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  • Finding Religion On 'Crowding Out' [View article]
    To Cullen Roche

    << No, all the crisis did was expose some realities for what they were: the money multiplier is wrong, government deficits don't drive up interest rates, Central Bank "money printing" doesn't cause high inflation, government deficits don't necessarily "crowd out" private investment. These realities aren't necessarily unique to this environment or some theory about "liquidity traps." >>

    I'm not sure which multiplier you're talking about, but the rest of it sounds like the smartest thing I've heard from anyone in a long time.

    Please forgive me in advance if I soon plagiarize you.
    Apr 24, 2015. 04:49 PM | Likes Like |Link to Comment
  • What Will The New Tesla Product Be And How Much Will It Cost? Here's My Best Guess [View article]
    To WhosSideUon

    oh, uh, um, never mind, i think i figured it out.
    Apr 24, 2015. 11:11 AM | Likes Like |Link to Comment
  • What Will The New Tesla Product Be And How Much Will It Cost? Here's My Best Guess [View article]
    To WhosSideRUon

    << They sell you power, not panels. You only pay for the electricity generated by the panels. If [they] do not produce, you don't pay. >>

    The lease summary seemly indicates that "declining production" is expected during the 20 year lease.

    I estimate that SCTY expects the 20th year to have roughly 12% less production than the 1st year; my estimate is based on a simple "straight-line" degradation assumption:

    First year production 6,000 kWh
    Total 20 years production 114,000 kWh

    So, if production is declining (at roughly 0.6%/year), and the lease payment is escalating (at 2.9%/year), I don't see how your statement can be true, unless it is explicitly stated somewhere in the lease terms.

    I hope that it is true. Please set me staight.
    Apr 24, 2015. 10:43 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Lawrence J. Kramer

    << You know what keeps the Fiddler on the Roof? TRADITION. Not calculation. Over time, the people find out what they need to find out. They observe that taxes do not wander all over the place but bear some relation to the price of milk at the grocery store. Rules of thumb emerge. Explicit information is over-rated. >>

    (Yawn) ... ah, you're just rehashing your previous (debunked) idea, spiced up with an artsy-fartsy Broadway musical reference.

    My response could've included some words on the "wisdom of the crowds" or "the value of perfect information" (see wikipedia for a simple example) and some more economics, but you haven't developed any one of the 3 into any kind of defense for your position.

    Seems like you're not quite the "fiddler on the roof".
    Just doing this out of habit, with no real heart in the matter.

    I'll pass. (Yawn.)
    Apr 24, 2015. 01:44 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Lawrence J Kramer

    You're saying taxpayers will hoard as minimumly as possible, presuming that they have some basis to 'calculate' the tax required to reduce the money supply. Thus minimizing the theoretical damage to the economy.

    I'm arguing they have no such knowledge, they will have to save as much as possilble to avoid an unknowable tax that would ruin them if they are not careful. Uncertainty raises the amount each rational person would want to save, and maximises the damage to the economy.

    You could argue that someone will surely be in a position to announce the right number. And I'd stipulate that that number develops over time, which ruins taxpayers' tax planning.

    A central bank resolves all these issues by isssuing backed money, a simple elegant solution.
    Apr 23, 2015. 02:22 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Lawrence

    << And you are denying the readership the benefit of that argument ... >>

    I think you and I are alone here.
    No one much cares about this extremely minor issue.
    And I can crush the argument.
    Apr 23, 2015. 12:36 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Lawrence J. Kramer

    I was about to commend you on a "good save" until I got to here"

    << But I think it reasonable to believe that they would hoard only as much as they expect will be necessary to fund the taxes, and, unless the taxes were actually passed, they would stop hoarding. >>

    The average man doesn't have access to the reams of data he would need to calculate the excessiveness of the money supply, and even if he have access to the data, he wouldn't have time to analyze it, and even if he did have enough time to analyze it, he wouldn't know how to analyze it.

    THe economy is "built" on the specialization of labor. As well as that stuff you've blogged about like relative advantage and absolute advantage.

    Now you're willing to put that asunder? Wow, you are really committed to relaxing every constraint imposed by reality to maintain a silly position, and a silly theory (MMT). Your perseverance in the face of seemingly insurmountable odds is commendable.

