Chartalist & Circuitist analyses of money - Page 8

thats exactly what we've been saying. i feel like we're arguing over semantics

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"When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters"- Adam Smith

i love how instead of attacking my evidence you simply dismiss what I'm saying out of hand and then state that deficit spending only increase business profits without providing any sort of evidence for that statement. please provide me with evidence or some kind of logical accounting identities that show deficit spending only increases business profits and reducel wages.

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"When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters"- Adam Smith

Right. Business spending in this time period becomes cost of goods sold in the next time period. Business-to-business spending in this time period also is business revenue in this time period. Not the totality of business revenue. But I'm saying the flipside of the spending, of the expense, is someone elses revenue.

So business spending in this time period becomes cost of goods sold in the next time period. Or at least is proportional to same. If there was little consumption or government spending then in the next time period just about all the business spending would become cost of goods sold. So before tax profits would wind up being very low.

But government spending is a business revenue, that does not become cost of goods sold next time period. So government spending boosts before tax profits. Government spending in deficit, becomes business revenue that doesn't translate into cost of goods sold. Nor will it translate into higher taxes while the government is in deficit initially. So that therefore government deficit spending will boost business profits.

It will boost business profits. But it will reduce real wages. Since wages and salaries are a business expense. And shifting real resources from business reduces directly the amount in real terms that constitutes business spending. Hence we see that deficit spending will increase profits at least in nominal terms. But it will reduce wages and salaries in real terms.

This is what all this jive about a "jobless recovery" is all about. Profit reporting shows things are rosy on Wall Street. Whereas no bugger can get a job.

Right I accept that possibility. Ha ha. I may have to join your school of economic thought. I've got to go back and see where one is talking nominal or real in every case.

I think that is the important thing. One must know whether one is talking nominal or real in every situation. Sure its true that banks do not create real assets, if things are taken community-wide. They add to nominal assets only from that basis. Even if they increase their own assets both in real and nominal terms. And their inflationism increases assets community-wide in nominal terms.

you just made in argument, you did not provide evidence. show me evidence that deficit spending does not increase incomes (and thus savings) and only increases business profits. also a focus on real wages is fallacious because a doubling of nominal wages even at the same time as a doubling of nominal prices will increase disposable income because the real cost of servicing debts will be cut in half.

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"When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters"- Adam Smith

You asked for accounting identities to make my case and I gave them to you. Also this reasoning works in with our experiences of "jobless recoveries" from the last two recessions. These dummies interpret it that productivity has suddenly gone up. Morons. Because they only see productivity in relation to the production of consumer goods.

Its not that I'm focusing on real wages. But sometimes you can make a statement that will mean pretty definite things about a nominal outcome. And sometimes you can make a statement that can mean something pretty definite about a real outcome. And you must specify which. Else you will confuse yourself and others. I wanted to avoid that since I think that is what was happening earlier on this thread.

A priori, deficit spending will tend to increase nominal wages and salaries but reduce them in real terms. That would be the tendency. Since after all national income and GDP are the same as a nominal figure. And deficit spending will tend to increase nominal GDP.

wages will only be reduced in real terms if the inflation rate goes up. cpi has been deccelerating for the last year. as long as the country has as much excess capacity as it does additional deficit spending will increase output without significantly affecting the inflation rate up until the point that most of the country's resources have been or have started to be utilized.

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"When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters"- Adam Smith

Right. But we aren't talking about what will happen and what won't happen. But the effect of policy on what would otherwise HAVE happened.

For example in the global warming racket, we expect that nature would now send us into a cold spell. The extra human CO2 I don't think will warm in any significant way. But if the weather overall cools, which it will do, I cannot then say that its the CO2 that cooled us down. I cannot even on that basis claim that the CO2 had no warming effect, even if I wanted to. The CO2 may be having a small warming effect even as we get colder and colder weather.

What we are talking about is not whether it actually cools or not. But rather whether the CO2 itself had a warming or a cooling effect compared to WHAT OTHERWISE WOULD HAVE BEEN.

For this reason we can say with some confidence that deficit spending, created by more spending, rather than less taxation, will tend to increase nominal wages and reduce real wages, in comparison to what otherwise would have been.

The effect of deficit spending, caused by tax cuts, is somewhat more indeterminate.

i'm going to ignore the "global warming racket" comment because i think they're are enough issues going on in this thread. first of all i don't understand the distinction you made between tax cuts and spending increases. obviously they're are different distributional effects but lets simplify a bit (ok in incredible amount). usa economy's income=100 dollars. taxes=30 dollars. cut taxes 5 dollars, world's disposablel income now=75 (assume no other costs). government increases spending 5 dollars, world income =105. disposable income= not 75? obviously i made this a joke of a model but i just wanted to know why the same net government spending would be "indeterminate" if accomplished by tax cuts while reduce real wages if accomplished by spending. we agree that nominal wages will go up. what i want to know is how you know that real wages will go down and how you know real disposable income won't increase because of reduced debt burdens.

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"When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters"- Adam Smith

Its a night and day difference. Since increasing deficits by extra spending reduces business-to-business spending and increases government spending. Whereas tax cuts may not necessarily reduce business-to-business spending depending on what sort of tax cuts they are.

Always we have to remember that there are not just nominal effects. But diversions of REAL RESOURCES. Extra government spending must reduce real wages since it improves nominal profits, while reducing production. It diverts resources from that sort of spending that would increase the productivity of labour.