Maksutov wrote:Markk wrote:If you guys do not understand this my guess is you have a goverment job.
I had a federal government career, Markk, for 33 years and I'm proud of it.
Now tell me all about what I think and what I did. Go on.
canpakes wrote:Saw this little factoid today and immediately thought of this thread:
“An estimated one-third of the federal workforce is made up of veterans, according to the Office of Personnel Management...”
subgenius wrote:canpakes wrote:Saw this little factoid today and immediately thought of this thread:
“An estimated one-third of the federal workforce is made up of veterans, according to the Office of Personnel Management...”
wow, and what percentage are Americans?
such a relevant "factoid", do we draw outlandish conclusions now, or just when politically convenient?
EAllusion wrote:Some Manafort defense documents were improperly redacted, giving reporters a better glimpse into the case. It includes juicy details like Manafort, then acting campaign manager for Donald Trump, sharing internal polling campaign data with Russian intelligence operatives in secret international meetings. You know, as one does.
(His defense doesn't dispute that he did this or that he misled Mueller when he said he didn't. It claims that he simply forgot. You know, as one does.)
canpakes wrote:Saw this little factoid today and immediately thought of this thread:
“An estimated one-third of the federal workforce is made up of veterans, according to the Office of Personnel Management...”
Markk wrote:But the point is and was, when the burden is higher than the revenues received we, in my view, need to stop spending so much, and quit borrowing money we don't have. Do you somehow disagree with this?
Markk wrote: ... we, in my view, need to stop spending so much, and quit borrowing money we don't have. Do you somehow disagree with this?
Politicians like to describe government as like a household. When you’ve borrowed too much, you cut your spending so you can pay off debt, don’t you? You might be able to get a better-paid job, which helps you to pay it off faster. But you still budget to reduce your debt over time. Going on a spending spree means tightening your belt later. Similarly, if government borrows too much, there must be austerity to pay it down. Stands to reason, doesn’t it?
People understand this reasoning. It is politically popular, especially when times are hard. In March 2009, when the U.S. was in the deepest recession since the 1930s, John Boehner, former Speaker of the House of Representatives, said on CBS News that “it’s time for government to tighten their belts and show the American people that we ‘get it.’”
"Government is like a household" can even win elections. At the height of the financial crisis in 2008, David Cameron, then leader of the U.K.’s Conservative party, wrote this in the (now defunct) News of the World:
"This [Labour] government has maxed out our nation’s credit card—and they want to keep on spending by getting another. We believe we need to get a grip, be responsible and help families now in a way that doesn’t cost us our future."
He became the U.K.’s Prime Minister in May 2010.
Keynesian economists such as Paul Krugman argue that instead of trying to reduce public deficits in a recession, government should increase spending, helping businesses to grow and providing employment. Government debt will rise, of course, but the government can run fiscal surpluses to pay it down when growth returns. Austerity is for the good times, not the bad times.
But this message has not been heard. In the name of "living within our means," "balancing the books" and "paying down the debt," governments on both sides of the Atlantic have pursued austerity policies ever since the Great Recession. The terrible story of Greece shows us that harsh austerity is the wrong medicine for a poorly-performing, highly indebted economy. But Greece is merely the worst example. Many Western countries have suffered deep and lasting damage, both from the Great Recession itself and from premature attempts to reduce public deficits.
There is a growing body of literature showing that austerity policies can be unnecessary even when a government is highly indebted. Recently, two researchers at the IMF showed that the effective limit on public debt in major economies is far higher than had previously been thought, and could even be infinite. And now, Roger Farmer of Warwick University and Pawel Zabczyk of the Bank of England have debunked the "household fallacy." In a recent paper, they say that government doesn’t need to “tighten its belt” to pay down debt, even in the good times:
"We refer to the idea that government must ‘tighten its belt’ as a necessary policy response to higher indebtedness as the household fallacy. We provide a reason to be skeptical of this claim that holds even if the economy always operates at full employment and all markets clear."
That reason is the behavior of interest rates. Here’s how Farmer & Zabczyk explain their thinking:
"Governments are monopoly suppliers of risk-free treasury securities. In contrast to households, which are assumed to be price-takers, government debt-management policies have first order implications for the interest rate. We show that an increase in government debt can, under plausible parameterizations of the economy, cause a drop in the real interest rate. As a consequence, the fiscal authority can run an active policy that ignores the level of debt when determining the path of the primary fiscal deficit."
Translating this piece of econo-speak: increasing government debt causes interest rates to fall, which makes the debt more affordable. (Wait, what about Greece? More on that shortly….)
Of course, the stock of U.S. government debt has increased almost continually throughout the 35-year bull run in U.S. Treasuries. So it’s hardly difficult to show that rising debt is associated with falling interest rates. But Farmer & Zabczyk assert that falling interest rates are caused by this rising debt, not merely correlated with it. How does this work, then?
Key to their argument is the idea that those who pay for government debt through their taxes, and those who hold it as savings, are two distinct groups. They point out that it is the young, not the old, who are active savers. Old people are spending what they have saved, rather than building up new savings. Farmer & Zabczyk use a two-generation model that focuses on the behaviour of these young savers.
