LateMechanic
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User ID: 1841
LateMechanic
3mo ago
MMT just gives the descriptive reality & logic of how things work now and throughout history, including how the base interest rate is simply a policy tool to subsidize savings (which can be set at 0% any time we desire to not pay that subsidy). Argentina is currently serving as a good example of why giving savers free money, in proportion to how much money they already have (increasing the interest rate), is probably not the tool you're looking for if you want to combat inflation (shocked pikachu there). As for the USD inflation, it appears that most currencies around the world experienced about the same cost-push inflation coming out of covid, while having fairly disparate levels of counter-cyclical fiscal injections and unemployment levels, so it's not as obvious as it may seem.
The Greece point is that the conversation was simply incoherent just 10-15 years ago, but has moved significantly toward productive correct debates about the preferred size of government and inflation constraints, rather than a fear of large numbers and negative-sounding words debt & deficit. So that's my prediction that the world is moving farther away from arbitrary limit rules on those, rather than looking to embrace the wisdom of Germany in 2009 or 1992.
LateMechanic
6mo ago
Oh inflation, yeah that will continue and definitely feeds into exchange rates when different from other currencies. In the story about how people thought $100 million was too much government debt in the early 1800s, then $2-3 billion sounded crazy after the civil war, then $20 billion, $1 trillion, $30 trillion, etc., that's obviously also underscoring that over time inflation changes the value of a single dollar. All the prices just have to adjust, which can be annoying and unpleasant but not apocalyptic, especially if the inflation is fairly low/constant over short time frames.
If you print money, then each dollar is going to be less valuable. Increasing the supply of something reduces its price. Say the US printed $50 trillion tomorrow. The value of the USD would fall compared to foreign currencies because each dollar would be worth less
Although more accurately the identity is MV≡PQ where all parts can be independent, bringing in quantity of goods sold and especially velocity, which both can't simply be assumed to be fixed. So if the $50 trillion is issued (and counted in whatever monetary aggregate you want to use) but it just sits in an account, then you can say that M went way up and V went way down, with the price level unaffected.
If the hypothetical is that the government actually pushes out $50 trillion in spending tomorrow, it would massively juice GDP and also a ton would come back in taxes, but yeah the price level would adjust well upward from that kind of shock (with some short-term chaos) and the exchange rate would move accordingly (or more). The question for importing though (and the economy in general) isn't what a single dollar can buy, but what all the dollars can buy. And as for americans themselves, some may wish to say 'this isn't worth the paper it's printed on anymore', but they still have to pay taxes every year payable only in USD, and pretty soon in this hypothetical, the median annual income tax bill might go from ~$15k to $100k+.
There just isn't evidence that inflation or national debt are disastrous powder kegs waiting to explode. On the other hand, every time the national debt was significantly reduced, it ended with our only depressions. Which makes sense, because the government debt is simultaneously the non-government net savings, and things get dicey when you drain the savings from the private sector and force up private debt:
In its first 150 years, the government periodically undertook systematic multi-year reductions in the national debt by taking in more revenues than it spent.
Each of six such sustained periods led to one of the six major depressions in our history. The last three of these crashes were the truly significant depressions of the industrial era.
This is the record:
- 1817-21: In five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.
- 1823-36: In 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.
- 1852-57: In six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857..
- 1867-73: In seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.
- 1880-93: In 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.
- 1920-30: In 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.
What happens when they stop buying US bonds because they know that the only thing backing US bonds is more US bonds to be printed in future years?
That's the 'bond vigilantes' threat story, but it's just not a relevant factor in the real world of governments that issue their own currency and have their own central banks. Even with the self-imposed legal constraint that the Fed can't directly buy treasury bonds at auction or let the treasury's reserve account go negative/overdraft, they still effectively make sure that every single treasury auction goes off without a hitch at the policy rate (even 0% forever if they want). The NYFed manages primary dealer commercial banks who are tasked with this, in order to circumvent the law against 'direct' central bank funding.