    More horsefeathers is your prize.
    Apr 23, 2015. 12:31 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    Lawrence J. Kramer

    PS - let me ask again:

    Larry, if taxes destroy dollars, and Uncle Sam creates dollars, does anyone keep an accounting of what is destroyed, and what is created? After all, if more dollars are created than are destroyed, then the Fed's liabilities would grow, but the Fed's assets would not grow, which means that Fed's equity capital would be reduced, which means that the Fed would soon become insolvent. So, does anyone keep an accounting of what's destroyed, and what's created, to ensure what is destroyed equals what is created, so that the Fed's not rendered insolvent?

    I think it's mportant to ask, since you recently said this:
    << Neither I nor Abytec have any interest in an economy in which the money cannot, by the nature of the currency, be issued by a central bank. >>
    Apr 23, 2015. 12:04 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Lawrence J Kramer

    NRA said: "It's impossible to know a year in advance whether an increase or decrease in the money supply would be required during the ensuing tax year, so anyone would have to estimate the required reduction to be $-0-."

    << As I said, that [above] is the most idiotic position you hold. [The Fed] knows very well that it will need to decrease the money supply relative to where it would be with zero taxes, which, as I said, is the only baseline that makes sense. Moreover, not being able to know and not being able to estimate are different things. >>

    There you go again, railing against a perfectly logical argument, calling it idiotic.

    So, you're claiming that "if there were no taxes" then there'd be a surge in demand, turning a (presumed) excess of money into inflation. And a lower money supply would then be needed. Not bad for a beginner.

    But you can't "just wish away" taxes ... and you ought to know that because I've seen you cite "Ricardian Equivlance" more than once. Economists (starting with Ricardo, the authority you often cite), have noticed that taxpayers tend to horde cash when they see deficit spending, which is what you call "zero taxes".

    So, you're taking quite a few liberties with basic economics to avoid agreeing that excess money isn't taxed out of circulation, as you have long claimed.

    (BTW, you missed an obvious argument in your favor.)

    Now you've argued yourself into corner, whose only escape is to pretend that good estimates can be 'calculated' (in some vague way) from your self-serving, wongheaded conjecture that flies in the face of basic economics. I commend you on your imagination.

    Horsefeathers is your prize.
    Apr 22, 2015. 11:54 PM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Asbytec

    << Cuz it's inflationary. >>

    (I don't think that's the actual problem with ballooning the Debt to the Moon, but the real issue is Cheney's specious conclsuion. So let's assume you're right and I'm wrong for the moment)

    If it's inflationary, then the Debt does matter.
    If the Debt does matter, then deficits matter.
    If defiits matter, then Cheny was wrong about what was proven by Reagan.

    No such "proof" is part of Reagan's legacy.
    Apr 22, 2015. 08:04 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Lawrence J. Kramer

    For the moment, let's presume MMT is true and correct.

    You have long said that the purpose of taxation is to reduce the money supply, or purchasing power, inflation, etc.. And that the government simply destroys all the money received (tax revenue) because the government can print and spend dollars on whatever it needs. And that explains why you have long said that the government neither has any money, nor does not have any money.

    << Our political system determines how much [tax revenue] will APPROXIMATELY be needed, and that's close enough for government work. >>

    It's impossible to know a year in advance whether an increase or decrease in the money supply would be required during the ensuing tax year, so anyone would have to estimate the required reduction to be $-0-.

    One cannot even include an "average reduction" in the tax code as that would raise the tax burden needlessly and slow the economy in most years, while it doesn't accomplish enough reduction in other years, and there is a better solution.

    No sir, the idea that the existing tax code could ever be used (to reduce an excessive money supply) is a dead idea.

    As I said before, if reductions are required during the tax year, then they must either be (1.) communicated as an separate tax, and would be a nuisance at best, and an unexpected burden at worst. (And taxpayers cannot plan their taxes (thus resulting in delinquencies in "burdensome" tax years) and would be inadvertently coerced to horde cash, and not spend it, thus needlessly slowing the economy.) Or (2.) borrowed out of circulation.

    Given that Uncle Sam borrows more money (virtually) every year, it is obvious that any excess money supply must have been "borrowed out" of circulation, not "taxed out" because the easy&obvious solution is simply to wait&see how much needs to be reduced, and then "borrow it out".

