Debt As Tax Deferred, Or Why Public Debt For Public Interest Works Boosts The Economy

In A Way No Private Spending can replace

ECONOMIC ACTIVITY BOOSTED BY PUBLIC SPENDING FROM GOVERNMENT DEBT:

IN THE LAST decade, the US has happily run massive deficits. Under Obama, deficits were often around 10% of GDP, or more. Obama deficits peaked at 15% of US GDP. Meanwhile, the US economy grew so much, it overtook the entire, growing, European GDP output (UK included). In 2017 US nominal GDP was 19 trillion dollars, just above the EU GDP (which is still higher at PPP, $23 T). US yearly GDP, charging ahead at a Chinese like clip, has passed $20 trillions as these lines are written.

The Obama spirit of deficit was happily pursued by Trump… And now the new Democratic controlled Congress, wisely enough, has not uttered a peep about this (it prefers to distract its audience with the notion of billionaire Trump as an agent of Putin).

Each three months of 2018 America’s federal government borrowed nearly $320 billion, or about 6% of quarterly GDP. The deficit was 1.5 percentage points higher than in the same quarter the year earlier, despite the fact that unemployment fell below 4% in the intervening period (and thus borrowing more was just because the Trump government is embarked on increasing spending).

The USA borrowed as much in a single quarter as it did in all of 2006, towards the peak of the previous economic cycle.

That debt Graph would look very different if one incorporated EXTINGUISHED debt

Orthodox economists have traditionally been self-assured, arrogant, and idiotic about debt. “Government spending must be paid for now or later,” wrote Robert Barro, of Harvard University, in a seminal paper published in 1989. “A cut in today’s taxes must be matched by a corresponding increase in the present value of future taxes.”

“Must”? Why? How much more idiotic can one get? Governments can default on debt, and can do it soft, or hard. They can even make default look like an act of God: consider the Russian default when the Soviets took power, in 1917, leaving millions of French investors the poorer for it (yet also leaving Russia with a much improved industrial basis and better trains).

The USA also defaulted twice during the Twentieth Century (under presidents FDR and Nixon). A way to default is devaluation of the currency, another way to sneakily default is inflation.

The late 1920s bull mania was a deliberate attempt by the US Fed and the bank of England, to extinguish debt from World War One. So was the inflation of the 1930s (Paris, against it, argued with Washington, for it; the US was right, France wrong; of course Hitler inflated beyond reason, encouraged by Washington…)

Once again, a traditional, but misleading graph: it contains violently extinguished debt

Inflation is not just a way to extinguish excessive debt: I have argued that it is a way to accelerate the economy, making it more technological.

So why would a Harvard professor say such a stupid thing? Do I need to ask? Even rhetorically? Because it pleased the US plutocratic class at the time, which probably rewarded him handsomely.

Looking around history, one can see big differences between the economy of the last four decades, and the period 1935-1975. The first period was characterized by massive expansion of economy and education (in spite of the 100 million directly killed by generalized fascism). For example air travel, universal higher education and universal health care appeared and became dominant. After that, pretty much stagnation… except for the increase of inequality.

And what do we also see since the Glorious Thirties (the 1945-1975 period when Western economies saw a wealth expansion of the 90%; after that, all the growth in income went to the 1%…)? Public spending on infrastructure, educational, or industrial, collapsed, throughout the West, thanks to the Trickle-Down plutocratic ideology.  

Reciprocally, a return to massive public spending might raise the activity, hence the returns to private investment, generating more the latter. (Calling that “populism” worked for a while as an insult, but should be now backfiring… as We The People realizes that there is nothing wrong with We The People… contrarily to what the insulting elite keeps on claiming…)

Eurocrats and their masters, the Europlutocrats, brandish the scare of public debt. However, japan with a more elderly population, is roaring back thanks to Abenomics… And a 230% of GDP public debt.

