Sunday, 31 August 2014

Enough with the balanced budget crap

An arbitrary budget deficit cap or a debt-to-GDP cap doesn't make sense, regardless if you're living in a democracy or a dictatorship.

There's no such thing as a free lunch; and people in Europe haven't been getting it. Welfare payments don't produce goods out of thin air. At the end of the day, that welfare money goes to producers and service providers. And the permanent and involuntary unemployment are in such a position because of government fiscal policy - not because they're lazy or want to live in poverty all their lives.

The slogan of the right is always the same. Subsidies for the big corporations. Yes, we want. Tax cuts/deductions for the big corps? Yes, we want. Child care or health insurance for the poor and middle class? NO! We don't want. That's unproductive and inflationary, don't ya know. So yeah, I'm really tired with all these double-standards.

Even in your minimalistic state, the government would still need to run a fiscal deficit in order to allow for private economic activity. For any given size government, there's always a respective fiscal deficit level required to achieve and maintain full employment and price stability. When there are more unemployed than the government sector wishes to hire, the government can either lower the tax or spend more money into the economy - a simple and just way would be for it to directly spend it into people's pockets. A basic income doesn't go against the "fairness" ideea of the reasonable libertarian. Hell, governments are net payers of interest to bankers anyway. Why not scrap this state of affairs, and make government a net payer of money to households?

I'm not really familiar with how EIB works and who stands behind it. Probably rich member states limit poorer states access to this funds with 50-50 financing scheme and deficit limit. After all EIB is not charity, is it?"

The EIB's framework is utter nonsense. Its design simply favors the commercial surplus EZ countries to get access to funding; it doesn't allow access, based on the scheme's constraints, to the commercial deficit countries - the so-called periphery. One more undemocratic feature of the Union, meant to give leverage over the deficit countries. For France and Germany namely to do as they wish.

You'll notice that in the USA, the Federal government and the other states are not making a case for the deficit states to balance their trade and budgets OR ELSE! Nobody is threatening Texas to leave the union because they run net commercial and budget deficits.

In the EZ, the framework is totally idiotic as well as malitious.
As for the accounting (S-I)+(G-T)+(X-M)=0 It means this: (G-T)=(S-I)+(X-M)
Thus the root source of all the money that goes to paying government taxes, that goes to buying government bonds, and that remains in the pockets of the private nongovernment sector as net financial savings - all of that money comes from government spending.

Though it's true that the vast majority of the world's money is created endogenously by private banks - and only a minority of that is base money (net assets created by government fiscal deficits); all that private bank money created, all those assets created horizontally have a corresponding liability. All horizontal transactions balance out to 0. A reason for why private debt levels are so high, is because government fiscal deficits are too low to satisfy the desire of the private sectors to net save. This goes for the USA, for Europe, and many other parts of the world.

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