    Furthermore, it is clear to me that if Uncle Sam can't raise enough to fund his budget, then he's certainly has no need to destroy all the "tax revenue" he does raise. He surely spends it all, rather than destroy it.

    Yet, when I ask you a simple question about your "claim", you are strangely silent:
    << ... my claim that taxation destroys money applies to the USD >>

    Larry, if taxes destroy dollars, and Uncle Sam creates dollars, does anyone keep an accounting of what is destroyed, and what is created? After all, if more dollars are created than are destroyed, then the Fed's liabilities would grow, but the Fed's assets would not grow, which means that Fed's equity capital would be reduced, which means that the Fed would soon become insolvent. So, does anyone keep an accounting of what's destroyed, and what's created, to ensure what is destroyed equals what is created, so that the Fed's not rendered insolvent?


    << "Think about how often the Fed decides to make a U-turn and contract a little and then, make another U-turn and expand a little." -- You cannot make a minor adjustment into a U-turn by, well fiat. It's unbacked. And idiotic. >>

    Idiotic?

    When the Fed changes course from buying to selling, that qualifies as a U-turn. U-turns indicate a mistake has been recognized. Most such mistakes are small and insignificant. But occasionally, they are neither.

    Unbacked?

    The central bank has assets to sell to retrieve money from circulation. That's why dollars are said to be "backed". I'm using the word "backed" and "unbacked" as they are commonly used in published articles. I've said that before, and you have yet to show I used either word incorrectly.

    You know dollars are backed by bonds, so, when you call the dollar "unbacked", you imply a better "backing" exists, presumably which would make the dollar "invulnerable to inflation". But no such "better backing" exists.

    The Real Bills Doctrine was a once popular belief that "good assets" would guarantee the value of money backed by said "good assets", making that money "invulnerable" to inflation. But the Real Bills Doctrine has long been proven invalid. Money is vulnerable to inflation no matter "backs" it.

    The dollar is "backed", and saying otherwise means you don't know what you're talking about.
    << Like "unbacked," "emergencies" is your word. But if there is an emergency, it is an emergency that manifests as too little or too much spending, so the tax code is tweaked to remove more or less money from the economy to encourage or suppress spending. >>

    Emergencies?

    The Fed typically increases the money supply in emergencies like Y2k, terrorist attacks, demand shocks, supply shocks, recessions, and Christmas shopping. I guess you were focused on heavy shopping, rather than something truly emergent.

    Yet, later on, the Fed must reduce the money supply, presumably via taxation, as you have consistently insisted. Hmmm ...


    << "Emergency" and "To remove money" are not mutually exclusive categories, so the presence of one does not negate the presence of the other. Double-duh. >>

    Hmmm ... yeah, Christmas shopping is certainly not an emergency. I'll try to remember that. Good call.


    << I'm not flummoxed by backing. I just view it as an obsolete technology, a vestigial organ whose presence does not interest me unless other evidence of scarcity and spendability are also absent, as is not the case with modern money in a robust economy. >>

    "Backing" is obsolete because it has been replaced by what? Something "better" makes "backing" obsolete?

    If you say "scarcity" makes "backing" obsolete, then I would remind you that "unbacked" money causes hardship in the economy when the excess is removed, whether by taxation or borrowing, and causes hardship when the excess is not removed. And each hardship is eliminated or minimized by "backed" money.

    << CERTAIN kinds of backing get in the way of adequate monetary expansion. >>
    Please be specific which kinds you are referring to.

    << But I regard such backing as just another rule limiting the creation of money, with no special standing different from, say, a law forbidding the creation of more than $X per year. >>

    "Backing" does not limit the creation of money. There will always be assets in the world not owned by a central bank.

    << Backing is a better rule than an arbitrary limit, but not as good a rule as the ones in place today - fiat money with a central bank. >>

    That's too vague to respond to. What "[rules] in place today - fiat money with a central bank" are you referring to? All money created by any central bank is "backed".

    << But since I care only about spendability, I don't care about some binary concept like "backing." >>

    And I suppose "spendability" is "purchasing power", which is money that holds its value. And by binary, I suppose you mean "backed" or "unbacked".

