Monetary sovereignty and euro member states

[Theodorex]

They don't. A government can always print more money, and I said this several times over here. However, a bigger risk does hurt the capacity of debt repayment.

No it doesn't. Capacity of government keystroking remains the same.

After all, if you print money to repay debts, the debt holders lose money (hey hey hey let's give you that 1 million dollars bond but now a dollar is worth 90% less, so you end up with 100k HA) or the population does - I discussed it previously so I'm not going further on this point. Therefore, knowing of this risk an investor raises interest rate demand over the bond so he can compensate the money lost and even profit of that loan.

It doesn't work like this. That's why I told you earlier that the system is much worse than you ever imagined. It is a government monopoly, if government doesn't pay you that interest and doesn't sell those bonds to you then you have no place to earn interest. It is not true borrowing al all by the government, issuing money is as much borrowing as issuing treasury securities. Both are government liabilities, technically M0 is fed's liabilty, for this talk here there is no point of separating fed and treasury.

You need to understand that investors aren't retards who are "uh okay" when a government gives less money than they lent. They will chase the government and pressure for more yields to profit from the bond.

Again, what are we talking about? Profit from the bond? Compare to what, compare to earning zero interest on money? Are people dum enough to accept government money when there is inflation and get zero rate? They seem to be.

Or try to imagine fed accepting treasury securities for collateral for loans. Would you as a banker demand 150% interest rate (happened in Russia before Russia defaulted) or just get a loan from the fed. You'd have to be retarded not to get a loan and not to use your bond as a collateral.

[Theodorex]

Gold bugs generally have no idea how gold or silver standard operated in real life. I am not getting into the qestion here that authors of this essay ask

The Debasement Puzzle: An Essay on Medieval Monetary History https://pdfs.semanticscholar.org/feea/d6b9ded2eb233b70eda4b5bb49f55413f87e.pdf

In France, the silver currency went through 123 debasements between 1285 and 1490. Of these, 112 reduced the silver content of the currency by more than 5 percent. The single largest debasement reduced it by 50 percent. Gold coinage changed comparatively less in the same period: there were 64 debasements, 48 of which were by more than 5 percent. Compared to France, England enjoyed monetary stability. While debasements occurred for both silver and gold during the 14th and 15th centuries, they were far less frequent than in France. Seigniorage rates always remained low, debasements occurred at long intervals, and the pound sterling never lost more than 20 percent at a time. This reign of monetary stability ended with the Great Debasement. From 1542 to 1551, silver or gold was debased ten times, and the pound sterling lost 83 percent of its silver content. The gross seigniorage rate went from 2 percent to 57 percent. Yet the volume of minting was so large that the single mint at the Tower of London was not enough, and the sovereign had to open six new mints.

[Great Minarchistan]

No it doesn't. Capacity of government keystroking remains the same.

I wonder why some government bonds yield more than 10% a year... Stop to be so goofy, that's not how bonds work.

It doesn't work like this. That's why I told you earlier that the system is much worse than you ever imagined. It is a government monopoly, if government doesn't pay you that interest and doesn't sell those bonds to you then you have no place to earn interest.

But hey, who offers the government money? Exactly, the lenders do. Try to joke with them and you'll receive no debt monies to cover your deficit. So if you set interest rates too low the private lenders will leave you alone with public lenders (explaining below).

You need to understand that investors aren't retards who are "uh okay" when a government gives less money than they lent. They will chase the government and pressure for more yields to profit from the bond.

Again, what are we talking about? Profit from the bond? Compare to what, compare to earning zero interest on money? Are people dum enough to accept government money when there is inflation and get zero rate? They seem to be.

That happens because as our dear comrade Arkolon mentioned, ECB started a bond purchasing program. Basically the ECB is acting like a lender and is purchasing a hell lot of bonds from Eurozone countries, causing zero or even negative interest rates because instead of buy private bonds, Euro members can simply borrow from ECB at lower rates. Same happens in Japan. Is it sustainable? Nope.

Or try to imagine fed accepting treasury securities for collateral for loans. Would you as a banker demand 150% interest rate (happened in Russia before Russia defaulted) or just get a loan from the fed. You'd have to be retarded not to get a loan and not to use your bond as a collateral.

Eh sorry I'm not an economist or anything along these lines, so I'd be glad to see you rephrasing that to me.

