Thanks for the translation.

• Committing massive and pervasive fraud both when they initiated mortgage loans and when they foreclosed on them (and see this)
  
  
• Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this.
  
  
• Cheating homeowners by gaming laws meant to protect people from unfair foreclosure
  
  
• Charging veterans unlawful mortgage fees
  
  
• Engaging in mafia-style big-rigging fraud against local governments. See this, this and this
  
  
• Cooking their books (and see this)
  
  
• Bribing and bullying ratings agencies to inflate ratings on their risky investments
  
  
• Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this
  
  
• Engaging in unlawful “frontrunning” to manipulate markets. See this, this, this, this, this and this
  
  
• Laundering money for drug cartels. See this, this and this (indeed, drug dealers kept the banking system afloat during the depths of the 2008 financial crisis)
  
  Much more here: http://www.washingtonsblog.com/2012/07/the-many-ways-banks-commit-criminal-fraud.html
  
  Now you can't pretend that you don't know what crimes have been committed unless you want to admit you are being intentionally deceptive.

Back up that statement.

I did end up reading the rest of your comment. It seems as if you are more interested in picking a fight than having a real discussion.

I have absolutely no idea why it matters to you which government body does the shredding. My point was that money sent to the IRS gets destroyed, removed from the economy. You ignored the larger point and went off on a tangent.



You didn't answer my question about what would happen if the only way to get money into the economy was through lending, as you claimed. What would ultimately happen when borrowers needed to repay their debts rather than spend the borrowed money? (Here's a hint: read Fisher)

Fed lending has increased, but bank lending has still declined since before the crisis. The Fed lends to banks, it doesn't lend directly to consumers and it can't force the banks to lend to consumers, therefore the money has not made its way into the real economy. The Fed is operating under the failed neoclassical assumption that reserves fuel lending. In reality, demand from qualified borrowers is what drives lending. Banks are never reserve constrained to begin with. That's why we can't depend on monetary policy to pull us out of this crisis. We need real fiscal solutions.

Once again, I will ask you to reconsider the question. Pretend that the banks aren't lending and that we're running a trade deficit (precisely our circumstance after the global financial collapse). How can our GDP grow if the only way to get money into the economy is through lending? How can tax revenue and domestic demand for government debt increase? Where is this magical money coming from? Don't say Fed loans again! We've just established that the banks aren't lending, so the Fed could loan the banks $500 trillion and it wouldn't matter!

The GDP did go up, despite the conditions mentioned above. I will save you the trouble of explaining where the money came from. The government spent it into existence in the form of the stimulus package, increased use of food stamps, unemployment compensation, welfare etc (this is exactly why these programs are called "automatic stabilizers".



Very little of our money supply is actually printed. Most money gets added to the economy in the manner I described, via the government directly crediting accounts. Only a tiny fraction of our money supply circulates as dollars (or coins). ETA: less than $1 trillion, or 1/16 of M3

But lets say printing is the means by which all of our money is created. After the money is printed, how does it find its way into the economy? Random helicopter drops?



I never said the government doesn't have accounts. Don't put words in my mouth. What I said is that our government can always meet its same currency debt obligations. There is absolutely no danger of default, unless Congress chooses to default (which would only happen if the majority went insane) and the President refuses to use Treasury's Constitutional authority to mint. A sovereign fiat currency government literally cannot run out of money. That's what people mean when they say the crisis was fake.



Here is a Bernanke quote on the Fed controlling the yield curve. If you want to go up against the central bank because you believe they can't control rates, go for it! Bet the farm.

[div class="excerpt" bg="blue"]However, a principal message of my talk today is that a central bank whose accustomed policy rate has been forced down to zero has most definitely not run out of ammunition. As I will discuss, a central bank, either alone or in cooperation with other parts of the government, retains considerable power to expand aggregate demand and economic activity even when its accustomed policy rate is at zero.

So what then might the Fed do if its target interest rate, the overnight federal funds rate, fell to zero? One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure–that is, rates on government bonds of longer maturities. There are at least two ways of bringing down longer-term rates, which are complementary and could be employed separately or in combination. One approach, similar to an action taken in the past couple of years by the Bank of Japan, would be for the Fed to commit to holding the overnight rate at zero for some specified period. Because long-term interest rates represent averages of current and expected future short-term rates, plus a term premium, a commitment to keep short-term rates at zero for some time–if it were credible–would induce a decline in longer-term rates. A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields. If this program were successful, not only would yields on medium-term Treasury securities fall, but (because of links operating through expectations of future interest rates) yields on longer-term public and private debt (such as mortgages) would likely fall as well.

Goldbug? Paulite? That's pretty funny.

Have you really never heard of Minsky? Galbraith? Chartalism? Post-Keynesianism? Lerner? Modern Monetary Theory? L. Randall Wray? Bill Mitchell? This is not right-wing fantasy land. This is real word, 21st century economics.

