Seeking Alpha
View as an RSS Feed

Neil_Anderson  

View Neil_Anderson's Comments BY TICKER:
Latest  |  Highest rated
  • Is A Fiscal Deficit Really 'Austerity'? [View article]
    To David de Los Angeles

    << ... if the deficit is falling, that is the opposite of what Dr. Keynes proposed, and thus "austerity". You are quite correct that that is not what Dr. Keynes proposed. He argued for increased *spending* and the opposite of that, decreased government spending, is indeed a deficit. >>

    I'd like to point up a small error:
    Lord Keynes did not advise deficit spending to cure a lingering recession.
    Lord Keynes did propose deficit spending to cure the Great Depression.

    Furthermore, Lord Keynes proposed deficit spending for Britain's economy in the 1930s, whose political structure allowed quicker economic action to be taken than our American political system, which is slow, due to building consensus, due to negotiation and compromise.

    Every economist ought to agree that a small amount of quick action is more effective than a large amount of slow action. So, it's arguable that Keynes' policy prescription for the Britain in the 1930s might be quite different than what he might advocate for the US in the 1930s.

    Furthermore, Keynes never knew what caused the Great Depression.

    Had Keynes known the cause of the Great Depression (which was the Federal Reserves' inappropriate focus on Moral Hazard, explained below), then it seems quite possible his policy prescriptions in the 1930s might have been quite different.

    The Fed caused the Great Depression by failing to be the Lender of Last Resort, and failing to expand the money supply. The Great Depression would probably have been a mere recession, had the errors been corrected early on ... the emphasis being on quick action.

    The Fed made these errors because they were (short-sightedly) focused on Moral Hazard, the idea that if a bank took excessive risks and went bankrupt, it would be "wrong" to bail them out. The short-sighted Fed was blind to "collateral damage": when one sick bank fails, it brings down healthy banks, because depositors panic.

    Moral Hazard is something that we always need to be concerned about and address, but not when the economy is plummeting. Moral Hazard can only be addressed before problems start.

    The point of all this is that it seems wrong to assert that Lord Keynes said anything about what we should do in 2015, since he died in 1946, and never knew the cause of the Great Depression, which started as a mere recession.

    My guess is that Lord Keynes would have advocated QE, instead of deficit spending, and then advocated deficit spending if QE were proved to be not enough.

    It is important to note that Lord Keynes always advocated paying off the deficit, as soon as the economy recovered. We've never really followed that bit of advice from Lord Keynes, and no one really thinks about why he advocated being so conservative after deficit spending.

    My guess is that he didn't want his beloved country to end up in the position the US is in today, wherein our political system is hamstrung (i.e., slow to reach consensus) by fear that the Debt is dangerously high: and that's because the Debt has been growing faster than GDP almost every year since 1946, which is when Keynes died.

    One of my other guesses is that Keynes surely suspected another war was likely because the economic conditions (esp in Germany) following WWI prompted Lord Keynes to write the book (which made him famous) that correctly predicted the rise of a demogoge in Germany. Keynes must have known WWI was funded by Debt, and one could argue that the ability to "borrow more" was a decisive advantage. Thankfully, today we don't have such rising threats as Hitler was from the mid-1930s through WWII.

    No sir, all we have to worry about today is ISIS, Kim Jung Il, Putin and our growing entitlements.
    May 19, 2015. 01:38 PM | 1 Like Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    Lawrence,

    << ... a legal fiction is a LOGICAL device for implementing a substantive rule by incorporation. It has nothing to do with the transactional reality of what it purports to be. >>

    I cannot complain about something that I like.
    I like your definition.

    Point, Game, Match, Set, Kramer.
    C'est la vie & devaju allover again
    May 18, 2015. 07:53 PM | Likes Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    To Lawrence J. Kramer

    YourExample: << [A FRN is] a legal fiction because it is unenforceable. >>

    MyCounter: "Oral contracts arent enforceable, but they arent legal fictions."

