I woke up expecting to spend the entire day working on my new book. Instead, I sat around agitating over something I found in my inbox. It was Bloomberg’s Weekend Edition, and it began, “This week we’re looking at scenarios for a US debt crisis…”
"…so have economists on both sides of the political spectrum. (Democrats vs Republicans)"
There is no spectrum. Those are just two PR teams for the neoliberal Corporate Uniparty assigned to maintain the "drowning in debt" message ever before the undereducated public's mind. Don't forget it was Bill Clinton who became a neoliberal hero for balancing the federal budget.
You have to seek the third integrative way, i.e. the way of Wisdom which has always been the intellectual discipline that discovers resolution of opposites. Pissing and moaning over Dualities that do not integrate is the curse word of human history and human intellectualism.
Read my posts on the universally beneficial monetary and economic effects of the policies of the new monetary paradigm posted in Stephanie's last newsletter posts that resolve the problems of the economy and integrate the self interests of traditionally opposed political constituencies.
I repeat: What has that to do with the fact there aren't and "opposed political constituencies" in the US with any degree of influence, because both parties have been full-bore neoliberal since 1992?
People vote their pocketbooks. Its an old but very true POLITICAL insight. And the benefits of the policies I referenced are easily and DIRECTLY perceived by even a dunce. Do yourself a favor and don't fall into the favorite habit of modern intellectualism, namely cynicism which leads directly to apathy.
I’m always curious about who, apart from those seeking an excuse to cut “entitlements,” stands to benefit from this seemingly desired austerity. Stockholders? Bond holders? Gold hoarders? Cryptobros?
Capitalism requires government austerity to function as the oligarchs want it to. It keeps the people busy trying to stay alive, and they are easier to control that way. Education is a bad idea because educated people are harder to control. The bottom line is that it's all about controlling the masses.
Tell a big enough lie and tell it often enough, and people will believe it. We are fed bullshit on a daily basis.
i think the standard explanation is the war between the haves and the have nots. the haves always want to have more. and so do the have nots. they see no way to have more than to take it from the other guy. FDR/Keynes showed that was not necessarily true, but it is still the way people think. the have nots want to tax the rich to help the poor (themselves), the haves want to protect what they have (naturally), i think it has been shown that "austerity"is counter-productive, but it is still the way people think. and i myself don't think the world (earth) can withstand unlimited "growth". i think our best course is a "fair" -er distribution, and recognition of the perils of greed on both sides.
Someday, God willing, we'll have another election. The first party to promise a federal job guarantee (see jobguarantee.org) will win back the 35 million low income voters who sat out 2024, and take the election. Tell Democrats to make a federal job guarantee a plank in their platform, and throw this crop of fascist bums out. And silence the neoliberal parrots as well.
Stephanie, I thought you once said that there's no reason for a government to borrow in its own currency; that is, all it needs do is "print" more money. What am I missing? Thanks.
"To pay for this deficit, the federal government borrows money by selling marketable securities such as Treasury bonds, bills, notes, floating rate notes, and Treasury inflation-protected securities (TIPS)."
So, where things get confusing is when economists use the term "borrow" in this description. I think it is misleading and unhelpful like much of mainstream economic vocabulary. We say that we "borrow" by selling bonds, but in Kelton's book, The Deficit Myth, she admits we don't have to do it this way at all.
The rest of it says; "...bills" and "notes," etc. So the government "borrows bills and notes"... from itself?!? Yeah, that wording again is unhelpful. No, the Federal government just creates the money by passing law authorized by Congress.
Kelton's credit card analogy was new to me but it wasn't very helpful either. I can't create my own currency or change the credit limit on my credit card to infinity like the federal government. It can help people visualize the economy a little better I suppose.
