Knock it off. Keep the personalization to the Pit.
[/moderating]
If there’s a government benefit that conservatives favour but liberals want to cut, I’m happy to debate it. However, you’re unlikely to find one that I personally support. I’m not a great believer in corporate welfare, and I recognise the need for corporate income tax.
That’s not how it works and I’m having to guess at what your incorrectness is based on. The point of the first four quotes is that the loan creates a deposit, and that deposit is considered part of the money supply. I think it would be tedious for both of us for me to walk through the credits and debits of fractional reserve banking. The basic idea is that there is a given amount of currency in the system (the m0/mB component of money supply), some of which is held by banks. That money then goes through a cycle where 1) the bank loans the money to a consumer, 2) the consumer pays the money to a supplier, 3) the supplier deposits the money into the bank, and 1) the bank loans the money to a another consumer. Go through this cycle three times, and the bank has three times more in loans and deposits than it’s holding in currency. The deposits and currency are money (the m1 component of money supply), the loans are not. Paying off the loans moves additional funds into the bank. It doesn’t touch the deposits.
I disagree with the authors of the BOE’s paper that paying off a credit card balance destroys money. When I use my credit card at a store, I’m creating a liability for myself. There’s a corresponding transaction at the bank which records my liability as an asset and then transfers funds to the store’s bank account. That’s neutral as far as the money supply goes. The authors seem to be saying that if I have money in my bank account at the beginning of the month, and use my credit card which results in a deposit in the store’s bank account, there’s a temporary increase in the money supply. That increase then disappears when I pay the credit card balance from my account. However, they aren’t saying what’s on the the other side of the store’s deposit. Maybe there’s a component such as settlement or interbank lending that I’m not considering.
After looking around a bit, I think the premise that you and the authors are working off is that within the banking economy, there are both loans and deposits. If the deposits are used to pay off the loans, then that does reduce the money supply. However, loans are usually paid off with future earnings, not currently present deposits. If you’re discussing another concept, please detail it.
You’re taking a general concept, that banks receive loan payments and then reloan those funds, a concept that fractional reserve banking, the subject that you brought up, depends on and you’re trying to refute it by bringing up a specific circumstance, and then using a poor cite that only marginally relates to that circumstance. You’re also arguing that lending is at a low point but ignoring that as recently as 2017, lending was at an all-time high. Most economists are worried that worldwide debt is too high, not too low.
I’m suggesting it. If you forgive a set of student loans, you better ensure that no equivalent of future student loans is available. Because if it is, the next set of borrowers who’ve made bad lending decisions will expect their debt to be forgiven and will howl with outrage if they don’t receive the same giveaway the previous borrowers received.
At the start of the thread, didn’t you object to whataboutism? I’m happy to respond, but I don’t want to react to something you object to.
Yes. We’re discussing money supply in an aside to student debts, which is an aside to personal responsibility. But as described earlier, fractional reserve banking is dependent on deposits. Fiat currency, which I’ve described as the m0/mB component of the money supply acts as part of that process, but is not expansive (within an FRB economic model), whereas the the m2 component of the money supply is.
No.
I’ve already refuted that. The students paid for their education. Their payments entered the economy. Those payments were based on borrowed funds. If the students made poor forecasting decisions about borrowing for their education, then their personal economy is certainly hurt. However, the effect that subset economy is offset by the subset that received the funds, the university economy.
Anyway, enough about banking and economics.
This is a thread hijack, which I started, but within modern times, I don’t think you can find a better government investment than vaccinations. The benefit/cost ratio is probably in the hundred-thousands. I agree and have stated that education is a societal investment. However, at some point, the beneficiaries of that investment need to pay it back. This is especially true if the students have received greater benefits than someone who opted out of those benefits due to cost.
Because at a certain point, societally necessary education turns into personally beneficial education. There’s no clear dividing line between the two, and indeed the point isn’t binary, but a crossing of a variable percentage threshold. Nevertheless, American society has determined that point to be high school graduation. Students who pursue college education are generally expected to pay for at least a part of their education and often the entirety. The students borrow student loans to receive the personally beneficial education. No one is forcing them to do so, and if the education is not personally beneficial to them, they can choose not to pursue it.