    Your reply << Of course [oral contracts] are enforceable. They may be difficult to prove ... >>

    Larry,

    Yes, if an oral contract is not disputed, then it's surely "enforceable" ...
    but who "enforces" an undisputed contract, whether written or oral?
    No one, because no one **needs to** enforce anything undisputed.

    Conclusions:
    1.) If an oral contract is NOT disputed, then yes it's enforceable.
    2.) If an oral contract is disputed, then no it's NOT enforceable.

    Summary:
    An undisputed oral contract NEED NOT be enforced (being undisputed)
    but a disputed oral contract CAN NOT be enforced (being he said/she said)

    Super-summary:
    Oral contracts are either not enforceable, or need no enforcement.
    Sorry for the confusion.
    My fault.
    May 18, 2015. 07:42 PM | Likes Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    To Lawrence J. Kramer

    I'll settle for labeling FRNs as accounting liabilities, as you advise,
    and leave the legal definitions to lawyers, as you also advise.

    I think we've been riding the same horse, together, a bit more than necessary. Let's find a fresh horse.
    May 18, 2015. 04:58 PM | Likes Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    To Lawrence J. Kramer

    << Ordinarily, when the Fed swaps money for a bond with a significant interest rate, inflation can occur. If MMT held that the asset swap argument applied to every cash-for-bond swap, there would never be any constraint on the creation of money, when in fact, MMT says that inflation is the only such constraint. As I have been trying to tell you, you only think you understand MMT. >>

    You are right, I was wrong about the asset swap being an MMT explanation for the lack of inflation from QE.

    This quote from Bill Mitchell from the past is probably what tripped me up, as it sounded so much like Cullen Roche.

    From Bill Mitchell:
    Invoking the “evil-sounding” printing money terminology to describe this practice is thus very misleading – and probably deliberately so. All transactions between the Government sector (Treasury and Central Bank) and the non-government sector involve the creation and destruction of net financial assets denominated in the currency of issue. Typically, when the Government buys something from the Non-government sector they just credit a bank account somewhere – that is, numbers denoting the size of the transaction appear electronically in the banking system.

    It is inappropriate to call this process – “printing money”. Commentators who use this nomenclature do so because they know it sounds bad! The orthodox (neo-liberal) economics approach uses the “printing money” term as equivalent to “inflationary expansion”. If they understood how the modern monetary system actually worked they would never be so crass.

    PS --
    Bill rambles on to correctly explain the lack of inflation in the same manner that I have been doing.

    Thank you very much for correcting me. I appreciate it.
    May 18, 2015. 04:51 PM | Likes Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    Lawrence,

    Yes, oral contracts are enforceable ... but not if your opponent is willing to lie to a court. And if you reread my post, you will see that reality is properly stated.
    May 18, 2015. 04:35 PM | Likes Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    To Lawrence

    << The Fed's balance sheet tells us how much money it has created. To do that, it has to put the FRNs SOMEWHERE. So it puts them under "liabilities." But that does not make them liabilities in any other sense. The accountants understand the notion of a legal fiction. >>

    The FRNs have to be placed somewhere? Yes, you're right about that, but FRNs cannot be placed under assets, because they are liabilities. And they cannot be placed under equity, because they are liablities.

    Just because these liabilities do not have a maturity date, does not mean they are not liabilities.

    Just because these liabilities could render the Fed insolvent under the 'mark to market' rule, and the Fed's insolvency is does not result in an immediate Fed shut-down, does not mean they are not liabilities.

    Commercial banks could be allowed to continue to run when they are insolvent. THere was great debate about relaxing the 'mark to market' rule in 2008-9, but the rules were held firm.

    I thought that was the right thing to do. There's good reason to have such a rule. Why should we have any such rule in good times, if they are relaxed in bad times?

