Debt, The EU, And Greece

Malor wrote:

Again: what do you think fiat money is? What do you think gets added to the economy when more of it is injected?

I answered that. Money that is backed by Government Decree. IE Taxing and Spending Power. That is it.

And question #2, it matters what it is used for.

So you don't think of money as a store of wealth, correct?

edit: I think I asked the original question badly. More accurately: what purpose(s) do you think money serves?

goman wrote:

France and Greece are on the Euro so they cannot deficit spend without the okay of the other countries. Also Greece was not a social-Democratic state. They have been ruled by the Conservatives until most recently.

However the Scandinavian countries were smart enough not to get into the Euro and do not have too much debt in other countries currencies. They can control their own finances without the politics of the other countries.

Point of Information; The above is incorrect. The Scandinavian countries bar Norway (not in the EU but in the EFTA) are in ERM II along with all the other member states except for Britain, who exercised its opt-out clause in not joining it. ERM II basically keeps the members states to a deficit and debt system similar to that of the eurozone members so to claim that they have more control over their economy than France or Germany has is not true in this respect. Only the setting of interest rates is the difference and if that is the route to success than Iceland, Britain and the US are the exception to that rule.

That is not to say I don't particularly admire the Scandinavian countries way of life, I do, but to claim that they are some how completely separate from the eurozone isn't quite true. Interesting that Newsweek rates the best country in the world right now is Finland, who happen to be in the eurozone. Go figure.

Edit: Also the only EU member state not in ERM II or the eurozone has it finances in a complete mess, the UK.

Re Scandinavia: Also remember that Sweden as a non-EMU state is currently strongly contemplating joining the eurozone. It certainly is one of the hot issues for the elections in September. Denmark has a referendum in the works that should abolish their opt-out of EMU (among other things). In both there is a significant pro-euro sentiment.

Malor wrote:

So you don't think of money as a store of wealth, correct?

edit: I think I asked the original question badly. More accurately: what purpose(s) do you think money serves?

Money is a storage of wealth. I have said that in the past. But since Governments cannot save. It is not a storage of wealth for them. Only for the People. In Economics this means Households and Firms.

Money also facilitates transactions. This is obvious.

Axon wrote:
goman wrote:

France and Greece are on the Euro so they cannot deficit spend without the okay of the other countries. Also Greece was not a social-Democratic state. They have been ruled by the Conservatives until most recently.

However the Scandinavian countries were smart enough not to get into the Euro and do not have too much debt in other countries currencies. They can control their own finances without the politics of the other countries.

Point of Information; The above is incorrect. The Scandinavian countries bar Norway (not in the EU but in the EFTA) are in ERM II along with all the other member states except for Britain, who exercised its opt-out clause in not joining it. ERM II basically keeps the members states to a deficit and debt system similar to that of the eurozone members so to claim that they have more control over their economy than France or Germany has is not true in this respect. Only the setting of interest rates is the difference and if that is the route to success than Iceland, Britain and the US are the exception to that rule.

That is not to say I don't particularly admire the Scandinavian countries way of life, I do, but to claim that they are some how completely separate from the eurozone isn't quite true. Interesting that Newsweek rates the best country in the world right now is Finland, who happen to be in the eurozone. Go figure.

Edit: Also the only EU member state not in ERM II or the eurozone has it finances in a complete mess, the UK.

They do not use the Euro now. That is my point, not that they are part of the Eurozone. Iceland had too much debt in Pounds. That was their problem. All of Britains debt is Pounds. All of USAs debt is in Dollars. All of Japans debt is in Yen. This is a very significant distinction.

Poland also did not have that much debt in foreign currency (the financial mess past them by) , although the Baltic States did. Baltic countries shrunk most in the financial crisis.

UK government does not have messed up finances since they are sovereign in their own debt. That is just political nonsense. Their banks on the other hand.

Here is the article that explains what I am saying.

http://www.ft.com/cms/s/0/e8a3cc8c-a...

‘True sovereigns’ immune from eurozone contagion

The only economic school that knows the problems and perhaps the solutions is the Post-Keynesians. They are the only ones the both called the financial mess before hand and called deflation after.

The Austrians called the financial mess but they also called hyperinflation. This is because they are wrong on how government money works.

The neoliberals aka the orthodoxy did not call the financial mess and are the same ones calling the deficit problems. They are wrong in both instances.

