LateMechanic
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User ID: 1841
LateMechanic
3d ago
Every citizen is ultimately on the hook for the government's debts in one way or another.
I'm pretty sure they were also saying 200 years ago "our grandchildren are going to be burdened by paying off this debt!" Somehow the bill hasn't come due yet, but maybe our grandkids will finally be the time? Seems a bit more likely that people should solve their cognitive dissonance on this stuff by realizing they don't quite understand money, accounting, banking, and government finance as much as they thought they did.
"The fiscal crisis is about to destroy this country, the government deficit is about to hit $10 million $2 billion $90 billion $1 trillion $50 quadrillion"
Particularly if anyone finds themself like Elon saying 'what, the total worldwide debt is $100 trillion...lol who do we owe it to, Jupiter??', surely there must be some sense of 'maybe I just don't understand this fully'.
If you find it desirable, why not cut the middleman and increase corporate surplus by donating your money to a corporation directly?
If I had the power of broad taxation where the only thing I accept in payment is my own IOUs back to me, then: my IOUs would be perpetually valuable, people would probably want to save some extra for a rainy day / retirement, and I would indeed (have to) satisfy their savings desires by spending & giving them out (hopefully in reasonable ways).
LateMechanic
3d ago
Yes, in order for the private sector as a whole to be a net creditor, the government must be a net debtor, but that's meaningless. There's no reason we should care about the private sector being a net creditor.
Well I agree that it's not like a rule of the universe that the private sector must always need or want to be in perpetual surplus, accumulating monetary savings. It just happens to be how people have acted, in the US in the past few centuries at least.
In the US's history, there have been 6 periods where the government went significantly into surplus, with the private sector being significantly in deficit. Those ended in the 6 depressions in the country's history:
- 1817-21: In five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.
- 1823-36: In 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.
- 1852-57: In six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857.
- 1867-73: In seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.
- 1880-93: In 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.
- 1920-30: In 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.
And it seems pretty understandable logically, that people like accumulating net savings over time.
In more recent history, the private sector going into financial deficit (some combination of spending down savings and increasing private debt) in the late '90s and mid '00s ended with a massive recession. Your contention that non-financial physical asset wealth was fine didn't seem to stop that resulting recession.
It's true that if government doesn't run deficits private investors can't invest in government bonds, but they can buy private bonds or invest in equities.
It's not even about the actual financial savings instruments being available, because we have banks with infinitely flexible balance sheets (indeed, the current monetary policy regime is simply paying interest on reserve balances directly, so treasury securities are a pointless vestigial leftover). It's more about the flows of spending: someone's spending is someone else's income.
The government borrowing [...] adds to the burden of private borrowers by driving up interest rates
If there's enough demand for government bonds that government can borrow at rates low enough
For a government that uses their own currency and has their own central bank, the base interest rate is a simple policy tool set wherever you want -- it's not subject to market forces.
Under no circumstances should the government borrow 6% of GDP at 4% interest at the peak of the business cycle in order to subsidize middle-class consumption.
Totally agreed, as they should drop the interest rate much closer to 0-1% and leave it there. Interest income is just deficit spending in a mostly-pointless, regressive way.
LateMechanic
3d ago
It's not our debt, it's just the government as a balance sheet entity which is issuing IOUs that we (the actual people/households/firms) get to hold as assets. As for people/firms 'buying bonds': at that point it's just an asset swap between different types of interchangeable government IOUs (reserves, notes, coins, bonds, etc).
Anyone benefiting from the government spending more money into the economy than it drains back out in taxes is taking part in the aggregate private sector surplus. The rich undoubtedly are benefiting from the government deficit, but the evidence isn't that they're holding their savings in the form of bonds at the end of the day. (The government could set the interest rate at 0% permanently, and would still use the deficit to inject savings into the private sector.)
LateMechanic
4d ago
In a way, this realization is liberating. It puts you at peace. You understand that the problem will never be solved until a fiscal crisis occurs.
And the next step, for even more complete inner peace that lets you sleep like a baby at night: realizing that the government's deficit is the private sector's surplus, which most people find desirable and wouldn't want to cut. That's why we run government deficits for centuries, because the private sector likes accumulating net savings over time.
I think we're still in mistake theory territory with some true believers like Musk who thinks government debt is "our" collective debt, which would somehow be an existential problem soon. But unless things really ramp up dramatically with DOGE with congress's backing, it's currently still thankfully mostly beating up the ideological opponents with the current small cuts.
