Why are we trying to balance the federal budget?

[Days]

What exactly makes any sense in balancing the federal budget? The money we are playing monopoly with is not silver and gold, it is not precious or limited... there's no rhyme or reason to worry about balancing a fiat currency; what is achieved by doing that? Limiting the debt? Debt to who? Debt of what? What is this debt? Imaginary numbers, is all. The debt is an illusion. There is no real money being passed, it is all numbers in cyber space. why would you choose to spend less monopoly money when the creation of the money is by total fiat?

Do you realize that our "economy" is nothing more than the volume of debt currency in circulation? The same ten dollars can be passed 100 times or it can be passed two times; in the first economy, $1000 goes on the chalkboard, in the 2nd economy only $20 goes on the chalkboard, when the ten dollar bill is printed out of thin air to begin with, why would you choose austerity over "growth"? It isn't growth anyway, it is merely activity. Growth is when you actually build more factories or begin new industries. America has not grown in my lifetime, she just keeps receding. But she does print up a lot of synthetic money and pass it around. Our "economy" is just a measure of how much synthetic money is passed around, it doesn't measure growth, just activity.

In a world of synthetic money, synthetic debt, synthetic budgets, and wealth transfer, why would the idiots creating the federal budget choose austerity? That's like kicking yourself in your butt to make yourself hurt. Not a very sensible behavior. Pardon my conspiracy theories, but the only reason to make the whole nation poorer is to make the rich richer. That's all it achieves.

A more perfect fiat of this synthetic money would be spreading the wealth around instead of freezing out the masses to make the top of the top of the top of society slightly more wealthy. We are all getting poorer, but if we shared the wealth (what a concept: commonwealth) we could all live decent enough lives. Higher taxes on everything in the market place with less money in main street circulation is so senseless, it makes you wonder if the prince of darkness is pushing the buttons. This is suffering for the sake of suffering. It achieves very little beyond that.

Learn our system. Then ask yourself... what the heck are those people in power doing?

 

[EatTheRich]

The point of a balanced budget is to prevent inflation, pay low interest on bonds, etc. It may not be a good idea, especially in a recession, but it has its advantages.

But you're right that it's factories and industries, and not money, that's real wealth. This is true whether the money you're talking about is paper, gold, or whatever. So spreading the wealth around means not so much redistributing dollar bills as redistributing land and taking control of the industries via a workers' and farmers' government.

 

[Days]

Here's a concept: fiat money distributes the existing wealth.

A balanced budget is a dinosaur from the republic that ran on real money.

 

[EatTheRich]

There's no such thing as "real money." Money is only a medium of exchange, a store of value. In other words, money represents a social relationship among producers and consumers. It does not have any value outside the social system of exchange, i.e., outside the subjective value placed on it by society.

See also en.wikipedia.org/wiki/Commodity_fetishism

 

[Days]

So you just defined real money... versus synthetic money.

Money, if it is really money, is something of intrinsic value, by which, it can store value, and is also divisible for measuring trade.

Synthetic money is appointed a value by a fiat and trade takes place upon the strength of the fiat. Synthetic money, apart from the fiat, is not money and has no value in and of itself.

 

[EatTheRich]

Gold is appointed a value by a fiat. It is convenient as money for some circumstances, particularly those of medieval Europe and Africa, because it is rare, malleable, durable, and easily divided. But it is valued because it serves as money. If we chose to use yap stones, or wampum belts, or cowrie shells instead, they would be real money. If we use pieces of paper, which (like gold pieces, yap stones, wampum belts, or cowrie shells) have an exchange value based on their cost of production (including the cost of limiting counterfeiting), they are real money. Get it?

 

[Days]

yep. But when the appointed value is completely by fiat and has no bearing on actual value; then it is synthetic money. It costs the FED the same printing cost for a one dollar bill as for a 500 dollar bill; both bills have the same intrinsic value, and both are appointed a value by the fiat, independent of and without any consideration for intrinsic value; value is the enforcement of the fiat, solely. Fiats used marks on wood to do the same thing for centuries.

Meanwhile, the value you say is appointed to gold is more like the value appointed the paper, which then sets the price of gold. In reality, gold is still gold, it never changes. It s the value of the paper that is changing. Let's look at another example. Say you bought a house 40 years ago for $30,000. Today the house is worth $250,000. Did the house go up in value? Heck no, the house was much more valuable when it was new. The house has declined in value, but not near as fastly as the money has declined in value. so it is the fiat script that is dropping in value, not the house rising in value.

When gold is priced at $2000 per ounce, that says that the fiats of synthetic currencies have no confidence in the value of their money. After all, who's holding all the gold? (they are) Did gold go up in value? Nope. The money went down in value.

 

[EatTheRich]

The exchange value of gold changes; in fact as gold mining has gone up the value of gold relative to other commodities has gone down in a long-term historical trend. And monetary manipulation can affect the price of gold more than it can affect the price of the dollar, precisely because the dollar is a more stable currency. But despite the short-term effects of monetary manipulation, in the long run point the exchange value of gold is ultimately based on the cost of production.