Look at how much govt revenue the US is spending just on paying interest.
Yeah I think it's crazy as well, although mainly because I find the argument compelling that they're currently wrong about whether low rates are inflationary / high rates are disinflationary, and that there's good evidence that it's the reverse (so all those years of 0% interest but they couldn't get inflation up to target 2%, and now years of inflation sparked by supply chain issues that stubbornly won't come down no matter how high they raise rates). Precisely because the government is a massive net payer of interest, so raising rates increases government spending, which we would expect to be expansionary not contractionary.
I'd agree with a policy of just setting the FFR at 0-1% and leaving it there, because it's just not a cleanly useful policy lever, and we shouldn't otherwise have any goal of the government subsidizing risk-free savings by choosing to pay interest.
LateMechanic
9mo ago
Just noting, something in the last day or so broke that collapse/uncollapse functionality on this waterfox classic browser (both the +/- signs and the vertical bars)
LateMechanic
3mo ago
I mean it'll stop the specific problem they had with corruption, which was taking on debt and spending it all on politically connected patrons rather than investing it into more productive uses.
It just doesn't really sound like reality here to me, talking about huge complex government budgets like this. Is the premise something like, they'll do all the necessary & proper spending first, and then at the end of that, if they are still allowed to issue some more bonds before hitting some limit (with some kind of timing, like the last day of each period?), then they'll max that out and give the money out to the cronies? So the hall-monitors from other countries try to perfectly set a limit on them in order to just allow enough for the proper spending which should be prioritized? If the leadership is simply corrupt and untrustworthy, why wouldn't all that 'favored' spending be mixed in with all the 'proper' spending, and the distinction being possibly subjective anyway?
Good governance is hard and I don't know all the ways that other countries and US states for example try to deal with these. The euro monetary union countries definitely have a tricky setup to deal with, without a 'united states of europe' fiscal authority. I can imagine the psychology of being in other countries and feeling a lack of trust of others' behavior. It just seems like everyone is moving away from thinking that arbitrary limits on the fiscal outcomes are workable solutions.
This might be beyond me. What do you mean?
That chart of sectoral balances is the fastest way to really intuitively understand that financial assets are zero-sum. So when we talk about the government deficit, we're simultaneously talking about the non-government's surplus. You can slice everything into any number of different sectors, but a common useful separation is 'government' vs 'domestic private sector' vs 'external / rest of world' sectors.
What we find is that the private sector really wants to be running a surplus at almost all times, because people like to build up savings for security. So that's why in general the government almost always has to be running a deficit, injecting financial assets (money, bonds) into the economy. When the private sector is in deficit, that means people are collectively spending down savings and/or running up private debt, and we see it tends to end with a significant recession where the private sector forces itself back into surplus by cutting spending.
(The other source of financial assets would be the external sector, where a net exporting country runs a trade surplus. Then you could potentially have the domestic private sector and the government both in surplus potentially. On the flipside, if a country is running a trade deficit, then their government deficits need to be even larger in order for the private sector to be in surplus.)
So this is the dynamic 'savings desire' of the private sector. The behavior could be affected by various psychological, historical, cultural factors, and could be incentivized or disincentivized by stuff like tax-advantaged retirement saving, etc. We might find that the Japanese people lose trust in saving for the future by buying stocks, and instead they largely want to build up huge monetary savings for retirement, which could cause the japanese government to need to issue a massive amount of bonds & currency for people to sit on (without any inflationary effect, just having to solve the paradox of thrift and fight off deflation).
I don't think you can chalk it up to aesthetic preferences - for Greece specifically we have the comparison of the modern day vs the post war era up till the oil crisis, during which they kept the budget controlled and growth was steady and reliable.
Going off some Greek sectoral balance charts here (which I would prefer to be flipped around 0 to look more useful) and from the paper they're quoting from. It looks like Greece had a moderate government deficit but their trade balance turned to deficit in the late 90s, which pushed their domestic private sector into significant deficit, probably running up a lot of private debt. Similar to the US at the time in the late clinton-era. Then Greece adopted the euro and was locked into effectively a currency peg with the likes of Germany, which essentially made the trade deficit structural from then on.
