One of the most well thought out, salient posts I've read in quite some time. Bravo !
US National Debt Does Not Matter?
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One of the most well thought out, salient posts I've read in quite some time. Bravo !
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TRUE. Eventually it does matter; especially when rates rise, in the end. Some asked several years ago =what IS wrong with the US[gov] bond market?? LOL i dont know; maybe after all these years people dont believe US debt is risk free/prediction LOL-LOL
It would appear that the US is not terribly out of line with other G7 countries in terms of debt metrics. Japan looks like they really need to be having a national conversation (as of 2018 Japan's debt to GDP ratio is twice that of the US). No clear thinking, rational person would argue that the United States has the premier capacity to organically develop new technologies and to commercially exploit them. America also has this uncanny ability to constantly reinvent economic development drivers. And quite frankly American military prowess does lend a certain element of security - which is important for the health and vitality of sovereign debt and international status.
Yes, the United States prints money. But apparently for the past 50 years the World has continued to value US Sovereign Debt without the Gold Standard.
Yes, the United States prints money. But apparently for the past 50 years the World has continued to value US Sovereign Debt without the Gold Standard.
%% Good points; but the US has so much private sector$ well run businesses.It would appear that the US is not terribly out of line with other G7 countries in terms of debt metrics. Japan looks like they really need to be having a national conversation (as of 2018 Japan's debt to GDP ratio is twice that of the US). No clear thinking, rational person would argue that the United States has the premier capacity to organically develop new technologies and to commercially exploit them. America also has this uncanny ability to constantly reinvent economic development drivers. And quite frankly American military prowess does lend a certain element of security - which is important for the health and vitality of sovereign debt and international status.
Yes, the United States prints money. But apparently for the past 50 years the World has continued to value US Sovereign Debt without the Gold Standard.
But business man Mr Trump saying US[gov] debt is like a poker game......Well @ least he hasnt said that lately, as Pres.LOL
NOT to get to political, but FORBES figured his fortune[after bankruptcys] was about 4-5 billion not 10 billion, he claimed .Actually i still like US dollars/silver coins, for buying, selling. Besides even Japan, the debt leader on your chart LOL; makes HMC, Nissan, Toyota s much better than GM. NOT a stock or debt tip.
EVERYTHING YOU WANTED TO KNOW ABOUT MMT (BUT WERE AFRAID TO ASK)
https://www.themacrotourist.com/posts/2019/01/23/mmt/
So let’s get to it. What exactly is MMT?
Modern Monetary Theory is a macroeconomic theory that contends that a country that operates with a sovereign currency has a degree of freedom in their fiscal and monetary policy which means government spending is never revenue constrained, but rather only limited by inflation.
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This is my layman’s version after reading and listening to everything I could on the subject, but I think I got the gist of it.
MMT’ers believe that government’s red ink is someone else’s black ink. Sure, the government owes dollars, but they have a monopoly of creating those dollars, and not only that, the creation of more and more dollars is essential to the functioning of the economy.
Here are the policy implications of accepting MMT:
And in fact, Stephanie Kelton argues it is immoral to not utilize this power to fix problems in our society. From an interview she gave,
“if you think you can’t repair crumbling infrastructure or feed hungry kids, unless and until you find some money somewhere, it’s actually pretty cruel because you leave people who are struggling in a position where there are still struggling and they are hurting, and they are not properly taken care of…”
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Regardless of whether you agree with my view or not, it doesn’t matter.
The public has woken up to the fact that supply-side-trickle-down economics is not helping them anywhere near as much as promised.
You might think these sorts of tax-cutting pro-business policies are the best thing for our economy. So be it. Reasonable people can have differing opinions. But the tide is shifting away from this belief, so it really doesn’t matter what you, or I, or even the smartest economist in the world believes.
https://www.themacrotourist.com/posts/2019/01/23/mmt/
So let’s get to it. What exactly is MMT?
Modern Monetary Theory is a macroeconomic theory that contends that a country that operates with a sovereign currency has a degree of freedom in their fiscal and monetary policy which means government spending is never revenue constrained, but rather only limited by inflation.
--
This is my layman’s version after reading and listening to everything I could on the subject, but I think I got the gist of it.
