There was an interesting discussion with Evercore’s Roger Altman on CNBC’s Squawk Box yesterday. Altman talked about some of the things that economists, market participants, pundits, and policymakers have gotten wrong in recent years. Here’s part of what he said:
I tried the link for the Bloomberg interview but I couldn't sit through an hour and a half of frankly stupid commentary (looking at you Bill Gross, that's as far as I got).
I would love some elaboration on when the debt becomes a concern in deficit spending. If you think of the debt in the same way a corporation takes on debt for growth, at 130% of GDP we aren't near what aims large corporations carry.
So when is it a concern for a government? It's always something to be aware of, but when do we get worried? The Fed's rate hikes haven't helped anything, as far as I can tell.
Here's what I find amazing. The Biden Administration spent about $5 trillion on pandemic relief. And, lo and behold, inflation is roaring back down toward 2%. The benefits to society were absolutely enormous--and continue to be so. So why aren't people screaming: "Let's do it again! Except this time without the price gouging." Another $5 trillion could easily be spent on green energy projects, creating tons of good jobs in the process.
Worried about interest rates? The Fed should stop selling bonds altogether! There have been two seismic shocks to our economy in the last 60 plus years. The first was going off the gold standard in 1971. The 2nd was making it legal around 2009 for the Fed to pay "Interest On Reserves." The FDIC could simply insure ALL bank reserves in any amount (say goodbye to the $250K limit) and pay, say, 2% interest. Forget the "bond vigilantes." Anyone who doesn't like it can go pound sand or invest in the stock market. Holders of US dollars have a lot less leverage than folks imagine.
Every action that has transpired you and the rest of MMT understood perfectly. Thank you so much for opening the Owl eyes of thousands of citizens. I will continue to learn and evangelize to all I encounter. Superb work Stephanie!
Agree on inflation as a primary concern - and so as a question, my math has the US GDP increasing by 5x the past 25-30 years to $25 trillion or so, and the money supply increasing by 7x or so during this time period - if these stats are roughly accurate, seems inflation would be inevitable with the money supply outpacing GDP growth (I.e. the constraints SK highlights - so how to maintain a political economy that optimizes the balance of these two criteria?
As the wise 'Aslan' from Narnia said, "one can never know what might have been.". Absent Fed interest rate games, what _would_ have happened? As right/wrong as Ms. K may be, there seems to be so much sentiment & perception involved that I fear we'll just never know.
Jen Andrews points to the size of corporate debt taken on for growth. Large corporate debt is one of the chief factors that gave us the Great Recession - and it persists as a far greater threat to our economy than government debt. Yet deficit "hawks" never talk about it. It would be one thing if that corporate debt represented investment in R&D and manufacturing, but a lot of it is tied up in financial shenanigans like stock buybacks--useless to most of us. I recommend Rana Foroohar's Makers and Takers as Foroohar takes on financialization as a drag on, and risk to, the real economy. Lots of people make similar arguments as Foroohar, but the difference is she, as does Stephanie, uses language and examples that non-economists can understand. The next time you hear a politician or pundit drone on about the supposed perils of the national debt, think of what they are NOT talking about.
And the interview comes very close to addressing the deficit spending question, but doesn't elaborate on her brief frm work in her excellent book "Deficit Myth" about how much is too much.
I tried the link for the Bloomberg interview but I couldn't sit through an hour and a half of frankly stupid commentary (looking at you Bill Gross, that's as far as I got).
I would love some elaboration on when the debt becomes a concern in deficit spending. If you think of the debt in the same way a corporation takes on debt for growth, at 130% of GDP we aren't near what aims large corporations carry.
So when is it a concern for a government? It's always something to be aware of, but when do we get worried? The Fed's rate hikes haven't helped anything, as far as I can tell.
Here's what I find amazing. The Biden Administration spent about $5 trillion on pandemic relief. And, lo and behold, inflation is roaring back down toward 2%. The benefits to society were absolutely enormous--and continue to be so. So why aren't people screaming: "Let's do it again! Except this time without the price gouging." Another $5 trillion could easily be spent on green energy projects, creating tons of good jobs in the process.
Worried about interest rates? The Fed should stop selling bonds altogether! There have been two seismic shocks to our economy in the last 60 plus years. The first was going off the gold standard in 1971. The 2nd was making it legal around 2009 for the Fed to pay "Interest On Reserves." The FDIC could simply insure ALL bank reserves in any amount (say goodbye to the $250K limit) and pay, say, 2% interest. Forget the "bond vigilantes." Anyone who doesn't like it can go pound sand or invest in the stock market. Holders of US dollars have a lot less leverage than folks imagine.
Every action that has transpired you and the rest of MMT understood perfectly. Thank you so much for opening the Owl eyes of thousands of citizens. I will continue to learn and evangelize to all I encounter. Superb work Stephanie!
Agree on inflation as a primary concern - and so as a question, my math has the US GDP increasing by 5x the past 25-30 years to $25 trillion or so, and the money supply increasing by 7x or so during this time period - if these stats are roughly accurate, seems inflation would be inevitable with the money supply outpacing GDP growth (I.e. the constraints SK highlights - so how to maintain a political economy that optimizes the balance of these two criteria?
As the wise 'Aslan' from Narnia said, "one can never know what might have been.". Absent Fed interest rate games, what _would_ have happened? As right/wrong as Ms. K may be, there seems to be so much sentiment & perception involved that I fear we'll just never know.
Jen Andrews points to the size of corporate debt taken on for growth. Large corporate debt is one of the chief factors that gave us the Great Recession - and it persists as a far greater threat to our economy than government debt. Yet deficit "hawks" never talk about it. It would be one thing if that corporate debt represented investment in R&D and manufacturing, but a lot of it is tied up in financial shenanigans like stock buybacks--useless to most of us. I recommend Rana Foroohar's Makers and Takers as Foroohar takes on financialization as a drag on, and risk to, the real economy. Lots of people make similar arguments as Foroohar, but the difference is she, as does Stephanie, uses language and examples that non-economists can understand. The next time you hear a politician or pundit drone on about the supposed perils of the national debt, think of what they are NOT talking about.
And the interview comes very close to addressing the deficit spending question, but doesn't elaborate on her brief frm work in her excellent book "Deficit Myth" about how much is too much.