What is really happening with the economy is that politicians are saying that the problem is public finances. But are also hedging their bets with some government stimulus. By not going all in with stimulus you are going to have unemployment problems. The only time USA went all in was during WWII. 1944, 1.2% unemployment rate.

So stop the nonsense and fight for employment and growth.

Interesting story here about what's happening in Greece with new austerity measures. Greek industry is not competitive, so wages have to come down. Unemployment is shooting up. The government is slashing its workers' salaries. And in an economy that derives 70% of GDP from consumer spending, that's a problem. The result is falling tax revenues, which then makes the budget deficits harder to erase.

Hard to know where this is going to end up. "Everything is getting more expensive, I'm hardly earning any money, and then I'm supposed to pay more taxes to help save the country? How is that supposed to work?" says one shipbuilding worker quoted in the article.

Funkenpants wrote:

Interesting story here about what's happening in Greece with new austerity measures. Greek industry is not competitive, so wages have to come down. Unemployment is shooting up. The government is slashing its workers' salaries. And in an economy that derives 70% of GDP from consumer spending, that's a problem. The result is falling tax revenues, which then makes the budget deficits harder to erase.

Hard to know where this is going to end up. "Everything is getting more expensive, I'm hardly earning any money, and then I'm supposed to pay more taxes to help save the country? How is that supposed to work?" says one shipbuilding worker quoted in the article.

I already know how austerity supporters will interpret this.

This is good because they shouldn't have let their finances be so messed up.
Debt to GDP is still way too high.
They are lazy southern Europeans anyway. Get back to work.
Why should we bail them out?
It would be worse without austerity.

It's actually pretty straightforward. Again, the austerity is not the cause of this - that's like blaming your hangover for making you feel bad the morning after you've been drinking. Greece has been on a debt bender for decades, and the hangover they have now obviously hurts. This is what faces any country that tries to do this.

The problem, of course, is that eventually all countries will be forced to get off the debt bender, because it's essentially a Ponzi scheme which will always collapse when you run out of suckers. The question then becomes: "do we stop drinking and get straight now, with all the pain that entails, or drink ourselves to death?" No one is saying this isn't painful for Greece - it obviously is, and indeed their government may not survive the process. But their previous course was unsustainable. Bailouts would only drag the rest of Europe down with them, extending the Ponzi scheme to a much larger group of suckers.

Aetius wrote:

It's actually pretty straightforward. Again, the austerity is not the cause of this - that's like blaming your hangover for making you feel bad the morning after you've been drinking. Greece has been on a debt bender for decades, and the hangover they have now obviously hurts. This is what faces any country that tries to do this.

The problem, of course, is that eventually all countries will be forced to get off the debt bender, because it's essentially a Ponzi scheme which will always collapse when you run out of suckers. The question then becomes: "do we stop drinking and get straight now, with all the pain that entails, or drink ourselves to death?" No one is saying this isn't painful for Greece - it obviously is, and indeed their government may not survive the process. But their previous course was unsustainable. Bailouts would only drag the rest of Europe down with them, extending the Ponzi scheme to a much larger group of suckers.

HAHA - I was right.

goman wrote:

They do not use the Euro now. That is my point, not that they are part of the Eurozone. Iceland had too much debt in Pounds. That was their problem. All of Britains debt is Pounds. All of USAs debt is in Dollars. All of Japans debt is in Yen. This is a very significant distinction.

Poland also did not have that much debt in foreign currency (the financial mess past them by) , although the Baltic States did. Baltic countries shrunk most in the financial crisis.

UK government does not have messed up finances since they are sovereign in their own debt. That is just political nonsense. Their banks on the other hand.

Here is the article that explains what I am saying.

http://www.ft.com/cms/s/0/e8a3cc8c-a...

‘True sovereigns’ immune from eurozone contagion

Small countries have their debt in stronger or reserve currencies? Really, I didn't know that except for the fact I repeatedly told you that the Irish before the euro saved their money in sterling or dollars. Your whole solution is based on either massive economies or reserve currencies which strangely enough is not achievable for most of us unless we, I dunno, form a monetary union with our neighbours in order to create one.

I cannot comment on Poland or the Baltic states but the fact that all those states want to join the euro even with all the current turmoil should tell you something.

As for Britain, are you claiming that the Bank of England isn't a government body or that that it doesn't hold foreign debt? Or that government bonds haven't been bought by foreign entities? I'm not sure what you're implying with that statement. If your implying that the UK can't go bankrupt, I agree. On the other hand, it can print money until inflation destroys the economy but I'm sure that would be more comforting solution.

