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MMT is an insane idea. Running up deficits with government spending will necessarily deflate currency.
We (humans) have been here before. The US isn't the first country to debase its own currency. We won't be the last.
Newly printed money is outcompeting labor for the ownership of every asset class, including housing. It is unconscionable and indefensible.
I highly recommend the book "The Price of Time" by Edward Chancellor
again, I'm no economist and have no idea. What I do know is that people have been screaming at me for 40 years how we're destroying ourselves with debt, and we still haven't. So if some here in this thread are screaming the same, pardon me if I have a hard time believing them.Quote:
Originally Posted by J. Barron DeJong
Inflation is back to reasonable levels and the USD over 10 years trumped any other currency in the world.Quote:
Originally Posted by Kevo
As for MMT the problem is that they are 2 parts: 1- deficits don’t matter UNTIL there is inflation. 2- raise taxes to kill inflation. Part 2, the often ignored part, is completely unpalatable in the US so we should abstain from part 1.
America tried MMT in the late 60s / early 70s, and it failed. That was before my time and you were just a kid so maybe boomers can fill us in on what living through latter 70s / early 80s stagflation was like. Our more recent inflation ills give us a taste of what MMT'ers would do to us if they had their way.Quote:
Originally Posted by Danno
Going back even further Weimar Germany is the canonical example. The part that is often left out is the fact Weimar righted the ship and got spending & inflation under control but by that time it was too late to prevent a radicalized labor force ushering in political violence and the Hitler putsch.
Developing countries have also seen their economies destroyed by too much debt followed by attempts to monetize it. Venezuela started out with a left-wing spending agenda only to find itself mired in constant political turmoil. Albeit, MMT'ers blame America for that situation too.
I’m one of those people who’s always saying that debt fears are overblown. And you can look at Japan as an example of a country having significantly higher debt without catastrophic, or even significant harm.Quote:
Originally Posted by Danno
But I don’t think there are any serious economists out there who would say it wouldn’t be a problem is the US debt was, say, ten times as big as it is now.
My take us that the us debt is just like my personal debtQuote:
Originally Posted by Danno
I got at least 80k in credit card limits so I decide to take a year off and not work
I have 10k in cash
I start using credit cards to live off instead of working
I use the 10k to make my minimum monthly payments
After 1.5 years w no work and 80k in debt from maxed cc the 10k in savings is spent making minimum payments
I start working again but can't afford to pay off the debt
Eventually there is a breaking point in my life same w the govt
Since this is the stock market thread, one might argue debt fears were not overblown given it took 35 years, up until this year in fact, for the Tokyo Stock Exchange Nikkei average to finally surpass its previous high set in 1989. A slow growth economy may well work culturally for a country like Japan but not culturally for a country like America.Quote:
Originally Posted by J. Barron DeJong
Actually, while I am no economist, I know that this is absolutely not the case (govt debt being like personal debt), and if there is a breaking point, we haven't come close to hitting it yet.Quote:
Originally Posted by fastfred
The way to look at government debt is as the price level adjusting so the real value of the debt matches the expected value of an economy's economic surpluses. In other words, inflation outside of “supply & demand shocks” happens when debt holders lose faith in being repaid in real not nominal terms.
So three scenarios in Danno's working lifetime:
1) Surplus = No Inflation. The rise in debt since the late 80s didn't lead to inflation because high economic surplus led to expectations of real returns on debt repayment.
2) Deficit followed by eventual future expected surplus = Deflation . From 2008-2020 we saw a long period of negative real interest rates on debt which meant the government could borrow without having an effect on inflation as real interest rate fell. In a deflationary environment bondholders expect a positive future real return.
3) Deficit followed by low faith in expected surplus = High Inflation . From 2021-2024 inflation surged after the US government borrowed around $5 trillion dollars, increasing U.S. outstanding debt by a third. Inflation surged first due to supply shocks and then due to the fiscal shock of the massive increase in debt. Inflation abated somewhat because the rapid rise in inflation monetized about 25 percent of pandemic debt issue.
In a nutshell, it all comes down faith in the US government's willingness to promote economic growth.
