Something I don't understand about economics

[zerocarbs]

Money is "generated" by printing it, the value of said money is determined on an international scale through a floating currency exchange system, which is based mostly on what the money can buy. The purchasing power of money is based at least in part on the gross domestic product of the country of origin. The GDP can be grown through several methods, currently with the degraded state of the US infrastructure many economists agree that improvements would increase gross production as well as reduce manufacturing and distribution costs resulting in an increase in GDP.

So your preferred method is entering zeros into a computer before raising taxes. Got it.

[Kujako]

So your preferred method is entering zeros into a computer before raising taxes. Got it.

No... I dont think you do "got it". But your ignorance seems to either be intentional or incurable.

[Daelak]

So your preferred method is entering zeros into a computer before raising taxes. Got it.

As opposed to what? Rational actors do not exist. Wages and prices are sticky, and are influenced solely by our irrational decisions in the market. Just because Zimbabwe had hyper-inflation doesn't mean that the fed MBS and bond program will send us careening off into hell.

We are the largest economy in the world with the largest tax-base. We have the ability to steer the entire globe's production and markets. There's just one problem, we have ideologues in government that would rather see the US fall into 2nd and 3rd world status for their little pet purity tests.

[Bolson13]

No, I want to know how money is generated.

Either by printing cash,
The central bank increasing their assets
A commercial bank giving out a loan for which they often don't have collateral (the money wasn't there before) and you get what happened in Cyprus now where the debt is I think 6x the GDP? The solvancy of banks was a big problem in the crisis and basically why so many collapsed.


It is a good question and not that easy to answer actually. Something a kid could come up with but not easy to answer

[Deleted]

What I don't understand is why the markets would loan us money, when they knew we couldn't repay them.
Why not (the markets) let Greece either bankrupt 20 years earlier or take austerity measures 20 years earlier by denying loans.

The same can be said about the US and their debt. I think it comes from people not wanting to hear the truth, or people clinging to very small chances of hope. They're completely delusional though, they lost all sense of reality.

[Daelak]

The same can be said about the US and their debt. I think it comes from people not wanting to hear the truth, or people clinging to very small chances of hope. They're completely delusional though, they lost all sense of reality.

No it cannot. To equate the finances of Greece, to the largest economy and first world country is complete bullshit.

Rational actors do not exist. Wages and prices are sticky, and are influenced solely by our irrational decisions in the market. Just because Zimbabwe had hyper-inflation doesn't mean that the fed MBS and bond program will send us careening off into hell.

You either haven't read about the past 60-70 years in the US or Europe, or you just think it's all "revisionist" history, completely broadbrushing every issue and blaming it on "liberals" or some other bullshit.

We get it, you want a gold-backed currency and a small enough government you can drown in the bathtub.

[Deleted]

We are the largest economy in the world with the largest tax-base. We have the ability to steer the entire globe's production and markets.

I think you're a little bit too patriotic to see the truth.
The US is indeed the country with the largest economy, but it isn't the largest economy in the world. The EU has a bigger economy and a bigger global economic influence.

The only thing the US is clearly #1 with is military spending and influence in global affairs between countries. World police and all that.

---------- Post added 2013-03-19 at 05:59 PM ----------

No it cannot. To equate the finances of Greece, to the largest economy and first world country is complete bullshit.

The difference between Greece and the US is that Greece lied about their debt. That's about the only difference. Just because the US is big doesn't mean it doesn't need to follow any rules.

You think creating more and more debt is the right direction? Let's just print money because the rest of the world will suck it up anyway? Yeah, smart move. It will work, but only for a while.

[Deleted]

OP: The reason that the money was loaned to Greece was because of the fear of a contagious cascade in the Eurozone, which was predicted to cause a 15-20 year global Depression (in the "aftermath of the 1929 crash" sense). Thus, it was in the Eurozone and the EU's rational* interest to loan money to Greece.

*'Rational' as in 'in the best', not 'rational' as in 'logical'.

[Daelak]

I think you're a little bit too patriotic to see the truth.
The US is indeed the country with the largest economy, but it isn't the largest economy in the world. The EU has a bigger economy and a bigger global economic influence.

The only thing the US is clearly #1 with is military spending and influence in global affairs between countries. World police and all that.

No it does not. The EU is a union of 14(?) countries, and we have several states that produce just as much or more as the majority of those countries.

21st century governance and economics DEMANDS strong mixed economies (the EU, Scandinavia, the US) since it gives us the most prosperity and freedom. 21st century governance and economics DEMANDS a robust welfare state, for it increases productivity and disposable income thereby increasing consumer demand.

[lakhesis]

One of the significant issues in the case of sovereign debt is if banks are also weak - which is most definitely the case throughout Europe.

Banks are required to hold a certain degree of "safe" capital, so that in the event of the bank going belly up they can still contribute to paying off depositors etc (e.g. normal people with normal bank accounts).

One of the core standard varieties of "safe" capital is sovereign debt, because what could be safer than an entire country, right? I mean if they're short on money, they can just raise taxes, right?

But then a country goes belly up, which sends random banks belly up.

Which banks? Who knows? When all the multifaceted financial instruments & interdependencies kick in, no one can really be sure who's left holding the bomb at the end.

So a weak government that was being held up by a combination of quasi-obligatory buying & rampant speculation passes their problems on to banks, which pass their issues on to every other business & government those banks interact with (both as creditors & debtors), and that's the problem.

That's the (extremely) short version of why the governing bodies of Europe are so concerned about protecting bond holders & why money continued to be available to Greece et al.