So then, during and after the financial crisis and great recession, the private sector was hammered and was trying to de-leverage and rebuild savings, which by necessity is going to force the government into massive deficit (as tax revenue falls and safety net spending rises, the normal automatic stabilizer reasons for this).
If the main moral failing (causing a larger headline government deficit number) turned out to be that they were running a trade deficit and had been suffering a private deficit for a decade, it doesn't really seem that damning. Hard to make corruption & profligacy actually work as a macro story (though I'm sure it's plentiful at the micro level).
LateMechanic
3mo ago
Yeah there's nothing stopping anyone from doing a bad job running a government, but I'm skeptical that austerity is going to significantly hamper the corrupt actors anyway. That often seemed more like a 'just-world' convenient justification in each of the sovereign debt sagas. Greece would have been fine (at least in this sovereign debt regard) if they hadn't given up the drachma, and they ended up fine once the ECB finally realized it was their job to simply fully back all member states.
Any government will need to have various checks against spending getting out of control, such as having a proper budgeting and auditing process. But once you land on the size of government desired, the taxes and especially the debt & deficit are just dynamically emergent results based on the private sector's savings desire and the level of exporting. Net exporters acting like their lower deficits are evidence of good sense & morality is more of that just-world confusion. Trying to force a country to shoot themselves in the foot economically based on those debt/deficit outcomes being too large for someone's aesthetic preference (or bad faith justification) is a destructive angle that it seems people are not falling for as much anymore.
LateMechanic
3mo ago
Agreed on all counts I think. But despite the rage and desire to punish, they did have to accept the economic reality and Draghi finally set it right in 2012 with the "whatever it takes" admission, which was correcting the first main issue. Then I think since covid and looking at the 15 years of poor growth, they've been coming around on the problems with deficit limits, which is the second big economic problem. These things reflect what necessary compromises had to be made 30 years ago to get buy-in, and what were the dominant narratives at the time (where central bankers and monetary policy were seen as sufficient wizardry to manage an economy).
LateMechanic
6mo ago
From wikipedia:
Hmm what someone wrote there sounds like some kind of narrative argument based around fixed exchange rates, but not very relevant in the world of floating currencies. Like when Soros 'Broke the Bank of England', he was specifically targeting their policy peg, and eventually forced them to abandon it and let it float.
As for net-exporting in order to have a stronger currency, that's kind of a self-correcting system with floating exchanges. Countries that want to keep a current account surplus (in order to target export-led demand growth) have to continually buy up foreign reserves and leave them untouched in bank accounts, in order to devalue their own currency to keep their exports competitive, like Japan and then China have done. And the countries on the receiving end like the US have foreign countries intentionally 'saving' in our currency like this, basically benefit for free (as long as we don't succumb to a fear of big numbers from the required government deficit, as the previous FRED graph showed in red, in order for green & blue to both be positive).
But I would say it's still unclear just how exchange rates are at all enabling or making space for borrowing or printing domestically. There just isn't a mechanism there. For the interest rate, the government raising their own interest rate can increase the deficit, but monetary policy can't exactly discipline fiscal policy in any way. The government has the power to levy taxes, has its own currency, and has its own central bank, so I'd think the debt that's gone up for centuries should be able to continue at pace without any economic armageddon.
LateMechanic
6mo ago
What's the premise that a current account surplus allows higher government deficits? It should be the other way around: a current account surplus is the only way you can get away with running a government surplus. Otherwise, if the foreign sector is saving in your currency, and the domestic private sector always wants to net save, then the government has to run even larger deficits because it's all zero sum.
If the government is unwilling to run those deficits, then the domestic private sector would be hammered and run down savings / run up private debt like in the late clinton years until 2008 finally blew up: https://fred.stlouisfed.org/graph/?g=k16a
People aren't going to trade real goods and services for bits of paper forever, no matter how classy and prestigious those bits of paper might be.
