Friday, July 29, 2011

You will hear a lot of crap from Washington......

But budget deficits are an accounting gimmick! Reducing the size of government simply means quit voting for more programs and giving more money to people who bribe the politicians. Our empire is with us for ever and cutting anything that exists is politically impossible because the government can print, borrow, tax, or steal all the money it will ever need to finance anything voted upon.

And the gang in Washington knows it.

Yes, our government has an unlimited line of credit and those of us who don't like it vote for people to stop the corruption and it hasn't worked. That's why millions of people all jump on the bandwagon of reducing the deficit.

The empire can't be stopped! Everyone is either been bought off to go along or scared shit less of losing their checks.

 And every deficit cut is someone losing their check! So,is their a solution to  solving the problem. Only if the economy grows. The world economy that is. That's where the wealth is being created and taxed to pay for our life styles.

Hey, it's not my fault we shipped our jobs over seas! But I've been bitching about it for years but the gang in that owns our government insist.

And they rule!

New Economic Perspectives: Pinch-Hitting for Peterson. Part 2: How Progressives Helped Stoke Deficit Hysteria; A Case Study
The reality is, as all those reading this blog know well, a sovereign government is never financially constrained in its own currency. Government spends by keystrokes. It can stroke keys to pay interest and as well stroke keys to undertake any progressive spending policies EPI proposes. And it still has “room” to stroke keys for bailouts. There is no affordability tradeoff. What matters is inflation—too much government spending drives the economy to the inflation barrier. And real resource use: a government that takes too many resources for its use (hopefully, to serve the public purpose) leaves too few for the private sector. But that requires full capacity use—otherwise at most you get bottlenecks.

Further, as all readers here know, the interest rate is a policy variable. The central bank chooses the overnight interest rate; the short maturity government bill rate tracks that closely since bills are close substitutes for bank reserves. Other rates are more complexly determined. Government bills and bonds are interest-earning alternatives to the rates paid on reserves by the central bank. Let us say that government decides it wants to spend less on interest on longer maturity bonds. Easy enough: stop issuing them. Facing a drought of longer maturity bonds, markets will bid up their prices and rates will fall. Government can stay in the short end of the market as long as it wants; indeed, it can stop issuing even bills and just pay 25 basis points on reserves (as it now does). Yes, this requires a change from current operating procedure. I won’t go through this now as NEP has provided ample analysis of operating procedures and the simple changes that would lead to an era of zero government debt (as conventionally measured, since reserves and currency are not counted).


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