And your ace in the hole is the three other reserve currencies outside of the euro. Like I said, explain how that helps for example Latvia who can just get picked off by short sellers because it doesn't matter what happens to Lat in the greater scheme of things and certain. Least off all if you work in the major financial hubs and get paid in a reserve currency.

I've said it before in this thread, your solution is one for an American economy and not a pan-European one. The dynamics are very different and often more to do with politics than economics, the euro itself a prime example. But we muddle through and make it up as we go along and this is where people should pay attention. I said repeatedly in this thread that the point of interest was not over countries default or leaving the euro because both were and are not going to happen. The question is how much further integration would go given the scale of the crisis.

As for the comments about the austerity measures in Greece, I'm with Aetius on this one. They should take comfort in the fact that the eurozone grew in the last quarter and ones of its PIIGS partners, Ireland, is facing growth next year. Also, don't think for a second that in a country who's GDP contracted by over 11% percent in 2 years that I somehow escaped from this scot free and I'm not sympathetic to their plight. At the very least they won't have to beg for their unemployment benefit like the 99ers.

goman wrote:

HAHA - I was right.

Really? Where did he used bigoted language like "lazy southern Europeans" and state that they should "get back to work". Also, they have been bailed out. Aetius and I had that discussion a few pages back about how the bailout would happen. The austerity measures are the cost of the bailout! Also none of us stated it was "good" that the Greeks will face hard time and have repeatedly expressed sympathy. The only part of your statement that was correct is the debt to GDP issue but that is completely out of their hands because they are in the euro and limited by the rules of it.

Axon wrote:
goman wrote:

HAHA - I was right.

Really? Where did he used bigoted language like "lazy southern Europeans" and state that they should "get back to work". Also, they have been bailed out. Aetius and I had that discussion a few pages back about how the bailout would happen. The austerity measures are the cost of the bailout! Also none of us stated it was "good" that the Greeks will face hard time and have repeatedly expressed sympathy. The only part of your statement that was correct is the debt to GDP issue but that is completely out of their hands because they are in the euro and limited by the rules of it.

Okay okay you got me there but I did call the other responses.

Axon wrote:

Small countries have their debt in stronger or reserve currencies? Really, I didn't know that except for the fact I repeatedly told you that the Irish before the euro saved their money in sterling or dollars. Your whole solution is based on either massive economies or reserve currencies which strangely enough is not achievable for most of us unless we, I dunno, form a monetary union with our neighbours in order to create one.

Yeah, they think this is a tool for stability but look at what has happened. True stability is only if you are truly sovereign. Perhaps some of these countries are too small to be truly sovereign but it is working for say Canada.

Axon wrote:

I cannot comment on Poland or the Baltic states but the fact that all those states want to join the euro even with all the current turmoil should tell you something.

They think Euro equals stability. Tell Greece and Spain that. If private banks control credit creation and especially bad credit it does not matter how well the government finances are during a boom. See Spain or even your country Ireland. So the Growth and Stability pact is meaningless especially during a recession. Shouldn't you trust investors to do their due diligence?

Axon wrote:

As for Britain, are you claiming that the Bank of England isn't a government body or that that it doesn't hold foreign debt? Or that government bonds haven't been bought by foreign entities? I'm not sure what you're implying with that statement. If your implying that the UK can't go bankrupt, I agree. On the other hand, it can print money until inflation destroys the economy but I'm sure that would be more comforting solution.

Britain like America and the Euroland's problem is unemployment and deflation. Britain and Euroland's markets are too big for significant internal inflation problems by printing money. There could always be external import-inflation problems however. That is what stagflation in the 70s was.

Axon wrote:

And your ace in the hole is the three other reserve currencies outside of the euro. Like I said, explain how that helps for example Latvia who can just get picked off by short sellers because it doesn't matter what happens to Lat in the greater scheme of things and certain. Least off all if you work in the major financial hubs and get paid in a reserve currency.

Latvia's debt was not in Latvian money but rather Euros, Swiss francs and Swedish crowns. Same thing happened in Iceland. Too much debt in a foreign currency. I already said that. Latvia also pegged their currency. They are not true sovereigns. Did you read the article I posted.

Axon wrote:

I've said it before in this thread, your solution is one for an American economy and not a pan-European one. The dynamics are very different and often more to do with politics than economics, the euro itself a prime example. But we muddle through and make it up as we go along and this is where people should pay attention. I said repeatedly in this thread that the point of interest was not over countries default or leaving the euro because both were and are not going to happen. The question is how much further integration would go given the scale of the crisis.