LateMechanic
5d ago
I would have recommended glenn greenwald (System Update), max blumenthal & aaron mate (The Grayzone), and matt taibbi (Racket News) as leftist journalists with good video/audio backlogs. But that may not be what you're looking for here, as these are the types who feel the modern left moved away from them over the last 10 years, and don't necessarily have many takes that the motte disagrees with. So it's largely critical of israel/neocons/neoliberals, and often defenses of trump against the establishment.
The 'vibe shift' also changed the equation somewhat. Some unabashed american chauvinism from an outside 'mirer in the mid biden years feels like a breath of fresh air, leaving many people saying 'you've got better spirit than a lot of my actual neighbors, hope to see you here soon bro'. Or at least respecting the contrarian take (especially framed as an argument with a more cosmopolitan/europhile girlfriend).
But right now and for the past few months, practically every day has already felt like christmas to an american chauvinist. So there's no longer much feeling of thirsty drought of that kind of spirit -- making it exactly the wrong time to air any kind of annoyed entitlement over the changes from the shift, based on taking the previous sentiments for granted. That exposes the cracks in the 'more american than actual americans' fantasy.
LateMechanic
4mo ago
https://www.donaldjtrump.com/agenda47/president-donald-j-trump-free-speech-policy-initiative So it's from Dec 2022, during the twitter files? Part of what seems strange is that he's aged appreciably since then, particularly after the shooting. Biden from 2-3 years ago also practically seems like AI when you're used to seeing him now.
LateMechanic
4mo ago
Remember how it felt in July, that this was basically a guaranteed lost election cycle for the democrats, and the main question was who would step up and take it? (to save the downballot races from utter landslide territory if they left Biden in) Everyone at that time was looking past Kamala, as an obvious bad choice, and speculating about Newsom or other up-and-coming talent. But then there was the specter that looking past her would be a perpetual thorn in their side, where Kamala could always be on the outside saying 'told you so', 'my turn', or playing identity cards, fracturing support with stepped-on toes and 'what if' cases.
So it seemed that for the Obamas & party leadership, letting Kamala take this (likely) loss served to clear out Biden, Kamala, and Trump, all in one fell swoop, from the next 2028 cycle. I don't think it was quite at the level of the 'Harris as Jobber' argument -- they would still try to push her to victory. But her loss isn't necessarily theirs, and helps their future prospects in some ways.
LateMechanic
4mo ago
I can't fully remember the 2016 one, but Cenk had a solid 4 minute rant ripping democrats once the NYT needle got to about 85-90% last night, maybe 10-20 minutes before he went on the PBD show to take some lumps from a hostile crowd. But definitely different vibe from 2016 -- less utter shock or tear-shedding from over-investment in a candidate.
LateMechanic
4mo ago
The point I am trying to make is that "MAGA see Puerto Ricans as outgroup" is not priced in - if Hinchcliffe had said Haiti was a trash island it would have been a dog bites man story.
I'd think it's roughly the opposite of that (at least in reality, but maybe you're making a good case for why pundits would try to make this stick). Puerto Rico works as the punchline because it's a funny surprise, exactly because they're not a serious outgroup currently, but are a decent sub-population in NYC. They can take being roasted in 2024, especially when the bit is more about the 'island of trash' setup, and the punchline just needs to be [real place].
It would have actually sounded a lot meaner and out of place if he said "yeah, I think it's called Haiti". That's where other comedians would start saying 'woah did this just turn into a klan rally?'
LateMechanic
7mo ago
The most disturbing thing isn't the joke itself, but watching and hearing the crowd go fucking wild at it.
That's what makes me think that in context of the whole show (without having heard Tenacious D in 20 years), it must be practically like an in-character comedy set, where the audience is willing to go along with near full charity, not with arms crossed and deciding how they really feel about anything said.
Mind you, this was before the shooting, and I am intensely interested in their next episode together.
Definitely, this has to be one of their most anticipated episodes. John's TDS does seem embarrassing, but I at least gave him credit before if he was trying to say out loud how he really felt, even knowing that it didn't sound good. I think now that things actually ramped up to another level, it's sobering, and people are feeling a bit sheepish to have been involved in childish gay ops or fantasies. But to the extent anyone keeps at it or doubles down, that's important to learn. I'm still not interested in going after a Home Depot worker for it, but I'd hold John to a higher bar (although it's a bit unlucky to not have been this past monday for a less filtered take).
