domain:aporiamagazine.com
LateMechanic
18hr ago
Yet issuing more Treasuries and then wasting the proceeds is not sustainable.
But what are the 'proceeds' in your formulation? They issue a government liability that pays the policy rate, swap it for a different government liability that pays the policy rate (central bank reserves), and then spend it. There is no difference between reserves and treasuries, so calling one 'money' and calling the other 'debt that requires backing and an ability to repay' is only serving to confuse your thinking.
It's akin to printing up a new $5 bill, then exchanging it for quarters because that's what the arcade takes. No more or less money in any form. They can print as many central bank reserves or treasury securities as they want, so 'repayment' is a non issue. Inflation is the only relevant concern.
Fruck
Lacks all conviction
18hr ago
Yeah you'll get nothing from it really. Depending on the model they usually have between 5 and 10 messages. And it's only chatgpt that can do it thanks to its latest update - to do it with others you need to do it at the end of a long meandering chat session otherwise you just get a reflection of whatever you're talking about right then. The really interesting version will be when Gemini can tap into your Google account, although I will let others test that one.
LateMechanic
18hr ago
What will inevitably happen is that some lefty will use this bullshit to do what they always do and spend with abandon until collapse.
That seems to be the driving fear, although we've never seen it happen in a productive democracy. In the real world, regular people seem to hate inflation so much that we almost always err on the other side: too much unemployment from taxes being too high.
It will not be like greece, who was bailed out by the nordic german taxpayer (while being decried as evil austerites), more like venezuela.
It would definitely be weird if the US ended up looking like a country that gave up their own currency or a country that relied on a single export while borrowing in a foreign currency they didn't control.
IGI-111
God was a dream of good government.
18hr ago
I never really had that core furious uncomfortability that someone else's decisions can affect 'my money',
Frankly, you just sound like a tits and beer liberal, if you're not mainlining Mises to the degree that it affects your metaphysical outlook, you're not really doing a libertarianism in my opinion. But that's a fine and reasonable position. I was once just such.
The whole current system especially in the US is downstream of hundreds of years of business interests, ideological libertarians, and others clashing over precisely the kind of political questions you listed.
"It says here in this history book that luckily, the good guys have won every single time. What are the odds?”
It's almost purely a charade that they pretend the market has a role in buying US debt.
I notice you're stalling on answering the question, and trying to get into procedural matters. Nobody gives a shit what the US' opinion of their own system is, they give a shit about the real economic effect of US debt being toilet paper.
Moving the ball is not making it disappear. I too can borrow to myself infinitely in made up me-bucks. But in the scenario where US debt is no longer the world's reserve currency, that doesn't translate into any ability to buy goods.
"Primary dealers" of monopoly money can surely not fail in delivering it to the US government, but how exactly does that translate into food rations for GI?
Lykurg
We're all living in Amerika
19hr ago
My guess was definitely about US officials and how their actions may be explained by their private knowledge, rather than an estimation about our forum members' beliefs.
The point of me saying this was that in that situation you should put more effort on justification.
When collectively...
None of this describes an actual problem with inflation. It says that inflation will automatically regulate away any excess borrowings. Why then not set taxes to 0, and just let the inflation run its course?
If you think the government deficit is a bad thing that should be reduced, you have to explain why you think that of the non-government surplus as well. It is quite literally the same thing.
Is there any reason this is unique to the government? Or is my deficit also literally the same thing as rest-of-the-economy surplus? Because if it is, then it seems noone else should have objections to me borrowing indefinitely, either - it just makes you better of!
When collectively the private sector has more monetary savings than we want
Why would they not want more? You demand that I explain why we would ever want non-government surplus to be less, but now you just assert that it will be the case.
LateMechanic
19hr ago
Private savings don't have to be in T-Bills. To the extent the market is flooded with them, they crowd out private investment and savings in private instruments.
