Government’s Financial Condition

by David Jenyns on April 8, 2012

Difference between debt and operating costs. Seeing how large obligations are for social security and medicare
Video Rating: 4 / 5

CodenameBourbon April 8, 2012 at 11:53 am

@markuskentwood You can’t expect a person to be completely unbiased,? they’re human after all. And you are NOT sacred about how much debt this ? O_O

spankmybishop1 April 8, 2012 at 12:15 pm

Ron? Paul 2012!

busybuzz83 April 8, 2012 at 12:46 pm

@markuskentwood youre an idiot?

busybuzz83 April 8, 2012 at 1:32 pm

wow this country is so screwed! ROMNEY 2012. hehe?

PADRAEG April 8, 2012 at 1:50 pm

SHOCKING,? even journalists might learn easily…

codebreaker000 April 8, 2012 at 1:58 pm

He just said the unbiased facts. But the reality is that the facts are indeed scary. If its not scary to you, you do not understand the time value of money and the power of? compounding…

markuskentwood April 8, 2012 at 2:50 pm

as much as i love the khan academy for providing free education, it needs to be? less biased with the “scary” stuff it talks about. just say the facts.

markuskentwood April 8, 2012 at 3:19 pm

notice how the khan academy doesn’t have a lot of videos on? the government. conspiracy much?

ThatIsNotDeadWhich April 8, 2012 at 3:46 pm

It’s been a pleasure. You’re the only Austrian who’s ever actually improved my understanding of the political economy. I have to say it’s refreshing to encounter one who actually studies the mechanics rather than simply saying “gub’mint BAD,? private GOOD.” Experience with the latter sort of Austrian may be the reason (note: reason, not excuse) for the dismissive attitude you’ve encountered previously.

Drop me a message if you want to chat in the future.

ExquisiteDoom April 8, 2012 at 3:59 pm

Okay well, thank you. I’m going to have to concede for the moment, i will start to get to reading what you’ve suggested, thank you for being the only keynesian that actuall gave me some time of day to? answer my questions. Can’t say i’m in agreement but i have to do my part of the work to verify what you’ve told me lately. I really appreciate it by the way.

ThatIsNotDeadWhich April 8, 2012 at 4:30 pm

Reserve requirements is a tool used by the central bank to impose its policy interest rate in an open market operations based modern central banking system. They don’t develop naturally in an unregulated banking system.

Oh, sure, it’s possible that the depositors could – at great expense and no small inconvenience – organise to? impose reserve requirements on banks. But such requirements would make no sense for the depositors – they care about solidity, not liquidity.

ExquisiteDoom April 8, 2012 at 5:28 pm

Okay , well, i’ll make sure to read a book about either side for? sure.

ThatIsNotDeadWhich April 8, 2012 at 6:14 pm

Yes, I can,? because the New Deal spending allowed the private sector to escape from an otherwise unsustainable debt overhang.

But elaborating on the causal mechanisms is somewhat beyond the scope of the YouTube comment format – Hyman Minsky spent most of Stabilizing An Unstable Economy on that subject, so 500 characters just won’t do it justice.

ExquisiteDoom April 8, 2012 at 6:28 pm

What? about reserve requirements though?=

ExquisiteDoom April 8, 2012 at 6:34 pm

Can you really attribute it’s health to the New Deal level of spending? I don’t think we can find? a reliable cause and effect here.

ThatIsNotDeadWhich April 8, 2012 at 6:36 pm

No. Under a free market banks would create credit backed by the full faith and credit of the bank. This does not require any capital at? all. All it requires is a willing customer, a good pen and social recognition of the validity of bank credit as a means of payment. This social recognition is completely independent of deposits, capital or even the solvency of the bank. Those only become constraints when the government gets tired of bank runs and starts policing banks.

ExquisiteDoom April 8, 2012 at 7:05 pm

Okay, i’ll look that? up., sure.

ThatIsNotDeadWhich April 8, 2012 at 7:36 pm

The Bank of International Settlements (hardly a hippie commune, by the way) has some excellent working papers, if somewhat heavy on the jargon. I’d recommend BIS working paper 292, pages 16 through 21 (incl.) if you want? to understand why there is nothing special about deposits (it talks about quantitative easing, but for almost all practical purposes that was simply the government making a huge deposit, which is why it didn’t do squat).

ExquisiteDoom April 8, 2012 at 8:03 pm

Although that doesn’t really change the argument much. Banks USED to loan out deposits and it is how it would work in a free market admittedly. The way you’re saying it works isn’t? really an argument that is in favor of it but merely stating what it is. It still doesn’t change much.

ThatIsNotDeadWhich April 8, 2012 at 8:25 pm

Sure, if by “little more? than it used to be” you mean up by two to four percentage points of GDP from a baseline of 20 % of GDP. And that baseline was the New Deal baseline, not the Coolidge baseline.

Besides, (a) the private sector was much healthier in 1945 than in 1941, precisely because of the intervening four years of record profits and (b) the wartime economy wasn’t sustainable, so some cutting back was certainly indicated.

ExquisiteDoom April 8, 2012 at 8:41 pm

Okay, did not know? that, guess i need to know more about central banking than to just watch these Khan videos.

ExquisiteDoom April 8, 2012 at 9:41 pm

uhm, what? I’m talking about? WW2, not ww1. If you check any historical chart you can see the spending was cut back to a little more than it used to be. so i’m not sure what you’re talking about here

ThatIsNotDeadWhich April 8, 2012 at 9:44 pm

That’s just not how banks work.

Deposits go straight to the central bank. Interest is paid on deposits because it is cheaper to pay the public 25 basis points than to pay the central bank’s discount window 75 basis points. But in extremis the bank could fund entirely in the interbank market or at the discount window without? ever touching deposits. Similarly, a bank could take deposits and deposit them with the CB as long as it’s paying deposits less than the CB support rate.

ExquisiteDoom April 8, 2012 at 9:52 pm

You can only loan your own capital without deposits, isn’t the whole purpose of giving an interest on deposits to attract capital in order to make more loands than was originally possible? Otherwise, why do they actually give interest if they don’t make any money? from this?

ThatIsNotDeadWhich April 8, 2012 at 10:06 pm

Uh, yeah. The? war effort did break the reactionary opposition to unrestricted government spending.

But by the end of the war, spending was not reduced materially. It was just put to more productive uses than blowing stuff up. Go check with the Treasury if you don’t believe me.

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