Moderators: Elvis, DrVolin, Jeff
by Grizzly » Tue Aug 13, 2019 2:03 am
by Elvis » Wed Sep 18, 2019 6:55 am
As interest rates head into negative territory and Greek debt yields less than US Treasury debt, DOUBLE DOWN asks economist and historian, Dr. Michael Hudson if any economic theory has ever suggested negative interest rates. Not since back to the Bronze Age does he recall anything like this being suggested. That’s because, for thousands of years, economic beings have chosen to hold debt jubilees. Negative rates achieve that a bit slower but they do the same thing eventually by bringing the volume of savings on the asset side of the balance sheet down to the volume of debt that can be repaid. Hudson believes rates will quickly go as negative as 25% and thus erase some of the debt burdens. He believes we are entering a post dollar world and that gold is the only option available. Tune in to hear the conversation.
by Elvis » Wed Sep 18, 2019 7:11 am
http://bilbo.economicoutlook.net/blog/?p=43176
ECB confirms monetary policy has run its course – Part 1
Tuesday, September 17, 2019 bill Central banking, Eurozone, Fiscal Statements
3 Comments
[. . .] Today, I am in Maastricht – after travelling by train from Paris. I have two events – one on framing and language and the other on Reclaiming the State and Modern Monetary Theory (MMT) basics. Then I am heading to Berlin for a talk at PIMCO and on Friday I am presenting an MMT workshop at the European Central Bank. Last week, the ECB made its next move, the last one for current President Mario Draghi. It will also lock in Madame Lagarde for a time and represents a rather overt statement about the failure of mainstream macroeconomics. While the mechanics of their various policy decisions are interesting and are worth discussing (albeit briefly) the overall optics were more powerful. The ECB has now joined a host of central bankers around the world in, more or less, admitting that monetary policy has run its course and is being pushed into ever more desperate configurations. At the same time, the corollary is that fiscal policy makers are failing in their responsibility to use policy to avoid stagnation and elevated levels of unemployment. Despite rather significant monetary policy gymnastics, aimed at stimulating economic growth and lifting inflation rates, central bankers have largely failed. They have failed because they are wedded to mainstream theory. Fiscal policy makers are constrained by an austerity-biased ideology and/or voluntary institutional machinery that has been created to stifle fiscal initiative (destructive fiscal rules). The cracks are widening. We are approaching the period of fiscal policy dominance – finally! This is Part 1 of a two-part series on this topic. Part 2 will follow tomorrow.
by Elvis » Wed Sep 18, 2019 8:03 am
New Economic Thinking
63.4K subscribers
The New York Times’ Binyamin Appelbaum explains the role Democratic presidents, from Kennedy to Obama, in moving economic policy to the right
INET President Rob Johnson sits down with The New York Times’ Binyamin Appelbaum to discuss his new book, The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society (Little, Brown: 2019).
by Grizzly » Wed Sep 18, 2019 12:47 pm
by Elvis » Wed Sep 18, 2019 9:07 pm
Grizzly » Wed Sep 18, 2019 9:47 am wrote:
This is the motherload of treason. But go ahead and play Coke vs Pepsi, games. You know you can not, not play.
JackRiddler » Mon Jun 24, 2019 12:29 pm wrote:Unless the Pentagon has a secret Federal Reserve of its own allocating funds out of nothing, a full 21 trillion never existed as cash that was lost and might still be found. What can be found won't be in one place or in one main project. Their books are a chaos universe. One book estimates values of given assets (movable and not). Some other book elsewhere values the same assets as some other amount, with no information passed between the two books. Then someone elsewhere still can't find the assets at either value. It's 40 or 50 or 70 years of discrepancies that cannot be and will never be reconciled. They can't and obviously they don't want to figure these out, because this allows them to hide shit. A galactic-sized bullshit storm of bad accounting, largely intentional, conceals constellations of ops, crimes, financial frauds, graft, incompetence.
http://neweconomicperspectives.org/2018 ... -debt.html
The Explicable Mystery of the National Debt
Posted on August 1, 2018 by J.D. Alt | 40 Comments
By J.D. ALT
America’s current “national debt” is tallied to be $21.5 trillion. When politicians and economic pundits talk (worry, fret, wring their hands, gnash their teeth) about this “debt” they implicitly assume—along with their listeners, readers, and potential voters—that this fantastic sum will eventually have to be paid back. That’s what happens with debts, right? Someone calls them due! Everyone also assumes the American tax-payer will have to do the paying. (Quick calculation to save you the trouble: Each one of us is in hock for $65,950!)
