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
30 comments:
Seems dumb to have unlimited immigration of unskilled migrants who upon arriving Will immediately need public assistance then at the same time say you’re gonna have to limit public assistance…
There's no such thing as unlimited immigration. Immigrants are not numbers on a scoreboard.
Looking at all the variants of social media yesterday you would have thought the world had ended.
https://tradingeconomics.com/united-states/stock-market
The right wing marketing campaigns are second to none when they decide to instill fear into people. They were wrong about a Biden recession the whole time and will market anything to install that failed narrative into people's heads. The sheep absorb it like a sponge. The way the media advertised it you would have thought it had crashed all the way back down to below 2500 lol.
Probably, Mr Market having a meeting with itself and deciding when Iran attacks Israel things could very quickly get out of hand in the strait of hormuz.
Others looking at it as another buying opportunity.
https://seekingalpha.com/instablog/910351-robert-p-balan/6048590-massive-spx-oi-put-positioning-for-coming-week-aug-5-to-aug-9-dont-get-net-long-equities-just
The amount of money the Monetarists have thrown at you tube is really quite disturbing. You can't watch anything without doomed, recession, bankrupt, a return to the gold standard blah, blah, blah pestering you every 5 mins.
Got to hand it to them, they know how to brainwash and have it down to a fine art. As soon as the Republicans win most of it will vanish. Then when they get beat it ramps back up again.
Tories were in charge for 15 years not one riot regarding immigration. Labour were in charge for a month and it starts. It was the Tories that opened the flood gates.
The right know how to get organised when out of power.
The right wanted the just stop oil protesters given lengthy jail sentences just for sitting down on roads. Now we actually do have rioting in the streets it is a different narrative. Their hypocrisy seeps out of every pore on every issue.
This narrative that there's no left or right anymore just nationalists v globalists etc etc. Is complete BS if you ask me. The right are always advancing their agenda regardless and the left have to compromise THEIR values if the serfs have to come together to be united.
When you study the narrative and framing on individual economic policies it has nothing to do with nationalists v globalists. That's just The framing being used, in the end it is all right v left.
The riots are just another example of the right kicking lumps out of each other in public to decide what the new face of Conservatism looks like in the future. They have no intention whatsoever of uniting with the left. They just use left-wing voters to advance their own right wing agenda.
Watching GB news gives the game away every 2 mins it Is on air. Copied the model of Fox news. If you think Tucker Carlson wants anything to do with the left as he uses their voters for his agenda then please step away from the crack pipe. All of these populists despise the left while spinning the story they are working for the working class.
The future for the likes of Jimmy Dore, Russell Brand and other lefties who have drank this Kool aid and believed it won't end well for them. Once the right gain even more power and reveal their true agenda.
I'm in this camp
https://moneyontheleft.org/
Who haven't moved an inch. Who never drank the nationalists v globalists Kool aid and saw it for what it was. A Pantomime passed down through the ages, a historical strategy repeated over and over again as the right use it to increase their political power over everyone else.
US banking system has been receiving about $15B per month of the IOR accruing to Capital for over 2 years now…
Bank system capital at/near all time highs … even with the unprecedented Biden rate increases causing those losses …
Uh...oh yes you can. You can go to my channel. Mike Norman MMT
A 10 yr security at 4.5% going to a 3.75% yield = a 6% increase in price …
US banking system has over $4T of securities in bank credit…
+6% on 4T is +$240B …
US 10yr yield recently moved from 4.5 down to 3.75 so as much as bank securities are equivalent to a 10yr UST then if this current rate holds banking system looking at a $240B increase in capital…
But it’s got to stay here down at 3.75 for a while
10 yr rate has usually gone back up after these periodic reductions …
If it can stay here until a probable September rate cut then probably banks will start to report significant increase in capital …
Yes, Labour is a right wing government.
Anybody who disagrees with their theory is right wing to them …
What is this infatuation with interest payments all of a sudden rather than the deficit ?
Trump had a nearly zero rate policy with a $trillion deficit for the very first time and the narrative was very very bullish.
When they start cutting interest rates and you strip away interest payments the deficit is still going to be quite large and way bigger than Trumps $trillion.
With the chips and science act and inflation reduction act and climate Bill that was passed isn't more fiscal baked in for years to come ?
As these projects roll out it is projected that the US will run $2 trillion deficits over the next 10 years.
Even with rate cuts that is HUGE.
This fiscal really does support the economy compared with interest payments most of which are probably saved.
So my question is , is this current infatuation with interest payments the wrong focus moving forward if deficits are projected to be $2 trillion over the next decade ?
