Agree on this article. However when it feels we have all the facts on our side the market just continues to go up. Congress keeps spending money like a college kid with this parents credit card with no fear of the consequences.
Soon the interest payments on our debt will be 25-30% of tax revenue. There is no spending cuts even being discussed to get us to a balanced budget - let a lone a budget surplus.
SPR is at a 40 year low, just in time for another war in the Middle East.
The only shocking thing I have not heard yet is "well we need to raise the tax rates." We need more of YOUR money to support other countries and pay for the well being of the 7MM illegal immigrants that magically showed up.
After the setup with all those dour facts about where we are today, you caught me fully exposed to an uncontrolled belly laugh with the "If you look closely you can actually hear her making the "baaaaa" sheep noise" statement. Not my finest moment, but boy it was a good laugh!
Sometimes you just need to laugh to help face a difficult situation.
While it is very clear to me, at least, that the can kicking is running out of road, the one thing we cannot underestimate is the creativity of central bankers and finance ministers when it comes to keeping the music playing. I think they know that a collapse could result in a French Revolution type response by the citizenry, and in the US, with its 300 million guns in private hands, they might find themselves in a difficult spot.
With that in mind, I do agree that reality is soon going to intrude on many of today's tropes including the energy transition as well as the financial system.
Deep Thoughts or "If you have enough DMT in Your Brain anything can seem like anything else"
I do have some empathy for the MMT crowd as MMT implicitly recognizes something that even mainstream economics glosses over -- that money is simply a form of social imagination rather than Newtonian particles with velocity and momentum. Why is this even useful framing?
Money is weird. Many societies have existed throughout history without money. They organized themselves, grew crops, made clothes, made shelters, made art, developed small scale manufacturing industries like pottery and tools, created songs and rituals, "employed" people in occupations that served common good -- but they had no idea of "money".
In our society the idea of money replaces the mythic structures these non-monetary societies lived by. In our society, our entire approach to self-organization and group cooperation is formed around the idea of exchanging money, but money itself doesn't materially exist. All that exists are 1) Nature, 2) Imagination, 3) Cooperation or conflict. All forms of the economic activity that produces money are composed of those 3 elemental realities -- money is only a derivative composition.
This third idea seems the most relevant in this context. When debt expands in effect "assets" also expand, since assets are the flip-side of "debt". Is there a limit to how fast or far assets can expand? In history the great debt-related social breakdowns/inflations seemed to have as an antecedent the emerging breakdowns in the viability of the assets the debt created. What assets? Well, the forms of social cooperation the debt financed -- stable and marginal enterprises, industries with overcapacity, visions of community and cooperation these created and that created these in a form of reciprocal nourishment. This ensemble began to break down at some point when too many forms of cooperation, too many formal structures that demand human participation -- "overcapacity" in economic parlance -- too many and varied "assets" all compete for use by society. Many of these breakdowns historically occurred in nations with smaller geographic footprints than ours and in cultures where historical tribal dynamics and class/ethnic tensions also played a role in fomenting instability. The forms of social cooperation in these societies were more fragile perhaps than in ours -- outside of the polarization in the years preceding the Civil War. If society can process the resulting bankruptcies and creative destructions without conflict and collapse, is there really a breakdown?
Does this mean MMT is correct? I'd say No. It's only incomplete. One man's debt is another man's asset. One man's interest cost is another man's interest income. So far there is no breakdown. But there can't be an infinite amount of assets in any economy any more than an infinite amount of debt. MMT will say "inflation" is the constraint, but that just kicks the can of reasoning because at the point inflation is capable of restraining an MMT regime that may already be too late without a politically unviable Volcker-like crack down. At what point is the constructive asset|debt equilibrium broken to the point it breaks down completely. Is this point subject to laws of mathematical determinism, as if it's a swarm of particles in a classical mechanical Newtonian inertial frame of reference? I don't think so. It seems to me a much more multi-faceted and in the parlance of math a "very high dimensional function". Why do non-monetary societies break down? What insights does that hold for monetary societies?
Classical economics understood "political economy" in a very useful way. 20th century economics obsessed over importing the math of Newtonian Mechanics AS IF money was a particle with velocity and momentum with all the properties of matter, weight, mass, density, etc. It isn't. In a strange inversion, nature is Newtonian at large scale but quantum at small scale. Money is Newtonian at small scale -- if you spend at a store or restaurant it's Newtonian in the micro but quantum at large scale in the macro -- where probabilities based on historical patterns and judgment define values of assets and liabilities. It's much stranger and more complicated than Newtonian particles and related metaphors, since it's "only" imagination at the cultural level -- and the laws of imagination are pretty much an undiscovered country, if they exist at all.
