Wednesday, October 26, 2016

Here is why I am 100% certain that a Balanced Budget Amendment is going to become a reality.

I contribute to Real Money at the

The other day I wrote an article about how the national debt is not really a debt at all, but just part of the assets of the non-government. You know, basic MMT stuff.

I even included a link to a table from the Daily Treasury Statement that showed how the Federal Government redeemed (paid back) $94 Trillion last year. I did this to try to show how all the fear-mongering by Pete Peterson and Fix the Debt, etc was a total manipulation.

Well, after that article went up I got f'ckin bombarded with emails. These are just a few. Read them. Once you read them you will see that the public is sooo f'ckin ignorant on this stuff that I am sure, without a doubt, a balanced budget amendment to the Constitution will happen.

What a crock of SHIT!  This is just more lies published by the toadies of the 600 billionaires who are NOT paying their share of taxes, and who ARE systematically looting the assets of the United States.
You are TRULY STUPID! You must be liberal because your math skills suck. Many foreign governments and investors own treasuries; we pay interest on them that will soon take up over half our budget; and yes the money gets paid back. Man you are DUMB! Go peddle you BS elsewhere. WOW!

You missed it on this article.The statement says 94.2 trillion was paid off but it also says there is 95.6 trillion of new debt.  You have to look at the net to figure out what is going on.  We basically went into debt by another 1.4 trillion.  It is the way accountants handle things.  Apparently the debt is being refinanced over and over again.  If you re-financed the million you owe on your private island, the books would say 1 million paid and 1 million new debt.  If you re-financed it again for 1.2 million, the books would now say 2 million paid and 2.2 million new debt.
This article is trash and is a fucking lie.  There is debt and there is interest.  You are a true joke and I'm not sure how this article got past your editor.  If you'd like to debate your philosophy, let's do it.  Oh, and the Revolutionary War was not fought over a TAX, it was fought over who controls currency.  idiot.
Hi Mike,I read your article on the illusion of the National Debt. Then I went to the websites you said were shams, Fix the Debt, and read their prophecies of doom. Then I went to Wikipedia. That led me to this link: the gov seems to be telling me that current medicare and social security spending are unsustainable, and the debt is a big problem. I'm trying to get fair and balanced information, and your column "it doesn't exist" seems to be as extreme to one side as Fix The Debt is to the other...I always thought spending more than you make is a BAD thing. What's the deal?Thank you.
Dear Mr Norman - I am writing to you with interest in your answering 2 questions.1) If, as you assert, there is nothing to worry about with the national debt, is it an equal assertion that the line item that covers debt service in the federal budget is also of equal meaninglessness?I assume these debt payments are real and without a national debt these debt payments would either not need to be paid or the money could be spent in other ways.  Please clarify if you will.2) If the debt is meaningless, could then the Fed simply apply an easement to this number to wipe it out?  Why would this not be a good idea?Thank you.Dave KSeattle WA
Could not disagree more with your article.  There is debt and it IS owed to the people/other nations.  Garbage article.
Mike, I just looked over your article and the screen shot of the Treasury page you talk about. I also looked at the line about Net Change to Public Debt and saw it was only about $1.4B as a result of the $94 trillion redemption. I presume almost all of that amount went to interest on the debt, and the amount of debt was only reduced by $1.4 trillion. 
Just read your article "There is no Debt", and it made sense to me, except I wonder, "Then why is the spending power of the government limited?  Why can't we do more things?"  You see, I work for the Navy, and see all sorts of budgetary constraints, lack of resources to do the most basic things, etc.  While in an accounting sense there is no debt, there is a problem with something, perhaps with something other than debt but is conflated with the national debt, that is limiting us.  Indeed, why do we pay taxes?  Can we stop paying, if there is no debt?  Not trying to pick a fight, but some more explanation and clarification will help.  Thanks!
Foolish article. The money is owed to foreign countries. You think we are idiots ?
You, are an idiot
The $94 trillion you mention is from accounting of mostly non-marketable securities. These are securities that are made up of payments and reciepts for Social Security, Pensions, etc. within the government. It is not the total that matters it is the difference. You are misleading your readers with your article.Debt matters, it matters because we are spending today's money by paying with future tax dollars.
And if we believe that bull crap story that you liberals would have us believe, then you've got a bridge to sell us, cheap, right???? What about the trillions of dollars we've borrowed from China? ----they're just going to write that off, Right?That's like saying we don't have any debt on our houses or cars because we make payments on them How gullible do you think the American people are? We're  not all as stupid as your liberal bunch of sheep are, who just bury their heads in the sand and believe all your crap like this
Then why collect taxes?  If there is no debt.
