The National Debt Is Sooooooo Big

Posts in this series

The Deficit Myth By Stephanie Kelton: Introduction And Index
Debunking The Deficit Myth
MMT On Inflation
Reflections On The Deficit Myth

Chapter 3 of Stephanie Kelton’s The Deficit Myth addresses the National Debt. It’s a very big number, and politicians use it to terrorize voters. Kelton tells a story about Senator Mike Enzi, R-WY, complaining about a CBO budget outlook report, saying it should put in the zeros instead of using the word “trillion”. And that’s how seriously we should take the problem. Remember what we learned in the last post: money is a debt on the books of the US government, but it’s also an asset in the hands of a currency user. That means that the National Debt tells us how much we collectively have received in assets from the Treasury.

Kelton says that fear of the National Debt is shared by everyone in and near government across the ideological spectrum, politicians, staffers, wonks and think-tankers. When she was Chief Economist for Bernie Sanders on the Senate Finance Committee, Kelton questioned the myth.

One of the most eye-opening things I learned came from a game I would play with members of the committee (or their staffers). I did this dozens of times, and I always got the same incredible reaction. I’d start by asking them to imagine that they had discovered a magic wand with the power to eliminate the entire national debt with one flick of the wrist. Then I’d ask, “Would you wave the wand?” Without hesitation, they all wanted the debt gone. After establishing an unflinching desire to wipe the slate clean, I’d ask a seemingly different question: “Suppose that wand had the power to rid the world of Treasuries. Would you wave it?” The question drew puzzled looks, furrowed brows, and pensive expressions. Eventually, everyone would decide against waving the wand. P. 77. [1]

Wiping out the National Debt means eliminating Treasuries, and that exposed the contradiction at the heart of the myth of the Very Scary Debt. We can’t get rid of Treasuries! But the raw number scares voters so many people continued to rant about the National Debt. They never asked why voters were scared, or questioned their role in creating that fear.

Intuitively, if deficits aren’t a problem unless they cause inflation, then the national debt isn’t a problem unless it causes inflation. In the same way interest on the national debt isn’t a problem unless it causes inflation. Kelton acknowledges that there may be limits on the size of the national debt, usually discussed in terms of the ratio between the national debt and the GNP. The US is nowhere near the size of the debt to GNP ratio of Japan, for example, so there’s no immediate problem. Assuming there is some limit, Kelton turns to the various ways we could eliminate the national debt.

One way would be to run government budget surpluses, as we did when Bill Clinton was President. We could easily do that by raising taxes on the rich and their corporations, slowly depleting their total wealth. That’s a good idea on its own terms, because it would reduce their political and economic power. Kelton says that in the past when the government has run surpluses for several years the result was depressions. I would add that if we did raise taxes we’d be destroyed in the shrieks of the rich saying that their money was being used to pay for social programs like Social Security.

Or, the Fed could get rid of all of the Treasuries with just a few clicks on a keyboard, by reducing the number in the Treasury Securities account and increasing the numbers in the bank account of the holders of the Treasury securites. Economists call this monetizing the debt.

Or, we could do it by continuing to spend as we see fit subject to the inflation constraint, but stop issuing new Treasuries. As the old ones mature, the Fed pays them by crediting the accounts of the holders with green dollars. We could stop that at any time we reached a level of debt that wouldn’t frighten even the most fearful Americans. or at some higher level. [2]

Once getting rid of Treasuries would have caused a problem, because the Fed used the market in Treasuries to control interest rates. That is no longer the only control mechanism available to the Fed. [3] But then what? Kelton discusses an article by Eric Lonergan, an economist and fund manager. Lonergan asks what would happen if Japan monetized all its bonds. I quote his analysis in full:

First, let’s go through the balance sheet effects: 1. The government now has no debt. 2. The value of the Japanese private sector’s assets is unchanged – they used to hold JGBs [Japanese Government Bonds], now they hold the same value in cash. So overnight, the government’s debt is eliminated, and the private sector’s net wealth is unchanged.

The income effects are also interesting: 1. The government’s budget position improves. 2. The income of the private sector falls because bonds paying interest have been replaced with cash holding none.

So what happens to the economy?

Most people tend to say, “hyperinflation”, but that makes little sense. Why on earth would the Japanese household sector rush out and buy things when their interest income has fallen, their wealth is unchanged, and they are used to falling prices. The private sector already has a high wealth to GDP ratio and are spending less than they produce (which is precisely why the government runs a deficit).

The Yen might weaken because the yield on overseas assets has risen relative to Japanese assets, but this spread is hardly offering much compensation for exchange rate risk. My conclusion is that nothing would change in Japan if you had 100% monetization of the stock of JGBs!

The takeaway is that getting rid of Japanese government debt wouldn’t affect the economy at least in the short term. Two possible problems: a) less spending because bond income disappears from the economy; and b) weakening of currency in international markets because there are higher return available on the bonds of other countries. In the case of the US, we can add that cash previously held as Treasuries suddenly isn’t producing any return, so its owners look elsewhere for returns. That might mean an increased purchases of assets by foreigners; purchase of the debt of other countries; or something else. But that’s not all bad, and I don’t know enough to work it out.

Kelton accepts Lonergan’s logic. Paying off US Treasury Securities is possible and likely would have minimal short-term effects. Late in the Clinton Administration the US ran budget surpluses, to the point that White House economists prepared a draft report titled Life After Debt. Here’s a discussion by David Kestenbaum of Planet Money. This report got labeled PRELIMINARY AND CLOSE HOLD OFFICIAL USE ONLY”, and Planet Money got it through FOIA. Then the Republicans cut taxes for the rich, with the usual pennies for the rest of us, so the problem evaporated.

In sum, the national debt isn’t a problem as long as it doesn’t lead to inflation. A lesser constraint might be the impact on the value of the dollar, which might affect international trade in unpredictable ways.

[Graphic via Grand Rapids Community Media Center under Creative Commons license-Attribution, No Derivatives]

[1] This is a good example of Kelton’s style. As you can see, it’s clear, simple, and direct English prose, the highest praise my high school English teacher, Brother Daniel, ever bestowed.

[2] Here’s a recent tweet from Scott Fullwiler, an MMT economist:

The core point is it should be done by the [Central Bank]—there’s no reason why the appropriate (for mkt conditions) change in risk-free, liquid securities should equal size of govt debt/surplus, & no reason for appropriate maturity structure to be same as what cost-minimizing [Treasury] chooses.

[3] For example, the Fed began to pay interest on the reserves commercial banks are required to keep at the Fed. There is a full explanation starting at P. 117.

[4] There are, of course, distributional issues for both Treasury Securities and for the interest they pay. This is a normative issue best dealt with by politicians, and not economists. One consideration is that many people benefit indirectly from interest on Treasuries through money market funds, investments by pension plans and direct purchase, because Treasuries are absolutely safe.

129 replies
  1. Wm. Boyce says:

    Reducing the national debt is used by rich people to advocate gutting social programs, such as Social Security and Medicare. The debt going up is bad when being used to help many people. However, the national debt is irrelevant when cutting taxes on the wealthy, which balloons the national debt.
    Please try and learn this very important lesson.