LateMechanic
7mo ago
It does have basic comedic timing, with a big setup to say something unexpected and then blowing out candles: https://youtube.com/watch?v=-hPUM01nuis
I wouldn't know to what extent they're playing characters, but it seems pretty exaggerated. And they're americans in another country so it may have seemed less inflammatory to go for a darker joke there. But yeah it doesn't preclude that he did mean what he said, even if as a punchline.
LateMechanic
7mo ago
This was my main expectation after the assassination attempt -- that the 3 remaining cases were going to be pretty quickly abandoned or dismissed (whether on strong or dubious merit, doesn't even matter) and the 4th's sentencing would be even more minor. The supreme court had already been handing out rebukes, and the tide was beginning to turn after they got the big courtroom spectacle and it didn't change much. But it just seems like things are ratcheted up to a different level after saturday, like a splash of cold water, where trying to continue doggedly pursuing these ticky-tacky partisan trials now would just come across so badly and not at all as the behavior of "the adults in the room".
Maybe they'll go for an appeal, and get the georgia case going again with a different prosecutor or something, but I suspect a lot of people want to take any excuse to shut these all down now (can save face by just saying 'oh well, trump appointed that judge and those supreme court justices, what can we do').
LateMechanic
8mo ago
Wasn't the timing that Obama's public support on Friday helped stem the tide for a few days, but then on Tuesday/Wednesday stories started coming out saying that Obama was now privately highly concerned? WaPo tuesday night: Obama shares concerns after shaky debate, offers Biden his advice, and then a bunch of articles came out from other outlets based on that report, with harsher headlines.
LateMechanic
8mo ago
I remember the big Feinstein moments, but somehow I totally missed any with Pelosi. Must be this one? That is wacky: https://youtube.com/watch?v=fwqWzbk_LeY
LateMechanic
8mo ago
but it's not as if me changing my mind now to vote would influence them to make similar decisions.
It's not that it would influence them, it's that the hundreds/tens of thousands of other "you"s are also considering the exact same choice. If all ~75,000 of the statistically equivalent "me"s out there in the country all decide 'who cares about my 1 vote', then we may all tip to the side of not voting. But maybe if I decide that I must be part of a statistical block of similar people rather than a super unique individual, then maybe all the "me"s also decide that, and we end up voting anyway.
At least that's how I like to think of it (even if I'm overestimating the number of "me"s out there, on any given simple issue it grows much larger).
It seems like your deep dive was not into primary MMT sources, but rather critiques from the outside? Your post sounds like you were just following the attempted dismissal from like a Sumner/Rowe/Noah Smith, at least from when I was following along 10 years ago.
If you were reading anything from the main MMTers themselves, you would surely have seen them counter these dismissals a hundred times. You would surely have seen that the main thing they talk about is about how fiscal policy already manages the macro system with automatic stabilizers for the last 80+ years, not requiring congress to manually fiddle with tax rates all the time to respond to demand and inflation. And you would have heard Wray say in every book or every talk that we could certainly get some demand-pull inflation before true full employment if simply pumping fiscal stimulus via general spending, which is a demonstrated lesson from the 60s keynesians. If those were 2 of your own 3 conclusions from an actual deep dive, and you weren't just re-presenting a critique you heard, I don't really know what to say.
I do agree that a full discussion is a bit pointless and frustrating. In general I'm perfectly content with how economists, central bankers, policymakers, all the way on down to average internet commenters, have shifted a decent amount in the last 15 years toward the MMT explanations. From what I see there's a lot less of the really goofy misconceptions (we're borrowing from china, we're broke, central bankers are wizards, interest rates control the price level, banks are lending out reserves, QE is printing money, etc). So to the extent that the dismissal of MMT is "we already knew that" or "I don't agree with their progressive policy prescriptions", it works for me.
LateMechanic
10mo ago
It may be the case when dealing with random commenters on the internet, but that kind of goes for everything right? I'm talking about like Paul Krugman who kept being embarrassed when going a few rounds against MMT economists over the years, and he kept exposing that he couldn't shake some fundamental incorrect starting points like a loanable funds framework.
As for different words, that's definitely a communication hurdle where people feel like they're not speaking the same language. To me it seems to be warranted to actually cut to the heart of what matters with some different terminology, to avoid some pitfalls with peoples' everyday colloquial versions of money, lending, borrowing, etc., and talk about what is actually happening with each balance sheet operation.