The peculiar thing is the Fed could take all the debt it's purchased on its balance sheet, purchase even more outstanding debt (private and govt debt), cancel it all and start over at zero having self-recapitalized -- there would be no change in the physical economy across the nation. There is no physical law preventing that. And Congress could pass laws permitting it, which a president could sign. Since this is undeniably true, what does that mean for what (at the fundamental level of being) the debt is now? It's a form of social cooperation-mapping, an ensemble of cooperational structures that organize society in the manner of a mythic construct that organized any non-monetary society for 50,000 years of human existance. Would our society break down in an inflationary collapse due to the shock if that money-inspired ensemble of cooperational structures is shown to have failed? Maybe, but maybe not. What would take it's place and how? It's all "political economy".
When I read the late anthropologist David Graeber's "Debt the First 5000 Years" I was struck that even in 3000 BC China evidently there were similar recognitions of the strange ideas of money and debt and the tensions between social nourishment or breakdown. In ancient Greece too, the same ideas and the same debates -- and probably at a more cogent level than in our own. The Newtonian metaphors, the classical statistical methods and methods of calculus (which derived from physics not from economics) bias our thinking. And the history of social inflations and collapses have other stimuli -- the central banking policies and debt creation that preceded these can be seen both as causes and also as effects of more primal underlying social causes that transcend monetary regimes but act alongside them.
In my view it's not that MMT is wrong or foolish (OK maybe a little), it's that ALL economics are incomplete attempts at mapping very complex psychological and cultural forces that they are equally oblivious to. None of it in my view stands out as particularly lucid. MMT is no better and no worse than Austrian economics. Both are right in a limited way, but both are incomplete.
For now, the American idiot continues to use the welfare, disability social sec. gov. contract employment. Scumbags fill their grocerty carts with food I cannot afford and drive away in brand new vehicles. Maybe the key-is to look at how many Americans who actually work in the private sector and how many of them want to blow up every fucking corporate owned agency and every fuckin militarised dog catcher to fish cop everywhere-That might be my popsicle index. FUCK THIS SYSTEM burn it down. Take your limited $ out of this system. FUCK EM
Given the 33 Trillion of government stimulus [wasteful spending], I keep waiting for that "GDP multiplier effect" to kick in - but it seems the only multiplying that's going on is related to compound interest [usury]
Agree on this article. However when it feels we have all the facts on our side the market just continues to go up. Congress keeps spending money like a college kid with this parents credit card with no fear of the consequences.
Soon the interest payments on our debt will be 25-30% of tax revenue. There is no spending cuts even being discussed to get us to a balanced budget - let a lone a budget surplus.
SPR is at a 40 year low, just in time for another war in the Middle East.
The only shocking thing I have not heard yet is "well we need to raise the tax rates." We need more of YOUR money to support other countries and pay for the well being of the 7MM illegal immigrants that magically showed up.
Very well reasoned and hard hitting article.
After the setup with all those dour facts about where we are today, you caught me fully exposed to an uncontrolled belly laugh with the "If you look closely you can actually hear her making the "baaaaa" sheep noise" statement. Not my finest moment, but boy it was a good laugh!
Sometimes you just need to laugh to help face a difficult situation.
Agree. Winter is coming. Like it or not.
While it is very clear to me, at least, that the can kicking is running out of road, the one thing we cannot underestimate is the creativity of central bankers and finance ministers when it comes to keeping the music playing. I think they know that a collapse could result in a French Revolution type response by the citizenry, and in the US, with its 300 million guns in private hands, they might find themselves in a difficult spot.
With that in mind, I do agree that reality is soon going to intrude on many of today's tropes including the energy transition as well as the financial system.
truly this is the 4th turning
Deep Thoughts or "If you have enough DMT in Your Brain anything can seem like anything else"
I do have some empathy for the MMT crowd as MMT implicitly recognizes something that even mainstream economics glosses over -- that money is simply a form of social imagination rather than Newtonian particles with velocity and momentum. Why is this even useful framing?
Money is weird. Many societies have existed throughout history without money. They organized themselves, grew crops, made clothes, made shelters, made art, developed small scale manufacturing industries like pottery and tools, created songs and rituals, "employed" people in occupations that served common good -- but they had no idea of "money".
In our society the idea of money replaces the mythic structures these non-monetary societies lived by. In our society, our entire approach to self-organization and group cooperation is formed around the idea of exchanging money, but money itself doesn't materially exist. All that exists are 1) Nature, 2) Imagination, 3) Cooperation or conflict. All forms of the economic activity that produces money are composed of those 3 elemental realities -- money is only a derivative composition.
