US Budget for Dummies....

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You just made an extraordinary claim, that requires extraordinary support. Plese provide a reasonable verification of your claim.

?-)

Tell that to the cat that hit the wall at the ceiling on the far side of the room when it sank it's claws into me.

The link didn't work but I believe you.

Oh, I found it with the ID. Well, at least it's increasing.

Yes, I know.

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Well, maybe so, but I still don't understand how the fed works to increase the money supply. For example, in a small community where there are 10 houses and everybody chips in to build a new 11th house, the new value of each house would be about 91% of the old value, given a fixed money supply. How does the local bank fix the problem to maintain a constant house value? If they print money, how does that get distributed?

-Bill

Landed on it's feet, didn't it?

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You're example is too small an 'economy'.

In a nutshell, there is always someone, lots of someone's, borrowing money with not the least being our beloved government,

The Fed loans money or, put the other way, buys debt. Where do they get the money? Thin Air. See? More money.

When they want to contract the money supply they sell off debt, notes they hold from earlier debt purchases.

It's hard to swallow but... thin air.

No. On it's head. Twice. Once into the wall, and again onto the floor.

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You're confusing money and wealth. Where did the money come to buy the materials?

Now you are starting to see the magic! I get in a bunch of parts and boards, and a few days later I have a products to sell. The products bring in more than the parts cost me (if I want to stay in business) so now there is suddenly more money in existance!

Now, most of this money is never printed, the fed just created it as a ledger item in its books. I say, let's use this magic!

I hereby call for the debt ceiling to NOT BE RAISED! Instead, the fed shall just pay for the everyday spending of the federal government by 'printing' more money. Most of us will never know the difference, at least not immediately, but it will make a huge difference in the economy. Also, as present debt instruments become due, they shall be paid off (the same way, but magic!) and no further debt shall be issued.

Now, who will this effect? Most of the debt is bought either by banks (who need somewhere to put the extra dollars that they have where it can make money, since interest rates are so low that making loans costs them more in handling the transaction than they make in interests) or foreign governments, who have surplus dollars that we have given them to buy products that they need something to do with. What will happen? First, interest rates will rise! Banks will have to raise them to some reasonable level so that they can make money with their money. Second, all those foreign governments will have to buy products with them, causing all kinds of fluctuations in the the value of the dollar. Our exports will be cheaper, and we will be making more of them. Our imports may go up, and we will buy less of them. A win-win for us!

Nothing you described created money. You have more in your pocket because the person who bought product has fewer in his.

You remind me of The Sorcerer's Apprentice.

Yeah. It's like falling off cliff. It doesn't seem so bad right off but when you notice the ground coming up a warp speed it's too late to do anything about it.

Just hyperinflation.

Since 'new' money is increasingly worthless and, so, it takes increasingly more of them just to stand still.

Not 'all sorts'. One 'sort'. An increasingly rapid downward spiral to worth 0.

Ask 1920s Germany how that worked out.

The commemorative coin reads: "On 1st November 1923 cost

There is nothing extraordinary about it. I forget the book I read it in. That was nearly thirty years ago. It's *bog standard* in any history of the Industrial Revolution that bothers to talk about finance.

Try to keep it simple. No material cost. The new house is a log cabin and several people in the community agreed to cut the trees and build the cabin. The new house is worth the same as the others and total dollars in circulation hasn't changed, so the value of houses has fallen to 91% of their previous value. The house buyer pays cash to cover labor costs, no loan. The currency value has now increased. What do we do about it and what are the mechanics?

-Bill

Thanks Bill. That is a really interesting question as it begins to address the transition between microeconomics and macroeconomics. The "value" of the community has increased by the application of labor to land and materials. Does the local money supply increase or decrease? Does that affect local prices and why?

I think you can see why this transition zone is so difficult for theorists and equally challenging for empiricists. None of the theories or explanations (that i have seen) work.

?-)

Then you get a simplistic and useless answer.

Again, you're confusing wealth and money. The value of the houses hasn't fallen because you can now accommodate another family to harvest trees and cut lumber. If the number of people is constant, then you've built the equivalent of an empty hole, and filled it in. You must be Obama! ;-)

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support.

Yet in other posts in _this thread_ you admit that it _has been done_.

MASSIVE FAIL.

Not only has it 'been done' but self financing was common during the "Industrial Revolution." That plus 'family and friends', as well as rich patrons, were the primary funding mechanisms.

The kind of financing we see today is a relatively recent phenomena.

Sorry. This URL appears to be what their applet wants:

Yes, but the slope... We should be sloped sharply up, regaining lost jobs quickly. Instead we're sloped *lower* than trend. (Take a peek at the 30-year plot)

Whether the net slope is > or < [the rate of population increase] I'm not sure; it's close. Either way, it ensures extended hope and change, at best.

James Arthur

Right--they count and compound the benefits going forward, as a dollar of handout is spent and re-spent, but never count the always-greater chain of destruction radiating backwards.

Namely, the people they took that money from will also, in complementary fashion, hire less, won't buy things, from vendors who in turn won't buy things, etc. That's 1st order. A 2nd order effect is to hurt people engaged in productive commerce in favor of those who aren't.

Put simply, they think taking from A to give to B (plus waste) creates more. They also completely dismiss without the slightest sympathy or awareness what looting A does to A's psyche, or how A responds to that behaviorally. Likewise, they don't notice the demotivating effect on B.

They're callous.

All this stuff was figured out, understood, and fully discussed hundreds of years ago, at the time of America's founding. Paine's "Common Sense" lays it out quite succinctly (before the American Revolution)--a government that does /anything/ more than protect people's collective and individual rights *cannot* do this without doing violence to someone else's rights; such a government inherently sets them against each other (each seeking favor from the other), and violates the very reason for its founding: protecting rights.

So, it's not just economics, it's freedom.

I said that tounge in cheek.