    Do you want to call the "mark to market" rule a legal fiction for commercial banks as well?
    May 18, 2015. 12:20 PM | Likes Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    Lawrence,

    << Yes, and that rule is IMPLEMENTED through the legal fiction that the thief holds it in trust, because the law of trusts grafts that requirement onto the relationship between the thief and the property. >>

    Seems like it's working as intended without anyone needing to "wink" to remind the judge that "this is JUST a legal fiction"

    The owner does deserve his property returned without damage.

    If the grafting of language works very well, how can you call it a fiction?
    Just because you don't believe there's a "legal trust involunteerily entered into by a theft of property" doesn't mean there isn't one.

    What should we call it, if not that?
    May 18, 2015. 12:00 PM | Likes Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    Lawrence,

    << "Same can be said for other more typical buinsesses."
    But didn't you just say that a Fed isn't like a typical business? >>

    You misunderstood the point. My fault.
    May 18, 2015. 11:52 AM | Likes Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    To Lawrence J. Kramer

    << Neil said "After all, it was simply a lie, under oath, which is perjury,
    whether anyone was fooled or not." -- No, it's not a crime without an intent to deceive. >>

    If there was no intention to deceive, then there are 3 non-perjurious possible answers:

    1. Yes, your Honor, there is a bond -- or
    2. No, your Honor, there's no bond -- or
    3. Well, your Honor, I really don't know if there is a bond, or not.

    If a parent answers with #2, when the parent knows the correct answer is #1 or #3, well then I'd say that that parent is committing perjury.

    Obviously, if the parent was deceiving themselves, then there's no perjury but they do need psychiatric help.
    May 18, 2015. 11:50 AM | Likes Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    To Salmo trutta

    << "No one has ever tried to control velocity ... it is impossible to control it"
    How so? If you know what causes it, you can control it. In fact, even if you couldn't directly control it, you could indirectly control it. >>

    Please provide any example that proves me wrong.
    I'll admit that I'm blind to any such example; guessing would waste tiime
    May 18, 2015. 11:23 AM | 1 Like Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    To LAwrence J Kramer

    << All I can say for the FRNs is that treating them as liabilities on the balance sheet allows the balance sheet to, well, balance. But no one is fooled, so there is no hoax. >>

    If the FRNs were not reported on the balance sheet, how would we know if our "outside" money were 100% backed by the Fed, or partially unbacked? Seems to me that's the whole point of reporting FRNs.

    To some of us, that's important.
    To you, not so much.
    Se la vive.
    May 18, 2015. 07:15 AM | 1 Like Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    Lawrence,

    << If the Fed were a business, it could debit "bonds held" and credit "profit on unenforceable paper issued." But no one is reading the Fed's balance sheet to see how much money it has made by hoodwinking us yokels into thinking its notes actually create a liability in any but the arbitrary accounting sense. >>

    Yet the Fed reports unrealized gains on the bond portfolio in a separate schedule, every week. And yet the Fed does not report the exact maturity structure of the bond portfolio, just large tranches such as Maturing in 1 to 5 years. Probably because of the sensitive nature of that info.
    May 18, 2015. 07:08 AM | 1 Like Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    To Lawrence J. Kramer

    << If I steal something from you ... >>

    It's only logical that you be required to return it to me in the same condition in which you stole it. Just fair and logical.
    May 18, 2015. 07:04 AM | 1 Like Like |Link to Comment
  • Would A Sovereign Money System Be Flexible Enough? [View article]
    To Lawrence J. Kramer

    << ... because the Fed sure as hell isn't really liable to any cause of action with respect to it. >>

    Just because the Fed is incapable of fixing it's insolvency, does not relieve its duty of trying to avoid insolvency. Same can be said for other more typical buinsesses.

    An insolvent company, forced or volunteered to liquidate itself, can not satisfy all liabilities. Unpaid creditors just have to suck it up.
    May 18, 2015. 07:00 AM | 1 Like Like |Link to Comment
COMMENTS STATS
2,235 Comments
1,574 Likes