Please tell me you think this is funny.
Mar 10, 2013 8:57am
A short, brilliantly done funny skit that demonstrates very simply why we're in this economic mess.
Length: 3:08
Me: He needs to go down in his basement and print the money he needs. Problem solved.
R.W.: Well not FUNNY exactly but brilliantly demonstrates the problem, and Rich is correct, to take the analogy further, this man would go print money, which does NOT make him wealthier, but instead makes each dollar worth LESS as money is merely a representation of wealth. So now that you see the problem, can we agree that throwing money at poverty does not SOLVE the problem and in fact is detrimental to the entire population. To make this skit more realistic, 60% of mans budget should have been given away to pan handlers on the street.
B.R.: I don't think the video is a realistic or nearly enveloping depiction of America's financial challenges. I just think it's pretty funny.
R.W.: Then you have learned nothing.
B.R.: Haha thank you master.
R.W.: Do not make complicated, that which is simple, young grasshopper.
B.R.: Do not assume that your deeply dug narrative is the only narrative, old grasshopper.
R.W.: in this case it kinda is
B.R.: yeaaaaaah no. here's another narrative that holds up just as well as yours:
"The concept of the debt crisis is completely manufactured. What the Republicans are arguing about the need to tackle the debt right now sounds logical if you assume that personal finance is the same as finance in a country that has its own currency (e.g. the U.S.). But they are substantively different, and every econ major who's studied Macro-economics 101 knows this. The GOP knows it too, but are trying to sell bullshit because their strategy is not to govern but to bring down Obama and to make the Dems look bad at the next election in 2014. We do not have a debt crisis. We have a jobs crisis, and the only way the country is going to recover is for the government to spend more money. It is exactly how the U.S. recovered from the Great Depression. There is plenty of capital just sitting around because there is no demand; to create demand, we need a very large entity to spend. That entity can't be big business because (a) they currently have no incentive to spend; they're the ones currently sitting on their money; and (b) even big business isn't nearly big enough to generate the spending needed. As for the debt, yes it is large, but this is not a current problem. In macroeconomic terms, you pay down debt when the economy is rolling - a good tax platform will generate higher revenues during such times and the surpluses should be used to pay down the debt, both for long-term stability and as a short-term hedge against inflation. During a recession interest rates drop (in this great recession the prime rate is virtually zero) and there is no risk of inflation. The risk (as we are seeing) is stagnation because demand has stopped, no one is hiring, and capital just piles up in the coffers of banks and big businesses. The only way out is for the government to increase spending, even to increase the debt, because the zero interest situation is actually the most prudent time to incur debt, and the worst time to try to pay off debt (for a country, at least)."
See? I've learned a lot.
R.W.: what a serious load of crap
B.R.: Go on...
Me: I'm not inclined to defend what repubs supposedly say, since I'm not one, but permit me to respond.
B.R.: Please do.
Me: But first, regarding your assertion that the country needs to spend more money. How is that working out?
B.R.: It's not my assertion, Rich, it's an example of another narrative, since R.W. said that in this case, there are no other narratives.
Me: By definition your statement of another narrative is the status of an assertion. Again, how's that working out?
B.R.: Just fine so far - the current direction of the economy is UP, though slowly.
Me: Compared to the typical length of an economic downturn, this one is the longest since the Great Depression.
B.R.: No argument here. You've got your solutions to speed up the recovery, and I've got mine. Neither of us can prove which one will hypothetically work, but at least I've proven my point that the video above does not illustrate the only valid narrative.
Me: I happen to disagree with the video.
But let me walk you through my thinking. First, what is the three sources of government money? Print it, borrow it, tax it. Now speculate, please, on the the effects of each action.
B.R.: No thanks, but I'd honestly like to listen to your speculations. I want to hear other narratives.
Me: You're in favor of government spending more money to improve the economy. This process doesn't happen in a vacuum. Surely there are effects to obtaining money these three ways.
B.R.: Right, okay. So with the little knowledge I do have, I'd say we should borrow it. The interest rates are the lowest in years, and the debt is a lower priority than boosting the economy through job growth. So here's how I'd see the next few years going - I understand if this is naive, but you asked...
Government borrows and spends money now to increase programs that create jobs > Economy improves more quickly and becomes robust once more > Government pays down debt during that time of strong economy > Everybody gets a pony (too naive?)
Me: I can't grant you your premise that government programs create jobs. I'll have to explain why later.
Let's look at the "borrow" scenario. The government issues bonds, which are purchased by investors. The money comes from people with disposable income, other governments, and the Federal Reserve. The Fed is by far the largest owner of US debt, somewhere above 70%.
Rich people have been staying away from government bonds, which is ironic in a sense, because they're frequently accused of sitting on their money. If they bought bonds they would in essence be giving over their money for government to use instead of the government taxing it.
Government bonds pay so little, no one wants them. You say that the debt is not in crisis mode, but that isn't the way foreign government bond purchasers view it. China in particular has reduced its US bond holdings by over half.
That leaves the Fed. Where do they get the money to purchase bonds? From the US Treasury. The Treasury prints money by direction of the Fed, which uses the money to purchase Us bonds. For all practical purposes, borrowing money is the same thing as printing it.
B.R.: Fascinating. Got any sources to back up your narrative?
Me: http://www.chinadaily.com.cn/china/2012-03/03/content_14746454.htm
http://en.wikipedia.org/wiki/Federal_Reserve_Note
http://www.federalreserve.gov/releases/H41/current/h41.pdf
http://www.nypost.com/p/news/opinion/opedcolumnists/how_us_debt_risks_dollar_doomsday_j8dxHSYWUa22QpSN7ttOIL
http://cnsnews.com/news/article/fed-now-largest-owner-us-gov-t-debt-surpassing-china
http://cnsnews.com/news/article/fed-now-largest-owner-us-gov-t-debt-surpassing-china
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