Monday, September 24, 2018

Stephanie Kelton and Noah Smith — Just When Should We Start Worrying About Deficits?

Stephanie and Noah debate.

Bloomberg Opinion
Just When Should We Start Worrying About Deficits?
Stephanie Kelton and Noah Smith


Konrad said...

Just When Should We Start Worrying About Deficits?

“The U.S. is racking up record debt. It feels great now, but someday the tab will come.”

Bloomberg falsely equates the public federal debt (which is trivial) with private debt (which is destroying the USA).

The purpose of this fraud is to justify inequality.

“Yes the oligarchs are enslaving you, but slavery is your only protection from the national debt crisis. If you had freedom and prosperity like rich people have, it would destroy the world.”

Joe said...

Sectoral balances front and center as it should be. Good job!
Was Noah being deliberately thick, or did I misunderstand what he was saying? Not seeing the relevance of the sectoral balances, would you rather have $10000 more at the end of the year than you started the year with or $10000 less? Year after year? Would that impact any of your spending and investment decisions or your quality of life?
It's almost too obvious to require comment.

AXEC / E.K-H said...

Stephanie and Noah ― economics at the intellectual zero lower bound
Comment on Stephanie Kelton/Noah Smith on ‘Just When Should We Start Worrying About Deficits?’

This is the point at issue: “The Congressional Budget Office just said it expects the deficit to top $1 trillion in 2019, a record. Should we be worried?”

This is an open invitation for Stephanie Kelton to enthusiastically push the agenda of the oligarchy:#1

• “What I find interesting is … the fact that Republicans added roughly $2 trillion in stimulus at a time when nearly everyone said it shouldn’t be done, citing proximity to full employment. ‘You don’t do stimulus at full employment,’ was basically the argument. Well, here we are well into the experiment and ... what’s the problem? Inflation remains in check, unemployment has ticked down a bit further, small business confidence is at a 45-year high and growth has accelerated.”

• “And, as you note, they helped without raising inflation, which tells me they didn’t overstimulate, which further tells me there may be room to do even more. Tax Cuts 2.0, anyone?”

• “And so while critics use terms like, ‘blowing up the deficit’ or ‘drowning in red ink’ to describe what’s happening to the government’s finances, Republicans seem more interested in the fact that their deficits will improve the private sector’s finances, especially the biggest corporations and wealthiest people in America. In other words, the GOP seems to understand that the government’s red ink is our black ink!”

• “The most intuitive way to show this is through the sector financial balances. This becomes clear if you listen to Hatzius explain why he thinks sector-balance analysis can send a signal when the private sector’s financial positions are becoming overly fragile. And because it’s nothing more than accounting, it also tells us that the crowding-out story is 100 percent wrong — a government deficit raises private sector incomes; it doesn’t crowd out private finance.”#2

The economic blunder/fraud is in the reference to MMT’s balances equation and in the assertion “the government’s red ink is our black ink.” No, it is not OUR black ink but THEIRS = the oligarchy’s black ink.#3

Noah Smith does not spot the lethal fault is Stephanie Kelton’s argument and merely waves with the inflation red-herring: “It seems like you’re agreeing with me that accelerating inflation is a risk of deficits. The question is whether that would come slowly or quickly.”

What, then, is the lethal fault is Stephanie Kelton’s argument? Fact is:

• The MMT balances equation, i.e. (I−S)+(G−T)+(X−M)=0, is provably false.#4

• Neither Stephanie nor Noah ever mentions the profit effect of deficit-spending/money-creation.#5

• From the scientifically correct Profit Law Qm=Yd+(I−Sm)+(G−T)+(X−M) follows Public Deficit = Private Profit.#6

• Therefore, MMT economic policy ultimately boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.

MMT is failed/fake science#7 and the proponents of MMT in general and Stephanie Kelton, in particular, are stupid/corrupt agenda pushers.