The students are making an investment in their university education that they will have to pay off later, unless that debt is relieved. While attending university, they are undergoing an expense which they are not paying off with an asset, but are instead accepting a liability. My argument is that they are knowingly accepting this liability, which will need to be paid off later.
If I’m not creating a strawman, why are you accusing me of doing so? Also, in a thread discussing personal responsibility, to state that a question relating to personal responsibility is a false question is a dodge of the question.
I’m sure there’s more to the remainder of your response to debate, but I think this current post is long enough.
Loans create M1 money, assuming the funds are allocated to a checkable account. k9bfriender’s cite seems to mean M1 money when they say “money”.
Below is an example. You can see M1 expand when loans are made in steps 2 and 5, while it shrinks when deposits are made (to savings accounts) in steps 1 and 4. It also shrinks when a loan is repaid in step 9.
step Bank Joe Bob Sue desc
0 100 200 0 0 Nobody owes anybody anything
---- ---- ---- ---
100 200 0 0 = 300 total money supply (M1: 200)
1 110 100 0 0 Joe deposits 100 in bank
-100 +100 (bank liable to Joe for 100)
---- ---- ---- ---
100 200 0 0 = 300 total money supply (M1: 100)
2 150 100 0 50 Bank loans Sue 50
-100 +100 (bank liable to Joe for 100)
+ 50 -50 (Sue liable to bank for 50)
---- ---- ---- ---
100 200 0 0 = 300 total money supply (M1: 150)
3 150 120 10 20 Sue pays Bob 10 and Joe 20
-100 +100 (bank liable to Joe for 100)
+ 50 -50 (Sue liable to bank for 50)
---- ---- ---- ---
100 220 10 -30 = 300 total money supply (M1: 150)
4 180 100 0 20 Joe deposits 20; Bob deposits 10
-120 +120 (bank liable to Joe for 120)
+ 50 -50 (Sue liable to bank for 50)
- 10 + 10 (bank liable to Bob for 10)
---- ---- ---- ---
100 220 10 -30 = 300 total money supply (M1: 120)
5 80 100 100 20 Bank loans Bob 100
-120 +120 (bank liable to Joe for 120)
+ 50 -50 (Sue liable to bank for 50)
- 10 + 10 (bank liable to Bob for 10)
+100 -100 (Bob liable to bank for 100)
---- ---- ---- ---
100 220 10 -30 = 300 total money supply (M1: 220)
6 80 100 100 20 Bank adds 2% interest to Joe's account
-122.4 +122.4 (bank liable to Joe for 126)
+ 50 -50 (Sue liable to bank for 50)
- 10 + 10 (bank liable to Bob for 10)
+100 -100 (Bob liable to bank for 100)
------ ------ ---- ---
97.6 222.4 10 -30 = 300 total money supply (M1: 220)
7 80 100 100 20 Bank adds 6% interest to Sue's loan
-122.4 +122.4 (bank liable to Joe for 126)
+ 53 -53 (Sue liable to bank for 50)
- 10 + 10 (bank liable to Bob for 10)
+100 -100 (Bob liable to bank for 100)
------ ------ ---- ---
100.6 222.4 10 -33 = 300 total money supply (M1: 220)
8 80 100 5 115 Bob pays Sue 95
-122.4 +122.4 (bank liable to Joe for 126)
+ 53 -53 (Sue liable to bank for 50)
- 10 + 10 (bank liable to Bob for 10)
+100 -100 (Bob liable to bank for 100)
------ ------ ---- ---
100.6 222.4 -85 62 = 300 total money supply (M1: 220)
9 133 100 5 62 Sue pays off her loan
-122.4 +122.4 (bank liable to Joe for 126)
- 10 + 10 (bank liable to Bob for 10)
+100 -100 (Bob liable to bank for 100)
------ ------ ---- ---
100.6 222.4 -85 62 = 300 total money supply (M1: 167)
~Max
When I was talking about judging, I was talking about being judgemental. What you are talking about is using judgement to arrive at a sound decision. I perhaps did not do a good job distinguishing this. My bad.
Hmm. It’s not a question I asked myself. It’s just what my father told me at the time. I sort of figured he knew what he was talking about. Plus, as horrific as my injuries seems to to before I got to the burn center, once I was there I felt incredibly lucky. There were children there who’s survival was doubtful because of infection. There was a kid who accidentally pulled a pot of boiling oil onto his head, and his face basically melted off. For a lot of those kids the fact that they were burned was going to be the primary thing in their life for the rest of their life. Horrific stuff.
