L. Randall Wray wrote:With one brief exception, the federal government has been in debt every year since 1776. In January 1835, for the first and only time in U.S. history, the public debt was retired, and a budget surplus was maintained for the next two years in order to accumulate what Treasury Secretary Levi Woodbury called “a fund to meet future deficits.”? In 1837 the economy collapsed into a deep depression that drove the budget into deficit, and the federal government has been in debt ever since. Since 1776 there have been exactly seven periods of substantial budget surpluses and significant reduction of the debt. From 1817 to 1821 the national debt fell by 29 percent; from 1823 to 1836 it was eliminated (Jackson’s efforts); from 1852 to 1857 it fell by 59 percent, from 1867 to 1873 by 27 percent, from 1880 to 1893 by more than 50 percent, and from 1920 to 1930 by about a third. Of course, the last time we ran a budget surplus was during the Clinton years. I do not know any household that has been able to run budget deficits for approximately 190 out of the past 230-odd years, and to accumulate debt virtually nonstop since 1837.
The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929. (Do you see any pattern? Take a look at the dates listed above.) With the exception of the Clinton surpluses, every significant reduction of the outstanding debt has been followed by a depression, and every depression has been preceded by significant debt reduction. The Clinton surplus was followed by the Bush recession, a speculative euphoria, and then the collapse in which we now find ourselves. The jury is still out on whether we might manage to work this up to yet another great depression. While we cannot rule out coincidences, seven surpluses followed by six and a half depressions (with some possibility for making it the perfect seven) should raise some eyebrows. And, by the way, our less serious downturns have almost always been preceded by reductions of federal budget deficits. I don’t know of any case of a national depression caused by a household budget surplus.
According to actual history, every depression has been preceded by a government surplus. This isn't surprising to those of us who understand the monetary system. So, while you're reading your Austrian textbook and telling us why the government surplus should have resulted in increased economic activity and wealth, those of us who understand what drives economic activity have covered our bases with our investments appropriately.
I keep telling you that I could care less if your logic makes sense or not. All I care about is what actually happens. And history is clearly not on your side — since every depression in our nation's history has been preceded by a government surplus.
What I'm saying is that your brilliant logic makes a terrible investment strategy.
Last edited by Gumby on Thu Sep 12, 2013 10:09 am, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
Pointedstick wrote:
I don't think this thread is going to go anywhere positive from here. Maybe we should all take a breather and let it die with dignity.
Agreed. If KShartle can prove what he's saying, I'm all ears.
Otherwise, it's just talk that doesn't match up with reality and we should stop.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
Gumby wrote:
According to actual history, every depression has been preceded by a government surplus.
What I'm saying is that your brilliant logic makes a terrible investment strategy.
First point makes logical sense. When an unsustainable government bubble is no longer sustained, the period where the market sorts out the missalocations is a recession. When the government interferes with the recession....depression.
Kshartle wrote:
Dollars don't transform into other assets.
Sure they do. Dollars can be converted into Treasury Bonds. Treasury Bonds are an asset of the private sector. They represent our savings (literally, in the case of the Permanent Portfolio). Those assets can be used to back private credit and spur investment in all the wonderful things you think we should be producing.
The don't covert they are traded. You need a lesson in reality.
Pointedstick wrote:
I don't think this thread is going to go anywhere positive from here. Maybe we should all take a breather and let it die with dignity.
I think you're right PS. No thread where actual economics are discussed will ever go anywhere because of the nonsensical beliefs in fantasies that don't exist.
