Until I have time to get back to these other folks, here is a chapter heading I recalled having seen in Stephanie Kelton's (formally Bell) book entitled "The Deficit Myth." I had the book in my library so I looked it up this am. Apparently at least one person agrees with me! from her Website: Stephanie is a leading authority on Modern Monetary Theory, a new approach to economics that is taking the world by storm. She is considered one of the most important voices influencing the policy debate today. Her New York Times bestseller, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, shows how to break free of the flawed thinking that has hamstrung policymakers around the world. In addition to her many academic publications, she has been a contributor at Bloomberg Opinion and has written for the Financial Times, The New York Times, The Los Angeles Times, U.S. News & World Reports, CNN, and many others. Professor Kelton has worked in both academia and politics. She served as chief economist on the U.S. Senate Budget Committee (Democratic staff) in 2015 and as a senior economic adviser to Bernie Sanders’ 2016 and 2020 presidential campaigns. She is a Senior Fellow at the Schwartz Center for Economic Policy Analysis and a Professor of Economics and Public Policy at Stony Brook University. Stephanie has held Visiting Professorships at The New School for Social Research, the University of Ljubljana, and the University of Adelaide. POLITICO called her one of the 50 Most Influential Thinkers in 2016, Bloomberg listed her as one of the 50 people who defined 2019, Barron’s named her one of the 100 most influential women in finance in 2020, and Prospect Magazine listed her among the world’s top 50 thinkers in 2020. She was previously Chair of the Department of Economics at the University of Missouri, Kansas City.
US debt is real! there's no artificial about it. US pays $892 billion dollars in interest every year National Deficit | U.S. Treasury Fiscal Data "A budget deficit occurs when money going out (spending) exceeds money coming in (revenue) during a defined period. In FY2023, the federal government spent $6.13 trillion and collected $4.44 trillion in revenue, resulting in a deficit. The amount by which spending exceeds revenue, $1.70 trillion in 2023, is referred to as deficit spending." " The National Debt Explained The national debt is the amount of money the federal government has borrowed to cover the outstanding balance of expenses incurred over time. In a given fiscal year (FY), when spending (ex. money for roadways) exceeds revenue (ex. money from federal income tax), a budget deficit results. To pay for this deficit, the federal government borrows money by selling marketable securities such as Treasury bonds, bills, notes, floating rate notes, and Treasury inflation-protected securities (TIPS). The national debt is the accumulation of this borrowing along with associated interest owed to the investors who purchased these securities. As the federal government experiences reoccurring deficits, which is common, the national debt grows. Simply put, the national debt is similar to a person using a credit card for purchases and not paying off the full balance each month. The cost of purchases exceeding the amount paid off represents a deficit, while accumulated deficits over time represents a person’s overall debt "
LOL again the DEFICIT is not the issue (and never was by the way, other than for political gamesmanship and those too ignorant to know better), the THIRTYFIVETRILLIONDOLLAR AND CONTINUING TO GROW DEBT is.
I like the first part of your post, sort of, but not the second part. My opinion is that we should be very much concerned about the rate at which the aggregate deficit grows. Which is the same as saying we need to be concerned about the total amount of money in the private sector and its growth rate (relative to aggregate productivity of course.) Ersatz debt and deficit are linked, penny for penny, initially at least. Then later the Fed may reduce ersatz debt by converting it to bank reserves via open market operations, and vice versa. If the Fed buys securities then the national, ersatz debt decreases (assuming only the securities owned by the private sector are considered government "debt".) Accordingly, when the Fed sells Treasury securities to the private sector, ersatz debt increases while private sector demand accounts of primary dealers and banks are debited and private sector savings accounts are credited. The accounting reveals these open market operations amount to swapping, back and forth, money in a form that doesn't pay interest for money in a form that does. The Fed does this, according to its current monetary policy, because one form may add to the M2 money supply, whereas the other form doesn't. Someone who doesn't understand that the Treasury and the Fed are coordinated government agencies will never be able to understand any of this. Believe it or not, there are people here who think that the Fed is (still) a private for profit bank. (I'm not kidding! One of these is our own 'Overnite'; one of my favorite posters by the way.) ____________ * All money issued by the government, regardless of form, is a government liability when in the private sector.