Depending on which political football is being tossed around, this “national debt” is either a crisis that must be addressed first (before anything else can be paid for!) or it’s something we can simply ignore for the time being—until the promised “economic growth” comes along that will somehow enable the federal government to collect that extra $65K from each of us. So long as we promise that Yes! someday we’ll pay it off, we can feel okay about going one more day, or month, or year without even starting to do so. In the meantime, of course, the “national debt” somehow keeps growing! At least that must stop, we declare! Our government must stop borrowing even more!
So, we resolve to put a cap on the “national debt.” Which everyone feels good about until the federal government starts running out of tax-dollars to meet the expenses Congress has already committed it to meet. When that happens, the government—or crucial parts of it—painfully shut down. And the fault lies with whoever voted for all that spending in the first place—or whoever voted for all those tax-cuts that made the spending impossible. In the end, after everyone has been thoroughly blamed, the cap on the “national debt” is, of necessity, raised a little higher into the clouds, like Jack’s beanstalk.
Meanwhile, of course, it’s impossible to even discuss the need to spend new dollars to address any of the dire and critical things America confronts as a collective society. We can’t repair our dangerously impaired highway bridges. We can’t modernize our air-traffic control system. We can’t replace our failing, lead-polluted, water-systems. We can’t clean-up the super-fund sites leaching toxins into our ground-water. We can’t provide free pre-school day-care to every mother who wants to secure a job. We can’t modernize and guard from cyber-attack our national electric grid. We can’t provide healthy food and safe accommodations for homeless families. We can’t provide Medicare for every American. We can’t build affordable housing for families earning the minimum wage. We can’t provide a post-high school education for our nation’s workforce. We can’t build modern transit systems that relieve the congestion and gridlock of our urban centers and corridors. We cannot even begin to plan for the relocation and/or rebuilding of millions of square miles of human infrastructure and habitation that will, beginning in the next decades, be flooded by rising sea levels…. There is simply not enough money to even think about doing all these things—and the fact we can’t even begin paying off our “national debt” is a constant reminder of that “reality.”
The mystery is, while all this perpetual haggling and hand-wringing is happening, no one seems to be knocking on America’s door asking to be repaid. Unlike Greece and Italy who are constantly being squeezed by the E.U. central bank and the IMF to repay their debts, no one seems to be squeezing the U.S. at all. Unlike Spain, which gets an earful from Germany if it even whispers about increasing its national borrowing, the U.S. hears nothing from anybody (except its own politicians and pundits) when it votes to raise the beanstalk one cap higher. How can that be? It’s almost as if—weirdly—there isn’t anyone out there expecting to get paid back.
Could that be true?
This puzzlement can, in fact, be explained. More important, the explaining—if you accept the explanation—will change your understanding of what the American economy is capable of accomplishing. And it’s exponentially more than you’d ever imagined.
The mystery lies in the use of the term “borrow.” As it’s commonly understood, when you borrow something, you take temporary possession of it from its owner (the lender)—and when you “repay” what you’ve borrowed, you give it back. What is often not considered in thinking about this transaction is that the lender’s possession is always replaced—either implicitly or explicitly—with a “promise” (i.e. the promise to return the possession, often with an additional premium to compensate the lender for his trouble.)
What is unique about U.S. government “borrowing”—and what gives the term, applied in that context, its confusing ambiguity—is the fact that the “promise” which replaces a borrowed dollar is simply another kind of “dollar.” Specifically, the government borrows a dollar from the economy, and replaces it with a “treasury bond or note” which is, in effect, a special form of “dollars” that earn interest. The treasury bond or note has the same liquidity/tradability in the economy as the regular dollars it has replaced; therefore, the amount of “money” in the private sector doesn’t fall by the amount taken out by the “borrowing” but remains the same as before the “borrowing” occurred.
