When money is not in circulation, it’s not being used to pay for goods and services…it’s just…sitting there being hoarded.

This is why I think the velocity of money should be a key economic indicator. Money moving around and doing work is what makes an economy better for everyone. When it starts to pool in the economy it slows down and benefits only a few.

This is another thing I learned from “Making Money”

Fully agreed, the whole “Debt bad! Deficit evil!” trope is just neoliberal propaganda against public expenditure, which translates into a weakening of the welfare state

What about staying at 0? Why is debt better than no debt AND no surplus?

Wait till you learn about how the stock market works. Everyone with a share actually just holds an IOU in the DTCC.

It’s all built on bullshit

Who decides what’s bad and what’s ok?

Yeah, it might have been funny the first time 10 years ago, but repeating the same joke over and over again, often makes it annoying and unfunny, as is the case with your comment, especially when it’s not even accurate.

And how exactly is guessing your credit worthiness based on those factors a better system than literally keeping track of what happened each previous time money was lent to you, when it comes to making a decision on lending money to you?

This is like arguing it’s a better idea to select NBA players by their height, than by their performance in high school and college basketball games.

and have no idea why

Just because you refuse to learn doesn’t mean it’s magic. It is very simple to understand why exactly you have the credit score you do. Maybe mommy isn’t being entirely truthful with you.

I’d definitely recommend getting a credit report (not from the websites that advertise with an insane jingle, but from the actual credit bureaus — you’re entitled to a free report). Mine had debt from a relative with a similar name; I was able to get that removed. They will also tell you in more detail what goes in to calculating it.

I agree that it’s not perfect, and often very opaque, but you should be able to get some understanding of why she doesn’t have good credit.

Does your mom have debt that she pays on time? Is her “doing everything right” visible to credit scoring agencies and aligned what statistic says about good borrowing customers?

Credit score doesn’t mean “runs a good personal economy” it means “likely to pay their loans on time, consistently, based on statistics that are observable”.

Most people who think they understand how credit scores work…don’t understand how credit scores work.

The biggest things are loan-to-limit, payment history, and average age of accounts.

Loan-to-limit is easily achieved by keeping balances below 50%, and ideally below 30%. It’s also helped tremendously by not carrying a revolving balance (paying the statement balance in full each month) and not closing idle cards.

Payment history is of course helped by making payments on time.

And AAoA is probably the easiest. Just don’t close cards. Call and “downgrade” a card if it isn’t worth the annual fee. If there’s no annual fee, there’s no reason to close a card.

Just make sure you use it every now and then and pay it off. I sock-drawered one of my oldest cards a long time ago and it just closed last month from being idle, and that took a hit to my score (high limit gone and it’s no longer incrementing time in my AAoA).

It’s also worth mentioning that credit scores don’t matter until you are looking for credit. Credit cards are probably the easiest way to build credit, as long as they are used properly. But they’ll give a basic card to any schmuck. Where it really matters is getting mortgages and larger loans like cars. That’s where having a good score matters. And also better cards that earn more points/miles/cashback and have other fringe benefits.

imposing a higher interest rate on them on top of that is just the final nail in the coffin.

That’s the only way to justify loaning to people like that at all, given how much more often they default (and the lender never gets repaid at all). If lenders were forced to give the same interest rate to everyone, that would cause them not to lend to “A person with a low income with a precarious job” at all.

You’re discounting the people who have always lived within their means and so never took on debt.

No I’m not. Those people are unknown quantities, and so also suffer if credit scores go away, because bad borrowers are worse than first-time borrowers, so without credit scores, first-timers will be treated worse.

Andrew Jackson sold off enough Native American land to cause a real estate bubble, and between that and other things started a bank run, and the kind of people that think they’ll win the shell game pretend it’s because non-productive debt is good, and the problem was elimination of debt, not how it was done and other circumstances (among them being on a gold standard so you can actually do a bank run)

https://www.history.com/this-day-in-history/andrew-jackson-national-debt-reaches-zero-dollars

Yeah. It’s another form of creation of money. It’s a useful tool for some things, like the central bank being able to control interest rates in the economy, as shown during the recent inflationary episode.

Yes more or less, that is indeed how the central bank creates money most of the time; the government creates a piece of paper that says “IOU 100k and I’ll pay you 5% interest on it for 20 years and then I’ll return your original 100k to you in 20 years” (that’s a bond), which they sell on the open market, at auction (where the variable element is the interest rate someone is willing to accept). When the central bank wishes to increase the money supply they buy government bonds on the open market (ie from other holders, rarely from the government directly) by materialising money out of thin air.

When they wish to shrink the money supply they sell their government bonds and destroys the money that they receive from the sale.

Denmark has not introduced the euro, following a rejection by referendum in 2000, but the Danish krone is pegged closely to the euro (with the rate 7.46038±2.25%) in ERM II, the EU’s exchange rate mechanism.

So if euro gets stronger, so does the krone. If euro drops, so does the krone.

