US Budget for Dummies....

Well, it's right there in that Wiki article:

"During the Reagan administration, federal receipts grew from $618 billion to $991 billion (an increase of 60%); while outlays grew from $

746 billion to $1144 billion (an increase of 53%).[40][41] According to a 1996 report of the Joint Economic Committee of the United States Congress, during Reagan's two terms, and through 1993, the top 10% of taxpayers paid an increased share of income taxes (not including payroll taxes) to the Federal government, while the lowest 50% of taxpayers paid a reduced share of income tax revenue."

The reason government debt also increased was the typical treachery of the democrats, who promised $3 spending reduction for every new $ of tax increase but they did not deliver on that promise. Looks like this scam is what the democrats will try again in the upcoming debt ceiling battle but I hope the republicans don't fall for it again and will demand spending cuts in synch with any new tax or debt increase.

[snip]

Dream on. We be screwed. But you'll be assured a sleeping space in the local "projects"... your entitlement >:-} ...Jim Thompson

--
| James E.Thompson, CTO                            |    mens     | 
| Analog Innovations, Inc.                         |     et      | 
| Analog/Mixed-Signal ASIC's and Discrete Systems  |    manus    | 
| Phoenix, Arizona  85048    Skype: Contacts Only  |             | 
| Voice:(480)460-2350  Fax: Available upon request |  Brass Rat  | 
| E-mail Icon at http://www.analog-innovations.com |    1962     | 
              
I love to cook with wine.     Sometimes I even put it in the food.

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That makes sense. The small bank basically just manages the loan guaranteed by big brother fed? So, there are no assets or liabilities, just interest payments and expenses. Interesting link you provided. Haven't studied it all but bookmarked it for reference.

-Bill

Thanks for the link, I bookmarked it. Makes it a bit clearer. Seems big brother (the fed) loans the small bank the 100K to manage the loan and make profits from interest minus costs. So, all you do as a small bank is manage the feds unlimited supply of money? I haven't studied the link in detail, but bookmarked it for reference. Still confusing how the 100K turns into 300K.

-Bill

Aha I see. But then we don't really know if any presumed economic "success" of the Reagan era was due to tax cutting or to spending increases, do we?

Also found this which seems to contradict your claim.

But I will bow out here, my point was only to correct an apparent misunderstanding on Jims part.

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John Devereux

I'm not interested in your fairy tales. I want to see some evidence

you've got no proof.

so you should hve no trouble citing, yet you still havent.

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?? 100% natural 

--- news://freenews.netfront.net/ - complaints: news@netfront.net ---

cite.

The dotcom bubble?

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?? 100% natural

No you aren't. You're interested in spreading your lies.

*You* are my proof. If you had half a brain you wouldn't bring this nonsense up again, after being repeatedly spanked in the past.

Because you refuse to learn, I have no interest in spoon feeding you.

*AGAIN*.

Nope. It just has a pool of loans balanced by reserves. The FDIC is the only guarantor and it protects only depositors. The Fed does not underwrite anything.

the "too big to fail " banks were bet-making iBanks like Goldman Sachs, not depository institutions. That was a fiat of Federal power, not the norm.

There *are* assets and liabilities, but there is other stuff too. It's all of a piece. Yes, you darn near need a whiteboard to understand it.

Management of a bank is management of the proportions between certain numbers on instruments in their books.

It is one of the best things I have found on the Web. For that matter, I cannot find a book to replace it. Take your time with it; there's a lot there ( er, that worked for me anyway ).

It is limited - you only get so much at a time, and have to make enough interest on it to prove you're worthy of more. It's not a bad system when it's used properly.

If you make too many loans, the regulators visit you. When they visit too much, you lose your... charter, or whatever the founding document of bank is.

We're presuming a $200K house has been created by the activity enabled by the loan. The $100K for land, labor and materials is expended ( but still exist, captured in the house itself ). For sale of an existing house, nothing is really created.

So if you can build a house for $100K that would sell for $200K, that's profit - but it still exists. You will be assessed for it as an asset by the tax bureau. It's an oversimplified textbook example, but you get my drift.