In conventionally understood “borrowing,” when the borrowed thing is returned, the “promise” that was being held by the lender (either implicitly or explicitly) is simply cancelled. In U.S. government “borrowing,” however, the borrowed thing is NEVER returned because, by logic, the promise being held in its place is already the same thing as what was borrowed. E.g. a $1000 treasury bond is the same “thing” as 1000 dollars—only better, because it earns interest! When the treasury bond “matures,” the dollars it “contains” are simply converted to “regular” dollars or, more often than not, they are rolled into a new treasury bond.
This is why there is nobody squeezing the U.S. government to repay what the government has “borrowed.” They have already been repaid by the treasury bonds they took in exchange for the dollars they “loaned.” (As you can see, the term “loan” applied to this transaction has the same paradoxical ambiguity as the term “borrow.” What’s really happening is that one kind of money is simply being traded for another.)
The surprising result of this transaction is that when the government subsequently spends the “borrowed” dollars back into the economy, there is a net increase in the monetary assets in the private sector equal to the number of dollars “borrowed.” In effect, the treasury bond auction process creates “new” dollars that previously did not exist—dollars which the U.S. government now has possession of and authorization to spend. And that’s exactly what it does: it spends the new dollars to pay for things that Congress has determined will benefit American society.
The consequences of this explanation
First, the U.S. “national debt” is functionally not a debt at all. It is simply a tally of the U.S. treasury bonds which the government has issued and then traded for U.S. dollars which already existed in the private sector. These treasury bonds are in effect interest-paying, time-deposit savings accounts for the bond holders. You personally may have traded some of your retirement dollars for one of these “savings accounts” and you know, firsthand, they definitely contain real money! The “national debt,” then, is really a “national savings account.”
This is, to say the least, a startling and liberating perspective. It means all the political drama and hand-wringing about how we are going to repay our “national debt” can just go away. Even better, all the haggling can be replaced with an entirely different conversation: What shall our government spend the new dollars—created by the treasury bond auction process—to accomplish? The short list of deferred needs, recited earlier, could be a start.
The most extraordinary consequence, however, is that the explanation we’ve just outlined constructs an overarching view of the modern U.S. economy that has never been clear before:
The economy—that is to say, the creation and spending of dollars to undertake and accomplish humanly defined goals—is composed of not one, but two, money-creation processes. The first (and most commonly understood) process is the U.S. banking system: Banks “create” new dollars when they issue loans. This is the engine of American capitalism, and the new dollars sent into circulation by the banking system are specifically (and exclusively) targeted to accomplish goals associated with the generating of personal or corporate financial profits in the market economy.
The second money-creation process, as our explanation above has made clear, is the process we have been habitually calling “government borrowing.” The issuing and auctioning of U.S. treasury bonds, as we’ve just discovered, is not “borrowing” money at all, but creating it. Most important, the dollars generated by this process, which are then spent by the U.S. government, are not spent in the pursuit of personal or corporate financial profits. They are spent to pursue the collective goals—and address the collective needs—of society at large.
The problem we are struggling with today is that while we continue to encourage the first money-creating process—the banking system—to “create” as many dollars as American enterprise and consumers can profitably spend, we have habitually constrained the second money-creating process by labeling it our “national debt” and falsely believing it is encumbering us. In doing so, we severely—and unnecessarily—limit and constrain what we undertake to accomplish for the benefit of what could be called our collective “social economy.” This is a mistake we must now stop making.
Note: I am indebted to Thornton Parker for planting the seed of this essay and, of course, to Warren Mosler who was the first, I believe, to see and understand the true character of sovereign treasury securities.
by Elvis » Thu Sep 19, 2019 5:59 pm
What actually becomes of those tax payments and paycheck witholdings? What is the path and what is the final destination/disposition of those payments?
So far, I've learned that when the IRS receives tax checks—trillions of dollars annually—the IRS sends them straight off to a "TT&L" account, federal gov't accounts in several hundred selected commercial banks around the country, set up to receive all (or most) payments of federal taxes, including all Social Security FICA taxes. To start see: https://en.wikipedia.org/wiki/Treasury_Tax_and_Loan
The TT&Ls (Tax and Loan) were originally "Liberty Loans" during WWI and gradually became what they are today. Here's a 1979 St. Louis Fed bank paper giving a history TT&Ls (I'm about halfway through): https://files.stlouisfed.org/files/htdo ... ct1979.pdf
Among other purposes, the TTLs bolster bank reserves, and help spread out the processing of these many, many checks. And seemingly, as it works today, to give the banking system a crack at briefly using some of the money, a constant flow of quarterly and other federal tax payments. I haven't seen anything stating explicitly, "then, your taxes are played with by commercial banks before being sent on to the Treasury." I see no reason why the banking industry would not want access to that cash (while it's still cash).