Economists out France or Germany say that Japanese public debt is a terrible thing. Why? If worse came to worst, the Japanese government would have to tell those who bought Japanese debt: ’Sorry, we can’t pay you back. At all.’ What would then have happened? A tax! Like in Europe! In other words, should the Japanese government 100% default, those wealthy enough to have lend to the Japanese government would then have to pay… a tax! They would be reduced to the status of French taxpayers, horror of all horrors!

Except, of course, in France, taxes, being mostly indirect, strike the poor and the poorest of the poor… whereas a Japanese default (which will not happen) would strike the wealthy (including a few wealthy foreigners…). The same is a fortiori true for US debt.

If the US defaulted on its debt (and it will not happen), lots of wealthy foreigners may cry… Meanwhile the US economy will have roared ahead… thanks to foreign money. What will the foreigners do, if the USA default, to get even? Invade? (No, the US military, paid by aforesaid foreigners, is too strong…) Refuse to lend some more? Not necessarily: when you can’t beat up the strong, you may as well join it. That’s exactly what happened when the US defaulted… and the USA defaults all the time…

There are many ways to default: first one can default on the interest only, or part of it.

Inflation also extinguishes debt. The CPI (the inflation measurement) in the San Francisco Bay Area, the biggest tech engine of the US and world economy, reached nearly 5% last year (2017). Such a healthy dose of inflation will absorbs lots of debt. Meanwhile, among many other things, said Bay Area fabricated for more than twelve billion dollars of electric cars in 2018…. While Apple Inc. based a few miles away, generated more than 200 billions in revenue…  

So the SF Bay Area is a perfect illustration that a roaring economy goes well with roaring inflation, thus roaring debt, etc. Looking in detail within the machinery of some major tech companies (say Oracle) show lots of debt at major points of development…

When the pace of economic (GDP) growth exceeds the rate of interest on a country’s public debt, managing indebtedness is a shrinking business: debt incurred in the past shrinks steadily as a share of GDP without any new taxes needing to be levied.

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Public Debt Helps The Public In General, and the Poor First of All:

Some are sure to whine that debt might nonetheless rise if annual deficits are sufficiently gigantic, as they are in US America now. Even so, at prevailing interest rates and growth rates, and with deficits continuing at 5% of GDP, it would take more than a century for America’s ratio of gross public debt to GDP to reach the current Japanese level…. And then, as I pointed out, so what? A tax? A 2018 French-like situation? Overtaxation? No, not really: remember, only the wealthy lend. So debt will reduce inequality. Actually MASSIVE debt reduces inequality in two ways:  it potentially taxes the wealthy, in the future, and, in the meantime, it feeds countries and the poor (who are the first to profit from public infrastructure)…

Hypocrites will come, and suggest inflation hurts the poor… However, although inflation extinguishes debt, there are other ways to extinguish debt, and thus rampant debt doesn’t mean rampant inflation…

Olivier Blanchard, long chief economist of the IMF, pointed out that since 1870, the average nominal interest rate on one-year US government debt has been 4.6%, though the average annual growth rate of nominal GDP has been 5.3%. Growth rates have surpassed interest rates in every decade since 1950, except the 1980s…. And guess what happened in the 1980s? Plutocratization! (Much admired by all too many “democrats”, including Barry Obama…)

***

The Rise Of Evil Power, aka, Plutocracy was tied in to debt extinction:

(Perhaps unwittingly, and hopefully witlessly) Evil US president Carter launched a secret war in Afghanistan, using Muslim Fundamentalist and the Muslim Fundamentalist ISI of Pakistan… On July 3, 1979, and immediately afterwards, Reagan, helped by the evil Democratic Congress, led by fellow Irishman Tip O’Neil, launched officially trickle-down economics: instead of making everybody wealthier through public debt, Reagan and his “democratic” little helpers claimed that, the economy would do better by making the wealthiest wealthier…

Nicholas Crafts of the University of Warwick observed that the difference between growth and interest rates did more to reduce British debt loads in the 20th century than budget surpluses. Indeed, austerity-induced deflation in the 1920s frustrated attempts to pay down war debts (that was followed by the attempt of inflating out, which was too brutal, and helped bring the 1929 crash…)

