Posted by Warren Mosler, new "guest blogger" on Mike Norman Economics!
Mosler critiques an excerpt from a recent, John Mauldin piece. (Mauldin is severely out of paradigm. I don't read his stuff at all anymore!)
THIS IS THE PROBLEM- NO ONE SEEMS TO UNDERSTAND THE MONETARY SYSTEM:
Where do we find the money?
Obviously, governments may buy a portion of these bonds themselves, but they cannot afford more than a fraction of the total unless they want to challenge Mugabe as the ultimate master of illusion.NO, THE 'FUNDING' OF THE BONDS HAS NOTHING TO DO WITH INFLATION. THE SPENDING IS AN INFLATIONARY BIAS, IN THIS CASE MEANT TO FIRST STOP THE CURRENT FORCES OF CONTRACTION.
Neither should investors hold out for sovereign wealth funds to do the dirty work. As is clear from chart 9, the total amount of wealth accumulated in these funds is pocket money when compared to the projected bond issuance over the next few years.
Hence it comes down to the price at which governments can attract sufficient demand from people like you and me.
NO, THE GOVERNMENT SETS ITS OWN INTEREST RATE. JUST LOOK AT JAPAN. MORE THAN DOUBLE THE DEBT OF THE US FOR DECADES AND RATES NEAR 0 THE ENTIRE TIME. AND THAT'S AFTER BEING DOWNGRADED TO WAY BELOW INVESTMENT GRADE.
One of two things may happen. Either this crisis will ignite such a bout of deflation that investors will happily own government bonds yielding 2-3% or the deflation scare goes away ultimately, the global economy recovers and bond investors demand much higher yields for taking sovereign risk.
NO SUCH THING FOR A GOVT THAT ISSUES ITS OWN NON CONVERTIBLE CURRENCY
I am not yet sure which scenario will prevail, but I do know that both are quite bad for equities longer term. Take your profits!
THAT PART MAY BE RIGHT!
Niels C. Jensen
similar to the folks who say that your bank deposits are instantly loaned out to folks
ReplyDeletei wonder if people think that the so called liar loaners who got into houses they could not afford
actually were given other peoples' deposits to achieve this - via the banker man.
again, liar loaners represented only 100 to 200 billion which the free market would have been able to mop up given that their loans were not collaterized, bundled and derivativized ... by a factor of 30 to 1.
so the misnomer that tax payers are on the hook and that our deposits were/are for the loans is actually a smoke screen for the real trickery that went on - our banks were not acting as banks,
and our loans were not loans.
that our deposits were loaned out to liar loaners or whichever loan - is the inversion of what happened
Not !
our loans were deposited out of our banks !!!
that our tax payers are/were on the hook for spending stimulus ?
Not !
the hooks are/were spending stimulus on the tax payers !!!
a perfect Hegelian predicate that no one is protesting to a real degree ?