You have to include all federal taxes to really understand how flat/regressive the US federal tax system is. Payroll taxes have been used to keep statutory income taxes low. Reagan got low personal rates by hiking corporate tax rates as another example.
The point is statutory tax rates is not the actual incidence of taxes for the population. If you still to accept this, I'll give you another example. I lived in the UK earning good money. They have two main brackets, 20% and 40%. I was under the 40% bracket which kicks in after 35,000 GBP. After ALL government payroll/income taxes, I still payed less than if I was in the US for the same set of taxes. However, If I included VAT into my calculation, UK national taxes become greater. Payroll taxes are the most regressive and useless taxes in the US that actively harm the middle class and businesses. Abolish it and this recession is immediately over. There is no downside at all. SS and Medicare doesn't actually need that funding source.
Savings is not "out of circulation." Savings are typically utilized for the investment sector or production sector. Out of circulation can more accurately refer to reserve currency that has not enter the economy. Quantitative easing is an example of how the Fed has dramatically increased the reserves inside the Banks, but this money is locked up and not usable by the banks for loans, because they aren't lending, thus no impact on the real economy.
Weimar Germany inflation was due to the allies demanding war reparations. Weimar had little productive capacity after the war and in order to pay the Allies, they debased their currency. Once the allies stopped demanding payment, the new issue of the transition currency allowed the country to escape the inflationary spiral.
The US can't become Weimar Republic because the US is resource rich and has ridiculous productive capacity. The only thing inflation in the US would lead to is MAYBE less imports.
The problem the US has today is our political system has not figured out a way to keep people employed while importing the rest of the world's wealth.
The true test of a national government's impact on monetary policy and spending is does this spending : 1. Reduce unemployment or underemployment 2. Does this spending cause inflation
You comment is nonsensical because you have not proven that federal spending is unsustainable or causing inflation above the current 2% target. Bernanke is using every tool he has to inflate, but he is stuck below 2%. In fact the real concern has been deflation and continues to be. Today's problem is that the private sector has too much debt, not the government. Private sector debt today stands at 1.7x of GDP what it was during the Great Depression.
Bitcoin is at best a commodity today. As a currency it would be just plain ridiculous. My favorite is how most people who vehemently speak out against a global currency are the same people who love bitcoin. If you want to see what a Bitcoin world would look like, just look at the Euro and Greece.
They need to tax middle income more. That's where most of the money is. If you taxed 100% of income of the 1% you still wouldn't have enough. Realise that when you say tax rich people more, you are including yourself in that. When you're quite happy saying "tax me more" then we can go forward.
I wish more people understood the fact that while state and local governments are "revenue constrained," the federal government has no such constraint. The only fiscal priority the US should have at this point is to end the recession and recover. The federal government does not need to balance its books, and it does not have a long term solvency problem. The federal government can spend whatever it wants as long as inflation is stays within normal boundaries. Federal Tax policy and fiscal spending is the mechanism by which inflation can be increased or decreased. Today mainstreet needs more money. Payroll taxes is the first simple thing the government can do to boost the economy out of recession. There are absolutely zero downsides from doing this. While recovery takes places, inequality can be addressed with tax reform.
I'm saying this on a tech website because while most people who read this will think i'm crazy, I have faith that enough of you are open minded to actually understand the truth of how the US monetary system actually works.
Sorry trying address gentrification is akin to trying to treat the symptom without treating the cause. Poor people and middle class people are pissed that they don't have jobs. They don't have jobs because America's fiscal policy is nonexistent because of the GOP. The moment the government starts spending and/or taxing less, the sooner the negative aspects of gentrification become less problematic. Today the federal government is over-taxing and underspending. It is no wonder that on a microeconomic level this is translating to higher income inequality.
Stockholders do not own the company in the traditional sense of ownership. They are "residual claimants," that have very very limited rights in the relationship with the firm. People have it backwards. Legally speaking the firm is an independent legal entity that is real. "Stockholders" are not a legal physical entity. The modern notion of the stockholder as the "owners" came from the writings of Milton Freidman.
