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Where's the Money come from? (General)

by dulan drift, Friday, May 01, 2020, 07:20 (102 days ago)

The world is about to embark on an unprecedented cash-splash in order to kick-start economies. Australia is spending about a trillion dollars while the US is talking several trillion. Most countries are doing the same.

Firstly, i was surprised there even was that much money to spend - when you see how stingy certain governments can be on funding various essential services and now there is a bottomless well suddenly.

Secondly, i'm curious as to where that money comes from? My understanding is that some of it is from Central Banks buying 100-year government bonds - which may or may not be ever paid back. How does that work? Other money comes from loans - though i'm not sure who's loaning the money.

I do wonder what happens if we have another rainy day - say next year? A real rainy day - for example a permanent border shutdown with China due to escalating tensions or even a war? Or another over-reaction to another corona virus?

And how does all this money get paid back? Again, i don't understand it all properly but on the face of it I'd hate to be a young person coz it looks like they'll be getting saddled with higher taxes and less government services for the terms of their natural lives. At least they can be satisfied in the knowledge that through their sacrifice the lives of some sick elderly people were prolonged for an extra few months or even years.

Then there's Modern Monetary Theory. According to an article in The Chronicle:

"The sneaky third way to pay back debt is just printing money and giving it to your lenders. Governments can do that, but historically they have chosen not to, because it tends to cause hyperinflation. However, a variation of this idea is coming back into fashion, with a new name - Modern Monetary Theory."

All of the above feeds back into the basic question: Are government's weighing up these repercussions as they chart radical policy courses that will reverberate long into the future? Coz now is the time to weigh them. Before would have been better. Later, will be too late.

Where's the Money come from?

by dan @, Friday, May 01, 2020, 16:04 (102 days ago) @ dulan drift

This was my first thought when Trump announced the initial 2 TRILLION dollar infusion of cash -- where does it come from and why couldn't they do that to solve the decades old health care crisis in the US?

Clearly they could do that for any reason they want, but they choose not to. This money is going to keep their rich friends afloat, not poor Joe and Joanne who are going to lose their business and end up on the street.

My world view is this -- these governments are just legalized gangs. They're the scum that have tricked, swindled, cheated, and if that doesn't work, killed all the competition. The US govt. is simply the most powerful gang. Sure, we vote, to elect a temporary gang leader.

So they can create as much money as they want. Yes, they just print it. They just create it out of thin air, and it will result in inflation. My parents bought the house I grew up in for 30K, and that was a shitload of money then. It's now worth nearly 500K. That's inflation and it's a stupid amount of money for a very normal house in a normal neighborhood.

Just a few decades ago, 100K would have been more than enough for a couple to retire on, now they need 1 million, minimum.

And how about the newest fad, negative interest rates. Banks lend money out, and accept less in return because at the rate that the value of the currency is going down, the bank does better to get that percentage back. So, for example, they lend out $10, and will accept as payment $9 in a certain period, because if they don't do that, that $10 will only be worth $8 by that date.

I think what we're going to see at some point is the end of cash, and covid is moving that forward: https://www.bbc.com/news/business-52455706 . I've been studying money for a while now, and digital currencies, and cryptocurrencies, and there's a lot happening. I think in the not to distant future, governments will be rolling out their own digital currencies, and among other things, this will increase their surveillance capabilities by degrees I don't want to imagine.

In the meantime, whatever money we have is worth less and less and less.

Where's the Money come from?

by dan @, Friday, May 01, 2020, 16:25 (102 days ago) @ dan

This guy is good if you want to learn more about the history of money and cryptocurrencies and surveillance potentials of central bank digital currencies:

https://www.youtube.com/user/aantonop
https://aantonop.com/

EDIT: Here's a random video from one of those pages: https://www.youtube.com/watch?v=LgI0liAee4s. I haven't listened to it all yet.

Where's the Money come from?

by dulan drift, Saturday, May 02, 2020, 11:54 (101 days ago) @ dan

I think what we're going to see at some point is the end of cash, and covid is moving that forward: https://www.bbc.com/news/business-52455706 . I've been studying money for a while now, and digital currencies, and cryptocurrencies, and there's a lot happening. I think in the not to distant future, governments will be rolling out their own digital currencies, and among other things, this will increase their surveillance capabilities by degrees I don't want to imagine.

In the meantime, whatever money we have is worth less and less and less.

Read a few days ago that China has started a trial roll-out of state run digital currency. Interesting coincidence that it comes on the back of the virus roll-out

Where's the Money come from?

by dan @, Saturday, May 02, 2020, 14:57 (101 days ago) @ dulan drift

Very interesting. And of course once they do it, everybody else will. It gives governments enormous power and control over those people required to use the currency. They will know exactly what digital units of currency were spent on, when, and where it was spent. They'll be able to trace a unit of currency indefinitely. And since they pay people in this currency, they'll know exactly who is spending what, when, and where. And those people accepting it will, of course, also be identifiable; they'll have to be in order to use the currency.

