So much ink has been spilled for so long on the national debt, it might be nice if that $22 trillion plus on the red side of the US balance sheet just didn't really matter.
That's exactly the thinking behind a new school of economic theory that the government should be spending more, not less.…
But people like Stephanie Kelton, Sanders' economist in 2016, a professor at Stony Brook University, and a proselytizer for this view toward currencies and national economies, argues that the government essentially prints money each time it authorizes new unpaid for programs and that it hasn't hurt the economy by causing runaway inflation.
We asked her for her her thoughts on the national debt as it approaches $22 trillion. That exchange is below:CNN Politics
Debt? What debt? At $22 trillion, here's the argument the national debt doesn't matter
Z. Byron Wolf
See also at Twitter
I am a fiscal conservative and I governed that way. I spent an hour and a half with Stephanie Kelton. She may be on to something. She is not a “socialist” or an ideologue. She is a very smart economist with a new way of looking at a big problem. I’d like to hear from others here. https://t.co/ym8E9Ytbff
— Howard Dean (@GovHowardDean) January 13, 2019
7 comments:
The National Debt is not the problem per se but that it, the inherently risk-free debt of the monetary sovereign, yields more than ZERO percent MINUS overhead costs.
Not only that but POSITIVE yields/interest on the inherently risk-free debt of the monetary sovereign constitute welfare proportional to account balance, i.e. welfare for the banks and the rich.
But what does ethics have to do with anything, eh Progressives? As you stumble from one pragmatic "solution" to another?
Right-wingers falsely condemn MMT as “socialist” in order to make average peasants support neoliberalism.
In reality, MMT is no more “socialist" than is the theory of relativity or the theory of aerodynamics.
“The national debt is nothing more than a historical record of all the dollars that were spent by government but not taxed back.” ~ Stephanie Kelton
Wrong. The national debt is the amount of money currently deposited in Federal Reserve savings accounts. People deposit this money when they buy Treasury securities. At least half of security purchases have been by various federal agencies.
The deposits are called a “debt” because depositors temporarily lend their money to the Fed when they buy T-securities. (All banks are in debt in an amount that equals their deposits.)
This has nothing to do with the US government’s ability to keep spending with money created out of thin air by the crediting of bank accounts.
Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
Comment on Z. Byron Wolf on ‘Debt? What debt? At $22 trillion, here’s the argument the national debt doesn’t matter’*
Stephanie Kelton argues: “When the government spends more than it collects in the form of taxes (and other payments), we label it ‘deficit spending.’ But that’s only part of the story. To complete the picture, suppose the government spends $100 into the economy but only taxes $90 back out. The result is a surplus equal to $10 that shows up somewhere in the non-government part of the economy. In other words, the government’s ‘red ink’ becomes our ‘black ink.’ Their deficits are our financial surpluses. So where does the ‘debt’ come into play? Whenever the government runs a deficit, it sells government bonds called U.S. Treasuries. This is usually referred to as ‘borrowing,’ but that’s actually misleading. What’s really happening is that the government is allowing people to trade in their dollars for a bond that pays some interest. A pretty good deal if you happen to be lucky enough to hold some of that $22 trillion.”
Indeed. The government’s ‘red ink’ becomes our ‘black ink.’ We are the lucky ones, WeThePeople, right? Wrong!
Macroeconomics gives one this balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0 which reduces to Q=(G−T) which says that macroeconomic profit Q (= black ink) is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment.
Stephanie Kelton’s provably false MMT balances equation reads (X−M)+(G−T)+(I−S)=0, which reduces to S=(G−T) which says “a surplus S shows up somewhere in the non-government part of the economy” (= black ink) which is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment.
Note that the business sector’s profit Q becomes “a surplus somewhere in the non-government part of the economy” S.
In other words, the government’s ‘red ink’ becomes [our] their ‘black ink’ i.e. [our] = [WeThePeople] is corrected to their = WeTheOligarchy.#1, #2
MMT’s Stephanie Kelton is a political fraudster.#3
Egmont Kakarot-Handtke
* CNN politics
https://edition.cnn.com/2019/01/13/politics/debt-spending-mmt/index.html
#1 MMT and the single most stupid physicist
https://axecorg.blogspot.com/2018/09/mmt-and-single-most-stupid-physicist.html
#2 Down with idiocy!
https://axecorg.blogspot.com/2017/12/down-with-idiocy.html
#3 The Kelton-Fraud
https://axecorg.blogspot.com/2018/07/the-kelton-fraud.html
“The national debt is nothing more than a historical record of all the dollars that were spent by government but not taxed back.” ~ Stephanie Kelton [bold added]
Wrong since Interest on Reserves (IOR), for example, also creates sovereign debt, i.e. it creates bank reserves.
Or is fiat creation by the Central Bank for the private sector now to be considered "government spending", Ms. Kelton?
Do not feed the troll AXEC.
Hey, Egmont, Bill Mitchell and Stephanie Kelton says that the Government doesn't have to issue bonds to raise money. In fact, Bill Mitchell says it's an unfair give away to the rich. Well, we know that issuing bonds has a function - to set overnight interest rates, and take money out of the economy to fight inflation, etc.
Now, if a government deficit spends a million a month on a hospital without taxing it back, then that million will filter out into the economy when the hospital staff buy goods and services. Other companies will supply the goods and services and may expand, also, their staff will spend their wages promoting more growth.
Eventually, the oligrchs, who run many of the large corporations, will get some of that money, and maybe most of it in the end, when they supply goods and services. Now what's wrong with them capturing the money when they supplied these goods and services?
You say the oligarchs capture the when the government issues bonds, but what if they spent the money instead on infrastructure, schools, healthcare, etc? That's not a free give away to the rich, even if they provide much of the goods and services?
Well, we know that issuing bonds has a function - to set overnight interest rates, and take money out of the economy to fight inflation, etc.
KV
Interest rates in fiat are artificially low since only banks may use fiat except for mere physical fiat, aka "cash", and because of other privileges for banks that favor the use of private bank deposits over the Nation's fiat.
So, to compensate for privileges for the banks, the government provides WELFARE for the banks to raise interest rates!?
If the present banking model weren't so unjust and dangerous, it should be a laughing stock for being such a kludge of unprincipled "fixes."
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