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Friday, April 27, 2018

John Buell — Government debt and spending


Nice précis of MMT.

Mount Desert Islander — Letters to the Editor
Government debt and spending
John Buell

6 comments:

  1. “When there’s a deficit, some of that new money can be traded in for a government bond. What’s often missed in the public debate is the fact that the money to buy the bond comes from the deficit spending itself. Stefanie Kelton [bold added]

    Only SOME of that new money can be traded in for a government bond?! Mustn't ALL new US fiat, by law, be matched by the sale of new, longer maturity US sovereign debt?

    “What isn’t missed is … government pays interest on those bonds. Lawmakers are obsessed with this line item in the budget, Stefanie Kelton

    They should be obsessed with it since the debt of a monetary sovereign, being inherently risk-free, should yield at most 0% to avoid welfare proportional to account balance. Does welfare for the rich not concern the MMT folks?

    as if it’s … taking a bigger and bigger bite out of your household budget. It isn’t. Stefanie Kelton

    Wrong. The aforementioned welfare proportional to account balance itself eats into how much the monetary sovereign may deficit spend for a given amount of price inflation and since it is non-discretionary spending, the positive interest payments on sovereign debt shall eventually (given continual deficts with no budget surpluses) consume ALL of the monetary sovereign's ability to deficit spend for a given amount of price inflation and then taxes (or price inflation) must go up.

    Unlike a household, the government doesn’t have to trim other parts of its budget to make ends meet. Congress can always create more room in the budget by adding rows or widening the columns to put more resources into education, infrastructure, defense and so on. It is purely a political decision.” Stefanie Kelton

    Except interest on the National Debt is non-discretionary unlike those other things which will eventually be sacrificed as allowable price inflation is exceeded.

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  2. FD: Had to look up “précis”....

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  3. Yeah, I wondered about using that but decided to go with it anyway.

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  4. Yeah, but how do you pronounce it without sounding hoity toity?

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  5. In Texas I think it’s pronounced ‘pree-siss”...

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