The government can never run out of money.

Then you weren't paying attention to the last three posts I made and failed previously to address what I said. By the way infrastructure spending is at an all time low as a budget percentage for exactly the same reason that military spending is. Welfare state expenditures are cannibalizing them.

 

As I said the tax cut achieved was one Kennedy had been trying to get done almost the entire last year of his presidency. Kennedy. Your own article says it was Kennedy's idea not Johnson's.

 

Yes, and the world leaders know this. They keep it from you, because those that are in power are a cult of satan. For you to know there is a God, would completely destroy their empires, for everyone would live completely different, knowing the creator is watching and judging. While it may seem ludacris and conspiracy, at least think about it. The Bible even tells us that a deception so great would occur, that if it were possible even the very elect would be deceived.

If the earth is indeed flat, like I think it is, (admittedly I cannot prove it), would this not be such a great deception as the Bible talks about? If you think those that are in power are of good will, than an unimaginable evil is about to reveal itself to you. For they are purposely destroying the current system of all countries, to bring about a one world king.

For those that have eyes, can see this. But those without the Holy Spirit will be deceived, God even says He will make sure of it. So if you cannot see this happening, perhaps you should seek our Father.

 

Sorry, you don't get to change what you said. What you said is a matter of record:

Now proved to be wrong, along with many of your other statements.

 

A lot of people are doing that. Hence all the gold and silver ads in mass media. But that would require a home vault, and home vaults are very attractive targets.

Cases of cigarettes, whisky, and ammunition might be a slightly better bet. Then again maybe the Fed has finally discovered a way to "Beat Inflation Now!" - and forever.

 

The idea of a large collection of single malt and Cuban cigars does rather appeal to me.

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Ahhh, so that currency is in fact tied back to the "wealth". So simply printing money doesn't create wealth.

Now you are on the right track.

 

Government deficit spending is spending past tax receipts. It leads to new net financial assets in the domestic private sector when bank accounts are credited.
A surplus is when a government taxes more then it spends.

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Money is the engine of wealth creation, not wealth itself.

 

That's just stating a conclusion. What I asked is how that happens. How does a deficit "lead to new financial assets" in the sense of the money supply being expanded.

When the government borrows money, money is transferred from one entity (the lender or purchaser of Govt debt) and it is then spent by the Government. It is a wash transfer, no new money is created, nor is the money supply expanded.

The exceptions are if the lender/purchaser is a bank (for its own holdings, not acting as a broker), which would expand deposits just as any bank loan does. Or if the lender/purchaser is the Fed (through its intermediaries), in which case new base money is being created and the money supply expanded. But that is the bank's or Fed's action doing it, not the Govt running a deficit.

Yeah, I knew that.

 

You should read this:
http://neweconomicperspectives.org/2010/11/yes-deficit-spending-adds-to-private.html

 

wealth redistribution does create wealth.

 

Treasury plans to spend $100 and anticipates tax payments in the amount of $90. If it did not sell bonds to coordinate its fiscal operations, the private sector would end up with a $10 net addition to its financial holdings. On this point, there appears to be general agreement.

I don't generally agree. If the Govt has tax receipts of $90, it cannot spend $100 and there can be no $10 net addition to the private sector. The Govt does not maintain (significant) reserves of cash to do this.

In stage 2, the Treasury sells $10 of debt to BoA, and BoA pays for these bonds by crediting the Treasury’s TT&L account.

This example assumes that BOA is making a loan (i.e. purchasing the debt) of the US Govt. As I pointed out in my post above, any time a bank makes a loan, it results in an expansion of deposits, whether that loan is to a private individual or the US Govt.

But while banks may act as intermediaries or brokers for US Govt debt transactions, banks end up holding only a small fraction of US Govt debt. In the vast bulk of cases, the ultimate lender/purchaser is not a bank, but a private individual, entity or government, and the bank is only acting as an intermediary or broker.

In the case of your example, if the bank were acting as a broker, BOA would not hold the bond, but it would transfer the bond to the individual (or corporation or government) buyer, in which case BOA would receive cash (base money or the electronic equivalent at the FRB) and the individual's deposit account would decrease, eliminating the temporary increase in overall deposits caused by BOA's initial purchase of the US Govt debt.

In such a case, you do not have an expansion of deposits (and thus, the money supply) like you do when a bank is doing the lending.

 

paying the debts of the several United States requires money.

 

The fact you recognize currency is in fact tied back to "wealth" means something.

Now you are on the right track!

 

After all these years you still don't understand. If the banks buy them, which they do. The private sector is left $10 net. I know you're still clinging to the whole the banks are just brokers, but that was proven wrong to you many times.