But it has to be said that people in finance and central banking pretty much immediately understand MMT's descriptions in a matter of minutes. After MMT started gaining popularity, there were multiple central bank research papers put out saying the same types of things, to help educate the field and wider public, and to help correct classic misconceptions still being taught in economic textbooks. The only people who really struggled with it were mainstream academic economists, who had to try to translate real world explanations into their toy model terms. 'So you're saying that in your version of my model, my drawn curve here should be basically a vertical/horizontal line pushed out over here?'
LateMechanic
10mo ago
The core bulk of MMT is descriptive, showing how money, banking, and government finance work, from a fundamental logic & accounting level of interlocking balance sheets. When armed with these correct fundamentals, it's a lot easier to see where actual tradeoffs and choices apply, and to avoid being upset by goofy incorrect gut notions and suffering from various types of cognitive dissonance. If anyone even talks about "public borrowing", they likely still don't grasp what is even actually happening in the accounting plumbing.
The policy prescriptions which some MMT proponents tack onto that descriptive project is probably a mistake in my view. But most of them think that once you understand the real constraints, then some choices (like implementing a Job Guarantee / Employer of Last Resort program) are so obvious and moral that they should always be pitched at the same time, and ended up with a largely progressive following who wanted more of that. You can take or leave those prescriptions though, it doesn't make the descriptive project incorrect.
There is not a single MMT economist who is confused that different countries & currencies have different challenges. By the 2010s when they were starting to get traction after a decade, they probably knew more about it than almost anyone, because this was such a common early dismissal attempt 'yeah maybe they know about the US, but circumstances are special there'. The core logic still works in any situation, and understanding real constraints vs. imaginary or self-imposed constraints is the key thing to get right. There are definitely real constraints and tradeoffs in all cases.
LateMechanic
10mo ago
This is rather MMTers poking some fun at other supposed macro experts who don't actually have a correct clear grasp on how money or government funding works. He kept tripping over his words because his intuition was leading him astray, so "government prints money and then lends it" kept coming out. The correct, clear, simple answer is that government prints money in the form of bonds every day, and swaps them with central bank reserves where appropriate (like swapping between $100 bills, $1 bills, and quarters where appropriate, perhaps when trying to ride the bus or go to the arcade). The only clash is that people have pre-existing non-sensical stricter definitions of the word "money", so MMT generally prefers to sidestep a language intuition issue and just refer more broadly to what matters, financial assets.
It's already been nearly a decade since mainstream economists stopped trying to say MMT is wrong, and switched to "we knew that already", so I guarantee you MMTers aren't saying something as obviously wrong as "we can print as much money as we want without worrying about inflation". And it's MMT who has pushed better & better verbal explanations to laypeople of all those interlocking balance sheets in IGI's linked NYFed diagram.
LateMechanic
11mo ago
There's something to be said that the current backwards-compatible syntax for modern C++ will get unwieldy, but there has already been public discussion of attempts to make breaking revisions to it: see Sutter's proposal for cppfront.
And I think the other main one currently would be google's Carbon, which is an experiment from the google LLVM/clang crowd, from their frustration with the c++ committee's hesitance to do breaking changes. They're trying to use good ideas from Rust and others, in a way that's interoperable with c++ files & libraries. Although I haven't heard much about it lately.
LateMechanic
1yr ago
I mean it'll stop the specific problem they had with corruption, which was taking on debt and spending it all on politically connected patrons rather than investing it into more productive uses.
It just doesn't really sound like reality here to me, talking about huge complex government budgets like this. Is the premise something like, they'll do all the necessary & proper spending first, and then at the end of that, if they are still allowed to issue some more bonds before hitting some limit (with some kind of timing, like the last day of each period?), then they'll max that out and give the money out to the cronies? So the hall-monitors from other countries try to perfectly set a limit on them in order to just allow enough for the proper spending which should be prioritized? If the leadership is simply corrupt and untrustworthy, why wouldn't all that 'favored' spending be mixed in with all the 'proper' spending, and the distinction being possibly subjective anyway?
Good governance is hard and I don't know all the ways that other countries and US states for example try to deal with these. The euro monetary union countries definitely have a tricky setup to deal with, without a 'united states of europe' fiscal authority. I can imagine the psychology of being in other countries and feeling a lack of trust of others' behavior. It just seems like everyone is moving away from thinking that arbitrary limits on the fiscal outcomes are workable solutions.
This might be beyond me. What do you mean?
That chart of sectoral balances is the fastest way to really intuitively understand that financial assets are zero-sum. So when we talk about the government deficit, we're simultaneously talking about the non-government's surplus. You can slice everything into any number of different sectors, but a common useful separation is 'government' vs 'domestic private sector' vs 'external / rest of world' sectors.
