What the hell is "the welfare state"?
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17-05-2016, 05:48 AM
RE: What the hell is "the welfare state"?
(15-05-2016 08:54 AM)Born Again Pagan Wrote:  Most money is not real at all. When a bank writes a mortgage they don't have the money lying in a vault to take out and give to you, they just tickle a computer that invents the money out of thin air and sends it to the seller, also as a bunch of 1's and zeros in a computer. Then you are expected t pay the bank back 3 or 4 times hat amount over 20 or 30 years. The paper money that is passed from hand to hand is only a small fraction of the money supply, No I am not an economist, and surely I have some of it wrong, but I believe i am basically correct here.

I was actually just reading about this idea on another forum, yesterday. You are somewhat right:

DSMatticus Wrote:Alright, so let's talk about the money supply. The two most commonly used measures of the money supply are the M0 and the M2. The M0 is a simple measure of the actual amount of liquidity in the economy and the banks. If someone asked you, "so how much cash is there, anyway?" you'd point them to the M0 and tell them "that much." The M2 is more complicated. If I had to describe it in the simplest terms possible, I would say that whereas the M0 was a measure of the amount of liquidity that actually exists, the M2 is a measure of the amount of liquidity that exists on paper. It's the M0 plus a bunch of things that people use in day-to-day economic transactions but aren't cash (their checking accounts, their savings accounts) and things that can be semi-quickly exchanged for cash (certain kinds of mutual funds, certificates of deposit).

And right now you're probably wondering why the M0 and the M2 aren't the same thing. I.e., why doesn't the amount of money that exists on paper equal the amount of money that actually exists? And the answer is fractional reserve banking. Banks are only required to keep a certain percentage of their deposits as cash on hand - usually 10%. That means if the government prints $10 dollars and hands it to a bank (i.e. the M0 increases by $10), that bank can use that $10 dollars to support $100 dollars worth of deposits (i.e. the M2 increases by up to $100). There's a multiplier effect in which $10 worth of physical cash can create up to $100 worth of theoretical cash - theoretical cash that people will use in actual day to day transactions as though it were cash. Even though so much of it is money we're just pretending it exists, the M2 is actually considered the more important of the two by anyone who knows what the fuck they're talking about.

But notice how I said that the M2 increases by up to $100, not that it actually does. And this is very important to understanding why QE didn't cause inflation. The central bank printed a fuckton of money and handed it to our banks, and then instead of taking that money and using the power of fractional reserve banking and credit to create 10x as much pretend-money, they sat on it. See, the banks looked at their internal finances (i.e. barely profitable with tons of toxic assets leftover from the financial crisis) and said "oh god, we're fucked." Then they looked at the economy as a whole (i.e. consumer demand in the shitter, absolutely no sane opportunities for investment) and said "oh god, they're fucked." And they stuck all that money in a vault and are using it to protect themself from the imminent possibility of their own collapse.

The end result is that under QE the M0 has quintupled, while the M2 has only almost doubled. Almost. The M2 is actually on the exact same trajectory it was before the crisis. Looking at an unlabelled graph of the M2, you probably wouldn't even be able to tell me where QE began. And that is why inflation hasn't happened. Because the M2 didn't fuggin' change, and the M0 is fucking irrelevant if the money being printed doesn't make it into circulation (and it isn't, because in practice that's what the M2 is).
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17-05-2016, 06:49 AM
RE: What the hell is "the welfare state"?
What does the money supply have to do with welfare?

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17-05-2016, 08:44 AM
RE: What the hell is "the welfare state"?
(17-05-2016 06:49 AM)BnW Wrote:  What does the money supply have to do with welfare?

OP's last question about printing money.

I encourage the OP to read what Quantitative Easing is which has been a policy of the Fed for the last 8 or so years and it's impact on income disparity. Start with wiki.

https://en.wikipedia.org/wiki/Quantitative_easing

Essentially when the government issues debt it is normally purchased by a handful of connected major banks. Then the Fed purchases the debt from these entities not by transferring existing funds but rather by simply crediting the bank with the money. It is called printing but in reality it is simply a computerized process that simply puts money in the selling banks account. If you are familiar with double entry accounting, a normal transaction would have one account increased and another decreased during a purchase transaction. The Fed isn't decreasing any accounts it "prints" the money.

The theory behind why you do this is that the banks that purchased debt from the Government in an auction then sell it back to the Fed (for a small profit - a nice arrangement of guaranteed risk free profit if you are big enough to qualify) then make this money available to businesses and consumers as loans to encourage economic growth/expansion.

The problem is the banks haven't done that. Instead with all this cash they played the stock market. Every month the Fed injects billions to the banks who then buy stocks and since QE continues their are more buyers for stocks and thus stock prices go up (see stock market rise during QE).

So who has benefited? The banks and to some degree stock holders but the rise in the market has nothing to do with fundamental strength but rather an artificial demand for stocks over the last 8 years. So stock market looks great (our president loves to mention that) but the bankers got rich and people who own stocks have paper gains but this will come crashing down.

The other problem is that with money creation, inflation increases. But because of near zero interest rates anyone on a fixed income is screwed b/c safe investments are earning very low interest which is not keeping up with inflation forcing retirees to go back to work. Look at the metrics for job gains- 55 and older are getting the most jobs while 25-45 are losing (disclaimer I may have the exact ages wrong but you'll find I'm close if not correct).

Sorry for the long post but it should be a starting point for understanding how the Fed and the current government's fiscal policies have royally fucked everyone but the wealthy in the last 8 years.