There's no crowding out there, it's just a price effect. The government sets the risk-free rate, and others price risk premiums on top of that. Finance is infinitely available: price not quantity.
So even if some amount of T-bill generation each year is actually good, it would be best achieved by funding courts and police and setting taxes near to zero.
That's exactly right, that's why we fight (politically) for our preferred outcomes. It's just a mistake to say the deficit has anything to do with the size of government or what we prioritize doing in the public sector. The size of the government deficit & debt have to do with the savings desires of the populace. So it's just the wrong target to look at.
erwgv3g34
19hr ago
DoorDash is like something a communist would invent as a parody of capitalist decadence. A private taxi for my burrito? Give me a fucking break!
LateMechanic
19hr ago
MMT is mainly about describing how fiscal policy and money itself works, and it apparently has been essentially the same throughout human history. The word 'modern' was a joke from a Keynes quote about "the past 4000 years, at least". Mesopotamian temple accounts, European tally-sticks, various stamped coins, etc. Always money being transferable credit, and dominated by credit from the authority of the day. It's how you would bootstrap a monetary economy into existence, whether you're talking about a hippie commune, a Lost desert island situation, or a new nation, without relying on any circular reasoning "lets call this seashell money: I value it, because someone else will value it, because someone else...". Using the authority's power of taxation (and power to punish/expel those who don't pay) to give value to money is an imposition, but it appears to be the least barbaric method for organizing society we've come up with so far.
Monetary policy as the business of setting interest rates, isn't of that much concern to me. I think they've landed on basically sane goals of desiring slight inflation over time, and a policy regime of simply paying interest on reserves to set the base interest rate (much better than the pre-2008 system of open market operations). I would like to see them just set the interest rate at 0-1% and leave it there forever, as I don't think there's good evidence that it controls inflation or the economy like they wish it did, and I think interest payments are maybe some of the worst government spending.
But have you sit down for a second and asked yourself if that's a good thing that it works like that or not?
I was basically a libertarian before I learned MMT and became a normie, although I never really had that core furious uncomfortability that someone else's decisions can affect 'my money', which seems to really animate some people in these questions you're raising.
The whole current system especially in the US is downstream of hundreds of years of business interests, ideological libertarians, and others clashing over precisely the kind of political questions you listed. The core economic logic is actually extremely simple, but there are a million self-imposed constraints, strange terminology, and extra steps between it all (leftover from the gold-standard era mainly, but it's been through a lot).
And most importantly, what happens to all this the day that people stop buying US debt no questions asked?
It's almost purely a charade that they pretend the market has a role in buying US debt. 'Almost', because they currently do like to take the temperature of market predictions on longer-term securities, and let those rates up the yield curve fluctuate with market sentiment. It's a self-imposed constraint that the treasury and central bank are separated, a self-imposed constraint that the treasury can't go into infinite overdraft on their account, a self-imposed constraint that they can't directly swap liabilities with each other, etc. After WW2 when they re-imposed that last constraint, the Fed chair Eccles told congress exactly that the market plays no real role and that it was a charade, but they re-imposed the pretend restriction anyway for the optics.
The current system of maneuvering around the laws in the US is that the central bank contracts commercial banks as 'primary dealers' who have an obligation to make sure every treasury bond issuance goes off perfectly without a hitch at the chosen policy rate. No bond vigilantes get a say in the process.