Yep it is political. The Growth and Stability Pact is political, not economic. Although there are good things about Euroland too such as trade agreements and access to markets.

Axon wrote:

As for the comments about the austerity measures in Greece, I'm with Aetius on this one. They should take comfort in the fact that the eurozone grew in the last quarter and ones of its PIIGS partners, Ireland, is facing growth next year. Also, don't think for a second that in a country who's GDP contracted by over 11% percent in 2 years that I somehow escaped from this scot free and I'm not sympathetic to their plight. At the very least they won't have to beg for their unemployment benefit like the 99ers.

The only way Ireland gets out of the mess is automatic fiscal spending stabilizers such as unemployment benefits.

Money being a commodity money is a modern explanation of money which is wrong.

Money has always been fiat based.

Bullion was not money in ancient times. Coins were money. Coins are token based. However bullion or raw material was prized because it was used to make coins/tokens.

Like today, the value of a coin is what is said on it, not what you can melt it and sell it at. The melting value of the tokens/coins were always less then the value of a coin. If that coin was melted it was no longer money.

This is also obviously true with the other token we use today. Paper money.

And even more true with the other token we use. Credit/debit cards.

goman wrote:

Perhaps some of these countries are too small to be truly sovereign but it is working for say Canada.

That is what this citizen of a small country is trying to tell you. Of course places like Japan, US, UK, Canada, France or even Germany for that matter can have "truly sovereign" currencies (what a condescending phrase) but anyone outside of the G8 are not that fortunate. How to you propose to fix that problem?

goman wrote:

They think Euro equals stability. Tell Greece and Spain that

No, tell that to Iceland who are currently trying to speed up their entry to the EU and the EMU. Last time I checked Greece, Spain and Ireland are all still solvent, unlike Iceland. Perhaps the Baltic states reasoning is sound enough.

Also, you state that the Growth and Stability pact is meaningless yet just a few post ago France, Greece and the other eurozone countries were getting their budgets approved by the commission. Which is it?

goman wrote:

That is what stagflation in the 70s was.

And was that any better? In the end they had to get bailed out by the EEC (the old EU) and the IMF. Areas of the country are still unemployment black spots due to the policles of the 70s and the cure of the 80s.

goman wrote:

Did you read the article I posted.

Sure did. Now, how does Latvia avoid having nearly all its debt in foreign currencies. Who in the right mind will hold debt that is counted in Lats?

goman wrote:

Yep it is political. The Growth and Stability Pact is political, not economic. Although there are good things about Euroland too such as trade agreements and access to markets.

Well, I wouldn't go so far as to call the Pact as political but the application of it was. Hopefully this crisis will require the ECB to far more vigilant in the future and not allow the big boys rewrite the rules when they see fit. Time will tell.

Don't call it Euroland, sounds like Euro Diseny or some other theme park. EU for all 27 member states and eurozone for the 16 who use the euro. Its the whole UK/British Isles debacle all over again

goman wrote:

The only way Ireland gets out of the mess is automatic fiscal spending stabilizers such as unemployment benefits.

As do all the European countries undergoing the austerity measures so good news all round.

The Pact is meaningless in an economic sense, not a political sense. Oh and it is bad politics. The so-called free marketers don't trust the market.

The austerity reduces growth while the fiscal spending aka stimulus promotes growth. Both are happening hence a Japanification of economics.

No one buys the Lat because it is not free floating but rather pegged to the Euro. Because they do this they are not "truly sovereign." And no I am not being condescending but rather just stating a fact. You cannot be sovereign if you depend on someone else's finances. Why did Latvia and Iceland let their economy be dominated by foreign currencies? Now that is stupid economics that Greece didn't even do.

Also don't trust the economic forecasts blindly. They are probably wrong by as much as 5% or more.

Ignoring the commentary about the EU and austerity for now, you still haven't answered the question. How do small countries maintain "truly sovereign" currencies? Your example of the Greeks, by the by, only reinforces my position because their currency is the euro, a reserve currency!

So, how do Iceland and the Baltic states or a myriad of small countries from around the world obtain "truly sovereign" currencies?

Axon wrote:

Ignoring the commentary about the EU and austerity for now, you still haven't answered the question. How do small countries maintain "truly sovereign" currencies? Your example of the Greeks, by the by, only reinforces my position because their currency is the euro, a reserve currency!