    • Theodora30 says:

      It is also a favorite scare tactic of the mainstream media — at least when Democrats are in office. I remember in the early 90s the constant reporting about the debt clock clanging our doom. Then Clinton and the Democrats raised taxes, mostly on upper incomes. Republicans were screaming from the rooftops that it would crash our economy; it boomed instead. Suddenly we not only had a balanced budget, we had a healthy surplus that was rapidly paying down our national debt.
      The media got very quiet. When Gore ran against Dubya he advocated continuing to use the surplus to pay down the debt. In contrast Bush claimed the surplus proved that taxes were too high, constantly saying it was our money after all. Bush conveniently neglected to mention it was also our debt, a debt that Republicans claimed to abhor. What was the media reaction? They shut up about the debt they had obsessed over when Clinton took office and proclaimed Bush more fun to have a beer with.
      I remember being astounded that the media downplayed the fact that the Clinton was paying down the debt without hurting the economy and were willing to ignore Bush’s budget busting idiocy.

  2. laura says:

    I want confiscatory tax rates that wring the idle capital out of the soft palms – including a whopping big estate tax for the unearned income that it represents because fuck those fuckers on general principle. I want big juicy robust government so big it has direct hire as a jobs guarantee. I want infrastructure everywhere because crumbling schools are for shite along with roads and bridges and trains and buses and housing. I want it so big that it drowns out the cries of Grover Norquist and all who pledged their souls to tax cuts for the rich and nought but a scrap for the rest of us. The biggest New Deal that can be gotten.

  3. Zirc says:

    I surprised myself by following pretty much everything you said. However, I am not sure the logic of this statement holds: “The US is nowhere near the size of the debt to GNP ratio of Japan, for example, so there’s no immediate problem.” The US occupies a different position in the world economy than Japan. Leaving aside the relative merits of having or not having a large debt, can we necessarily assume that what holds for Japan holds for the US? Or are you stating a universal, in which case we can assume we are far short of a troubling debt to GNP ratio of the US?


    • YinzerInExile says:

      Zirc, you ask an excellent question, as to the different position in the world economy that the US occupies (for now, anyway), but I think that under both MMT and establishment economics the answer cuts the other way, namely in favor of a significant national debt (and, for that matter, a significant trade deficit, although how we get to that trade deficit is a separate issue).

      Recall that government debt is simply the same thing as cash that pays interest; then take your point, that the US occupies a unique place in the world economy, specifically as the “reserve currency” for world commerce. Reserve currency status creates a demand for US currency outside the United States; that demand is satisfied, in part, by shipping dollars overseas to buy foreign goods (hence one of several reasons for a structural international trade deficit), and in part by letting foreigners trade those dollars for US Treasury securities (the notionally safest interest-bearing instrument in the world, since it represents the US Dollar as reserve currency and is also backed by the “full faith and credit” of the US government to assure repayment — repayment merely being conversion back into the reserve currency itself). In other words, in order to enjoy the so-called “exorbitant privilege” of serving as the world’s reserve currency, the US must ship both Dollars and Treasuries outside the United States, and thus must maintain a stock of government debt that cannot practically be repaid. Eliminate the debt — and the Treasury securities that embody the debt — and I don’t see how it’s possible for the US to maintain its position in the world economy.

      (Seen through that lens, the “deficit hawks” who are constantly harping on this issue have a giant gun pointed at their own heads; getting them to change their perspective on this is the genius of the Stephanie Kelton “game” referred to in Ed’s text.)

      Note that the relative lack of concern about levels of government debt and of government-issued money in circulation, relative to GNP, and subject to the inflation-management constraint, arises only in the context of sovereign debt issued by a government that controls its own currency. Levels of private debt to GNP, by contrast, can become very problematic; when the ratio of private debt to GNP gets out of hand, that generally means that banks have relaxed lending and underwriting standards too much, and plenty of the debt is bad, because the assets that collateralize the debt are overvalued. These private-debt-fueled bubbles inevitably burst, and that is one of the principal causes of financial panics, recessions and depressions. (The former banker Richard Vague has written two books on this topic, if you’re interested.)

      There, my first-ever comment! Woo-hoo.

    • Ed Walker says:

      This is a good question. Kelton takes the issue up, so I followed suit. There is an important similarity between Japan and the US, in that both are absolutely sovereign in their currency, and economists commonly compare the two. But as you point there is an important difference. The Yen is not a world currency, and the Japanese own a substantial part of their own debt, perhaps in the range of 90%. Foreigners own a larger percentage of US Treasuries, in part because we are the international currency, and in part because of our large trade imbalances. That’s why I added the part about foreigners buying up our assets as a medium term problem.

      According to this site, the total of foreign holdings of US Treasuries was about $6.8 T in March 2019. The total public debt was about $22.7 T, and the Fed held about $2.1 T, so about 35% of US debt was held by foreigners.

      Is that a problem? Does it change the utility of Japan as a comparison? I don’t know. I think it might, because that would buy a lot of US assets. But maybe it doesn’t matter? I don’t know.

    • Silly but True says:

      This is the same intuitive position that hangs me up on this theory too: comparison to Japan is no good standard. That there are “worse” fiscally irresponsible actors than us does not mean we should push irresponsibility to their level.

      If everyone acknowledges a limit to debt-to-GDP, then the best thing we can do is objectively quantify it and come to political agreement on it, construct bipartisan legal firewalls in place to block ever reaching it, and then pump the throttle if we’re not there yet or let off if we already were.

      • jonf says:

        Do you have any way of actually quantifying the limit? Before someone starts putting limits on it ( I bet there are some conservatives already have a limit in mind, like say Rand Paul, facts be damned) that would be nice to have. Personally I have no clear idea about how to do it, except you will know it when you get there, I suppose. Much of this likely rests on confidence and, hence, it would not be good to default on a payment. I suppose our enlightened congress could hold up payments on the debt to prove to the other side who wears the pants. There is a limit of sorts. We could limit that risk if we chose to.

        • Silly but True says:

          I agree and I’m not aware of accurate or reasonable quantification of the limit.

          I trust it’s a solvable math problem that can be modeled by the best of our minds and technology in 2020.

          I trust that we can know what it is before it’s reached so that cooler and controlled heads can execute a soft, gradual turn rather than creating a catastrophic financial condition which becomes an emergency and atypical powers to resolve.

          • Theodora30 says:

            Watch the clip I posted below of Paul Krugman explaining why debt isn’t the problem we have been led to believe. Also it doesn’t drive inflation (anymore) which is the real danger and it helps avoid a deflationary trap.

    • Theodora30 says:

      The reason it doesn’t matter is that it isn’t driving inflation in Japan and likely won’t here either. That is the biggest fear about debt. We ran up a huge debt during WWII and never paid it off. We just grew so much that it became a meaningless percentage of our GDP. Spending, especially investment in things that grow our economy, also grow the economy.
      Paul Krugman recently explained this on Morning Joe:

      • Ed Walker says:

        I appreciate the Krugman piece, but please note that he is a Keynsian of some sort, and has specifically rejected MMT. He thinks debt isn’t a problem only because we are in a liquidity trap, where interest rates are low so borrowing doesn’t hurt. MMT rejects this view, for reasons I hope I have made clear in this and earlier posts.

  4. BoBo says:

    All of this talk about deficits is nonsense until we recognize that some spending is an investment that literally pays returns into future years. Example: transportation infrastructure and maintenance. All new infrastructure create a need to spend money in the future on maintenance.

    Other spending does absolutely nothing to create monetary value in our economy. The military industrial complex and weapons of mass destruction fall into this category even if we accept that some spending for national defense is imperative.

    I do not understand why anyone, especially progressives, want to lump all government spending into one category as if there is no need to identify longer-term investments with immediate expenditures that do not produce meaningful economic growth.