    So, Larry, you're in good company: Like you, absolutely no one cares about money being backed or unbacked when it's a good store of value. Only when money loses it's purchasing power, does anyone start to care.

    Backed money is better than unbacked money because backed money can be retrieved from circulation without undue harm to the economy.

    << Neither I nor Abytec have any interest in an economy in which the money cannot, by the nature of the currency, be issued by a central bank. >>
    Then you do not understand MMT, nor economics.
    Apr 22, 2015. 08:02 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Asbytec

    << I was trying to bolster the claim that with appropriate tax policy, inflation can be held at bay. >>

    Fiscal (tax) policy gooses demand. Demand gooses inflation "if and only if" the money supply is excessive, or if money's velocity increases. It's solely monetary policy that can hold inflation at bay, unless you intend to crash the economy on purpose via bad fiscal policies, and thus kill aggregate demand.

    If deficits don't matter, then the Debt don't matter,
    and if the Debt don't matter, then why bother taxing any of us at all? Why not just balloon the Debt to the Moon?

    Obviously, at some point a large Debt can become dangerous because it can hamstring the economy, in fact a high-Debt might pose no problem at all in one year, yet the same level of Debt could create huge problems the following year, if the economy goes into a recession, or worse.


    Apr 21, 2015. 05:45 PM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Asbytec

    << "Reagan proved that deficits don't matter." - Cheney >>

    Come on, are you calling Cheney an authority on what has or has not been proven? If Reagan proved anything, it weren't that.
    Apr 21, 2015. 12:36 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Lawrence J. Kramer

    << As reflected in the term premium in the interest rates. Duh. The point, of course, is that the Fed's scope of action is limited and so it cannot suppress spending any more than its scope of action permits. Being you, you found something to disagree with, relevance be damned. Bravo. >>

    This is how you admit you've mis-communicated? First, you agree with me, then retort me with "Duh" and "relevance be damned" and "Bravo"?

    Hmm ... I apologize for failing to realize that you misspoke.

    << The point, of course, is that the Fed's scope of action is limited and so it cannot suppress spending any more than its scope of action permits. >>

    Of course, I think you meant this: "The point, of course, is that the Fed's scope of action is limited and so it cannot suppress spending any more than it needs to."

    Now, finally, the bigger picture is .... Taxes?

    No sir, there are no taxes being collected to reduce the money supply. The only taxes being collected are those that were defined about a year in advance, and no one can know how much to reduce the money supply a year in advance.

    You can opine that taxes "are levied to remove purchasing power" but your opinion cannot standup to simple common sense and a pinch of logic: the Treasury spends more than it taxes, it does not remove purchasing power at all, it simply usurps it from the taxpayers.

    Your reputation is married to MMT. You've invested a lot of time in explaining and defending it. You've got yourself comfortable with an idea whose time came and went centuries before the enlightenment, the renaissance or Modernity were even ideas.

    << Many people argue over whether money issued by the Fed for Treasury bonds is "backed." Yet here you are assuming that there is no central bank in the picture if the currency is "unbacked." >>

    Yes, Larry, I'm well aware because I'm one of them.
    Let me run thru it to prove a point:

    A bond is nothing more than a promise to deliver dollars in the future. If you took $1000 cash to the Fed and demanded "the backing", all you could conceivably get is a bond, which is nothing more than the promise of dollars in the future. So, your position in dollars is pretty much unchanged.

    Most people are appalled that they cannot exit their dollar position, and obtain something with "intrinsic" value, like gold or silver. We know these precious metals have intrinsic value ... but how do we know that?

    Well, the markets tell us that gold and silver have stable values. And yet the markets also tell us that the promise to deliver dollars in the future also has stable value. In fact, there is no other authority that can tell us what is valuable and what is not.

    If the value of the dollar drops due to inflation, then the value of the promise to deliver dollars in the future also drops in value. If the dollar gets inflated, so do any bonds denominated in dollars. So, bonds don't give "the dollar" any intrinsic value.

    The only thing of value that bonds can give to "the dollar" is scarcity, because bonds allow the excess money to be retrieved from circulation easily, quickly, with minimum prejudice, and without repercussions that damage the economy.

    << Remember, all this prattle about an "unbacked" currency is yours. >>
    Yes, it's certainly prattle to uneducated ears, or ears that do not find my voice to be credible. May be I should give up.