If it’s a gop sweep then I assume they will implement some type of tax cuts… Trump saying elimination of current taxes on Tips&Gratuities and senior citizens Social Security xfer payments… they may index capital gains , etc..,
If Dems win then it’s going to be tampons in every men’s room…
The interest payments are more significant than 'deficits' when the debt to GDP ratio is as high as it is, and the front end loan system is long fixed. It's what Warren has been saying for ages. And in a rising price environment interest tends to be spent, not saved. The belief in 'saving interest' is very mainstream. Deficits, by definition given they are saving, are deflationary. It's the overall gross flow that determines how much stimulatory push there is, not how much is left in pockets.
Well in 2023 iirc the deficit increased more than the increase in interest paid so it was mostly saved , 2024 has probably been different …
The overall gross flow, including the interest vastly increased. Likely the percentage of gross flow saved didn't change that much at all. (It's always interesting that deficits are in big number terms rather than percentages - unlike everything else).
Nobody has taken the time to actually show the marginal propensity to consume when it comes to interest payments on either side of the debate.
However, it is the framing that is confusing. $1 trillion deficits good. $2 trillion deficits markets won't perform as well.
Nobody saves in their current account nowadays, so what interest was made in there was probably spent which is a trickle.
To earn any kind of interest you have to lock it in to a time deposit and penalised if you take it out early. Roughly 90% of people will roll those over. I looked after these instruments when working as a premium investment consultant at Santander.
A break down of who owns the debt suggests any debt held by consumers are in longer term time deposits. The marginal propensity to consume interest payments of those who already have plenty of money is unknown.
It's jobs that matter. The chips and science act and inflation reduction act and climate Bill that were passed boosted jobs and only just got started.
If you give somebody £100, they spend it which is taxed at 20%, leaving the next person with £80 as income. They then spend that £80 which is taxed at 20%, leaving the next person with £64 as income. And so on until the entire £100 disappears and creates £100 of extra tax. All without changing the tax rate one single percent in an inflationary environment.
As long as people have jobs it just means it returns to source quicker and savings are less. Consumers can manage the situation.
What the interest payments probably did was offset the saving less above as the spending injection returned to source quicker due to higher prices.
But inflation has dropped from 9% to 3%. Wages have risen so as the interest payments diminish a large part of it has been offset already.
Until eventually,
If you give somebody £100, they spend it which is taxed at 20%, leaving the next person with £80 as income. They then spend that £80 which is taxed at 20%, leaving the next person with £64 as income. And so on until the entire £100 disappears and creates £100 of extra tax. Will start to return the spending injection back to source at a slower rate than an inflationary environment.
This is why the tax drains were so large during the inflationary period. The stone skipped across the pond at a faster rate.
So as things offset and you add $2 trillion deficits as the norm. What's the problem ?
Elimination of current taxes on Tips&Gratuities and senior citizens Social Security xfer payments… As those are skipped across the pond will return to source exactly the same as a government spending injection.
Trump broke every US government spending record the last time he was in office. It will all depend if these Pyscho's control him or not.
https://www.heritage.org/conservatism/commentary/project-2025
And
https://www.heritage.org/conservatism/commentary/what-the-socialist-left-fails-grasp-about-wealth-and-innovation-america
These Psychopaths have ran the Republican Party for years now.
If the Heritage Foundation move their people into policy jobs during Project 25, Trump will be isolated and neutered again.
https://www.heritage.org/budget/pages/policy-proposals.html
They'll do what they always do, art laffer trickle down until the deficit becomes too small to support the credit structure of the economy.
They simply don't care as they'll make billions and fund the war chest to fight the next election.
Those chumps that think Trump is going to save them will finally realise they lost again playing the 3 card monte. Anger will increase, division will increase until America looks like the streets of England.
The Republican party will go the way of the Tory party and then we'll just have to wait and see who white America blame for it. As white America certainly won't look in the mirror and blame themselves and who they kept voting for over a 50 year period. Understand where and when these problems originated as they all moved right across the political spectrum.
Minorities and people with a different skin colour and different religion will get the blame. The one party nation state will make it so, as the money continues to drain upwards.
They'll simply wait everybody out. Allow generations to die off, as they prepare the next generations in their education camps.
It was always thus.
Trump is 78 the Heritage Foundation will simply wait him out as they move their people into policy jobs. He will achieve very little just like the last time and it will all be reversed anyway as the Republican party revert to type when he is gone.
INTERVIEW: Basil Valentine & Heiko Khoo - Behind UK's Malicious Racial Violence
https://rumble.com/v5a5q6r-interview-basil-valentine-and-heiko-khoo-behind-uks-malicious-racial-violen.html
TNT Radio guest host Basil Valentine speaks with ex-Worker's Party candidate Heiko Khoo, to discuss the troubling racial conflict and violence currently taking place across the UK which is being labelled as “far-right thuggery”, whilst challenging the government’s response solution which so far has been to lock people up rather than addressing the issues at its core. The recent tensions in Britain are mainly directed towards the “Muslim” immigrant community led by far-right groups and agitators like Tommy Robinson. Since Oct 7 not only Muslims but many other communities have banded together in support of Palestine, whilst on the other hand, one in four MPs have received money from pro-Israel lobbyists.
