| "As long as the rest of the world is willing to lend us their savings so cheaply, we'd be wise to use it to rebuild our crumbling infrastructure and our schools and parks - and thereby put more Americans back to work - rather try to cut the deficit too much and too soon." |
Feel free to comment. I've already said enough.
As a hypothetical, what would happen if China decided to sell all of it's Tresuries?
ReplyDeleteWould price for Tresuries go down and likewise rate of return go up?
Continuing… if China was successful, where would all their dollars go? Assuming for a moment that they didn't attempt to move them into another asset or commodited, would they simpley be moved from a "savings account" at the Fed into a "checking account" at the Fed? If so, what do we call these checking accounts?….Resevere accounts?
thanks.
Sorry.. that comment above was me. As I re-read my comment, does that phrase "if China was successful" even make sense? I guess what it should say is "assuming there were buyers for all of China's Treasuries being sold,"
ReplyDeletehttp://www.guardian.co.uk/commentisfree/2012/jun/26/robert-mundell-evil-genius-euro
ReplyDeleteGreg Palast-Robert Mundell, evil genius of the euro
For the architect of the euro, taking macroeconomics away from elected politicians and forcing deregulation were part of the plan
Right. Already posted here on June 29th.
ReplyDeleteGreg Palast — Robert Mundell, evil genius of the euro
JK,
ReplyDeleteLooks like these are the accounts at the Fed:
http://federalreserve.gov/econresdata/releases/intlsumm/usliabforinst20120831.htm
rsp,
Matt thanks for the link. So…
ReplyDeleteTheir dollars would move from row 3 to row 2?
Does row 2 comprise "Rerserve accounts" similar to what U.S. banks have? Or do foreign government not hold Reserves?
right,
ReplyDeleteLooks like from 4 or 3 transferred over into 2....
Hey.... arent you taking Forstaters class this semester?
If so, this better not be homework questions you are posting here!!! ;)
if you are taking his course he better give you an A just on principle....
rsp,
PS jk,
ReplyDeleteTake a look at all 4 pages of that Fed report for even more info...
rsp,
In other words, the Fed can buy T-bonds as fast as China could sell them. As for using the dollars to buy things... good luck with that. The President has authority to block (and even unwind) any transaction involving a foreign power. They can't buy up US farmland, corporations or coal unless the President wants them to (and since much of our foreign policy involves making oil exporters US client states, its not like China is able to buy up Saudi oil reserves).
ReplyDeleteI actually was thinking today on something worthwhile China should be allowed to buy. Apparently they offered to finance 100% of California's high speed rail project if they could operate (and equip) it. I say, double down and offer them a franchise to build out a national high speed rail system. I read a study putting the cost of a US high speed rail network at over $600 billion (Obama has budgeted, thus far, an Obamaesque $8 billion). This is not a problem, let China pay for it. If its a white elephant that bleeds cash, sucks for them. If it turns out to be one of the wonders of the world, Uncle Sam can always eminent domain it (or more productively, talk them into paying for some other crazy scheme)
off topic, but does any one have a link to the treasury redemption statements mike posts every now and then. I assume they are weekly.
ReplyDeleteReich's piece reminded me of something Michael Lind wrote yesterday, pointing out that the presidential race is between a supply side conservative (lower capital gains taxes) and a supply side liberal (more education and training).
ReplyDeletehttp://www.salon.com/2012/09/11/obamas_a_supply_sider_too/
Lind points out we have a demand problem, which can be tackled in three different ways---
demand side liberalism (revenue sharing to keep state/local employment and services intact)
demand side centrism (Reich's take here, more infrastructure please)
demand side conservatism (this is in The Donald's wheelhouse, first step to boost AD is eliminating the trade deficit).
Lind doesn't mention payroll tax cuts, perhaps because its an inherently conservative idea that, alas, is popularly seen as a liberal idea ever since Obama (half-heartedly) embraced it.
Matt, How'd you know I was in Forstater's class? Are you here at UMKC?
ReplyDeleteDon't tell Forstater… but I find myself reading and commenting here at MNE too much... while I should have my face in The Wealth of Nations FOr Forstater's class, and Marx's Capital for Erik Olsen's Political Economy :)
JK,
ReplyDeleteyou mentioned it here once IIRC.
I was in college many moons ago not now...
btw Tom here would be a good sounding board for your thoughts and observations on Smith and Marx imo.... even tho Tom is "not an economist" as he is often want to point out....
rsp,
" I say, double down and offer them a franchise to build out a national high speed rail system."
ReplyDeleteBeo,
They would parachute in grass cutters to cut lawns for $15 if we would allow them to... the magnitude of their zombie-like zealousness for obtaining control of balances of USD NFAs is unmatched in history....
