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# Tag Info

## Hot answers tagged government

16

Most of the same considerations apply to countries as apply to businesses and people, plus a couple of extra cons Pros of Being Debt Free No interest payments Not beholden to someone else (financial freedom) Cons of Being Debt Free Buying things on (interest free) credit can save a little money Paying for things in installments can match costs to income ...

10

There is an interesting report that circulated during the Clinton administration, when we predicted we'd pay off all the debt, that I think answers your question. (here's a public radio article about it) The main takeaway is that government bonds are the safest and most liquid asset. Its existence is necessary for a large number of financial institutions (...

9

You write "qualitative easing", but I think you refer to quantitative easing. I'll just do both. Quantitative Easing Quantitative easing corresponds to the central bank (CB) expanding its balance sheets by "buying" assets. This is typically done in secondary markets. It mainly injects liquidity into the system. To the extend that there is an additional ...

7

"Why I don't hear nobody speaking about such idea?" Because historical experience says it won't work. By printing money instead of collecting taxes, what increases is the nominal disposable income. The "value of work" is certainly not increased. And the important question is, does this increased nominal income lead to higher consumption? Consider a ...

6

SOE's don't have to perform worse that private enterprises, but they often do. The reasons are manifold: Some SOE's are not set up for profit motive, but rather to seed strategic industries for a nation (e.g. Port of Singapore, or Huawei Telecom). Frequently, state influence at market-oriented is counterproductive because politicians placed in leadership ...

5

The current answers correctly point out that financing the government via the printing press would generate inflation. Since inflation is bad, this would be a bad policy. However, these answers miss out on several advantages of an inflation tax. Firstly, there would be substantial productivity gains since the entire government revenue system, tax advisors, ...

5

Suppose your country holds debt equal to thirty percent of GDP and that the government is obliged to pay interest of five percent per year on that debt. This implies that each year the cost of servicing the debt is 1.5% of GDP. Thus, if the country's GDP grows at a rate of 1.5% then it can afford to service the debt indefinitely without the debt/GDP ratio ...

5

An interest rate is the return that a lender earns on money lent to someone else. If the interest rate is higher then it makes lending money more attractive because the return is higher. In particular, if the interest rate in, say, Russia increases relative to that in the USA then American lenders will switch from lending their money in America to lending ...

5

Because of the large number of roughly comparably sized private and public firms, the petroleum industry provides a laboratory for exploring differences between private and state owned enterprises in related businesses. Without passing judgement on if it has to be that way, it appears as though the private firms are vastly more efficient: Efficiency ...

5

An obligatory draft is a tax collected in kind - productive time. Instead of producing in the private sector, citizens of the economy offer their services to the army. Now, we should acknowledge that the existence of an army offers some desired public good (or at least that the society implementing the draft thinks so). Is this a utility-enhancing, or a ...

4

The answer to your first question is no. For example in Saudi Arabia only foreign residents are taxed. The state can afford to do this because it owns the oil fields and receives a lot revenue from them. In Russia the oil and gas companies gave 52% of the federal budget. Part of this is in the form of taxes, but it is mostly the profit of Gazprom, the ...

4

When recession strikes, it's prone to the currency equivalent of "bank runs" where everyone attempts to trade in their paper money for gold at once, causing a drastic reduction in the money supply, rising of interest rates, and the dreaded deflationary spiral. In the face of a recession, you want the opposite to happen. During the Great Depression, every ...

3

It depends. If customers are currently making informed decisions when they book a surge-priced car, then banning surge pricing punishes customers, drivers, intermediaries, and the wider economy. It deliberately introduces an economic inefficiency. If, however, a lot of customers are making uninformed decisions and are effectively being conned by surge ...

3

No, it cannot cause inflation. Inflation is a general rise in the price level, a decrease in the purchasing power of money. While military spending, for example, could cause inflation if paid for through seigniorage (essentially, devaluing a currency by printing more of it), there's neither any reason in theory nor any empirical evidence to support the idea ...

