ECB explains why it can't go bankrupt. Can someone at the Fed please explains this to idiots here?

Interesting stuff's been coming out of Bloomberg of all places. Very much "in-paradigm" columns. (A breath of fresh air after years of that moron, Caroline Baum.)

Here's the footnote:

"Central banks are protected from insolvency due to their ability to create money and can therefore operate with negative equity."

By the way, this applies to sovereign, currency issuing governments, too, but don't expect the idiots in the mainstream (economics, media, Wall Street, corporate, policy or otherwise) to understand or admit this.

I don't know what the Fed would do in a negative equity situation simply because Congress might get on their case about not remitting profits. The ECB doesn't have that problem. It is truly independent from the idiots in Brussels.

Read the article here.

For once Bloomberg posts something on their website that makes sense.

I thought I was seeing things just now when I came across an article on Bloomberg.com that was entitled, "Here's how to add 2.4 million jobs to the economy." I figured since it was Bloomberg there'd be a bunch of dumb suggestions like get the government out of the way, reduce regulation, cut corporate taxes and that sort of stuff.

To be honest I don't even know why I started reading it because I hardly ever read what's on that site as it's always the same, incessantly wrong, out-of-paradigm neoliberal cheerleading that we hear everywhere.

However, this article was different. So different in fact that I don't know how Bloomberg let this slip through the cracks. It was written by some guy named Peter Gosselin and I have no idea who the dude is, but he seems to get it.

Check it out:

"The U.S. is paying a big price in growth, jobs and wages by practicing the kind of fiscal austerity that it criticizes European nations for pursuing." Read on. 

In the article Gosselin talks about how government spending cuts are weighing heavily on the economy. He  points out what we have been saying here on MNE and what every MMT person knows: that government consumption  and investment is the second biggest component in GDP and the most easily varied (save for the politics, anyway, and I know that's not easy).

The article states pretty emphatically that government  spending has to be increased; that's the only way to boost GDP and job growth. It also says we "gave up on fiscal stimulus too soon." (We said that here on MNE back in 2009!)

Gosselin also rightly shames clueless Conservative lawmakers and doesn't give the Democrats a pass either. Read below:

Opponents of using fiscal tools, especially higher government spending, focus on what they regard as a greater threat than tepid growth: federal deficits and debt. “Government can’t spend its way back to a strong economy,” said Representative Kevin Brady, a Texas Republican and member of the House Ways and Means Committee.

and...

"The nation’s retreat from tax cuts and spending increases to promote the recovery has been a bipartisan affair. Democratic President Barack Obama and Republican House Speaker John Boehner agreed in 2011 to apply the fiscal brakes by negotiating $1 trillion in spending cutbacks over 10 years and a process to impose more."

Anyway, kudos to Bloomberg--THIS ONE TIME.

I'm sure they'll go right back to doing what they usually do, which is posting up the same ignorant and inapplicable shit that has become a mainstay of their opinion writers. (Cue Caroline Baum right about now.)

More unbelievably stupid shit from Bloomberg LLP

Here comes more unbelievably stupid and ignorant commentary from Bloomberg LLP. Mike built a great financial information service, but tarnished it when he added that whole team of idiots over  there who sit and do commentary. That goes for their TV channel, too. It sucks.

This time I am referring to an article that comes NOT from our favorite Bloomberg columnist and CINEMA MAJOR--Caroline Baum--who opinies on all things economic (did I mention she's a cinema major?), but some girl by the name of Kasia Klimasinka who, with a name like that is probably straight out of Russia or one of the former Soviet Republics so I shouldn't be too surprised by the incredibly flawed take on things. In fact, I wouldn't be surprised if Putin was reading her shit right now, which would explain some of the inept economic moves he's been making recently, but I digress.

Anyway, Ms. Klimasinka starts her piece off with a very scary title, which warns us that "America's fututre just got $7 trillion worse" because,  supposedly, in 2035 that's how much will be added to the USA's "debt."

I don't know about you, but I just love it when they start projecting out 10, 20, 30 years into the future in order to scare people now, as if nothing can be done/will be done and does this have any real fuckng significance??? I mean, why stop at 2035 when you can say, in the year ten billion two thousand fifteen (thereabouts) the earth will be consumed by our sun when it turns into a giant supernova. Now THAT'S scary.

Below is a snippet from the article. Feel free to read it with amusement or disgust (depending what kind of  person you are)

In 2035, the debt will almost equal the size of the U.S. economy; four years later it will match the previous record, set in 1946, at 106 percent of gross domestic product, the CBO estimated last year. Compare that to the 2014 debt burden of $12.8 trillion, or 74 percent of GDP. 

Wow. I'm shaking in my fucking boots.

This is not only mind-bogglingly stupid and pathetically misinformed, it's just really shitty journalism. Go try to work at Bloomberg. They're a stickler  for credentials and that applies to academics, I'm sure this chick probably went to Columbia School of Journalism or Mike's Alma Matter, Johns Hopkins no less, and yet, they publish this crap? This is a totally one-side, misinformed, slanted and completely ignorant piece. It's not worth the electrons it was written with.

However, give Ms. Klitchensinka some credit. She did use citations in her article. She cited the very fair and balanced, "Committee for a Responsible Federal Budget." In case you didn't know who those guys are, they're a right wing organization whose sole aim is to get rid of the social safety nets. The president over there is Maya MacGuineas. Ms. MacGuineas spent her entire career slinging conservative tripe at places like Brookings, followed by stints on that rag sheet, Wall Street Journal, on the editorial board, of course. Her nickname is the "anti-deficit warrior." Is that freakin' corny or what? The "Anti-deficit warrior?" Seriously? What utter stupidity. It's blind, rah, rah, dogma. Frat house shit.

Okay, now let me switch gears a bit. I have something for you to look at. It's the Debt Clock. You know, that's the not-so-little fear monger widget that MacGuineas and other "responsible" folks like her dreamt up and run. It's pure propaganda, but many people are frightened by it. There's a big one right here in Times Square, NYC. 

At the very top of the Debt Clock (the online version) it shows the $18.2 trillion national debt. The number's right there, right in front of our faces to make sure we see it. Alongside the national "debt" is the supposed, "debt per citizen" of $56,793 and right next to that is the "debt per taxpayer" of $154,219. The very way the Debt Clock is designed is to get us (the people) to see these supposedly really, really, scary numbers.

But here's something they never show you: not our little chickie journalist at Bloomberg or Maya and her colleagues at "Responsible" budget or any of the cynics, liars and morons who are working nonstop to foist this bullshit on us. 

If you look all the way down at the very bottom of the debt clock, right smack in the middle you will see "Total National Assets" of $115.8 trillion and assets per citizen of $361,000. 

You got that? The nation's assets--right  now--are almost 10 times the debt and the assets per citizen--right now--are almost seven times the debt. And that's now. What will they be like 18 years hence? They never tell you that. In fact, the debt clock in Times Square doesn't even have those asset numbers. It's deliberately left out. 

So you see, the whole thing is intentionally designed to manipulate you into demanding what THEY want and believing what THEY believe.

I can promise you this: Walk into any bank with these ratios: assets, 10x your liabilities and income 85 times your annual debt service ('cause that's what it is) and believe me, they'll lend you money. They'll fucking throw money at  you.

And we all know it's not even about that. It's not about the USA getting a loan in 2035 or 2075 or tomorrow for that matter. It's got nothing to do with borrowing. That's because the USA doesn't borrow. It doesn't borrow its own dollars that it can create without limit. The whole assertion is preposterous. All of the treasury securities out there today, every penny, all $18 trillion, have been bought with dollars and the same will be true in 2035 when the amount will be $40 trillion or whatever.  And those dollars will be there because they will have already been spent into existence. I'll even go a step further...all Treasuries in existence, now and in the future, ARE dollars, just held in a different form. THERE. IS. NO. DEBT.

That about raps it up. That's all I really want to say for now. Bloomberg LLP is garbage. Don't read it. Taking your advice from a cinema major or any of the other jokers over there is like taking medical advice from a quack. It can kill ya. 

As for Maya MacGuineas, Committee for a Responsible Federal Budget, Brookings, Wall Street Journal and all the other deluded ideologues out there who are tying to lie to us and screw us over...FUCK YOU, TOO!

Bloomberg's Caroline Baum, at it again!

Please, let's mobilize to get Caroline Baum kicked off of Bloomberg. Her economic commentaries are some of the most ignorant out there and her rudeness and arrogance is reason enough for Bloomberg LLP to fire her.

Here is her latest misguided missive, where she again conflates the U.S. with Greece and Portugal. This woman has a degree in cinema, yet she is pontificating on economics!. For god sakes, this is Bloomberg, they're supposed to be a little more sophisticated than let's say, CNBC.

Please send an email to Bloomberg LLP CEO Dan Doctoroff asking him to get rid of her.

-Mike Norman

More fear mongering on Bloomberg

Caroline Baum is a Bloomberg.com columnist who writes about bonds, banks, budgets and bubbles, of which she seems to know nothing. Maybe that's because Ms. Baum has a degree in poliitical science and cinema studies (which I guess qualifies her in the eyes of Bloomberg to write about bonds), but I'm not here to cast aspersions.

In her most recent piece, "Four Numbers Add Up to an American Debt Disaster," Ms. Baum has produced a real doozy. In that column she basically states that the United States is facing a "crisis" and a "disaster" becauase a lot of its debt is short term debt and $5.9 trillion of it is going to have to be rolled over five years from now.

Here's an excerpt:

"In plain English, the Treasury’s reliance on short-term financing serves a dual purpose, neither of which is beneficial in the long run. First, it helps conceal the depth of the nation’s structural imbalances: the difference between what it spends and what it collects in taxes. Second, it puts the U.S. in the precarious position of having to roll over 71 percent of its privately held marketable debt in the next five years -- probably at higher interest rates."

"In plain English??"

"Issuing short term debt helps to conceal the depth of the nation's structural imbalances??"

What the hell does that mean?

"Puts the U.S. in the precarious position of having to roll over 71% of its privately held marketable debt?"

Oh really?

Even if Ms. Baum were not well versed in MMT, or if she didn't understand the fact that there is never a problem rolling over debt denominated in a nation's own currency, she still could have gone to the Treasury's website and had a look at the amount of debt that the Treasury rolled over, successfully, last year. Had she done that Ms. Baum would have found that the Treasury rolled over $64 trillion of debt last year (see chart below) without so much as a hiccup. And, by the way, interest rates went down all along the yield curve, the Fed funds rate remained at zero, the dollar went up, stocks rallied, the economy grew, etc, etc, etc. In short, no disaster, no crisis, even though the amount rolled over was more than 10 times the amount that Ms. Baum tells us will produce a disaster.

And that's just the tip of the iceberg because in the past 10 years the Treasury rolled over $473 TRILLION of public debt (almost 80 times Baum's disaster-triggering-quantity), once again without any problem whatsoever. Rates even came down.

Just by looking at the data any reasonable person would have had to question their premise that a $5.9 trillion rollover five years from now would be something that triggered a crisis and a disaster. However, Caroline Baum did not bother to check. Ms. Baum prefers to engage in fear mongering.

I cannot tell if this is ignorance or subversion, but I'll give Ms. Baum the benefit of the doubt and call it ignorance. Whatever it is, it's fear mongering and It's completely irresponsible. It's also terribly shoddy journalism because the facts are easily available to anyone who would take five minutes to go get them.

From the Daily Treasury Statement of Sept 30, 2011

"I suspect you're one of those MMTers"

I sent an email to Caroline Baum today. She's a columnist for Bloomberg.com. (Bloomberg is notorious for their terribly misinformed economic "columnists" and Baum is a good example.)

I was responding to an article she wrote entitled, "Rear-View Mirror Can’t Forecast 2011 Economy."

In the article she attempts to argue that the 1.8% Q1 GDP growth was an aberration. According to her, one of the reasons why we should be getting ready for boom times is because (sigh), finally that darned, growth killing fiscal stimulus will soon end.

This is her "logic"...

"Finally there are the waning effects of “fiscal stimulus,” or government spending by another name. Since one dollar can’t be spent by two entities at the same time, government spending can only substitute for private spending. Any resulting increase in GDP is temporary."

So, being the masochist that I am, I decided to send Ms. Baum an email and ask her to clarify.

Here's how it went:

Me: "How does the “non-government” get the dollars to satisfy their tax liabilities or, to “net save” in that unit of account?"

(Sorry for the formatting. Baum writes in all CAPS, like an angry pwerson, so that's why the formatting is like this)

C. Baum : "I DON'T UNDERSTAND THE QUESTION BUT I SUSPECT YOU ARE ONE OF THOSE MMTERS."

Me: LOL!!! YOU RESPOND TO MY QUESTION WITH A SNARKY REMARK. OKAY.

SO, THE QUESTION SEEMS TO BE PRETTY SIMPLE. HOW DOES THE NON SOVEREIGN, I.E., THE PRIVATE SECTOR GET THE DOLLARS TO SATISFY THEIR TAX LIABILITIES? WHERE DO THEY GET THOSE FROM? IT HAS TO COME FROM SOMEWHERE? YOU SAY THE GOVERNMENT AND THE PEOPLE CANNOT SPEND THE "SAME DOLLAR." WHAT IN THE WORLD DOES THAT MEAN? DOES THE GOV'T HAVE TO GET BACK THE DOLLARS IT ISSUES IN ORDER TO BE ABLE TO SPEND? IS THAT WHAT YOU ARE SAYING?

C. Baum: I'M TALKING ABOUT BASTIAT'S BROKEN WINDOW. ACTUALLY AFTER BEING ATTACKED BY MOSLER FOR A SPELL, I FINALLY UNDERSTAND AFTER READING ROBERT MURPHY ON MISES YESTERDAY WHAT MMT IS ALL ABOUT. NOW IT REALLY MAKES NO SENSE. I DON'T NEED THE GOVT TO SPEND SO I CAN SAVE. THAT'S LUDICROUS. I CAN'T IMAGINE ANY SMART PERSON CAN THINK THAT. MAYBE YOU CAN ANSWER A QUESTION: WHY IS IT CALLED MMT SINCE IT'S ABOUT FISCAL POLICY.

Me: MOSLER ATTACK?? HARDLY. HE'S THE MOST RESPECTFUL AND POLITE PERSON I HAVE EVER MET. THAT "ATTACK" WAS YOUR OWN COGNITIVE DISSONANCE. (CREATES STRESS, INTERNAL CONFLICT. MAY HAVE CAUSED YOU TO PERCEIVE IT AS AN ATTACK.)

MURPHY'S PIECE MAY WELL DESCRIBE AN ECONOMY OF PRIVATE ACTORS WHERE THERE IS NOT AN AUTHORITY THAT IMPOSES A TAX THAT CAN ONLY BE PAID IN UNITS OF ITS OWN CURRENCY. IF A WORLD LIKE THAT EXISTS, PLEASE LET EVERYONE KNOW IN A NEW COLUMN. I CERTAINLY AM NOT AWARE OF ONE.

I BELIEVE THE TERM MMT CAME ABOUT FROM A BLOG POST BY SOMEONE BACK IN THE 1990S AND IT WAS NOT AN MMTER. (DON'T QUOTE ME.) HOWEVER IT CAME ABOUT, THE NAME STUCK.

C. Baum: MOSLER USED TO SEND ME NOTES AND SEND TO HIS ENTIRE DISTRIBUTION, SO THEN I HEARD FROM THEM. WHAT IS HIS MOTTO? THERE IS NO PROBLEM THAT CAN'T BE FIXED BY MORE GOVERNMENT SPENDING? C'MON.

Me: NO, THAT IS CERTAINLY NOT HIS MOTTO. YOUR STATEMENT SHOWS THAT YOU HAVE NOT EVEN TAKEN THE TIME TO INVESTIGATE MMT. YOU CRITICIZE IT WITHOUT EVEN UNDERSTANDING IT.

C. Baum: B/C THERE IS NOTHING TO UNDERSTAND BUT SOME ACCOUNTING TAUTOLOGY. I DID LOOK AT IT AT THE TIME. SO PLEASE DON'T ACCUSE ME.

MOSLER'S LAW: THERE IS NO FINANCIAL CRISIS SO DEEP THAT A SUFFICIENTLY LARGE TAX CUT OR SPENDING INCREASE CANNOT DEAL WITH IT.

THE GIST IS THE SAME

Me: THAT'S RIGHT, READ WHAT YOU WROTE:

YOU SAID THAT MOSLER STATES, "THERE IS NO PROBLEM THAT CAN'T BE FIXED BY GOVERNMENT SPENDING."

YET WHAT HE SAID (FROM THE ACTUAL QUOTE FROM HIS WEBSITE, WHICH YOU INCLUDED IN YOUR EMAIL TO ME) IS, "THERE IS NO FINANCIAL CRISIS SO DEEP THAT A SUFFICIENTLY LARGE TAX CUT OR SPENDING INCREASE CANNOT DEAL WITH."

TWO DIFFERENT THINGS.

ANYWAY, NICE CHATTING WITH YOU. GOOD BYE.

You get the "gist" of it. ;)

Oh yes, the "elites" are getting nervous now. We have entered their domain and one by one they are getting picked off. They've already lost Goldman, Morgan Stanley and the other smart ones among their ranks will soon become converts, too! Baum will certainly be among the last to turn, if ever.