Good news! Biden says to hell with deficits!
drummerboy said:
I think you'll find that Europe's welfare states already had mechanisms to deal with the pandemic, whereas the U.S. had to come up with new spending. Since 2020 we've spent more than 5TR, I think, on new spending. I don't think European new spending comes close.
What I found was this: $2 trillion in new recovery spending. (€2.364 trillion minus €540 billion, converted to current dollars.)
Together with the €540 billion of funds already in place for the three safety nets (for workers, for businesses and for member states), the overall EU's recovery package amounts to €2 364.3 billion.
https://www.consilium.europa.eu/en/policies/coronavirus/covid-19-economy/
True, $2 trillion is only 40 percent of $5 trillion. Then again, the E.U.'s GDP in 2019 of $14 trillion was only 67 percent of [corrected my math and language there] the U.S. GDP of $21 trillion.
So economists still disagree on what causes inflation as they do on almost everything. Yet they want us to think that Economics is a science. Imagine if there were such disagreements among chemists.
drummerboy said:
Is my certainty any different than yours? Do you have a smarter armchair?
Explain to us the mechanism by which a deficit causes inflation.
Some economists, notably Larry Summers, has blamed the increased spending for inflation, but that is different than blaming the deficit, even though they're related.
Your comment about hungry people is silly. If anything, the demand for groceries may be lower than during the pandemic - since so many restaurants were closed during the pandemic, people were forced to cook at home.
My armchair is informed by an Ivy MBA in Finance, however I’ve expressed no such certainty. The more you know, the more you realize what you do not know.
The deficit and attendant direct payments to families results in a subset of the spending, so I’m not sure how the “related” deficit had “nothing” to do with inflation.
We’ll just have to agree to disagree that aid to poor families with children results in reduced spending on groceries?
jimmurphy said:
The deficit and attendant direct payments to families results in a subset of the spending, so I’m not sure how the “related” deficit had “nothing” to do with inflation.
Query: If the direct payments did not result in a deficit, would your conclusion remain the same concerning whether or not the deficit caused inflation?
Steve said:
Query: If the direct payments did not result in a deficit, would your conclusion remain the same concerning whether or not the deficit caused inflation?
The direct payments are intended to satisfy demand. To help people.
I’m not arguing about allocation of resources. If we can’t agree that giving money to people who will be spend it does not increase the demand in the market, which could contribute to inflation, then there really is nothing to discuss.
And if I haven’t said it enough times, I do not object to the aid or to the resultant inflation.
I supported and still support the stimulus.
Steve said:
Query: If the direct payments did not result in a deficit, would your conclusion remain the same concerning whether or not the deficit caused inflation?
And to be more direct, if you change “caused” (which I never said) to “contributed to,” then Yes.
jimmurphy said:
Steve said:
Query: If the direct payments did not result in a deficit, would your conclusion remain the same concerning whether or not the deficit caused inflation?
The direct payments are intended to satisfy demand. To help people.
I’m not arguing about allocation of resources. If we can’t agree that giving money to people who will be spend it does not increase the demand in the market, which could contribute to inflation, then there really is nothing to discuss.
And if I haven’t said it enough times, I do not object to the aid or to the resultant inflation.
I supported and still support the stimulus.
you didn't answer the question, which is basically the same as mine.
was it the stimulus, or the resulting deficit that is affecting inflation?
and the question of the child tax credit is whether it caused a demand increase enough to produce the inflation that we're seeing. So far, looking at what data I can find, it doesn't seem that it raised aggregate demand that much. but again, that's a separate question as to what the deficit affects, if any, are.
drummerboy said:
you didn't answer the question, which is basically the same as mine.
was it the stimulus, or the resulting deficit that is affecting inflation?
and the question of the child tax credit is whether it caused a demand increase enough to produce the inflation that we're seeing. So far, looking at what data I can find, it doesn't seem that it raised aggregate demand that much. but again, that's a separate question as to what the deficit affects, if any, are.
Yes I did.
You said I was wrong, but then didn't explain how I was. You just criticized my armchair, and then claimed superior authority, while avoiding direct questions.
ok then.
drummerboy said:
was it the stimulus, or the resulting deficit that is affecting inflation?
We already know stimulus doesn’t affect inflation, because you gave us the example of Europe.
jimmurphy said:
The more you know, the more you realize what you do not know.
Amen.
Once again DB, I never said that it “caused a demand increase enough to produce the inflation that we’re seeing.”
I said that we cannot say that “it had nothing to do do with it,” like you did. It is a fundamental rule of supply and demand that it contributed to it. I stand by that.
I am able to to understand that I am not an expert on all things to be able to express opinions with absolute certainty.
if you can't explain the mechanism by which a deficit causes inflation, then you have no reason to say I'm wrong other than your gut and general annoyance with me.
drummerboy said:
if you can't explain the mechanism by which a deficit causes inflation, then you have no reason to say I'm wrong other than your gut and general annoyance with me.
Induced increased demand, resulting in a deficit or not, has the capacity to increase inflation.
Digest what I said, not what you think I said.
I think we could remove "deficits" and focus on "increased spending" without changing jummurphy's point, and maybe reducing some of db's complaint?
PVW said:
I think we could remove "deficits" and focus on "increased spending" without changing jummurphy's point, and maybe reducing some of db's complaint?
