What Bob Adelmann doesn't seem to get is that government spending adds to GDP and if GDP and the debt grow at the same rate, then the debt to GDP ratio remains the same. There is a multiplier, however, and if the multiplier is greater than 1, then the ratio decreases (GDP goes up more than debt), while if the multiplier is less than 1, the ratio increases (debt goes up more than GDP). The focus therefore should be on the multiplier if one evaluates growth as the priority and assumes that GDP reflects growth more or less accurately. But growth really the issue?
Moreover, Bob Adelmann does not understand the concept of aggregate net financial assets. When the government spends it creates reserve balances for banks on the Fed's spreadsheet (M0 grows). The banks then credit customer deposit accounts (M1 increases). The liability is therefore the government's and the asset is owned by the private sector.
If the private sector wishes to save in "safe assets," it can purchase default risk-free securities from the government. Purchase of government securities transfers funds from customer deposit accounts to government securities, which the respective banks settle using their reserve balances at the Fed. M1 decreases and so does MO but the total amount of non-government net financial assets in aggregate remains the same. Purchase of government securities simply drains reserves in the payments system operated by the Fed into government securities. When the securities come due, the Fed simply reverses the process by retiring bonds and crediting bank accounts.
What this means is that government deficit spending increases non-government net financial assets in aggregate and this remains constant whether these assets are held in zero-maturity government obligations or term-maturity obligations that bear interest. Interest-bearing government obligations further add to non-government net financial assets in aggregated through the interest payments that increase both M0 and M1.
What's not to like here— if one understands it operationally. MMT provides that understanding.
Bob Adelmann apparently doesn't.
Bob Adelmann apparently doesn't.
In simple terms, MMT is the new alchemy, a reiteration of a 4,000-year-old dream of tyrants, a medieval chemical pseudo-science that aimed to change lead into gold, a philosophy that promised a universal cure for cancer and a means of indefinitely prolonging life on earth.Rant much?
CBO: National Debt to Nearly Double by 2029
Bob Adelmann
7 comments:
“What Bob Adelmann doesn't seem to get is that government spending adds to GDP and if GDP and the debt grow at the same rate, then the debt to GDP ratio remains the same.”
The debt-to-GDP ratio is a crucial measure for nations that have trade deficits, but do not have monetary sovereignty (e.g. Greece and France).
It is also a crucial measure in nations that have trade deficits, and which do have monetary sovereignty, but whose national currency is not spendable outside the nations’ borders. Argentina, for example, if a disaster because its foreign debt-to-GDP ratio is very high.
However the debt-to-GDP ratio is meaningless for the USA, whose government creates dollars out of thin air, and whose dollars are spendable worldwide. Since the USA does not need foreign currencies, the USA’s debt (i.e. money deposited in Fed savings account) is denominated in dollars.
So what’s the problem? There isn’t any.
Adelmann correctly says, “MMT rejects Margaret Thatcher’s claim that ‘the problem with socialism is that you eventually run out of other peoples’ money.’ MMT says this isn’t true if you own the printing press.”
But then Adelmann essentially says, ZIMBABWE!
His idiot readers repeat ZIMBABWE!
Note how these morons only scream ZIMBABWE!” when they speak of social programs that help AVERAGE PEOPLE.
Meanwhile, each year the US government sets a new record in creating money for wars and weapons makers. And no one ever screams ZIMBABWE! or HOW WILL YOU PAY FOR IT?
+++++++++++++++++++++++++++++
Incidentally Adelmann uses the word “loan” as a verb eleven times. Someone plese tell him that “loan” is a noun.
The word he should have used is lend.
And yes, when I am dealing with fools, I become a "grammar Nazi."
I want one of these Zimbabwe shriekers to point out one, ONE example of a country that was as productive and had the landmass/natural resources of the US that experienced a hyperinflation because it significantly increased its govt spending on health care, education and infrastructure. There isn't one. What you wish to spend money on matters.
Virtually every example of hyperinflation involved an economy with supply problems of critical resources and no way to import stuff using their own currency, hence the need to borrow from vultures. Not even remotely the case in the US, not by a long shot.
"Virtually every example of hyperinflation involved an economy with supply problems of critical resources and no way to import stuff using their own currency, hence the need to borrow from vultures. Not even remotely the case in the US, not by a long shot."
Absolutely correct.
I can understand why some people scream ZIMBABWE!
The rich want to forever widen the gap between themselves and the rest.
Politicians and media pundits work for the rich.
Economics professors also work for the rich, since universities depend on endowments.
Gold hucksters want you to think the sky is falling, so you had better buy shares in their "gold exchange" (which does not involve the exchange of any actual gold).
But what about average people? Why do they scream "Zimbabwe"? The answer is they are programmed from their day of their birth that they are forever fu*ked, and that even though the door of their jail cell is always open, there are horrors in the free world outside.
Their jail cell is awful, but familiar. It is a baby's crib.
Ever notice how many commercials there are on Faux News selling some sort of financial product to the elderly and how the biggest emphasis is that it "Govt guaranteed" I remember when Fred Thompson was running for the GOP nomination against Obama and he always painted scary stories of govt ineptitude, I literally laughed out loud when I happened upon a commercial of his for some annuity, one of the times couldn't t avoid Fox at some bar or someplace, and he closes with the govt guaranteed line. What a tool.
Why don't they ever say " Jamie Dimon promises you'll get all your money!"
Or they talk about your "dollars becoming worthless" ...... so send them to me and I'll give you gold instead.
Or they talk about your "dollars becoming worthless" ...... so send them to me and I'll give you gold instead."
Whenever I hear someone claim that US dollars are worthless, I become a good Samaritan. I compassionately offer to take all their worthless dollars off their hands, if they will just give them to me.
I only want to help, but for some reason, no one takes me up on my very kind offer.
RODDIS: The sky is falling on your grandchildren!
Presidential candidates Elizabeth Warren and Kamala Harris want to pay trillions of dollars to African Americans as reparations for slavery.
I only have one question...
How will you pay for it?"
And also,ZIMBABWE!
Post a Comment