Budget Problems And Solutions.

[morganist]

In my comments, I was in large part recalling the essence of remarks made in some of your prior posts that evidenced for me that you hold to economic theory that has been, as far as I am concerned, thoroughly discredited. For example, in your post above you write "...future taxation that will pay the borrowed money back." This certainly implies to me a misleading intermingling of a government prerogative, i.e., taxation, with a private sector obligation, i.e., paying borrowed money back. In essence, taxation simply removes money from the economy and helps to give money value, in so far as citizens are required to pay taxes. To be more specific I would have to go back and reread some of your earlier posts. I am not inclined to do that now, but perhaps later.

The government is definitely intending to take in taxation to pay off the outstanding government debt because they have very few other revenue streams. I intend to increase the governments revenue streams to bring in other money to pay off the outstanding government or pay for the government's expenditure so it does not have to get into more debt.

 

[piezoe]

I intend to increase the governments revenue streams to bring in other money to pay off the outstanding government or pay for the government's expenditure so it does not have to get into more debt.

Why? If you increase the governments revenue stream by taking additional revenue from the private sector, depending on how much you take relative to demand for money including the need to allow for private savings, i.e., investment, you may end up forcing the private sector into recession. There may be times when increasing government revenue is appropriate. What criterion will you use to decide if it's appropriate? I don't think, generally speaking, debt is the proper criterion. That would be a criterion if we were talking about personal debt, because we can 't create a permanent addition to money. We can only create a temporary addition via credit. We are not writing of personal debt and revenue here; we are writing of sovereign debt and revenue. The criteria are quite different in my view.

 

[morganist]

Why? If you increase the governments revenue stream by taking additional revenue from the private sector, depending on how much you take relative to demand for money including the need to allow for private savings, i.e., investment, you may end up forcing the private sector into recession. There may be times when increasing government revenue is appropriate. What criterion will you use to decide if it's appropriate? I don't think, generally speaking, debt is the proper criterion. That would be a criterion if we were talking about personal debt, because we can 't create a permanent addition to money. We can only create a temporary addition via credit. We are not writing of personal debt and revenue here; we are writing of sovereign debt and revenue. The criteria are quite different in my view.

You are looking at economics purely from a domestic perspective. The government can produce new products and sell them or license them around the world. Many products are only possible if the government allows them by introducing new legislation or approval. These new products can offers new services for consumers that were not available before and they can also make efficiencies for services already provided. There is ample opportunity to generate more wealth in a domestic economy and bring in money from foreign trade through the government developing new products. The products would be new and not impact the existing private sector business model, it may even enhance it by offering private business operations the opportunity to use the newly developed products which would be superior to the existing product range.

 

[piezoe]

You are looking at economics purely from a domestic perspective.

I'm not really. What I have said applies to countries whose economies are part of the global economy. In fact all industrialized nations are, today, to one extent or another, participants in the global economy. The underlying constraint for all nations that have their own fiat currencies is that the amount of money that is circulating and readily available to purchase goods and services, priced in that same currency, remains in balance with the demand for those same goods and services. All modern nations with fiat currencies are effectively now on a productivity standard.

 

[morganist]

I'm not really. What I have said applies to countries whose economies are part of the global economy. In fact all industrialized nations are, today, to one extent or another, participants in the global economy. The underlying constraint for all nations that have their own fiat currencies is that the amount of money that is circulating and readily available to purchase goods and services, priced in that same currency, remains in balance with the demand for those same goods and services. All modern nations with fiat currencies are effectively now on a productivity standard.

You are missing two elements to the circulation of money, the first is the velocity of money and the ability of the function of transaction to increase. The second is the ability of the economy to produce a greater number of products or services. Unless there is zero unemployment, underemployment, or all of the resources in the nation are utilised and there is no opportunity for efficiencies or optimisation then the economy can grow regardless of whether the growth derives from the public or private sector. Many private sector business opportunities are only enabled by the government's authorisation of the production process or service they provide. This in itself can be expanded or eased to drive the opportunity for further domestic output and foreign trade. Optimisation and efficiencies for products and services can be developed and the licensed use of the methods of enabling these techniques can generate and income for the organisation that owns them.

