MedEwok wrote:
A common mistake made by many economists and politicians is to think that money is in any way limited or that debt means anything.
That is only so because we as a society agree it does, but if we find these views not to be beneficial to society as a whole, then we can eliminate debt or multiply money at the stroke of a pen. I’m not saying that doesn’t have other, negative consequence, but it is remarkable how the human psyche is primed to accept the current circumstances as a given, preventing out of the box thinking. This has been very evident throughout the pandemic.
I agree completely with this! You can’t eat money. Money can’t nurse you when you’re ill. Money is simply a way of allocating resources. Debts are just a promise to give back resources at some later time and as you say, such promises can be made void at the stroke of a pen.
Another example of the same. In Sweden the pension system was changed some 20 years ago. Before that, pensions were payed by the taxes of working people. After that, pensions are paid using an insurance system where you pay insurance premiums throughout your life. (I’m simplifying enormously, but that’s the gist of it.)
This was promoted as everyone are now paying for their own pension rather than having other people pay for it. That’s of course hogwash. When you retire, it is working people who feed you, clothe you, nurse you when you are ill or infirm etc. It was true 20 years ago, it is true today and will be true tomorrow. So you will still be “taking” resources from working people when you retire.
The only difference is what decides what resources should be taken. With the old system the size of pensions was obviously a political decision. Of course it still is, but less obviously. So when people complain about low pensions today, politicians can wash their hand and say “it’s not our fault.”
it is remarkable how the human psyche is primed to accept the current circumstances
@Medewok there is probably a rich vein for research by behavioural economists on that statement. Macro hedge funds might look at government default probability from different perspectives: fiscal balance, debt burden as a proportion of budget, debt/GDP/GNP, size of public sector, graft/corruption, tax evasion, inflation, fiat money creation, etc
An interesting correlation is the population of some countries tolerate quite high ratios which are compensated by high native/domestic savings ratios: Italy, Japan for example.
Today we are in the unusual circumstance that we are awash with Central Bank liquidity. This is not the same as a strong domestic savings ratio! As the sage of Omaha said ‘only when the tide is out do you discover who’s been swimming naked’.
Tidal forces will return, cue Blondie The tide is high…
MedEwok wrote:
A common mistake made by many economists …
To be fair, a lot of economists are Keynesians. From his wikipedia page:
When Time magazine included Keynes among its Most Important People of the Century in 1999, it stated that “his radical idea that governments should spend money they don’t have may have saved capitalism.”
I have always liked what is printed on every dollar bill when it comes to who we place our monetary trust in. 
MedEwok wrote:
A common mistake made by many economists and politicians is to think that money is in any way limited or that debt means anything.
[…] but it is remarkable how the human psyche is primed to accept the current circumstances as a given, preventing out of the box thinking.
I think you are making that mistake yourself. Debt isn’t a huge factor now because interest rates are so low (negative). But it’s a mistake to think that will always be the case. It won’t be. This is a very unusual blip.
Countries like my own, with very high national debts, will have big problems once interest rates go back up. The debt might never have to be repaid, but the interest does. (And yes the debt does have to be repaid, but is generally repaid by getting more debt….if the market is willing to lend at an interest rate that you can pay). High interest bills means takes have to be paid just to cover the interest of previous borrowing.
Defaulting isn’t much of an option either. It means that the only people (if any) who are willing to lend to you in the future will charge you extraordinary rates, which means you’ll need to make much harder adjustments that you would have had to do if you make the adjustment earlier. Oh….and you’ll have a lot of very angry citizens who’s pension funds are now worthless.
It’s a fallacy to think that debt doesn’t matter. It’s very short term thinking.
dublinpilot wrote:
Debt isn’t a huge factor now because interest rates are so low (negative). But it’s a mistake to think that will always be the case.
A few years ago this was considered cheap ..
C210_Flyer wrote:
The recommendation to wear surgical masks to supplement other public health measures did not reduce the SARS-CoV-2 infection rate among wearers by more than 50% in a community with modest infection rates, some degree of social distancing, and uncommon general mask use. The data were compatible with lesser degrees of self-protection.
You should read your own quotes: “did not reduce … more than 50%” is something completely different from “masks are not effective”.
And that is only the statements in bold. The fineprint of this study is even more interesting: It did not compare mask wearing people with non mask wearing people. It compared people whom a recommendation to wear masks was given to those who did not get such a recommendation. It might well be that both groups actually wore the masks as often…
Cobalt wrote:
they did not conclude that face masks are ineffective to prevent spread, they concluded that face masks were ineffective to protect from infection.
To be even more precise: they concluded that just the recommendation to wear masks (w/o any enforcement) does not reduce the own risk of infection more than 50%
MedEwok wrote:
A common mistake made by many economists and politicians is to think that money is in any way limited or that debt means anything.
It is a common mistake of some new post socialist economic beliefs that it doesn’t!
Debt means something! Debt means trust!
And while on paper a nation (to be more precise: a central bank) can obviously easily get rid of all it’s debt, it would in the same moment also get rid of all its trust.
Therefore money is very limited – not the 100 EUR bill of course, because that can be printed almost unlimited – but the trust between two parties that is codified in this 100 EUR bill. If I do work for you and you give me a 100 EUR bill in exchange, the only reason why I would ever accept this (just think how stupid it must look for an Alien that I swap a day of hard work against a slip of colored paper…) is because I trust that with this 100 EUR bill I could by some avgas for my plane later on. If I loose my trust in that – e.g. because you think that money is not limited and can be freely printed – I would not work for you for money.
In history we had several periods/nations that thought exactly along your way: The result is always massive inflation up to a point where the monetary system collapsed totally and people only exchanged physical goods as the “trust of last resort”.
I’m not aware of a single example where a country came out of such a “forced inflation” better off than at the start.
It depends over what period of time. You could look at 1920’s USA, 1930’s Germany, 1950’ + 60s UK 1960’s China. There are many other occasions that one could point to.
Free government money is never free… whether it comes from tax revenues or the investments of people who save and deserve a meaningful return on their hard won savings. If it comes from printing money, that is effectively a reduction in the value of people’s savings without their consent.
I was at the USPS post office yesterday and the nice lady behind the counter was explaining to me that she’d just got an email or text from her bank telling me her ‘free money’ had arrived. I told her that was great and that she should enjoy it… while thinking what complete nonsense it is that my tax payments earned as an ‘at will’ employee are being given to a government worker who has precisely no chance of any interruption in her pay due to CV, even if she weren’t able to work. She then told me that she intended to use it pay off personal debt, which is really ironic.
A long time European motorcycling friend with whom we had dinner the other night explained to me that his total take for the series of CV handouts will be $5700, covering he and his wife. This is a 77 year old multi-millionaire who retired at 45 and is wealthier now than he was then. He keeps his debt, cash flow and adjusted gross income low because he likes it that way, and apparently the US Federal Government wants to thank him for his responsible financial management. He suggested with a smile that it would be more efficient for the money to go directly from my bank account to his account. 
I’ve had mortgages between 2.625% and 11.5% and have made darn sure my current debt has a fixed interest rate.