I agree.
But I’ll poke the bear a little for fun. ;-)
MMT is the liberal version of trickle-down, supply-side, voodoo economics.
It’s just the same thing from the demand-side.
btw, the deficit went down last year, and is expected to go down by a larger amount this year.
I repeat - the deficit has nothing to do with our current inflation.
Nothing.
PVW said:
I think we could remove "deficits" and focus on "increased spending" without changing jummurphy's point, and maybe reducing some of db's complaint?
This is what I was trying to point out. It's the spending, not the deficit. I think that was db's point, too. Deficits don't create demand, spending power does.
Steve said:
This is what I was trying to point out. It's the spending, not the deficit. I think that was db's point, too. Deficits don't create demand, spending power does.
well, it's not clear that it's the spending either.
This is a long video, but pretty informative:
Dean Baker (my fav economist) points out that beef demand has fallen to pre-pandemic levels, yet beef has risen 23% in the past two years (starting from prior to our increased spending) and is not yet dropping.
I've still seen no explanation for why profits are through the roof during this bout of inflation. I think we're being gamed.
drummerboy said:
btw, the deficit went down last year, and is expected to go down by a larger amount this year.
I repeat - the deficit has nothing to do with our current inflation.
Nothing.
Doubling down - you must be right since you are so absolutely positive!
Must be nice to live in your world where the normal rules of supply and demand do not apply!
Steve and PVW both picked up on the distinction, which I clarified, and agree with. Apparently you believe that increased spending power has no effect on deficit, surplus, or inflation. Again, must be nice...
DaveSchmidt said:
Drummerboy in RealClear clothing:
I'm not sure what to make of this statement from the article:
"...it should be said that in addition to mistaking rising prices for the currency devaluation that is inflation (there’s a difference)..."
The author doesn't define the difference. Perhaps DB can explain?
jimmurphy said:
The author doesn't define the difference.
The same author thinks he does here, but alas …
I don’t really mean to waste everyone else’s time with these links. The writing style and emphatic conclusion that deficits and inflation are unrelated just brought a smile to my morning.
Thankfully, I’ve found more useful links on the topic online, but I’m still not entirely sure what to make of them — other than than it’s complicated, and explanations differ — so I’ll keep them to myself.
DaveSchmidt said:
The same author thinks he does here, but alas …
I don’t really mean to waste everyone else’s time with these links. The writing style and emphatic conclusion that deficits and inflation are unrelated just brought a smile to my morning.
Thankfully, I’ve found more useful links on the topic online, but I’m still not entirely sure what to make of them — other than than it’s complicated, and explanations differ — so I’ll keep them to myself.
I thought the clear takeaway is that you're in the market for a new armchair?
PVW said:
I thought the clear takeaway is that you're in the market for a new armchair?
Naw, man. I’m rocking!
(Morning smiles all around.)
jimmurphy said:
drummerboy said:
btw, the deficit went down last year, and is expected to go down by a larger amount this year.
I repeat - the deficit has nothing to do with our current inflation.
Nothing.
Doubling down - you must be right since you are so absolutely positive!
Must be nice to live in your world where the normal rules of supply and demand do not apply!
Steve and PVW both picked up on the distinction, which I clarified, and agree with. Apparently you believe that increased spending power has no effect on deficit, surplus, or inflation. Again, must be nice...
what does supply and demand have to do with the federal deficit?
are you sure you have a degree in finance?
drummerboy said:
what does supply and demand have to do with the federal deficit?
are you sure you have a degree in finance?
For the final time, my point is that it is the additional government spending that has a potential impact on demand and therefore inflation, whether the government budget is in deficit or surplus.
Explain to me how that is immaterial and has nothing to do with current inflation.
jimmurphy said:
drummerboy said:
what does supply and demand have to do with the federal deficit?
are you sure you have a degree in finance?
For the final time, my point is that it is the additional government spending that has a potential impact on demand and therefore inflation, whether the government budget is in deficit or surplus.
Explain to me how that is immaterial and has nothing to do with current inflation.
why should I? I never made that claim. I just said the deficit had nothing to do with it - nothing more, nothing less - and you jumped all over me. Why couldn't you stick to the original subject?
jimmurphy said:
I'm not sure what to make of this statement from the article:
"...it should be said that in addition to mistaking rising prices for the currency devaluation that is inflation (there’s a difference)..." I
The author doesn't define the difference. Perhaps DB can explain?
That's not that hard to understand. Take cars as an example, the "chip shortage" limited supply and prices went up (even for used cars). The deficit is irrelevant to the fact that people are willing to pay more for a car from that reduced supply. How strong the dollar is against other currencies is similarly irrelevant.
Sponsored Business
Promote your business here - Businesses get highlighted throughout the site and you can add a deal.
For Sale
Garage Sales
-
Multi Family Garage Sale Sale Date: Apr 20, 2024
More info
Is my certainty any different than yours? Do you have a smarter armchair?
Explain to us the mechanism by which a deficit causes inflation.
Some economists, notably Larry Summers, has blamed the increased spending for inflation, but that is different than blaming the deficit, even though they're related.
Your comment about hungry people is silly. If anything, the demand for groceries may be lower than during the pandemic - since so many restaurants were closed during the pandemic, people were forced to cook at home.