Their trade policy is a form of modern day voluntary Tribute imo.
rsp,
Any investment China or other foreign entity makes in the U.S. infrastructure will only further vacuum USD balances out of the U.S.
ReplyDeleteThey would by definition be in business to make a profit, so if they succeeded it would result in a larger trade deficit.
Not a soulution for reducing the trade deficit, although it would help our investment in the future.
For us to get the USD balances back they have to buy our goods and services.
Tom here would be a good sounding board for your thoughts and observations on Smith and Marx imo.... even tho Tom is "not an economist" as he is often want to point out....
ReplyDeleteWe must remember that Smith and Marx were not economists either. There was not such thing as economics at the time. They had to invent it.
Smith and Marx were philosophers, and it is not possible to fully comprehend what they were doing without knowing their more philosophical work, — For example, Smith's Theory of Moral Sentiments and Marx's Grundrisse. They were also products of their time and need to be read in the context of that age.
Reading Smith and Marx as if they were speaking to our age "in advance" is just silly, but it is the approach that many economists take. So everything Smith said is right and everything that Marx said is wrong due to subsequent events. Nonsense.
History is dialectical and the Classicals began the discipline we now call economics. They would be appalled at the turn their work has taken and the use to which it has been put because it violates what what they were about, which is "the good life" of individuals in society, which is what philosophy has been about since the Greeks set the stage for subsequent Western thought.
Robert Reich, as I would expect, makes fewer mistakes than some of the idiots in high places. However he is still talking thru his rear end.
ReplyDeleteFirst, infrastructure projects are a dumb way of getting out of a recession because such projects usually take years to plan and get started, by which time the recession might be over.
Second, when an economy is not at capacity, what’s the point of borrowing when you can print and spend money? You’ve got to be crazy to pay anyone even 1% when you can print.
Third, where a government insists on borrowing, there is no particular reason for it to spend on infrastructure rather than on the hundred other things government spends money on just because interest rates are low (or high). E.g. why not spend the money on education, a NASA mission, the police, the military – you name it.
"We must remember that Smith and Marx were not economists either. There was not such thing as economics at the time. They had to invent it."
ReplyDeleteEconomists aren't economists either, at least 95% of them aren't. The profession is destroying the world for the rest of us and are part of the problem rather than the solution.
Economics can be split into two distinct parts…
• The production, distribution and consumption of goods and services.
• The spending machine that drives it.
One doesn't work well/at all without the other but the spending machine dominates. This is where MMT comes in.
I'm going to make the case that the production, etc. part does a pretty good job of managing itself. Natural human motivations coupled with trial-and-error leads on their own to a diverse marketplace of products both needed and wanted.
I base this on the argument that over my lifetime economics has been managed with overt incompetence, yet we have had fairly good outcomes and prosperity.
There is no doubt the system can be tweaked to provide better outcomes for all but this is not possible without the feeding the spending machine with liquidity in the right places. Re-stated, MMT rules as the framework for this part of economics.
I submit that nearly every economics department in universities across the nation and world be shut down and its professors be re-purposed to think tanks and such and treated like monks. In other words never to be seen or heard from again. Let them study for the rest of their lives the economics of belly-button lint, but keep their findings to themselves.
Leave the heterodox schools in place but require anyone teaching economics have at least a minor in engineering principles re problem solving plus a thorough understanding of thermodymics and it's implications wrt systems.
Cynical? You betcha. But I believe every word.
paul, Any investment China or other foreign entity makes in the U.S. infrastructure will only further vacuum USD balances out of the U.S.
ReplyDeleteThey would by definition be in business to make a profit, so if they succeeded it would result in a larger trade deficit.
Not a soulution for reducing the trade deficit, although it would help our investment in the future.
For us to get the USD balances back they have to buy our goods and services.
And US policy is to reverse the process so that the US in the "beneficiary."
The global economy cannot grow and prosper with this sort of attitude, which was already see amply demonstrated in the EZ with the trade imbalance there and the consequences.
My youngest daughter just moved out of the house, so my wife and I took the opportunity to clean her room and all the stuff she left in the basement. We are throwing out thousands of dollars worth of stuff "made in China". If we all did did the same thing when our kids leave, it should add up to a tidy sum. Then we just cancel their Treasuries and call it even.
ReplyDelete"And US policy is to reverse the process so that the US in the "beneficiary."
ReplyDeleteTom, yes and the "beneficiaries" are the big U.S. corporations that are also vacuuming dollars out of the economy at the expense of wage-earners.
I know you know this - I'm employing repetiton.
Gotta get those talking points out there.
We have to break the dogma that business interests are the interests of wage-earners.
What was good for GM wasn't necessarily good for Americans.
paul, What was good for GM wasn't necessarily good for Americans
ReplyDeleteI like to say that what is good for America is not necessarily good for Americans. "Good for America" is code signaling good for the elites. The people? Meh, "It will trickle down."