Well, people also said that when a million dollar debt was a large amount, and then when a billion dollar debt sounded like a lot, and then again when a trillion sounded like a lot. Historically it does look like this can go on perpetually unless the economy stops working for people pragmatically, fear of large numbers or not.
LateMechanic
3mo ago
To be honest, intuitively I would have expected more correlation. But as far as this chart goes, the x-axis doesn't really look like what I'd expect, with almost all countries clumped closely together between .01 and .05, whatever those refer to (I was under the impression covid stimulus varied a lot more, like these charts show). Tracking down this paper from your twitter screenshot, this is Robert Barro who is apparently still interested in his old bizarre idea of ricardian equivalence, where consumers are supposed to be rational agents and thus should respond to government deficits by saving money instead of spending it because they know they (or their descendants) will pay more taxes in the future at some point...So I imagine that explains the strange x-axis here, working in extra variables that are relevant to him wanting to test his specific ideas about rational consumers looking at debt ratios and duration.
LateMechanic
7mo ago
no mainstream conservative figure like a Ben Shapiro or a Steven Crowder has reviewed it or interviewed him.
I was randomly looking up Adam Carolla's podcast yesterday and watched a recent episode, which happened to feature Hanania and his book, so I just assumed he's been making the rounds. He was good and fit in fine as a guest with only a little bit of airtime, although it looks like the youtube views at least are only around 20k per episode (probably better numbers for other audio-only spots).
LateMechanic
7mo ago
Yeah was going to say this. Probably one reason reddit doesn't let mods see author-deleted comments is because there's such a simple workaround extra step (edit to blank or something useless), which only distinguishes between people who know to use it or not. Then again, there are other tools like RSS which pick up the initial posts/comments, so it still is a bit like email where once you've hit 'send', it's out there.
Meanwhile the nice thing about this codebase's change is that you still have access to your own deleted posts (in gray) and can easily 'undelete', which must be similar to what the mods see.
LateMechanic
7mo ago
The real magic here is in the fact they sell miles from their loyalty programs to other companies (like AA to Hertz) so they get the incentive benefits. These are sold at a markup
I think that's a smart evolution of the business, although I wouldn't say there's any particular magic in this step either. This still falls under the universal logic of IOU issuance: anyone can issue their own IOUs (printed from nothing) and decide both what it takes to get one and what the redemption value will be.
I guess what moves it to feel more 'bank-like' is that the airlines take tracking accounts in their database very seriously, compared to less serious bearer punch-cards for free Subway sandwiches or whatever. And flights are more universally desirable, compared to more subjective businesses. Maybe I will use Hertz instead of Avis if it's giving me $X towards my next flight on my usual airline, but for some reason if they were partnered with Mcdonalds reward points, it would take a lot more than $X to move the needle.
LateMechanic
9mo ago
Awesome, thanks! Interesting to hear what that compatibility issue was (sounds like a handy operator). I probably do need to jump to Basilisk or just finally give up on XUL addons and go back to Firefox, but you may have given me a final stay of execution
Yep I get it, and I'm resigned to using different browsers for a few sites that break over time. Just seems crazy that simple things can be incompatible, but I don't know my way around javascript or github to spot how after working forever, now onclick "collapse_comment" reference could be not defined for me starting ~2 days ago. edit: I think a version update will fix it on my end, so all good
LateMechanic
1yr ago
Nah it really must be more ideological, or something else like that. To the extent any journalist or economist was speculating that the Fed wants to avoid paying interest on excess reserves, they would be flatly incorrect. Central bank reserves are a closed system, so to the extent that a narrow bank is attracting them, that's just a flow from other banks where they were beforehand. The central bank is paying the same interest out either way. Other non-depository institutions (who aren't eligible for IOR) using reverse-repos to get (nearly) the base interest rate is just a workaround to help smooth out the system (ineligible because of congressional rules; the central bank would almost certainly prefer to pay it out in as simple a fashion as possible).
