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Deficits Don't Matter
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And it’s a good thing they don’t, else we wouldn’t be in the midst of a V-shaped recovery:

The federal government ran up a record October deficit of $284.1 billion, double the red ink of the same month a year ago, as revenues declined while spending to deal with the impact of the coronavirus soared.

The October deficit was double the $134.5 billion deficit logged in October 2019. It smashed the previous October record of a $176 billion deficit set in 2009, when the government was spending heavily to lift the country out of a deep recession caused by the 2008 financial crisis.

The deficit for the 2020 budget year, which ended Sept. 30, totaled a record $3.1 trillion, breaking the old mark for an annual deficit of $1.4 trillion set in 2009.

It’s a good thing the government spending $9.5 billion a day, or $400 million an hour, or $6.5 million a minute, or over $100,000 a second beyond what it vacuums up in taxes doesn’t matter, because if it did, all the money creation underwriting this utterly unpayable debt might destroy the currency it is denominated in.

• Category: Culture/Society, Economics • Tags: Econoclysm, Economics 
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  1. Jtgw says:

    As Rothbard said, the only ethical course of action is default.

  2. The last couple of times you advanced this point, I took the bait as it were, but meanwhile you are right.

    Under your withering cross-examination, my friend No True Scotsman and I are forced to admit that Congress’ reckless fiscal indiscipline has little to do with real Modern Monetary Theory (MMT). MMT merely affords a convenient excuse for Congress to blast the federal treasury to smithereens.

    Some federal fiscal discipline, if only in the name of prudence and in reserve against excessive giddiness, would be warranted.

  3. Twinkie says:

    My parents were wrong – money really does grow on trees. In fact, trees (turned into paper) are money!

    • Thanks: Jtgw
    • Replies: @TomSchmidt
  4. songbird says:

    When the feds run a deficit, everyone in Congress should be paid in Zimbabwean dollars.

  5. @V. K. Ovelund

    I’ve quoted Mark Steyn once or twice to the effect of, “I used to worry there would be a civil war; now I worry there won’t be a civil war.”

    My own take is that I used to worry there would be a currency collapse; now I worry there won’t be a currency collapse.

    • Replies: @animalogic
  6. Mark G. says:

    Trump did have a chance to cut spending. His non-interventionist foreign policy could have led to cuts in military spending but instead he increased it. Having a large military increases the likelihood of future interventions because there will be people like Madeleine Albright saying what’s the point of having this superb military if we don’t use it? Most military spending is just pouring money down a rat hole.

    His immigration policy could have also led to less spending since immigrants and their families use more welfare than natives. It probably did so but was offset by increases in spending in other areas. For example, spending on farm aid doubled under Trump. Right before he lost he was advocating a bigger new stimulus bill than the Republicans in Congress and was promising blacks more spending as part of his “platinum plan” if they would vote for him.

    • Agree: Voltarde
  7. @Almost Missouri

    “Currency collapse” ? Possible. But not odds on. While the US $$ is the reserve currency & a majority of international transactions are conducted in US $$’s then a collapse is not likely.
    But, then again, things go well, until they don’t.

    • Replies: @TomSchmidt
    , @indocon
  8. neutral says:

    Any country that still wants to couple itself financially to the US dollar is stupid. De dollarisation should be the number one priority for any responsible state. The US regime is fast approaching a point of no return, the rest of the world must not be dragged down with it.

    • Replies: @Donald A Thomson
  9. @neutral

    The last time the USA reneged on it’s debt did no harm to the USA. How many Yanks even remember that the USA guaranteed convertibility of the US dollar to gold at a fixed rate and then reneged?

    If other countries are stupid enough to trust the USA, they will be the ones to suffer. However, those who are used to obedience usually are obedient. Like the French during the USA’s first reneging, Russia won’t suffer but China, many oil producers and Japan are still exposed to action by their debtor. [email protected]

  10. Before the end of Bretton Woods, $40 bought one ounce of gold. Today, the same ounce can only be had for $1900. The currency has already collapsed, it just has not mattered as much as we might have assumed. That is because we are, by and large, a nation of debtors rather than a nation of savers. An inflationary runaway that reduces the real pain of debt—a good old-fashioned wage-price spiral—is helping us not hurting us. If we had a real economic steward in a position of power, he would be doing more of this sort of thing. A reverse income tax and a federal multiplier to earned wages in order to monetize all existing debt would be the least painful, least disruptive way out of the debt crisis we have created for ourselves.

    That is why rampant Fed money-printing has not yet destroyed the economy. It will eventually destroy the economy, but not because of its inflationary tendencies. It will destroy the economy because it encourages speculation at the expense of capex. Our physical infrastructure is getting older and older and is never really repaired and replaced. Eventually we will get to a tipping point where there are just too many damn potholes in the roads—literally and figuratively—to permit modern society to go on functioning. It is then and only then that we will experience, good and hard, the true folly of neoliberalism.

    • Thanks: Audacious Epigone
  11. The JEW/WASP Ruling Class of the American Empire is in the last ditch and they are using monetary extremism and mass communications propaganda to stay in power.

    The new political party called White Core America will dislodge from power the evil and treasonous JEW/WASP Ruling Class and decency and honor and patriotism will be restored to the USA.