Your lack of understanding in banking is why you are so flawed with your arguments. The government does not need tax dollars nor do they need the non-banking private sector to make up any deficit in spending. And banks do in fact create money from thin air, lol.

 

You think?

Chart Showing Owners of US Treasury Debt

http://dustydean.com/notes/chart-showing-owners-of-us-treasury-debt/

So explain to us, if the banks are buying and holding all the US Govt debt (because they are not brokers), how can it be that only 4% (or less) of US Govt debt outstanding is held by banks?

Hmmmmmm...

 

Like MMT says, the only way we can fund the government is if they fund us first. The only way we can purchase debt is if we have the money to purchase the debt first. Which is why understanding banking/primary dealers is necessary to understanding the whole argument as to why the US can spend whatever amount of money they want without any problems or worries of paying it back.

 

Deficits (and by extension, the debt) are irrelevant. They are neither good nor bad in themselves. This is the one fact you have to remember when you see a propaganda exercise like this:

[video=youtube;vnZkXf_viLM]https://www.youtube.com/watch?v=vnZkXf_viLM[/video]

Why is the debt irrelevant? It is, in real terms, strictly an artifact - it does not actually measure any real quantity.

Let us review how the money system works, in real terms (i.e., actual monetary operations).
1) The government collects taxes. This money does not go into any "account." It is simply annihilated, or extinguished. If you pay taxes with physical currency, it is literally burned by the Fed. The purpose of taxation is NOT to collect revenue which will be later spent.
2) The government creates in money it requires through the act of spending. It is literally created "ex nihilo," out of nothing. It is created by a keystroke, crediting an account owned by an individual or corporation. All money is created ex nihilo.
3) The government does not "need" to borrow money to spend in excess of revenue. Taxing and spending are functionally unrelated. We have legal/institutional arrangements that require us to create debt instruments offsetting spending in excess of revenue. This is a holdover from obsolete theories of money, and are not operationally necessary.
4) The government creates some money from spending, but the vast majority of money is created in the private sector by commercial banks and also through the shadow banking system. This money, like all money, is created ex nihilo (out of nothing).
5) A government with debt denominated in a sovereign currency can never be forced to default on its debts. It may choose to do so, but this is always a political, not an economic, choice.
6) Government creation of money does not create inflation, unless the total money supply grows much faster than actual real world growth in goods and services. If economic conditions (recession or depression) cause the money supply to contract, then logically the government needs to create money (by spending) much faster than normal, in order to offset this.
The printing press runs both directions. Money is created and destroyed. Over the past decade, the presses have been running in reverse. This is why we now experience persistent disinflation, teetering on deflation.
7) Government creation of money is a fiscal function, not a monetary function. When the Fed engages in QE, it is primarily altering the maturity of debt instruments. The net effect on money supply is marginal. Monetarism is the wrong tool for managing the money supply, like using a hammer to turn a screw.

The bottom line is that the focus on the "debt" is at best misguided, usually by people with good intentions and honest concerns. At worst, it is a propaganda exercise deliberately intended to mislead people, as in the Peterson ad above.

 

That's the secondary market. Not who purchases it from the Treasury. And banks holdings were depleted because the FR. We've been through this before, lol. The fact 47% of the bonds are held by Foreign govts and the FR should tell you something.

 

And yet, as I proved in the post above, banks/primary dealers who buy all this US Govt debt (but are not brokers, according to you) are only holding 4% of the outstanding US Govt debt.

I'm waiting on your explanation of how this could possibly be. Just like the last time I showed you this evidence and you dodged it.

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Wait a minute. You claimed that the banks/primary dealers who buy all the debt are not brokers. So how come they are only holding 4%? What happened to the other 96% they bought if they are not acting as brokers? How does it get into the "secondary market" lol.

 

Because the FR took them off the books. Where have you been the last 8 years, lol. Ever hear of QE?

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Because the FR bought them off them to get them off their books. This has been explained to you many times.

 

LOL, the FR took what "off the books"? The 96% of the US Govt debt that the banks/primary dealers who are not brokers bought but do not hold? Are you claiming the FR holds 96% of the outstanding US Govt debt? If you are, take another look at the chart above and you may want to reconsider your answer.

 

The US dollar is the world's currency and will remain so, there is no alternative. If and when it ever ceases to be the reserve currency, we will have plenty of notice.

 

The problem with that perspective is that there is more debt than there are dollars (Federal Reserve Bank notes). The government Treasury is promising to pay dollars that it does not have, that it will have to collect in future taxation. And the debt is greater than the dollars used to purchase that debt in the first place, because of compounding interest over the years.

So in one sense, the Treasury can "create" money by simply promising to pay in the future. So you see, the public can and does fund the government without being first "funded" by the government.