 

[piezoe]

You are missing two elements to the circulation of money, the first is the velocity of money and the ability of the function of transaction to increase. The second is the ability of the economy to produce a greater number of products or services. Unless there is zero unemployment, underemployment, or all of the resources in the nation are utilised and there is no opportunity for efficiencies or optimisation then the economy can grow regardless of whether the growth derives from the public or private sector. Many private sector business opportunities are only enabled by the government's authorisation of the production process or service they provide. This in itself can be expanded or eased to drive the opportunity for further domestic output and foreign trade. Optimisation and efficiencies for products and services can be developed and the licensed use of the methods of enabling these techniques can generate and income for the organisation that owns them.

This amounts to arm waving on your part. I was not as clear in my response to you as I might have been. For convenience I used a simple example where there is no trade imbalance to consider. If foreign sector involvement is added where there is a trade imbalance, the principles are essentially the same.

Ignoring the government's role for the moment to keep this as simple as possible, say nation A runs a trade surplus with nation B. For both nations their aggregate savings is equal to their investment plus export flow. For nation A, savings exceed investment because their net exports are positive, while for nation B savings fall short of investment because their net exports are negative.

When the governments role is added into an open economy with free trade, aggregate saving is the sum of the governments deficit plus investment plus net exports. What I have written applies equally, once you add in the effect of trade, to countries whose economies are part of the global economy , but have balanced trade, and to a country with a closed economy -- I simplified by assuming that countries with global trade did not have a trade imbalance, because I wanted to emphasize what is most important . In fact all industrialized nations today are participants in the global economy. The underlying constraint, to avoid inflation or deflation, for the nations that have their own fiat currencies is that the "effective" amount of money circulating and readily available to purchase goods and services, priced in that same currency, remains in balance with the goods and services available for purchase. This view automatically incorporates the concept of money velocity. The bottom line is that all modern nations with fiat currencies are effectively on a productivity standard. Money is worth what it can be exchanged for.

 

[morganist]

This amounts to arm waving on your part. I was not as clear in my response to you as I might have been. For convenience I used a simple example where there is no trade imbalance to consider. If foreign sector involvement is added where there is a trade imbalance, the principles are essentially the same.

Ignoring the government's role for the moment to keep this as simple as possible, say nation A runs a trade surplus with nation B. For both nations their aggregate savings is equal to their investment plus export flow. For nation A, savings exceed investment because their net exports are positive, while for nation B savings fall short of investment because their net exports are negative.

When the governments role is added into an open economy with free trade, aggregate saving is the sum of the governments deficit plus investment plus net exports. What I have written applies equally, once you add in the effect of trade, to countries whose economies are part of the global economy , but have balanced trade, and to a country with a closed economy -- I simplified by assuming that countries with global trade did not have a trade imbalance, because I wanted to emphasize what is most important . In fact all industrialized nations today are participants in the global economy. The underlying constraint, to avoid inflation or deflation, for the nations that have their own fiat currencies is that the "effective" amount of money circulating and readily available to purchase goods and services, priced in that same currency, remains in balance with the goods and services available for purchase. This view automatically incorporates the concept of money velocity. The bottom line is that all modern nations with fiat currencies are effectively on a productivity standard. Money is worth what it can be exchanged for.

You are now missing another aspect to money circulation and production. You are assuming the level of production is constant and cannot be increased. If the new products improve efficiencies the ability to produce a greater quantity of goods will have been achieved. An increase in supply of goods and services will generate economic growth. When governments operate internationally and enter other nations' markets they do as a private enterprise and can help to increase the output of a nation.

If a country developed a new product that enables an efficiency which increases the output of goods it could be marketed around the world and enable economic growth. There is an argument as to whether the new output would create deflation or whether the increased supply of goods generates its own demand, which is put forward in Say's Law. In any event there has been an increase in economic growth. Wither way it is either more goods at lower prices or more goods at the same price, but it is more goods.

 

[TommyR]

may i recommend this short analysis not to discount the top down approach

 

[piezoe]

You are assuming the level of production is constant and cannot be increased

Of course I am not. Why would that be an assumption? How bizarre...

 

[Overnight]

...

If a country developed a new product that enables an efficiency which increases the output of goods it could be marketed around the world and enable economic growth. There is an argument as to whether the new output would create deflation or whether the increased supply of goods generates its own demand, which is put forward in Say's Law. In any event there has been an increase in economic growth. Wither way it is either more goods at lower prices or more goods at the same price, but it is more goods.

And you're missing a lot more of the aspect of the economy, which is people...

And very very important here, listen to John Wooden's words that come here and are brief. About players and teams. Vital. He knew what Nash was all about...

Morganist that into your school of thought, and you'll make millions.