    I wrote this in December of 2019 about the ruling class of the American Empire and monetary extremism and asset bubbles and inflation and debt:

    When the real estate bubble and the bond bubble and the stock market bubble implodes, the Federal Reserve Bank will go Bernanke Helicopter Money big time. That is a saying a lot, because for over ten years now we have seen monetary extremism of a sort never before seen.

    Inflation has been “booming” in health care costs and education costs and housing costs and the inflation of asset prices in the stock, bond and real estate bubble.

    Once the ruling class goes helicopter money, you’ll see price inflation and the currency will drop like a rock.

    Monetary extremism of the kind currently ongoing was always going to bring on a currency collapse. So I say bring it on. There must be patriotic and redemptive retaliation — legal — against the plutocrats and upper middle class and others who have benefited from this rancid and rigged globalized central banker shyster system.

    Inflation in wages has been suppressed by the use of mass legal immigration and mass illegal immigration. Central bankers have used nation-wrecking mass immigration as a monetary tool to prevent the wage inflation that would normally occur during bouts of monetary extremism. Carney at the Bank of England came damn close to directly admitting it, but he shut up about it because the ruling class in England don’t want to tell the truth too much.

    So, the implosion of the stock market bubble will cause inflation by the reaction of the globalized central banks when they double down or quadruple down on their already extremist monetary policies.

    The ruling class in the American Empire will order the Federal Reserve Bank to make 3 trillion dollar a year deficits possible and they’ll destroy the purchasing power of the dollar and they’ll let inflation storm up to keep their power. It won’t work, the current ruling class of the American Empire is heading for the dodo boneyard of ruling classes.

  12. @animalogic

    Michael Ledeen famously said that every few years the USA has to take some crappy country and throw it against the wall just to show the world we mean business. I suspect that’s to show that we will still sacrifice the lives of our young (albeit with drones, not so much) to pay in blood the reserve currency profits that our elites “wet their beaks” with up there at the top. That’s one reason why we need to spend over 850bln on defense and intelligence.

    The end is much closer than you think. It’s going to impoverish the country as a whole, but it’s going to gut the elite class that profits from it most. They REALLY don’t want to give up those dollars.

    If the overall interest rate on Federal debt is 2%, then the Feds will need to pay 540bln in interest every year. That’s getting up near the amounts spent on Social Security and Medicare, net of received taxes annually. Need we remind you that most of the recipients reflect the demographics of 65 years ago: 90+% white, and all of them benefitting from “white privilege” and “systemic racism.”

    Social Security was long the Third Rail of American politics. My guess is that the elites need that money meant for elderly racist Trump supporters to kill brown people so that the reserve currency scam can continue. It’s coming.

  13. @Twinkie

    Paper for money is made of cotton and linen. No trees. But I remind you that the word for cotton in German is “Baumwolle.” Thats tree wool.

  14. @V. K. Ovelund

    The Federal Government can print two kinds of fiat currency: both debt and credit instruments. It prints either one out of thin air. It is just that banks own the government and want the government to print debt instruments. They do not want the government to print credit instruments.

    If the Federal government so desired, it could print enough credit instruments tomorrow to cancel all of its debt and those that hold the debt would be forced to have credit with the government rather than have the government owe them. The Federal debt would be zero. We would all be trading credit instruments rather than debt instruments as our currency.

    That is essentially what MMT is (or should be). I am never sure they quite get it though. They are economists, not lawyers, and being economists, they can’t see beyond their banker’s noses.

    This is not a new idea. Coins are credit instruments not debt instruments. Of course, banks would like nothing more than to have coins go away and are doing their best to see it happen. It used to be that coins were a substantial part of our currency. Now they are a smidgen of 1% of it.

    • Replies: @V. K. Ovelund
  15. because if it did, all the money creation underwriting this utterly unpayable debt

    False premise; it’s not money creation underwriting the debt, but the gullibility of the bondholders. The Fed/Treasury do not monetize the debt. Greece had low interest rates in the 00s, too.

  16. indocon says:

    Deficits don’t matter until they do come up, USD is the reserve currency of the world until it is not, let’s stop pretending that nothing changes in perpetuity, it will, only question is if any of us will be alive to see that.

    Re USD, I have been thinking about the possibility of China invading Taiwan and US being capable of doing nothing, that is the most likely scenario in my opinion where USD loses the reserve currency status.

  17. @davidgmillsatty

    The Federal Government can print two kinds of fiat currency: both debt and credit instruments.

    What is the distinction between debt and credit instruments, please? I would like to understand the terms but do not understand them in this context.

  18. A123 says:

    As shown in the Syriza Greece fiasco, you cannot solve a government spending problem while both individual and business spending is down. The inevitable result is an Austerity Death Spiral. Germany imposed brutal cuts and punished the people of Greece so harshly they still have not recovered.

    Had WUHAN-19 not been inflicted on the world by China, perhaps we would now be in a position where government collections were up as both individuals and tax paying businesses did better.

    Complaining about unbalanced budgets now makes little sense. Did Russian patriots complain about unbalanced budgets in the early 40’s when the Nazi’s were on the move? No, of course not. Similarly, American patriots are not complaining now while the world is under attack by China.

    PEACE 😇

    • Troll: d dan

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