It may cost about as much to print a dollar bill as a $500 bill, and they are obviously defined relative to each other, but the cost of production also includes the cost of preventing counterfeiting of the currency in general, and that's what ultimately sets the value of the dollar. If anyone could take a piece of paper costing less than a cent, borrow a pen, and write "$500" on it, and spend it like a $500 bill, the dollar would be next to worthless. It is the wealth spent on security measures and enforcement, and the wealth spent on special cotton paper and ink to give the dollar its durability, that give it its exchange value as money.

And of course from a social point of view, all the wealth spent on gold, paper money, etc., is ultimately wasted compared to the ideal (utopian) efficiency of money-free exchange of equal values.

 

[Days]

These items are bullet points, but should not be offered as central themes.

I would add that a bigger factor determining the value of gold, today, is the availability of gold. The primary trigger driving up - then down - gold in today's market was the limited access to the vast majority of reserves. Mining costs haven't changed all that much and you have to remember, gold is like oil, it gets refined and priced as a finished product (don't read that to say that the raw product isn't priced, just read it as it intends: there is a finished product that gets priced; hence, THAT price is not only reflecting the mining or drilling cost, but includes the final product cost - including refining) but gold is not consumed, it hangs around in that finished product form. After some 50 centuries of hanging around; the price of all the finished gold on the planet reflects availability much more than mining or refining costs; there's much more old gold hanging around than new gold coming onto the market.

However, you are completely missing the mark when you determined that a fiat currency is more stable in value than gold. Gold is rock stable in value. The changing price of gold reflects the changing value of fiat currencies. The basket of currencies used to value those currencies against each other is merely an exchange rate; it doesn't set value... gold does that.

Also, your bullet point on security is a good one. But, again, it isn't the central theme for establishing the value of a fiat currency. The size of the nation's army would be a better benchmark. I pointed at the NYFED being the banker to the world, all the world's reserves are held there. That's an important benchmark. Security, is only important if it is poor, otherwise, its like saying the value of a corporation is the lock on its headquarters doors... as opposed to how good a product they are marketing. Security is important, but it isn't a central theme. It became a central theme for awhile when the housing bubble was bursting and identity fraud was taking advantage of MERS, but that was hidden from public view, and it was temporary. We have a long term security problem with North Korean state run counterfeiting, but we seem to be able to absorb it. 99% of our currency is in electronic form, so counterfeit bills represent a fraction of 1% of the currency. Hence, it doesn't affect value as much as you would surmise from our public education. Likewise, the wealth spent on the cotton and the ink amount to something like 6 cents per bill, and that cost is passed on to the local banks buying bills, it is really a non-factor in determining the value of the currency. But when you see the price of gold swing from $500 per ounce up to $2000 per ounce in under a decade, then you realize that the whole financial globe is experiencing a meltdown.

There is no utopia in fiat currencies, they are intrinsically unstable, they don't store value, they melt down all the time, they have a terrible history. That's why our forefathers chose hard currency to build the nation upon. Remember, the colonies flourished and struggled with fiat currencies BEFORE the Constitutional convention chose a silver coin for the new Republics money. Benjamin Franklin sang the praises of fiat currency BEFORE he blamed the same currency as a primary cause for the revolutionary war.

You haven't studied this enough to get a grip on how it all works and how it doesn't work. You recognize various parts to the machine, but you are not seeing how the machine works as a whole... you need to see the operation of money over time, learn the nature of money, and the natures of different monies. It isn't just accounting.

 

[as seen on tv]

the last time the budget was balanced - one of the clinton years, the other 7 were deficits - it was by accident. the "irrational exuberance" of the stock market, coupled with dot.com profits and low marginal capital gains rates conspired to produce unexpectedly high tax receipts.

although a balanced budget isn't essential, it's impossible to keep growing the deficit at a high multiple of the growth of inflation and/or population. That will eventually trigger a massive fall in the value of the dollar (hyper inflation) destroying savings and retirement plans. typically only real estate and gold survive that sort of debacle.

as long as the deficit grows at a lower rate than inflation, and interest rates remain reasonable, a balanced budget provides no essential benefit.

 

[Days]

When the money is created out of thin air, why not create it? That's the Bernanke position. America still thinks her money is real. Our leaders still think the debt is real. Our bankers know the debt is money, but the folks creating the debt still haven't figured that out. Spend the debt! That sounds strange to our ears, but it is how our money works.

The top post tried (and failed) to ask the question, to discover the reason for trying to balance the budget. I know why they try to do it, they try to do it because they still think the debt is real, they do not understand the money. Then there's Ron Paul who sees how scary the situation is and wants to panic and start over... you can't do that with the national currency, you have to work with the currency you have.

Our schools will teach the kids how a bill is made into law, but they won't teach them how the money is structured. Politics looks at social issues, never the money. You would think the government would have tried to fix the currency after a global meltdown, but they didn't lift a finger. Instead we have this austerity idiocy.

and the beat goes on.

 

[EatTheRich]

If you're asking why they don't fund the debt by printing money, the answer is that they don't want the hyperinflation that'll result.