Alan Longbon schools his readers in Godley's monetary economics.
- The US budget deficit is USD 75 billion in June 2018; this is a net add of income to the private sector and allows it to grow.
- The good news is that dollars are being added to the economy by the Federal government, and it grows the economy.
- Further net inflows are expected for the rest of the year from the Federal government and private credit growth.
- Private credit growth has so far added $36 billion to the net money supply; last year, it was only $23 billion. At this rate, it could total $100 billion for the year....
Seeking Alpha
Good News: U.S. Government Posts A $75 Billion Deficit For June 2018
Alan Longbon
29 comments:
If I remember correctly, Matt was predicting YUGE surpluses months ago for the foreseeable future. Notwithstanding all my criticisms of Matt, he does have a damn fine analytical mind when it comes to banking and monetary matters, although he does use it to advocate regressive policies:)
Anyway, Matt, what do you think went wrong? Any pointers to where you made an error? I'd love to see your thinking on why you predicted large surpluses and then see a critique of what you missed (and you won't make the same mistake next time). I don't know how much truth there is to the old saw that a staggeringly successful currency trader is one who can win 50% of the time!
I did not say that I said EVERYBODY was predicting $1T deficit this year... doesn’t look like we come anywhere near that...
John, if you eat AND shit on the same day, do you worry that you may be starving????
Oh.... oh.... oh .... right here from the article:
“The US budget deficit narrowed to USD 75.0 billion in June 2018 from USD 90.2 billion in the same month of the previous year, and below market expectations of USD 98.2 billion.“
LOL!!!
How are we going to have a $1T “deficit!” if it is FALLING YoY?????
Uh oh!!!!
This is too good!!!!!
John,
Were you able to get out to the countryside this week to get a glimpse of Trump and Melania?
Too bad there is not a futures contract on the “deficit!” I could probably be retired....
Now theyre going to all be going “deficit too small!”...
“We need more savings!!!!”
Uh oh:
https://m.seattlepi.com/business/article/Deficit-to-top-1-trillion-per-year-by-2020-CBO-12818677.php#photo-15365999
“WASHINGTON - America's deficit is rising sharply and will surpass $1 trillion per year by 2020, a gap that has grown since Congress cut taxes and increased spending, the Congressional Budget Office reported Monday”
But now it is FALLING!!! Oh no!!! What is wrong with our pea brains?!?!?
Uh oh:
http://www.crfb.org/press-releases/budget-deal-could-lead-2-trillion-deficits
“ trillion-dollar deficits will now return next year and top $2 trillion”
Oh no!!! What do we do now the “deficit” is falling!!!
Uh oh:
“This morning, White House National Economic Council Director Larry Kudlow appeared on Fox Business and made the following claim (emphasis added):
"As the economy gears up, more people working, better jobs and careers, those revenues come rolling in, and the deficit, which was one of the other criticisms [of the 2017 tax law], is coming down. And it's coming down rapidly. Growth solves a lot of problems. You've heard me say this for a very long time."
We rate this claim as false. Not only are deficits not falling rapidly – they aren't falling at all.”
http://www.crfb.org/blogs/deficit-not-coming-down-rapidly
Pretty bad when Larry Kudlow can make you look like an idiot...
John:
https://mikenormaneconomics.blogspot.com/2018/05/trudeau-says-us-borrowing-is.html
https://mikenormaneconomics.blogspot.com/2018/04/deficit-watch.html
https://mikenormaneconomics.blogspot.com/2018/02/us-government-posts-49-billion-surplus.html
https://mikenormaneconomics.blogspot.com/2018/01/deficit-watch-january-16th.html
https://mikenormaneconomics.blogspot.com/2018/01/report-apple-likely-to-repatriate-200.html
Never said surpluses... took issue with $1T deficit calls which includes MMT elites direct or implied... which now puts them in the same boat as the Peterson people.... good job!!!! Nice technical competency... outwitted by Larry Kudlow (Art major...)...
Never said what I thought but for FD I was thinking a little higher to a little lower ... just not near $1T......
Deficits are going to have to really get going to get to $1T it is at about 600b with only 3 months to go.. they need 133B per month.... let’s see what happens...
Blimey, Matt, it was just a query! I thought I might get a pointer on deficits and surpluses from someone who knows their stuff.
Matt: "...if you eat AND shit on the same day, do you worry that you may be starving????"
It's possible. I've eaten considerable amounts and defecated considerable amounts, yet have been really hungry!
Matt: "Were you able to get out to the countryside this week to get a glimpse of Trump and Melania?"
I wanted to, but I was too busy with my eating and pooing problem.
PS. The deficit is too small, way too small. When all Americans have good paying jobs, and their are more good jobs than people looking for work, that's the time to talk deficits. Until then, it's too damn small!!!
You have the deficit backwards... it’s savings which is like a leakage.. think of a colostomy bag... can function but not ideal...
“I wanted to, but I was too busy with my eating and pooing problem. “
Can never get around those gd real constraints...