Tree
19hr ago
What will inevitably happen is that some lefty will use this bullshit to do what they always do and spend with abandon until collapse. It will not be like greece, who was bailed out by the nordic german taxpayer (while being decried as evil austerites), more like venezuela. Oh, how surprised they will all be, that the infinite money machine did not, in fact, work.
doglatine
19hr ago
A key factor is how productivity improvements are handled by legacy companies vs new entrants. The digital revolution probably didn’t change much for Ohio Widgets PLC, with its large unionised workforce and complex compliance requirements. For Shenzhen Widgets LLC, on the other hand, digitisation is essential for its ability to take customised CNC machined orders from anywhere in the world, translate them into Mandarin, and have them shipped anywhere in the world in 5 days.
anti_dan
19hr ago
Identities are a basic check to make sure you're not getting something totally wrong. If you think the government deficit is a bad thing that should be reduced, you have to explain why you think that of the non-government surplus as well. It is quite literally the same thing. As Kelton said in that presentation, people goof up on this all the time. The WSJ in the late clinton years proudly proclaiming in one column "isn't this wonderful? This is the longest sustained budget surplus since 1929!" while the next column over is hand-wringing "this is very worrying, the private sector savings are plummeting!".
Private savings don't have to be in T-Bills. To the extent the market is flooded with them, they crowd out private investment and savings in private instruments.
Still, the real reason government deficits are bad is that the bulk of government spending is bad. Transfer programs for the poor and elderly, government schools, subsidies for corn farmers, etc. When you spend money on these things you are buying fairly useless products, employing people in positions where they would be better for the country if they were employed elsewhere, etc. So even if some amount of T-bill generation each year is actually good, it would be best achieved by funding courts and police and setting taxes near to zero.
anti_dan
20hr ago
Why not offer the Fiscal Responsibility mantel to the Democrats?
Why would they be interested? They are the party who's identity is in opposing spending cuts. Even the "Big Beautiful Bill" has spending cuts, it just also has larger tax cuts.
No_one
20hr ago
As soon as Musk was out of the door Jared Isaacman‘s nomination for NASA director was revoked.
It's claimed the nomination being rescinded was part of what made Musk mad and lash out. (I don't know).
IGI-111
God was a dream of good government.
20hr ago
Like any bearer asset, it doesn't magically obviate the need to launder the source of funds. People will also ask questions if you show up to a bank with bars of gold and no explanation as to where they come from.
Even with privacycoins, it's accounting that gets you busted in the end. That's how they got Capone after all.
No_one
20hr ago
China doesn't have the people to need to build on Mars, Venus, etc, either, their fertility rate is 1.
And it's always going to be 1. Same as US fertility rate never rose after 1930s. And of course Chinese are never going to produce AGI aligned to their values which would make them a formidable threat even if the population went back where it was in 1930, about 400 million.
GoofyGoose
20hr ago
The problem is never the amount of debt, but the backing of that debt. It is true that government debt is useful: money is a government liability (zero coupon, infinite maturity for cash) and treasuries are a safe security (until we default) in a world where safe securities are scarce. In the 90s, people were worried that by lowering deficits we would create a shortage of government debt and safe assets. This was completely misguided because we can always issue more debt and use the proceeds to buy valuable assets to finance the repayment.
When people say that they are worried about government debt, they mean relative to the ability to repay. Since we see that increases in debt don’t go towards increasing our ability to repay it but rather decrease it, it is natural to say that we want government debt to stop increasing.
I actually think that there is not enough Treasuries around as we can see by the convenience yield that they have. This convenience yield says that we could profit by issuing debt and investing in real assets, turning the federal government into a massive bank (which it kind of is). Yet issuing more Treasuries and then wasting the proceeds is not sustainable.
campfireSmoresEaten
20hr ago
Maybe without leaded gasoline the average IQ (or brain health, if IQ is too gross) of the United States would have been raised just enough to prevent this.
No_one
20hr ago
East Asians are severely underrepresented in gang criminality, religious motivated violence and the like.
East Asians do organised crime so well organised and so quietly that they basically never cause enough outrage for a democratic government to do anything. No bodies found, no shootings, no nothing.
Hacker: The freedom of the British people is worth more than the lives of a few Ministers. Freedom is indivisible. Ministers are expendable. A man in public life must expect to be the target of cranks and fanatics. [Sliding into a Churchill impersonation.] It is a Minister's duty to set his life at naught. He must be able to stand up and say, here I am, do your worst! And not cower in craven terror behind electronic equipment, secret microphones, and all the hideous apparatus of the police state. [He snaps back to his normal self.] Anyway, Humphrey, I don't want to hear any more about it.
Sir Humphrey: But Minister, you must allow me to say just one more thing on this matter.
Hacker: Very well, just one, but be brief.
Sir Humphrey: The Special Branch have found your name on a death list.
Hacker: That has absolutely no bearing on the situation... What?!
No_one
20hr ago
Okay, 'embezzled'. It's not theft if the bitcoins were entrusted to you and you took them, it's embezzlement.
IMO he’s saying that:
- IF there are important things genuinely worth spending money on (there always are).
- AND it is the case that the US needs to be careful about the budget (it does).
- THEN the Republican Party should make the case for spending on things they think are genuinely important, leaving it to the Democrats to urge caution and reduce the deficit because they know the Republicans won’t.
- CAUSING the Republicans to get at least some of what they want and become popular, while the Democrats have to sacrifice their own objectives and cut spending in a way that makes them unpopular.
In short, play the game of chicken to its end in an attempt to reverse the usual dynamic where Democrats make heartrending pleas and inspiring plans while Republicans explain why lots of things have to be cut and dodge rotten tomatoes.
@FCfromSCC is this a fair summary?
MMT is propably not a popular position here.
That is definitely the case, but I would be surprised if anyone could do the t-accounts for various government & banking accounting operations and actually put the liabilities & assets on the correct sides, etc. Even most economists mess it up completely. It's just not something most people learn or care about. My guess was definitely about US officials and how their actions may be explained by their private knowledge, rather than an estimation about our forum members' beliefs.
The rest is the same thing in different words. And as for that.
Identities are a basic check to make sure you're not getting something totally wrong. If you think the government deficit is a bad thing that should be reduced, you have to explain why you think that of the non-government surplus as well. It is quite literally the same thing. As Kelton said in that presentation, people goof up on this all the time. The WSJ in the late clinton years proudly proclaiming in one column "isn't this wonderful? This is the longest sustained budget surplus since 1929!" while the next column over is hand-wringing "this is very worrying, the private sector savings are plummeting!".
Why is inflation correcting it?
When collectively the private sector has more monetary savings than we want, we will value money less and increasingly try to spend it away - the hot potato effect. Prices will get bid up high enough from this economic activity (falling value of a dollar) until we have the correct/desired amount of savings again. Or before that, the increased economic activity will cause the excess monetary savings to get shed off in increased tax payments (monetary destruction, IOUs returning to their issuer).
So taxes being set at rates instead of flat amounts is therefore one of our main automatic stabilizer policies (the other being safety net spending): the government deficit automatically shrinks & grows depending on the state of the economy. Demand-pull inflation is the final relief valve after that, re-valuing money downward until we have the amount we want.
Corvos
20hr ago
I think ‘buying trinkets’ is an okay way to say essentially ‘frivolous spending that has no long-term advantage’.
Since we’re talking about literal spending here, perhaps more context would be better in this case to be clear that you aren’t literally talking about buying physical things like jet planes.
MMT is a relatively accurate model of how modern Western monetary policy works. But have you sit down for a second and asked yourself if that's a good thing that it works like that or not?
Because if you did not, I don't think you're equipped to engage with its actual opponents.
Does the State having control over the rate of interest incentivize good or bad investments? What's a good rate of inflation and who does that good rate benefit and harm? And most importantly, what happens to all this the day that people stop buying US debt no questions asked?
Indeed, it's true that if I want the government to lower its deficit spending on Hole Digging and Filling Up Again, then I am also calling for an equivalent reduction of surplus enjoyed by Hole Digging and Filling Up Again companies. The alternative isn't that money never being created, the alternative it is being created through other means. Under our current system it doesn't even have to be the government. The private sector can also spend money into existence.
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