Facts do not cease to exist because they are ignored- Aldous Huxley
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17-05-2016, 11:42 AM
RE: What the hell is "the welfare state"?
I was with you until your last line. It hasn't been the last 8 years. It's been a whole lot longer than that, and going back to when Greenspan headed the Fed. That one asshole has done more damage than all the bad Presidents combined.

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17-05-2016, 01:02 PM
RE: What the hell is "the welfare state"?
Economics is one of the main reasons I can't fully align with democrats (that and I think summing up all your nation's strategy for government in a single label is silly). For instance I think a nationwide $15 min wage is ridiculous. I think a better welfare system would incentivise (able-bodied individuals) breaking out of it more. While I'm sure many people need it and use it appropriately, I personally know many who have used it in a selfish way (i.e. they didn't really need it, but got it because they could). I also feel too many live above their means. Choosing your location, form of transportation, and what you eat (not to mention what technology you pay for) makes the difference between needing $700 a month to get by vs needing $2000+ a month to get by.

The tangled web has already been woven. Undoing it is no simple task. I think Communism/communal living is a great paradigm on a small scale. But I don't have enough faith in humanity to believe it works on a large scale. Give people the chance to take advantage (especially in anonymity), and they will. That being said, whether or not welfare-abusers are actually a significant drain in the U.S. is a completely different conversation. I would be more interested in decreasing military spending.

I prefer fantasy, but I have to live in reality.
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17-05-2016, 01:16 PM
RE: What the hell is "the welfare state"?
(17-05-2016 11:42 AM)BnW Wrote:  I was with you until your last line. It hasn't been the last 8 years. It's been a whole lot longer than that, and going back to when Greenspan headed the Fed. That one asshole has done more damage than all the bad Presidents combined.

QE1 started November / December 2008

See
http://useconomy.about.com/od/glossary/g...Easing.htm
https://www.theguardian.com/business/201...ary-policy

[Image: -1x-1.png]

Edit: I agree with you that Greenspan's policies have harmed the country immensely and very few understand it.

Facts do not cease to exist because they are ignored- Aldous Huxley
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17-05-2016, 01:45 PM
RE: What the hell is "the welfare state"?
Yes, my comment wasn't really focused on the QE as much as the impact of the Fed in general.

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17-05-2016, 02:49 PM
RE: What the hell is "the welfare state"?
(14-05-2016 12:10 PM)Mittens Deluxe Wrote:  People on welfare. What's the problem with that? Don't answer that just yet, because I have a few more things I want to work out in my head. Okay, first of all, where do republicans get the idea that people are just lazy?
I was actually suprised to learn that the Republicans are right wing and the Democrates are left wing.

I knew the Republicans were religo nutty, so I just assumed they would be left wing.

In NZ the religious based parties seem to be for the left. They tend to like looking after the poor (by giving them stuff), they tend to think it is "right" to take from the "rich" and give to the poor. Tend to be for unions and equal pay.

But in USA it seems the religo nutters are far right.

Personally I do have problems with overly socialist policies. I value freedom, I value personal responsibility, I think people who go to school, focus on an education and work hard deserve the rewards that they seek. I think it is unfair when a person drops out of school aged 14 and has 8 children by the time she is 24 and gets huge domestic purpose benefits paid by the tax payers.

But, I do have an issue with leaving people to rot on the park benches too.
I value opportunity, which is why I like the idea of free school and free health. I value the idea of wellfare being a temporary measure which comes with some responsibility. Those on wellfare need to be actively looking for jobs or need to be actively upskilling. I think there ought to be a limit to domestic purpose benefit, as the solo mother has her nth child she shouldn't be getting richer, she should find it harder to make her financial commitments hence she should have a disincentive to keep on reproducing.
I truly think the main issue is in the home. I think handing out money creates dependencies and dependent habits that are passed onto the next generation.
I think encouraging businesses means the creation of jobs and the flow of money in a thriving society.
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20-05-2016, 03:18 PM
RE: What the hell is "the welfare state"?
I have seen some people who have nice cars, nice jewelries, nice dresses, good businesses and pay for their food with food stamps.
I knew people who were selling drugs, had nice things and received welfare and other benefits.
Nice, while those who live honestly, work very hard and can not have all those benefits.
I saw drug addicts who use their welfare money to buy drugs.
Does the government do anything about this?
I don't think the government even cares about it.
That is why I hate big fat government, the one the Democrats are fighting for. And some Republicans the same as Democrats do this. They(Republicans) only pretend they fight for conservative values but behind the scene they make deals with Democrats. Deals that are not good for the poor and needy. Deals that make them(politicians) more powerful and more rich.

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20-05-2016, 05:47 PM
RE: What the hell is "the welfare state"?
(20-05-2016 03:18 PM)Alla Wrote:  I have seen some people who have nice cars, nice jewelries, nice dresses, good businesses and pay for their food with food stamps.
I knew people who were selling drugs, had nice things and received welfare and other benefits.
Nice, while those who live honestly, work very hard and can not have all those benefits.
I saw drug addicts who use their welfare money to buy drugs.
Does the government do anything about this?
I don't think the government even cares about it.
That is why I hate big fat government, the one the Democrats are fighting for. And some Republicans the same as Democrats do this. They(Republicans) only pretend they fight for conservative values but behind the scene they make deals with Democrats. Deals that are not good for the poor and needy. Deals that make them(politicians) more powerful and more rich.
Its the problem of having a two party system. Now that NZ has MMP we don't swing right and left, we are much more middle ground now.
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