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Seven Deadly Innocent Frauds of Economic Policy

1. The government must raise funds through taxation or borrowing in order to spend. In other words, government spending is limited by its ability to tax or borrow.
2. With government deficits, we are leaving our debt burden to our children.
3. Government budget deficits take away savings.
4. Social Security is broken.
5. The trade deficit is an unsustainable imbalance that takes away jobs and output.
6. We need savings to provide the funds for investment.
7. It’s a bad thing that higher deficits today mean higher taxes tomorrow.

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Let's start by looking at what happens if you pay your taxes by writing a check. When the US government gets your check, and it's depositied and "clears," all the government does is change the number in your checking account "downward" as they subtract the amount of your check from your bank balance. Does the governemnt actually get anything real to give to someone else? No, it's not like there's a gold coin to spend. You can actaully see this happen with online banking - watch the balance in your bank account on your computer screen. Suppose the balance in your account is $5,000 and you write a check to the government for $2,000. When that check clears (gets processed), what happens? The 5 turns into a 3 and your new balance is now down to $3,000. All before your very eyes! The government didn't actually "get" anything to give to someone else.

...

Can you see now why it makes no sense at all to think that the government has to get money by taxing in order to get money to spend? In no case does it actually "get" anything that it subsequently "uses."

So that's why the government doesn't need my taxes, or to borrow money... all they need to do is change numbers in their accounts, and they can spend indefinitely. Holy CRAP! This guy is fucking funny as hell! He should be on the stand-up comedy tour bus! So all I need to do to be a millionaire is change a couple numbers in my bank account! Fuck yeah! It's so damn simple, why didn't I think of that!



I couldn't bring myself to read the rest of the article without peeing my pants. His argument is just one step removed from trading a child two pennies for one quarter, and telling the child they have twice as much now. Sadly, however, this is why the price of precious metals is through the roof and our currency is being devalued to the brink of a currency collapse, because the government is doing just that... creating more money by just changing numbers in their account instead of raising actually money, which isn't very funny at all.

I don't mean to be disrespectful, I'm not laughing at you... I'm laughing at him. I've never seen anyone try to spell it all out like as if it makes sense, totally ignoring the fact that "intangible" doesn't mean "not real". Those "numbers" they are changing in the bank accounts actually represent a "REAL" asset, despite his claim they don't.

Edited by Gatinho (04/10/11 07:55 PM)

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dollars and US Treasury debt (securities) are nothing more than "accounts," which are nothing more than numbers that the government makes on its own books... We remove those dollars from their savings account at the Fed and add them to their checking account at the Fed, and wait for them to say what, if anything, they might want to do next.

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The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy.

It's lunacy... which is why you posted it here, in the Looney Bin, where it belongs.

As I previously stated "Sadly, however, this is why the price of precious metals is through the roof and our currency is being devalued to the brink of a currency collapse, because the government is doing just that... creating more money by just changing numbers in their account instead of raising actually money, which isn't very funny at all."



Why do you think that paper doesn't even get to it's substance until page 9? Because, just like a work of fiction first must help the reader "suspend disbelief" in order to accept the story, so to does this fairy tale spend most of the first eight pages on testimonials and praise trying to help you suspend disbelief and accept this fantasy as reality.

(Edit: ok, I'm being overly harsh here. Don't mean to be mean. But it is just that kind of thinking that pervades Washington right now... which is spiraling up our debt and printing more money devaluing our currency.)



Edited by Gatinho (04/11/11 01:36 AM)

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Standard & Poor's Ratings Service sent shock waves through economic and political circles Monday when it lowered its outlook for U.S. debt from "stable" to "negative." Though it kept U.S. credit ratings steady, the agency warned that political deadlock could compel it to downgrade Washington's rating in just a couple years.

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President Obama Faces Heavy Lift in Downplaying U.S. Credit Warning.

The S&P announcement was in large part a political judgment -- the ratings agency based its assessment on the sentiment that a budget agreement addressing the country's long-term deficit and debt problem might not be reached until after the 2012 election. The Obama administration claims the atmosphere for consensus is better than S&P predicts.

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President Obama unveiled a proposal last week to cut $4 trillion from the deficits over 12 years by enacting a mix of spending cuts and tax increases.

Yet just TODAY Obama gave a "waiver" to ALL seniors in the medicare advantage programs from being forced to participate in the landmark healthcare bill (which was eneacted specifically to address the cost of senior's medicare costs!).

Why did he do that? Why, in one waiver, would he undo his entire single biggest political voctory in one fell swoop? Because it was pointed out that Obamacare is harder on seniors than is the Republican "Ryan Proposal". Seniors are a huge voting block. Political expediency prevailed.

So now... EVERY significant cost cutting measure of Obamacare is GONE! Seniors keep what they got now (which was supposed to be unsustainable), and the doctor 30% reimbursement rate cuts got "fixed" over a year ago... leaving the health care bill savings COMPLETELY UNDONE by the very party that passed it in the first place, preserving only its costly new bureaucracies.

Republicans don't have to repeal the health care bill, the dems are slowly undoing it themselves.

With one hand they offer cuts and taxes, and with the other hand they undo what cuts they enact. The net result is just more taxes and bureaucracy... things get worse not better.

That is S&P's point. We're still trying to fix the spiraling cost of healthcare that the trillion dollar historic health care bill supposedly fixed!

There IS no real US POLITICAL WILL to actually FIX the deficit problem; the politicians are more worried about their re-elections than fixing the problem, and they just keep making it WORSE.


Edited by Gatinho (04/20/11 08:43 PM)