This third idea seems the most relevant in this context. When debt expands in effect "assets" also expand, since assets are the flip-side of "debt". Is there a limit to how fast or far assets can expand? In history the great debt-related social breakdowns/inflations seemed to have as an antecedent the emerging breakdowns in the viability of the assets the debt created. What assets? Well, the forms of social cooperation the debt financed -- stable and marginal enterprises, industries with overcapacity, visions of community and cooperation these created and that created these in a form of reciprocal nourishment. This ensemble began to break down at some point when too many forms of cooperation, too many formal structures that demand human participation -- "overcapacity" in economic parlance -- too many and varied "assets" all compete for use by society. Many of these breakdowns historically occurred in nations with smaller geographic footprints than ours and in cultures where historical tribal dynamics and class/ethnic tensions also played a role in fomenting instability. The forms of social cooperation in these societies were more fragile perhaps than in ours -- outside of the polarization in the years preceding the Civil War. If society can process the resulting bankruptcies and creative destructions without conflict and collapse, is there really a breakdown?
Does this mean MMT is correct? I'd say No. It's only incomplete. One man's debt is another man's asset. One man's interest cost is another man's interest income. So far there is no breakdown. But there can't be an infinite amount of assets in any economy any more than an infinite amount of debt. MMT will say "inflation" is the constraint, but that just kicks the can of reasoning because at the point inflation is capable of restraining an MMT regime that may already be too late without a politically unviable Volcker-like crack down. At what point is the constructive asset|debt equilibrium broken to the point it breaks down completely. Is this point subject to laws of mathematical determinism, as if it's a swarm of particles in a classical mechanical Newtonian inertial frame of reference? I don't think so. It seems to me a much more multi-faceted and in the parlance of math a "very high dimensional function". Why do non-monetary societies break down? What insights does that hold for monetary societies?
Classical economics understood "political economy" in a very useful way. 20th century economics obsessed over importing the math of Newtonian Mechanics AS IF money was a particle with velocity and momentum with all the properties of matter, weight, mass, density, etc. It isn't. In a strange inversion, nature is Newtonian at large scale but quantum at small scale. Money is Newtonian at small scale -- if you spend at a store or restaurant it's Newtonian in the micro but quantum at large scale in the macro -- where probabilities based on historical patterns and judgment define values of assets and liabilities. It's much stranger and more complicated than Newtonian particles and related metaphors, since it's "only" imagination at the cultural level -- and the laws of imagination are pretty much an undiscovered country, if they exist at all.
The peculiar thing is the Fed could take all the debt it's purchased on its balance sheet, purchase even more outstanding debt (private and govt debt), cancel it all and start over at zero having self-recapitalized -- there would be no change in the physical economy across the nation. There is no physical law preventing that. And Congress could pass laws permitting it, which a president could sign. Since this is undeniably true, what does that mean for what (at the fundamental level of being) the debt is now? It's a form of social cooperation-mapping, an ensemble of cooperational structures that organize society in the manner of a mythic construct that organized any non-monetary society for 50,000 years of human existance. Would our society break down in an inflationary collapse due to the shock if that money-inspired ensemble of cooperational structures is shown to have failed? Maybe, but maybe not. What would take it's place and how? It's all "political economy".
When I read the late anthropologist David Graeber's "Debt the First 5000 Years" I was struck that even in 3000 BC China evidently there were similar recognitions of the strange ideas of money and debt and the tensions between social nourishment or breakdown. In ancient Greece too, the same ideas and the same debates -- and probably at a more cogent level than in our own. The Newtonian metaphors, the classical statistical methods and methods of calculus (which derived from physics not from economics) bias our thinking. And the history of social inflations and collapses have other stimuli -- the central banking policies and debt creation that preceded these can be seen both as causes and also as effects of more primal underlying social causes that transcend monetary regimes but act alongside them.
In my view it's not that MMT is wrong or foolish (OK maybe a little), it's that ALL economics are incomplete attempts at mapping very complex psychological and cultural forces that they are equally oblivious to. None of it in my view stands out as particularly lucid. MMT is no better and no worse than Austrian economics. Both are right in a limited way, but both are incomplete.
On the bright side, I am looking forward to my socialist neighbors digging up and eating their manicured lawns.
It is nice to know that no one is to blame!! Or is it someone else is to blame ?? I have forgotten.
I better watch main stream media to find out.
https://home.solari.com/
For now, the American idiot continues to use the welfare, disability social sec. gov. contract employment. Scumbags fill their grocerty carts with food I cannot afford and drive away in brand new vehicles. Maybe the key-is to look at how many Americans who actually work in the private sector and how many of them want to blow up every fucking corporate owned agency and every fuckin militarised dog catcher to fish cop everywhere-That might be my popsicle index. FUCK THIS SYSTEM burn it down. Take your limited $ out of this system. FUCK EM
I saved it, so when all this turns out to be true, I can tweet it.
MMT = KTCDTR (kick the can down the road).
Me, in my Forrest Gump voice, “And just like that, you run out of road.”
👍👍👍
Given the 33 Trillion of government stimulus [wasteful spending], I keep waiting for that "GDP multiplier effect" to kick in - but it seems the only multiplying that's going on is related to compound interest [usury]