3

Note: This answer was posted 4 months before the OP clarified what it really wanted to ask (see comments below the answer). I will accept @Ubiquitous view of the question, which in summary is: Why not having a publicly owned monopoly in the banking sector? Instead of a, however regulated, private banking sector? It would be naive to counter "then why ...

3

First of all, please check the properties of money and keep them in mind. Indeed money is a convention, but nobody forces you to use it. For example, prisoners use ciggarettes as a medium of exchange. But let's assume you are the absolute ruler of a country and you want your people to use your currency. You can either do it by force or you have to give ...

3

Your claim that most go into academia is wrong. From the top universities, about half to two-thirds go into academia, but from most universities, most go to non-academic careers. It's simple accounting: a top-30 university graduates about 20 PhDs in economics per year, hires 1 or 2. Google "[university name] economics job market outcomes", or "[university ...

3

Actually you could use taxes because GDP formula using income approach can be also expressed as value added at basic prices + taxes less subsidies. However, you can’t do it at the same time when using the approach in your question as you would be double counting. Using: $$GDP= w+i + r+ \pi + o$$ Where $w$ are wages $i$ interest income $r$ return on ...

2

First off, you are looking at the wrong column to compare like with like. Total debt went from \$16.7tr to \$17.8tr but that includes intragovernmental debt. Changes in this number will net out in the deficit calculation (this is one part of the government lending money to another part). Secondly, you are starting on the wrong date. You need to go full ...

2

There are many ways of calculating public sector finances. One approach is similar to corporate accounting and the UK Treasury publishes Whole of Government Accounts. Those are different in construction to the Public Sector Finances statistics published by the Office for National Statistics, who follow international National Accounts methodology In ...

2

QE is designed to increase the money supply, usually in economic environment in which the money supply would otherwise be falling. The process by which this happens is not easy to understand unless you already have a very good grasp of fractional reserve banking, and it certainly isn't as simple as "printing money". In the first instance QE increases base ...

2

Possible revenue sources of government Taxes Sovereign funds investment (Norway, UAE) Natural Resources (Saudi Arabia, Russia) State Owned Enterprises

2

You can't create something from nothing. When the government prints money, that's really just colored paper. Printed money, in case production has not increased, will make money lose value. When the government raises taxes, it is taxing goods and services, i.e. getting real ressources from people (in the form of money, yes, but real ressources nonetheless). ...

2

The answer to this question is maybe (but most likely not). The most common method central banks use to increase money supply (assuming they control their own monetary policy) is through open market operations. Open market operations is when the central bank purchases or sells treasuries in the secondary market (typically). The answer to your question ...

2

This is a difficult but important question: a) At the heart of it is whether the markets are competitive or not. In competitive markets, prices reflect demand and supply so changing prices is the natural way that demand and supply are balances. You want many more cab drivers to come out in peak time, which only happens if you can reward them with a little ...

2

Central banks can create money 'out of nothing'. So for starters there isn't 'less amount' of money left with the central bank. The amount of money at the central bank is 'infinite'. So it's not because the CB lends X amount of money to the government, that the CB has X amount less money to lend to the banks, the supply of money is not constrained... Off ...

2

The government is a producer of goods/services that are then usually not subject to market transactions. Some goods/services that the government produce can be said to increase directly the utility of the households/individuals in the economy. Others can be said to function as intermediate goods, entering, usually as a positive externality, the production ...

2

The question: How much would GDP change if during a recession the government raises unemployment benefits by \$100 million? can be understood in more than one way. There is the pure accounting question which could be formulated more precisely (albeit in terms of a rather unrealistic scenario) as follows: Suppose, in a certain period, the economic ...

2

Transfer payments aren't included in GDP to prevent double-counting. The reason the author's question is troubling you is because the answer externalizes everything that happens after the payment has been made (which is when the money from that payment DOES get factored into GDP, see below). I assume it does this to reinforce that transfer payments aren't ...

2

The wages of government workers are counted as wages of individuals in the income measure of GDP. If the Government trades, then surpluses or profits of these activities are counted as income in the income measure of GDP. If GDP is being measured at market prices then some indirect taxes (on production or on imports, less any subsidies) are also taken ...

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