When interest rates fall, depressing returns on investment, younger people saving for their retirements cut back spending and save even more to ensure that they have enough money to live on in retirement. This reinforces the downwards pressure on interest rates. Thus, provided demand for government debt among these young savers remains strong, the level of debt doesn’t matter. Interest rates will adjust downwards to accommodate any level of debt.
So there is no need for a responsible government to pursue austerity policies to reduce indebtedness. Indeed, since the young need government debt as safe savings vehicles, reducing government debt could be harmful to them, especially those on lower incomes: pricing the poor out of safe savings is hardly progressive. What the government should be doing is managing the economy so as to generate prosperity for its citizens. In an ageing society where people’s need for retirement savings is very high, that might mean running very high levels of debt to accommodate the population’s demand for safe savings vehicles. Hello, Japan.
Of course, there is a huge caveat here. What if the young collectively decide that government debt is too high – or the government too unstable - for them to trust it as a safe savings vehicle for retirement? Well, under those circumstances, government debt could indeed spiral out of control, causing interest rates to rise rapidly and forcing the government either to monetize debt or default.
It is hard to regard the debt issued by governments with a history of instability and default as any sort of “safe savings vehicle”. It would be entirely understandable for the young in countries with unstable and corrupt governments to prefer USTs, gold or Bitcoin as savings vehicles. Clearly, Farmer & Zabczyk’s findings don’t apply to every government.
But historically, government debt crises have tended to be driven by foreign investors, not by their own populations. Greece’s current problem, for example, is that most of its debt is now owed to foreign governments, and it is those governments that are insisting on austerity measures to reduce the indebtedness.
Greece had another problem too. Government debt is only the primary safe savings vehicle for its citizens if the government issues the currency. If it doesn’t, then the primary safe savings vehicle is the debt of whichever country issues the currency. As Greece is a member of the Euro, Greek citizens can save in the public debt of (currently) nineteen countries without facing FX risk. They can therefore reject their own government’s public debt as a savings vehicle much more easily than a citizen of the U.S. or the U.K. can theirs. Bond spreads tell us that the primary safe savings vehicle for countries that use the Euro is German public debt.
Of course, the risk that a government cannot refinance its debt is not zero even for a major economy such as the U.S. But for stable, responsible governments that issue their own currencies, the risk is small. Farmer & Zabczyk’s work on interest rate dynamics reinforces the point recently made by researchers at the IMF. Governments do not need to pursue austerity policies to reduce indebtedness. Indeed, if austerity policies reduce prosperity, making it difficult for the young to save, they may make debt less sustainable, not more.
A responsible, stable government that issues its own currency is nothing like a household. Trying to manage it like one merely impoverishes its population.
Markk wrote:canpakes wrote:Saw this little factoid today and immediately thought of this thread:
“An estimated one-third of the federal workforce is made up of veterans, according to the Office of Personnel Management...”
Not quite sure what your point is? Many service members do enter the federal payroll so they can roll over their retirement. I have a co worker that is on 60% disability due to a forklift accident in Iraq, and he is looking for a federal position so he can roll or add to his already tenured time. He get's a disability check every month , veterans insurance, and if he finds a federal job wages and benefits from that position. Good for him, he is a good worker and got hurt defending our nation.
I am in no way saying we need to cut down veterans benefits at all, we need to take care of our veterans.
But the point is and was, when the burden is higher than the revenues received we, in my view, need to stop spending so much, and quit borrowing money we don't have. Do you somehow disagree with this?
Markk wrote: ... we, in my view, need to stop spending so much, and quit borrowing money we don't have. Do you somehow disagree with this?
Chap wrote:If 'we' is your household, then borrowing money for general spending is, in general, not a good idea. (Although there are limited instances when it may be a good idea, for a while at least.)
If 'we' is the government of a sovereign state, then the terms you use are no longer valid, because a sovereign state is in a whole different ball-game. You have been caught by the so-called 'household fallacy'.
If you read this article, you may understand the situation better:
Governments Are Nothing Like HouseholdsPoliticians like to describe government as like a household. When you’ve borrowed too much, you cut your spending so you can pay off debt, don’t you? You might be able to get a better-paid job, which helps you to pay it off faster. But you still budget to reduce your debt over time. Going on a spending spree means tightening your belt later. Similarly, if government borrows too much, there must be austerity to pay it down. Stands to reason, doesn’t it?
People understand this reasoning. It is politically popular, especially when times are hard. In March 2009, when the U.S. was in the deepest recession since the 1930s, John Boehner, former Speaker of the House of Representatives, said on CBS News that “it’s time for government to tighten their belts and show the American people that we ‘get it.’”
"Government is like a household" can even win elections. At the height of the financial crisis in 2008, David Cameron, then leader of the U.K.’s Conservative party, wrote this in the (now defunct) News of the World:
"This [Labour] government has maxed out our nation’s credit card—and they want to keep on spending by getting another. We believe we need to get a grip, be responsible and help families now in a way that doesn’t cost us our future."
He became the U.K.’s Prime Minister in May 2010.