MMT’ers believe that government’s red ink is someone else’s black ink. Sure, the government owes dollars, but they have a monopoly of creating those dollars, and not only that, the creation of more and more dollars is essential to the functioning of the economy.
Here are the policy implications of accepting MMT:
- governments cannot go bankrupt as long as it doesn’t borrow in another currency
- it can issue more dollars through a simple keystroke in the ledger (much like the Fed did in the Great Financial Crisis)
- it can always make all payments
- the government can always afford to buy anything for sale
- the government can always afford to get people jobs and pay wages
- government only faces two different kinds of limitations; political restraint and full employment (which causes inflation)
And in fact, Stephanie Kelton argues it is immoral to not utilize this power to fix problems in our society. From an interview she gave,
“if you think you can’t repair crumbling infrastructure or feed hungry kids, unless and until you find some money somewhere, it’s actually pretty cruel because you leave people who are struggling in a position where there are still struggling and they are hurting, and they are not properly taken care of…”
--
Regardless of whether you agree with my view or not, it doesn’t matter.
The public has woken up to the fact that supply-side-trickle-down economics is not helping them anywhere near as much as promised.
You might think these sorts of tax-cutting pro-business policies are the best thing for our economy. So be it. Reasonable people can have differing opinions. But the tide is shifting away from this belief, so it really doesn’t matter what you, or I, or even the smartest economist in the world believes.
Two questions:
1. What if the black ink belong to China and Germany for example? What if they decide to use their $ to buy up US assets and eventually own most US assets?
2. What if the "Government" is Venezuela? According to MMT, Venezuela can keep printing?
When I study the history of civilization, I found that great empires went into decline often when the empires overspent on stuff they didn't need, built an army they couldn't afford....
I am assuming when you said US assets, you are talking about US debt. Article is talking about red ink/ black ink wrt to debt.
Switch China and Germany to Jane and Joe. Jane and Joe buys up US treasury for lesser yield compared to Bank deposit means they have more confidence in US treasury compared to credit risk of the bank. Same thing applies to China and Germany, instead of retiring their own debt, they are buying US treasury instead of Turkey notes means they have more confidence in US Treasury than other riskier countries or their own. Owning more US debt is make them tied to US system more. Any default in US debt hurts them more.
MMT is very clear. Government spending is limited not by revenue, but by inflation. Venezuela and Zimbabwe don't need to apply. Currently US deficit has multiplied since the recession with US inflation target 2% yet to breach.
Agree with this one. But we have not overspent in improving the common citizens life better like infrastructure project. All the spending has gone in the form of tax cuts. All those deficit hawks during the Obama era put straight jacket in fiscal spending with revenue neutral budget. Deficit hawks suddenly gone silent, but increased the deficit with unnecessary tax cuts.
In fact monetary stimulus and fiscal austerity is worst of the both world. All it has done is made rich more richer because of the asset inflation and tax cuts. They are laughing all the way to bank, thanking the red necks in the south for all the sacrifices they made and while struggling to put food in the table, but looking out for them.
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No, use U$ to buy up US companies, real estates...., like sovereign wealth funds from Saudi, Singapore, Norway, etc.
I haven't seen sovereign fund buying entire companies. They had taken few minority stakes like Qatar fund buying 5% in American Airlines. They still have to comply with US laws and other 95% have majority vote and control of the board. I don't see any problem with it.
Regarding real estate, sovereign fund buying trophy properties and some major commercial buildings. These bigger ventures anyway need major investors for these transactions and doesn't really effect residential transactions. Buying up these properties doesn't always work out for these foreign investors. I believe Chinese purchase of Plaza hotel did not work out for them.
Having said that, buying up of residential property by foreign investors driving up the local market and squeezing out local renters is bigger issue. It has become already hot issue in Vancouver, Australia and till recently in London. Tighter regulation and increase of stamp duties or registration of these foreign buyers is working thru the system or already been implemented in those area. Critics say over regulation, but this one is needed.
Thank you for your post.
Actually I answered my own question after I posted it:
China's foreign reserves are about $3 trillion so if they want to use it to buy up the US, it will only be a small piece and probably not a big problem for now. The greater risk is using it to disrupt the financial system, in which case will do harm to both sides so I doubt that is a viable strategy either.