Stockholders do not own the company. This is a myth that can be verified by the legal ownership claims. Every corporate governance lawyer knows this. Stockholders are a euphemism, they are nothing but "residual claimants."
What every modern business school learns about shareholders being owners of the company in corporate finance is a myth.
If you'll actually hear me out, I offer an explanation for why your statement is a contradiction.
The QE that the Fed did during the crisis involved the purchase of mortgage-backed securities. If you look at the the policy of QE from an operational view i.e. the balance sheet, what you will see that is that the Fed and the bank are simply doing an ASSET-SWAP. In return for selling the Fed the MBS, the bank increases their Reserves. For there to be an increase in the money supply, the money has to enter the hands of the public, i.e. USD, money in a checking account.
"Loans can indeed be issued on the increased supply from quantitative easing. We got lucky in that it did not happen."
Loans CAN be issued, yes, and therefore money supply would increase, I agree, but as you rightfully stated, "it did not happen." Therefore, QE did not affect the money supply. You have to understand QE policy from a double-entry accounting concept to recognize that QE policy of purchasing MBS is not the same as printing money. Real "money printing" would be the government selling bonds to the primary market, the Fed's purchasing those bonds to issue reserves, and then taking those reserves and crediting household checking accounts with money. Even if they did that, that still is not sufficient to cause inflation much less hyper-inflation. Additionally, QE policy is not required today to facilitate retail bank loan issuances because the US banks do not operate on a fractional reserve currency system. This ended decades ago. Banks operate under the concept of "demand deposits." Loans create the deposits. Today a bank does not check to see how much "reserve" they have before they go out and issue a loan, its a demand deposit direct from the Fed.
Watch the video link from 7:20 onwards until you get bored. If you have a remote interest in monetary policy and economics, you should know this. It's basic monetary operations that happens at every money desk an American bank.
So all this said, QE is not "money-printing" in any economic sense.
That definition is not academically precise. Money that a bank holds on reserved is not considered part of the money supply unless it actually enters into the economy. You have to understand that retails banks are just extensions of the public monetary system. Money supply increase if and only if these banks with increased reserved actually end up issuing more loans.
In practice this has not happened because QE policy assumes the Loanable Funds Framework which is not an accurate representation of how banks are run today. Today retail banks "create" money via demand deposits with the Fed. Banks are not constrained by the amounts of Reserve they have to issue a loan, contrary to what is shown in the movie, "It's a wonderful life."
Here is a very good video that very clearly explains it if you're a macroeconomic buff: http://youtu.be/Kw3uXAQ4DwE
Just to correct you, Quantitative Easing is NOT printing money. It is a balance sheet transaction that has nearly zero effect on the money supply. QE is nothing more than a balance sheet transaction.
NDA and ANDA is just a subset of what FDA has jurisdiction over. There are many "medical devices" that are regulated by the FDA that really don't require the regulatory hurdles that companies are required to jump through. Because the FDA holds broad authority by statute, the regulatory process it imposes is too cumbersome for some industries that would be better regulated by more specialized agencies or by manufacturer associations. On the other hand there are areas within food policy that the FDA fails to effectively regulate because of the revolving door. The UK and EU do a far better job with food safety.
While I agree with you that the FDA is important, it is worth pointing out how paper intensive getting FDA approval is. FDA needs serious reform so that food and medicial innovation can accelerate. The current state of innovation is moving at a snails pace. Keep in mind that even devices like hearing aids (I know they're sophisticated) are regulated which cause prices to be 1000x or more higher.
I remember it also. What you stated in your last comment does not dispute what I'm saying. Additionally Microsoft was far from monopoly back then. I was using OS/2. They had no obligation to be open. What Microsoft did back then pales in comparison to the current closed garden stuff that Silicon Valley companies have been pulling for the last few years.
Slashdot Mirror
You have to include all federal taxes to really understand how flat/regressive the US federal tax system is. Payroll taxes have been used to keep statutory income taxes low. Reagan got low personal rates by hiking corporate tax rates as another example.
