quetzalcoatl wrote:The actual mechanistic function of issuing sovereign debt is to accommodate the need for safe savings instruments in the private sector.
There is no such need, merely a desire on the part of wealthy parasites for risk-free returns without the need to make any contribution to production to earn that return. The other reason for issuing sovereign debt is to provide banksters with income without a need for them to make any sort of productive contribution in return.
While it is true that we have legal and institutional arrangements that currently require us to offset spending in excess of tax revenue with debt issues, there is no monetary necessity for this. Literally, none whatever.
Correct. The necessity is legal and political.
It would be far more logical to issue debt proportional to the demand from the private sector, irrespective of putative 'deficit' status. This is cognitive paradigm change which will take another few generations.
The expression, "private demand for public debt" refers to the desire of the wealthy to have government take wealth from others and give it to the wealthy without the latter having to make any productive contribution in return.
Budge 'deficits' literally do not exist*. They are artificial constructs. Tax revenue and government spending are not operationally related in any way.
That is true at the margin, but it must not be imagined that governments could do away with taxation altogether and just issue money to pay for their spending. Taxation is needed to transfer purchasing power from the private to the public sector. Leaving that purchasing power in the private sector while trying to pay for all government spending by issuing new money would be highly inflationary.
Can government spending result in inflation? Sometimes, but not always. Government spending is inflationary when employment is strong and warehouse stocks are low. in a persistent environment of high unemployment, high excess capacity, and disniflationary pressure it is irresponsible for governments not to spend. There is no 'budgetary' constraint on such spending, only political constraints.
Which are the result of both desire for unearned wealth on the part of banksters and parasites, and the broad public ignorance of the character of the debt money system.
quetzalcoatl wrote:Yes, but even private banks merely respond to the demand for credit, they cannot create the demand.
That is incorrect. By issuing -- let's be honest, shall we? --
debt money (not "credit"), private banksters increase the
money supply. This creates upward pressure on prices, especially for the assets the debt money is issued to buy, like REAL ESTATE. When people see rising prices for these assets, they want to climb on the escalator instead of toiling on the treadmill that powers it. But the only way for them to do that is by borrowing money to buy the asset, increasing their demand for debt money. This is the positive feedback mechanism that causes the "business cycle."
Therefore, their ability to create money is quite limited.
It is limited, but only by the restraint of fear on their greed.
All this is saying is that money creation is a market phenomenon, and that governments (or private banks) only have a limited control over it. This is why trillions in QE have not been able to counter disinflationary tendencies in western economies.
No, the problem is in how inflation is measured. QE has actually been very successful in its intended purpose: skyrocketing the prices of the stocks and real estate the wealthy own.
Another thing that is not well appreciated is the fact that private credit is responsible for periodic financial crashes, not government borrowing.
I don't think many people blame government borrowing for crashes. But it's true that few people understand how bankster issuance of debt money, the debt money system per se, causes bubbles and crashes.
B0ycey wrote:Not completely true.
It is completely true. Without reading further, I predict that you are about to demonstrate your ignorance of the banking system. Watch:
Banks have capital. They lend this capital to gain more capital.
No, they do not. Banks use their capital as
reserves. The money that is lent to borrowers is CREATED AT THE MOMENT IT IS LENT. This is a fact that not one person in 1000 understands. When a bank makes a loan, it simply writes a higher number in the borrower's account (which is an asset to the borrower and a liability to the bank), and makes a balancing entry in its loans account for the amount of the loan as an asset (which is also a liability for the borrower, of course). From that moment, the "borrowed" (actually newly created) money in the borrower's account is valid for purchases, like any other money. When the borrower spends it, the bank simply reduces his account by that amount, and it shows up on the books of the vendor as cash.
Lending out capital results in it being spent rather than become stagnant.
Banks don't lend out capital, although they do have to
have capital in order to lend, because they are required to by law (capital adequacy ratio).
This creates growth.
It is the
issuance of new money that creates the growth, not lending of existing money, which would merely transfer purchasing power from one party to another.
Currency value is determined by the confidence in it. Confidence in the government paying its creditors.
Governments can always pay creditors who are owed money the government can issue.
A strong economy creates confidence. However, and this is important, QE creates more IOUs and more interest to pay overall.
Not necessarily. The reduced interest rates can actually reduce total interest expenses.
By printing money, you reduce the value of previous IOUs. This doesn't necessary reduce confidence if the economy remains strong, but if you over do it,the penny will hit investers who have the said currency that it is losing it monetary value and they will eventually sell such currency. This will result in a loss of confidence and a loss in currency value overall. Look at Argentina as an example. A former wealthy country whose wealth was fabricated.
Different situation. Argentina owed US dollars, not pesos. A government may indeed find itself unable to pay debts denominated in currencies in cannot issue itself.