Keen is a great systems analyst and Stephanie is the same, but neither effectively utilizes their own insight that modern money is created BY EQUAL DEBITS AND CREDITS THAT SUM TO ZERO. Thus if Congress passed a law that said: Ok retail merchants you can reduce your prices by 50% (debit) to your customers and the FED will rebate you back every cent of your discounts (credit) making you whole on your prices...voila!..everyone's purchasing power just doubled and inflation went from 3% to -50%, the price to the consumer for a $500k house just became $250k. And if you repeat the 50% debits and credits at point of loan signing that house only costs the individual $125k. That will communicate the benefits of modern monetary realities...in the very best way, that is, right in their pocketbooks/bank accounts. Also, what merchant doesn't want to see a potential doubling of demand for their goods and services. And even the banks would have a hard time balking at getting a 50% gift of the interest on a $250k house right up front in exchange for reducing the principle on the note by 50%? And how many more $125k mortgages that they get $250k worth of interest can they create? A few more sane and imminently doable policies and regulations as I have posted here many times before...and you/ve got yourself a paradigm change in economics and the money system.
Sorry, but that is just BS. Giving people relative economic and monetary freedom along with strategic cultural prompts could not be anything but a generally positive occurence. Don't fall for the delusional "old fogeyism" that long acculturated monetary austerity reinforces.
You're welcome! What is amazing however is that the leading MMTers have not realized the power of strategically utilizing their own insight regarding how fiat money is created, that is the accounting operations of equal debits and credits that sum to zero. It probably all boils down to being mentally addicted to good/systemic/problem analysis and failing to realize that paradigmatic/applied conceptual/solutions analysis is where the real power for change exists.
I absolutely love how you speak of it. I have been studying MMT and other forms of economics for years. But the failure of MMT economists becomes woefully clear when they try to describe it to laymen. I have read Kelton's book -The Deficit Myth - more times than I can count but the whole " yellow and green dollar" conversation takes away from what you were describing with the: "fiat money that is created; that is the accounting operations of equal debits and credits that sum to zero." AND you go into this in detail. Fiat money being created to account for the operations of equal debits. It is all fiat! Thank you again my friend!!
Keen is a great systems analyst and Stephanie is the same, but neither effectively utilizes their own insight that modern money is created BY EQUAL DEBITS AND CREDITS THAT SUM TO ZERO. Thus if Congress passed a law that said: Ok retail merchants you can reduce your prices by 50% (debit) to your customers and the FED will rebate you back every cent of your discounts (credit) making you whole on your prices...voila!..everyone's purchasing power just doubled and inflation went from 3% to -50%, the price to the consumer for a $500k house just became $250k. And if you repeat the 50% debits and credits at point of loan signing that house only costs the individual $125k. That will communicate the benefits of modern monetary realities...in the very best way, that is, right in their pocketbooks/bank accounts. Also, what merchant doesn't want to see a potential doubling of demand for their goods and services. And even the banks would have a hard time balking at getting a 50% gift of the interest on a $250k house right up front in exchange for reducing the principle on the note by 50%? And how many more $125k mortgages that they get $250k worth of interest can they create? A few more sane and imminently doable policies and regulations as I have posted here many times before...and you/ve got yourself a paradigm change in economics and the money system.
We will be fighting this fight 'til the cows come home. I think this deficit/debt rhetoric is so entrenched throughout govt and society that it is nearly impossible to get through to them. It is as you say, people take these words and associate them with their own household understanding of the terms...esp. debt. They hear that word and instantly think about how this outrageous $ amount will ever be repaid and how it will burden future generations. And if they believe "genius" Musk, the fed govt will run out of money and could go bankrupt.
We are gaslit (intentionally or unintentionally) every hour of the day almost about how our taxpayer money is being spent and what we should do about it. We must "find the money" by cutting something else to "pay for" whatever it is that is wanted. I think this is done so the public feels like they have "skin in the game" and will vote or agree to a program touted to benefit them in some way or not.
I am so grateful to have the good sense to read your book after you went on your media tours. I've always been interested in how economics works. So after reading your book, it was like being let in on a secret. I think I underlined the whole thing. That started me on a path to research, on my own, all those other Modern Monetary economists. I love their podcasts. Wish you were in more.
There is still so much more I would like explained in more detail like the exact mechanics of what happens to the taxes on govt spreadsheets and how they are reconciled.
Just keep doing what you are doing. I look forward to your newsletters. Maybe you should work with the Progressive caucus, esp the AOC crowd who seem to understand economics from your perspective and will get the message out to colleagues and constituents.
Can't wait for your book. I hope we have a democracy with functioning economic system at the time your book is published.
To answer your question: "There is still so much more I would like explained in more detail like the exact mechanics of what happens to the taxes on govt spreadsheets and how they are reconciled."
Keen is a great systems analyst and Stephanie is the same, but neither effectively utilizes their own insight that modern money is created BY EQUAL DEBITS AND CREDITS THAT SUM TO ZERO. Thus if Congress passed a law that said: Ok retail merchants you can reduce your prices by 50% (debit) to your customers and the FED will rebate you back every cent of your discounts (credit) making you whole on your prices...voila!..everyone's purchasing power just doubled and inflation went from 3% to -50%, the price to the consumer for a $500k house just became $250k. And if you repeat the 50% debits and credits at point of loan signing that house only costs the individual $125k. That will communicate the benefits of modern monetary realities...in the very best way, that is, right in their pocketbooks/bank accounts. Also, what merchant doesn't want to see a potential doubling of demand for their goods and services. And even the banks would have a hard time balking at getting a 50% gift of the interest on a $250k house right up front in exchange for reducing the principle on the note by 50%? And how many more $125k mortgages that they get $250k worth of interest can they create? A few more sane and imminently doable policies and regulations as I have posted here many times before...and you/ve got yourself a paradigm change in economics and the money system.
"Beware the neoliberal Jabberwock, dear Stephanie,The jaws that bite, the claws that catch!, Beware the Jubjub bird, and shun the frumious Trumpus Bandersnatch!"
Sounds like the same arguments Hamilton had to make with Jefferson and other debt scold "founders". I just read Christian Parenti's great book "Radical Hamilton". Hamilton lays out the necessity of a national debt that sounds very much like your own, and repudiates much of Adam Smith in the bargain.
Is there an example of another universal misunderstanding, at a societal level, where a shift/correction in understanding occurred that we might learn from? One would hope for a more recent example, but how long did it take the general public to shift from a geocentric to heliocentric understanding of our solar system?
Too long. Another fundamental misunderstanding we keep paying for is around housing and the cause and cure for the Great Recession. I’d argue we’re further along with MMT than we are with our housing woes in the country. But as Kelton points out, we’re in the early innings of the backlash/renaissance phase of a new national dept spanking.
The sad willful ignorance when it comes to understanding government finances continues. Debt is a word the scares the average person so its a lot easier to brainwash the masses into thinking the US will go broke and has to get its fiscal house in order when reality it doesn't have to since they issue the currency. Time for America to wake up.
If not the market, then the treasury has to. And when the treasury does this, it devalues every dollar.
Dollars will become worthless compared to the countries who bought the bonds representing the debt, meaning the US will soon need to issue more and more debt to buy foreign currency, devaluing the dollar even more in order to pay the debts or to buy things like gold...
They’ve already been bought. The holders are the foreign buyers goats businesses and UHNWI. The new beneficiaries of the newly created money (by Congressional fiat or even #MintTheCoin if it comes down to it) will spend that money. What’s the problem ? There’s nothing to worry about.
The same people who whine about dollar devaluation are the same people who complain about a manufactured debt crisis which has never happened and never will. This is a typical mainstream nonsense response. You have no clue what you're talking about.
The Truss/Kwarteng UK sell-off in 2022 shows there are limits to what markets will swallow on debt. A widening term premium in the US now may be a flag when foreign appetite for US debt is waning. Or, like the guy coughing after smoking 2 packs a day for 30 years, it may be brushed aside as just a tickle.. The federal debt won’t matter until it matters, and the it will be all that matters
It’s a distraction. What “matters” are real resources (including labor). As long as those are available the Federal debt is nothing more than an accounting artefact.
Without recourse to debt finance, taxes would have to equal spending. Investment would need to be financed out of current revenues. In other words, “austerity.” Avoiding austerity means that the fiscal debt profile has to be believed to be sustainable, or rather not manifestly unsustainable in a short timescale. Otherwise, other economic agents will not give up their claims to current real resources - which they only do because they believe their claims on future real resources ( debt) will be honored.
CBO shows no spare capacity. Inflation stuck at 3 says no spare capacity.
Debt issuance is indeed a policy choice. Issuing non remunerated liabilities of the shortest maturity - aka money - is a feasible alternative. Unlike bond issuance there is no implied reduction in demand from the recipient. So inflation will result and resources will be relinquished by the private sector through that means. Inflation gave us Reagan, and inflation gave us Trump.
What I should have said is that when we have a situation such as a recession, e.g. after the Great Financial Crisis, a money-financed fiscal expansion can make a lot of sense because it expands demand into the economy with a lot of spare capacity without pushing up interest rates, as bond-financed fiscal expansion would do. Money-fianced fiscal expansions are inherently more expansionary than bon-fianced. The problem is that once you expand spending. itis difficult to ratchet it down again, for all sorts of reasons. So you get stuck with a big deficit at the tope of the cycle - where we are now. The Biden fiscal boost should have been a lot shorter than it was, IMO.
Inflation IS the key anomalous part of the puzzle...and my twin 50% debit and credit policies at retail sale and point of loan signing terminally end it while simultaneously accomplishing one of the classic signatures of historical paradigm changes namely, inversion of temporal universe reality, by mathematically inverting/transforming chronic problematic erosive inflation into universally/macro-economically beneficial price and asset DEFLATION. Open your mind, look at it...and marvel that we didn't see it as the solution since double entry bookkeeping was invented.
You’d have to be living under one of those couch cushions Musk is maniacally flipping over to have missed the full court deficits-are-bad press of the last few weeks. So I for one am happy you are on the case. It’s maddening that we get pandered to in these ways through official and unofficial channels alike. And I have spooky thoughts about the US doomcycling its way away from a stable sovereign currency the envy of the world to something broken and valueless like most cryptocurrencies.
"maniacally" is the right word, his lates "huge fraud in Social Security" based on his complete lack of understanding is so egregious I have hopes the people will wake up to what a fraud he is. slim hopes. the people are mostly not paying attention except to the big colorful lies. to at least partly explain better what i am talking about: SS keeps files open on dead people until there is a valid death certificate, but they are NOT paying money to those dead people. Musk claims that SS is fraudulently paying out that money. sheer stupidity to start out turned into big lie for public consumption.
It’s past time to pull off the gloves, grasp the narrative and write MMT into the Democratic platform to demonstrate the power of fiat currency and implement an effective liberal agenda at the same time expose the maga party (the artists previously known as republicans) criminality to all Americans. We can than begin to heal and wake our nation from this nightmare.
"…so have economists on both sides of the political spectrum. (Democrats vs Republicans)"
There is no spectrum. Those are just two PR teams for the neoliberal Corporate Uniparty assigned to maintain the "drowning in debt" message ever before the undereducated public's mind. Don't forget it was Bill Clinton who became a neoliberal hero for balancing the federal budget.
You have to seek the third integrative way, i.e. the way of Wisdom which has always been the intellectual discipline that discovers resolution of opposites. Pissing and moaning over Dualities that do not integrate is the curse word of human history and human intellectualism.
Which has what to do with the fact the two legacy major political parties in the US are, in fact, only two PR teams for the Corporate Uniparty?
Read my posts on the universally beneficial monetary and economic effects of the policies of the new monetary paradigm posted in Stephanie's last newsletter posts that resolve the problems of the economy and integrate the self interests of traditionally opposed political constituencies.
I repeat: What has that to do with the fact there aren't and "opposed political constituencies" in the US with any degree of influence, because both parties have been full-bore neoliberal since 1992?
People vote their pocketbooks. Its an old but very true POLITICAL insight. And the benefits of the policies I referenced are easily and DIRECTLY perceived by even a dunce. Do yourself a favor and don't fall into the favorite habit of modern intellectualism, namely cynicism which leads directly to apathy.
In other words, your response has nothing whatever to do with what I said but is in fact your need to show your intellectual superiority. Moving on. 🕊
I’m always curious about who, apart from those seeking an excuse to cut “entitlements,” stands to benefit from this seemingly desired austerity. Stockholders? Bond holders? Gold hoarders? Cryptobros?
Capitalism requires government austerity to function as the oligarchs want it to. It keeps the people busy trying to stay alive, and they are easier to control that way. Education is a bad idea because educated people are harder to control. The bottom line is that it's all about controlling the masses.
Tell a big enough lie and tell it often enough, and people will believe it. We are fed bullshit on a daily basis.
yes, yes, yes, yes, i.e., the oligarchic kleptocrats
joeff
i think the standard explanation is the war between the haves and the have nots. the haves always want to have more. and so do the have nots. they see no way to have more than to take it from the other guy. FDR/Keynes showed that was not necessarily true, but it is still the way people think. the have nots want to tax the rich to help the poor (themselves), the haves want to protect what they have (naturally), i think it has been shown that "austerity"is counter-productive, but it is still the way people think. and i myself don't think the world (earth) can withstand unlimited "growth". i think our best course is a "fair" -er distribution, and recognition of the perils of greed on both sides.
but i don't expect it.
Taxpayers benefit as tax take requirement will reduce.
ie no trillions (real money) going to fund interest on the borrowings.
Thank you for doing what you can to bring some rationality to the conversation.
Someday, God willing, we'll have another election. The first party to promise a federal job guarantee (see jobguarantee.org) will win back the 35 million low income voters who sat out 2024, and take the election. Tell Democrats to make a federal job guarantee a plank in their platform, and throw this crop of fascist bums out. And silence the neoliberal parrots as well.
Democrats? Liz's comment: There is no spectrum. Those are just two PR teams for the neoliberal Corporate Uniparty
Stephanie, I thought you once said that there's no reason for a government to borrow in its own currency; that is, all it needs do is "print" more money. What am I missing? Thanks.
Hi Mike. I think what she said was that there's no need to pay back what has been "borrowed".
"To pay for this deficit, the federal government borrows money by selling marketable securities such as Treasury bonds, bills, notes, floating rate notes, and Treasury inflation-protected securities (TIPS)."
So, where things get confusing is when economists use the term "borrow" in this description. I think it is misleading and unhelpful like much of mainstream economic vocabulary. We say that we "borrow" by selling bonds, but in Kelton's book, The Deficit Myth, she admits we don't have to do it this way at all.
The rest of it says; "...bills" and "notes," etc. So the government "borrows bills and notes"... from itself?!? Yeah, that wording again is unhelpful. No, the Federal government just creates the money by passing law authorized by Congress.
Kelton's credit card analogy was new to me but it wasn't very helpful either. I can't create my own currency or change the credit limit on my credit card to infinity like the federal government. It can help people visualize the economy a little better I suppose.
Keen is a great systems analyst and Stephanie is the same, but neither effectively utilizes their own insight that modern money is created BY EQUAL DEBITS AND CREDITS THAT SUM TO ZERO. Thus if Congress passed a law that said: Ok retail merchants you can reduce your prices by 50% (debit) to your customers and the FED will rebate you back every cent of your discounts (credit) making you whole on your prices...voila!..everyone's purchasing power just doubled and inflation went from 3% to -50%, the price to the consumer for a $500k house just became $250k. And if you repeat the 50% debits and credits at point of loan signing that house only costs the individual $125k. That will communicate the benefits of modern monetary realities...in the very best way, that is, right in their pocketbooks/bank accounts. Also, what merchant doesn't want to see a potential doubling of demand for their goods and services. And even the banks would have a hard time balking at getting a 50% gift of the interest on a $250k house right up front in exchange for reducing the principle on the note by 50%? And how many more $125k mortgages that they get $250k worth of interest can they create? A few more sane and imminently doable policies and regulations as I have posted here many times before...and you/ve got yourself a paradigm change in economics and the money system.
If congres would give such a present to the people it would destroy trust in the meritology that a liberal society needs.
Sorry, but that is just BS. Giving people relative economic and monetary freedom along with strategic cultural prompts could not be anything but a generally positive occurence. Don't fall for the delusional "old fogeyism" that long acculturated monetary austerity reinforces.
Beautifully written! Great insight and analysis Steve, thank you!
You're welcome! What is amazing however is that the leading MMTers have not realized the power of strategically utilizing their own insight regarding how fiat money is created, that is the accounting operations of equal debits and credits that sum to zero. It probably all boils down to being mentally addicted to good/systemic/problem analysis and failing to realize that paradigmatic/applied conceptual/solutions analysis is where the real power for change exists.
I absolutely love how you speak of it. I have been studying MMT and other forms of economics for years. But the failure of MMT economists becomes woefully clear when they try to describe it to laymen. I have read Kelton's book -The Deficit Myth - more times than I can count but the whole " yellow and green dollar" conversation takes away from what you were describing with the: "fiat money that is created; that is the accounting operations of equal debits and credits that sum to zero." AND you go into this in detail. Fiat money being created to account for the operations of equal debits. It is all fiat! Thank you again my friend!!
Anybody see Steve Keen writing a book on macroeconomics on X addressed to Elon Musk? Macroeconomics crash course to prevent crashing the economy.
Keen is a great systems analyst and Stephanie is the same, but neither effectively utilizes their own insight that modern money is created BY EQUAL DEBITS AND CREDITS THAT SUM TO ZERO. Thus if Congress passed a law that said: Ok retail merchants you can reduce your prices by 50% (debit) to your customers and the FED will rebate you back every cent of your discounts (credit) making you whole on your prices...voila!..everyone's purchasing power just doubled and inflation went from 3% to -50%, the price to the consumer for a $500k house just became $250k. And if you repeat the 50% debits and credits at point of loan signing that house only costs the individual $125k. That will communicate the benefits of modern monetary realities...in the very best way, that is, right in their pocketbooks/bank accounts. Also, what merchant doesn't want to see a potential doubling of demand for their goods and services. And even the banks would have a hard time balking at getting a 50% gift of the interest on a $250k house right up front in exchange for reducing the principle on the note by 50%? And how many more $125k mortgages that they get $250k worth of interest can they create? A few more sane and imminently doable policies and regulations as I have posted here many times before...and you/ve got yourself a paradigm change in economics and the money system.
We will be fighting this fight 'til the cows come home. I think this deficit/debt rhetoric is so entrenched throughout govt and society that it is nearly impossible to get through to them. It is as you say, people take these words and associate them with their own household understanding of the terms...esp. debt. They hear that word and instantly think about how this outrageous $ amount will ever be repaid and how it will burden future generations. And if they believe "genius" Musk, the fed govt will run out of money and could go bankrupt.
We are gaslit (intentionally or unintentionally) every hour of the day almost about how our taxpayer money is being spent and what we should do about it. We must "find the money" by cutting something else to "pay for" whatever it is that is wanted. I think this is done so the public feels like they have "skin in the game" and will vote or agree to a program touted to benefit them in some way or not.
I am so grateful to have the good sense to read your book after you went on your media tours. I've always been interested in how economics works. So after reading your book, it was like being let in on a secret. I think I underlined the whole thing. That started me on a path to research, on my own, all those other Modern Monetary economists. I love their podcasts. Wish you were in more.
There is still so much more I would like explained in more detail like the exact mechanics of what happens to the taxes on govt spreadsheets and how they are reconciled.
Just keep doing what you are doing. I look forward to your newsletters. Maybe you should work with the Progressive caucus, esp the AOC crowd who seem to understand economics from your perspective and will get the message out to colleagues and constituents.
Can't wait for your book. I hope we have a democracy with functioning economic system at the time your book is published.
To answer your question: "There is still so much more I would like explained in more detail like the exact mechanics of what happens to the taxes on govt spreadsheets and how they are reconciled."
I found her 1998 paper on this subject answered a lot of these questions for me: https://www.levyinstitute.org/pubs/wp244.pdf
BTW if anyone can recommend something like a video version of this paper I can share around, I'd love to know!
Thanks so much for the link. Look forward to reading what she has to say.
Keen is a great systems analyst and Stephanie is the same, but neither effectively utilizes their own insight that modern money is created BY EQUAL DEBITS AND CREDITS THAT SUM TO ZERO. Thus if Congress passed a law that said: Ok retail merchants you can reduce your prices by 50% (debit) to your customers and the FED will rebate you back every cent of your discounts (credit) making you whole on your prices...voila!..everyone's purchasing power just doubled and inflation went from 3% to -50%, the price to the consumer for a $500k house just became $250k. And if you repeat the 50% debits and credits at point of loan signing that house only costs the individual $125k. That will communicate the benefits of modern monetary realities...in the very best way, that is, right in their pocketbooks/bank accounts. Also, what merchant doesn't want to see a potential doubling of demand for their goods and services. And even the banks would have a hard time balking at getting a 50% gift of the interest on a $250k house right up front in exchange for reducing the principle on the note by 50%? And how many more $125k mortgages that they get $250k worth of interest can they create? A few more sane and imminently doable policies and regulations as I have posted here many times before...and you/ve got yourself a paradigm change in economics and the money system.
"Beware the neoliberal Jabberwock, dear Stephanie,The jaws that bite, the claws that catch!, Beware the Jubjub bird, and shun the frumious Trumpus Bandersnatch!"
Sounds like the same arguments Hamilton had to make with Jefferson and other debt scold "founders". I just read Christian Parenti's great book "Radical Hamilton". Hamilton lays out the necessity of a national debt that sounds very much like your own, and repudiates much of Adam Smith in the bargain.
Best way to get young MAGA folks tuned into this message is to turn it into a graphic novel.
I wish I was kidding.
The movie Finding the Money was excellent. Lively and inspiring!
But I have had very poor luck getting others to watch it.
Is there an example of another universal misunderstanding, at a societal level, where a shift/correction in understanding occurred that we might learn from? One would hope for a more recent example, but how long did it take the general public to shift from a geocentric to heliocentric understanding of our solar system?
Too long. Another fundamental misunderstanding we keep paying for is around housing and the cause and cure for the Great Recession. I’d argue we’re further along with MMT than we are with our housing woes in the country. But as Kelton points out, we’re in the early innings of the backlash/renaissance phase of a new national dept spanking.
The sad willful ignorance when it comes to understanding government finances continues. Debt is a word the scares the average person so its a lot easier to brainwash the masses into thinking the US will go broke and has to get its fiscal house in order when reality it doesn't have to since they issue the currency. Time for America to wake up.
Who will buy the debts?
If not the market, then the treasury has to. And when the treasury does this, it devalues every dollar.
Dollars will become worthless compared to the countries who bought the bonds representing the debt, meaning the US will soon need to issue more and more debt to buy foreign currency, devaluing the dollar even more in order to pay the debts or to buy things like gold...
They’ve already been bought. The holders are the foreign buyers goats businesses and UHNWI. The new beneficiaries of the newly created money (by Congressional fiat or even #MintTheCoin if it comes down to it) will spend that money. What’s the problem ? There’s nothing to worry about.
