I never really understand the b_b MMT style theories. Often they sort of make sense though. Kind of like if it was globally decided that everyone had to kill one person each. We would solve so many problems it makes perfect sense. The problem is it wouldn't be that simple.
Not sure what you mean. Debt cancellation, as in bankruptcy, means that the creditors lose all their money.
For example, any central bank could buy a nice fat chunk of its government's debt, heap the certificates in a pile, and set fire to it. That part of the debt will simply disappear. Or you could switch the debt into zero-coupon bonds with a maturity of eternity, and leave them in a drawer for aliens to discover when the human race is long gone. With the government debt (or at least a large chunk of it) gone, the government could then embark on a new borrowing and spending binge to kick-start economic growth.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
For example, any central bank could buy a nice fat chunk of its government's debt, heap the certificates in a pile, and set fire to it. That part of the debt will simply disappear. Or you could switch the debt into zero-coupon bonds with a maturity of eternity, and leave them in a drawer for aliens to discover when the human race is long gone. With the government debt (or at least a large chunk of it) gone, the government could then embark on a new borrowing and spending binge to kick-start economic growth.
This is not far from what is happening with QE. Sure the govt pays the coupon on the bonds, but it gets it straight back. And at the moment the Fed is purchasing new debt to replace any that matures.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
This is not far from what is happening with QE. Sure the govt pays the coupon on the bonds, but it gets it straight back. And at the moment the Fed is purchasing new debt to replace any that matures.
Yes but QE is worse in that the interest income is being lost from the private sector. The economy would be better off without QE-the us government will not default no matter how high the debt becomes - Japan is up to 1 quadrillion yen in debt and the bond market does not give a shit. You simply can not run out of fiat currency. So we are better off leaving the bonds in the hands of the private sector.
GloomBoomDoom
3 Oct 2013, 10:42 PM
I know! That's how I feel after reading some of your posts though.
We'll instead of suggesting I make no sense, maybe you could ask for clarification. Unlike cat weasel, I am more than happy to clarify or rephrase an answer to any specific question you may have. If you are interested.
This is not far from what is happening with QE. Sure the govt pays the coupon on the bonds, but it gets it straight back. And at the moment the Fed is purchasing new debt to replace any that matures.
QE is far from debt cancellation.
QE still requires double accounting. When the FED buys government bonds (or whatever) under QE with fresh money the fresh money becomes a debit to the FED. The FED balance sheet balance is unchanged because the fresh money debit entry equals the value of the credited purchased bonds. There is no debt reduction at all for the FED and therefore none for the Treasury. Any profits or losses for the FED are profits and losses for the Treasury.
I dislike MMT because it pretends that the legally enforced double accounting requirements on the CB and Treasury don't exist. MMTers claim that the FED simply credits the banks reserves when the FED buy bonds. They always ignore the fact that the FED debit themselves the fresh money they issue to pay for those bonds.
If it were as MMTers claim and the FED simply credit the reserves of the bond sellers, with no debit to themselves, then there would be no end to QE and total government debt elimination would would be a trivial exercise. Simply crediting the bank reserves would enable the FED to buy all government debt, at any price, and the FED balance sheet would get credited with all the issued government debt at zero cost. It would all be profit to the FED - the whole of the government's debt. The FED would then be obliged to hand over to the Treasury all that credit either in the form of currency or the held bonds. Government debt would be extinguished. That is what would happen if what the MMTers say was true.
Basically, no country has the MMT system as described by Mosler. Governments and CBs have to double account. Governments have to have funds in accounts before they can spend. The only way government accounts can get funded is from the private sector by taxes, bond sales and government service charges. All money spent by governments has first to be obtained from the private sector. It's true that government spending returns money to the private sector but it's my own view that for the most part they should never have taken it in the first place.
Government spending is used to stimulate the economy. I suggest the economy only needs stimulating because the government hurt the economy by taking the money from the private sector in the first place. It's a vicious circle. Cutting government spending is the only way to break the feedback loop.
MMT is leftist propaganda which was dreamt up by US Democrats to justify bigger government. Sure it has enlightening elements for example re the sectoral balances but MMT is not required for understanding those aspects of money.
QE still requires double accounting. When the FED buys government bonds (or whatever) under QE with fresh money the fresh money becomes a debit to the FED. The FED balance sheet balance is unchanged because the fresh money debit entry equals the value of the credited purchased bonds. There is no debt reduction at all for the FED and therefore none for the Treasury. Any profits or losses for the FED are profits and losses for the Treasury.
I dislike MMT because it pretends that the legally enforced double accounting requirements on the CB and Treasury don't exist. MMTers claim that the FED simply credits the banks reserves when the FED buy bonds. They always ignore the fact that the FED debit themselves the fresh money they issue to pay for those bonds.
If it were as MMTers claim and the FED simply credit the reserves of the bond sellers, with no debit to themselves, then there would be no end to QE and total government debt elimination would would be a trivial exercise. Simply crediting the bank reserves would enable the FED to buy all government debt, at any price, and the FED balance sheet would get credited with all the issued government debt at zero cost. It would all be profit to the FED - the whole of the government's debt. The FED would then be obliged to hand over to the Treasury all that credit either in the form of currency or the held bonds. Government debt would be extinguished. That is what would happen if what the MMTers say was true.
Basically, no country has the MMT system as described by Mosler. Governments and CBs have to double account. Governments have to have funds in accounts before they can spend. The only way government accounts can get funded is from the private sector by taxes, bond sales and government service charges. All money spent by governments has first to be obtained from the private sector. It's true that government spending returns money to the private sector but it's my own view that for the most part they should never have taken it in the first place.