Inflating out of debt was successful after World War Two. At the same time, the uppermost margin rates were pushed by Republican president Eisenhower up to 93% (nobody has accused Eisenhower to be a socialist… yet) Similar rates applied in Britain and high taxes on the wealthy also applied in throughout Europe…

In the past decade our great leaders have listened to their future benefactors, and sponsors, the wealthiest. The wealthiest want the poor ever poorer, so that wealth, power, can be worth having, ever more. So our great leaders, who are great servants of the wealthier, have done as ordered, and have stimulated public economies too little. (To make the lowest people feel good enough about themselves, while they undermined them, they have paid them with PC speech, and “identity politics”, that is, racism…)

Result? Rich countries have spent ever more time below their productive capacity than above it—at grave economic cost: while French, German, British and US  politicians explained to We The people that they cost too much, China, India and their satellites (population three billions) roared ahead, spending on the public as needed by the public. This is how Europe, its colonies and the US did it in the Nineteenth Century (and even in centuries prior, following the dominant economic theory known as “Mercantilism”)

An overdeveloped fear of public debt, invented by plutocrats, nurtured by prostituted economists, is to blame. But now a new class of “populist” leaders have appeared, who call a lot of it, for what it is. So some government economists have been ordered to acquaint themselves with reality.

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The 3% Deficit Limit Is Killing the European Union:

And guess what? Experience suggests that governments face much looser budget constraints than once was claimed on every rooftop. So governments enjoy more freedom to support struggling economies than previously believed. Economists, happy to get orders less debasing to themselves, are taking note, that, indeed, yes, governments can borrow more…..

“Neoliberalism” is fundamentally a lie. “Neoliberalism” is a creed, a faith, and a conspiracy for the gullible. “Neoliberalism” asserts that the economy does best, when left to private enterprise. This is a lie, just there, and propaganda. Indeed it always omits a detail: how money is created.

In the “Neoliberal” creed, the (private) banks create money by lending. To whom do they lend? The wealthiest. So the wealthiest privates get more and more money, and the poor, less and less, augmenting inequality, year after year, as observed: the color of the skin of the president has nothing to do with it.

The only way to cut that vicious circle is having the Treasury create money and use said created money for public work. The Treasury can do this by creating bonds. That will spur the economy.

Should a crisis arise, a sovereign government can grab the debt and extinguish it.

In 1790, Secretary of the US Treasury Alexander Hamilton did just that: he took all the debt, from all the states, and extinguished it, by making it into Federal Debt (hint to the European Union… do the same…).

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When Not Sovereign Debt To Foreigners Means Loss of Independence: the Case of Dauphiné

The French Crown had done exactly the same extinction of debt with the state of Dauphiné in 1349 CE. Long an independent republic in the Roman empire, that region, named after an altruistic sea mammal, found itself with crushing debts in the Fourteenth Century. In exchange Dauphiné lost its independence inside the Roman Empire, becoming instead subject to the kingdom of France, “empire in its own kingdom” (don’t ask: a consequence of the Frexit of the Tenth Century; France by then had discovered that it would be better to make one with the region east of the Rhone-Saône).

Dauphiné has a very long independent history, all the way back to before Hannibal. The Dolphin was selected as a symbol of the altruism of that Alpine quasi-republic. Differently from fellow Switzerland, debt enslaved it… But France was the superpower of the time… Switzerland solved the ownership problem by fighting its owners, the Habsburg, to death…

The kingdom of France, empire onto itself had debts, of course, but when it so pleased. Otherwise, it could always send the army to visit lenders with too much of an inappropriate attitude (as the soon to be ex-Republic of Florence found out…)

Sovereignty and debts are bound together. The EU should do as the US did in 1790 CE. Meanwhile, the present European situation is not sustainable: whereas the USA can grow debt as big as it wants, and the notion of debt doesn’t even exist in China, Europe is reducing its economic activity to profit its plutocrats.  

At least US politicians are not so treacherously corrupt, that they will stoop that low. 

