Beat you by 30 years - original copy on my bookshelf of "Free to Choose" (1980) by Nobel Laureate Economist Milton Friedman - some ideas he is dead right, others not so much.
Totally agree with your remarks on Friedman. I have read him too. He was , y'know , a member of Hayek's Mount Pelerin Discussion group as a young man. It was only much later that he began to appreciate the flaws in Austrian economics. Lets just say that Austrians are better at skiing, and leave it to that.
Funny how you can see the flaws in Austrian economics, been around for 100+ years, but not today's flavor of the day MMT - we can "afford" to buy a Tesla for every American, problem (not having the actual money no not that) it is that Elon can't make enough off them fast enough so says dimbulb blonde (Stephanie Kelton who else) in a NYTimes editorial the other day.
Nah. Our parents said that 40 years ago when we topped $1 trillion in debt. We feel no pain. The debt usually doubles every 10 years give or take. That's why we always have some kind of war or crisis every 10 years so we have an excuse to spend more. 1998 we were at $5 trillion debt. 2008 we were at $10 trillion. 2018 we were at $20 trillion. We got 6 more years to hit $40 trillion. Then by 2048 we'll be at $80 trillion. I think dems will try to decrease spending because they love to say "We reduced the deficit" so they'll probably go big for the last time this year and start reducing so we hit that $40 trillion debt target in 2028 without going over by too much.
I see what to me are questionable assumptions being made by some of the MMT economists when proposing certain policies, actions, or programs, but as far as seeing any flaws in MMT itself, I am unaware of any having been discovered. MMT itself is just based on fact and Treasury Fed balance sheet examination and official procedure and policy. For example, the MMT economists point out that the U.S. always money finances its deficits. This is just a fact that's very easily demonstrated from examination of balance sheets. It can't be argued. Always is a pretty strong word. However until someone turns up a single example of where we financed a deficit with borrowed money there is no choice other than to accept what the MMT economists tell us about deficit funding. When the Treasury sells securities they are just removing from reserve accounts the money the Fed previously created to cover Treasury overdrafts when the Treasury wrote checks; there is no real borrowing going on. Said another way, when the Treasury, well after it has spent newly created money, auctions associated, Treasury securities, it is just taking the new money out of reserve accounts and replacing it with Securities. The Fed can later put some of this money back into reserve accounts by buying back securities as they believe necessary to support their present monetary policy. These are facts; not opinions. They can't be argued. What's legitimate to argue about is the wisdom of certain programs and policies the MMT economists have proposed. No MMT economist, to my knowledge, has ever said we should just spend without consideration of how much or on what. Unproductive, wasteful spending could lead to undesirably high, non-discretionary spending, or inflation that's difficult to control. (If you thought Kelton was proposing that the government should buy a Tesla for everyone that wants one you likely misunderstood her. But when she said we could afford to do that, she was correct.) Private sector investments involve spending money now for more money later. But Governments may invest in things like research and education without expecting to make money. Our government has no need to make money, although sometimes government agencies do turn a profit. (The Treasury made money on TARP, for example.) The government might invest in education expecting to lower the nations costs of law enforcement and incarceration, and increase productivity. Or it might invest in high speed rail anticipating a saving in national energy costs and productivity gains. There certainly is no reason not to do these things from a cost standpoint alone. When you hear Congressmen saying "we can't afford it" that's usually code for "I'm ideologically opposed", or "the special interests I represent oppose it." Friedman famously said "Inflation is everywhere and always a monetary problem." This is true. Unfortunately it has led people to believe that big deficits are going to lead to inflation. But that's not what Friedman said, nor is it necessarily true. But regardless big deficits caused by too much spending in unproductive or harmful ways is always a bad idea. But an even worse idea is to put off spending on investments we should be making because we think we can't afford it. Sometimes we can't afford not to invest.
Its really not mind boggling. In fact we’ve been here before and what ensued was the greatest economic expansion in human history. Now I don’t know if we have the political stability to properly address the debt but it certainly is possible. Chin up.
@piezoe says that the US does not have debt. So either he is wrong, or the above chart is wrong. It cannot be both. So which is true and correct?
We have no word to describe what the treasury is doing when they appear to be borrowing due to deficit spending. What they are actually doing is not borrowing but exchanging new money created, and already spent into the economy, for Treasury securities. When they do this, the money comes out of bank reserve accounts and goes right back to the Treasury. But the money does not disappear from the private sector economy. It just changes its form into that of an interest paying, Treasury security. You and I can't do this sort of money transaction, but if we had our own money machine we might do a roughly equivalent sort of thing. Say, we wanted to buy a car for $35,000. We would go into our basement where we keep our money machine and print out $35,000. We would buy the car. Now we have the car and the car dealer has our newly printed $35,000. Then we would sell a bond with a face value of $35,000. (We would only do this if we wanted to mimic what the government does.) Now we have both the car and the $35,000 we printed, and we are obligated to give the $35,000 back to the bond purchaser, with interest, sometime in the future. When the bond matures, the bond purchaser ends up with $35,000 that we printed and we still have the car. We did create a future liability for ourselves when we sold the bond, but since, in that process, we got our 35K$ back, we could buy the bond back at any time we like and strike a match to it. The net result is we printed $35,000 and bought a car. You can see, that net, there is really no borrowing going on; only printing and buying. We will get the interest we paid the dealer by printing that too, or if we prefer, just stealing the money we need for the interest payment from our neighbor (our equivalent of taxation). One of the remarkable things that the MMT economists realized is that the U.S. always money finances its purchases and then only later appears to be borrowing when the Treasury sells securities in an equivalent amount. In other words we always buy first, and then appear to borrow. This raises a perfectly good question. If the Treasury does not have to borrow, why do they sell securities? The answer is that issue and sale of Treasury securities has nothing to do with the need to raise money. Instead, Treasury securities are essential tools of the Central bank used to control the aggregate amount of money in reserve accounts and also serve the private sector as an interest paying, zero risk store of money. (There is of course inflation risk, but there is no risk of default unless artificially created.) The only way new money, i.e., money that remains in the private sector until, and unless, it is taxed back out, gets into the private sector in the first place is via deficit spending. Once this new money gets into the economy, at can be converted to Treasury Securities. Regardless of its form, this is what economists call "outside" or "base" money. Deficits are essential when the amount of "outside" money in the private sector must be increased. By far the biggest component of what we call the money supply is, however, not outside money but rather what economists call "inside" or "credit" money. This kind of money is impermanent. It appears when a bank makes a loan and disappears when the loan is paid off. Once a person understands "outside" money, they will have no problem realizing that what we refer to as the "national debt" is simply the accumulation of deficits. Even a well run economy, if it grows, will necessarily have an accumulating deficit, one that continues to accumulate as long as the economy continues to grow. Both the mean rate at which deficits accumulate and what money is spent for are important factors. The idea of taxing to reduce a deficit that has grown too rapidly relative to GDP is not without merit, but taxing too much out of an economy too rapidly will cause a recession and possibly damaging deflation. That occurred after the First World War when Wilson wanted to promptly pay back the War debt. Wouldn't it be nice if someone who understood these things could be appointed head of CBO? I always get the feeling when listening to our budget offices heads that they haven't a clue how our money works or where it comes from.