Keynesian economists such as Paul Krugman argue that instead of trying to reduce public deficits in a recession, government should increase spending, helping businesses to grow and providing employment. Government debt will rise, of course, but the government can run fiscal surpluses to pay it down when growth returns. Austerity is for the good times, not the bad times.
But this message has not been heard. In the name of "living within our means," "balancing the books" and "paying down the debt," governments on both sides of the Atlantic have pursued austerity policies ever since the Great Recession. The terrible story of Greece shows us that harsh austerity is the wrong medicine for a poorly-performing, highly indebted economy. But Greece is merely the worst example. Many Western countries have suffered deep and lasting damage, both from the Great Recession itself and from premature attempts to reduce public deficits.
There is a growing body of literature showing that austerity policies can be unnecessary even when a government is highly indebted. Recently, two researchers at the IMF showed that the effective limit on public debt in major economies is far higher than had previously been thought, and could even be infinite. And now, Roger Farmer of Warwick University and Pawel Zabczyk of the Bank of England have debunked the "household fallacy." In a recent paper, they say that government doesn’t need to “tighten its belt” to pay down debt, even in the good times:
"We refer to the idea that government must ‘tighten its belt’ as a necessary policy response to higher indebtedness as the household fallacy. We provide a reason to be skeptical of this claim that holds even if the economy always operates at full employment and all markets clear."
That reason is the behavior of interest rates. Here’s how Farmer & Zabczyk explain their thinking:
"Governments are monopoly suppliers of risk-free treasury securities. In contrast to households, which are assumed to be price-takers, government debt-management policies have first order implications for the interest rate. We show that an increase in government debt can, under plausible parameterizations of the economy, cause a drop in the real interest rate. As a consequence, the fiscal authority can run an active policy that ignores the level of debt when determining the path of the primary fiscal deficit."
Translating this piece of econo-speak: increasing government debt causes interest rates to fall, which makes the debt more affordable. (Wait, what about Greece? More on that shortly….)
Of course, the stock of U.S. government debt has increased almost continually throughout the 35-year bull run in U.S. Treasuries. So it’s hardly difficult to show that rising debt is associated with falling interest rates. But Farmer & Zabczyk assert that falling interest rates are caused by this rising debt, not merely correlated with it. How does this work, then?
Key to their argument is the idea that those who pay for government debt through their taxes, and those who hold it as savings, are two distinct groups. They point out that it is the young, not the old, who are active savers. Old people are spending what they have saved, rather than building up new savings. Farmer & Zabczyk use a two-generation model that focuses on the behaviour of these young savers.
When interest rates fall, depressing returns on investment, younger people saving for their retirements cut back spending and save even more to ensure that they have enough money to live on in retirement. This reinforces the downwards pressure on interest rates. Thus, provided demand for government debt among these young savers remains strong, the level of debt doesn’t matter. Interest rates will adjust downwards to accommodate any level of debt.
So there is no need for a responsible government to pursue austerity policies to reduce indebtedness. Indeed, since the young need government debt as safe savings vehicles, reducing government debt could be harmful to them, especially those on lower incomes: pricing the poor out of safe savings is hardly progressive. What the government should be doing is managing the economy so as to generate prosperity for its citizens. In an ageing society where people’s need for retirement savings is very high, that might mean running very high levels of debt to accommodate the population’s demand for safe savings vehicles. Hello, Japan.
Of course, there is a huge caveat here. What if the young collectively decide that government debt is too high – or the government too unstable - for them to trust it as a safe savings vehicle for retirement? Well, under those circumstances, government debt could indeed spiral out of control, causing interest rates to rise rapidly and forcing the government either to monetize debt or default.
It is hard to regard the debt issued by governments with a history of instability and default as any sort of “safe savings vehicle”. It would be entirely understandable for the young in countries with unstable and corrupt governments to prefer USTs, gold or Bitcoin as savings vehicles. Clearly, Farmer & Zabczyk’s findings don’t apply to every government.
But historically, government debt crises have tended to be driven by foreign investors, not by their own populations. Greece’s current problem, for example, is that most of its debt is now owed to foreign governments, and it is those governments that are insisting on austerity measures to reduce the indebtedness.
Greece had another problem too. Government debt is only the primary safe savings vehicle for its citizens if the government issues the currency. If it doesn’t, then the primary safe savings vehicle is the debt of whichever country issues the currency. As Greece is a member of the Euro, Greek citizens can save in the public debt of (currently) nineteen countries without facing FX risk. They can therefore reject their own government’s public debt as a savings vehicle much more easily than a citizen of the U.S. or the U.K. can theirs. Bond spreads tell us that the primary safe savings vehicle for countries that use the Euro is German public debt.
Of course, the risk that a government cannot refinance its debt is not zero even for a major economy such as the U.S. But for stable, responsible governments that issue their own currencies, the risk is small. Farmer & Zabczyk’s work on interest rate dynamics reinforces the point recently made by researchers at the IMF. Governments do not need to pursue austerity policies to reduce indebtedness. Indeed, if austerity policies reduce prosperity, making it difficult for the young to save, they may make debt less sustainable, not more.
A responsible, stable government that issues its own currency is nothing like a household. Trying to manage it like one merely impoverishes its population.