Government spending is used to stimulate the economy. I suggest the economy only needs stimulating because the government hurt the economy by taking the money from the private sector in the first place. It's a vicious circle. Cutting government spending is the only way to break the feedback loop.
MMT is leftist propaganda which was dreamt up by US Democrats to justify bigger government. Sure it has enlightening elements for example re the sectoral balances but MMT is not required for understanding those aspects of money.
My understanding is mmt fully recognises the fed creates a liability when they by bonds. The issue is, what is the value of the liability that you have full power to create. You can issue strinberg dollars to anyone, and you can record those as a liability against your account via double entry bookkeeping, But so what? You are not constrained by strinberg dollars, so the liability means something else to you compared to anyone else (a currency user). It does not change the fact you have unlimited strinberg dollars. You are still not constrained.
And I'm sorry, deficit spending adds dollars to the private sector. For you to argue otherwise you need to put forward how the USA has increased debt by $16 trillion dollars since 1971. If this money was already in the private sector in 1971, where was it hiding?
My understanding is mmt fully recognises the fed creates a liability when they by bonds. The issue is, what is the value of the liability that you have full power to create. You can issue strinberg dollars to anyone, and you can record those as a liability against your account via double entry bookkeeping, But so what? You are not constrained by strinberg dollars, so the liability means something else to you compared to anyone else (a currency user). It does not change the fact you have unlimited strinberg dollars. You are still not constrained.
And I'm sorry, deficit spending adds dollars to the private sector. For you to argue otherwise you need to put forward how the USA has increased debt by $16 trillion dollars since 1971. If this money was already in the private sector in 1971, where was it hiding?
I think Strindberg got a bit muddled up on the feds QE bond buying. There is no legal reason why they cannot buy all of the debt. Their constaint is only an inflation one.
However he is right that MMT goes out of its ways to muddle the waters over the way the US is legally constrained when it spends and it must have an in credit account.
The B_B comment about the 16Trillion debt and where was the money hiding is silly and he knows it. Obviously you can easily create a huge debt by repeatedly borrowing and spending the small amount of existing money.
QE still requires double accounting. When the FED buys government bonds (or whatever) under QE with fresh money the fresh money becomes a debit to the FED. The FED balance sheet balance is unchanged because the fresh money debit entry equals the value of the credited purchased bonds. There is no debt reduction at all for the FED and therefore none for the Treasury. Any profits or losses for the FED are profits and losses for the Treasury.
I dislike MMT because it pretends that the legally enforced double accounting requirements on the CB and Treasury don't exist. MMTers claim that the FED simply credits the banks reserves when the FED buy bonds. They always ignore the fact that the FED debit themselves the fresh money they issue to pay for those bonds.
If it were as MMTers claim and the FED simply credit the reserves of the bond sellers, with no debit to themselves, then there would be no end to QE and total government debt elimination would would be a trivial exercise. Simply crediting the bank reserves would enable the FED to buy all government debt, at any price, and the FED balance sheet would get credited with all the issued government debt at zero cost. It would all be profit to the FED - the whole of the government's debt. The FED would then be obliged to hand over to the Treasury all that credit either in the form of currency or the held bonds. Government debt would be extinguished. That is what would happen if what the MMTers say was true.
Basically, no country has the MMT system as described by Mosler. Governments and CBs have to double account. Governments have to have funds in accounts before they can spend. The only way government accounts can get funded is from the private sector by taxes, bond sales and government service charges. All money spent by governments has first to be obtained from the private sector. It's true that government spending returns money to the private sector but it's my own view that for the most part they should never have taken it in the first place.
Government spending is used to stimulate the economy. I suggest the economy only needs stimulating because the government hurt the economy by taking the money from the private sector in the first place. It's a vicious circle. Cutting government spending is the only way to break the feedback loop.
MMT is leftist propaganda which was dreamt up by US Democrats to justify bigger government. Sure it has enlightening elements for example re the sectoral balances but MMT is not required for understanding those aspects of money.
Actually agree strongly with Strindberg's view on this one - especially on the cutting to government spending. It is mind boggling that with all the technology efficiencies gained, infrastructure already in place from prior generations work and taxes and increased workforce participation rate (referring to women) leading to larger tax receipts that governments still manage to put in place more and more taxes and run up huge government debts, this is largely due to bigger and more bloated governments providing less and less value per dollar of tax receipts. An example was during the boom years 2002 - 2007 in the UK the labour government still managed to run deficits by expanding the public sector - it's a strategic move by socialist governments to have a higher percentage of the population paid out of the public purse and therefore more likely to vote for a government that will not cut government spending. Perhaps one day we can all be employed by the government or on government welfare.
Just a side note funny story, a few years out of school myself and a few mates caught up for drinks. Most of us had finished uni in the last 2-3 years there was an accountant, lawyer, doctor to be still studying, engineer and then another guy who had gone to work for state government (his brother got him the job). As we were swapping stories the gov worker was talking about his flex time, sick leave, annual leave etc and how he ended up basically working four days per week getting paid full time. He continued to tell us how in his first week on the job a co-worker showed him how to jam up the printer, which apparently happened at least every other day. It got better though as when we were asking what he actually did for his job he genuinely could not tell us, it went something along the lines of, we have staff meetings every couple of days, I answer some phone calls which I transfer to another department, sometimes they transfer them back, then I transfer them to a different department, have to print some documents every other day but often the printer is jammed. Since then he has moved up through the ranks into a manager position but still struggles to tell us what he actually does!
Obviously there are a lot of public sector workers that work hard and I wouldn't want to tar them all with the same brush but after getting a taste of the massive inefficiencies and waste of taxpayer funds occurring in the public sector I am all for a smaller government.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy