Tuesday, September 13, 2016

Deficit is up 25% over last year, as I forecast. Will the "deficit is too small crowd" now change their position?

The deficit is up 25% over last year. Just reported.

I already knew this and anyone who subscribes to my MMT Trader report knew this because I see the deficit on a daily basis from my analysis of the Daily Treasury Statement.

So, this is no surprise to me. In fact, I have been forecasting this and alerting you, dear readers, about this trend from time to time.

My question, however, is to Mosler and the people who parrot him on the deficit. He (and the others) have been wrong for three years forecasting a recession based on the shrinking deficit whereas I have been consistently and correctly pointing out that it's all about flows.

I follow fiscal flows, each. No one else does that. Flows have been very, very, strong.

So the question is, will Mosler now get bullish? His whole entire premise has evaporated. He's been dead wrong. Will there be any consistency to his view? I doubt it.


Matthew Franko said...

I'd assume they would say that it is still not big enough Mike....

Tom Hickey said...

I'd assume they would say that it is still not big enough Mike....

If there is underemployment, the deficit is not big enough, as I understand it.

Marriner Eccles said that 90% stimulus doesn't cut it in ending a crisis.

Charles Hayden said...

Mosler doesn't predict the stock market; he's about full employment and price stability.

And a note: in 2010 he was telling us all there would not be a second crash or double dip because the deficit was still over 10% of GDP.

Gary Hart said...

Somebody correct me but from what I understand from Bill Mitchell the deficit should not be compared to GDP, but should be large enough to quell unemployment.

MRW said...

Flows have been very, very, strong.

Then why is economic growth (according to the U.S. Bureau of Economic Analysis*) only 1.1%, when the average from 1947 to 2016 was 3.22%? Why are 94 million Americans underemployed or unemployed? Why are 45 million still on food stamps?

Who is benefiting from these flows? Just traders? Just Wall Street?

These are sincere, serious, questions. I am not asking them to be an asshole or smart-ass. I would really like to be enlightened, if possible. The deficit is just the difference between govt spending and taxes collected. An accounting measurement that recognizes the level of congressional spending and exercise of fiscal policy, the latter a phantom of times past. I really don’t see the contradiction that you claim makes Mosler wrong.

Steve D said...

@ MRW -"I really don’t see the contradiction that you claim makes Mosler wrong."

Mosler consistently says borrowing to spend (to grow output) can come from any combination of the indebtedness of the public/private sectors. So yeah, the deficit remains too small.

Mr. Norman's nit-picking (by assuming that Mosler strictly means the public "deficit is too small") is Mike's go-to recourse to assuage his own ego. Therefore, no dogma-free economics on MNE.

The financial economy always trumps the real economy.

Over 2 million have left SNAP roles since 2014, making the total today closer to 42m.