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View Diary: NYT: It's Krugman Vs. Reinhart & Rogoff, Who Trivialize Their Incompetence And Attack “Left” (246 comments)

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  •  So (6+ / 0-)

    you are an extreme Reinhart/Rogoff-arian? If "increasing the public debt is a bad idea at any time", their claim that a 90% debt to GDP ratio causes a drop in economic growth does not go nearly far enough. If "[t]he public debt is important because it tells us that the economy is being badly managed", then you think the ratio should be close to 0%. Any chance you could publish your views in an academic journal? I've heard the austerians are looking new scholarly justification for their destruction of the world economy.

    •  hannah is not objecting to deficits (32+ / 0-)

      she is objecting to the creation of fiat money being encumbered by debt. These are very different things with very different implications.

      •  Do tell! (1+ / 0-)
        Recommended by:
        No one gets out alive

        How does one claim "increasing the public debt is a bad idea at any time" without "objecting to deficits"? This is a perverse misreading of MMT.  Here's Bill Mitchell on the subject:

        In MMT, we see public debt as private wealth and the interest payments as private income. The outstanding public debt is really just an expression of the accumulated budget deficits that have been run in the past. These budget deficits have added financial assets to the private sector, providing the demand for goods and services that have allowed us to maintain income growth. And that income growth has allowed us to save and accumulate financial assets at a far greater rate than we would have been able to without the deficits.

        The only issues a progressive person might have with public debt would be the equity considerations of who owns the debt and whether there an equitable provision of private wealth coming from the deficits. There is a debate to be had about that, but there is no reason to obsess over the level of outstanding public debt. The government can always honor its debt; it can never go bankrupt. There’s no question that the debt obligations will be met. There’s no risk. What’s more, this debt provides firms, households, and others in the private sector a vehicle to park their saved wealth in a risk-free form.
        None of this is to say that budget deficits don’t matter at all. The fundamental point that the original developers of MMT would make—myself or Randall Wray or Warren Mosler— is that the risk of budget deficits is not insolvency but inflation. In saying that, however, we would also stress that inflation is the risk of any kind of overspending, whether investment, consumption, export, or government spending. Any component of aggregate demand could push the economy to that point where we get inflation. Excessive government spending is not always to blame.

        In sum, we’re quite categorical that we believe that budget deficits can be excessive and can be deficient as well. Deficits can be too large, just as they can be too small, and the aim of government is to make sure that they’re just right to employ all available productive capacity.

        •  Debt is NOT the same a deficit (0+ / 0-)

          If you understand the difference, you see Mitchell and hannah are in substantial agreement. MMT does not describe the debt as a necessary constituent of fiscal policy - in my understanding of the MMT formulation, there is functionally no difference between issuing non interest bearing notes and interest bearing notes, except the latter require debt service. Currency creation only requires bond creation because that's the way the law is written. It's welfare for the 1%.

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