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Showing posts from February, 2013

Federal Deficit Spending Part II

Continuing the previous post on federal deficit spending...

Another reason why the federal government can safely run a deficit is that the government's money comes from taxes. Therefore, any and all money that the government spends is money from taxes. The government's expenditures are counted as GNP or Gross Domestic Product, making it largely available to recapture by taxation. Thus, the government's ability to earn money is far greater than any single business, in fact it's far greater than almost all US businesses combined.

Business firms owe their debts to someone other than themselves where they have no control- whether it is bondholders or the bank they borrowed the money from. So to pay its debts, businesses have to transfer funds of its own possession into the possession of bondholders. If this transfer cannot be made and a businesses does not have the funds to pay its bondholders or lender, it will go bankrupt.

The government- its bondholders, banks, people, and…

Federal Deficit Spending Part I

There's much talk, argument, and debate about the federal deficit. Although all of it is not nonsense, in truth much of it is. Businesses and big corporations spend on deficits all the time. In fact, a business spending more than it takes in is considered healthy, normal, and safe.

Large corporations, through loans from banks, takes the savings of the public to build new plants and purchase new equipment. Much of the time, a business' expenditures on capital equipment are greater than its sales, although that info is hidden from stockholders. Instead of calling this spending behavior a "deficit," they call it "investment." In a posting last week, we looked at why a business must spend more than it takes in.

Businesses run deficits as long as they want because once their bonds come due and must be paid back, corporations issue new bonds of equal value to the old ones, then sells the new bonds and uses that money to pay off its old bondholders.  Through this be…

A Cup of Music

Music is like water: it can take on any shape, size, form, mass, or volume (pun intended) while keeping its true integrity.
Water is water, whether it's sitting in a muddy Louisiana swamp, coloring the wondrous shores of Brazil or filling the contents of an overpriced FIJI bottle. Water is water.
Music is music, whether it's heard through the smoothness of r&b, the tales of country, the beat of hip-hop, the complexity of jazz, the stirrings of classical, the instrumentation of folk, the energies of pop, synthesizers of techno, or screams of rock. Music is music.
Regardless of preference, figure, or texture, they remain undeniably true to their state: water is water and music is music. 
Water and music are capable of taking whatever shape you want them to. Water has its ice, beaches, swimming pools, and the blessed ability to hydrate and cool us down on hot summer days. Sometimes music can describe our situations better than we, ourselves, can. Music can be motivation to make a…

Households & Businesses Interlock

This entry comes as a continuation of my last posting.

Here are a few of the many ways the household sector and the business sector interlock:


The Business Sector employs workers from the Household Sector. Without the labor and intellect supplied by the Household Sector, the Business Sector would crumble.The Business Sector pays the Household Sector in wages, earnings, and salaries. Without income, many a Household would crumble.The Household Sector spends its earned income from the Business Sector to purchase goods and services supplied by the Business Sector.The Household Sector invests its earned income from the Business Sector in stocks, bonds, and mutual funds which become revenues for both sectors.Ultimately it is the Household Sector (people) that creates new Businesses.(Repeat Cycle)

The business sector has no taxing power. For business, the only way to sustain on a large scale is for money to be voluntarily relinquished by the household sector. Economic growth takes place thro…

Household & Business Spending Flow

Where does household spending come from? 

Household spending comes from household earnings-- wages, salaries, rents, dividends, profits, or whatever other payments householders receive from the work they have performed. It also comes from transfer payments from the government such as Social Security checks. The flow of spending can be raised if households draw from their savings accounts, borrow money, or liquidate stocks or bonds.

Like the household sector, the business sector buys its ordinary day-to-day requirements from the money it makes from sales. However, there is one huge difference between household spending and business spending. The business sector does not normally save money. On the contrary, it spends more than it takes in. 

How can corporations buy more than they take in?

Business does not spend all of its earnings. It saves a portion of these earnings as "profits," and meanwhile borrows additional financial revenues from banks or by selling its stocks and bonds.…

The Cost of New Business

In our present day economy, with the job growth rate sluggish and high unemployment numbers, cities and regions are fighting for new and existing business growth now more than ever. This is by all means reasonable because those business create jobs for citizens, stimulate further capital investment, and helps spur other further BRE (Business Retention and Expansion) efforts.

The benefits of any sort of economic development project trigger a long line of ripple effects for employment, spending, taxation, quality of life, and expanded public services.

Consider this, if X Industry decides to build a new facility in your city bringing with it 200 new jobs,  you and I will be taxed to finance the public services for the new acquisition. X Industry will demand the necessary water, sewage, and roads on their property as well as the public services of policemen, firemen, etc.

The local government, as it should, will conduct a fiscal impact analysis to calculate how it will properly finance t…