Egmont Kakarot-Handtke

#1 MMT: So-called Progressives as trailblazers for Trumponomics

#2 MMT = Modern Monetary Trash

#3 MMT and the single most stupid physicist

#4 Down with idiocy!

#5 Why the MMT benefactors of humanity never talk about profit

#6 Keynes, Lerner, MMT, Trump and exploding profit

#7 For the full-spectrum refutation see cross-references MMT

Ralph Musgrave said...

Konrad, Another flaw in the "tab will come in" idea is that the UK's debt/GDP ratio declined from about 250% in 1945 to about 50% in the 1990s, but according to the second chart of an article by Roger Farmer (link below) none of that debt was "repaid" in the normal sense of the word repay. That is, the decline in the latter ratio took place entirely because of two factors; 1, inflation which eats away at the real value of the debt, and 2, increased GDP.

Matt Franko said...

Much being spent in buybacks:

“$SPX Q2,’18 buybacks tick up to $190.6B, setting new record, as Y/Y up 58.7%, half up 49.9% Y/Y; EPS tailwind increases, as buying supports stocks; expect continuation for the rest of 2018”

Ralph Musgrave said...

In the para starting “Why should we care…” Noah Smith claims it is private sector “gross debts” that matter, thus a private sector surplus (thanks to a government deficit) is irrelevant.


Private sector gross debts in terms of dollars will be at least ten times what they were just after WWII. Do we face disaster because of that? Obviously not.

Alternatively, if he’s referring to gross debts as a % of GDP, then clearly gross debts are not influenced by a private sector surplus. But that amounts to saying that if the typical household or firm has for the sake of argument assets which exactly equal its debts, it is not going to regard itself as better off when it receives $X as a result of the government deficit!

Personally, if my assets exactly equalled my debts, and I got a check from some sugar daddy, I would be LESS WORRIED (silly me) than prior to receiving the check. And I’d be LESS inclined to take part in any stock market panic or debt deflation panic.

AXEC / E.K-H said...

Ralph Musgrave

Noah Smith asked rhetorically ‘Just When Should We Start Worrying About Deficits?’

Stephanie Kelton answers with the MMT refrain don’t worry, be happy. You parrot her with: “Personally, if my assets exactly equalled my debts, and I got a check from some sugar daddy, I would be LESS WORRIED (silly me) than prior to receiving the check.”

So, nothing to worry about except that what is unfolding in the grand political Circus Maximus is ― to use Stephanie Kelton’s words ― “one of the greatest cons ever perpetrated on the American people.”#1

The facts to worry about are:

• With their plea for deficit-spending/money-creation, Stephanie Kelton, her MMT colleagues, and the social media sales trolls push the agenda of Wall Street.#2

• MMTer claim to promote the cause of WeThePeople (care for jobs, health, education, social cohesion, public infrastructure, environment, etcetera). These issues, though, are abused as talking points and door openers. MMTer call themselves Progressives but de facto undermine the genuine social grassroots movements.#3, #4, #5

• In the Stephanie-Noah fake debate on Bloomberg, Stephanie Kelton does not talk any longer about her care for humanity but straightforwardly pushes for the next round of MMT deficit-spending/money-creation: “Tax Cuts 2.0, anyone?”

• Academic economics has entirely abandoned scientific standards and integrity. Not only MMTers have become full-time media clowns and useful political idiots. Academia, too, has become a failed institution.

• Economically, the point to worry is that the US economy will drop dead as soon as the growth of public and private debt slows down and eventually reverses. The axiomatically correct Profit Law says: increasing debt ⇒ macroeconomic profit up, decreasing debt ⇒ macroeconomic loss up. To this day, we have only experienced the first half of the debt story.

Egmont Kakarot-Handtke

#1 MMT = Modern Monetary Trash

#2 MMT and the promotion of Wall Street socialism

#3 MMT and grassroots movements

#4 Political economics: Who hijacks British Labour?

#5 MMTers are NOT Friends-of-the-People