So anyway—this is where the tax checks are cleared, in the TT&Ls. With some TT&L accounts, the money is sent on to the Treasury the next day. Other TT&L accounts (there are basically two types) allow the commercial bank to keep the money for some weeks or months and invest it or loan it out. Then, either they send it along to the Treasury as scheduled, or the Treasury makes a withdrawl "as needed."
The Treasury divides its cash balance between two types of accounts: a Treasury General Account (TGA) at the Federal Reserve and Treasury Tax and Loan Note accounts (TT&L accounts) at private depository institutions.2 The behavior of the respective account balances changed dramatically in the fall of 2008. As shown in Chart 2, prior to the fi nancial crisis that followed the collapse of Lehman Brothers on September 15, 2008 (hereafter, “the crisis”), the TGA mostly fluctuated in a narrow band around $5 billion while TT&L balances varied more widely.3 In contrast, since the fall of 2008, TT&L balances have fluctuated in a narrow band around $2 billion and the TGA has varied widely.
[. . .]
The Missions of the U.S. Treasury and the Federal Reserve
The Treasury
A principal mission of the U.S. Treasury is collecting income taxes and other taxes prescribed by statute and funding the fi nancial commitments of the U.S. government.5 In the course of fulfi lling this mandate, the Treasury undertakes a variety of debt management operations, including refi nancing maturing debt with new issues, selling additional debt when expenditures exceed revenues, and retiring debt when the reverse is true. As noted earlier, the Treasury maintains accounts at the Federal Reserve and at private depository institutions to buffer day-to-day fl uctuations in cash fl ows that cannot be accommodated effi ciently with debt management operations.
The Federal Reserve
A principal mission of the Federal Reserve System is managing the U.S. money supply and credit market conditions to promote maximum employment with stable prices and moderate long-term interest rates.6 Prior to the fall of 2008, the Fed sought to carry out this mandate primarily by (1) targeting the interest rate on overnight loans in the federal funds market and (2) managing the supply of reserves available to the banking system to stabilize the federal funds rate at the target rate. Officials purchased (sold) Treasury securities, either outright or through repurchase agreements,7 when they wanted to add (drain) reserves to keep the funds rate from rising above (falling below) the target.
In the course of responding to the crisis, the Fed provided unprecedented quantities of central bank credit to banks, primary dealers, foreign central banks, and others. The increase in assets on the Fed’s balance sheet generated a corresponding increase in central bank liabilities. Currency in circulation expanded modestly, from $835 billion on September 10, 2008, to $890 billion at the end of the year, but deposits at the central bank ballooned from $38 billion to $1.2 trillion,8 far beyond what depository institutions were required to hold. As described below, the Fed and the Treasury adopted a variety of novel procedures 5 See “Duties and Functions of the U.S. Department of the Treasury,” available at www.treasury.gov/about/role-of-treasury ... ult.aspx.6 See Board of Governors of the Federal Reserve System (2005, p. 1).7 A repurchase agreement is a sale of securities coupled with an agreement to repurchase the same securities at a specifi ed price on a later date. Repurchase agreements are also called “repos.”8 Deposits at the central bank include reserve balances of depository institutions, U.S. Treasury deposits, foreign offi cial deposits, and service-related deposits (including required clearing balances and adjustments to compensate for fl oat).to prevent the expanding quantity of reserves from driving the federal funds rate to zero.
The Interface between the Federal Reserve and the Treasury
At first impression, the Federal Reserve and Treasury mandates might seem sufficiently distinct that the two institutions should be able to function independently of each other. However, the Treasury funnels most of its receipts into, and it disburses most of its payments from, the TGA. Thus, there is a continuous flow of funds from private depository institutions to the TGA and back again. During fiscal year 2010, $11.6 trillion flowed into, and then out of, the TGA.