    And then when dishonest republican-like Democrats like Pete Buttigieg want to jump on the deficits-all-bad-bandwagon, it is disgraceful and entirely disqualifying as a Presidential candidate.

    I find it regretful and disappointing that this appears not to be part of the discussion. If the recommended book does not clearly explain this, that author is unqualified to speak to the issue. The real issue has nothing to do with points from this book being highlighted.

    Perhaps this post’s author, for whatever reason, simply overlooked the most important reason it is a lie to focus on meaningless deficit numbers?

    • Rayne says:

      The purpose of comments here is to discuss the content in the post, and in the case of Ed Walker’s series, the entirety of the subject text.

      Instead of complaining about the topic and the post, make a reasoned counterargument. For example, you “do not understand why anyone, especially progressives, want to lump all government spending into one category” — expand on this. The government is already divided into mandatory spending, discretionary spending and interest on debt. How should those three categories be divided in your opinion, providing citations to bolster your case?

      I find it regretful and disappointing that this appears not to be part of the discussion.” <<-- This is why the comments are available, for YOU to make the discussion happen, not merely as a repository for complaints. Make your case. We're all ears. Welcome to emptywheel.

    • bmaz says:

      Hi there “BoBo”. Here is what I find “regretful and disappointing”. That common scolds like you blow in on a wind and a whim and try to blather shit about what “this post’s author”, much less the commenters here, know or think.

      “Perhaps” you are a troll. Whatever, get out and stay out.

    • Ed Walker says:

      This is macroeconomics. It’s about the big picture. In the big picture, all government spending is someone else’s income, and that’s the point of this kind of discussion. For the rest, what Rayne said.

    • jonf says:

      Hi Bo. Not sure I understand your perspective. We just spent some trillions on people for things like groceries and other expendables. And it all vanishes once spent. Except, if you take a longer perspective, that money is an investment in people. We did this in the great depression and the most recent financial crash. For me anyway, they were pretty wise spending decisions and helped keep the devil from the door, an investment if you like.

  5. drouse says:

    The Fed paying interest on reserves slowed down the recovery during the 2009 crisis. They injected all that liquidity into the banks and the banks finding that they couldn’t lend out at a rate that beat the Fed’s rate. So they just left it sitting in the reserve accounts. Bankers are about the most amoral bunch around so paying interest was somewhat self-defeating.

    • Ed Walker says:

      I’m not so sure about that. At the time, the Fed was trying to support bank lending, but the FDIC and other regulatory arms of the government were insisting that banks be very careful about lending, and no one wanted to borrow anyway, so the Fed was pushing on a rope.

      In the end, it felt a lot like the Fed was giving money to commercial banks in a backdoor subsidy. But maybe it was a good idea anyway, a cheap way to clean up the financial sector. That certainly was part of the motivation at the time.

    • Bruce Olsen says:

      The central issue in 2008 was overpriced housing.
      Congress should have forced mortgages to be renegotiated at realistic prices, which would have washed out some unqualified buyers but nothing like the bloodbath that occurred.
      Instead the Fed decided to inflate asset prices and save the bankers, and Congress decided to torment home buyers with loan modifications that were never going to be granted.
      If most homeowners had been able to get back on their feet via a good-faith loan modification process, they would have had normal financial lives and created demand. The Fed may have been able to stimulate demand when we had an industrial economy, but with a service/consumer economy they can’t do much.

      • timbo says:

        I like to think that this was true too. It’s one of the big shames of the first two years of the Obama Administration that they did not get this right.

  6. Leading Edge Boomer says:

    If my government bond investments were suddenly turned into a pile of cash, inflation would (currently slowly) diminish that pile over time. So I would be more tempted to spend some now rather than later on stuff I would eventually buy in any case. This is not what the article says I would do—what am I missing?

    • Rapier says:

      You can choose to sell your Treasury securities at any time to get the cash money in your bank account. However the Treasury cannot ‘call’. or prepay them off. All existing Treasury securities were issued as non callable.

    • Ed Walker says:

      In part the answer is that at that time Japan was in close to a deflationary position. At the same time, the holders lost income because cash doesn’t pay interest. So waiting to spend money made sense.

      For you it might make sense to spend more. We aren’t in deflation, and the loss of income may not matter. But if you are saving for retirement, college for your kids, or a down payment on a house, that may not be a choice.

    • jonf says:

      I have often wondered who buys bonds?The yield on 10 year Euro and Japanese bonds today is .07% and .04%, not going to get rich on that.

      • Bruce Olsen says:

        Some folks have so much money that most investments aren’t available to them–their presence will distort nearly any market they enter (or exit with their profits).

  7. Rapier says:

    Believe me I want to be sympathetic but the following in gobbelty gook. It is non sense.

    “Or, the Fed could get rid of all of the Treasuries with just a few clicks on a keyboard, by reducing the number in the Treasury Securities account and increasing the numbers in the bank account of the holders of the Treasury securites. Economists call this monetizing the debt.”

    First off. “reducing the number in the Treasury Securities account” Which “account?” Whose “account”. Pure nonsense.

    “Or, we could do it by continuing to spend as we see fit subject to the inflation constraint, but stop issuing new Treasuries” As the old ones mature, the Fed pays them by crediting the accounts of the holders with green dollars. We could stop that at any time we reached a level of debt that wouldn’t frighten even the most fearful Americans. or at some higher level.”

    Non sense. If the Treasury does not borrow money by selling Treasuries where is the money going to come from to fund the Treasury?
    It conflates the roles of the Fed and the Treasury. It ignores the Constitutional mandate that all Treasury debt must be paid back and the legal requirement that stipulates all current Treasury debt is not callable, cannot be paid off early.

    That isn’t to say that functionally such a system is not possible as it already has commenced. That is the Fed buys most or all Treasury issues, with money it ‘prints’, and then never asks for the principal be paid back. (however the Treasury does pay the interest to the Fed, which the Fed does then give to the Treasury.) Which is working because the Fed never mentions it won’t ask to be paid back by pretending that they will, and because they say its buying trillions is temporary. When central banks start permanently printing money to pay most government debt then the monetary system based upon Central Banks collapses. First on a logical basis and then eventually on a functional one.

    Now with America’s power one can suppose the US could get away with it for some time, and Japan has a 20 year record of doing so with little impact. Zimbabwe and 140 or so other countries, well they are not going to have the luxury. If’s all well and good to propose a system that works for your powerful country but if such a system isn’t applicable universally you better ask yourself if maybe there is a problem

    I despair.

    • Ed Walker says:

      Your analysis is clearly based in standard economic theory, the theory we were all taught in high school and college. It’s wrong. It doesn’t describe the world, it doesn’t work, practitioners have given bad advice, and been wrong repeatedly. They can’t even predict crashes. Their theories are grounded in normative principles, primarily Utilitarianism, and fail to take into account any of our knowledge outside their own discipline.

      You can wallow in your despair with them as your priests, or you can grow the fuck up and look at the world with fresh eyes. Start with this discussion of paradigms based on Kuhn’s Structure of Scientific Revolutions.

          • CCM says:

            Had to get in on this. First, while Kuhn makes for good reading, for the most part he misses the boat. Most science is mostly incremental and rarely revolutionary. Second, sure standard theory does not explain everything, but compare Argentina to Chile or Kenya. It does predict bubbles and the effects of monetary supply on inflation. What predictions of MMT do you want to hang your hat on?

            • Ed Walker says:

              On your first point: of course that’s true. Kuhn says so.

              On your second point. I accept the basic descriptive premise. So do the Republicans who have never even pretended to balance the budget for all their bullshit. MMT doesn’t pretend to make predictions. It offers a framework for understanding the way government spending works and its limits. Mainstream economists make up models that purport to predict the future in fairly specific ways. So far, to my knowledge, MMT hasn’t. And given the framework, it doesn’t lend itself to models. In that regard is is humble in the face of the intractable problem of a reality that can be thrown into disarray by an army of fraudulent RMBS sellers or a heavy dose of SARS-CoV-2.

            • earlofhuntingdon says:

              One would be hard-pressed to explain the economic histories of Chile, Argentina, and Kenya without considering the input of their politics. Chile and Argentina, especially, are poster children for the harm that can be done by neoliberal politics masquerading as economic policy.

      • jonf says:

        That is a pretty dense discourse there. I’ve heard it said it is the foundational document to MMT.

        • Bruce Olsen says:

          This is a little more tractable; a book by Mosler available on his site for free, entitled “Seven Deadly Innocent Frauds of Economic Policy.”

          I also worked my way through dozens of videos by Mosler, Kelton, Wray, and Mitchell. Anything 30-60 minutes long usually has enough content without overwhelming. Interviews are usually not worthwhile because the interviewers aren’t any good.

          Afer that I was comfortable ci

          • jonf says:

            yeah I walked into soft currency economics on his site some years ago. What a headache. Wray was much easier.

  8. readerOfTeaLeaves says:

    I’m still working my way through Kelton’s book, but time after time I am struck by the sense that what passes for political economic chatter is 96% moralistic claptrap.

    People do not think clearly about how the economy or money *actually work* at a large, federal scale.

    Instead, we get a ton of moralistic posturing, and the Daddy Party deigns to tell us that we ‘can’t afford’ more social services, nor improve infrastructure, because national debt is: irresponsible, slavish, weak, reckless, yada yada.

    Kelton, rather than offer up yet another a moralistic dramaturgy, at least gets to the nitty gritty of how things *actually* work.

    As more of us begin to understand what she is explaining, the potential exists for profound improvements in public policy.

    Many thanks, Ed and EW.

    • earlofhuntingdon says:

      The American economics profession has largely written the history and sociology of economics out of the American curriculum. Too “airy-fairy,” not enough quantitative analysis, and not enough time in a crowded semester are common rationales.

      A more likely rationale is that those studies – illustrated by Philip Mirowski’s work on neoliberalism – provide evidence that much of what passes for the magic of the market are really political choices made by those the choices benefit. Studying how economics really work is the first step toward changing the priorities that those choices perpetuate.

      • Ed Walker says:

        I suppose the good news is that the reality laid out in EoH’s second paragraph is starting to penetrate into the minds of centrists like the editorial board of the NYT:

        Now as then, the profound inequities of American life are the result of laws written at the behest of the wealthy and public institutions managed in their interest. Now as then, the nation’s economic problems are rooted in political problems. And now as then, the revival of broad prosperity — and the stability of American democracy — require the imposition of limits on the political influence of the wealthy. It requires the government to serve the interests of the governed.

        The Overton Window is moving leftward.

        • readerOfTeaLeaves says:

          Thanks, EoH and Ed.

          Part of this mess, as Yves Smith has documented at, is that attorneys and judges are exposed to neoliberal claptrap in their annual Continuing Legal Education seminars. Here’s hoping a judge or two picks up ‘The Deficit Myth’, along with many governors, mayors, legislators, and city managers. I’m not sure what an MMT CLE seminar would look like, but if I had a magic wand, Roberts, Alito, Kavanaugh, and Gorsich would be required to attend one this summer ;-)

          • Ed Walker says:

            In the late 70s I was talking to a State Court Judge in Nashville, Chancellor C. Allen High. He told a story about a trip to a judicial conference in a nice resort. What I learned, he said, was that when a company is small it violates the Securities Laws, and when it gets big it violates the Anti-Trust Laws. I guess things have changed a lot since then.

            • readerOfTeaLeaves says:

              Late 70s.
              Before Reagan, two Bushes, and a Clinton who became republicanLite –because neoliberalism captured everyone in an era of declining unions, the loss of the Fairness Doctrine in media, the demise of local media ownership, and the perverse obeisance to Shareholder Value. Also, the emergence of tax havens, with their ability to erode social responsibility. (IMVHO, tax havens are the apotheosis of the worship of Mammon, and trust in the magical properties of capital, over labor.)

              One wonders what the good judge would have supposed if he’d seen Facebook, Amazon, and/or Google. Alas.

              • Bruce Olsen says:

                Just to be clear, the causality arrow points the other way. Neoliberalism didn’t get lucky and capitalize on a preexisting trend of declining union power; the NL project intentionally elevated the myth of the all-knowing market while striving to reduce the power of labor (and the press, and academia, and science, and governmental competence).

                • readerOfTeaLeaves says:

                  I’m persuaded that you have it correct, and my explanation of causation was muddled.
                  Thank you, I sincerely appreciate having a good discussion that leads to more clarity.

          • vvv says:

            “attorneys and judges are exposed to neoliberal claptrap in their annual Continuing Legal Education seminars”

            As a guy who is 1 hour short of next July’s two-year compliance requirement (35 hours every 2 years – meaning I do a lot of CLE, including an hour long, live on-line seminar today about corporate names and trademarks), I call BS.

              • vvv says:

                Not a judge, and to the extent it ever came up, I shot it down immediately.

                I mentioned a month or 3 back I just gave up my fed trial bar as I’m not there much anymore and the *pro bono* was potentially a problem.

                I’m a state court civil litigation guy in practice many years, long out of school.

                I take CLE for the requirement, and sometimes for fun because it can be interesting.

                And I again assert, from the front lines here in IL, I’ve not been “exposed to neoliberal claptrap in … annual Continuing Legal Education seminars”, and wouldn’t tolerate it if it happened.

                But it doesn’t, IME.

                Quick aside, I had one class last year where we had some defense atty’s actually involved in and a former prosecutor (not directly involved) speaking of some investigations and cases collateral to the Russia and DB stuff – that was cool in that it touched upon some stuff that’s been discussed here.

            • readerOfTeaLeaves says:

              Good luck with the CLE’s.

              Yves Smith at, and in her book ECONned, has documented the influence of private (propertied) interests in CLE offerings and ongoing legal education. Indeed, her work really woke me up to the scope and implications of this situation.

              Ed links to an article by David Dayen, who IMVHO is truly an expert on this topic. Note that the article references George Mason University (hoo boy…).

     has had many good articles on this topic. Here is a favorite, and I will add that George Mason University Prof Tyler Cowan, who seems to think that NIMBY’s like myself are the root of all economic evil, is to my mind a primary example of dangerous economics.

              (Cowan blames no end of ills on NIMBY’s like myself. However, in my strongly held opinion, NIMBY’s are the reason that school bonds pass, the reason that library funding passes, tax ourselves for fire, police, and hospital services, and are a primary reason that local high schools are able to have bands and orchestras. But to the Tyler Cowan’s of the world, we are the cause of economic dysfunction.)

              • earlofhuntingdon says:

                The law and economics faculties at George Mason, the Mercatus Center, in particular, should be presumed to be biased in favor of neoliberalism.

                • Molly Pitcher says:

                  I am impressed by your tactful labeling of George Mason and the Mercatus Center as neoliberal. I can think of a lot more terms that, while accurate, would probably ban me from this site.