So, how do Iceland and the Baltic states or a myriad of small countries from around the world obtain "truly sovereign" currencies?

Switzerland is a small country that does it. So is Norway. Actually those are a couple of the most stable countries in the world. It is not impossible.

And assuming that they don't have debt in foreign currencies (I know the Swiss do), how do we go about achieving what they did? Discover massive oil deposits or becoming a massive haven for illegal monies?

Axon wrote:

And assuming that they don't have debt in foreign currencies (I know the Swiss do), how do we go about achieving what they did? Discover massive oil deposits or becoming a massive haven for illegal monies?

Neither. Have a policy of employment. That is all. How it is done is irrelevant.

Iran and Venezuela have massive oil deposits. Stable countries. Nope.

I'm sorry but assume I'm a five year old. A small country like Latvia, Iceland or Ireland could have truly sovereign currencies by having a policy of employment? Am I understanding you right because I'm having a hell of a time working out either have any effect on the other. Germany has a policy of employment yet uses the euro so its not "truly sovereign" which seems to turn the point on its head. Doesn't every country have a policy of employment, for that matter?

You say how its done is irrelevant but its completely relevant to the question I'm asking. If there is some nirvana of sovereignty that is of huge benefit to everyone in the world, the way its achieved would surely be quite important. So far we have ascertained that not holding any of your debt in foreign currencies and have a policy of employment are part of the process. Its all well and good pointing at the dollar, yen or pound and advise us to be more like them, the route to get there is clearly the important issue.

Look, as it stands the best option for stability for the Baltic states, Iceland or the myriad or small countries around the fringes of the eurozone in the short, medium or long term is to integrate further into the Common Market and adopt the euro. Even larger entities are recognising the benefits of joining perhaps not immediately but certainly at some stage. You're suggesting they are unwise to do so on the basis of some reasoning that escapes me entirely. Are we going about it in the best possible way? Not at all but your alternative so far has involved a lot of hand waving and, to be frank, nobody is going to bet their economic stability of some notion of a "truly sovereign" currency without a few details.

I might add that in the article, all the author said that what made a country truly sovereign was their risk of default. I suspect there would be several billion people who would take issue with that reasoning.

To be truly sovereign you must have 2 things. Floating currency and interest rate control. None of the EMU countries have that. One could say that Germany and perhaps France are the only sovereign in the EMU. Since they are export oriented countries the fiscal and monetary policies help their countries the most. I have said this before. But not all countries can be export oriented. It is an impossibility for the world since exports and imports cancel each other out. Perhaps Ireland can be part of the X countries but the EMU as a whole cannot work with all countries being X.

Now where does employment policy come into play. Well if you are a country that controls their own currency then you can keep your employment policies without outside speculator influence. Because defaults are impossible. The only thing possible is hyperinflation. But as argued before hyperinflation will not happen unless productive parts of the economy is destroyed either internally or externally.

There is no hand waving at all in this theory. It is an explanation of how macroeconomics work from accounting principles. The proponents of this explanation call this Modern Monetary Theory. If you would like to read more about it please do so. I might not be the best explainer of this theory but there are some that are such as Warren Mosler, L Randall Wray, and Bill Mitchell. Before posting I ask you to read at least Mosler's 7 deadly innocent frauds. http://moslereconomics.com/2009/12/1...

But to understand you need to change your reference.

That is not to say there are not good things that Eurozone countries have such as a large market, similar regulations, good trade policies and the like. However these things cannot stop recessions. Only fiscal and monetary policies can work to minimize recessions. Recessions are the biggest threat to employment and unemployment is the biggest threat to the stability of countries.

goman wrote:

Before posting I ask you to read at least Mosler's 7 deadly innocent frauds. http://moslereconomics.com/2009/12/1...

Lets talk about some of his "solutions" to the crisis:

1) Sales tax holiday, which would add $650 to the monthly take-home pay of a couple with a $100,000 income. Something very similar was already tried in January 2008. Far from creating "millions of new jobs", it just put us further in debt and the economy crashed a few months later.

2) Revenue sharing ($150 billion to the states). The states have already received at least twice that amount in stimulus funds, still have huge deficits, and are still cutting services. Totally ineffective, and indeed counter-productive.

