MMT & the "deficit" debate

[El Prezidente Kaboom]

MMT- Modern Monetary Theory

Kaboom here. Back in black.
Folks, I don't know how to say this, but I've come to a basic conclusion: You, me, and everybody else, WE'RE ALL IDIOTS! This goes for Democrats and Republicans...elites, middle class, and poor folk alike. I don't give a damn.
Why do I say this? Because most of us barely have any understanding of our nation's financial system or THE 4TH BRANCH OF THE US GOVERNMENT. And this includes some of the people in charge.

MMT is something that I was exposed to a long time ago, but it's truly taken a very long time for me to conceptualize and accept in my own mind.
From the get-go, conservatives are going to be frightened..but all I have to say to that is BLAME YOURSELVES. This is in fact your system...your neo-liberal banker-politicians have been in charge of designing it and running it for over 40 years.


Basic principles of MMT:
1. Federal government is not a household. It's a sovereign issuer of its own currency.
2. Federal government spends before it taxes.
3. Taxes do not pay for spending. Taxes manage demand and create demand for our currency.
4. Bonds do not finance deficits. Bond issuance acts as a reserve drain to allow the Fed to manage interest rates. Bond auctions are highly orchestrated...Treasury + Fed are targeting reserves they know are in the system...as a result of deficit spending.
3&4 consolidated: Taxes and bonds are not fiscal financing tools.
5. Bonds are like opening a savings account with the Treasury + Central Bank.

Now MMT is not about ideology or making value choices. It's focus is on understanding how the system actually works.
From this reality, conservatives and liberals are welcome to suggesting different policy routes...and there are left-right divisions amongst those who accept MMT. But the federal government is not a household, and MMT holds that anyone who suggests policy from that basis is dead wrong.

The US Congress might be broken..but until revolution or high-water the USG is never broke! The Treasury is open...the economy is operating at 13-14 trillion annually....and we got problems that austerity is not going to fix. For conservatives who're afraid of inflation....make the rich pay more in taxes.....high marginal Bush-era tax cuts are loading up world markets with excess funds to speculate and bid up prices! But for god-sakes don't make government run a surplus! Net government sectoral balances=net private sectoral balances!
A balance budget amendment would be national suicide. The system needs government "deficit" spending to add net private gains and credibility to the private financial system.

The problem is the government's response to the financial crisis has been more Monetarism than Keynesian. From the top-down...as opposed to the bottom-up.
Until unemployment drops....the FEAR BUBBLE will continue to drive our politics and our economy.

MMT doesn't say gov't can spend, spend, spend without at some point losing the faith and trust of markets and the governed. But "deficit" spending is functionally necessary to grow the economy and it is vital in times of output gaps like ours now.

UNEMPLOYMENT IS THE FUCKING PROBLEM!


So here's a link to a post on Naked Capitalism about MMT.
MMT: A Primer on the Operational Realities of the Monetary System
by Scott Fullwiler...associate economics professor at Wartburg College
http://www.nakedcapitalism.com/2010/08/guest-post-modern-monetary-theory-%E2%80%94-a-primer-on-the-operational-realities-of-the-monetary-system.html


One can Google ...Modern Monetary Theory.... and find a lot more information.

Kaboom

[Festivito]

1. Me thinks this is a bunch of hoo-ha.

It's long, folksy (which isn't a complement), and refers to more long passages.

Truth by being long-winded.

And, the basic hope seems to be: keep a national debt, i.e., don't pay it down.

That means, keep under the thumb of the rich folk and never let yourself up.

hoo-ha!

[El Prezidente Kaboom]

2. hoo-ha?

My point is there is no national "debt." There are net-world dollar denominated savings. The US debt clock in New York is not measuring what "taxpayers" owe....it's measuring what investors have saved!
Debt issuance does not "fund" government spending!
We have been sold a package of "noble lies"!

[girl gone mad]

3. It's not hoo-ha, and there's really nothing controversial about it.

It's basically standard double-entry bookkeeping.

MMTers actually argue that we should get rid of the Fed and get rich people out of the middle of our transactions, btw. A sovereign currency government has no need to borrow its own fiat currency.