Hi Mike,I just read your article on national debt and why it doesn't matter.  Its so contrary to what I hear and read constantly I had to write in with a few questions.  Yes, the government paid out $94T in your example,but it also took in $95T in the same period.  So in essence they're capability to pay depends on confidence in the system.  The fed can print money,but if this is abused doesn't it devalue currency?  If everyone had a money printer in their house,what would happen to the value of goods and the purchasing power of the dollar?  The value of currency depends on its scarcity to some extent.  Japan is proof that the limits can be stretched,but I find it hard to believe that the markets capacity for money printing is infinite.    History is riddled with examples of bubbles and economic collapse.  How are the laws of economic gravity different today?
Isn't that the same thinking the Greek government / economists were telling their people who dared to "fret" about their country's :debt"?
Thoughtful argument, Mike but you miss the point.  Number 1. Dollars spent by government are not as productive as dollars coming from the private sector. And Two.  The debt is a measure of government intrusion.  Example.  The government fined (I say shook down( banks for $250 Billion since 2009. Most of that money wen to the regulators.  Banks are levered 10 to one so that would mean $2.5 Trillion came out of the economy.  And that is just one example.  Costs of compliance from regulators is trillions more and mostly they are too attacks of personal property rights.  Half our economy is now public and public employees.  And the whole cycle leads to Corporatism.
There are Issues and Redemption's and you completely ignore the fact that they took in more than they paid out. Your article is flawed.
i don't get your logic.  the government issued 1.4 trillion than it redeemed (last line of table). to me thats increasing the debt subject to interest of 14 billion assuming a 1% rate.  if the government used the money for social programs, it gets no payback but still has the debt.  if the government used the money to create jobs, it gets a payback thru payroll taxes to service the debt.  ???
You are a dangerous man, a monumental asshole. You were paid to write this, which makes you an immoral and unethical asshole. In fact you are $20Trillion assholes wrapped up in one big asshole. You should be ashamed.
The Merriam-Webster definition of debt is "an amount of money that you owe to a person, bank, company, etc."  Investopedia tells us that "When an investor purchases a T-Bill, the U.S. government writes an IOU."  When I go to the bank to get money from them that I don't have, the only way I can get it is to borrow it from them.  They issue me a loan of some kind.  I sign papers (a form of note promising them I will pay back the money) that indicate an IOU status for the money I now have, and they do not have.Are we playing with words here?  Enron famously played the game you described:  "There is the proof, right in front of our noses, that the debt is meaningless. It's just a bunch of bookkeeping entries. Keystrokes."  Where is Enron today?You stated, "If you go to the last statement of the fiscal year . . .you will see the government redeemed (paid back) $94.2 trillion in one year!" First, if it isn't a debt, why did you   use the phrase in parentheses, "paid back"?  Second, where did the government get $94.2 trillion to pay anything back?  They didn't get it from taxpayers, and they certainly didn't get it from where it was just "lying around somewhere&quot
Mike, you really need to read "The Debt Virus" as well as understand the manner in which Government borrows money and pays interest on that borrowing and how it inflates the money supply.  Even if the inflation is "checkbook" money, it still has an effect on prices and growth.
Mike,I am curious after reading your article "The National Debt: why Fret......", what happens to the paper treasuries if on January 1, 2017 all oil trade settlements were changed to Euro's instead of Dollars ?My point, because of Oil Trades must all be settled in US Dollars there is an unbalanced Demand for US Treasuries that allows our Govt via the FED to always borrow or continuously refinance said debt from the last 240 yrs.There is no basis to pay the debt, it just gets rolled over and diluted.Am I wrong here
what can happen if you pretend the debt doesn't matter.
Actually, it's you who is misinforming.  You are correct in that the US redeemed and reissued 90trillion dollars.  Who cares?  If debt didn't matter, why not run a trillion $ deficit?  Why not $5T or $10T?  Let's build those roads, pay for everyones college bills and give all people a basic benefit.  At some point, the interest on that debt over takes the budget.  Now - we could say that doesn't matter because we can issue all the $ we want to take care of this interest.  We only need to look at other countries who have done this to see how that worked out for them.  STOP
Mike, if the government can spend more than it takes in and incur no debt, then why tax us in the first place? Why not just spend to their heart's content? The answer is, there is a national debt and I think you need to go back to Economics 101. Our country is about the learn how devastating this irresponsible spending has been. I eagerly await your correct to your silly article. Good luck.
Mr. Norman, debt isn't an asset, it's the opposite...a liability.  Take a basic accounting class.  You are so clueless I don't know where to start with your ridiculous article on "no national debt".  How did anyone print your article?

