Tuesday, August 1, 2017

Diane V. Nugent — Letter: Federal debt

There is a fundamental problem with The Post and Courier’s “piling on” when it comes to analyzing the federal debt. Looking at federal debt without considering the asset side of the federal government’s balance sheet makes for incomplete analysis.
One school of economic thought, the Modern Monetary Theory (MMT) crowd, would argue that there are at least as many federal assets as there are federal liabilities. But going beyond that mathematical balance, the U.S. monetary system is not tied to any standard or limitation other than those that are self-imposed. In other words, the only limitation on printing money or government deficit spending is inflation....

The Post and Courier (Charleston, SC)
Letter: Federal debt
Diane V. Nugent | President and CEO, Victoria Capital Mortgage

24 comments:

Matt Franko said...

"Looking at federal debt without considering the asset side"

NOT allowed under Modified Accrual....

Matt Franko said...

"Modified accrual accounting recognizes revenues when they become available and measurable and, with a few exceptions, recognizes expenditures when liabilities are incurred."

Checkmate!

Read more: Modified Accrual Accounting http://www.investopedia.com/terms/m/modified-accrual-accounting.asp#ixzz4oY7AR9OD
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Matt Franko said...

What is Nugent's training?

Matt Franko said...

Funny comment there from another female:

"After all, debt is only bad if you're the one stuck with it and we're leaving our debt to our children as their inheritence"

LOL!

Matt Franko said...

"the U.S. economy has experienced only two short periods of budget surplus over the past 75 years and the size of the federal debt has surged in recent years. Yet this growing “burden” has coincided with one of the great expansions of the American economy,"

Yeah 1.48% average growth over the last 8 years... what planet is this woman living on?

Kaivey said...
This comment has been removed by the author.
MRW said...

Matt,

"Looking at federal debt without considering the asset side"

NOT allowed under Modified Accrual….


Quick! You better let Warren Warren, Stephanie Kelton, Randy Wray, et al, know.

They’ve been wrong about this all this time. Save them!

MRW said...

Correction: Warren Mosler.

MRW said...

The "the great expansions of the American economy" she's talking about is the last 75 years.

Matt Franko said...

Maybe they could walk across the college green and try to talk to an academic accountant...

Instead of getting nowhere in endless conceptual arguments with other academic economists...

Firms will modify their accounting methods all the time...

And btw We've had great expansions with surpluses ... Clinton/Dems brag about it all the time...

MRW said...

Maybe they could walk across the college green and try to talk to an academic accountant...

Perhaps you didn't know that Stephanie Kelton was an accountant before she switched to economics for her Masters and doctoral work.

Matt Franko said...

Maybe Basis of Accounting is covered at the graduate level?

MRW said...

From the article: This is a key point - whether we're discussing Tsarist Russia, the Soviet Union, or present-day Russia, Russian society has never seen property-rights as morally axiomatic, or as central to its conception of freedom.

Which is probably why Putin chased Khodorkovsky across Europe in 2003 to get the Yukos shares and property back for the Russian people, and prevent him selling them to Cheney’s secret oil gang. Interesting to note that Jacob de Rothschild (who was to be part of that share purchase) managed Khodorkovsky’s holdings while he was in jail.

MRW said...

OH SHIT. Last comment in wrong thread. Sorry. I have to write this shit in a word processor because Blogger on this site won't accept returns from me. PITA.

Matt Franko said...

Here accrue this as taxes receivable on the left:

http://www.benefitspro.com/2015/06/30/total-retirement-assets-near-25-trillion-mark

Probably over 30T by now at 33% tax rate it offsets the domestic liability of USTs, the other can come from a 33% on the TIC external accounts ... "Taxes Receivable"

To do this you have propose that govt modify its Basis of accounting at the CBO/OMB ...

https://www.accountingtools.com/articles/how-to-convert-cash-basis-to-accrual-basis-accounting.html

Not rocket science.... could do it in a month...


Matt Franko said...

But the people there would have to be trained in Accounting which they are not Elmendorf and the new guy are PhD Economists and Mulvaney is Econ undergrad and went to law school...

Not the correct training/qualifications imo

MRW said...

Basis of Accounting is first year. Even a QuickBooks user has to know the difference.

MRW said...

Not the correct training/qualifications imo.

No shit.

Econ majors right up to PhD level don't have to know a damn thing about accounting or banking. A few years ago, when investigating whether Warren Mosler, et al, were correct, I canvassed some of the blogging econ PhDs to see if accountancy was part of their core requirements. MIT, Harvard, Univ Chicago, Yale grads all said no. It was an elective, and that most didn’t bother with it, too involved with their models.

MRW said...

Matt,

Discussion for the general public like Nugent’s are the overview, not the nitty-gritty detail. You’re getting verklempt over details no one cares about, or can even understand or want to understand, UNTIL they’ve grasped the overview.

The US Treasury is an Executive department, not a government “agency” no more that the State Dept is an agency. It is charged, first and foremost, with enacting the financial (fiscal) legal directives determined by Congressional appropriation. So if Congress says spend $20 billion, the US Treasury tells the Fed mark us up by $20 billion in our General Account.

Pretty basic shit. And that’s all that those who talk about the other side of the ledger are talking about. Or trying to make ordinary folk understand.

The various ”government agencies" are ‘subsets’ of the US Treasury directives to the Fed. Right there in Table III-A of the Daily Treasury Statement.

The fact of the matter is that the federal government is run on quadruple-entry accounting, not double-entry. But as Scott Fullwiler says that’s getting into the weeds for most people, and he said he hadn’t had one incoming graduate student yet who understood it.

So take a deep breath in your submarine, and stop complaining that no one understands your cockpit instrumentation readings.

MRW said...

For example, the US Post Office is a ‘government agency.” Its accounting rules are unique to it. It accrues future pension funds on its books out 75 years in the future. Reason why it claims to be broke.

Matt Franko said...

Well they have gotten nowhere in over 20+ years despite spending a bunch of "money!"...

You shouldn't dumb it down that is where the whole "govt as household" analogy comes from ...

Also the Budget process if you haven't noticed gets a lot of political attention and votes can be lost in the appropriations process because of what the budget people are asserting... it's important...

Matt Franko said...

Why are Econ phds running the CBO then?

MRW said...

Why are Econ phds running the CBO then? Beats me. Because they can? They've been wrong in their projections for 17 years that I've been paying attention.

MRW said...

Matt,

You shouldn't dumb it down that is where the whole "govt as household" analogy comes from ...

Nah. Haven’t dumbed it down enough. Household have a different ledger sheet. Assets on the left are owned by someone else until the right-side liabilities are paid off (house, car, etc.).