                • readerOfTeaLeaves says:

                  Truly, they are evangelists for neoliberalism.

                  I honestly doubt they could really grapple with MMT; it’s too foreign to their thinking. Meh.

              • vvv says:

                “Good luck with the CLE’s.” Thank you for that.

                We’ve only had it required here in IL for about 5 or 6 years. When they first instituted it, the general thought was it’s just lip service, and a way for legal hangers-on and retired judges and also profs and scholars to make some coin from the practicing bar. And it worked like that for a couple years until the professional ins. carriers, title companies and big law firms figured out that free CLE course are great advertisement.

                So the $ part of it is not really a consideration; you can pretty much get your 17.5 hours a year for free.

                But the lip service part is in effect, by which I mean “luck” is not close to required – there’s no testing, just check-in requirements (sometimes every 20 minutes if online).

                Me, I try to avoid the stupid and irrelevant-to-me stuff for the most part, but it’s quite possible to nap through ’em.

                As an aside for the other attys here, all of my civil jury trials are now or about to be set for status in Jan and Feb, and here in Cook Co (world’s largest aggregate court) the courts are open but civil lawyers are told not to appear, but rather to handle stuff by agreement, emailing of proposed schedules and orders, and court-ZOOM where necessary. Also, there are no criminal juries at the moment, which is why you might read a lot of political bitching about all of the bonds, home confinements, etc. I’ve been told that if you accept a reduced bond, particularly I-bonds, you waive speedy trial.

                • bmaz says:

                  Yeah, we have had a 15 hour a year requirement here forever. It used to be really expensive, but my firm paid for it. Now there are a lot of alternatives that are really cheap. My specialization section of the bar offers a monthly one hour class at a lunch at a very posh Phoenix country club. People you know well, a gourmet lunch and desert, and almost always very useful topics for like $25 an hour. What’s not to love about that?!? So I go to as many of those as I can, and then fill in with online stuff to get my yearly hours. There is a joint called Attorney that is ridiculously cheap for this purpose. Some of their stuff is snoozer worthy, some not bad.

                  But the thought that attorney CLE is some kind of weird neoliberal capitalist indoctrination plot strikes me as borderline insane. Neither David, who I know personally, nor Yves/Susan, are lawyers and neither know diddly squat about CLE.

                  There are no juries of any kind here until at least August, and I am certain that will be extended beyond that at the rate Arizona is going with Covid. The only issue is with in custody criminal cases. Anytime a criminal case gets continued you pretty much automatically have to waive speedy trial time, and that is always the case, not just now with Covid. If you object to such waiver, the court will almost always find cause. But soon enough this is going to get tested in some class 1 and class 2 felony cases, and then we shall see what happens under covid. I mean, you can’t do a criminal jury trial over Zoom, so something will have to give sooner or later. Civil cases though, that ain’t happening anytime soon.

                  Courthouses are theoretically open, but don’t try getting in one in person, it is almost impossible. I occasionally represent DV victims, and those cases are pretty much the only ones that still happen live. The two last times I went, I was the only other lawyer in the massive courthouse other than a couple of judges. Hard to describe how empty and weird it is, straight out of a Twilight Zone episode where everybody else on earth has disappeared. Am starting to miss the real and bustling scene, but only a little.

                  • bmaz says:

                    And, by the way, I had to substantively deal with three different courtrooms today. The instant David or Susan ever does, ever, please let me know. And, again, I already did my 15 hours of CLE this year. Neither of them has ever done one fucking second, ever. So, please, don’t cite them as knowledgeable, much less experts, on CLE and attorneys.

              • earlofhuntingdon says:

                I think the issue DD and Yves pointed out was more specific: The harm neoliberal foundations pose when they sponsor free or nominal cost continuing legal education programs for judges at posh, isolated locations. (The arrangement is not unique to the law. Medical doctors, researchers, and congresscritters have no dearth of lobbyist-paid getaways and other goodies.)

                The public rationale is that judges are underpaid and the opportunity is open to all. But it would be taken up largely by those predisposed to listen to, say, the FedSoc or Mercatur’s messaging. (As bmaz notes about CLE for lawyers, there are many inexpensive ways to fulfill requirements.) Formally, the discussions are disinterested; in fact, attendance would reinforce the messaging and proclaim tribal affiliation,

                A kind of bribe – listen to our schtick and you get a free long weekend at our resort – the events create a captive audience for neoliberal messaging. It allows sponsors to confirm which judges are most worth networking with and supporting. The effects might be subliminal, and it’s probably protected speech, but it’s purposes are corrupting.

                • bmaz says:

                  I still think they are full of shit, at least as to lawyers and judges. There are tons of problems with judges, and the way they are selected and/or elected. That they go to a few seminars is not among the top ones. I have been to FedSoc CLE seminars, and I loathe FedSoc, but managed to make it out without having been indoctrinated. The FAR bigger problem is that the FedSoc is picking judges, federal and state, NOT that any judges are going to their CLE seminars. Seriously, with apologies to David and Susan, that is just batshit.

                  • readerOfTeaLeaves says:

                    Well, thanks to all who have helped me amend my thinking. My ego is a bit tarnished, but I trust that won’t prevent the sun rising in the east on the morrow.

                    Personally, I think the country club luncheon is the way to go — it creates jobs, sounds pretty low stress, and sounds reasonably convivial.

                    I heard a bit ago on the news that the SCOTUS is going granular. Again. I truly believe that a lot of Americans need to understand what they bought into because they wanted judges who were ‘pro life’. A whole boatload of other ideas came along for the ride, and we need a much better grasp of the FedSoc: who are they? what do they do? and who funds them?!

                • vvv says:

                  Again, I never saw *any* of that.

                  I work in a metro area, so country clubs are a little inconveniently distant. The costlier attendance seminars are in fancy hotels, or the odd “social club”. They are typically sponsored first by legal organizations including publishers (the local Daily Law Bulletin and its affiliates), expert witness providers, arbitrator/mediator providers, forensic accountants, and Big Law (usually one defense firm to one plaintiff firm).

                  I’ll further note that the local attorney regulatory body, ARDC (affectionately known to some as “the Gestapo”) usually has a speaker or two in the longer seminars – so the ethics of the presentations are tight.

                  The only objectionable thing I have ever seen is when a speaker or presentation gets a bit commercial in advertising whatever service or product they provide (electronic discovery and video deps and demonstrative evidence makers in particular).

                  On-line is more convenient, but I like the attendance ones, also – the networking is good, the food usually decent, the “free” drinks appreciated, and I’ve even drummed some bidness …

  9. rip says:

    Tangential, perhaps – and I apologize ahead of time.

    What happens to monetary theory and government debt when a significant portion of the cash flowing through an economy is not subject to normal guidelines and safeguards? I’m thinking of counterfeit money printed by a hostile to disrupt another country’s economy, or perhaps by a massive amount of money laundering that is not even tracked by the government and taxing agencies? Perhaps purposefully.

    • readerOfTeaLeaves says:

      The money laundering system, and the insouciance about laws that it generates, is profoundly destabilizing. I’ll admit that I can’t quite suss out (yet) how MMT can simply avoid the problems created by this ‘parallel predatory economy’.

      • Ed Walker says:

        Money laundering is a crime issue. I’m all for transparency, especially getting rid of shell companies. There are some bills before Congress, but passing things is impossibly slow right now.

          • Ed Walker says:

            Current regulation of all forms of business enterprise does not require disclosure of beneficial holders to the registering office. This information is vital to tracing all kinds of illegal activity, from money-laundering to bribery.

