I will keep an updated quarterly graph here on The Minsky’s as FRED releases data."Muddling along."
The Minkys
USA 2017 Q1 Sectoral Balances Update
Brad Voracek
I will keep an updated quarterly graph here on The Minsky’s as FRED releases data."Muddling along."
16 comments:
"The response to the crisis was to massively expand the government deficit to buy up the toxic housing assets, which meant both US households and US business went into surplus, "
I do not believe Fed asset purchases are accounted for in the National Income Accounting....
Leading govt (Treasury account withdrawals) spending was increased in response to the crisis and taxes cut so the immediate response (ex post measured) was a higher deficit for a while ...
This is where "deficit too small!" type thinking gets you.... you end up not really knowing what is happening...
This is like pointing a hot hair dryer at an electric motor to increase its output because you noticed before that whenever the motor output increased the motor would get warmer...
This "The response to the crisis was to massively expand the government deficit...." is equivalent to "the response to the flooding was to massively heat up the pump motor ..."
Nobody thinks this way...
I do not believe Fed asset purchases are accounted for in the National Income Accounting....
Why not? Amounts paid to U.S. Treasury by Federal Reserve banks are included.
Here ya’ go. From https://www.bea.gov/national/pdf/all-chapters.pdf
Financial accounts of the United States:
Part of the U.S. system of national economic accounts. The financial accounts of the United States, prepared by the U.S. Board of Governors of the Federal Reserve System, record the acquisition of assets throughout the U.S. economy, document the sources of the funds used to acquire those assets, and measure the value of total assets and liabilities. Formerly known as the “flow of funds accounts.”
From page 11 of the “GLOSSARY: NATIONAL INCOME AND PRODUCT ACCOUNTS (Updated: October 2016), at the end.
They don't use normal Accrual Basis of accounting for Federal accounting... they use Modified Accrual ... which I would describe conceptually as "they use Cash Basis on the left and Accrual on the right..."
So the mark up to the TGA i.e. deposit from the Fed happens on the left (a + deposit on left), and this is treated Cash Basis, meanwhile over on the right, the bond issuance is treated Accrual and represents a long term (accrued) liability... hence they only see the "debt!"...
ie they're morons...
They would have to use normal Accrual then over in the left they could have an accrued asset like "Taxes Receivable" to offset the accrued liability on the right...
Their Modified Accrual does not allow this ...
http://www.investopedia.com/terms/m/modified-accrual-accounting.asp
MRW,
Those are two different sets of accounts... the Fed does the Z.1 (I believe what you are talking about) but "the deficit!" is computed by a division in the Treasury using Modified Accrual Basis...
Here it is it's The Bureau of the Fiscal Service:
https://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/backissues.htm
"The deficit is too small!" crowd is clearly at odds with the "flows only matter in one direction!" crowd, Matt.
Well that is because the flow in the one direction is a function of the flow in the other direction...
Or are you saying that govt spending depends on the taxes?
1. Changing the flow in either direction changes the flow in the other direction, which changes the flow in the other direction, etc. Ultimately, we don't know if the flow in the other direction changes positively or negatively due to the initial change in flow. Either outcome is possible.
2. I'm not saying "govt spending depends on the taxes"
We don't really know what the net change in flow will be in advance, all we can do is guess. My guess is more spending (flow) or less taxes (flow in the other direction) will lead to more economic activity, which leads to more taxes (flow in the other direction).
It's not really "direction" either... this is a figure of speech ...
I should have said, " the one flow is a function of the other..." and left it at that...
I think funds can "flow" from one account to another. That is their "direction". I think we all know the meaning of "direction", figure of speech or not.
It's probably not appropriate .. technically ...
Post a Comment