tag:blogger.com,1999:blog-7366878066073177705.post8549736753890801270..comments2024-02-09T18:16:45.614+00:00Comments on The Psy-Fi Blog: Tax Notes To An Unborn Grandchildtimarrhttp://www.blogger.com/profile/06254802085744425067noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-7366878066073177705.post-26949782142806394782012-06-23T09:22:56.356+01:002012-06-23T09:22:56.356+01:00I think that the problem of the household debt is ...I think that the problem of the household debt is being more exposed lately. I assume it is due to the fact that housing prices are falling and people who thought that they will have their assets always protected and increased by the (ever) increasing housing market (which is of course an economic blasphemy) are now exposed to the fact,that their property may become too cheap to pay their own debts.<br /><br />I think that economic irresponsibility is not a matter of rational behavior but rather matter of confusion and misinterpretation of economic facts (thanks to big banks and governments, who tells us to spend more). My evidence for this is that even the best educated and advanced nations are struggling with the high levels of debt. In Canada <a href="http://ilovetoronto.com/featured/2012/04/right-time-canada-debt-consolidation" rel="nofollow">the problem of debt consolidation</a> became an issue of the central government. <br /><br />The most important thing is that banks and governments stop lying to people about the situation. The other is to promote new economic behavior, which will have enough room for individualism, but will also merit more community building and social cohesion.Laura S.noreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-87308436025903635052012-06-22T13:18:10.507+01:002012-06-22T13:18:10.507+01:00Hi Kev
Actually I have no idea how debt will hurt...Hi Kev<br /><br />Actually I have no idea how debt will hurt us, or even if it will. I just thought it was an interesting topic :)<br /><br />By coincidence I was listening to Niall Ferguson's Reith lecture this morning, which covers some of the same ground. Which doesn't make it any more right, of course, but his US debt figures are even more mind-boggling ... <a href="http://www.bbc.co.uk/programmes/b01jmx0p/features/transcript" rel="nofollow">The Human Hive</a>timarrhttps://www.blogger.com/profile/06254802085744425067noreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-53872804754416297802012-06-22T13:11:18.760+01:002012-06-22T13:11:18.760+01:00Dear Grandpa,
Try again. I was aborted by your da...Dear Grandpa,<br /><br />Try again. I was aborted by your daughter after she found out her unemployed, crackhead boyfriend was also cheating on her.<br /><br />See you in hell!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-6731901625418280602012-06-22T10:33:52.043+01:002012-06-22T10:33:52.043+01:00What I wrote doesn't contradict Reinhart &...What I wrote doesn't contradict Reinhart & Rogoff. If we can agree that debt issuance expands the money supply and that expanding the money supply pushes up the general price level. GDP is a summation of market values (price levels) over a given period. A rising price level leads to rising GDP. Since debt/GDP is a ratio, if issuing debt causes the price level to rise which causes GDP to rise then increases in absolute debt levels don't necessarily cause debt/GDP to rise. The numerator and denominator of the ratio are correlated, the transmission mechanism is debt inflation -> price inflation -> GDP inflation. <br /><br />Anyway, I love your blog. One of the things you've taught me is that confirmation bias together with bias blind spot makes it unlikely that people will convince each other on a blog. I agree with the general gist of the article, which is that all this debt will hurt us. We just disagree on how. Keep up the good work!Kevnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-63864623598523869642012-06-22T09:01:25.372+01:002012-06-22T09:01:25.372+01:00Two points.