            • readerOfTeaLeaves says:

              Thanks, Ed.
              What a mess.

              And that is so sidewise from ‘open markets’ and the ‘invisible hand’ that I don’t know whether to laugh, cry, or just scream…

            • earlofhuntingdon says:

              The Brits are having a hard time with that sort of corporate reform, too. But they virtually invented the art of hiding from the people and the tax man who owns what. It would seem a necessary craft for a monarchy and a small elite, which own the vast majority of land and assets in the UK. At the height of empire, that extended to assets half way round the world, many of them made valuable or available through extremely unwholesome methods.

              For centuries, for example, the UK had the most concentrated land ownership in Europe. It still does. People often don’t know who owns the neighboring estate, which owns the village or neighborhood they live in, or who controls it. The family living there might have the beneficial right to do that, perhaps paying a peppercorn a year for the privilege. But formal ownership might travel among various trusts, partnerships, and LLCs, a London bank, the Channel Islands, Gibraltar, Bermuda, or the Caribbean, Luxembourg or Lichtenstein, half a dozen other places, and back to a trust nominally administered by the local solicitors down the road. The idea is that the left hand should never know who owns the right one. Who knew taxes and avoiding a ride in a tumbrel could be so much fun?

              • readerOfTeaLeaves says:

                Amen to all that!
                Nicholas Shaxson (“Treasure Islands: Tax Havens and the Men Who Stole the World”) describes the tax havens of the past 60 years as a kind of post-colonialism, and it makes a ton of sense.

                The way to hang on to privilege, and even to ‘grow it’ in portfolios. It works. Until it doesn’t.

    • earlofhuntingdon says:

      Nice find. Thanks. I was struck by the incomprehensibility Mirowski finds in many on the left, who are unwilling to say that what he calls the Neoliberal Thought Collective even exists. Many deride it as having so many sides to grasp or use, it might frighten away students! I interpret that as a reluctance to go beyond orthodoxy, out of fear of being derided as “outside the mainstream,” which appears to be the kiss of academic death in economics (something Bill Black can attest to).

      Mirowski is gobsmacked that many have never heard of the Mont Pelerin Society, the Atlas Foundation, the Liberty Fund, the Mercatus Center, Heritage Action, the Ethics and Public Policy Center, or the Federalist Society. That lack of familiarity Mirowski decries as bordering on the “unforgivable.” Most of those were founded or refounded with large grants after 1970. The FedSoc, for example, dates only from 1982. Yet, they are the foundation that perpetuates neoliberalism’s political project.

      There are many works that might fill that gap. Mirowski cites two. Amanda Hollis-Brusky. 2015. Ideas with Consequences: The Federalist Society and the Conservative Counterrevolution. And Djelic, Marie Laure & Reza Mousavi, date and title tbd, which deals with organizational structures used in the spread of ideologies, using Atlas and neoliberalism as a model. I would add, Mirowski. 2013. Never Let A Serious Crisis Go to Waste, and Kim Phillips-Fein. 2009. Invisible Hands: The Businessmen’s Crusade Against the New Deal. (A crusade they are still pursuing 85 years later.)

      Mirowski’s critique leads me to a pair of quotes: “The greatest trick the Devil ever pulled was convincing the world he didn’t exist.” Baudelaire. (Quoted in The Usual Suspects.) “The second greatest trick the Devil ever pulled was convincing the world he is the good guy.” Ken Ammi. Both apply to neoliberalism, which has become so foundational, it lies in the background, like air pollution or smallpox. The second quote also applies to the curious destructive charm of Donald Trump.

    • earlofhuntingdon says:

      The nicest part of that article is that Mirowski lists four pages of references. His conclusion is worth a read on its own. He argues, in effect, that we need an awareness of Neoliberalism’s claim that the market (really, only its largest players) is the Great Decider of all things. It decides not just prices for commodities, but the priority of all aspects of human life. Only with that awareness can we understand the most important “structural developments in modern politics.”

      For one thing, Neoliberalism has buried its nemesis: Marxism. It has “corroded [it]…as a serious intellectual proposition,” which prohibits the academy from seriously studying it. That removes it from all but the mouse holes of the cultural architecture. On the flip side, Neoliberalism has brought us all-consuming, “platforms like Facebook, Zenodo and Mendeley.”

      It achieves its success, in part, by hiding itself as a background constant, like the bacteria that caused so many routine deaths before the advent of penicillin. Its success, though, and its vulnerability, is that it is really a function of determined, organized, disciplined, and well-funded effort.

    • earlofhuntingdon says:

      From a recent interview with Noam Chomsky: “In general, it is quite correct to describe the [Covid-19] pandemic as a capitalist catastrophe, exacerbated by neoliberal savagery.”

      “We should, however, have no illusions about belief in markets or homo economicus. The core principle of neoliberalism is to shift decisions from governments, which are, to some extent, subject to public influence, to private tyrannies [the largest actors in the market] that are completely unaccountable to the public — and according to neoliberal doctrine, must be devoted solely to self-enrichment.”

      Behavior, btw, that most enriches those largest actors, which they feel should be adopted and ratified by everyone, as a way of making them complicit in their own demise.

      • Bruce Olsen says:

        Thought you might like it.

        His description of the dangers of Open Science are quite concerning.

        Software engineers are often portrayed as libertarians but there’s a very large progressive contingent that believes it’s using technology strictly for good (I was one). It turns out they’re roughly analogous to Dr. King’s racist liberals, by providing comfort (and software) to the enemy without understanding what they’re actually doing.

        There has been much discussion about various AI techniques in this context (e.g., facial recognition), but while the free software platforms meant to open science may be less obvious they are probably more damaging in the long run: it’s the foundation of science itself that is being harmed.

        Neoliberalism’s permeation of our economic and business environments seem more like water to a fish; the fish doesn’t even realize there is water, much less that it may be polluted.

        • earlofhuntingdon says:

          As I understand it, “Open Science,” presents at least two significant problems, on top of that the s/w that serves it is itself a creature of neoliberalism.

          One is that it creates a free-rider problem, in that it forces publication and release of data sets, which private sector operators could surreptitiously mine before the creator of that knowledge has the time and resources to protect it. That would seem to be a kind of Gresham’s Law problem, in that it would discourage research not funded by big capital. Its effects would be monopolistic and highly anti-competitive, and be diametrically opposed to the reasoning behind scientific cooperation and sharing, and the existence of intellectual property law. In other words, it would facilitate theft on a grand scale.

          The second is that the s/w that facilitates so-called Open Science uses algorithms, which categorize, censor, and prioritize published analyses and data (similarly to the cruder way in which giggle decides what “hits” make it to the top of its first page, the only one most people view). The power that gives the platforms and the potential harm from that way of organizing our knowledge of knowledge would seem to be extensive.

    • Philip S. Webster says:

      I left yesterday to read the article left by Bruce Olsen above and came back to finish it this morning…Man, difficult read: reading it again as it is dense.
      How he takes it back even before Hayek into the 30s and farther seems perfect to me. And: Hayek’s invention of the “the market as information processor..the sole arbiter” rings loudly. And all the discussion of Fake News and the difficulty in knowing truth…guy has some strong points here.
      Anyway: thanks to all at EW to Ed Walker particularly. I really love this.
      Gotta read this again. Thanks for the link.