[Theodorex]

Great Minarchistan

Let me tell you why Mises and Rothbard are never accepted by economic community. It is because of the synthetic a priori knowledge. This is not accepted in science, praxeology. This originaters with Kant but Kant was wrong.

Their logic goes like this: we can theorise in a classroom about geometry and if we use math we'll find all the right answers and gain knowledge by doing this.

Wrong, this leads to all kinds of philosophical disasters. Euclidean geometry is considered as a pure mathematical theory, it is nothing but analytic a priori knowledge, and asserts nothing of the world, since it is tautologous and non-informative.

But, when Euclidean geometry is applied to the world, it is judged as making synthetic a posteriori statements,which can only be verified or falsified by experience or empirical evidence. That is to say, applied Euclidean geometrical statements can be refuted empirically, and Euclidean geometry – when asserted as a universally true theory of space – is now known to be a false theory.

Hayek rejected praxeology. It is universally rejected, It can be a religion but not a scientific theory discribing real world economics. As simple as that.

[Great Minarchistan]

Gold bugs generally have no idea how gold or silver standard operated in real life. I am not getting into the qestion here that authors of this essay ask

The Debasement Puzzle: An Essay on Medieval Monetary History https://pdfs.semanticscholar.org/feea/d6b9ded2eb233b70eda4b5bb49f55413f87e.pdf

In France, the silver currency went through 123 debasements between 1285 and 1490. Of these, 112 reduced the silver content of the currency by more than 5 percent. The single largest debasement reduced it by 50 percent. Gold coinage changed comparatively less in the same period: there were 64 debasements, 48 of which were by more than 5 percent. Compared to France, England enjoyed monetary stability. While debasements occurred for both silver and gold during the 14th and 15th centuries, they were far less frequent than in France. Seigniorage rates always remained low, debasements occurred at long intervals, and the pound sterling never lost more than 20 percent at a time. This reign of monetary stability ended with the Great Debasement. From 1542 to 1551, silver or gold was debased ten times, and the pound sterling lost 83 percent of its silver content. The gross seigniorage rate went from 2 percent to 57 percent. Yet the volume of minting was so large that the single mint at the Tower of London was not enough, and the sovereign had to open six new mints.

I wonder if you even read the quote, because if you ever did you'd notice that it favors the gold standard saying that after the currency debasements England suffered a heavy currency instability. And unless you are a speculator or just like unstable currencies, that is a clear negative effect.

[Great Minarchistan]

Great Minarchistan

Let me tell you why Mises and Rothbard are never accepted by economic community.

Should be tho. Anyways...

Their logic goes like this: we can theorise in a classroom about geometry and if we use math we'll find all the right answers and gain knowledge by doing this.

Uh no. Austrian economy as well as any other economic school understands the fact that economy is a science, yet at the same time it strives for the best system possible. Personally Austrian School shows the events with an incredibly good perspective, analyzing the side effects of policies and why we should test them or not.

Wrong, this leads to all kinds of philosophical disasters.

Exactly, because economy isn't an exact science...

Euclidean geometry is considered as a pure mathematical theory, it is nothing but analytic a priori knowledge, and asserts nothing of the world, since it is tautologous and non-informative.

Unnecessary comment.

But, when Euclidean geometry is applied to the world, it is judged as making synthetic a posteriori statements,which can only be verified or falsified by experience or empirical evidence. That is to say, applied Euclidean geometrical statements can be refuted empirically, and Euclidean geometry – when asserted as a universally true theory of space – is now known to be a false theory.

Austrian. Economics. Are. Not. Math. Actually comrade Theodorex, the econometrics were born in the branch of keynesianism, not in the branch of Austrian School.

Hayek rejected praxeology. It is universally rejected, It can be a religion but not a scientific theory discribing real world economics. As simple as that.

Did he? I'd gladly take sources on that. because AFAIK praxeology is one of the pillars of Austrian School. Also, praxeology is a pretty good method to identify the mechanism of economies, because the economy isn't math. The economy is us. Reject the human variant on the economic calculus is a big mistake.

[Arkolon]

The Italian government has already approved bailout terms for Monte dei Paschi

Financed by who? Oh, by more debt. Those guys know how to create sustainable banking systems.