***

Conclusion: Debt is tax deferred. Public debt for public interest works boosts the economy, in a way no private spending can replace. Indeed, private spending is motivated by profit, but serving the public is serving the public, not profiting from the public.

The “Neoliberal” creed, truly the power of evil, has insisted human beings know just one motivation: greed. But humanity, in full, know many other motivations, including that of serving public good. Servicing public good is more deeply anchored in human psychobiology, because, prehistorically speaking, the individual couldn’t exist without the collective (the tribe).

We need more public spending, thus, to not overtax the economy, more debt.  

Patrice Ayme

***
***

Even “The Economist” has noticed. Consider: Economists reconsider how much governments can borrowThe profession is becoming less debt-averse”

***

Dauphiné lost its independence to Paris in 1349 CE… But not its Parliament. However, in 1788 CE, one year before well known events in Paris, the French Revolution started, for real, south of Grenoble in the city of Vizille, encircled by mighty mountains. A consequence of the Revolution would be the loss of regional parliaments, including that of Grenoble…

 

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21 Responses to “Debt As Tax Deferred, Or Why Public Debt For Public Interest Works Boosts The Economy”

  1. Benign Brodwicz Says:

    Credit overextension => collapse, historically. What we need is a jubilee (cf. Michael Hudson on this). Global debt/GDP is ~350%, a record, I believe.

    Regarding capitalism, Marx got the prognosis right, the solution wrong. So long as r > g (Piketty) the plutos get richer, the workers relatively poorer, ending in massive income and wealth inequality. Adding debt to that situation [when the only buyer is the central bank, which is where the US and EU are now] results in a Japanese-type situation since 1990, i.e., QE, zero or negative interest rates, the complete negation of market signals because the central bankers know better.

    I favor legislation such as Germany has had in past, I believe, that collars wage contours (multiples) to remain within set ratios. Forty years ago the typical big corporate CEO in the US made ~30X the average worker’s pay; today it’s ~300X. If it could be made to stick, this would be like a generator on an electric motor, preventing inequality from running away. I think Sweden has had these laws and has suffered a lapse into neoconservatism in rolling them back, although I note that according a recent query the top marginal tax rate in Sweden is still over 60%.

    Last time we were in this position 80 years ago the answer was war, which a lot of neocons apparently think will work this time too.

    peace,
    benign

    Like

    • Patrice Ayme Says:

      Hi Benign!
      I tried to explain that credit overextension is, at most, a tax. Not a collapse. Debt extinction is an old request of any serious revolution… and thus has happened many times, without collapse…
      For example suppose (not going to happen, but suppose) that the US declared the extinction of all and any debt. There would be pandemonium (private banks assets would be equal zero). If the bankers revolted, one could declare martial law, or forbid them to demonstrate (lest they die of heart attacks)… However, the US Navy would still rule the seas, etc. The US defaulted twice from one day to the next in the 20C. Result? not collapse, but US domination.

      inflation is debt dilution… 5% in SF bay… As I said, no coincidence…

      What matters is if the country is sovereign or not, and that’s military, not bankitary… A non-sovereign country can’t default. Most countries are non-sovereign as they depend crucially on the rest of the world. But not the USA, not Russia, not China… even China is heavily dependent on all sorts of exports… In the EU, France and the UK, because of their mighty military… and co-dependence with the US military and otherwise, are the most sovereign (hence their antics…)

      Switzerland voted in a RIC to limit some corporate pay (passed at 68% in 2013; a RIC limiting pay differential 1 to 12 failed, though…a lso in 2013). EU Parliament passed a law limiting bankers’ bonuses to twice their salaries…

      From: https://www.swissinfo.ch/eng/minder-law_executive-pay-rises-despite-law-change/42045966

      The public debate over executive pay died down after politician Thomas Minder persuaded voters to overwhelmingly accept his initiative against “rip off” salaries in 2013. Now part of Swiss law, the initiative gives shareholders of listed firms binding votes on remuneration packages and outlaws various types of bonuses, such as ‘golden parachute’ severance agreements, or handcuffs.

      Disquiet about so-called fat cats has not gone away completely, however, and it still simmers in the background.

      ‘Unbounded cheek’

      Minder himself remains dissatisfied with his own initiative, which he complains was diluted first by parliament and then by the wording of the resulting law. In an interview on Sunday with the SonntagsZeitung newspaper, the independent politician and company boss accused some firms of “unbounded cheek” for getting around the spirit of the law with sharp practices.

      https://www.usnews.com/opinion/blogs/pat-garofalo/2013/11/25/the-importance-of-switzerlands-112-ceo-pay-cap-vote

      Like

  2. SDM Says:

    Is this not basically Keynesian economics- public deficit spending? Even the New Deal spending of FDR was insufficient to get the US out of depression but the full scale military spending for WWII accomplished that. Ever since, military spending has been the most politically acceptable means of pumping money into the economy. State funded capitalism as Chomsky calls it. Without it, capitalism would not survive in its present form. The problem now is that public spending has been overly militarized at the expense of the general public together with the lack of progressive taxation to reign in the plutocracy.

    Like

    • Patrice Ayme Says:

      Ever since Themistocles funded the Athenian war fleet, more than 25 centuries ago, with public debt and a public-private partnership, public and military spending have been the core of real democracy.
      The Firenze Republic invented modern Treasury Bonds to finance its army… worked fine until bankers called the Medicis took over, and then France decided to reject Spain out of territories in southern Italy freed from savage Muslim invaders, by Angevins and Normans, 4 centuries earlier…

      Democracy means fighting plutocracy, and that means military….

      Like

      • SDM Says:

        So is your argument that US military spending at current levels is preferable to spending on public projects such as infrastructure such as roads, bridges, green/renewable energy grid, more sustainable farming/agriculture, education, and public healthcare? Or just that military spending is also vitally important? In the US, the military spending supports the plutocracy – a gravy train for defense contractors, fossil fuel industry, etc.

        Like

        • pshakkottai Says:

          Both public spending and military spending are necessary for civilization and there is no need to skimp, created money being entirely free.

          Like

          • Patrice Ayme Says:

            Absolutely right, Partha. One has to provide the money needed for necessary, or optimizing activities, which necessity forces upon us, or technology opens up. If there is no greed in it, the public has to do so.
            IF THERE IS NO GREED in it, the public will have to do so, because the private parts will not…

            Like

        • Patrice Ayme Says:

          Absolutely not: Eisenhower financed publicly the FREEway system on the pretext of DEFENSE.
          I do think though that dual use systems should be financed in priority… But that means mass quality public education first (and in particular health for children, etc…)
          FDR did it pretty right that way in the 1930s…

          Like

        • Patrice Ayme Says:

          Military spending as it is in the USA is too much of a gravy train: I have been highly critical of the F35 (which even Sanders support!)
          https://patriceayme.wordpress.com/2012/08/12/5483/

          For example, FUSION research should be supported more. So should non too radioactive fission (thorium, etc.) Or hypersonic MHD research, where the Russians are hinting that they broke through…

          Like

  3. Rich Reinhofer Says:

    This is Modern Monetary Theory. A theory that shows even the Babylonians understood how this works. MMT has a 4000 year old track record of being correct and yet it’s still called heterodox economics.

    Liked by 1 person

    • Patrice Ayme Says:

      Thanks Rich… I guess I have to read about that MMT…
      Mercantilism was also the main theory of Europe… for many centuries… whereas “Neoliberalism” is at most a few decades old, and already dying (hopefully…)

      Like

    • Patrice Ayme Says:

      The early Achaemenid empire, more than 25 centuries ago, went through all possible economic regimes, very quickly, with radical changes within a few years… and that contributed to its tremendous expansion… The Parsi Poney Express, in particular was the greatest public work ever, arguably (including the pyramids which were mostly useless…)

      Liked by 1 person

  4. Lovell Says:

    In the case of the US, I really don’t understand the fixation about federal debt because the solvency of the federal government is absolute – it can never ever default on those (so-called) debt because it is all denominated in dollars; the same unit of account that it has sole and sovereign authority to issue.

    It would be entirely different if the US gov’t borrows from, say, Japan and the terms of that borrowing stipulates that it should only be payable in Japanese yen. If the US treasury don’t have enough yen reserves to pay back the amount when it comes due, then it might have to consider defaulting or borrow some more and roll it over.

    Right now however, all of those so-called federal debt ($21 trillion and counting) are denominated in dollars.

    I emphasize so-called because there’s actually another way of looking at it. All of those $21 trillion are also the total treasury bond deposits held in combination by private wealthy individuals, corporate entities, pension funds, foreign governments, and also by agencies of the federal gov’t itself.

    Debt = deposits.

    Those are all interest earning deposit accounts in much the same way that one has a savings account at Wells Fargo or Bank of America. We don’t so much shudder at the thought that Wells Fargo or Bank of America has so much deposits, do we?

    However, unlike Wells Fargo or Bank of America that might go bankrupt in case of a bank run, the US federal gov’t, through its central bank, can 100% guarantee that those deposits will be safe and available if they mature at a certain time. US treasury bonds are considered the safest asset instrument by much of the investing world.

    Does the federal gov’t actually use those deposited money to fund its spending?

    Actually, no. The federal gov’t spends money into existence when congress approves the appropriated spending bill in a given fiscal year.

    So why does the gov’t keep on borrowing or keep on issuing treasury bonds?

    The practice of borrowing to fund the deficits is a relic of the gold standard era. The great paradigm shift in US federal finances happened in 1971 when President Nixon took the US out of the gold standard.

    Since then however, most politicians and congress critters still behave as if the federal gov’t is always and forever constrained by the amount of gold in its possession.

    Alexandria Ocasio-Cortez got it right that Medicare for All can be afforded through sovereign spending.

    The Pentagon had been using MMT concept all these years so why not health care for every Americans.

    https://www.bloomberg.com/news/articles/2018-12-21/what-drives-growth-under-trumponomics-looks-like-debt-so-far

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  5. Benign Brodwicz Says:

    Weimar, Zimbabwe, etc. When government debt = money (i.e., is reservable in the banking system) the *ultimate* result of excessive debt creation is hyperinflation and loss of confidence in the currency and the government, and collapse. The root of the problem is that financial accounting standards are debased, as they are now (google FAS 56) and bad debt assets fill the banks. The Minsky moment results from excessive credit creation, including private credit. I understand the “strong military guarantees currency will be accepted” argument but it doesn’t nullify the Minsky moment, it is more applicable to the dollar as international reserve currency.

    The EU is heading toward currency collapse. Zero and negative interest rates negate the information value of the debt markets. Negative interest rates are an abomination (like Larry Summers’ face)–what would make you distrust the currency more than the government saying if you don’t spend it we’ll take it away! The ECB has to buy all the (bad) debt now. “Bad debt” is defined as debts that will never be repaid. As you say, inflation devalues debt. Exactly. But when the central bank is chockerblot with government debt, interest rates hug the zero bound (an empirical regularity of aggregate money demand with an oversupply of reserves in fractional reserve banking systems). This is the debt-deflation scenario. The CB can’t get an inflation going. This is the likely outcome for the EU. Bankers love this because then they can go in and seize assets when the debts are not repaid, assets of the state if the debt is sovereign (e.g., Greece). Negative interest rates preceded the Weimar hyperinflation. Once the liquidation phase begins the government responds with more debt creation, and the downward spiral of confidence begins.

    The only thing that will save Europe now is to scrap the EU, float national currencies, let the Germans write off or restructure the bad debts, and let each nation try to get their house in order. The basic idea is that once people lose confidence in the paper, they don’t want to hold it anymore. The US will soon be in a similar position. Actually, my overriding hypothesis has been that since going off the Bretton Woods quasi-gold standard in 1971 the currencies will sooner or later engage in a race to the bottom (China too).

    cheers!

    Like

    • Lovell Says:

      An important distinction needs to be made between gov’t debt and private debt.

