold standard is that it allows competition on the money market and provides better checks and balances against fraud (i.e. someone just doubling the amount of money).

I read in the paper today that fake 50 euro bills are circulating and it kind of made me wonder. Under a fiat currency system, what is the reasoning for allowing certain institutions to print money while others (like the private "entrepreneurs" circulating the 50s) are commiting a crime. Especially since the very core of fiat currency is the fact that the newly printed money does not have to be backed (or only fractionally with the fractions being lowered whenever it is convenient).

Clowntable

I'm curious to know if anybody has seen this before and what people's thoughts are on it.

Basically the flowchart attempts to track money from the highest levels of power towards left-media outlets. I can't speak too much for its veracity but I do know that the Ford Foundation funds Pacifica/Democracy Now

*I suppose some people there might see George Soros and think "wait, Soros hates the establishment"

My major problem with that diagram is

1) The shadowy CIA, Skull & Bones and various other stuff at the top, with no further data, whereas the big green ones and related funding all has data (like $$ amounts) associated
2) The implication that the media should be able to do what they want and ignore people paying their salaries. If you accept funding from an outside group - instead of working on a profit model - your agenda is your money source's agenda. If you work on a profit model, then your agenda is "producing the best possible content".

So, the conspiracy overtones of that drive me bonkers because it's more paranoia than fact. And the naivete expressed in the theory behind the diagram is silly as well.

I don't think thats being implied at all. I don't think any value judgments are being made about what the media should be doing.

Then why the quote at the top? That completely sets the tone for the flowchart.

well, I think the word "phony" actually is what sets the tone- the quote I think is only supposed to provide support for the theory that the left media is in fact phony

I had a sociology professor who used to call NPR "national petroleum radio" and I used to think he was crazy.

What does phony mean?

That privately funded media has an agenda? That opinion based media (and everything I've heard on NPR is opinion based) has an agenda? That's the heart of opinion based media.

Phony- a fraud, fake, intended to deceive

Here is what the makers of the chart (and me too) are saying:

A lot of people understand that the MSM (mainstream media) is corporate controlled and that they don't give you the complete story on a lot of issues (take the Russia/Georgia issue or the bailout as recent examples)

So they seek out non-corporate controlled sources of news only to find that these too are ultimately corporate controlled.

Assuming this is true, what would the point of that be?

(don't answer, its a rhetorical question)