No austerity ever in the US anyway:
Government spending is at an all-time high. Look at federal spending by agency and make your own charts here: https://t.co/lKB2Vykiit pic.twitter.com/NLjn2XxsDY
— DownsizeTheFeds (@DownsizeTheFeds) January 3, 2018
Other harmful policies were implemented both to cause the GFC and the following slow recovery' but "austerity!" wasn't one of them...
24 comments:
Absolute amounts are usually relatively meaningless in analysis, no pun intended.
Of course GDP and government spending will track population growth. So at a minimum a per capita figure is required.
Secondly, changes in fiscal stance are about fluctuations around the mean. Even in a fairly long-run chart like this there is obvious volatility in fiscal stance.
Agreed Tom, not to mention that distribution matters. Austerity has been a real thing for many families as their services get cut and they now pay more out of pocket for some things.
I know Matt knows better. Making America great again has been wearing him out, he's fatigued and not as sharp as usual
It doesnt do any good to say that there was austerity when there wasnt any... you lose all technical credibility...
We are getting our clocks cleaned by crypto...
Here:
MMT is the Titans player and the Patriots player is crypto:
https://twitter.com/BarstoolBigCat/status/952363384888012800
We are getting LIT...UP....
https://cointelegraph.com/news/russias-ministry-of-finance-legalizes-cryptocurrency-trading-central-bank-disagrees
"The Ministry of Finance of the Russian Federation (Minfin) has presented the Digital Assets Regulation Bill which defines and establishes a regulatory system for cryptocurrencies, ICOs, mining and trading, local news agency TASS reported today Jan. 25."
There goes Russia...
Wage stagnation / decreasing purchasing power is the same net effect as austerity. High deductible health insurance is a form of austerity. Rental service monopolies (power / communication / information) are yet another. Deterioration of public infrastructure is another. The list goes on ...
"Austerity" means a tight fiscal stance. A tight fiscal stance forces more private sector borrowing to obtain units of account. Private borrowing is unsustainable over time unless the ability to pay, ultimately income, keep up with service obligations. Thus, so-called sound finance leads in the long-run to private debt becoming unsustainable, a situation that can only be addressed by loosening the fiscal stance or rising non-performance and ultimately private default.
"Private borrowing is unsustainable over time unless the ability to pay, ultimately income, keep up with service obligations. "
Tom they dont give you the loan in the first place unless you demonstrate ability to pay BEFORE you get the loan...
Minsky is 100% FOS...
Tom,
1 govt increases DTS withdrawal rate for some reason (Y2K, GWOT, wtf..) which increases income in system...
2 that income is THEN ABLE to be leveraged by depository institutions which results in increase in DTS deposit rate to eventually the point of surplus..
3 Treasury THEN takes the surplus USD balances (it doesnt "destroy dollars!") it puts the surplus USD balances in DEPOSIT accounts (creating a right side AND left side entry) in the SAME SYSTEM OF DEPOSITORY INSTITUTIONS which just created the new loan assets.... then this necessitates a systemic asset markdown of previously established assets in the system of depository institutions as the depository institutions are regulated at a FIXED ratio/coefficient of capital : ALL assets and the capital accounts are FIXED for the relevant time domain (frequency) limits of these operations...
non-risk assets go UP and capital remains FIXED then risk assets get marked DOWN in this algebraic relationship...
this is NOT a Ponzi scheme .... its just f-ed up...
Tom they dont give you the loan in the first place unless you demonstrate ability to pay BEFORE you get the loan...
Used to be the case under anti-usury laws. Now they just jack up the interest, e.g, payday lenders. Credit cards are another case in point. Banks hand out cards pretty indiscriminately and charge rates that cover anticipated defaults.
Governments do that on purpose to limit bank lending.
There is debate about this in the banking industry. Arguments are that this is too restrictive but so far the regs have not been loosened.
But governments want banks to increase capital and be more prudent in lending.
This is part of "global macroprudential policy" and macroprudential regulation that goes right up to the BIS in addressing "systemic risk."
Banks are lobbying against this since it limits their leverage, which is now they make money. They have been unsuccessful so far.
“Governments do that on purpose to limit bank lending. “
No they don’t they believe in “loanable funds”... they think giving banks more deposits leaves them with “more USDs to lend out”... they think it is bullish...
You can’t say tptb are FOS on “loanable funds” and then in the next breath say they know what is going on too... can’t have it both ways...
https://www.americanbanker.com/search?query=leverage+ratio
Abstract
This paper analyses how the Basel III leverage ratio (Tier 1 capital/exposure) behaves over the cycle. The analysis proposes a setup to test for the cyclical properties of bank capital ratios, taking into account structural shifts in banks’ behaviour during the global financial crisis and its aftermath. Using a large data set covering international banks headquartered in 14 advanced economies for the period 1995–2012, we find that the Basel III leverage ratio is significantly more countercyclical than the risk- weighted regulatory capital ratio: it is a tighter constraint for banks in booms and a looser constraint in recessions.
BIS
The leverage ratio over the cycle
Michael Brei and Leonardo Gambacorta
Well then why are we not having a typical downturn now?
When is the current stability going to create some instability?
Well then why are we not having a typical downturn now?
When is the current stability going to create some instability?
Downturns follow expansions. There has been a slow recovery from the last downturn and no big expansion other than asset appreciation owing to rising capital share.
Consumer demand is being driven by expanding credit not matched by increasing income. That is an unsustainable process.
Business Insider
US consumer debt surges by the most in over 2 years to $3.8 trillion
Christopher Rugaber, Associated Press
Jan. 8, 2018
Total debt was up 28b for the month which implies a 336b annual amount..
Mike has Treasury net withdrawals up 3% YoY on a 4.5t basis so that implies a 135b annual increase in income with no multiple...
You can easily finance 336b of assets on 135b income.... and again that is assuming no multiple on the govt spending increase...
Meanwhile as usual in an expansion we are getting an increase in tax deposits and the deficit collapsed in Dec and now we are in surplus in January... TGA has surged up to 270b....
Only If they start to put those surplus USD balances building up in the TGA back in the depositories (which they are not) will we get the usual downturn....
We know that income and wealth are increasing.
We also know the distribution. It's not increasing for the people taking on consumer debt.
Distribution is a separate issue...
You can’t even get to distributional details if you don’t understand how the system is operating ...
You can’t even get to distributional details if you don’t understand how the system is operating ...
It's no mystery how the system has been operating at least since Reagan and later ratifies by the New Democrats.
Distribution is affected by the bargaining power of labor and that has been declining. Labor share is also.
The fundamental problem with contemporary capitalism is with demand, which leads to "over-supply."
The problem with demand is not notional demand (wants) but effective demand (purchasing power). The latter is dependent on income, which affected by bargaining power.
The way the cycle is running is based on private credit supplementing incomes. Private debit expands until unsustainable by income and then contracts.
In a time of near universal surplus in terms of real goods, distribution is the only issue.
It's time for governments to step in and allocate real resources because the private sector cannot assure fair distribution. Then see the irony of self proclaimed authoritarians crying about communism.
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