Some debriefing on continuous fiscal deficits and debt issuance — Bill Mitchell

A government cannot run continuous fiscal deficits! Yes it can. How? You need to understand what a deficit is and how it arises to answer that. But isn’t a fiscal surplus the norm that governments should aspire to? Why frame the question that way? Why not inquire into and understand that it is all about context? What do you mean, context? The situation is obvious, if it runs deficits it has to fund itself with debt, and that becomes dangerous, doesn’t it? It doesn’t ‘fund’ itself with debt and to think that means you don’t understand elemental characteristics of the currency that the governments issues as a monopoly. These claims about continuous deficits and debt financing are made regularly at various levels in society – at the family dinner table, during elections, in the media, and almost everywhere else where we discuss governments. Perhaps they are not articulated with finesse but they are constantly being rehearsed and the responses I provided above to them are mostly not understood and that means policy choices are distorted and often the worst policy decisions are taken. So, while I have written extensively about these matters in the past, I think it is time for a refresh – and the motivation was a conversation I had yesterday about another conversation that I don’t care to disclose. But it told me that there is still a lot of work to be done to even get MMT onto the starting line.... 

William Mitchell — Modern Monetary Theory
Some debriefing on continuous fiscal deficits and debt issuance

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Austra…

Episode 4 of the Smith Family Manga (S2) is now available — Bill Mitchell

Today (August 23, 2024), MMTed releases Episode 4 in the Second Season of our Manga series – The Smith Family and their Adventures with Money. Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit …

William Mitchell — Modern Monetary Theory

Episode 4 of the Smith Family Manga (S2) is now available
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Chartbook 310 The shock of the new: Dollar dominance and modern monetary macro in the 1920s. — Adam Tooze

Not MMT but relevant historically. How the world got here ((to dollar hegemony), as well as to monetarism, the accounting identity that is, as the basis of macro.  

Adam Tooze is a historian rather than an economist, so he is able to shine a different light on the subject.

Chartbook
Chartbook 310 The shock of the new: Dollar dominance and modern monetary macro in the 1920s.
Adam Tooze | Shelby Cullom Davis chair of History at Columbia University and serves as Director of the European Institute

NDX100 EPS

 

Something happened after the 2022 Biden unprecedented rate increases to really crush (-32%) the EPS of the NDX100… 🤔

With the implication that this one time discount after the unprecedented Biden rate increases in 2022 might be reversed if those said rate increases were to be reversed…

An Economic program for Kamala that will benefit everyone, and win the Presidency in November! — John Rudden

MMT.

Daily Kos
An Economic program for Kamala that will benefit everyone, and win the Presidency in November!
 John Rudden

Major macroeconomic policy reform is needed to reduce the reliance on monetary policy — Bill Mitchell

There is some commentary emerging that is finally starting to question the reliance on monetary policy (setting interest rates) as the primary macroeconomic policy tool with fiscal policy forced into a passive role. In Australia, this debate has intensified in the last week following the hubris from the new Reserve Bank governor, who thinks her role is to sound like a ‘tough guy’ dishing out threats of ever increasing interest rate rises even as inflation falls. There was an Op Ed in the Sydney Morning Herald today (August 12, 2024) – Maybe only a recession will fix macroeconomic management – by the Economics Editor Ross Gittins, which challenges the current macroeconomic consensus. Some of this argument is acceptable. But when he advances his alternative proposal of “a new independent authority” to set monetary and fiscal policy, the reality is that this would be as bad as we have now. More on that later....

William Mitchell — Modern Monetary Theory

Major macroeconomic policy reform is needed to reduce the reliance on monetary policy
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Episode 3 of the Smith Family Manga (S2) is now available — Bill Mitchell

Today (August 9, 2024), MMTed releases Episode 3 in the Second Season of our Manga series – The Smith Family and their Adventures with Money. Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit …

William Mitchell — Modern Monetary Theory

Episode 3 of the Smith Family Manga (S2) is now available

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

US labour force data provides no basis (yet) for recession panic — Bill Mitchell

The financial markets around the world have over the last week demonstrated, once again, that they are subject to wild swings in irrationality despite mainstream economists holding out the idea that these sorts of transactions exhibit pure rationality. Some of the capital movements are explained by a shift in the interest rate spread between Japan and the US as the former nation decided to increase interest rates modestly. That altered the profitability of financial assets in each currency and so there were margins to exploit. But the big seings came when the US Bureau of Labor Statistics (BLS) released their latest labour market data last Friday (August 2, 2024) – Employment Situation Summary – July 2024 – which showed payroll employment increasing by only 114,000 (well down on expectation) and the unemployment rate rising by 0.2 points to 4.3 per cent. Suddenly, the headlines were calling an imminent recession in the US and that triggered a flight into safer assets (government bonds) away from shares etc, which drove down bond yields (as bond prices rose) and left some short-run carnage in the share markets. A few days later the panic subsided and one has to ask what was it all about. In this blog post, I examine the labour force data and add some new extra ‘recession predictors’ to see whether the panic was justified. The conclusion is that it was not....

William Mitchell — Modern Monetary Theory

US labour force data provides no basis (yet) for recession panic
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

The Bank of England does not need a tiered reserve system for the Government to avoid austerity — Bill Mitchell

There is an interesting debate going on in the UK at present about the concept of tiered bank reserves. The concept is now being used by commentators to argue that the new British government does not need to inflict the austerity that the Chancellor has now announced (even though she is denying that is what the government is up to) because the government can simply reduce outlays to the commercial banks in order to meet the fiscal rules. The discussion is rather asinine really and features all the missteps that commentators make when trying to appear progressive but falling into the usual mainstream macroeconomic fictions....

William Mitchell — Modern Monetary Theory
The Bank of England does not need a tiered reserve system for the Government to avoid austerity
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Trump: No tax on tips, no tax on Social Security

If he can get back in, would be substantial fiscal stimulus… Trump at least talking about economic proposals Dems just talking about all the transgender and climate nutter stuff while prices for real items remain elevated, unemployment rate keeps rising and rate of job creation keeps falling…

Trump telling Powell at the Fed not to modify the policy rate before the election if he wants to finish his term if Trump gets back in…. Prediction markets now 100% probability of a cut in September so looks like Fed is going to reduce the rate before the election…

Trump will then claim “election interference!” and will probably then get in front of it by promising to fire Powell on day one and guarantee a new Fed chairman who will immediately lower the policy rate to a point where the 30-year mortgage rate immediately goes back to 3% where it was when he left…

So Trump proposals will be: no tax on tips, no tax on Social Security, and a return to the 3% 30-year mortgage rate…

British Chancellor fails the basic test – language is meant to impart meaning — Bill Mitchell

Language is meant to bring meaning to discourse. That means we want to use terms that convey information that is of use to us in making our way in the world. The problem is that economists have perverted that process and introduced a metaphorical language that is intended to persuade the reader/listener to accept a particular view of the world but which undermines their ability to actually understand the phenomenon in question. Marx knew long ago how language could be constructed to advance the interests of the ruling class. The mainstream economics commentary that is also used by politicians falls into this category. Terms are used that have no meaning in an elemental sense but provide support for ideological agendas. We, the public, allow that to happen because we are ignorant about the context. It becomes a vicious cycle of lies and fictions which undermine human and environmental sustainability but certainly transfer income to the top-end-of-town. A recent path setting address to the House of Commons by the new Chancellor is a classic example of this reality denial....

William Mitchell — Modern Monetary Theory
British Chancellor fails the basic test – language is meant to impart meaning
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia