Mike Kimel — The National Debt Disappeared

I commented there.

Angry Bear
The National Debt Disappeared
Mike Kimel

Stephanie Kelton — Slapping Trillions of Obligations Into the Diapers of the Next Generation

Warming up for the upcoming debt ceiling 2014 kerfuffle.

New Economic Perspectives
Slapping Trillions of Obligations Into the Diapers of the Next Generation
Stephanie Kelton | Associate Professor and Chair of the Economics Department, UMKC

See also Frederick C. Thayer, Think big deficits cause recessions? Think again! for a brief summary of the article to which Stephanie links.

See also Steve Roth, Does Reducing the Federal Debt Cause Financial Collapse? at Asymptosis

Kimberly Amadeo — Who Owns the U.S. National Debt?

Summarizes Treasury Bulletin, Monthly Treasury Statement, Table 6. Schedule D-Investments of Federal Government Accounts in Federal Securities, August 30, 2013. Forget what she has to say about QE though.

About.com
Who Owns the U.S. National Debt?
Kimberly Amadeo

What If Everyone With Private Assets To Manage Finds Out That NO ONE NEEDS Wall St. Advisers?

Commentary by Roger Erickson

Or Obama either?

National Savings = National Debt ~= Private Assets under fee-based "management"
 (hat tip MoveThroughIt )

What if we just:

* quit grossly over-taxing labor with FICA/medicare/medicaid, (not to mention distorted property/building taxes)

* quit asking everyone to let Wall St "play" with all the
demand-leakage liquidity ... and instead

* just kept all that diverted initiative at work and INVESTED, in the USA?

Stop the stupid? Is it rally that simple?

Gosh indeed. Maybe our national Adaptive Rate might turn positive again?


ps: There are always Index Funds

or, you can try the Occupy Money Cooperative, but remember that even the TBTJ banks were once honest ... once upon a time ... well, maybe.

Marshall Auerback — Who’s afraid of the big, bad deficit wolf? Not China.

… it’s nice to see that at least one major economy is not succumbing to the screams of the fiscal deficit fetishists. Far from being a burden, the deficits and the corresponding government bonds constitute the foundation of private financial wealth in any nation that creates its own sovereign currency for use by its citizens. Debt owed by the government yields net income to the private sector, unlike all purely private debts, which merely transfer income from one part of the private sector to another. In basic national accounting terms, government deficits equal non-government savings surpluses.

Notwithstanding the obvious reality that sovereign governments have no solvency risk because they create their own currency, most financial commentators (and economists) still waste their time talking about sovereign default risks. Unfortunately, we implicitly legitimize this sort of talk when we use the analogy of the household and the alleged need for government to embrace budgeting like a household does. Remember, firms, households and even state and local governments require income or borrowings in order to spend. But a sovereign government’s spending is not constrained by revenues or borrowing. It is constrained only by what its population chooses as national goals.

Fortunately, Beijing appears to understand this. Would that similar wisdom were shown in Washington, Ottawa, Brussels or Berlin.

Macrobits
Who’s afraid of the big, bad deficit wolf? Not China.
Marshall Auerback
(h/t Kevin Fathi via email)

News from the front — civil war front, that is.

Liberalism has returned in force, Senate Minority Leader Mitch McConnell (R-Ky.) said on Tuesday, reviewing the president's Inaugural Address.

"One thing is clear from the president's speech: The era of liberalism is back. His unabashedly far-left-of-center inaugural speech certainly brings back memories of the Democratic Party in ages past," he said. "If the president pursued that kind of agenda, obviously it's not designed to bring us together, and certainly not designed to deal with the transcendent issue of our era, which is deficits and debt."

The Huffington Post
Mitch McConnell On Obama Inauguration Speech: 'The Era Of Liberalism Is Back'
Ryan Grim

******************

At a Ways and Means Committee hearing on Tuesday, Rep. Jim McDermott (D-WA) blasted Republicans for refusing to raising the federal debt ceiling unless Democrats agreed to budget cuts.“I have to tell you, listening to this hearing is like we are living in Alice in Wonderland,” McDermott said. “Here we are hearing from witnesses telling us how to use default creatively or use it to get some leverage or something — and the simple talking about it here is destructive.

“The whole world is watching this hearing. It is the first hearing on this issue. The whole point of a society is to create and run a government to make order for people. People don’t like chaos and this hearing is about how to create chaos to get what you can’t get politically with votes....

“They want everyone who is lucky and doing well to just do well,” McDermott continued. “And if you aren’t doing well, well you’ve got to deal with it, it’s your problem. It is social Darwinism. It is survival of the fittest put into public policy.”

The Raw Story
Rep. McDermott slams GOP for using debt ceiling to push ‘social Darwinism’ 
Eric W. Dolan

******************

Are Governors Scott Walker, Rick Scott, Jan Brewer, John Kasich, Rick Perry, Rick Snyder, Nikki Haley and others conspiring to hijack our Constitution on July 4th, 2013? The conservative think-tank, Goldwater Institute, is moving lobbyists into position to mobilize legislatures throughout our nation with a Compact for America devised by their lead attorney Nick Dranias.

The Compact for America has set a timetable to convene a single issue constitutional convention this summer using Article V of the US Constitution to railroad the revised Balanced Budget Amendment in to the Constitution.

Article V of the Constitution allows states to assemble and propose amendments. It takes 34 states to request an Article V convention. The proposals that pass are then sent through Congress for a majority support. Then the amendment or amendments are sent out to the states for ratification. If 38 states agree, the amendment becomes part of the Constitution.

The Compact for America guarantees that the process will exclude the input of the other states and restricts the delegates to the Balanced Budget Amendment discussion under threat of pre-written instructions to state Attorney Generals.

The Compact for America defines that the states will choose the governor of that state as the only delegate to the convention. The number of red states gives the Goldwater Institute a much easier path to victory. There is no election or presidential action that will stop this effort. The campaign relies on the cooperation of state legislatures and governors, not popular support. Popular opposition will have little effect as well. There is no way to stop the governors and other delegates from passing the amendment. The Compact for America makes sure they collectively use their power to impose their will on the Constitution without debate of any other issue or consideration of any language changes in the amendment itself. It is all rigged in advance.

FireDogLake
Is THIS Grounds for Revolution?
Daniel Marks

Nick Dranias responds to Daniel Marks piece in the comments at FDL. When I posted a link to Compact for American previously here at MNE, Nick also came by and the record is in the comments there. He is polite, articulate, persistent, and presents his case well, but he is wrong when it comes to the monetary economics and understanding of public finance. We disagreed about the economic implications of a balanced budget approach in comparison with a sectoral balance approach to the appropriate fiscal stance and functional finance approach to fiscal policy.

References:
Fiscal Policy in a Stock-Flow Consistent (SFC) Model by Wynne Godley and Marc Lavoie (Levy Institute, April 2007)

Functional Finance and the Federal Debt by Abba P.Lerner (Social Research,  Vol. 10, No. 1, February 1943)

The Seven Deadly Innocent Frauds of Monetary Policy by Warren Mosler (2010)

Soft Currency Economics II by Warren Mosler (1994, 2012)

Understanding Modern Money: The Key to Full Employment and Price Stability by L. Randall Wray (1999)

Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems by L. Randall Wray (2012)

Frances Coppola — Government debt isn't what you think it is

Government debt is not debt in any meaningful sense of the word.

Well, actually that's not quite true. Let me clarify. The debt of genuinely sovereign governments that issue their own currencies, have properly functioning central banks and full control of monetary policy is not debt in any meaningful sense of the word.

Coppola Comment
Government debt isn't what you think it is
Frances Coppola

UPDATE:

So what's the catch?