There may be a way of looking at it that means I am double counting one $100K, but I believe at this writing that all three actually exist. IOW, that might be a "bug" but I haven't found it yet. My accounting could be off - I am totaling all possible assets created by the full transaction. But only the original $100K is "mobile" money.

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Les Cargill

Nope. You're confusing wealth (or 'value') with money supply. At a poker game, changing the number of chips on the table doesn't change the total amount in the players' wallets.

Money is just poker chips. By value, each dollar represents roughly [The value of the United States] / [total number of dollars].

If you increase the net worth of the US by adding something valuable, like a house, you've just increased the theoretical value of a dollar. Don't worry, the fed makes more dollars, wiping that out. You didn't create money, the fed did.

The price of computers has been falling for 50 years, and they keep getting better, yet people keep buying them.

If the dollar doesn't hold its value people use something else. That's not good for the economy. For example, they stop saving. And, they won't loan, since they'll get back less.

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Cheers, 
James Arthur

Sorry, when you replied the newsgroup I posted from got deleted so I didn't see it till now.

Risk is another whole matter and is wrapped up in the 10% the bank held back 'in reserve'.

No, because your house isn't 'money' and when you paid back the

100,000 it erased the 'created' 100,000. I.E. no more debt.

Btw, I've heard it argued that repayment is why debt must continually increase (which means the money supply also) because you pay the

100,000 PLUS interest and lets say that was 5%. So where did the 'extra' $5,000 come from? I has to be 'created' somewhere and debt is what 'creates' money so there has to be 'new' debt. Except that 'new' debt will have to be paid back WITH interest too so where will that 'extra' money come from? Debt, which... ad infinitum.

I'm not convinced that holds because debt is 'future' production moved (by borrowing against it) into today so the interest can be paid by working an 'extra day' (in the future), so to speak.

As far as 'money' goes the same thing happens. Someone 'has faith' that 'their gold' is sitting in the bank but, in fact, it's in the borrower's hot little hands, till he pays it back and the debt, 'created money', is erased.

Note that, even with the 'gold standard', we still have 'paper money' in that the depositor has nothing but a ledger entry saying the bank will give him back X dollars (in gold). Back in 'the good old days' banks would issue 'bank (promissory) notes', rather than just a ledger entry, which were 'redeemable' for the deposit and people could trade those as money, as long as they all had 'faith' the bank could actually pay off the note. But that's the same as the ledger entry.

The 'difference' seems to be in how new, shall we call it, 'base' money gets into the system. By that I mean, take the gold case. Someone 'finds' new gold, gets rich, and the gold in circulation (or a vault somewhere) is increased because our rich dude spends it. 'Debt' is not needed. Fiat money gets 'into the system' by debt.

That's exactly one of the criticisms of the gold standard and deflation was one of the 'disasters' of The Great Depression. It does tend to depress the economy for the precise reason you mention and it helped ensure than an economy in free fall would continue to free fall, or so the argument goes.

One of FDR's economic 'plans' was to deliberately create inflation and there were PSA's made 'explaining' the 'economic miracle' of doing so (TCM aired it quite a while back and I watched it then). Basically it went that the shoe maker will have 'more money to spend', because his price is more (inflation) and, so, he can buy more goods, increasing the economy, but the stupid thing completely ignored that everything he bought would also cost more so nothing is gained.

The other 'advantage', done in Simon Legree style, was that debtors (farmers) would get the joy of SCREWING the evil lenders since they'd be paying back with CHEAP dollars, yeah baby! But it neglected to mention you'd either never get another loan, especially if you bankrupted the lender, or REALLY pay through the nose next time.

It really was pitiful watching alleged 'brilliant economists' speaking such gibberish.

Btw, another argument is that the Fed royally screwed up in contracting the money supply to 'fight inflation' that wasn't happening, driving the economy, which had recovered 90% of the crash, into the ditch.

The principal advantage of the gold standard is that it keeps the egg- headed gods at the fed from twiddling all the knobs and wrecking the predictability of value (for the common good, of course).

Those knobs have nothing to do with it. It's Obama. It's the spending. The fed's enabling it--financing the unfinanceable, covering Obama's tail with trickery--not fixing it. I overhead some people talking at the gas station yesterday for crying out loud-- they're scared stiff.