This is of course what we read and are told by politicians over and over. It will take many years for this to be corrected. What we read was correct many years ago. It is wrong today however, because we no longer borrow from the private sector to cover deficit spending, and the U.S. government has no debt in anything like the conventional meaning. Nowadays new money is "printed" and spent into the economy in amounts equal to revenue shortfalls. Then later, Treasury Securities are auctioned in amounts equal to the new money already printed and spent. The sale of securities of course removes the new money from the economy and replaces it with securities. Then the Fed will adjust the ratio of securities in the economy to transactional money via open market operations. Recognition that Treasury Securities serve an entirely different purpose than the raising of money, and that Tax revenue is not necessary for the government to spend, is an achievement of the 20th Century's MMT economists. I am reminded of a parallel situation in another discipline. Many of you will have taken an introductory course in College Chemistry. You were taught that, by use of d-orbitals, third period elements could form compounds with second period elements in which there are more than 8 electrons participating in bonding to the third period element . Formation of Phosphorus pentachloride would be one of many examples. Today every introductory, college level, chemistry textbook will show beautiful d-orbital probability diagrams for the five d-orbitals in conjunction with the explanation for the formation of 3rd-period, hypervalent compounds, despite it being know for more than 40 years that 3d orbitals lie too high in energy to be involved in binding in the 3rd period. (There is no question of their involvement in the 4th period however.) Today we have a 3-center bonding model that explains the bonding in 3rd period hypervalent compounds; yet, ~60 years after the 3-Center model became widely accepted, 100% of the textbooks remain incorrect, and the majority of Chemists still believe d-orbitals are involved in formation of 3rd period hypervalent compounds. This illustrates how very, very long clearly incorrect information can persist once it becomes widely embedded in the literature. (see: Why life exists. MJS Dewar, E Healy. Organometallics 1 (12), 1705-1708, 1982. 89, 1982) Today we have a very similar situation with regard to how deficits are financed by governments with great sovereignty over the money they issue. Its already been at least 40 years since it's been known that the U.S. no longer borrows from the private sector to cover deficits, and yet the myth persists! How long will it take for us to get this right? I have no idea.
I should have added to my previous ... continuing to grow (and grow and grow as a % of GDP). Ersatz air quotes lol or otherwise.
Of course the aggregate of deficits grows. Trying to understand why the aggregate grows, and MUST grow, is one of the points of our discussion here. Once this sinks in with each one of us we will stop talking past each another. Now I see real light at the end of this long dark tunnel of ignorance and weak thinking. Your astute comment in Bold Red Type tells me that our discussion is not for naught. I have made the point many times now that the deficit must grow so long as the economy grows. Obviously, then, what we should concern ourselves with is how much should it grow and at what rate; yet our knowledge may be insufficient to properly deal with this issue. How much U.S. Money must we create via deficits to supply not just the U.S. economy but all of the users of U.S. money around the world? Because Dexter White won the argument he had with John Keynes at Bretton Woods, we are obligated to supply sufficient Dollars to maintain the Dollar's status as a main reserve currency. This, it seems, has forced us to supply much more money than would be needed to serve only the U.S. economy. The Dollar's role as a reserve currency has also necessitated running both a trade imbalance and a payment imbalance. And too, we must make sufficient U.S. Treasury securities available to Central Banks to protect their excess Dollar Reserves from inflation. In considering how rapidly we must expand the supply of outside U.S. money, we must keep in mind that temporary inside money from credit issuance always overwhelms the outside money created via U.S. deficits. The latter is of course heavily dependent on demand which ebbs and flows according to interest rates and the health of economies worldwide. There will be plenty of work for the Fed's army of PhD economists. This matter of just how much deficit spending is required is a problem never considered by our Congress. They arrive at deficits spontaneously as a consequence of wanting to spend but not wanting to tax. This is yet another problem that could interfere with application of carefully considered principles of money supply management. We intuitively believe our deficits are way too high, but intuition is a poor substitute for fact. Thank you for your post.
MMT is hiding behind a dishonest accounting of inflation, as well as a complete denial of responsibility for the spillover effects causing massive price distortions in domestic credit markets. LOL that this retard (book promoter) says debts aren't real. Tell that to Japan. Aggressive deficits may very well induce competitive growth (GDP) with respect to a competing nation. However, there are very serious consequences.
Obviously. The rest I didn't bother with, as usual you ramble on unnecessarily. To make a point doesn't require paragraph after paragraph of needless nothingness. It ain't that hard. The debt vs GDP is growing by an ever greater percentage. Currently, around 125%. Period. You can say it doesn't matter all that much. Even if it gets to 200%, 300%, 400%. Fine. And all the other rose-colored glasses wearer MMT's too. The rest of us think differently. Stop trying to convert us.