And the central bank is not trying to avoid paying out interest -- it's a policy choice in the first place to pay IOR (that's the whole rate maintenance regime now: instead of using open-market-operations to maintain a positive interest rate, they simply flood the system with excess reserves and pay interest on them directly, which is way simpler). It sounds like the Fed had been narrowing the gap between ceiling and floor rates anyway, because they never were using that lower rate to try to really save money or whatever.
LateMechanic
1yr ago
So what explains this 16% difference other than some portion of those younger women dating older men?
One other nudge is that basically every year, 5% more males are born than females, and by early twenties, there are still ~4% more 'excess males' (funny word choice in that PDF, with different contexts). By age 40 it's down to more like 2% more men still alive than women.
LateMechanic
1mo ago
There's something to be said that the current backwards-compatible syntax for modern C++ will get unwieldy, but there has already been public discussion of attempts to make breaking revisions to it: see Sutter's proposal for cppfront.
And I think the other main one currently would be google's Carbon, which is an experiment from the google LLVM/clang crowd, from their frustration with the c++ committee's hesitance to do breaking changes. They're trying to use good ideas from Rust and others, in a way that's interoperable with c++ files & libraries. Although I haven't heard much about it lately.
Strange yes, although I realized it was very similar to how the stackexchange sites broke backward compatibility with older browsers 1-2 years ago for comment collapsing/uncollapsing. And I knew that was fixed for waterfox in a later update. So I just tested it and found the release was 2022.06 where they said "Web compatibility improvements to fix breakages across a variety of websites". In waterfox v2022.04 comment collapsing is broken on stackoverflow and in the new motte as of a few days ago, but both working fine in v2022.06. Just unfortunate for me because that's all after the 2021.09 version update which made their whole browser way slower, which kind of defeats half the purpose of using an older nonstandard browser.
LateMechanic
10mo ago
Here was the list I was using, pulling the comparable big-budget entries (although missed Alice in Wonderland from 2010 which I guess actually was the success that caused them to lean into this approach).
Mulan is a weird one that just can't be compared box-office-wise, because it was scheduled for March 2020 and went through a number of postponements until the theatrical release was simply scrapped and it was dumped on streaming.
The point is that for many people who haven't been paying as much attention, one might think that TLM is comparable to Cowboy Bebop or Dragonball and maybe people just don't like these. But we're a decade into this being one major pillar of disney's huge blockbuster release strategy (right up there with marvel & star wars) which had led to their box office domination high-point by 2019. The whole 'Walt Disney Pictures' division basically transformed into just making these, and up until the pandemic I don't think it could be described as anything other than an insane success. So now if it's starting to falter like star wars, marvel, pixar, and walt disney animation all are, that's definitely a possible culture-war hot spot.
Disney’s live-action division, which once struggled through an identity crisis and pricey flops like John Carter and The Lone Ranger, has found its sweet spot. The musical casts a light on an unsung part of the Disney moviemaking machine that has learned to lean in heavily on the live-action adaptations of beloved Disney-branded animated films. The label, which had two Pirates Of The Caribbean sequels in the billion-dollar club, notched its third with the Tim Burton-directed Johnny Depp-starrer Alice In Wonderland. It now seems a matter of time before Beauty And The Beast becomes its fourth. While a sequel to Alice failed — it was made even when Burton said no — The Jungle Book nearly cracked the billion-dollar mark with $966 million in global ticket sales.
Beauty And The Beast is just the latest example of a philosophical change within Disney’s most overshadowed silo. The baseball equivalent of Bailey’s mission statement is basically, be disciplined enough not to swing at bad pitches outside the strike zone. That wheelhouse has increasingly become about recapturing the animation library magic with live-action films, ideally supplying one or more of the three tentpole-sized annual films the division generates (supplemented by one or two films whose under $100 million budgets are far lower than the big pictures carry).
...