  10. earlofhuntingdon says:

    Speaking of money, there’s news about Jeffrey Epstein, his attorney, and Deutsche Bank. It appears that Epstein’s attorney was going into DB’s Park Avenue office 2-3 times a month to withdraw US$7500 each time. He did it at least 97 times, or roughly U$725,000 worth. He is alleged to have specifically asked DB how many times he could do that without DB having to file a Suspicious Activity Report (the trigger amount used to be US$10,000 in any 30-day period), which would flag the transactions. It is a crime to structure withdrawals specifically to avoid triggering an SAR.

    Being that obtuse is not conducive to the practice of law for the Jeffrey Epstein’s of the world, and that sort of info a competent attorney could have found out on her own, without creating an adverse evidentiary trail. If that attorney still has a license to practice law, I’d like to know why. The crime-fraud exception would seem eminently applicable. Epstein may be dead, but the A-C privilege still attaches, and the attorney may have spoken with others who might still be alive.

    Much of that money was apparently paid to various “women.” DB, not known for giving a shit what its shady customers do with their money, became so concerned, it told its people to giggle every name to determine, if possible, that they were at least eighteen years old. When queried, Epstein’s people said the funds were to pay school tuition for friends. Now, that amount would pay for one student to attend Harvard for about 10-12 years, but I don’t think that’s among the schools Jeffrey was paying tuition for.

    DB has apparently agreed to pay penalties of US$150 million relating to this. It’s the sort of money that used to lead to serial resignations of senior officials, in lieu of prison time, and changes in banking practices. No longer, because DB has also paid well over a billion dollars in other fines over the past decade. In a separate twt, Chris Hayes wants to know why DB still has a charter to conduct banking business. My hope is that the Feds elicited and intend to use information from DB that’s worth a lot more than US$150 million.

    • earlofhuntingdon says:

      Knowing how those payments were characterized on Epstein’s books would be useful. If they were for “tuition,” he could probably have deducted the expense, but only if he paid the school directly. Paying a person directly lumps the amount into the general gift category. That is subject to IRS disclosure and has tax implications when it’s above a certain annual amount.

      If the payments were accounted for as business expenses, then what goods or services did he purchase and for what business purpose? Epstein’s accounts must have many thousands of questionable items like that.

    • rosalind says:

      yeah, reading through that this a.m., i marveled at DB’s many successful efforts to avoid unpleasant realities in order to keep sucking up those sweet cash deposits:

      1) Atty 1 asks bank teller how to structure $ withdrawals w/out triggering alert, proceeds w/withdrawals.
      2) DB: “Dude, stop being obvious!”
      3) Atty 1: “These aren’t the structuring droids you’re looking for”
      4) DB: “Oh cool, carry on!”

      • readerOfTeaLeaves says:

        So then, who was protecting Epstein?
        And/or did Hastert not have enough shell corporations to hide his crimes?

    • sand says:

      The DOJ, in its incomparable prosecutorial discretion, also found it worthy to indict Mike “The Situation” Sorrentino in 2014 for some of the stupidest tax evasion in history (

      Who’s in the room when the decision is made on whether to devote resources to take down global criminal syndicates or the cast of Jersey Shore? Mike and his brother could have been brought to justice by Snooki, but Deutsche Bank, HSBC, The Trump Org, and others get to keep making their credits and debits?

      Bill Barr might want to remember that you don’t want to be on top when the Eschaton comes. The Situation served his time. He’s saved. Others, not so much.

      • Bruce Olsen says:

        Ever notice how much Trump and Snooki look alike? I think they must use the same spray tannist (if that’s what they’re called).

        NooYawkas hate those Joisey Shits, because they remind themselves of themselves.

  11. earlofhuntingdon says:

    US officially withdraws from the World Health Organization – in the midst of a pandemic. Everything for me, nothing for thee, is a mantra Donald Trump has lived by his whole life. He may soon regret it.

    I assume Joe will rejoin the WHO on January 20th, because if Arizona, Texas, and Florida are indicators, the number of sick and dead by then will be more horrible firsts for Donald Trump.

      • bmaz says:

        New prediction out from the Washington model predicts over 200,000 deaths by November 1st.

          • bmaz says:

            Feds not just failing to help, are making far worse by affirmatively demanding opening, especially of schools. 200K actually seems fairly conservative at this point.

            • jonf says:

              They now say it can linger a very long time in the air. That makes it very dangerous for closed spaces like restaurants……..and schools. We may need to shut it all down again to get control of it, like others have done.

            • P J Evans says:

              At the same time they’re whining about political pressure to keep schools closed. If I had school-age kids, I sure wouldn’t want them in a classroom for six to eight hours a day, even with everyone masked.

              • BobCon says:

                If this truly is the situation on September 1, two weeks before the election cases are going to be spiking among school kids and their families. Teachers too, and schools will be shutting down in a very visible sign of failure for Trump and the GOP.

                I know Trump doesn’t care, but I can’t get my head around GOP officials who are on the ballot and can’t see the basic timeline of how this plays out.

                I know some are starting to bolt, but there isn’t much time for others to make a run for it.

              • earlofhuntingdon says:

                As the hour of his demise draws near, Trump’s personality would be driven to destroy those who would make him vulnerable by holding him to account. He would welcome sickness and death to satisfy his vindictiveness, and rationalize it as unavoidable collateral damage necessary to keep him in power and away from accountability.

                The Democrats need to contemplate that and prepare a response to it, because Trump’s people will lie up a storm to keep that reality about the president from the general public.

                • Bruce Olsen says:

                  TBH I don’t think he rationalizes anything. If he experiences anything like guilt he projects.

  12. jonf says:

    I’m just going to leave this here for shits and grins as they say. It appears some are concerned about our national debt, as if there “must be” just “gotta be” a limit to how much we can dare. Nah, nothing, just nothing. But who knows maybe the world will lose their confidence in us like say we miss a payment or some such. Anyway, when you find that elusive limit let’s just stop selling bonds. They’re a pain in the ass for sure with those damn debt clocks everywhere. Frightful indeed.

    • Bruce Olsen says:

      Killing bonds will be a heavy lift. The donor class (on both sides) will want to perpetuate their “UBI for the rich” (paraphrasing Mosler).

    • jonf says:

      Someone above said there are people with more money than god so they like the bonds even with near zero interest. It is a really perfect savings account and will always be there so they can keep their money into the next world.

      • Bruce Olsen says:

        If there is a god, she’s likely a sovereign currency issuer.

        Before Martin Luther there was evidence she accepted local currencies.Not so much now.

  13. d4v1d says:

    It seems to my pedestrian eye that treasuries are a form of a voluntary tax, irrespective (I acknowledge) of the detailed arguments Ed makes or cites. This same pedestrian eye, which notices that some corporations each have capital value worth more than all the gold that has ever been dug up, and thinks ‘if this country wants to be the publishers of the reserve currency, it needs to earn that status by actually increasing it’s value internally and externally, not eating itself alive.’ Am I naive? Or just list in a thicket of twisted logic?

    • Ed Walker says:

      I’m not quite sure what you mean by your first point. As to the second, that’s an interesting question. Kelton discusses trade issues in Chapter 5, but doesn’t address this question directly. When we get there maybe we can try to come up with some kind of answer.

      More broadly, MMT is a fairly new branch of economics, and we will need more economists and other academics working on it to make it more useful. I expect that there will be some integration of the parts of existing theory that are value-neutral. Trade theory may be able to make useful descriptive and empirical contributions.

    • Bruce Olsen says:

      I think that’s consistent with MMT, which points out that real resources are the source of a country’s wealth.

