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Started By
Message
re: Hedge fund manager Daniel J. Arbess calls for direct money printing to Treasury
Posted on 5/20/13 at 12:01 am to BennyAndTheInkJets
Posted on 5/20/13 at 12:01 am to BennyAndTheInkJets
quote:
Interest is controlled by supply/demand of our debt so the Fed can smooth out the economic and market thirst for our debt but principal is still controlled by the budget. The budget is controlled by politicians, and if you think Keynesiasm creates a blank check for the government this would be creating a money tree.
I just can't possibly fathom how it would be any worse than what we've seen the last 5 years, and I also can't understand why a blank check for government to cut taxes until inflation arrives is any worse than a blank check to completely override the pricing mechanism for money & interest rates.
Like I always say, ZIRP is more dangerous than people think. This would be a more honest way to pay for government expenditure, in my opinion. It makes far more sense to just cut taxes across the board and make up for it with a counteracting inflation tax, rather than to pick winners and losers and subsidize the financial industry while creating odd pockets of asset price bubbles as the remainder of the economy continues to erode.
The CPI index fell from March to April this year for the first time since 2003. Things are not looking good.
2
Posted on 5/20/13 at 8:46 am to Doc Fenton
quote:agree
This would be a more honest way to pay for government expenditure
quote:But do you have any concern that funding the treasury this way could lead to even bigger stimulus packages in future economic downturns instead of across the board tax cuts? Which inevitably involves a lot of picking winners and losers. Or do you think this method wouldn't affect the ratio of tax cuts to stimulus much? I have little faith that future politicians will collectively vote to give themselves less power and pass on opportunities to play santa clause when they can convince voters it's in response to a "crisis".
rather than to pick winners and losers
quote:so the argument is that this should only be done the event of a financial crisis? To increase the money supply more quickly via tax cuts, instead of through the banks? At what point would you distinguish staving off a crisis from returning to the standard practice, near zero interest rates, etc, to combat a lagging economy following the crisis, and who would decide that? If it's at the fed's option, then I agree it would likely be a much better method for injecting money into the real economy, but if it's a standing option for congress, that distinction seems suspiciously arbitrary to me.
subsidize the financial industry while creating odd pockets of asset price bubbles
Posted on 5/21/13 at 11:21 am to Doc Fenton
quote:
I just can't possibly fathom how it would be any worse than what we've seen the last 5 years, and I also can't understand why a blank check for government to cut taxes until inflation arrives is any worse than a blank check to completely override the pricing mechanism for money & interest rates.
Because the government would still indirectly affect the pricing mechanisms for money & interest rates, and at the end of the day it depends on who you give this authority to. Who would you rather have the printing press, the Fed or the government. Because if you allow this, you do in substance give this power to the government. I'm sorry, but I can't see how you think this wouldn't be worse than the past 5 years. Our budget deficit is actually decreasing now thanks to the sequestration and tax receipts. Be it as it may, the sequestration completely cuts future growth drivers (R&D) while not cutting growth headwinds (entitlements), but that's a different conversation.
quote:
Like I always say, ZIRP is more dangerous than people think. This would be a more honest way to pay for government expenditure, in my opinion. It makes far more sense to just cut taxes across the board and make up for it with a counteracting inflation tax, rather than to pick winners and losers and subsidize the financial industry while creating odd pockets of asset price bubbles as the remainder of the economy continues to erode.
ZIRP is dangerous, but giving government unlimited money is infinitely more dangerous. How is it an honest way to pay for expenditures is for them to have no consequences for expenditures? That makes no sense. So your point is to cut taxes across the board, give the government a free checkbook, then tax when inflation rises? That's under the assumption that politicans do what's economically right. Come on Doc.
quote:
The CPI index fell from March to April this year for the first time since 2003. Things are not looking good.
They aren't looking absolutely horrible either. That's kind of what we're in for a while. We have three distinct pockets in the global market: Negative growth in Europe (possibly Japan), Slower but positive growth in the US (possibly Japan), and higher growth in EM.
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