In a conversation Monday, Bailey credited the division’s escalating success rate to the silo system instituted by Disney chairman Bob Iger and managed by Alan Horn, the former longtime Warner Bros chief who stabilized a static operation and infused his own moral sensibilities on the slate. It is a program where each division stays in its own lane and isn’t pressured to make more movies than its marketing machine can handle, while maintaining quality controls. This differs from some studios that seem to be bent on filling a high number of films on a slate. Disney’s annual collective output usually doesn’t exceed a dozen. But eight of those Disney films are global blockbusters that suck all the oxygen out of the box office when they are released.
The collective results have turned Disney into the most consistently dominant studio Hollywood has seen in the modern era, to the point where it now dictates the release calendar, at least the most desirable summer and holiday corridors. Date a Pixar, Marvel superhero, Star Wars sequel/spinoff, Disney Animation or live-action animated film remake, and it is likely that other studios will then have to work around it.
Personally I think the only one of any of these I've seen is the Jungle Book, just because it was that strange situation where two different studios put out new jungle book adaptations at the same time.
LateMechanic
1yr ago
Not an apocalypse for anybody with a skill set that can exist completely independent of the internet
Basically claiming that anyone who relies on the Internet is gonna get fukt, and they should cry about it.
Just pointing out, your interpretation there doesn't quite check out logically. It would only be a motte/bailey when mischaracterized like that.
LateMechanic
1yr ago
Yep that one, plus the Soulja Boy one with the great video id: https://youtube.com/watch?v=Pube5Aynsls . He's surprisingly nimble on his feet.
Bonus is the 2008 /r/programming post of it, which has the bizarre comment at the bottom (from 6 months ago somehow): "This post was made on the day i was born LMFAO"
LateMechanic
10mo ago
Oh yeah I think it's certainly going to end up being considered a massive flop, likely losing them upwards of a hundred million+. I put those production budget figures in for comparison's sake between the various movies, but making $450M on a $250M production budget would be a catastrophic loss, not a profit. Because there's also a huge marketing budget on top of that, and the box office revenue gets cut down by ~50% for the studio's share (the theaters get the other half).
LateMechanic
1yr ago
Yeah that's exactly it I think. The OP redditor's main mistake was being under the impression that FwB is a normal thing in modern dating, and that it's the casual next-step after flirty friendship (before taking the much bigger step of committing to a real monogamous relationship). There's almost no way this guy internalized that the mythical social media 'FwB' status was a prize final destination that he was just entitled to waltz right into.
So that's why summing it up as the guy 'essentially' asking "hey, wanna fuck?" / "Hey, wanna be my fuck buddy?" like many are doing here is a borderline strawman. With really minimal charity, it looks like confusion about the modern landscape way more than crassness. He likely already knew he was in trouble when she said "what's that?" and found himself trying to explain it.
LateMechanic
1yr ago
And on the other side, there's all sorts of evidence of other countries & currencies which also set 0% interest rates, that didn't experience any of the same kind of supposed wealth effects / asset bubble frenzy. 'Cheap money' is an attractive concept for building narrative explanations, but there just isn't such a slam dunk case for interest rate policy impact.
I think too many people in power have learned from MMT how money, banking, and government finance actually works, so it would probably take a few generations for people to forget those again for debt-hysteria to strongly return. In addition to the plain logic, all the evidence is that strong fiscal policy is the answer to extreme economic crises, rather than a target for blame.
Even the eurozone seems to have learned that their anti-fiscal-policy stances were a mistake and caused the first big crisis to flatline growth for the last 15 years. So the Maastricht 3% deficit limit is finally being scrutinized and softened to allow for better counter-cyclical fiscal policy. And in the US we've gone from Obama being confused and thinking he needed to fly to China to make sure they'll still 'lend' us money, to now the massive covid stimulus packages without a peep about becoming Greece or bankrupting our grandchildren.
Now the conversation is more correctly about inflation instead of solvency. And while regular people do hate inflation, even way more than is warranted, I'd guess that's too nuanced and subjective for much support of a constitutional amendment around debt/deficit.
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