You seem to have an aptitude for writing screen plays so there is that.
You make some real irresponsible finanancial assumptions
You make some real irresponsible finanancial assumptions
The Looming Train Wreck
- Thread starter Marshal Jim Duncan
- Start date
I'll help you Harry. The ultimate assumption is that the US government is the sole creator of US dollars and thus cannot ever be insolvent. The government doesn't rely on credit markets to borrow or repay. Also, US debt will always be an attractive investment because the US is the only creator of risk free US dollar assets.
The GDP is a bunch of transactions that each serve one of the following four purposes, to pay taxes, to purchase stuff, to invest in stuff, and to save. The money that makes up the GDP transactions comes from the four following places, government spending, purchase of stuff, investments, and trade surplus/deficit.
The equation he posted represents exports-imports (X-M), government spending-taxes (G-T), and uninvested savings-investments (S-I). The common macroeconomic sectorial balance equation is written as
(G-T)=(S-I)-(X-M). The money to cover (G-T) is what is borrowed, either from banks, domestic, or foreign investment, and equals savings-trade surplus/deficit. All of this assumes three sectors having these names and every dollar denominated account belongs to only one of the sectors.
But the simple of it all boils down to money comes from somewhere and goes somewhere, and the sum of all of those transactions equals zero.
I may be completely off. It's been a few years since my last economics class.
But then there is all of this stuff that doesn't necessarily fit the neoclassical macroeconomic model. I don't know what the threshold is, but I bet it won't be pretty when the US is borrowing money to pay the debt service on borrowed money.
http://www.justfacts.com/nationaldebt.asp
http://www.justfacts.com/nationaldebt.asp
Harry, allow me a pseudo-wine moment since I'll never be on facebutt to self-tout. I have 48 freakin' hours of OSU accounting, two degrees from there, and a CPA certificate. There's nothing remotely intelligent in the "blanks" in this thread that make one iota of financial sense, let alone convince a dog to stop licking its balls! Carry on!!
I think it is possible, but it would be a strange scenario like double or triple the savings rate of WWII. I also don't think it would be disastrous.
My assumptions are:
The nominal spending of a currency issuer is never constrained.
The real spending is constrained to taxes/GDP + Savings/GDP anything in excess will cause inflation
Under a normal scenario without cuts in government spending and with a savings rate close to zero as your interest expense approaches tax revenue inflation will go up and eat away your nominal debt/GDP to keep interest/GDP below taxes/GDP. Under extreme circumstances with a high savings rate inflation will stay low and interest expense can exceed taxes.
Shouldn't you be in court instead of explaining things here? Just tell him to google it.
That makes sense. We know the government is immune to the results of any of it's money policy. I guess my real question is what happens to the average joe under that scenario?
In a business as usual scenario, the real value of the average joe's dollar denominated liabilities (mortgages, car notes, etc) and dollar denominated assets (fixed rate bonds, annuities, contractual payments such as lease receivables) goes down. There are winners and there are losers but the economy would be working at full employment and capacity and debtors would generally be better off.
In the extremely high savings scenario nothing really changes from how things are now since the government is not hitting its constraints on real spending. As a caveat something would have to change massively to reach that scenario, like a world war, a massive increase in productivity, or a cultural shift towards aestheticism.
I can see them on the weekends though, sometimes. Is the new dad kind of a cuck too since he is spending his time and money raising my progeny? Thanks for bringing this up HSH. This sheds a whole new light on things. I get to make babies, and some other poor sap has to take care of them and listen to my ex nag. Not bad.
