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Sunday, July 21, 2013
Zero Hedge — Michael Hudson: QE End Game Over for Our Post-Feudalistic Economy; & Mosler on MMT
A couple of decent points in there. But the fact that the Fed might have negative income, while a potential political problem, is not an economic problem.
In fact, it is the fact that the Fed has been earning positive income that should be worry. The central bank is not supposed to make money, and the economy is not helped by its making money.
If Congress had been taking advantage of those remitted earning to expand the deficit, that would be OK - the Fed earnings would just be a net transfer from one part of the economy to another. But as we know, Congress has been shrinking the deficit dramatically with fiscal cliffs, sequesters, etc.
The Austrians are gearing up for another round of "Oh my God, the government is broke!"
All the Fed has to do to reduce the amount of US govt securities it is factoring is stop buying any more and let the Treasury and the GSEs/Agencies (or what ever they are properly termed these days) redeem their securities as scheduled at face value...
If the Fed is factoring 3T and ior is 0.25% then that is $7.5B max and then the banks still have to pay depositors some fraction of that as deposit interest to maintain their banking franchises...
This is a non-issue.
The real issue is that as Dan makes the point above, we have all been conditioned to expect way more than zero interest income in the economy and now we see things like Detroit going bankrupt as they have no interest income to help with their pension payments...
I think everyone has planned for at least a 5 to 6% 10-yr rate as a long term baseline risk free rate and now with 5 years of ZIRP, the dominoes are starting to fall, Detroit may be the first...
rsp,
PS: Hudson is another loose cannon who doesnt fully understand what is really going on....
"If Congress had been taking advantage of those remitted earning to expand the deficit, that would be OK - the Fed earnings would just be a net transfer from one part of the economy to another. "
Right. The narrative is always that Fed QE policy is saving taxpayers a lot of money, but I have yet to find a dividend check from the government in my mailbox. They should pass through the Fed interest income earnings either as a tax cut or as F. Beard suggests, some kind of universal restitution checks sent out to everyone whether they pay taxes or not.
I read a bit of Conant's text and immediately realized that he has almost no idea what he is talking about, nor any real interest in understanding what he is talking about. Just another delusional so-called "libertarian".
If you are so sure, why don't you set up a debate between them so Taylor can "destroy" Warren. That would be fun to watch, probably more fun that the Murphy debate with Bob conceding Warren's points on how the existing monetary system works.
How about the same Columbia Law School venue as with Bob Murphy, if they are up for doing it again? Maybe we can get John Carney to moderate again, too, since he a good bridge between the sides. That way we can get a nice video, too. Probably have to wait until after summer break to schedule it there, but August is pretty much dead month anyway, with folks on vacation.
Taylor can email me at tom dot hickey at yahoo dot com if he is up for that. If so, I'll contact the folks at Columbia Law to see what they say. Or Taylor can let me know if he has some other suggestion.
Bob Murphy seems to be more normal and humane when he's in public and not just speaking to cult converts.
However when he gets on his blog, just speaking to like-minded extreme far-right so-called "libertarian" types, the other side sometimes comes out, albeit in a superficially nice-sounding way.
Nonetheless he's still far better, and more rational and learned, than some of the truly repellent 'individuals' who skulk around in that blog domain, such as Major Psychological Issues.
Update on the Conant-Mosler blog debate. The blog has been set up and everything is ready to go.
Taylor is just leaving on a trip overseas and probably will not have the chance to post in August. So it will be September before it begins, which is just as well since August is vacation time and people are not paying much attention.
Of course, MNE will carry the news as it develops, so stay tuned.
This comment has been removed by the author.
ReplyDeleteA couple of decent points in there. But the fact that the Fed might have negative income, while a potential political problem, is not an economic problem.
ReplyDeleteIn fact, it is the fact that the Fed has been earning positive income that should be worry. The central bank is not supposed to make money, and the economy is not helped by its making money.
If Congress had been taking advantage of those remitted earning to expand the deficit, that would be OK - the Fed earnings would just be a net transfer from one part of the economy to another. But as we know, Congress has been shrinking the deficit dramatically with fiscal cliffs, sequesters, etc.
The Austrians are gearing up for another round of "Oh my God, the government is broke!"
Agency MBS are not 'toxic waste'...