      That’s one reason why we need to keep pushing toward freedom and equality;being a better place to live attracts the most ambitious people from the rest of the world, to learn, and hopefully to stay and found businesses.

      Unfortunately, foreign students are increasingly returning to their home countries when their studies are done (not solely because Trump supporters hate them). This makes the US poorer because it doesn’t get the benefit of their industry. Refusing student visas for virtual college students is similarly self-defeating.

      Most of Trump’s policies have the effect of diminishing our true wealth and eroding the reasons the world likes to keep our money around. He’s throwing it all away, for reasons I hope we learn before the election. If it goes too far, even embracing MMT won’t really save us.

      • klynn says:

        I’m a long time follower of the WEF. In this presentation, their assesment is honest. WEF’s overall stance for financing a Green economy is: huge gov investment followed by public-private partnerships. With two family members in Green tech and sustainability, they agree that this is the “reasonable” way forward with a hope of more public finance through a Green Infrastructure Bank. WEF supports the idea of Green Infrastructure Banks.

        • TIm says:

          I have believed for years that the Public-private partnerships are a con by those “capitalists” who want to get their greedy small hands on the common good (ie public education, postal service, vehicle maintenance, corrections, water and wastewater utilities, airport operation and waste collection and disposal, etc)

        • Bruce Olsen says:

          Tim is correct; public-private partnerships are little more than a way to have the government pay to create revenue streams for the private sector.

          Most of the GND should just be “works for hire” (to misappropriate a copyright term): there’s exactly zero need to privatize anything built for the common good. The only concern is managing the pace of the infrastructure spend so we don’t overcommit our real resources and cause inflation. Which you know if you’ve been paying attention to Ed.

          Andrew Carnegie donated the money to build his libraries and insisted each municipality operate their library, with free access to all. A PPP would charge to build the building and insist on (under)staffing it–and rent books instead of borrowing them. Carnegie was no angel, believing in segregation, but unlike most racists he at least built some “Colored Libraries”–a PPP would redline all the poor parts of town (just like mainstream supermarkets do to this day) and declaim “let them take them Uber!”

          Again, the fish doesn’t even know there’s such a thing as water–that’s how thoroughly we’ve bought into the NL narrative about The Market.

  14. earlofhuntingdon says:

    Doing the right thing is often expensive. Lt. Col. Vindman is retiring, his twenty-one-year army career having been tanked by the always vindictive Donald Trump. Among other things, Trump appears to have vetoed Vindman’s promotion to full bird. Of course he did. He doesn’t amount to a pimple on Roy Cohn’s ass, but he has aspirations.

    • earlofhuntingdon says:

      It appears that both the Sec’y of the Army and the SecDef approved Vindman’s promotion to colonel (O-6). That he will retire without it means that it’s all on Donald Trump.

      • Molly Pitcher says:

        I was heartened to see that Sen. Tammy Duckworth says she will block over 1000 military promotions until Trump’s defense secretary explains the ‘disgraceful situation’ that led Lt. Col. Alexander Vindman to retire.

        “Lt. Col. Vindman’s decision to retire puts the spotlight on Secretary of Defense Mark Esper’s failure to protect a decorated combat veteran against a vindictive Commander in Chief,” Duckworth, who is also a combat veteran, said in a statement Wednesday.

        She said: “Secretary Esper’s failure to protect his troops sets a new, dark precedent that any Commander in Chief can interfere with routine merit-based military promotions to carry out personal vendettas and retaliation against military officers who follow duly-authorized subpoenas while upholding their oath of office and core principles of service.”

        I only wish that I was in the position to hire him for a career in which he would find satisfaction. I cannot imagine a more valuable employee.

        • earlofhuntingdon says:

          It’s the sort of thing that would make the ordinary SecDef resign, and issue a public letter about why. No doubt, he is aware of a long list of other corrupt acts he should put in that letter. That would do more to support the US armed services than any amount of toadying to a corrupt president.

  15. BobCon says:

    I don’t see signs of a full break by Biden from the fairly conservative point of view on deficits that Obama had. But I’m gathering hints he is looking at a significant change in approach, if maybe not a complete overhaul.

    It has been reported that Biden is bluntly telling rich donors to expect a repeal of their Trump tax cuts. Obviously that alone doesn’t say much, but he has also signed off on what looks like a legitimate public option for health care, with automatic enrollment for people receiving low income benefits who do not qualify for Medicaid, including a no deductible option. Obviously this falls short of Medicare for all, but it still represents a major expansion in federal health benefits and does not fit the profile of a deficit hawk.

    He is backing the creation of a Postal Service banking system, which is both a boon to the Post Office and a major government expansion into the financial sector.

    Other things I’ve read suggest he is making good faith efforts to engage with the liberal wing of the party, and I think the endorsement by Delaware Senator Coons of ending the legislative filibuster is a hint that Biden wants to move fast.

    None of this is a sure thing, not in the least because we are looking at a horrible clean up job if Biden wins, which is not certain, and a Senate takeover is still dicey. But I think there is an opportunity for a major expansion of government programs and remaking of tax policy if the stars align. Far far from certain, but there is an opening.

    • readerOfTeaLeaves says:

      I think that if Biden really is telling rich donors that the tax cuts will be rolled back, they might at least appreciate some honesty, and that would build trust.

      Postal banking is brilliant: back in the day, I used it when I lived Down Under and it worked like a charm; simple, local, friendly, and low key. A postal bank in every community would really be an asset in terms of bank access to almost everyone. Also, the postmaster was like the village well: he knew everyone, so it was a very safe benefit for everyone in the community. And the post office doesn’t scam fees for their transactions: this really would be a huge public asset.

      • Bruce Olsen says:

        Any serious discussion of JG includes postal banking because JG’s target population has limited access to banks. Having this will make JG that much easier.

        If it happens, the responses from the banks and payday lenders will be entertaining.

        • BobCon says:

          Predatory lenders are obviously gunning to get as much as they can before a potential Trump loss — they just got CFPB to stop a regulation to prevent payday loans that exceed a person’s ability to pay.

          The Supreme Court just ruled that the head of CFPB can be fired almost at will by a president, which was supposed to be a favor to the financial world, although the bet seems a lot dicier with Trump’s election odds, and a strong consumer advocate might be in place next year instead of Trump’s pick finishing out her term.

    • earlofhuntingdon says:

      Postal reform – including simplified banking and removal of the crippling rule regarding pre-paying 75-years’ worth of benefits – is vital to the USPS and to maintaining representative government. Not revitalizing it – and to corrupt the vote – is one reason a Trump toady is now at the helm of USPS.

    • PhoneInducedPinkEye says:

      The supreme court must have some reforms if we want any gains to survive the next republican admin after Biden

      • earlofhuntingdon says:

        C.J. Roberts gives as he takes away on the Trump tax cases. Limited rulings. Trump not immune from state prosecution while president and NY prosecutors should get his tax information, but not until the lower courts work through a lot more stuff – potentially meaning elements come back to the S.Ct. – before the data is handed over. Even more limited a ruling in the second case, involving congressional subpoenas. Roberts refuses to get his head around the rights Congress should have in overseeing the presidency and in reining in obviously abusive behavior. Thomas and Alito are lost causes, which is why they’re there.

        Very important stuff, but Trump should be long gone from the White House before requested information is disclosed. As you said, reform of the Supremes is necessary. I would add objective conflicts, ethics and recusal standards, and two seats. It’s not like there isn’t enough work to go round. I wonder if Schumer and Pelosi would touch that issue with an oar.

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