Voting for Trump is like voting for Bozo the Clown, minus the entertainment.
Right you pay interest to people who have already exhibited a propensity to save and they just save more… also offshore corporate retained earnings those firms probably just increase share buy backs.,, this cycles increase in interest paid has been a dud…
Where is the big stimmie from all the interest income? NDX100 was at 408 In November 2021 now it’s at 435 almost 3 years later… 6.6% increase in 3 years could have made a lot more in MMMF…
Consumers ability to save were getting crushed due to higher prices. As the spending injections were moving back to source very quickly.The big stimmie from all the interest income probably off set that. It was the The big stimmie from all the interest income that allowed the non government sector to meet its savings desires.
People with jobs just cut back changed their spending habits and managed their budgets. As always it was the low earners and the unemployed who got crushed and were hurt the most.
A tax cut at this point would have been pissing in the wind - Lizz Truss budget - as higher prices would have take it due to lack of competition and the monopolies and consortium's that have been created in both the public and private sectors.
That's the thing about tax cuts and min wage increases nowadays, the big 2 or 3 in each sector and the consortium's on the high street try and take these for themselves.
The interest payments were large enough to meet the non government sector savings desires. The chips and science act and inflation reduction act and climate Bill that were passed boosted jobs and the fiscal injection was big enough to prevent another lost decade.
Mike in his recent videos has been highlighting a big red light warning. Currently we are back in a 2007 type scenario.
The last time interest rates were this high was the financial crash as the deficits became too low to support the credit structure of the economy. The Heritage Foundation ideology that you can grow an economy by replacing government spending with bank lending. Load consumers with debt until they can't pay and those that fund the Heritage Foundation sweep in and buy everything on the cheap as asset prices crash.
Debt was around 65% of GDP and the deficit hit around 8%. Strip the interest payments out of that and in 2008 the deficit would probably be around 5%.
Within a few years rates were back to zero and the deficit was below 3%. Interest payments and fiscal was stripped from the economy and the rich got their tax cuts.
Today Debt is around 120% of GDP the deficit around 6% of GDP. Strip the interest payments out of that and the deficit will probably be below 3% right Now.
So if the fiscal pump stays the same All else equal and they slash rates to zero the deficit will be around 3%. Mike is saying watch the leading flows and fiscal pump as they are slowing and might not stay the same and push the deficit into danger territory as the interest payments diminish as they cut rates.
So we are now back into 2007 - 2015 territory. A time when the slashed the rates to zero and slashed the fiscal pump at the same time.
Yet stocks soared right into 2020 from 2008 onwards. Even though interest payments were slashed and the fiscal pump had been dramatically reduced. The Trump effect had a lot do with that.
My strategy ( I'm actually thinking seriously about doing it) is get as much money as I can get together and get ready for the election. If Trump wins go long the market, max out my leverage to the highest leverage I can get and get out after the first year.
You will probably turn £20,000 into over £100,000 in that year. The market loves Trump regardless of MMT or the macro fundamentals. The first year the market will be nothing but sentiment and hubris as the right think he is god.
Get out take the money after the first year then go back to MMT macro analysis. If you are seriously thinking about carrying out this strategy then we want the market to go down before the election. More upside for us in Trumps first year.
I'd love to be able to wait 18 months but as I am going to leverage what money I have to the hilt. I simply don't have the balls to sit in longer than a year.
If Trump announced tax cuts for all and massive stimulus packages then I might stay in passed the first year of sentiment and hubris.
I've actually been lying in the bath thinking how I could have been a multi millionaire by now at my age.
All I needed to do was wait on every US election since I was 18 and invest in every winner of the election for their first year.
Take the profits after their first year and move the profits into government bonds for the next 3 years. Get the money out ready for the next US election rinse and repeat.
I would have had 9 US elections under my belt by now and many years in government bonds and I'm struggling to think of any US election when the market actually went down in the first year of an election win.
Why would it ?
When every winner is bought and paid for by the billionaire class.
If I can get £50,000 together and leverage myself to the hilt. I might just be a millionaire by the end of the first year of the US election 2032.
:)
“ The last time interest rates were this high was the financial crash as the deficits became too low to support the credit structure of the economy.”
There has been regulatory changes since 2007… Treasury no longer uses the TTL accounts so the 2007 surpluses that increased bank system deposit liabilities (causing the credit contraction, credit provision is proportional to (A-L)/A ) is no longer going to happen….
George Bush Junior as he was caught in Clinton's budget surpluses downturn when he won, would probably be the only time markets dropped during the first year.
Even Bush senior got a rise as he carried out the severe reforms.
I think if trump wins he will put ina Fed head who will cut the rates to get mortgages back down to 3% area..,where it was when he left..,
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