There's much, much, more.


Greg said...

You are 100% correct Mike.

We are going to have to go down this Balanced Budget road for a while (hopefully a short while) before we realize its a dead end.

Tom Hickey said...

If it passes, and it likely will, it will also likely be a farce.

"Emergency" and "necessary" (read supporting the military-industrial complex and other assorted graft") will be off-budget.

If that is not the case and the budget is actually balanced YoY with no off-budget appropriations, get ready for the grandaddy of all depressions.

It would be like unleashing Godzilla.

Matt Franko said...

We could buy put options....

André said...

Public finance is a complex subject and it's not surprising that people are unable to understand. They are not even aware of how wrong they are.

What can be made to abolish this ignorance?

To keep interesting and accessible MMT blogs was a good start, and I admire thoso who stated it. But unfortunately I guess it's not enought.

So what else can we do? I don't have a clue...

Unknown said...

I have had the most success in getting the MMT point of view across using two publications. Somehow, the others just don't seem to work. The first is Warren Mosler's "7DIF" the second is Frank Ashe's "A Kindergarten guide to modern monetary theory"

Unknown said...

Send them my way!

Unknown said...

Rough crowd over there at .....

I suspect that HRC will sign a balanced budget amendment if it comes across her desk.

Although, I wonder how they will arrive at a balanced budget given the way lobbying and moneyed interests run the show? All those interested parties are not going to take one for the team, so to speak.

Maybe they will copy Brownback's "success" in Kansas?

Abram Larson said...

Mike Norman - $20 Trillion [of] assholes wrapped up in one big asshole.

Sounds like a ringing endorsement. Something to add to your CV perhaps? Maybe just put it in your bio on The Street? LOL.

Charles DuBois said...

Mike The "people" have no clue but some also have the excuse of ignorance (unlike many economists). These "people" are not going to understand without learning one step at a time. Even then they will resist but you make your point until they walk away (most common - but revealingly they do not tell you why you are wrong) or they see the light (rare but it happens). For example, start with the simple (but new to most) concept that since all spending = all income - that a public sector deficit = private sector surplus (income). It's easy and if they don't get that - it's hopeless. But some do and then you move on with another bit of education. That works for me. My hit rate is still low but at least there are some hits.

Unknown said...

Hey guys, I read the article as well and My knee-jerk reaction is to disagree with it, but I am open to the idea of agreeing. Im humble enough to know I dont know everything, particularly with economics.... I have one question about this, if debt is an asset, why do we bother taxing at all? Why do we try to pay for our government programs if we can just give treasuries and print money? IF we cant fund it totally, and debt isnt bad, then why try to fund it at all? I'd like to hear some responses as I am quite curious about this topic. my email is

Tom Hickey said...