    << Neither I nor Abytec have any interest in an economy in which the money cannot, by the nature of the currency, be issued by a central bank. >>
    Good call. Now all you have to do is connect the dots, and think it through.

    The edifice on which MMT is based is a facade, built by unwitting economists who work under the direction of a non-economist, who happens to have money to throw around. Most of us don't recognize it as a facade because we've been "away from" unbacked money for hundreds of years.

    Admittedly, my point is subtle, but it is an implicit assumption that has wide ranging implications that damn MMT.

    << To be as clear as possible, my claim that taxation destroys money applies to the USD, whether or not the USD is "backed." >>
    That's a bit vague. Yes, if you burn a dollar bill it is certainly destroyed, whether it is backed or not, no doubt about it, no argument there. But if taxes destroy dollars, and the Sovereign creates dollars by spending them into circulation, does anyone need to keep an accounting of what is destroyed, and what is created? And if the amount destroyed must equal the amount created, then so what?

    << The whole matter of backing is something that seems to matter to you, apparently, because unbacked currency cannot be managed by a central bank. >>
    Good. You're catching on.

    << That's not the currency the rest of us are discussing. >>
    Actually, you just haven't realized you're wrong about that. I doubt neither W.Mosler nor R.Wray will ever realize it.

    << " ... due to randomly timed taxes in random amounts that must be paid immediately to reduce the money supply ... " -- This is probably the most idiotic of your positions. >>

    Idiotic? Aw, come on. Keep an open mind. Think about how often the Fed decides to make a U-turn and contract a little and then, make another U-turn and expand a little. How often does the Fed realize it's gotta to move boldly to fight inflation because it failed to "read the tea leaves" accurately?

    << ... we have had some ad hoc tax tweaks - payroll tax holidays, tax surcharges, rebates, etc., too. And we amend the IRC to increase and decrease taxes when there is sufficient popular support for the idea. Taxes were lowered in 1981 and raised again in 1982 and 1984. >>

    And all that supports my contention that you cannot tweak the existing tax structure to remove money from circulation, because the tax code is already being tweaked for "emergencies". Constantly tweaking the tax code to reduce the money supply is not a good idea, as it puts a nuisance on the taxpayers in the best case, or a burden in the worst case, and certainly isn't immediate. Taxes are averaged over the entire year, and monetary adjustments need to be immediate.

    Existing taxes are writ into law about year in advance, giving all taxpayers plenty of time to plan their tax positions. But no one can plan increases or decreases to the money supply a year in advance, in fact, it is done sometimes in advance, and sometimes in arrears. Surprises happen, and mistakes need to be corrected. Just ask any Fed Chairman.

    So, your reliance on existing taxes is what you should call "idiotic", although that is a rather harsher condemnation than I would prescribe. I'd just call it wrongheaded.

    << A knife and a fork are not "alternatives" >>
    Excellent, you're progressing. Robert Mundell was the first economist to realize that:
    1.) Monetary Policy could be very good at killing inflation, but not much good at stimulating the economy, whereas
    2.) Fiscal Policy could be very good at stimulating the economy, but not much good at killing inflation.

    Admittedly, this is not on-topic, but it's not worth the effort to argue that neither taxing nor borrowing are good alternatives for retrieving unbacked money from circulation.

    You seem to remain flummoxed by "backed" and "unbacked":
    There is no asset to be sold to retrieve "unbacked money" from circulation.
    There is an asset to be sold to retrieve "backed money" from circulation, and that asset is what is said to "back" the dollar.

    (Note: The intrinsic value of gold can vary quite a bit with demand, as it is thinly traded compared to T-bonds. And if the Fed chose to use gold or silver as backing, the Fed's demand alone (for gold or silver) would push it's price sky high, untill the Fed needed to sell, in which case it's price would fall like a rock. And that would damage any industry that uses gold or silver in its products.)
    Apr 20, 2015. 02:46 AM | Likes Like |Link to Comment
  • Economics Myths [View article]
    To Lawrence J. Kramer

    << So, where is the "falsely" part? >>

    That's the part where you cite entropy as (somehow) supporting your position.
    Apr 20, 2015. 12:24 AM | Likes Like |Link to Comment
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