The point is statutory tax rates is not the actual incidence of taxes for the population. If you still to accept this, I'll give you another example. I lived in the UK earning good money. They have two main brackets, 20% and 40%. I was under the 40% bracket which kicks in after 35,000 GBP. After ALL government payroll/income taxes, I still payed less than if I was in the US for the same set of taxes. However, If I included VAT into my calculation, UK national taxes become greater. Payroll taxes are the most regressive and useless taxes in the US that actively harm the middle class and businesses. Abolish it and this recession is immediately over. There is no downside at all. SS and Medicare doesn't actually need that funding source.
Savings is not "out of circulation." Savings are typically utilized for the investment sector or production sector. Out of circulation can more accurately refer to reserve currency that has not enter the economy. Quantitative easing is an example of how the Fed has dramatically increased the reserves inside the Banks, but this money is locked up and not usable by the banks for loans, because they aren't lending, thus no impact on the real economy.
That's why there's this formula for nominal GDP and Real GDP. Real GDP adjusts for the price levels and inflation.
Weimar Germany inflation was due to the allies demanding war reparations. Weimar had little productive capacity after the war and in order to pay the Allies, they debased their currency. Once the allies stopped demanding payment, the new issue of the transition currency allowed the country to escape the inflationary spiral.
The US can't become Weimar Republic because the US is resource rich and has ridiculous productive capacity. The only thing inflation in the US would lead to is MAYBE less imports.
The problem the US has today is our political system has not figured out a way to keep people employed while importing the rest of the world's wealth.
The true test of a national government's impact on monetary policy and spending is does this spending :
1. Reduce unemployment or underemployment
2. Does this spending cause inflation
You comment is nonsensical because you have not proven that federal spending is unsustainable or causing inflation above the current 2% target. Bernanke is using every tool he has to inflate, but he is stuck below 2%. In fact the real concern has been deflation and continues to be. Today's problem is that the private sector has too much debt, not the government. Private sector debt today stands at 1.7x of GDP what it was during the Great Depression.
Bitcoin is at best a commodity today. As a currency it would be just plain ridiculous. My favorite is how most people who vehemently speak out against a global currency are the same people who love bitcoin. If you want to see what a Bitcoin world would look like, just look at the Euro and Greece.
This is why I don't switch from iOS to android
Payroll taxes is the first simple thing the government can do to boost the economy out of recession.
I'm meant to say "eliminating payroll taxes"
They need to tax middle income more. That's where most of the money is. If you taxed 100% of income of the 1% you still wouldn't have enough. Realise that when you say tax rich people more, you are including yourself in that. When you're quite happy saying "tax me more" then we can go forward.
I wish more people understood the fact that while state and local governments are "revenue constrained," the federal government has no such constraint. The only fiscal priority the US should have at this point is to end the recession and recover. The federal government does not need to balance its books, and it does not have a long term solvency problem. The federal government can spend whatever it wants as long as inflation is stays within normal boundaries. Federal Tax policy and fiscal spending is the mechanism by which inflation can be increased or decreased. Today mainstreet needs more money. Payroll taxes is the first simple thing the government can do to boost the economy out of recession. There are absolutely zero downsides from doing this. While recovery takes places, inequality can be addressed with tax reform.
I'm saying this on a tech website because while most people who read this will think i'm crazy, I have faith that enough of you are open minded to actually understand the truth of how the US monetary system actually works.
THIS +1
Finally a fellow MMTer! *i presume*
Black makes things so crystal clear!
Sorry trying address gentrification is akin to trying to treat the symptom without treating the cause. Poor people and middle class people are pissed that they don't have jobs. They don't have jobs because America's fiscal policy is nonexistent because of the GOP. The moment the government starts spending and/or taxing less, the sooner the negative aspects of gentrification become less problematic. Today the federal government is over-taxing and underspending. It is no wonder that on a microeconomic level this is translating to higher income inequality.
Stockholders do not own the company in the traditional sense of ownership. They are "residual claimants," that have very very limited rights in the relationship with the firm. People have it backwards. Legally speaking the firm is an independent legal entity that is real. "Stockholders" are not a legal physical entity. The modern notion of the stockholder as the "owners" came from the writings of Milton Freidman.