I was essentially going to fully recover. So, what my father just said seemed true and obvious.
I disagree. Personal responsibility is about one’s choices. Choosing inaction can be very significant. One is responsible for the consequence of that choice just as they are for the positive choices./QUOTE]
I agree. I made a similar point pertaining to geography earlier in the thread.
What I said is true. Whether or not they get any takers if they overprice their labor is besides the point.
Hi Max,
Thanks. I think I followed most of that. A few comments:
-
I think at times you’re example is looking at the version of m0 measure of money supply which doesn’t include bank deposits, and referring to it as m1.
-
m1 includes both currency and demand deposits. So the act of depositing cash into a bank account increases the amount of demand deposits, but doesn’t move the m1 measure of money supply.
-
Interest charges aren’t part of the money supply, and at a transactional level don’t cause it to move up and down.
Scylla,
I don’t understand. How are the Navahos overpricing their wages?
I will do your taxes. I will charge $5,000/hr. Would you like to hire me.
How about beer drinker? I will drink your beer for $5/hr. Want to hire me?
I can price my labor wherever I want. But if I want takers I need to offer a service that is wanted at a price people are willing to pay.
I’m sure that he understands but is baffled why others value that labor at a lower number.
He is still on ‘living wage’ etc
I’m not sure I understand the question. I personally don’t have a particular opinion about Right To Work laws. Conceptually I can understand someone who advocates personal responsibility also advocating for workers being allowed to perform their own work agreement negotiations - and then having to live with them. Likewise, I can understand a business owner wanting the freedom to choose whether union membership in his business is optional or not. If you’re asking me if a business owner should follow the terms of a contract that he agreed to, even if the law doesn’t require him to, then yes I believe he should.
Yes, the loanmakers should be responsible for making bad loans and bankruptcy for people who genuinely can’t pay off their loans should be allowed. I’d be in favour of there being a minimum period after graduation before a student can claim bankruptcy, and also a grace period where the loan is frozen but the student can’t declare bankruptcy. But if someone is in a low-paying job 5 years after college and has an overwhelming amount of debt, then yes they should be allowed to declare bankruptcy.
Both of the bank deposit accounts in my example were savings accounts, so m1 was in fact m0 minus the total under the bank column.
Those deposits (steps 1 & 4) were to savings accounts, which don’t count towards m1. Think of each person’s balance, the top row of an entry under their own column, as their checking accounts or cash on hand.
Correct. Note that neither m0 (total money supply) nor m1 change when the bank credits Joe’s savings account in step 6, or when it charges interest on Sue’s loan in step 7.
~Max
Scylla,
Yes, you make my point. There are qualitative components involved. ‘Supply and demand’ is just one parameter that unfortunately is often casually thrown about as a platitude. Another is ‘productivity’.
What is obvious to you and me is not obvious to Hector. He is 37 years old and nothing is going to get better for him. He can still break horses and build fences when work is available but he has used up his body and it is failing him. The Indian Health Service patches his body, but the current administration is reducing funding. They seem to think Hector should buy private health insurance.
A more recent problem for Hector is the ID card thing. He was raised by the Apachito family when his father deserted his pregnant mother. The name on his social security card is Apachito but on his birth certificate it’s Begay. He can’t renew his drivers license unless he hires a lawyer to petition the court for a name change. Without the internal passport of a drivers license (or ID card) Hector is a non-citizen.
This is part of a national problem for which we, as citizens, are responsible. Citizenship is a personal responsibility. It’s not a matter of moving people or handing out money. It’s a matter of long term cultural change on both sides of the equation.
Let’s take a step away from the OP, and assume Neighbourhoods A and B are equal. Likewise their schools are equal: same budgets, same number of students and teachers, same level of parent involvement, etc. In year one of our hypothetical, because of all this equality, the schools have equal results.
After year one, the parents in Neighbourhood A decide they want to improve their children’s education. They increase their parental involvement, and sure enough it works. In year two, School A has better results than School B. Your proposal is to rebalance the schools. This means either taking money away from School A’s budget and giving it to School B, or taxing everyone in order to increase School B’s budget. You’re punishing Neighbourhood A for improving their school. This is exactly the liberal response that conservatives object to.