ReplyDeleteAll the Fed has to do to reduce the amount of US govt securities it is factoring is stop buying any more and let the Treasury and the GSEs/Agencies (or what ever they are properly termed these days) redeem their securities as scheduled at face value...
If the Fed is factoring 3T and ior is 0.25% then that is $7.5B max and then the banks still have to pay depositors some fraction of that as deposit interest to maintain their banking franchises...
This is a non-issue.
The real issue is that as Dan makes the point above, we have all been conditioned to expect way more than zero interest income in the economy and now we see things like Detroit going bankrupt as they have no interest income to help with their pension payments...
I think everyone has planned for at least a 5 to 6% 10-yr rate as a long term baseline risk free rate and now with 5 years of ZIRP, the dominoes are starting to fall, Detroit may be the first...
rsp,
PS: Hudson is another loose cannon who doesnt fully understand what is really going on....
"Hudson is another loose cannon who doesnt fully understand what is really going on...."
ReplyDeleteUnfortunately, you have that right.
Sheila Bair & ZeroHedge are also equally out of paradigm, in different directions
Strange Bedfellows
"If Congress had been taking advantage of those remitted earning to expand the deficit, that would be OK - the Fed earnings would just be a net transfer from one part of the economy to another. "
ReplyDeleteRight. The narrative is always that Fed QE policy is saving taxpayers a lot of money, but I have yet to find a dividend check from the government in my mailbox. They should pass through the Fed interest income earnings either as a tax cut or as F. Beard suggests, some kind of universal restitution checks sent out to everyone whether they pay taxes or not.
Thanks for the links to Taylor Conant's total evisceration of Mosler.
ReplyDeleteFor the opposite side of MMT, please see the Refutation of Mosler Economics series at EPJ: Part I, Part II, Part III, Part IV,
http://conant.economicpolicyjournal.com/2010/10/refutation-of-mosler-economics-and.html
The battle is over. MMT has lost.
according to a demented ideologue who has zero interest in reality.
ReplyDeleteBob,
ReplyDeleteDo the austrian people have a solution to the problems going on up there in Michigan/Detroit?
Bad scene up there...
rsp,
I read a bit of Conant's text and immediately realized that he has almost no idea what he is talking about, nor any real interest in understanding what he is talking about. Just another delusional so-called "libertarian".
ReplyDeleteThe battle is over. MMT has lost.
ReplyDeleteIf you are so sure, why don't you set up a debate between them so Taylor can "destroy" Warren. That would be fun to watch, probably more fun that the Murphy debate with Bob conceding Warren's points on how the existing monetary system works.
Taylor Conant informs me:
ReplyDelete"I'd debate Mosler any day."
I think he'd probably just shout things at Mosler, rather than debate him.
ReplyDeleteI emailed Warren with Taylor's OK.
ReplyDeleteWarren responded, "Set it up! Thanks."
How about the same Columbia Law School venue as with Bob Murphy, if they are up for doing it again? Maybe we can get John Carney to moderate again, too, since he a good bridge between the sides. That way we can get a nice video, too. Probably have to wait until after summer break to schedule it there, but August is pretty much dead month anyway, with folks on vacation.
Taylor can email me at tom dot hickey at yahoo dot com if he is up for that. If so, I'll contact the folks at Columbia Law to see what they say. Or Taylor can let me know if he has some other suggestion.
Bob Murphy seems to be more normal and humane when he's in public and not just speaking to cult converts.
ReplyDeleteHowever when he gets on his blog, just speaking to like-minded extreme far-right so-called "libertarian" types, the other side sometimes comes out, albeit in a superficially nice-sounding way.
Nonetheless he's still far better, and more rational and learned, than some of the truly repellent 'individuals' who skulk around in that blog domain, such as Major Psychological Issues.
The Conant-Mosler debate is on. Both say they prefer a written format, and that is now in the works. Details will follow as they are agreed upon.
ReplyDeleteUpdate on the Conant-Mosler blog debate. The blog has been set up and everything is ready to go.
ReplyDeleteTaylor is just leaving on a trip overseas and probably will not have the chance to post in August. So it will be September before it begins, which is just as well since August is vacation time and people are not paying much attention.
Of course, MNE will carry the news as it develops, so stay tuned.