Bill Mitchell — The ‘infinite-horizon fiscal gap’ is just an infinity of nonsense – try measuring that!

The ‘infinite-horizon fiscal gap’ is just an infinity of nonsense. That is, if such a level of ridiculousness can be measured, which it cannot. So suffice to say a pretty large dose of nonsense. Certainly nothing to take seriously. Anyone who sprouts this nonsense declares themselves unqualified to discuss notions of sovereignty and the capacities of a currency-issuing state. But while some mainstream economists are firmly stuck in their Groupthink-riddled stupors with their ‘infinite-horizon fiscal gap’ calculations producing ever increasing (scaremungous) $ sums that the US government is allegedly unable to ever pay, the movers and shakers of the political scene, such as the Koch Brothers in the US, feel no compunction to stick with a consistent line attacking fiscal deficits. A few years ago they were predicting mayhem and insolvency just like the stupified academics. How things change when some dollars are up for grabs even if the fiscal deficit has to rise to transfer that largesse to the non-government sector. Then it is look the other way on the deficit and send us the cash. Sickening. 

Class A smackdown of Laurence Kotlikoff.

Bill Mitchell – billy blog
The ‘infinite-horizon fiscal gap’ is just an infinity of nonsense – try measuring that!
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

Laurence Kotlikoff Tries To Screw His Country Again ... On Behalf Of Whomever's Paying Him. The NY Times Jumps Onboard As Willing Accomplice

   (Commentary posted by Roger Erickson)




Add Laurence Kotlikoff to that list of identified traitors to the USA.

"HOUSEHOLDS can’t spend, on a continuing basis, more than they earn. Countries can’t either, at least not over the long run."

Kotlikoff is spewing words that fail the most fundamental rule of discourse: Define your terms - or accept nonsensical semantics masquerading as discourse. Was Kotlikoff raised on Erble Logic?

Just restate his statements accurately, in the following way.

"CURRENCY USERS can’t spend, on a continuing basis, more than the currency they earn.

CURRENCY ISSUERS can, obviously, since they create, on-demand, the currency that their users need, to denominate existing transactions - no matter how fast they increase."

See? That wasn't so hard.

Kotlikoff is inventing a fiat mountain out of fiat nonsense, by misusing the semantics. Why? He should go into the magicians business, where it actually pays to distract and fool audiences. That strategy does NOT benefit a democracy.

How do YOU spell "Benedict Arnold?"

Few, if any, perform this kind of treason without a willing sponsor. Does anyone know who is paying Kotlikoff to spew such nonsense? Neither Marriner Eccles nor Beardsley Ruml would approve. Not even Benjamin Franklin. 

Who ya gonna believe? People that SERVED their country? Or those who undermine it, for personal gain?

Guest Post: Ralph Musgrave — We're ruled by idiots like Larry Summers.

We're ruled by idiots, like Larry Summers.

Here's a sample of the idiocy: first, the Bank of England doesn't know what happened to the money it created so as to effect QE. Second, the drug and porn addicted head of the Co-op bank in the UK when asked what the total assets of his bank were, gave £3bn as the answer. In fact the correct figure was £47bn. Don't you just love it? Anyway, moving on to that supposedly important speech by Summers at the IMF a few days ago, he points out that the crises was caused by "imprudent lending". Yes, we all worked that out. But he doesn't tell us what the solution for that problem is. Though presumably he's not so totally dim as not to be aware of the solution: make banks hold more capital. But personally I prefer taking that further, as advocated by Laurence Kotlikoff, and as follows.

Kotlikoff's solution. Ban the blatantly fraudulent practice that banks have adopted for decades, namely making silly loans in the knowledge that the taxpayer will rescue banks (particularly the large ones) when the loans are silly enough. In other words adopt the system advocated by Kotlikoff under which depositors who want their bank to lend their money on so as to enable them to earn interest carry the full cost when loans go wrong. That would greatly concentrate the minds of depositor / lenders and lead to more responsible lending. Though those who particularly wanted to lend to risky borrowers would be free to do so, but they they'd carry the risk. Alternatively, under K's system, where a depositor wants 100% safety, then their money is kept in a 100% safe fashion: nothing is done with it, so it's not loaned on, and thus earns no interest. The result would be that it would be near impossible for a bank to suddenly fail, though it could perfectly well dwindle to nothing over a period of years. Plus any credit crunches would be far less volatile. But whether we impose bigger capital requirements on banks or take that further and go for K's solution, the effect would be deflationary: banks would lend less. So some sort of compensating and stimulatory measure would be required.