Taxation creates a need on the part of non-government to obtain the currency.

Government then uses that need to provide the currency to meet tax liabilities it imposes by using the currency it alone issues to transfer private resource to pubic uses by purchasing those resources in markets.

1. Levy taxes.

2. Appropriate spending.

3. Credit non-government accounts with the currency to pay for spending.

4. Collect taxes levied, which destroys the currency that was issued. (This is called "reflux.")

Unknown said...

Setareh, Read the two very short monographs I linked to in my comment. They are very easy reads.

Anonymous said...


Consider this. What is the ultimate source of the US Dollar? The US government, of course. Suppose that the government spends a billion dollars. Where does it get it? Ultimately, it gets it from itself. When moneylenders tried to charge very high interest to the US government to finance the Civil War, Congress authorized the printing of greenback dollars, which were not backed by gold or silver, but were just paper money. It was not necessary for the government to borrow money. For a while greenbacks were worth less than dollars backed by gold, but eventually they traded at par. All of our dollars these days are greenbacks.

So why does the government borrow money? There are political reasons, but one major reason is to provide people with a safe investment. As safe as it gets, anyway. The goverment's debt is the people's asset.

Under Bill Clinton the government ran surpluses and it was projected that the government would pay off its debt around 2014, IIRC. You can look all this up online. Alan Greenspan at the Fed and bureaucrats at the Treasury realized that this would be a disaster for the people, and nearly freaked out. That was one reason for the Bush tax cuts. You can find out all about this online, as I said.

John said...

Mike, twas ever thus! An uninformed public allows all kinds of stupidities. But they're uninformed because they're being fed propaganda, not because they're intrinsically stupid. You yourself have said may times that you used to believe this nonsense! We all did. It is extremely hard to disabuse yourself of everything that you've been brought up to believe. It takes time and it takes effort - like all good things. It also requires brutal honesty, and that leaves you in a small minority. It's hard to say that there is no debt, commercial banks create the vast majority of the money supply, the state can set all interest rates if it so pleased, let alone saying something more controversial but just as truthful like our countries are leading terrorist states, or that the EU is a corporate imperialist enterprise run by Germany. Not unreasonably, people think you're a fucking wacko!!!

Even the smartest people on this blog say unimaginably stupid stuff when it comes to politics! You'd think MMTers would ask whether they've got erroneous beliefs about politics, but they don't.

Peter Pan said...

Mike, is this flood of emails a new phenomenon or the usual response to your columns?

Peter Pan said...

You've gotten their attention, time for a follow up to answer some of their questions, as futile as that may be.

Matt Franko said...

Bob, Yahoo posted Mikes Real Money (err I mean "Money!") column above the fold on the main Yahoo home page yesterday.... first story right at the top...

Matt Franko said...

Bob, here further info from Mike and E-P-I-C rant (FD Rated R):

GLH said...

Perhaps future administrations will learn the benefit of monetizing the debt, overt monetary financing, instead of issuing credit.

Ignacio said...

This is not going to go away until they start financing deficits through over monetization through subterfuges mechanics and not issuing liabilities. For that first we have to go through a lot of pain first, this could be Andrew Jackson level of stupidity (coming from the same type of crowd! that people should not be allowed any close to dictate financial policy).

People read the word "debt" and shut down their brain, too many biases stopping processing information.

Then other memes will become problematic, but at least the Perteson crew will have to fund an other ax to grind. I'm in favor of no issuing debt to finance deficits, although that would require a lot of changes to the financial system due to collateral requirements etc.

NeilW said...

When anybody says where will the money come from you just reply 'from spending the money'.

It's a facetious question, so it deserves a facetious reply.

Then you get out your wad of $100 monopoly money notes and show them how it works in practice.

The open mouths that produces are worth the entrance fee alone.