Stockholders do not own the company. This is a myth that can be verified by the legal ownership claims. Every corporate governance lawyer knows this. Stockholders are a euphemism, they are nothing but "residual claimants."
What every modern business school learns about shareholders being owners of the company in corporate finance is a myth.
Not sure what I said to be called a name. *geez*
If you'll actually hear me out, I offer an explanation for why your statement is a contradiction.
The QE that the Fed did during the crisis involved the purchase of mortgage-backed securities. If you look at the the policy of QE from an operational view i.e. the balance sheet, what you will see that is that the Fed and the bank are simply doing an ASSET-SWAP. In return for selling the Fed the MBS, the bank increases their Reserves. For there to be an increase in the money supply, the money has to enter the hands of the public, i.e. USD, money in a checking account.
"Loans can indeed be issued on the increased supply from quantitative easing. We got lucky in that it did not happen."
Loans CAN be issued, yes, and therefore money supply would increase, I agree, but as you rightfully stated, "it did not happen." Therefore, QE did not affect the money supply. You have to understand QE policy from a double-entry accounting concept to recognize that QE policy of purchasing MBS is not the same as printing money. Real "money printing" would be the government selling bonds to the primary market, the Fed's purchasing those bonds to issue reserves, and then taking those reserves and crediting household checking accounts with money. Even if they did that, that still is not sufficient to cause inflation much less hyper-inflation. Additionally, QE policy is not required today to facilitate retail bank loan issuances because the US banks do not operate on a fractional reserve currency system. This ended decades ago. Banks operate under the concept of "demand deposits." Loans create the deposits. Today a bank does not check to see how much "reserve" they have before they go out and issue a loan, its a demand deposit direct from the Fed.
Watch the video link from 7:20 onwards until you get bored. If you have a remote interest in monetary policy and economics, you should know this. It's basic monetary operations that happens at every money desk an American bank.
So all this said, QE is not "money-printing" in any economic sense.
That definition is not academically precise. Money that a bank holds on reserved is not considered part of the money supply unless it actually enters into the economy. You have to understand that retails banks are just extensions of the public monetary system. Money supply increase if and only if these banks with increased reserved actually end up issuing more loans.
In practice this has not happened because QE policy assumes the Loanable Funds Framework which is not an accurate representation of how banks are run today. Today retail banks "create" money via demand deposits with the Fed. Banks are not constrained by the amounts of Reserve they have to issue a loan, contrary to what is shown in the movie, "It's a wonderful life."
Here is a very good video that very clearly explains it if you're a macroeconomic buff:
http://youtu.be/Kw3uXAQ4DwE
Just to correct you, Quantitative Easing is NOT printing money. It is a balance sheet transaction that has nearly zero effect on the money supply. QE is nothing more than a balance sheet transaction.
It's because comments like this that I keep coming back to Slashdot.
Couldn't agree more
NDA and ANDA is just a subset of what FDA has jurisdiction over. There are many "medical devices" that are regulated by the FDA that really don't require the regulatory hurdles that companies are required to jump through. Because the FDA holds broad authority by statute, the regulatory process it imposes is too cumbersome for some industries that would be better regulated by more specialized agencies or by manufacturer associations. On the other hand there are areas within food policy that the FDA fails to effectively regulate because of the revolving door. The UK and EU do a far better job with food safety.
While I agree with you that the FDA is important, it is worth pointing out how paper intensive getting FDA approval is. FDA needs serious reform so that food and medicial innovation can accelerate. The current state of innovation is moving at a snails pace. Keep in mind that even devices like hearing aids (I know they're sophisticated) are regulated which cause prices to be 1000x or more higher.
"I'm not your monkey."
I find reading about Chu kick ass at Jeopardy far more entertaining then Jeopardy. Maybe if he keeps it up, new audiences will like jeopardy.
I just choked on a slice pizza after reading your comment. Hilarious! *and painful*
I remember it also. What you stated in your last comment does not dispute what I'm saying. Additionally Microsoft was far from monopoly back then. I was using OS/2. They had no obligation to be open. What Microsoft did back then pales in comparison to the current closed garden stuff that Silicon Valley companies have been pulling for the last few years.
Rob Weir is that you again? ;)