Harje Ronngard — She's Not Serious…Is She?

What happens when a business runs at a loss?

If it happens for long enough, eventually it’ll go bust.

So why should it be any different for the government?

Doh. Another Johnny-come-lately who still hasn't heard that the government is the currency issuer and that everyone that uses the currency must obtain it ultimately from the issuer as the monopoly provider.

Therefore, currency users are financially constrained, whereas a government that is sovereign in its currency is not constrained financially. Since the government is the currency issuer, it can always meet its obligations denominated in that currency.

The constraint on such governments is not financial but real. The constraint is the availability of real resources priced in the currency that the government issues. This implies that the government can always purchase and deploy idle resources without affecting prices.

However, if the government competes with the private sector for real resources in markets, then prices will adjust to what the government offers. This can increase market prices of scarce goods unless production increases to meet the higher demand.

MoneyMorning (Australia)
She's Not Serious…Is She?

Harje Ronngard

Bill Mitchell – The government is not a household and imports are still a benefit

A key post on MMT. Plus, it is short.

Bill Mitchell – billy blog
The government is not a household and imports are still a benefit
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Simon Wren-Lewis — Why was austerity once so popular?

A pretty good one. It argues indirectly for the need to educate voters that the currency issuer is the mirror image of the currency users, so their accounting statements are complementary rather than similar. Government deficits are non-government income and government debt is non-government net financial wealth in aggregate.

Mainly Macro
Why was austerity once so popular?
Simon Wren-Lewis | Professor of Economics, Oxford University

Neil Wilson — "How The Government’s Super-Platinum Credit Card Works"

 

Excellent simple explanation of why the government as household or firm is wrong.

Modern Money Matters
"How The Government’s Super-Platinum Credit Card Works" in Modern Money Matters

Neil Wilson

Steve Cecchetti and Kim Schoenholtz — Donald Trump, Treasury Debt and the Dollar

Mr. Trump appears to assume that his sensibilities as real estate mogul and dealmaker can be directly applied to government debt management policy. They cannot. Treasury securities bear absolutely no resemblance to the debt issued by Trump Entertainment Resorts, which went bankrupt in 1991, 2004, 2009, and 2014.…

In this post we will make two points. First, the United States benefits tremendously from its ability to issue Treasury securities at low cost regardless of financial conditions. This benefit is inextricably tied to the role of the U.S. dollar as the world’s reserve currency. Second, candidate Trump’s statements risk undermining investor confidence in U.S. debt. It is no exaggeration to say that the sudden loss of these safe assets, and of the privileged reserve status of the dollar, would be a disaster for the country and the world.…

Money & Banking

Donald Trump, Treasury Debt and the Dollar
Steve Cecchetti and Kim Schoenholtz

Stephen G. Cecchetti, Brandeis International University and Kermit L. Schoenholtz, Stern School of Business, New York University, are co-authors of Money, Banking, and Financial Markets, 4/e.

ModernMonetaryTheorist — Implications Of Trump's Statement 'U.S. Can Print Money'

Summary

• Presumptive Republican Nominee Trump has set off a firestorm economic debate declaring "United States government. First of all, you never have to default because you can print the money.".
• Trump introduces the key tenant of Modern Monetary Theory into the economic debate. The key part theorizes sovereign nations that borrow in own currency should spend to boost their economy.
• As this debate widens, it will spill into the gold markets as some people falsely fear the U.S. may kick off a bout of hyper-inflation if Trump wins the Presidency.

Seeking Alpha
Implications Of Trump's Statement 'U.S. Can Print Money'
ModernMonetaryTheorist

Yves Smith — Investment Manager GMO Debunks Mythology of “Sound Finance,” or Deficit Hawkery

Word is getting around. The last mile continues to close. GMO is not the Bank of England, but it is influential in financial circles.  This will be widely read.

Naked Capitalism
Investment Manager GMO Debunks Mythology of “Sound Finance,” or Deficit Hawkery
Yves Smith

Chris Dillow — "The country can't afford"

What's going on here? Part of the answer is that Osborne is perpetuating an error which the Tories - and indeed journalists - have been committing for years: he is equating the government's finances with the nation's. Mr Cameron did just this when he justified the cuts to tax credits by speaking of a "need to get on top of our national finance."

But straitening that out isn't going to do it either. The reasoning isn't economics at basis. Being political, it is moral. It's the old conservative refrain that some are better than others.

I fear, though, that what we're seeing here isn't just a neutral intellectual error. In defining the country and the nation to exclude the low paid, the Tories can create the illusion that the interests of the worst-off are not part of the national interest. This is an old trick of the ruling class. Here's C.B. Macpherson describing 17th century attitudes:

The Puritan doctrine of the poor, treating poverty as a mark of moral shortcoming, added moral obloquy to the political disregard in which the poor had always been held...Objects of solicitude or pity or scorn and sometimes of fear, the poor were not full members of a moral community...But while the poor were, in this view, less than full members, they were certainly subject to the jurisdictions of the political community. They were in but not of civil society. (The Political Theory of Possessive Individualism, p226-27)

Jeremy Hunt's claim that tax credit recipients lack self-respect and dignity echoes this. 

In this way, Osborne's rhetoric serves to create an illusion that the interests of the poor are antagonistic to the "national interest".

Same moral reasoning at work in the USA. It's a key reason why capitalism as the (conservative) rule of the ownership class is unworkable and needs to be jettisoned for socialism as government of the people, by the people and for the people.

Stumbling and Mumbling
"The country can't afford"
Chris Dillow | Investors Chronicle