Spend 7$ and watch the doc. She makes some interesting points as to the origin of taxation, fear mongering w he term national debt, etc
Also an interesting take on taxing the ultra wealthy: amassing bezos level dollars makes the ledger system that is the usd unbalanced and threatens the health of the system.
I'm already familiar with her arguments. They start out with simple truths followed by pretzel logic.
It's true the government can't go broke b/c it can simply print more money. But if the government prints too much money and issues too much debt then that lowers future expectations of repayment and we get inflation.
Whereas she says government spending can happen simply with more money printing. The things government can do are nearly endless. And there's no need for taxes. Taxes exist not to cover the cost of government spending, but to distribute wealth and lessen inequality. Taxes, according to her, also exist to create demand for currency.
That's where her argument turns into circular pretzels. The government prints new money. Taxes suction up the money to control inflation. Which means, wait for it, the spending is paid for with taxes! And to cover the debt from currency issuance, the government can simply issue new currency with the Fed not paying any interest on reserves.
Which begs the question why anyone would trade debt for assets that don't pay interest? Why would anyone postpone consumption today (in other words save) when there's no future return? MMT'ers response is banks don't lend deposits anyway so it doesn't matter. When people correctly state banks need deposits to lend and go to great lengths to attract deposits, all the MMT arguments essentially fall apart.
^thank you for clarifying her position MV
Yeah my post was just a general watch the doc. I agree many points are wack and assume this cavalier "gov issues currency no biggie" attitude.
I did find some points interesting re debt, rallying resources, etc. the way most ppl think about the national debt, myself included, is rethought in this theory.
The yen is in serious trouble, in fact, it may kick off a dumping of treasuries. Same in china. They’re buying up the gold. All of which, will fuck us.Quote:
Originally Posted by MultiVerse
I’ve heard the opposite too. As currency and economies flounder the dollar and therefore treasury still get bid.Quote:
Originally Posted by Cono Este
Also with regard to trade and service wages. That can change pretty fast especially if housing and auto weaken. Starbucks for example is struggling. They could easily close a lot of stores in a cut to grow strategy.
This last spike up in mortgage rates really hurt home buyer sentiment and drove many out of the market.
Most of the budget hole is from GW and Trump tax changes. Change those back and we'd be in fine shape. As a reminder, as GW entered office there was a surplus.Quote:
Originally Posted by Danno
Quoted for truth.Quote:
Originally Posted by schuss
Sent from my iPhone using TGR Forums
What are the implications of this?
Freddie and FHFA to enter secondary mortgage HEL market...
https://www.ft.com/content/1d287e0c-...1-9da157b50101
Do you have a way to share the article for free?Quote:
Originally Posted by summit
https://archive.ph/Quote:
Originally Posted by muted reborn
You're welcome. :D
The reverse carry trade is being slapped on hard right now and paying. Some say it will ultimately create a credit event.Quote:
Originally Posted by 4matic
My own amateur theory is that as long as so many countries want US dollars to park money safely, the US can run up its deficits without much consequence (maybe there are some limits on that, but like you, this has been an issue we've all heard about since birth). Will that change in our lifetime? I can't say. Regardless, with high interest rates, servicing our debt is going to tough and may require us to raise taxes. Yet, as long as U.S. Treasuries remain in high demand, I doubt the debt apocalypse will occur.Quote:
Originally Posted by Danno
A lot of countries are buying gold instead of treasuries now
Sent from my moto g 5G using Tapatalk
I think it's both and the interest in gold has been cyclical. The U.S. dollar remains the most widely held reserve currency. I read somewhere that central banks around the globe held over half of their reserves in U.S. dollars.
The dollar is stronger than ever against most other countries. China is in fact trying to do the opposite of what Rod is claiming. China doesn't want to see its currency further depreciate against the dollar because China wants to avoid a trade war, for now: " A perceived policy of currency depreciation would doubtless incur hostile reactions from the US — particularly under another Donald Trump administration — and the EU."
https://www.ft.com/content/3b127b6e-...8-d0ddec21b587
FWIW large deficits don't have to be apocalyptic to cause problems, today's high real interest rates are directly associated with large budget deficits.