Something else that went quietly under the market’s radar was the news that the US government (yes, that ‘gubmint’) posted its first monthly budget…surplus (!) since late 2008 this April. Uncle Sam was in the black to the tune of $59 billion last month, go figure. That’s one for Ripley’s “what are the odds of that?” kind of questions, but it is a fact. It is the first such surfeit for the Obama administration and it is likely to not “go over” very well in the Romney election camp, or on Fox News for that matter, even if it is not (yet) a game-changer overall.
I’ve seen some stretched political spin in Nadler’s commentary before. Maybe if Jon had increased his gold holdings beyond his recommended 5 to 10% a few years back, he could have afforded to go to Clooney’s recent $40 grand a plate Obama fundraiser.
@forwill
The thing is, when you see someone who is supposedly practical to the extent of being downright dour make such a silly statement (about the potential for improvements in U.S. federal deficit in the short term) you have to wonder if he is not trying to paint a picture somewhat different from the reality. Nalder does this kind of stuff enough to make him annoying to market observers even those who are not gold bugs.
Why bother about budget deficits if you have a sovereign currency?
In my opinion US are unofficially putting MMT into practise but nobody will ever admit such thing!
On Thursday 17 and Friday 18 I will hear the father of MMT at 2 summits in Italy, at the Investment & Trading Forum in Rimini. On thursday evening, my friend who is the moderator of the summits and me, may have dinner together with him and his wife. I have many questions for him, since I’m not 100% sure he is right about his beliefs.
Mosler says that these are 7 deadly FRAUDS of Economic Policy:
1. The government must raise funds through taxation or
borrowing in order to spend. In other words, government
spending is limited by its ability to tax or borrow.
2. With government deficits, we are leaving our debt burden
to our children.
3. Government budget deficits take away savings.
4. Social Security is broken.
5. The trade deficit is an unsustainable imbalance that takes
away jobs and output.
6. We need savings to provide the funds for investment.
7. It’s a bad thing that higher deficits today mean higher
taxes tomorrow.
and he does explain why in his free book here
http://moslereconomics.com/2009/12/10/7-deadly-innocent-frauds/
@Giuseppe
It will be interesting to hear what he has said to you but please note MMT is a mathematical formula and not economic policy or an economic model at all. It pretty much ignores the private sector and banking and does not count the effects of government fiscal policy on interest rates or willingness to lend in the private sector or the notional effects on money supply, private savings, etc. Deficit growth financed by monetary expansion at a minimum forces investors to seek returns equal to at least the size of the net increase in money supply and lack of opportunities to do that either creates a casino atmosphere in the best case or a complete shutdown of all entrepreneurial risk taking in the worst case. Perhaps MMT could have a role in an economic model if it were to incorporate monetary and financial sector realities but in its present incarnation it is about as workable as communism with a lower case “c” (of the Marx kind). The main thing of value it offers is that it does lend formulaic support to the need for fiscal policy to be expansionary when the private sector is contracting. If it were known for a fact that such expansion (monetizing deficits) was temporary then I think little valid argument could be made that a fiscal deficit by itself has negative implications for the private sector (a main claim of the Austrian school, that I happen to think is wrong in the short term). The problem is that people have no reasonable basis to believe fiscal deficits can be eliminated in the future and that ultimately makes the Austrian school case valid. In other words, because MMT does not appear to make a distinction between the short and long term (that I’ve seen), it unfortunately loses legitimacy very quickly even if there are some things about that are correct.
The surplus is news to me and a welcome relief, but Mr Nadler attempt to create a storyline from it is rather feeble…
Silverax’s explanation is much more rational and correct; as one of many self-employed, I had to pony up money this year, as our business improved…
As for Mosler (and I paid twenty bucks for his book) and his friends, you will find them all at Pragmatic Capitalists.com…
They do make many valid points, but as Silverax stated, it is fundamentally accounting gimmicks.. They do not believe that debt is bad (USA) until they are pressed on the matter…They will tell you, that since we have our own script, that we can print our way out of debt…
They believe when times are bad, such as now, that the government should create a job bank to keep people employed…
Hear is one from, Mosler, that taxes are used to regulate the growth of the economy! LOL
This is an old and discredit theory and enjoys little support.