How do we impart stimulus? Let's scratch our heads. Well that's a big problem for Summers because he doesn't seem to know how to impart stimulus. As he puts it, "we may well need, in the years ahead, to think about how we manage an economy in which the zero nominal interest rate is a chronic and systemic inhibitor of economic activity, holding our economies back below their potential." The jaw of most MMTers will drop at that statement. The great Larry Summers doesn't know how to impart stimulus when interest rates are near zero. Well Larry, if you're listening, here's how to do it. Create fiat and spend it (and/or cut taxes). The fact of government creating money and spending it means more jobs in the usual public sector areas: education, the military, infrastructure creation , etc. And as to tax cuts, that induces households to spend more. Moreover, the latter policy boosts the net liquid paper assets of the private sector, which induces the private sector to spend. What do people do when they win a lottery? Unless you're mentally retarded or a senior economist who hangs out inside the Washington beltway, you'll know that when people win a lottery, they tend to spend a fair proportion of their winnings. Revelation of the century that, wasn't it? As Dean Baker put it, "In elite Washington circles, ignorance is a credential".

Ralph Musgrave

Guest Post — Ralph Musgrave: Dodd-Frank is useless, but try this…..

Dodd-Frank is useless, but try this…..

Ralph Musgrave

On the subject of Dodd-Frank, Richard Fisher, president of the Dallas Fed said, “We contend that Dodd–Frank has not done enough to corral TBTF banks and that, on balance, the act has made things worse, not better.” He’s right. So how do we dispose of bank subsidies?

Well it’s easy. In fact the way to do it is set out in three hundred words below (in contrast to the thousands of pages of Dodd-Frank and Basel III which fail to solve the problem). And, the system set out below has an additional bonus: it makes SUDDEN bank failures impossible.

Obviously any poorly run firm should be allowed to ultimately fail, but it’s the SUDDEN failures or RUNS ON banks that are the big problem. Anyway, the solution is as follows.

Bank creditors (depositors in particular) have to choose between two types of account. First there are checking or transaction accounts. Money in those accounts is NOT LOANED ON or invested. It’s lodged in a 100% safe fashion (e.g. at the central bank). And that means no interest for those depositors.

Second, depositors can put some of their money into accounts where the relevant money IS LOANED ON or invested.  Those “investment accounts” pay interest because the relevant money is being used. Moreover, depositors choose what’s done with their money. For example they could go for safety: e.g. have their money put into mortgages where the mortgagor had a minimum equity stake of say 20%. Or they could choose something more risky.

Next, the VALUE OF the stakes that depositors have in safe mortgages (or whatever they’ve chosen) varies with the value of the underlying assets (e.g. the mortgages). In essence, depositors buy into a mutual fund. Indeed Laurence Kotlikoff, one of the several people advocating this system, explicitly advocates mutual funds in this connection.
The net result is that there is no reason for any bank subsidy. The taxpayer WOULD STAND BEHIND transaction accounts, but since no risk is taken with the money deposited, there is minimal taxpayer exposure.

As to investment accounts or mutual funds, if a particular fund makes silly loans or investments, then all that happens is the value of stakes in the fund falls, just as it does at present when a mutual fund makes silly decisions. Those with stakes in the fund have little reason to run, in the same way as there wasn’t a catastrophic run on BP shares after the recent Gulf oil spill. And even if there is a run on a hundred mutual funds, that doesn’t have systemically disastrous results. As Mervyn King put it, “a sharp fall in equity values” does not “cause the same damage as a banking crisis”.

As to the impossibility of sudden bank failure under this system, George Selgin explained the reason very neatly. He said, “For a balance sheet without debt liabilities, insolvency is ruled out.”.

And that’s it. The solution in just over 300 words. And if you want to see the same solution set out by someone else, try this Bloomberg article by Matthew Klein, or this WSJ article by John Cochrane.

— Ralph Musgrave

Ralph Musgrave — Werner versus Kotlikoff on Full Reserve Banking

Ralph compares and contrasts Laurence Kotlikoff and Richard Werner on full reserve and finds it a draw with respect to advantages and disadvantages.

Ralphonomics
Werner versus Kotlikoff
Ralph Musgrave

Laurence Kotlkoff is insane!

Watch and enjoy as I skewer Boston University Economics Professor(seriously?) Laurence Kotlikoff.

Fed "prints" $29 trillion. Dollar goes up!!

Peter Schiff, where are you?

Jimmy Rogers, are you awake?

Marc Faber, hello??

Laurence Kotlikoff, Ken Rogoff, Standard & Poor's, where have you all gone???

Ron Paul????

Rick Santelli?????

So we now find out, thanks to researchers at the UMKC, that the Fed "printed" over $29 trillion in the past three years (see prior post) and the dollar went...up???

Don't believe me? Have a look see:

So where have all these dollar bears gone? Why isn't anybody calling them out??

Their bogus dogma about "money printing" and "currency debasement" is about as flat as all the flat world theorist claims 500 years ago.

Time to wake up and relegate these clowns to the dustbin of failed economic theories. Time for everyone to get on board with MMT.

Oh yeah, I forgot to mention...Treasuries surged over that course of time!