3) National Service jobs, $8 an hour for anyone who "wants to work". Far from creating economic prosperity, this would simply create a class of people who are getting $8 an hour for nothing, taking resources from the private economy and redirecting them to useless ends. What would they be doing? What possible incentives would there be for these people work harder or faster, or indeed at all? We could have these people digging ditches with spoons and then filling them back in - would that benefit the economy?

4) $5000 a year for universal health coverage. All this would do is inflate health care costs even further, as a fixed and tightly constrained supply deals with sudden additional demand. It would change very little, in addition to being a juicy target for massive fraud and theft. This is, in fact, what has been occurring in the health care market as the government intrudes further and further.

Basically, he understands how fiat money functions mechanically, but ignores or dismisses the damage that manipulating fiat currency does to the real economy as well as ignoring or dismissing the very real costs of debt. (Hint: inflation is not the only problem with deficit spending, and debt has serious consequences for the real economy, especially when squandered. Think about what happens when a debt is inflated away.) His prescriptions have already been tried and they don't work, but rather make the problem worse.

Aetius wrote:
goman wrote:

Before posting I ask you to read at least Mosler's 7 deadly innocent frauds. http://moslereconomics.com/2009/12/1...

Lets talk about some of his "solutions" to the crisis:

1) Sales tax holiday, which would add $650 to the monthly take-home pay of a couple with a $100,000 income. Something very similar was already tried in January 2008. Far from creating "millions of new jobs", it just put us further in debt and the economy crashed a few months later.

2) Revenue sharing ($150 billion to the states). The states have already received at least twice that amount in stimulus funds, still have huge deficits, and are still cutting services. Totally ineffective, and indeed counter-productive.

3) National Service jobs, $8 an hour for anyone who "wants to work". Far from creating economic prosperity, this would simply create a class of people who are getting $8 an hour for nothing, taking resources from the private economy and redirecting them to useless ends. What would they be doing? What possible incentives would there be for these people work harder or faster, or indeed at all? We could have these people digging ditches with spoons and then filling them back in - would that benefit the economy?

4) $5000 a year for universal health coverage. All this would do is inflate health care costs even further, as a fixed and tightly constrained supply deals with sudden additional demand. It would change very little, in addition to being a juicy target for massive fraud and theft. This is, in fact, what has been occurring in the health care market as the government intrudes further and further.

Basically, he understands how fiat money functions mechanically, but ignores or dismisses the damage that manipulating fiat currency does to the real economy as well as ignoring or dismissing the very real costs of debt. (Hint: inflation is not the only problem with deficit spending, and debt has serious consequences for the real economy, especially when squandered. Think about what happens when a debt is inflated away.) His prescriptions have already been tried and they don't work, but rather make the problem worse.

1. It is a payroll tax holiday. Not an income tax or sales tax holiday. And it is done until the recovery is complete. IE full employment. Not beforehand.
2. It helps, no need to cut as much and exasperating the problem. I believe Krugman called it 50 little Hoovers problem. State and Local governments since they have budgets and constitutional amendments to balance the budget every year or two cannot deficit spend like the feds can.
3. The biggest incentive is making money. $8 hour is more than $0 hour. There is a lot that can be done at minimum wages. From database entry to infrastructure clean up to non-profit work that many people, especially the young, can do to be productive members of our country. Since private companies get their savings from deficit spending, it is impossible for them to compete for $8/hour workers.
4. Here is the health care proposal in his words. Not how you interpret it.

Mosler Health Care Proposal

Government funding for a full time, $8 per hour job that includes full federal health care coverage for the worker and dependents.

This immediately triggers market forces that will result in all businesses providing health care benefits as a matter of competition.
As a matter of economics and public purpose it is counter productive for health care to be a marginal cost of production.

No economist will disagree with this. Unless going to work makes one more prone to needing health care, making the cost
a marginal cost of production distorts the price structure and results in sub optimal outcomes.