Hey FYI Trump is staying the weekend with you guys up in Scotland (save fuel!) to play some golf before heading over to Finland to do some dealings with Putin.. maybe you could get up there this weekend...
You have the deficit backwards... it’s savings which is like a leakage.. think of a colostomy bag... can function but not ideal.
Not according to MMT. When the government spends (including transfers) it puts currency into the coffers of non-government, creating flow into the economy.
One of two things happens after spending (inflow). Taxes (outflow), or the residual after taxes "saved" in the form of government securities (reservoir).
Taxes withdraw input and are a drain in the sink of spendable funds that prevents the sink from overflowing (inflation occurring) because of an open faucet.
Government debt appears to be "savings" that result from draining the residual input into reservoirs, preventing further flow unless the reservoir being tapped (redemption). This is the conventional (wrong) view. On this analogy, QE would have set the returned the savings in tsys to the money supply as purchasing power, increasing inflation. Instead, the historically low interest rates along the curve resulted in asset appreciation, which can be viewed as another type of "inflation."
From the MMT POV, the so-called "savings" as the stock of public debt to which a deficit adds as the flow of "saving" (income not consumed) during the period does NOT result in demand leakage the way that saving (flow) and savings (stock) do in nongovernment.
According to MMT, deficits are bank reserves (demand accounts at the cb) drained into tsys (saving accounts at the cb). This drainage does not result in demand leakage in that tsys are both highly liquid and also the best collateral. Increased saving flowing to public debt doesn't work like saving in the private sector, which does result in demand leakage.
This is a crucial claim of MMT.
If one did not get the flip side of this, then one would have misinterpreted the effect of QE, as did the mainstream.
Moreover, the conventional (wrong view) is that raising the interest rate will increase saving thereby countering inflation is wrong from the MMT POV, since the higher rates will mean increased input from G.
"Not according to MMT. "
Youre tellin me... this is perhaps why they have been wrong for so long... their non-specific doom forecast is never happening...
Put a clock on it...
"Taxes (outflow), or the residual after taxes "saved" in the form of government securities (reservoir)."
Wrong... not if the Treasury runs a surplus and puts the surplus balances with the Depositories "for the taxpayers to earn interest"... its not "outflow" to the Depository at least it is "inflow" and creates a liability (on the RHS) ... what then has to happen to the LHS?
"Taxes withdraw input and are a drain in the sink of spendable funds that prevents the sink from overflowing (inflation occurring) because of an open faucet."
Oh so now its NOT "about price not quantity" now it is "about quantity not price"...
Is this the dialectic at work here Tom?
ie 'thesis' and 'anti-thesis' existing AT THE SAME TIME...
dialectic: "sometimes its about price and sometimes its about quantity!"....
Its never about quantity...
They should just give up on "inflation!" even Yellen admitted it is bullshit...
What if a colostomy bag fills up? doesnt the intestine fill with toxic digested material?
So you have to replace or at least empty a colostomy bag at a specified interval (time domain aspect) as directed by a science trained medical professional ... (never had one hope never do...)
Tom,
they are all in the tank with the Peterson people on $1T deficits... they say "but it will be a bad $1T deficit"....
What if we dont get the $1T? Were at 607B with 3 months to go.... July is at about 30B so far and September is seasonally typically a small deficit or surplus...
Where does that leave them? In the Peterson boat... NOT good imo...
Wrong... not if the Treasury runs a surplus and puts the surplus balances with the Depositories "for the taxpayers to earn interest"... its not "outflow" to the Depository at least it is "inflow" and creates a liability (on the RHS) ... what then has to happen to the LHS?
Not "wrong." MMT is talking about the general case that applies to all monetary system that issue public debt (which unnecessary operationally, according to MMT).
The case cited is a special case that is based on a political choice about institutional arrangements that affect bank operations.
Of course, particular cases have to looked in terms of the general case and any special cases that apply.
about price not quantity
Price and quantity are both factors. There's a choice which to use in economic decisions and policymaking.
As a matter of policy, a currency sovereign can choose to use its monopoly power or not. Or it may be constrained politically from doing so (which economic liberalism favors).
Again, special cases that have to looked at in terms of particular cases.
Uh, a reserve drain is not a colostomy bag, Matt. You are the one that is usually calling attention to poor analogies.
MMT is NOT about deficits as a panacea.
MMT makes a distinction between good and bad deficits.
A good deficit is one that results from effectively addressing issues.
Abad defunct results from policy that doesn't address them and is created by the automatic stabilization.
Austerity can result in bad deficits by contracting the economy unnecessarily, triggering automatic stabilization.
Matt, MMT economists have written extensively about these issues have been discussed in great detail. You are picking things out of context.
Tom they are all so political biased at this point to be as useless technically....
Tom they are all so political biased at this point to be as useless technically..
I don't see that in the academic writing, which is the body of literature underlying MMT.
Where I see political bias is on Twitter, FB and blogs.
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