Re: Starting Point

["Gary Santos" <evs@xxxxxxxxxxxx>]

I think we live in very unusual times. No other period in time is close to
what we have now. There are surely parallels but the drama's twists and
turns, I think, will be significantly different. The mix of opportunities
and uncertainties today, certainly difficult to sort out and make a
prognosis, gives one this feeling.

On Japan and when savings in fiat is satuarated, the character of the people
and their attitudes towards the Japanese nation certainly is one factor for
their deficit and bonds to be continually accepted. This is why, I think,
their bond market is still intact. It would be more difficult for the BOJ to
maintain rates so low if the markets did not cooperate, soft money theory
notwithstanding. And, I would think that employment will not necessarily be
a sign of saturation of net financial assets as stagflation is increasingly
a credible scenario.

Will people start to spend given enough savings? Makes one rethink some
basics: Which comes first --supply or demand? I'm thinking that there are
situations (that mix of opportunities and uncertainties I spoke of above)
where supply *can* come first. After some induced spending, the natural
economy takes over. But, there are other situations where demand *must*
first manifest itself before capital spending by the private sector resumes
without any prodding from the State. Put another way: Government deficit
spending during periods when the situation is the latter creates more costs
than benefits. The initial push does not "ripple" through the economy to the
extent it normally would. After the first few transactions, the process
comes to a halt with the amount spent in deficit, ending up in net financial
assets doing no good for the economy. And, with the effort petered out,  one
is left with the depressed level of activity one started out with. The
spending in deficit was for nothing and the net result was more debt left
idle. This will haunt the economy for a long time until the point government
debt is paid or inflation pay for the debt. In fact, all countries seem to
be in a situation where it will be fiscal suicide to raise interest rates.
And, if inflation does show itself by cost push in defiance to all efforts
to contain it, one will just have to wait until the storm passes. Makes one
want to buy gold and real assets, huh?


----- Original Message -----
From: "Warren Mosler" <mosler@xxxxxxxxxxxxxx>
To: "Gary Santos" <evs@xxxxxxxxxxxx>
Sent: Monday, March 17, 2003 11:20 AM
Subject: Re: Starting Point


>
> --- Gary Santos <evs@xxxxxxxxxxxx> wrote:
> > In my continuing effort to appreciate the concept of
> > "soft money", I have
> > trouble with that this taxation and fiat money link.
> > If the private sector
> > continues to accumulate bonds (or, "net financial
> > assets" as Warren like to
> > say) at the rate the two deficits are growing, it
> > will come to the point
> > that the total value in bonds is worth some
> > ridiculous number of decades
> > worth of taxes.
>
> right.  if the govt 'tries' to net spend more
> than the non govt sector desires to net save
> the evidence will be 'upward pressure on the
> price level.'
>  Money's marginal value should drop
> > as there will just be too
> > much of it. In all currencies in history, I dare
> > say, time and debt
> > accumulation killed each of them one after the
> > other.
>
> ok, but notice japan is still deflating even with
> heaps more deficit spending than the US.
> markets will 'tell us' when your 'saturation points'
> are being tested.  unemployment is good evidence
> there is mucho slack.
> warren
>  (At least, today we
> > are candid enough to rationalize that fiat's value
> > is tied to its use as
> > tender for taxes. Warren, I am still reading the
> > article you pointed me to.)
> >
> >
> > ----- Original Message -----
> > From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
> > To: <pkt@xxxxxxxxxxxxxxxx>
> > Sent: Sunday, March 16, 2003 2:53 AM
> > Subject: Re: Starting Point
> >
> >
> > No, taxation is what give value to money.  More of
> > it or less of it
> > depends on the size and direction of the economy,
> > and nothing else. Only
> > if taxation is out of sync with the economy would it
> > be a pain.  This is
> > true in both capitalism and socialism.
> >
> > Henry C.K. Liu
> >
> > Harry Veeder wrote:
> > >
> > >>From: Robert Williams <vic93@xxxxxxxxxxxx>
> > >
> > >
> > >>A more open definition other than "The economy"
> > equals "A Market".
> > >>would let you see beyond the Classical dead
> > endmarket = economy.
> > >>Polanyi considered taxation a part of the
> > Transaction Mode
> > >>he named Redistribution.
> > >
> > >
> > > Yes. Taxation is like physical pain. Sometimes we
> > desire more of it
> > > sometimes we desire less of it.
> > >
> > > Harry Veeder
> > >
> > >
> >
> >
> >
> >
> >
>
>
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