Therefore government should fund at least 90% of health care costs paid for by businesses.
Long term vision subject to revised details:
Everyone gets a ‘medical debit card’ with perhaps $5000 in it to be used for qualifying medical expenses (including dental) for the year.
Expenses beyond that are covered by catastrophic insurance.
At the end of the year, the debit card holder gets a check for the unused balance on the card, up to $4,000, with the $1,000 to be spent on preventative measures not refundable.
The next year, the cards are renewed for an additional $5,000.
Advantages:
Doctor/patient time doubled as doctor/insurance company time is eliminated.
The doctor must discuss the diagnosis and options regarding drugs, treatments, and costs with the patient rather than an insurance company.
Individuals have a strong incentive to keep costs down.
Doubling the time doctors have available for patients increases capacity and service without increasing real costs.
Total nominal cost of approx. $1.5 trillion ($5,000×300 million people) is about 10% of GDP which is less than being spent today, so even when catastrophic costs are added the numbers are not financially disruptive and can easily be modified.
Eliminates medical costs from businesses, removing price distortions and medical legacy costs.
May obviate the need for Medicare and other current programs.
Eliminates issues regarding receivables and bad debt for hospitals and doctors.
Eliminates the majority of administrative costs for the nation as a whole for the current system.
Patients can ’shop’ for medical services and prices as desired.
Disadvantages: Those more in need of the rebate at the end of the year may elect to forgo treatment beyond the $1,500 not subject to the rebate.
Doctors may be able to more easily convince patients of unneeded treatments and expensive drugs vs insurance companies.

I told Axon to read the innocent frauds, not the proposals for solutions. Else you wouldn't have made the mistakes in interpreting his proposals you have. Equating government debt with private debt. Competition with private sector.

goman wrote:

1. It is a payroll tax holiday. Not an income tax or sales tax holiday. And it is done until the recovery is complete. IE full employment. Not beforehand.

We can be at full employment today, by paying the unemployed to dig ditches and fill them in again with spoons. Is that economically productive? Of course not - in fact, it's economically counter-productive - an economic negative, which actually makes everyone worse off.

2. It helps, no need to cut as much and exasperating the problem. I believe Krugman called it 50 little Hoovers problem. State and Local governments since they have budgets and constitutional amendments to balance the budget every year or two cannot deficit spend like the feds can.

Since Hoover was a massive deficit spender, I find that comparison highly amusing. (Look it up - Roosevelt ran on an austerity platform and then proceeded to do more of what Hoover did, massive public programs and borrow/spend strategies.) What it actually is doing is preserving unproductive activities, such as propping up a failed public educational system that has doubled or tripled in cost over the last ten years without achieving any measurable gains in actually educating our kids. Again, these programs are actually a net negative, dragging our economy further down and setting the stage for worse problems later on.

3. The biggest incentive is making money. $8 hour is more than $0 hour. There is a lot that can be done at minimum wages. From database entry to infrastructure clean up to non-profit work that many people, especially the young, can do to be productive members of our country.

They can be productive, but why should they when they can get $8 an hour for doing next to nothing? These jobs are virtually guaranteed to be useless, since the decisions on what work to do will be made politically, not economically, while the workers won't be fireable ("how can you put them on the street?").

4. Here is the health care proposal in his words. Not how you interpret it.

Mosler Health Care Proposal

The problems with this should be obvious, and I've already mentioned them. This proposal would do virtually nothing he claims, and would cost trillions while making health care more expensive and less accessible.

I told Axon to read the innocent frauds, not the proposals for solutions. Else you wouldn't have made the mistakes in interpreting his proposals you have. Equating government debt with private debt. Competition with private sector.

Mistakes? His proposals and ideas have been tried. They've failed over and over again, most recently with the current administration. If he's wrong, it's not a mistake to discount his theories.

1. Payroll tax holiday until full employment. Not digging ditches and filling it with spoons. That is stupid. How about cleaning the highways or fixing the bridges or other public projects that do not have private profits as an incentive but rather trade and public welfare as an incentive.

2. Hoover may have spent but not at the scale of the New Deal programs. Also, there was no FDIC, no Social Security, no Unemployment Insurance and no Medicare during Hoovers time which are the automatic stabilizers that did not let us crash as bad as the Great Depression. It is not just about how much you spend but what you spend it on. I wouldn't call the Hoover Dam unproductive either. read about Marriner S Eccles He should be known as the American Keynes.

3. Economic decisions can be just as destabilizing as political decisions. It was profit motive on the highest order that got us in this mess. Profit motive favors individuals and corporations, not the government. How do I know this. Because the government cannot profit. It can only tax and spend as already pointed out.

4. Actually his proposal is pretty libertarian in my opinion. Giving people more control over their health care finances are what libertarians should be for. And no need to set up a new Department or anything. It can be like a tax credit in the IRS. So you are not even expanding government.

The reason that Europeans did not need as much stimulus to slow the recession is that their automatic stabilizers are stronger than American ones. People who wanted stimulus always said what Obama and Congress did was not enough. They did the math and they knew. So don't call them out. Call the austerity folks out. They are the ones that weakened the stimulus.

