gph1

Here's one: http://www.kickstarter.com/projects/2123355930/minsky-reform...

I'd be delighted to revise or update my views in light of any evidence you could provide.

Could you lay out the casual mechanism that this study is claiming, and how they make the distinction between govt consumption and investment?

I'd also like to see an empirical example of the crowding out thesis. The idea that public deficits bid up borrowing rates and reduce private sector borrowing opportunities has been pretty thoroughly debunked.

I'm not. The private sector generates wealth. One purpose of the government is to facilitate that wealth creation by running deficits to ensure there is sufficient demand for what our productive output supplies (due to growing capacity, income leakages from savings and trade deficits, distributional inequalities, etc)

Increasing the money supply is not in and of itself inflationary, nor does it logically imply a depreciating exchange rate. This is true no matter how many times Austrians and confused monetarists say so.

The idea that the US is running out of money or spending money it doesn't have is a non sequitor. The USG is monetary sovereign that issues it's own currency, and therefore has infinite ability to spend in dollars. Really, it's not even accurate to say the government "has" or "doesn't have" any money. We have an institutional arrangement whereby we cover all spending in excess of taxation by debt issuance, but that is just that--an particular institutional arrangement. The constraint is only inflation--is the USG spending in excess of what the economy's productive capacity can absorb? All available evidence suggests no.

Not to say that waste, corruption, poor capital allocation, etc aren't all legitimate problems. But that's not the question at hand.

This is just fetishism.

All currencies are fiat currencies, and all currencies are creatures of the state. If a currency is set at a fixed exchange rate to a precious metal, it's because a "statist fiat" made it so.

The problem with EZ countries is precisely that you can't "take them together" because there is no centralized fiscal agent. You need this because there has to be fiscal transfers between weaker and stronger nations or else face growing imbalance of payments, and with the right catalyst, financial crisis. That's why the U.S. works as a monetary union.

People focusing on the excel error and rebuttals such as this one are missing the point. The R/R argument fails because the causal inference itself is bunk. There are few plausible reasons to believe that higher public debt --> slower growth, but many reasons to suggest that slower growth --> higher dGDP. Public debts are private sector financial assets, and they are the result of deficits that represent a net flow of income from the government to households. The risk there--excessive inflation--is almost the opposite of the one suggested by R/R.

However, if the economy stalls and GDP growth slows, that leads to lower tax revenues and higher transfer payments (unemployment, etc), which will contribute directly to the deficit.

The level of confusion one sees in most any discussion of government debt/deficits is really mindblowing sometimes.

Please explain how monetary policy is "stealing money". Absurd tin foil hat caricatures like this often makes any reasonable discussion of the Fed and its role impossible.

Agreed re: Greece. Greece's bonds don't have the credibility because they aren't denominated in a currency that Greece controls.

There's no reasonable analogy between the US running a deficit and anyone's credit card. Again, like the commenter at the top of the thread, public and private finance are two different things. The US has infinite spending power. The constraint is not "affordability" but inflation. That's it. A "financially sound" budget for the US is one that maximizes employment with the minimal amount of inflation. It has nothing to do with deficits or surpluses.

You need to look at the federal budget as part of a closed loop of spending and income flows with the private, public and foreign sectors. Just like every country can't run a trade surplus, the public private and foreign sectors can't all run a surplus or a deficit. It has to net out. If the private sector runs a surplus (spends less than it earns) of 4% GDP and we have a current account deficit of 4% GDP, the gov't deficit will be 8%. It's just accounting.

No doubt there is plenty of wasteful and inefficient government spending. But I don't think the opportunity trade off works like you suggest.

It's not as if the government is removing otherwise productive dollars out of the economy to fund its deficits. Treasuries are generally purchased with excess reserves from the primary dealer banks that would otherwise just sit there. Or foreign governments, corporations, institutional buyers looking to stash their cash holdings where they will accrue risk free interest.

We can quibble about multipliers, but deficits represent a net income flow into the private sector and hence have an expansionary effect on demand (even if, unfortunately, those dollars are flowing into the pockets of crony defense contractors and what not).

The primary dealer banks will always be a ready funding agent for the US government--why wouldn't they be? Treasuries offer a risk free place for excess reserves to earn interest. It's literally free money.

It's instructive to remember that we match our deficit spending with debt issuance by legal fiat and not for any real operational reason. We could just as well deficit spend freely with no debt issuance (and no, it would not be more inflationary.

Of course, treasuries are a risk free savings vehicle for the private sector and world at large, and they play an important role in managing the payments system (though not one that couldn't be replace), so I'm not suggesting that we stop issuing debt. But it's important to understand how the system works so we can stop with the silly notion that we are just scraping by on the good graces of Treasury buyers.