The same people who whine about dollar devaluation are the same people who complain about a manufactured debt crisis which has never happened and never will. This is a typical mainstream nonsense response. You have no clue what you're talking about.
Why don't you enlighten us then, brainiac?
Thanks for all you do, I always look forward to reading your messages. They really help to make sense out of nonsense.
The Truss/Kwarteng UK sell-off in 2022 shows there are limits to what markets will swallow on debt. A widening term premium in the US now may be a flag when foreign appetite for US debt is waning. Or, like the guy coughing after smoking 2 packs a day for 30 years, it may be brushed aside as just a tickle.. The federal debt won’t matter until it matters, and the it will be all that matters
It’s a distraction. What “matters” are real resources (including labor). As long as those are available the Federal debt is nothing more than an accounting artefact.
Without recourse to debt finance, taxes would have to equal spending. Investment would need to be financed out of current revenues. In other words, “austerity.” Avoiding austerity means that the fiscal debt profile has to be believed to be sustainable, or rather not manifestly unsustainable in a short timescale. Otherwise, other economic agents will not give up their claims to current real resources - which they only do because they believe their claims on future real resources ( debt) will be honored.
This can only be true if all resources, including labour, are already productively engaged, which we know they are not.
And “debt issuance” is a policy choice for the monetary sovereign.
CBO shows no spare capacity. Inflation stuck at 3 says no spare capacity.
Debt issuance is indeed a policy choice. Issuing non remunerated liabilities of the shortest maturity - aka money - is a feasible alternative. Unlike bond issuance there is no implied reduction in demand from the recipient. So inflation will result and resources will be relinquished by the private sector through that means. Inflation gave us Reagan, and inflation gave us Trump.
PML
i actually think i understand and agree with what you are saying.
What I should have said is that when we have a situation such as a recession, e.g. after the Great Financial Crisis, a money-financed fiscal expansion can make a lot of sense because it expands demand into the economy with a lot of spare capacity without pushing up interest rates, as bond-financed fiscal expansion would do. Money-fianced fiscal expansions are inherently more expansionary than bon-fianced. The problem is that once you expand spending. itis difficult to ratchet it down again, for all sorts of reasons. So you get stuck with a big deficit at the tope of the cycle - where we are now. The Biden fiscal boost should have been a lot shorter than it was, IMO.
Inflation IS the key anomalous part of the puzzle...and my twin 50% debit and credit policies at retail sale and point of loan signing terminally end it while simultaneously accomplishing one of the classic signatures of historical paradigm changes namely, inversion of temporal universe reality, by mathematically inverting/transforming chronic problematic erosive inflation into universally/macro-economically beneficial price and asset DEFLATION. Open your mind, look at it...and marvel that we didn't see it as the solution since double entry bookkeeping was invented.
You’d have to be living under one of those couch cushions Musk is maniacally flipping over to have missed the full court deficits-are-bad press of the last few weeks. So I for one am happy you are on the case. It’s maddening that we get pandered to in these ways through official and unofficial channels alike. And I have spooky thoughts about the US doomcycling its way away from a stable sovereign currency the envy of the world to something broken and valueless like most cryptocurrencies.
justin
"maniacally" is the right word, his lates "huge fraud in Social Security" based on his complete lack of understanding is so egregious I have hopes the people will wake up to what a fraud he is. slim hopes. the people are mostly not paying attention except to the big colorful lies. to at least partly explain better what i am talking about: SS keeps files open on dead people until there is a valid death certificate, but they are NOT paying money to those dead people. Musk claims that SS is fraudulently paying out that money. sheer stupidity to start out turned into big lie for public consumption.
It’s past time to pull off the gloves, grasp the narrative and write MMT into the Democratic platform to demonstrate the power of fiat currency and implement an effective liberal agenda at the same time expose the maga party (the artists previously known as republicans) criminality to all Americans. We can than begin to heal and wake our nation from this nightmare.