What we find is that the private sector really wants to be running a surplus at almost all times, because people like to build up savings for security. So that's why in general the government almost always has to be running a deficit, injecting financial assets (money, bonds) into the economy. When the private sector is in deficit, that means people are collectively spending down savings and/or running up private debt, and we see it tends to end with a significant recession where the private sector forces itself back into surplus by cutting spending.
(The other source of financial assets would be the external sector, where a net exporting country runs a trade surplus. Then you could potentially have the domestic private sector and the government both in surplus potentially. On the flipside, if a country is running a trade deficit, then their government deficits need to be even larger in order for the private sector to be in surplus.)
So this is the dynamic 'savings desire' of the private sector. The behavior could be affected by various psychological, historical, cultural factors, and could be incentivized or disincentivized by stuff like tax-advantaged retirement saving, etc. We might find that the Japanese people lose trust in saving for the future by buying stocks, and instead they largely want to build up huge monetary savings for retirement, which could cause the japanese government to need to issue a massive amount of bonds & currency for people to sit on (without any inflationary effect, just having to solve the paradox of thrift and fight off deflation).
I don't think you can chalk it up to aesthetic preferences - for Greece specifically we have the comparison of the modern day vs the post war era up till the oil crisis, during which they kept the budget controlled and growth was steady and reliable.
Going off some Greek sectoral balance charts here (which I would prefer to be flipped around 0 to look more useful) and from the paper they're quoting from. It looks like Greece had a moderate government deficit but their trade balance turned to deficit in the late 90s, which pushed their domestic private sector into significant deficit, probably running up a lot of private debt. Similar to the US at the time in the late clinton-era. Then Greece adopted the euro and was locked into effectively a currency peg with the likes of Germany, which essentially made the trade deficit structural from then on.
So then, during and after the financial crisis and great recession, the private sector was hammered and was trying to de-leverage and rebuild savings, which by necessity is going to force the government into massive deficit (as tax revenue falls and safety net spending rises, the normal automatic stabilizer reasons for this).
If the main moral failing (causing a larger headline government deficit number) turned out to be that they were running a trade deficit and had been suffering a private deficit for a decade, it doesn't really seem that damning. Hard to make corruption & profligacy actually work as a macro story (though I'm sure it's plentiful at the micro level).
LateMechanic
1yr ago
Yeah there's nothing stopping anyone from doing a bad job running a government, but I'm skeptical that austerity is going to significantly hamper the corrupt actors anyway. That often seemed more like a 'just-world' convenient justification in each of the sovereign debt sagas. Greece would have been fine (at least in this sovereign debt regard) if they hadn't given up the drachma, and they ended up fine once the ECB finally realized it was their job to simply fully back all member states.
Any government will need to have various checks against spending getting out of control, such as having a proper budgeting and auditing process. But once you land on the size of government desired, the taxes and especially the debt & deficit are just dynamically emergent results based on the private sector's savings desire and the level of exporting. Net exporters acting like their lower deficits are evidence of good sense & morality is more of that just-world confusion. Trying to force a country to shoot themselves in the foot economically based on those debt/deficit outcomes being too large for someone's aesthetic preference (or bad faith justification) is a destructive angle that it seems people are not falling for as much anymore.
LateMechanic
1yr ago
To be honest, intuitively I would have expected more correlation. But as far as this chart goes, the x-axis doesn't really look like what I'd expect, with almost all countries clumped closely together between .01 and .05, whatever those refer to (I was under the impression covid stimulus varied a lot more, like these charts show). Tracking down this paper from your twitter screenshot, this is Robert Barro who is apparently still interested in his old bizarre idea of ricardian equivalence, where consumers are supposed to be rational agents and thus should respond to government deficits by saving money instead of spending it because they know they (or their descendants) will pay more taxes in the future at some point...So I imagine that explains the strange x-axis here, working in extra variables that are relevant to him wanting to test his specific ideas about rational consumers looking at debt ratios and duration.
They are choosing to set the interest rate above 0%, to subsidize savings by giving money to people who have money. Interest is just another type of deficit spending. On balance I agree with the view that it's probably a pretty dumb idea to do that subsidy spending. But the current macro regime still thinks that higher interest rates are anti-inflationary (even with large debt-to-gdp, which doesn't seem to have been worked into their models), and they want to have the ability in the future to drop rates (because they still think that's stimulative).
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