An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Saturday, November 3, 2018
David McCann — ‘The Federal Government Does Not Need Revenue’
Good article on MMT. It's essentially a short lecture by Stephanie Kelton. She is very articulate.
Falsely claiming that the U.S. government’s debt is a “ticking bomb” is always a good way to get people’s attention. It gets you interviews on corporate media outlets. It makes you seem like an “expert.”
Chicken Little: “The sky is falling!” The masses: “He must be an expert.”
”Kelton said that what she’s trying to do is ‘get us to the point where we can open a nice bottle of wine, read the headline that the national debt is at an all-time high, and feel at peace with the world. Because there is no reason to panic’.”
WHOA! There is reason to panic, because of private debt, which is growing exponentially, and which is destroying the UK and USA. When the U.S. and U.K. governments bailed out the banks, consumer and business debts were left in place. If the government had allowed the criminal banks to collapse from their own fraud, then the debts would have been wiped out. I recommend that everyone read the article below by Michael Hudson…
“One thing a country should absolutely not do, according to Kelton, is aggressively try to pay down its debt.”
True, as long as the government’s debt is denominated in the government’s own currency.
“When the government was running a surplus in the latter days of the Clinton Administration and began to pay down debt, ‘look what happened to the private sector’s financial position. It went deeply into the red’.”
Hold on. It is true that the U.S. government ran a budget surplus during the last four years of the Clinton regime. $69.3 billion in FY 1998, $126 billion in FY 1999, $236.2 billion in FY 2000, and $128 billion in FY 2001.
So, over four years, the U.S. government sucked $559.5 billion out of the U.S. economy.
However that money was effectively destroyed. It was not used to “pay down the debt.” The “national debt” consists of money deposited in Fed saving accounts. In return for your deposit, you get a T-security, which has a maturation date. The date is not affected by a deficit or surplus in the U.S. government's budget.
“For Kelton, the ‘how to pay for it’ question is a huge, destructive missed opportunity.”
It’s not a “missed opportunity.” It’s a lie. But I suppose that the peasants are more willing to listen to the truth when they hear that a lie is merely a “missed opportunity.”
I scanned the reader comments below the article. Most are idiotic. (Who knew that Franko had so many clones?)
”Kelton said that what she’s trying to do is ‘get us to the point where we can open a nice bottle of wine, read the headline that the national debt is at an all-time high, and feel at peace with the world. Because there is no reason to panic’.” That is the thing about MMT there is no reason to panic if the national debt is at an all time high but they don't recognize the fact that it depends on who is benefitting from that high. If all that debt goes into the financial sector instead of the real economy then I believe that there is a reason to panic because asset prices are increasing while the real economy is shrinking. The national debt is at an all time high and so is the DOW but homelessness is increasing, the private debt is increasing, yet wages aren't. How can anyone think there is no reason to panic? I guess that you could say all we have to do is spend a few more trillion on the military and that will increase the national debt and we will all be better off.
There is never a reason to panic based on national debt. MMT is right on that. All other issues which may end up as national debt may be something to be concerned about but not national dept itself.
I am not saying that the concern should be the size of the public debt. I am saying that there should be a huge concern with who controls that debt. If the money created by that debt is in assets instead of the productive economy then it simply adds to the cost of the real economy thus harming it instead of benefitting it. Simply increasing the size of the public debt is ridiculous if the money goes to finance.
You continue conflating issues. Public debt is not something to worry about no matter what. It’s what causes the debt that is of intrest. It can be good it can be bad.
Falsely claiming that the U.S. government’s debt is a “ticking bomb” is always a good way to get people’s attention. It gets you interviews on corporate media outlets. It makes you seem like an “expert.”
ReplyDeleteChicken Little: “The sky is falling!”
The masses: “He must be an expert.”
”Kelton said that what she’s trying to do is ‘get us to the point where we can open a nice bottle of wine, read the headline that the national debt is at an all-time high, and feel at peace with the world. Because there is no reason to panic’.”
WHOA! There is reason to panic, because of private debt, which is growing exponentially, and which is destroying the UK and USA. When the U.S. and U.K. governments bailed out the banks, consumer and business debts were left in place. If the government had allowed the criminal banks to collapse from their own fraud, then the debts would have been wiped out. I recommend that everyone read the article below by Michael Hudson…
https://www.counterpunch.org/2018/11/02/rescuing-the-banks-instead-of-the-economy/
“One thing a country should absolutely not do, according to Kelton, is aggressively try to pay down its debt.”
True, as long as the government’s debt is denominated in the government’s own currency.
“When the government was running a surplus in the latter days of the Clinton Administration and began to pay down debt, ‘look what happened to the private sector’s financial position. It went deeply into the red’.”
Hold on. It is true that the U.S. government ran a budget surplus during the last four years of the Clinton regime. $69.3 billion in FY 1998, $126 billion in FY 1999, $236.2 billion in FY 2000, and $128 billion in FY 2001.
So, over four years, the U.S. government sucked $559.5 billion out of the U.S. economy.
However that money was effectively destroyed. It was not used to “pay down the debt.” The “national debt” consists of money deposited in Fed saving accounts. In return for your deposit, you get a T-security, which has a maturation date. The date is not affected by a deficit or surplus in the U.S. government's budget.
“For Kelton, the ‘how to pay for it’ question is a huge, destructive missed opportunity.”
It’s not a “missed opportunity.” It’s a lie. But I suppose that the peasants are more willing to listen to the truth when they hear that a lie is merely a “missed opportunity.”
I scanned the reader comments below the article. Most are idiotic. (Who knew that Franko had so many clones?)
”Kelton said that what she’s trying to do is ‘get us to the point where we can open a nice bottle of wine, read the headline that the national debt is at an all-time high, and feel at peace with the world. Because there is no reason to panic’.” That is the thing about MMT there is no reason to panic if the national debt is at an all time high but they don't recognize the fact that it depends on who is benefitting from that high. If all that debt goes into the financial sector instead of the real economy then I believe that there is a reason to panic because asset prices are increasing while the real economy is shrinking. The national debt is at an all time high and so is the DOW but homelessness is increasing, the private debt is increasing, yet wages aren't. How can anyone think there is no reason to panic? I guess that you could say all we have to do is spend a few more trillion on the military and that will increase the national debt and we will all be better off.
ReplyDeleteThere is never a reason to panic based on national debt. MMT is right on that. All other issues which may end up as national debt may be something to be concerned about but not national dept itself.
ReplyDeleteI am not saying that the concern should be the size of the public debt. I am saying that there should be a huge concern with who controls that debt. If the money created by that debt is in assets instead of the productive economy then it simply adds to the cost of the real economy thus harming it instead of benefitting it. Simply increasing the size of the public debt is ridiculous if the money goes to finance.
ReplyDeleteYou continue conflating issues. Public debt is not something to worry about no matter what. It’s what causes the debt that is of intrest. It can be good it can be bad.
ReplyDelete