libertasbella wrote:Logically? You cannot hold these two positions. Government spending which creates jobs only looks appealing if you ignore the fact that the private sector would have created its own jobs had it retained its money rather than pay taxes.
This was true in the EU & EZ, because there the national Gov. could only deficit spend up to the 60% limit in the debt/GDP ratio. Now they are ignoring the debt rules, but are threatening to start enforcing them soon. Strangly, they didn't realize that the main way to increase the GDP is with deficit spending. Or, by exportig more than you import. But, by definition, it is not possible for all nations or even over half of nations to export more than they import. Also, in the EZ, German baanks need to lend their profits to people of the emporting nations so they cn buy more German made stuff.
. . This is fine until it stops. When the lending stops, suddenly, incomes in the borrowing nation drop, they reduces its GDP; this triggers the debt limit rules which cause the Gov. to tax more and spend less; this cuts incomes more. This is a trap that the US was in in 1929, the only way out fot FDR ws massive deficit spending. BUT, in the EU& EZ massive deficit spending it against the rules (especially, when they were already cutting sppending to reduuce the debt/GDP ratio). Strangly, only MMTers saw his result in the 1990s. They warned Europeanss that this would happen and it did after 2008. This whole series of events proves the essential truth of MMT. I.e., that reasonable deficit spending is absolutely necessary for almost all nations to have a growing GDP. With a constant (let alone falling) money supply, the *only* way the GDP to grow, is for the velocoty of money in the economy to increse; and obviously there is a limit to how fast money can circulate in an economy. No matter what tech is created to let money circulate faster, very soon the speed of circulation stabalizes until new tech is created. Obviously, new tech has not and will not be creaed fast enough forever. It is a good thing that fiat currencies have removed the only cap on Gov. deficit spending,i.e. the need to have gold to back all the cash in the naation.
. . Note, now there is no cap on the so-called "national debt", that is just the money fed over the centuries or decades into the economy to let GDP grow. It can grow without limit as long as it doesn't cause inflation. This why deficit spending must be kept to 'reasonble' levels. Generally, this is the total of leakages (savings & trade deficit) and a little more to let the GDP grow. Just replacing the leakages is not enough to allow GDP growth.
So, MMT has proven that nations like the US, Aust., NZ, Japan, etc. should deficit to replace the money that "leaks" out of the economy. That the 2 main leakages are savings and a foreign trade deficit. The deficit spending gives income to people without reducing anyone's income with taxes. If bonds were sold and remain held by the provate sector, the money is only what would have been saved anyway. If the Fed. buys the bonds, then the money is created out of thin air by the Fed. to buy them. [Like I explained in anoher recent thread, we really should not include money yhr gov. owes the ed. Soc. Sec. Admin., or othe US Gov. agencies because, even corps and people can't owe themselves money. Why should it be possible for the Gov. to do this impossible thing?
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