Anyway, let’s assume that the rebalancing works and in year three, the schools have equal results. Neighbourhood A’s parents decide to raise their game and become even more involved in their children’s education. So in year four School A again does better than School B. Are you going to punish Neighbourhood A again?
In real life, it’s probable that School A and School B are not equal even if they have the same budgets and parental involvement. Neighbourhood B may have systemic problems that cause hardships for their students. I’m in favour of proposals to relieve those hardships if they’re in the nature of free breakfasts, after school programs, school security, etc. And I do recognise these programs require money, but I’m in favour of spending that money because it will solve problems Neighbourhood B has that Neighbourhood A doesn’t.
By the way, I hope that you appreciate that I built the above strawman with the cleanest straw, the straightest sticks, and the strongest twine I could find.
Also, for anyone who thinks my scenarios are totally fictional, there are calls in the UK from liberals to ban private schools because of the advantages they give to rich students. They’re not just in favour of rebalancing parent-funded advantages, they want to ban them.
Something like your A/B comparison is occurring. Charter schools are putting pressure on the public school system to clean house. No top down funding shift is required. Just the presence of charter schools has changed public expectations.
I would then ask you to re-examine your position from [POST=21768660]post #28[/POST]:
In all three of the counter-examples I provided in [POST=21769463]post #34[/POST] (loan, interviewee, date), it is possible and necessary to judge somebody’s personal responsibility. Further, these judgments directly affect people’s lives. The loan applicant is granted or denied a loan, the interviewee is granted or denied a job, and your friend might call off a date, all based on your decision alone. Do you still think personal responsibility “has nothing to do with anybody else” except oneself?
Your narrative is powerful, and I thank you for sharing it, but it just doesn’t seem relevant. That’s not personal responsibility as we have been discussing it, it is just plain old responsibility. The personal responsibility we are discussing is being responsible for one’s own actions.
Let me elaborate. Pretend I purchase a chartered flight in Alaska, for sightseeing purposes. The proprietor is also the pilot, and he takes me up over Denali. He starts drinking over my objections and after a while we stall and start falling. He can’t regain control and we ditch the plane which crashes below. I land with only minor injuries but the drunk pilot released late (he may have lost consciousness during the fall), therefore I saw him glide into the trees half a mile uphill.
If I keep a level head, I would call the state troopers on my sat phone (if I have one) while setting out to find the pilot. Why go after the pilot? It’s not out of a sense of personal responsibility. The pilot is entirely responsible for the whole situation, as far as I am concerned. It was his plane, his drinking, his piloting. I’m in the clear and I’ll probably sue him if we make it out alive. I guess you could say I have a small incentive to save the pilot, so I can hold him personally responsible for the mess. There is also the fact that he probably knows the area better than I, and might know how to get to a rest house or how to salvage things from the plane, etc. Neither of those are my primary motivation in going to save the pilot. I would go after him out of a sense of humanity, not personal responsibility.
Now, if it had been me drinking and I reached over and messed with the pilot’s controls, which caused us to stall and crash, then I would be personally responsible for the pilot’s condition.
~Max
The dilemma remains. Personal responsibility and egalitarianism are conflicting doctrines.
I identify as conservative but I take a middle path here. I say there is a threshold, a minimum quality education that all students are entitled to. Children are entitled to a “good” education, not an “equal” education. I believe in nondiscrimination, not necessarily equal results.
If Neighborhood school B doesn’t meet that minimum, I don’t care how hard Neighborhood A worked to make themselves better, we are diverting funds to school B. A basic education is important. The long term societal benefit of meeting that minimum outweighs the cost of keeping Neighborhood A down.
That doesn’t necessarily mean I would rebalance the schools in the scenario you have written. It would depend on whether Neighborhood school B provides a minimum quality education each year. If Neighborhood school B meets the baseline, I won’t complain about further inequality but will respond to complaints by pointing at Neighborhood A as a model. “Look at what they’re doing, you could be doing that”.
~Max
Max,
Add a small variable. Suppose you were a geologist and had packed some heavy rock samples in your bag. You did nothing ‘wrong’ but it was your extra weight that prevented a recovery from the stall. Are you then responsible?