Does the national debt matter? 2020 Wray

 

2021/02/25

https://twitter.com/StephanieKelton/status/1364620371287228418

Stephanie Kelton 

"In truth, the only bond vigilante the US faces is the Fed—Congress allows it to raise rates whenever it wants ... But even if the Fed abandons low rates, the Treasury can ‘afford’ to make all payments on debt as they come due, no matter how high the Fed pushes rates.” 1/5

“Affordability is not the issue, but rather the desirability of making big interest payments to bond holders and potential effects on aggregate demand and hence inflation.” 2/5

Does the national debt matter?
(2020). Does the national debt matter? The Japanese Political Economy: Vol. 46, Debating modern monetary theory, pp. 261-286.
tandfonline.com★

“[T]he US Fed is a creature of Congress, and Congress can seize control of interest rates any time it wants (and in WWII interest rate policy was essentially dictated by the treasury).” 3/5

“Bond markets cannot hold the nation hostage—the central bank can always overrule them.” 4/5

Worth keeping all of this in mind as the debate over fiscal sustainability continues to miss the forest for the trees. “Market sentiment” is being weaponized to scare Congress away from taking bold action on climate/infrastructure/etc. 5/5  

All the quotes in this thread were taken from the Wray & Nersisyan article, “Does the National Debt Matter

https://twitter.com/StephanieKelton/status/1364621130263371784?s=20

https://twitter.com/goethe_chan/status/1364756640449191940?s=21

  🦉 ゲーテ( ⚔ セイバー)宝具Lv.5/Goethe-chan/歌德小姐 @goethe_chan

「実際、米国にとって唯一の債券自警団(政策に対し債権を売り抗議する投資家)はFRBだ。議会は必要なときにいつでも金利を引き上げることを許可している...しかし、FRBが低金利を放棄し、金利をどれほど高く押し上げても、期限が来れば財務省は債務のすべての支払いを『賄う』ことができる。」 1/5

「支払いを賄えるかどうかは問題ではなく、債券保有者に多額の利息を支払うことが望ましいかどうかであり、そして総需要ひいてはインフレへの潜在的な影響である。」 2/5

Does the national debt matter?
(2020). Does the national debt matter? The Japanese Political Economy: Vol. 46, Debating modern monetary theory, pp. 261-286.
tandfonline.com

「FRBは議会が生み出した組織であり、議会はいつでも金利のコントロールを掌握することができる（そして第二次世界大戦では、金利政策は本質的に国庫[財務省]が決定権を有していた）。」 3/5

「債券市場は国家／国民を人質にすることはできない。中央銀行は常に債権市場の影響を覆すことができるからだ。」 4/5

財政の持続可能性についての議論は木を見て森を見ずという状態が続いているため、上記の点を押さえておくことは重要だ。 「市場心理(センチメント)」は、議会が気候、インフラなどに対して大胆な行動を取らせないよう恐怖を煽る武器として利用されている。 5/5

このスレッドのすべての引用は、ランダル・レイとイェヴァ・ナーシシアンの記事『国家債務は重要なのか？』から引用した。by ケルトン

★

https://www.tandfonline.com/doi/full/10.1080/2329194X.2020.1867586?scroll=top&needAccess=true

…

Notes

1 See, for example, Rezende (2009); Jorge (2020); Wray and Liu (2014); and Mitchell (2016b).

2 See Kaboub (2019), Samba Sylla (2020), as well as this panel at the 3rd MMT Conference (2019), available at: https://www.youtube.com/watch?time_continue=518&v=lSCpJ3dSJ24.).

3 See Goodhart (1998). Note that the main purpose of his paper was to argue that the newly emerging euro area was an unprecedented deviation from the norm and that it likely would not turn out well. MMT (as well as Wynne Godley at the Levy Institute) reached a similar conclusion and in all important respects accurately predicted what would go wrong.

4 See, for example, the view in Japan in Nikkei Staff Writers (2019). In the US, Kenneth Rogoff (2019) labeled MMT “nonsense”; Larry Fink, CEO of BlackRock, called it “garbage” (Collins 2019); Paul Krugman (2019) said its claims were “obviously untrue”; and Larry Summers (2019) called it “voodoo economics”. For links and a considered response to each of these attacks, see Montier (2019). For responses to critics see Wray (2019a, 2019b, 2019c, 2019d, 2019e, 2019h, 2019i) and Mitchell (2019a, 2019b).

5 See Innes (1913, 1914), Grubb (2015), Hudson (2004), Graeber (2011), Ingham (2000), (Keynes 1976 [1930]), and Wray (1990, 1998, 2015) for discussions of the history of money that are consistent with the MMT view.

6 Case in point, before the creation of the Fed, whenever the U.S. government ran surpluses, it created a shortage of currency. It then tried to ameliorate this shortage by buying back its bonds as a way to inject currency withdrawn from circulation (due to the surplus) back into circulation (Chapman 1923).

7 The U.S. did not start using an auction system for longer-term treasury bond sales until 1970 (short-term securities were sold on an auction basis since 1950s). Prior to that, Treasury securities were offered on a fixed-price basis (Garbade 2012).

8 Total government spending is the sum of spending by the federal and state and local governments.

9 Note that while state and local government spending is large (approximately two-thirds the size of the federal government), the movement of the overall balance is mainly due to adjustments of the federal government balance (state and local government spending is largely constrained to tax revenues).

10 Obviously, a net exporter like Japan is in a different position, with its private sector surplus equal to the sum of its government budget deficit plus the ROW’s negative balance against Japan. This is why Japan’s private sector can accumulate net savings.

11 Source: Congressional Budget Office Historical Tables.

12 The authors thank Eric Tymoigne for supplying Figures 9 and 10.

13 Figure 10 does not include all private commitments as the more exotic financial liabilities—derivatives, swaps, etc.—are excluded, so total private obligations are much higher than this.