Flows of funds between the TGA and private depository institutions were important prior to the crisis because the TGA is maintained on the books of the Federal Reserve; increases in TGA balances stemming from Treasury net receipts drained reserves from the banking system and, in the absence of offset-ting actions, put upward pressure on the federal funds rate. Conversely, decreases in TGA balances resulting from Treasury net expenditures added reserves to the banking system and, absent offsetting actions, put downward pressure on the funds rate. This dynamic created an important interface between Treasury and Federal Reserve operations. The sections that follow describe first how Treasury and Federal Reserve officials cooperated to manage the interface before the crisis, and then how the interface has changed since the onset of the crisis and the expansion of the Fed’s balance sheet.
Treasury Cash Management before the Crisis
If, in the pre-crisis regime, the Treasury had deposited all of its receipts in the TGA as soon as they came in, and if it had held the funds in the TGA until they were disbursed, the supply of reserves available to the banking system—and hence the overnight federal funds rate—would have exhibited undesirable volatility. To dampen the volatility, the Fed would have had to conduct frequent and large-scale open market operations, draining reserves when TGA balances were declining and add-ing reserves when TGA balances were rising.9 A more efficient strategy, and the one used by the Treasury in its Tax and Loan program, was to seek to maintain a stable TGA balance.
The Treasury Tax and Loan Program
Prior to the onset of the crisis, the Treasury Tax and Loan program had three principal objectives: processing federal tax receipts, stabilizing the TGA balance, and generating interest income for the Treasury.
[...continues]
The behavior of the TGA has changed substantially in recent years. Before the financial crisis, the Treasury mainly used accounts at commercial banks, known as Treasury Tax and Loan Note (TT&L) accounts, to receive income and make payments. As shown in the annual data in panel A of figure 2, during this period the TGA balance at the Fed was small, only around $5 billion. Keeping the Treasury’s money at commercial banks helped prevent large payments to or from the Treasury from causing large fluctuations in the supply of bank reserves, which was important for the stability of money market interest rates in an era when bank reserves themselves were small.
But with the expansion of the Fed’s balance sheet during the financial crisis, it was no longer as important to prevent fluctuations in the now much larger supply of bank reserves. In addition, when the Fed began paying interest on reserves in October 2008, the formulas that determined the interest rates on TT&L accounts meant that it was less expensive for the Treasury to keep its money in the TGA than to use TT&L accounts.2 The Treasury therefore shifted essentially all of its balances to the TGA, resulting in the first upward jump shown in panel A of figure 2, in 2008.
In 2015, the size of the TGA took a second jump upward when the Treasury decided to maintain a substantial balance in the account at all times to ensure it could pay the government’s bills even if a disaster interrupted access to financial markets.3 The Treasury now aims to have enough cash on hand to cover one week of payments, subject to a minimum of $150 billion at times of the year when one week’s payments are expected to be small.
The expansion of the TGA has also made the account’s balance much more volatile, as illustrated by the weekly data in panel B of figure 2. The account now fluctuates between about $20 billion and nearly $450 billion. This volatility has two sources. First, the government’s income and outlays
are naturally volatile, with large tax payments arriving in some weeks and large expenditures leaving the account in other weeks. Second, as the figure shows, the Treasury occasionally reduces the account balance below the $150 billion minimum that it ordinarily targets. These reductions
generally occur when the Treasury approaches the debt ceiling—a limit set by Congress on the amount of money the government can borrow. Similar to a household that wants to pay its bills without taking out a loan, the Treasury, when it faces a tight debt limit, must spend down its checking
account until Congress allows it to borrow more. These factors mean that if the Treasury maintains its current approach to cash management, the Federal Reserve’s liabilities to the Treasury in future years will be both larger and more volatile than they were before the financial crisis.
by Elvis » Thu Sep 19, 2019 6:13 pm
by Elvis » Thu Sep 19, 2019 6:18 pm
by JackRiddler » Thu Sep 19, 2019 6:45 pm
Elvis » Thu Sep 19, 2019 5:18 pm wrote:Pretty lame-o rundown of MMT from The New Yorker. I do not regret canceling my subscription.
Could this guy write this without Paul Krugman holding his hand? Where are the real economics writers?
https://www.newyorker.com/news/news-des ... more-money
Not pasting. Don't even bother reading. I guess this is more about The New Yorker than MMT.