<giggle.gif>

Not really. They’ve got a version of the euro, called kroners, which allows Danes to believe they have their own currency. They are locked into an exchange rate band (extremely tight) which means the Danish central bank has to follow every decision the ECB takes within minutes). And this makes complete sense, in that it’s a compromise that’s edible by voters (maintaining the illusion that Denmark didn’t adopt the euro) and edible by business (allowing businesses in Denmark to participate fully in the common market).

And that’s one of the reasons Denmark has such small national debt and runs a government surplus - they can’t really invent new money because it would break the bond with the euro. So the Danish budget is sort of a “household budget” in that in contrast to, say, Sweden, they cannot create money (meaningfully) and the books have to balance (which they do; lots of oil, Novo Nordisk, Maersk, Vestas and a few other big international plays who still pay a majority of their tax in Denmark obviously helps a lot).

I’m as much of a leftist as you are, and I’m sorry if I sound a bit pretentious here but the analysis you’re doing of debt is wrong.

States generally create their own currency, and generally get indebted (i.e. issue state bonds) in their own currency. You can see how a state that creates its own money doesn’t really need debt to be able to pay for stuff, debt is just a political decision, sometimes misguided by people who don’t really understand it properly, sometimes properly guided by experts.

A state doesn’t need taxes to fund itself either. If it needs to build roads, it can literally create the currency to hire the workers to extract the resources, plan the roads, and build them. Taxes have many purposes such as removing money from the private sector to prevent or reduce inflation, disincentivizing certain behaviours (for example tobacco taxes), lowering inequality (for example progressive income taxes), or even making people use your currency instead of another (people in the private sector will end up using your currency if they are forced to pay taxes in that currency).

Taxing companies and rich people is useful because you place the burden of reducing money for inflation purposes on them instead of on the lower income people, and therefore you reduce inequality, so I obviously support at the very least heavy taxation of income and wealth of private individuals and companies, but the state really doesn’t need taxes to fund itself since it creates its own currency and pays in that currency.

I think you entirely missed the point haha

We could have a couple year of almost not having a deficit.

It’s not about only billionaires paying, it’s about them not being a magical money source. A higher rate might feel better, but it’s not solving government revenue problems.

Imitation is illegal… Smh why does nobody just print real money? Am I the only one seeing this loophole?!

Money = reputation

Your comment stems from a fundamental misunderstanding of public institutions and how money works.

It doesn’t matter that the debt is higher than the GDP if it’s debt in the currency that the state creates. Japan has a debt of 250% of the GDP and it’s always going to pay for it. Why? Because it’s in Yen, and the Japanese public sector is the ONLY institution in the world capable of creating Yen. If they wanted, the Japanese central bank could quite literally perform 100 keystrokes on a keyboard, and repay all debt early tomorrow, at a cost of exactly 0 yen to the taxpayer.

Taxes aren’t the way a state funds itself. Again, the state creates its own currency, why would it need tax collection to get that currency if it can create it at will at a keyboard’s stroke? Taxes serve many purposes, such as forcing people to use your currency in the private sector (they will need that currency to pay for the taxes so it’s the one they will use), such as disincentivizing certain behaviours (tax on tobacco for example), or such as reducing inequality (progressive income taxes), or also importantly, removing money from the private sector to reduce or prevent inflation. But the one thing taxes don’t do is funding the state budget, since the state’s budget is unlimited in theory. There are practical limits, but availability of currency really isn’t one of them.

The American citizen won’t spend a single dollar paying back state debt, in fact it’s exactly the opposite. The state creates the currency with which it pays back the debt, and it’s private citizens and corporations who the state owes the interest rate to. If you buy a bond for $1000 at an interest rate or 3%, next year you’ll have $1030. The state, through debt, literally creates money for the private sector. It makes people and companies wealthier. Taxes make people and companies poorer, but taxes and debt are completely unrelated to one another, since the state really doesn’t need taxes to pay the debt.

I fully agree with your analysis of the poor usage of the state budget and people not getting the welfare state they deserve by right, but that’s not something that has to do with debt, it has to do with the government representatives not acting for the benefit of the majority but a select elite of capitalist owners. Debt is purely a financial tool that serves purposes such as creating money, or controlling the interest rates of the country so that people and companies will take more or fewer loans, which has an effect in the economy.

The other person who responded to me made a very all written post but it gets a core assumption completely wrong.

They seemed to think that tax revenue in some way has to happen for spending to happen. That’s why they think GDP has anything to do with our ability to service debt. But the federal government creates money ex nihilo.

Money has to be created before it can be destroyed through taxation. Spending and back stopping creation of money by private banks through the reserve system comes first. You can’t destroy something you haven’t created.

It’s sad, really. Economists and politicians have blinded everyone with what I think of as “the money delusion”.

It doesn’t matter if the money can be “gathered up” to be spent on things we need. We do not rely on the money of the wealthy. What matters is actual, real resources and services we can provide.

The national “debt” is a misnomer. That’s the amount of dollars left in circulation that have not been destroyed through taxation, as well as the “dollars” that pay interest which we call bonds.

I’m glad to see at least a handful of other people who understand. Fight the good fight, fellow human.

What happens when they run out of people to sell bonds to and they run out of money to tax?