If you want to talk economics with me, you need to get beyond this level of absolute ignorance. Take some time to try and actually comprehend the things that I've told you, rather than simply lashing out with outlandish accusations that I'm a goldbug or a Ron Paul supporter.

By the way, you're the one who threw out the "Weimar Republic" analogy, which is a classic goldbug, Paulite canard.



You're still missing quite a bit. Just stop and think about it for a minute. If the only way to get dollars into the economy was through banks borrowing from the Fed ("using one of the various ways the Fed loans money to banks", what would our money supply look like? Explain how this would work, operationally. How could enough money exist in the economy for our government to even collect taxes or issue bonds? What do you think would happen if bank lending declined, the way it has since 2008? Use some basic logic.

In reality our sovereign government is the sole issuer of our currency, which it creates by spending. The government spends by crediting bank accounts. Banks can only create credit, they cannot create net new financial assets. The government purchases goods and services (or makes transfer payments such as social security and welfare) by crediting the bank accounts of the recipients. This also leads to a credit (not a debit, as you suggest) to the bank’s reserve account at the Central Bank. Honestly... this is how it works. I'm not making this stuff up, Jeff. Go study!



The debt crisis was a political crisis, not a fiscal crisis. There is no actual risk of our nation defaulting on its debts, except by choice. Obama could have easily avoided this political trap, but he lacked the courage.



It's interesting to me that you are so convinced you are right, and yet you keep getting it so wrong.

I'll let Edward Harrison explain to to you since he is more erudite than I am in this subject:



Now you know how the Central Bank manages (short, and subsequently long) rates. The Fed just showed you though quantitative easing that they are ready and willing to be the buyer of last resort. No bond trader would be successful if he or she didn't understand these concepts.



I think I've explained this to you a few times now. Ireland, Spain and Greece are Euro member nations. They are not sovereign in their debts, which are denominated in Euro. Their sovereign currencies are tied to the Euro at a fixed exchange rate. What's more, the ECB has never functioned as a true central bank the way our Federal Reserve does. We are not Greece. We are not Spain. We have a sovereign flexible rate currency and a strong central bank.



Right, it's always inflationary. Except when it isn't.



Tax hikes may or may not be popular, but it would be economically risky and, as I've mentioned, a waste of progressives' time and energy. The time to raise taxes and thereby remove money from the private sector is not in the midst of a balance sheet recession.

It took me many years of reading every economics book, article, blog and lecture I could get my hands on to get to the point where I am extremely comfortable with this subject. I shared a lot of this journey with fellow DUers. I am certain that if you made the effort to learn, rather than simply espousing these neoclassical and neoliberal cliches, you would be better able to devise cogent arguments. You do seem pretty interested in the subject.

Where did the money come from in the first place, Jeff?

The government has to spend money first before it can be taxed or "borrowed". That's sovereign fiat money mechanics 101.



No, government spending or "printing" is not massively inflationary. This is partly because the destruction of fiat via taxation acts as a check and drives demand for dollars, but also because our productive capacity is large and can grow naturally through population increases and technological innovation.

It's absurd to compare the US to the Weimar Republic. Weimar owed its debts in gold and foreign currencies, and as such, it was a merely a currency user, like a household or a business. Weimar also suffered a devastating decline in productive capacity. These are the two factors that led directly to Weimar's hyperinflation. Your analogy can never work and we would all be better pretending the words 'Weimar Republic' had not come up in this conversation.



True, good condition dollars might be put back into circulation, but much of the money the IRS takes in is simply shredded. Good condition dollars are recirculated, not sent over to Treasury to be spent by Treasury. The electronic funds are erased from existence with the push of a button. If you like, you can imagine someone transfers these digital sums over to an account somewhere at Treasury and that the government couldn't spend if this act did not occur, but, come on... get serious, Jeff. We all know it doesn't really work this way.



Interest rates are not the issue. Both the long and the short rate can easily be managed by our central bank. Check out Japan, which has run massive deficits for two decades yet pays very low rates. I thought that the general knowledge of economics on DU had progressed far beyond these types of debates. You're flat out wrong here. Bond vigilantes do not exist for sovereign currency issuer bonds.

Printing money is inflationary under some circumstances (mainly full employment and max. productive capacity), and when those conditions are met, the government should start to look at the deficit and adjust tax rates and/or cut spending to help reduce the money supply.

Printing money is not inflationary under all circumstances, or we would be facing high inflation right now.



Actually, the complaint is usually: "Democrats want to raise your taxes to pay for it!!11!"

Once people understand that we can invest in education, energy, infrastructure, jobs and pro-growth programs without raising taxes they are generally much more agreeable to the spending. Bush understood this concept. Why can't Democrats?