Joe said...

Hate to say it, but I think the mmt people generally do a poor job of explaining it. (Mike's article was good, but too narrow of focus)

My opinion is the sectoral balances are by far the most important aspect. As Mike says, it's all about flows, and they sum to zero.

I guarantee 95%+ of the population thinks it would be a good thing for everyone, including the govt, to earn more than they spend. The notion of earning more than you spend is built into the idea of "living within your means." And you must earn MORE than you spend to be considered responsible, for emergencies and retirement savings, etc.

Maybe get the public to understand the zero sum nature of flows first and then get them to realize that dollars originate from the govt, you can't even pay taxes in dollars until govt creates the dollars. So right away it's obvious the govt doesn't need revenue. Immediately after that, get into real resources and inflation to head off the "why can't we spend into oblivion" nonsense.

Mmt instantly made sense to me, since I was already thinking sectoral balances, I remember thinking in high school "if someone must spend a dollar for me to earn one, how's it even possible in theory for all of us to "make it". Most people on their own won't make the jump to see how that line of thought scales up to the economy as a whole. Most people just say "so what? other people can go work and earn their money" they're unable to close the circle, it's the paradox of thift.

The mirrored picture of the balances is probably the best tool available.

Tom Hickey said...

Most people think naïvely that money comes from "work."

Explaining where the money comes from is probably the first step.

Starting with a central bank note in hand with the government's name blazoned on the top makes it pretty obvious that "money comes from the government."

(In the US, conspiracy theorists will immediately point out that it is a federal reserve note and that the Fed is "privately owned by the banks." That's a show-stopper since there is no convincing them otherwise. So save time and move on.)

Once people admit that "money comes from the government," it is an easy step to see the difference between issuer and users, and therefore, why the government is not just a big firm or household.

Once they admit this, then the rest follows pretty easily, but the big problem then becomes getting them to remember it.

So this seems to be a process that requires time and repetiton to digest.

The rest of the problem is that it is bit unfamiliar territory for most people. The challenge is relating it to their experience and getting past their cognitive biases and programming.

It is going to take some time to scale this sufficiently to turn the tide and change the public mindset.

Maybe the simplest way to enlist some progressive celebrities that can deliver PR free.

Joe said...

The sectoral balances explain the proximate cause of the great recession, great depression,and the entire euro zone debacle. The ultimate causes are, of course, more complex. But it's obvious from the sectoral balances alone why austerity can't work, except for in very isolated beggar-thy-beighbor scenarios, which obviously can't apply to everyone. As Mark Blyth says, it's the "not Switzerland problem". Switzerland can work the way it does only because everyone else is not switzerland (or Finland can grow with austerity, but can't apply to everyone). Otherwise you run into a Katy Perry situation, you can have one but not both (he can't be with his wife and Katy Perry at the same time. Can't have govt and nongov both in surplus, ie the euro zone standard advice can't even work in theory).

It's the flows.

Tom Hickey said...

The problem is explaining sectoral balances in terms Joe and Jane Sixpack understand, that is, to people who know no accounting and have no algebra skills.

beyer.arch said...

Thanks, Mike, for the most lucid and direct refutation of the national "debt" that I've read in a long while. Let's start calling it "shareholder equity," shall we? If all the money created by the U.S. belongs to we citizens, we cannot have "borrowed" it. You don't borrow your own money; you manage it.

Joe said...

"The problem is explaining sectoral balances in terms Joe and Jane Sixpack understand, that is, to people who know no accounting and have no algebra skills"

Which is why I said that the mirrored picture of the sectoral balances is probably the best tool available. Like this one.

And coincidentally, that site recounts the guy's "conversion" being due to seeing the balances, not just some algebra on a paper.

Tom Hickey said...

Incidentally, the only time I had instantaneous success in explaining MMT to someone was to a friend who is a CPA. His reaction was, "Of course, it could not be otherwise," like, why are telling me this? It's obvious.

Joe said...
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