It also means they'll be able to disable units of currency if, for example, someone's 'social score' gets too low or they say the wrong thing on a blog posting.

The difference with bitcoin is that nobody can control it and that it's decentralized. That's why governments hate it so much. They've been trying to kill it since it started, and it just goes up in value. Sure, it's down from it's peak of 20k, but it will pass that over the next year or two, maybe much sooner.

Money has changed dramatically, from sea shells to metals and now to bits of data and nothing more, nothing more at all.

Where's the Money come from?

by dulan drift, Sunday, May 03, 2020, 08:23 (100 days ago) @ dan

There is some dissent about these things - but not a lot. Do you see any hope for a mass rebellion against this big-brother state that we're getting herded into?

Where's the Money come from?

by dan @, Monday, May 04, 2020, 15:42 (99 days ago) @ dulan drift

Nope, not until enough people are literally hungry enough to raise hell.

Where's the Money come from?

by dan @, Wednesday, May 06, 2020, 07:30 (97 days ago) @ dan

Warren Buffett explains the simple reason why the US will never default on its debt

In short, the US is accumulating debt in its own currency, and it can print as much currency as it likes, so it will never default on the debt. But, the currency will lose value and we'll have inflation.

https://finance.yahoo.com/news/warren-buffett-explains-the-simple-reason-why-the-us-wil...

Where's the Money come from?

by dulan drift, Wednesday, May 06, 2020, 19:11 (97 days ago) @ dan

Great article. So if you've borrowed in your own money then it is just a matter of printing money. You almost wonder why bother going through the pretense of borrowing it - why not just print it straight off?

Have often wondered at what point printing money causes inflation. If i print $10 it won't make a difference - or a $1000 or a million. At what point does it make a difference? Anyway, a few trillion should test it out

Where's the Money come from?

by dulan drift, Tuesday, May 12, 2020, 18:25 (91 days ago) @ dulan drift

Here's the Australian treasurer's take on the subject:

"More than $30 billion in aid is expected to flow next month, Mr Frydenberg told Parliament on Tuesday, the "largest and fastest injection of economic support Australia has ever seen". It's part of a $320 billion package - equivalent to 16.4 per cent of gross domestic product ... However the "unprecedented scale and speed" of the government's economic response had driven a rapid increase in borrowing, Mr Frydenberg said."

Ok - so how to pay that back?

Mr Frydenberg said the "proven path" for paying back debt was not higher taxes, but rather "growing the economy through productivity-enhancing reforms". The "values and the principles that have guided Coalition reforms in the past must guide us again in the future", Mr Frydenberg said.
"Unleashing the power of dynamic, innovative and open markets must be central to the recovery with the private sector leading job creation, not government."

So if it's the same values and principles then i'd wonder why productivity didn't dramatically increase last year?

Secondly, is the idea of growth as a solution flawed? You could argue that it's human growth/consumption that got us into this predicament in the first place.

"Labor's Treasury spokesman Jim Chalmers said the government seemed to have no plan to reboot the economy.
"If only the Treasurer had been able to cough up some detail," Mr Chalmers said, referring to a lengthy coughing fit Mr Frydenberg had during his speech."

He is currently being tested for the virus. I'll be surprised if he's got it coz it's down to zero cases for most states now - more likely he knew his words tickled his throat coming out.

Anyway, the guy is in a tough tough spot as treasurer. I don't envy him that job.

Where's the Money come from?

by dan @, Wednesday, May 13, 2020, 18:47 (90 days ago) @ dulan drift

"So if it's the same values and principles then i'd wonder why productivity didn't dramatically increase last year? "

Exactly, and that's the question they never want to answer. I think it was Reagan who invented the whole 'trickled down' concept, meaning if the rich get rich enough, their excess cash will somehow find it's way to those they don't give a shit about. Unsurprisingly, that has never happened even though the rich are richer now than ever.

And while the rich and powerful in the west demonize socialism in the best of times, in periods of crisis like this, they accept bailouts because they're "too big to fail". So it's socialism for the rich, and rugged individualism for everyone else.

It's a pathetic situation which can only lead to social, economic, and environmental collapse, if not outright war, which in a nuclear age won't be pretty. Regardless, I have little doubt we are witnessing the beginning of the end of an era.

I'd like to be more positive. But if we, as a species, can't even get our shit together to make a unified stand against a virus, how are we going to address global warming?

In fact, I suspect those in power don't really care about these crises because, either consciously or not, not only do they not give a shit about 30% of the world's population dying, it's actually a good thing. They're mostly poor, needy people anyway, so who gives a shit. Famine, war, chaos, these have all, historically, served to increase the wealth and power of the wealthy and powerful.

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