“What most concerns me is I can’t actually quite figure out what it is,” Paul Krugman, the Nobel Prize-winning economist* and Times columnist, told me. Krugman is a political progressive,** and he agrees with many of the spending programs that M.M.T. proponents support. But, he said, “I’ll be damned if I can figure out what it is exactly that they think.”
The rhetorical simplicity that frustrates professional economists is, for a layman, part of M.M.T.’s appeal.
One of Hubbard's consulting contracts was examined in a deposition in 2012. His work for Countrywide Financial for $1200/hr, attesting that the lender's loans were no worse than a control group of mortgages and not fraudulent, was examined by an attorney for MBIA. MBIA was suing Countrywide over its mortgage practices.[33]
[...]
33. Taibbi, Matt, "Glenn Hubbard, Leading Academic and Mitt Romney Advisor, Took $1200 an Hour to Be Countrywide's Expert Witness", Rolling Stone Taiblog, December 20, 2012. Retrieved 2012-12-26.
by JackRiddler » Mon Sep 30, 2019 9:41 pm
by brainpanhandler » Sat Oct 05, 2019 8:58 am
by JackRiddler » Sat Oct 05, 2019 11:48 am
Money as a Constitutional Project with Christine Desan
Posted Aug 06, 2018
Money as a Constitutional Project with Christine Desan
Posted Aug 06, 2018 by Scott Ferguson, Maxximilian Seijo, and William Saas
Capitalism , Democracy , Economic Theory , Financialization , History , Inequality , Labor , Political Economy , State Repression Europe , United Kingdom Money on the Left Episodes
In this episode we are joined by Christine Desan, Leo Goettlieb professor of law at Harvard Law School to discuss her excellent book, Making Money: Coin, Currency, and the Coming of Capitalism. Desan argues that money is a constitutional project, countering the dubious “commodity” theory common to contemporary economic and legal orthodoxies. Desan develops her constitutional theory of money through rigorous historical examinations of money’s evolution, from medieval Anglo-Saxon communities to early-modern England to the American Revolution and beyond.
by JackRiddler » Wed Oct 16, 2019 7:29 pm
Trump is on his way to an easy win in 2020, according to Moody’s accurate election model
PUBLISHED TUE, OCT 15 2019 11:33 AM EDT
UPDATED TUE, OCT 15 20195:55 PM EDT
Jeff Cox
@JEFF.COX.7528
@JEFFCOXCNBCCOM
KEY POINTS
President Donald Trump will win reelection easily in 2020 if the economy holds up, modeling by Moody’s Analytics shows.
“If voters were to vote primarily on the basis of their pocketbooks, the president would steamroll the competition,” the report states.
Three models show Trump getting at least 289 electoral votes and as many as 351, assuming average turnout.
The Moody’s models have been backtested to 1980 and were correct each time — except in 2016, when it indicated Clinton would get a narrow victory.
[...]
1. The class enemy does not just predict. They also predict so as to influence desired outcomes.
2. They also predict as animals of their herd, so as to tell the class what it wants to hear, and so influence desired outcomes.
3. Moody's is more than class enemy. They are the ratings agency of the class enemy, a composite actor, an "ideal capitalist" authority. Debtor nations live in terror of their judgment.
4. They were central to the Wall Street mass criminal action of the great MBS lie leading up to 2007, and in 2007 they provided the essential delaying fraud of maintaining AAA ratings for six months after it was obvious to the inside players that the market was to crash, allowing the market makers to fraudulently unload their own junk -- and set up massive bets against their own junk.
5. Under rule of law, Moody's, S&P and would have been seized and the executives prosecuted as a central, indispensable participant in the great fraud.
6. They pay "chief economists" to come up with this stuff? It's just the conventional wisdom about economies, incumbents and elections.
7. I notice the "model" has gone wrong only once since 1980. Which time would that have been?
8. By its criteria, it predicted a win for the incumbent party in the growth year of 2016, right? It's not like you'd have an anti-establishment wave in such a fine economy, right? America Was Already Great, we were told.
9. I like the caveats: yeah, depending on turnout. No shit. In other words, the prediction also exists to foster an atmosphere, to make a desired outcome seem inevitable.
by Grizzly » Thu Oct 17, 2019 12:16 am
Congress asked the IRS to report on why it audits the poor more than the affluent. Its response is that it doesn’t have enough money and people to audit the wealthy properly. So it’s not going to.
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