As the paper quoted above makes clear...Two points.<br /><br />As the paper quoted above makes clear, of the current estimate of US government debt ($80 trillion) the majority ($67 trillion) is the form of unfunded obligations for social security, healthcare etc. Arguments based purely on bond issuance are really marginal, but are understandable, given that government accounting is really a vast and opaque Ponzi scheme.<br /><br />In any case the work of Rogoff and Reinhart suggests that when debt levels get to 90% of GDP then growth stalls: see <a href="http://www.psyfitec.com/2011/08/triumph-of-pessimists.html" rel="nofollow">Triumph of the Pessimists</a>. The empirical evidence, as opposed to the economic theorising, suggests that our debt levels will matter in the future.timarrhttps://www.blogger.com/profile/06254802085744425067noreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-71589195584781790792012-06-22T01:59:10.823+01:002012-06-22T01:59:10.823+01:00Yes, the assumptions of this blog post are wrong. ...Yes, the assumptions of this blog post are wrong. To help you understand why, here is a link to a simple analysis:<br />http://www.nakedcapitalism.com/2012/05/j-d-alt-playing-monopolis-monopoly-an-inquiry-into-why-we-are-making-ourselves-so-miserable.htmlAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-51350590880583552882012-06-21T23:39:03.423+01:002012-06-21T23:39:03.423+01:00The government debt is the total sum of money that...The government debt is the total sum of money that the government has issued and not yet reclaimed. That government debt is in the hands of private citizens, both domestic and foreign, to whom it acts as government credit. When we buy stuff, we exchange government credit (money) for goods and services. The credit is extinguished when we use it to pay our taxes. <br /><br />When the government debt goes up, it means that the total amount of government credit in circulation (money) goes up. This inflation of the money supply leads to inflation of the general price level of goods and services with a two year lag period. <br /><br />Grandpa is causing damage, but he's wrong (maybe suffering from self-serving bias) in assuming that his grandson will pay the bill. The increasing government debt increases the money supply, which within two years causes inflation of grandpa's pension and savings. <br /><br />In contrast, by the time grandson starts to work for a living, society will be operating under a new price level based on the total amount of government debt at that period. Grandson will be used to price levels that would have sounded outrageous to granddad, but his wage will also be calculated at the new price levels. Grandson's future purchasing power isn't affected by granddad's foolishness today. Although if granddad intended to pass some savings onto his grandson, the money will be worth a lot less than what graddad had envisioned.Kevnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-32590395984918971822012-06-21T22:57:46.565+01:002012-06-21T22:57:46.565+01:00Yeah. I usually find the posts on this blog extrem...Yeah. I usually find the posts on this blog extremely interesting. But this post is based on a flawed understanding of how a monetary system works. Sorry, I'm with cig on this one.Kevnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-27041302694818206772012-06-21T13:08:54.834+01:002012-06-21T13:08:54.834+01:00Dear Granddad,
Fortunately, unlike you, I had the...Dear Granddad,<br /><br />Fortunately, unlike you, I had the benefit of an education. A particular interesting course was System Thinking 101. I know your brain is not what it used to be, and it's hard for you to concentrate more than five minutes, so I'll try to explain in the simplest possible terms.<br /><br />Debt is a contract that says that some time in the future a party will pay another party. Someone gives money, someone else receives it, and the amounts match to the penny. As you'll be dead by then, you cannot be the one who gets it. So basically someone of my generation will pay someone else of my generation. So as a generation we'll be even.<br /><br />It could be that the arrangements you've setup for us lead to transferring resources to undeserving members of my generation. This is only truly unfair if the recipients are a minority, but this makes it easy to solve: the majority will then just enact law to either cancel your old contracts, or, if it happens to be more convenient, tax back the unfairly distributed monies, and redistributing them back in a fair manner.<br /><br />In other words, there's no scenario where you can cock up so much as to inconvenience us. You need not worry, and can go back to watch daytime TV.<br /><br />I'll explain how your profligacy with fossil fuels is of similar irrelevance to us, once you had some rest. <br /><br />Best,<br />Your grandkid.cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-89203082493380271102012-06-21T11:32:14.453+01:002012-06-21T11:32:14.453+01:00* like the format* like the formatAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-68180700012767492672012-06-21T11:31:52.280+01:002012-06-21T11:31:52.280+01:00Very nice. Like for format.Very nice. Like for format.Anonymousnoreply@blogger.com