No doubt that Austrian's avoided some of the neoclassical blind spots that caused many economists to miss the crisis, but then again Austrian's are always predicting crises and they certainly offer no crystal ball--see Peter Schiff's hilarious prediction of soaring inflation every year since 2009.

Schiff's misfire is especially relevant to this discussion, because it demonstrates the Austrian school's grossly flawed understanding of public finance and our monetary system (despite having valuable things to say at times).

If you look, you'll notice that a recession followed nearly every reported government budget surplus.

This is not surprising: a surplus means that the government is removing more money from the economy than it's adding, something which is rarely warranted absent a large current account surplus and/or an economy operating at full capacity.

You need to understand the sector financial balances.

You must have an interesting definition of "improve".

Debt is a symptom, not the problem. The problem is a currency union with no central fiscal agent that can assume liabilities and enable transfers from wealthier to poorer states. That's how the US works. The euro crisis has been baked in from the beginning.

Which is why it's inaccurate to generalize this problem to "western states". The US is not comparable to any EZ country. We have our own currency and have been able to run large deficits to counteract the demand shortfall caused by the financial crisis and allow the prvt sector to repair balance sheets. This is why the recovery in the US has been much better than the UK or the EZ.

Saying that all philosophical topics are just embryonic scientific topics is just as reductive and rigid as dividing the two by "how" and "what".

Philosophy of mind is probably the dominant research area in contemporary philosophy, and I think you'd find a lot that doesn't overlap at all with empirical psychology.

It wasn't at all clear that that is what he was asking you. And you need to qualify the sense in which you "don't believe" in qualia. You don't believe that consciousness has phenomenal properties? Qualia certainly exist in some sense.

From what it sounds like, you are just dismissing compelling philosophical issues because it frustrates your beliefs.

I think sub-cortical (limbic) and cortical are probably better analogues for system 1 and 2 than empathetic/analytic (intutive system 1 thought isn't necesarily empathetic, and can certainly be 'analytic'. The difference vs. system 2 is the presence of reflective consciousness.)

Interesting but don't really see how this addresses the explanatory gap problem.

Yes, the Federal Reserve creates the electronic credits that it uses to purchase the bonds. But this is not "money printing" in any meaningful economic sense because it its just swapping one government liability for another one. There is no functional difference from the govt's persepctive between a reserve deposit and a treasury bond other than the term structure and the fact that the treasury bonds pay interest.

In fact, you could argue that QE ultimately reduces private sector income because it eliminates this interest income.

QE is not inflationary. Not only is it not money printing, but money printing =! inflation. This has been demonstrated over and over again.

Moreover, your hyperinflation concerns amount mostly to conspiracy theory. Hyperinflation occurs generally after very specific and exogenous shocks, such as a collapse in productivity or huge amounts of debt denominated in a foreign currency.

Demand-driven inflation occurs when the supply of money in the system outstrips the economys productive capacity to absorb it. Given that we are in a situation of huge slack capacity utilization and 8% unemployment, demand side inflation ranks just about last on the list of pressing economic concerns.

You are correct that the fiscal reality of a sovereign currency issuer is not like that of a businesses or households. If you carried this thought furthur, you'd realize why some of your concerns are unfounded.

A government that controls its own currency and does not keep any exchange peg is not revenue constrained. The only real constraint on gov't spending is inflation (that we match our deficit spending $ for $ with bond issuance is mostly an institutional legacy from the gold standard/ fixed exchange rate era, as well as performing certain key functions in stabilizing our payments system).

I challenge you to identify a point in history when we had to raise taxes in order to pay off retiring debt. Debt is paid by shuffling numbers in a xls at the Federal reserve. That's probably the best way to look at government spending in general--as ex nihilo. Spending creates money, and taxation destroys it. So think of taxation not as raising money per se but as the government draining enough aggregate demand from the system so as to enable it to spend sufficiently to achieve its goals without causing undue inflation.

Moreover, there is nothing a priori good about a balanced budget or a surplus. A surplus means the government is draining more income from the private sector than its adding in. In general, because household savings and a current account deficit represent a leakage of demand/income, the US should and does run a deficit most years (otherwise there wouldn't be enough available income in the system to purchase our output every year). Right now especially, with depressed household consumption due to the debt overhang and massive excess productive capactiy, the government should be running huge deficits in order to support private sector incomes.

Not surprising to see a libertarian-oriented site refer to QE as "money printing". It's not. Monetary policy doesn't increase the net financial assets available in an economy; that's only achieved by fiscal deficit spending. QE is just an asset swap (reserves for tsy's)--it's shifting the yield curve, but not adding anything new.

None of the issues you are describing in this comment address stagnant middle class income/consumption, which is a demand side problem not a supply side issue. Certainly there is need for more efficient regulatory and tax schemes for businesses, but really it has little to do with what's currently responsible for our economic situation.