Lots of O-voters are stunned and surprised their checks have gone down over the reinstatement of their Social Security tax rate. They're going ape over that measly 2% increase. They simply have /no/ idea what's ahead.

But hey, let's raise the debt ceiling while we take away everyone's right to self-defense, shall we? That'll distract 'em. Wheeeee!

James Arthur

Actually, *banks* create money through issuing debt. During the period in which the Scots Free Banks existed, the banks used fractional reserve banking to create money through debt and repayment. No government had anything to do with it outside of any suits brought in court.

What the central bank is supposed to do is maintain a constant value of the dollar against a rising stock of value. If value is created against a fixed (or inadequate ) stock of dollars, that is deflation. This is part of what happened during the Great Depression.

From 1983ish to the present, we haven't had many periods of real inflation; it's hard to say exactly *what* that was. it was, unfortunately, reported as inflation even though it's really a shoddy model called the CPI.

It means that people can choose a strategy of simply holding dollars rather than investing them. In other words, they can short the entire economy. As Scott Sumner puts it, money can be a medium of account or a medium of exchange. We ( whoever "we" are :) "want" the role of exchange to be primary, because then we'll be able to sell more stuff.

All the Fed does is run a sort of "traffic light" system to signal how much debt money banks should create.

Yes. That's the whole idea. We don't *want* people to hold dollars. We want them to be used in a flow to create more real value.

If dollars are the value, then that's something like reifying the symbol and it confuses people, there are less goods ( even though capacity is high ) and people suffer needlessly. Eventually capacity declines.

I am not making this up - yeah, they actually will.

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Les Cargill

It is possible to have fractional reserve banking and a gold standard simultaneously. Debt may not be needed but it certainly exists - there is no other way to boot up productive enterprise.

The gold standard doesn't work because countries can hold more gold than they issue paper, resulting in a deflation elsewhere. This is in fact what happened during the Depression ( and may well have been the actual cause of it ).

What the meaning of gold vs. paper is varies with time.

This is always a dynamic political tension between creditors and debtors. The book "Nation of Deadbeats" takes an interesting slant on it. Generally, there's a political crisis following a panic, but panics are often caused by politics.

It's also thought that the Fed tightened causing the crash to begin with. The crash was really caused by Bear Stearns not being able to get overnight repo financing. That should have caused a short sharp recession, but it hasn't and the present "control the money supply by measuring inflation" mechanism is under severe scrutiny.

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Les Cargill

I wonder how surprised they're going to be when their rent goes up because of higher tax on rental income.

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Reply in group, but if emailing add one more 
zero, and remove the last word.

That's the theory, but in practice, it's just as flawed as fiat money.

It's not *just* Obama; this has been going on since the 1980s. Just saying - had Romney been elected, we'd be in the same boat. Ditto McCain.

Bush43 got sold to; so did Reagan. Choice of POTUS is pretty insignificant.

Trying to say election results can fix this is silly.

The fear comes first, then it attaches to Something. I don't know exactly where the fear comes from - probably just the general entertainment climate, fatigue from willingly suspending disbelief.

Clueless louts are nothing new.

The Dem party knows you know this. Outside of a few Congrefs perthons, the rank and file will pull back on the gun front - guaranteed.

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Les Cargill

Thanks to Tricky Dicky.

Repercussions for a few centuries...

That's unlikely. If anything, rents will probably go down. You can tax rents until the cows come home; you can't really pass costs from them on to renters.

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Les Cargill

Of course you can. When the lease comes up for renewal what happens? ...Jim Thompson

--
| James E.Thompson, CTO                            |    mens     | 
| Analog Innovations, Inc.                         |     et      | 
| Analog/Mixed-Signal ASIC's and Discrete Systems  |    manus    | 
| Phoenix, Arizona  85048    Skype: Contacts Only  |             | 
| Voice:(480)460-2350  Fax: Available upon request |  Brass Rat  | 
| E-mail Icon at http://www.analog-innovations.com |    1962     | 
              
I love to cook with wine.     Sometimes I even put it in the food.

He did the right thing, given all the facts. "Repercussions" won't be clear. The Market Monetarists do not blame going off gold for the inflation of the '70s and can defend that opinion considerably.

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Les Cargill