      The Minsky Moment largely refers to private investment bubbles financed by private debt which could and would eventually pop.

      Private individuals and corporations are NOT monetarily sovereign, meaning they could go bankrupt when risks to their investments materialize.

      No such risk exist for gov’t debt of a monetarily sovereign country like the US.

      France, Germany, Portugal, Spain, Italy and others who adopted the euro are a different story altogether. They have surrendered their monetary sovereignty to the bankers in Brussels thereby the risk of defaulting on their debts when it becomes excessive is entirely possible.

      MMT recognizes the constraint of inflation which could arise when gov’t spends beyond the absorptive capacity and real resources of the economy. When that happens, it prescribes a combination of tapering, taxation and/or interest rate adjustment.

      Liked by 1 person

      • Patrice Ayme Says:

        Agreed.

        Yes the Europeans are in a strange situation: the French Republic is a military sovereign at war in as many (if not more) countries as its close ally and obstreperous child, the USA. However, France is NOT monetary sovereign. The other defense heavy weights of the West, the UK and Israel (!) are monetary sovereigns. Unbeknownst to itself, Germany has been all too undermining France… who is defending all of Europe (and even China) in Africa…

        I guess I have to read about that MMT… (Hahaha)

        Like

    • Patrice Ayme Says:

      Weimar??????
      My thesis is that inflation was deliberate in Weimar.
      Dr. Schacht, you know (that JP Morgan agent headed the central bank)
      He didn’t want to repair France… To better chances in the next round of German fascism to destroy the Republic…

      Like

  6. pshakkottai Says:

    A comment by mythfighter, Roger Malcolm Mitchell.

    “ Wow, the deficit will be $1,085 trillion, and the economy is “as good as it’s ever been, ever.” What does that tell us about the deficit?
    
    The deficit (red line) has gone up and up, especially to cure recessions (vertical bars), while the economy (GDP) has grown and grown, too. (The plot is in https://mythfighter.com/2018/08/21/the-doofus-science/)

    What is the connection between federal deficit spending and the economy? Doofuses don’t realize that federal deficit spending adds growth dollars to the economy, which is why the government increases deficit spending to get us out of recessions.
    Federal deficit spending is stimulative.

    Doofuses also don’t know this formula: GDP = Federal Spending + Non-federal Spending + Net Exports.
    Federal deficit spending increases the first two of the three right-side terms of the equation.

    from

    https://mythfighter.com/2018/08/21/the-doofus-science/

    The formula for GDP can be extended to get a quick formula for GDP in the following way.
    GDP = Federal Spending + Non-federal Spending + Net Exports.
    = govt created $ + K* (created $ – tax) + 0* tax + net exports , where K is a factor representing a “churn” factor, 4 for USA and about 5 for India and $ to be replaced by Rupee for India’s own currency

    Note immediately that GDP falls with Tax by K*tax. It would be a good idea not to tax at all. This includes Goods and Services Tax!

    The source of the economy is govt created money (called debt foolishly, a deliberate misnomer) and the sink is tax. Tax takes away money from the economy which could be usefully spent on common welfare and science and new technologies. GDP grows only by deficits ( = created money).

    Like

  7. G Max Says:

    Do you think the EU is breaking up because of their obsession with deficits? You seem to be hinting at that.

    Anyway sounds good… so is Trump a democrat in drags? I mean if he is a big public spender, on public stuff, which Obama was on banks. I mean there is no crisis, like Obama had, so Trump is a big spender the way democrats are supposed to be

    Like

  8. Nathan Daniel Curry Says:

    What do you do to earn money Patrice? I’m guessing you work in academia in some way. Just curious. But you live in the Sierras.
    I’m in San Francisco – but questioning if America is for me

    Like

    • Patrice Ayme Says:

      Money is what I want, as the Beatles sang… Also what intellectuals need, lest they couldn’t sing their songs anymore. The US is pitiless. it’s much more about kill, or be killed, than Europe is. Lots of bullshitters succeed very well, though… In any case, most intellectuals come from, or are related to, or have more than a passing acquaintance with the 1%….

      Like

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