1. Payroll tax holiday until full employment. Not digging ditches and filling it with spoons. That is stupid. How about cleaning the highways or fixing the bridges or other public projects that do not have private profits as an incentive but rather trade and public welfare as an incentive.

I'm all for deficit spending if it's targeted infrastructure stimulus. Even something like ubiquitous internet access for every citizen would be productive. I think Aetius is trying to say that the states tend to burn lump sums of cash on their own pet projects and ignore items of national interest, which is true - when the money isn't subject to conditions.

For instance, here in the Pacific Northwest we're using a lot of stimulus money to repair our crappy bridges, enhance public transportation, etc. These investments are long overdue and probably wouldn't have happened without matching, targeted stimulus money from the feds.

goman wrote:

1. Payroll tax holiday until full employment. Not digging ditches and filling it with spoons. That is stupid. How about cleaning the highways or fixing the bridges or other public projects that do not have private profits as an incentive but rather trade and public welfare as an incentive.

Those activities are just as economically marginal as digging ditches with spoons - if they weren't, they would be occurring already. You can't have trade without private profits - the entire purpose of trade is for both sides to benefit.

2. Hoover may have spent but not at the scale of the New Deal programs. Also, there was no FDIC, no Social Security, no Unemployment Insurance and no Medicare during Hoovers time which are the automatic stabilizers that did not let us crash as bad as the Great Depression.

None of these things were in place during the 1921 recession, which most people don't even know about. It was just as bad as the depression that started in 1929, but with a major difference - President Harding very carefully and deliberately did nothing, and even reduced the federal budget.

It is not just about how much you spend but what you spend it on. I wouldn't call the Hoover Dam unproductive either.

It's about optimal allocation of scarce resources. Yes, the Hoover Dam is useful - but what wasn't built because so much capital and resources went into the Dam instead? It is almost certain that whatever those things were, they would have been a better allocation of resources, because the dam was a politically driven project, not an economically driven one.

3. Economic decisions can be just as destabilizing as political decisions.

Absolutely, and often are much worse because their effects ripple much farther and affect many more people.

It was profit motive on the highest order that got us in this mess. Profit motive favors individuals and corporations, not the government. How do I know this. Because the government cannot profit. It can only tax and spend as already pointed out.

No. Rent-seeking and government meddling got us into this mess. Profit does not entail using government to protect your monopoly or to socialize losses while privatizing gains. Government cannot profit, but it can grow fat off of making sure that political cronies do profit ... which is exactly what happened.

4. Actually his proposal is pretty libertarian in my opinion. Giving people more control over their health care finances are what libertarians should be for. And no need to set up a new Department or anything. It can be like a tax credit in the IRS. So you are not even expanding government.

Absolutely not. His proposal takes wealth from people and gives it to others by force; it forces people to allocate the money in a certain way; it controls how the money can be spent; and it nationalizes health care beyond the money handed out, which would bloat Medicare or some similar program even further. It's simply preposterous to call his plan libertarian in any way, shape, or form. People should have entire control over their health care, as it is not something that government should be involved in at all. Government spending in that area should be reduced to zero and that money returned to the taxpayers who earned it to spend as they see fit - that's a libertarian plan.

The reason that Europeans did not need as much stimulus to slow the recession is that their automatic stabilizers are stronger than American ones. People who wanted stimulus always said what Obama and Congress did was not enough. They did the math and they knew. So don't call them out. Call the austerity folks out. They are the ones that weakened the stimulus.

No stimulus is ever big enough. It cannot work - you can't dig yourself out of a debt problem with more debt. Austerity isn't the Mad Dog 20/20, it's the morning-after hangover. Yes, you can drink more to temporarily stave it off, but it will just come back worse - or your liver will give out.

Minase wrote:

I think Aetius is trying to say that the states tend to burn lump sums of cash on their own pet projects and ignore items of national interest, which is true - when the money isn't subject to conditions.

No - I'm saying that all political spending is the way - such decisions are always made with political considerations in mind, not economic ones. You might as well try to stop water from flowing downhill.

For instance, here in the Pacific Northwest we're using a lot of stimulus money to repair our crappy bridges, enhance public transportation, etc. These investments are long overdue and probably wouldn't have happened without matching, targeted stimulus money from the feds.

The real question is - what price did you pay for those improvements? What economic activity didn't happen because the government took resources and spent them on those projects?