If you have a bank account or savings in any currently-issued modern currency since August 1971, I have some bad news for you. Money is debt: in a fiat monetary system, money is created by the private banking system out of thin air whenever a bank creates a loan for a client. We live in a credit-based monetary system, meaning all the money we have and use is a form of credit. It is a type of loan. When you pay back a loan, you shrink the money supply; when you take out a loan, you expand the money supply. This is how the entire world economy has worked since the 1970s and the collapse of the Bretton Woods system. Your sarcastic comment that "these guys know how to create a sustainable banking system" is funny to me, because that literally is the entire banking system - debt!

and the Italian government's financial position is secured thanks to the ECB's Asset Purchase Programme

More debt talk. Someone will pay the bill soon.

Government debt doesn't work at all like an individual's debt or household debt. Governments (and corporations for that matter) issue bonds, which they continuously and always pay back. The US government, and every government and institution with debt obligations, pays back some of its debt every single day. There is no need to "pay the bill" like a household would need to when it has to repay an unsecured loan, for example. The wonderful thing about bonds working this way is that they create assets for investors: a 60/40 equity/bond mix is the standard portfolio composition that you would learn about if you took a crash course in investing. Investors love bonds: corporate paper is usually pretty safe, but government bonds are the safest thing going. If I give the US government a hundred dollars, I can be reasonably certain they'll pay me back $100 plus interest when the bond matures. It doesn't matter whether it's financed through debt monetization or hyperinflation, since the debt obligation is honoured and I get my money back (nominally) regardless. If the US government had no debt, the entire American banking sector would fold since it's a reliable source of income. A government having a stable debt level is a sign of a very normal and very healthy modern economy - if the debt level is accelerating rapidly, that could be a potential problem.

forcing yields down, and the EU's ESM which basically guarantees that the Italian government would never face exorbitant interest rates on its debt.

So ECB is babysitting countries with artificially low interest rates. Sounds like a bad idea...

The alternative would have been to weaken the Eurozone governments by crippling them with high-interest payments on debts they can't serve. How is that better? Let's remember that all the troubled countries were forced to implement austerity measures that have, by and large, had a positive effect on reducing deficits and on liberalising domestic markets - measures that would have only been possible with lower interest rates, else these troubled countries would have been stuck in an endless spiral of ever-rising debt because of the exorbitant rates.

Whoever this guy is, he is a retard. He was performing pretty well until he said that when government buys more bonds, their price falls. No, no, no, no. AFAIK it's actually the inverse: More bond purchasing affect your credit rating and therefore the bond price rises. It's not like borrowing more will make your loans cheaper. What's funnier is when he says later that cheaper bonds lead to higher interest rates. Huh? Higher interest rates turn bonds more expensive...

Dude, you should be embarrassed... You've just proved to the rest of the thread that you have no idea how the bond market works. A bond is a fixed-income security, auctioned on the primary market to investors. Every day, the government (any that issues debt) auctions off a piece of paper and says it is worth a certain amount of money, let's say $100, which it will pay back when the bond matures, let's say after 10 years. Investors buy the asset, but at a lower price than $100 - the difference between the values is the "interest rate". So if the $100 bond is sold to investors for $90, the government receives $90 and pays a 10% "interest rate" on the debt it issued ($100). That's why it's not really called an "interest rate" but a "yield", which is modified to work out at an annualised rate. On the secondary market, already-auctioned bonds are resold to other investors. If the investor who bought the bond for $90 sells at $80, the yield rises. If he sells it at $99, the yield falls. Because the yield on the secondary market affects investors' actions on the primary market (why would an investor buy a bond for lower interest on the primary market when yield is higher on the secondary market?), when the price of a bond falls, the yield on the bond rises, consequently making debt more expensive for the government since it receives less and less money when auctioning bonds on the primary market.

[Theodorex]

Theodorex wrote:
Hayek rejected praxeology. It is universally rejected, It can be a religion but not a scientific theory discribing real world economics. As simple as that.


Did he? I'd gladly take sources on that. because AFAIK praxeology is one of the pillars of Austrian School. Also, praxeology is a pretty good method to identify the mechanism of economies, because the economy isn't math. The economy is us. Reject the human variant on the economic calculus is a big mistake.

The prosecution rests its case. Not only are you not familiar with other schools of economic thought, you are not familiar with the school of thought's scholars you claim to be a fan of. Within one minute I can find on the internet where Hayek says he is against that unscientific method like praxeology . The fact that you don't know anything about It is telling. Who else do you know in Austrian School at all?

My example was not about math at all, It was about detuctive reasoning without empirical evidence. There are some good ideas in my opinion in Austrian School but I am assuming here by your previous input that you wouldn't know anything about them.