Good news! Biden says to hell with deficits!
jimmurphy said:
Dave and Cramer,
Your altruistic spending is the rare exception, not the rule.
jimmurphy - I think you're thinking of Paul Tudor Jones' philantropic foundation, the Robin Hood Foundation.
I was referring to Robinhood Trading, the zero commission trading app, not altrusitic at all.
"Stock trading app Robinhood also saw an uptick in activity. “What we have seen is an increase in the percentage of deposits equaling $2,100 or $2,400,” a company spokesperson said. “This was around the week of April 13, when people first started getting their stimulus checks.”
eta - A lot of people who were working from home got their stimulus checks and opened up an account at Robinhood or one of the many online brokerage firms that offer zero commission trading. Since they were at home in front of their computers, there was a lot more trading than had been previously been the case. To a certain extent (and perhaps a lot) this explains the incredible run of Tesla, Amazon, etc. The firms offered frractional shares which allowed smaller accounts to invest in shares of these companies. Plus, many people were trading on margin, or buying options.
So that's where some of the stimulus money went.
jimmurphy said:
Dave and Cramer,
Your altruistic spending is the rare exception, not the rule.
If you don’t need the “free money” from the government and have a loved one or neighbor who does, it seems like a rather easy, painless decision. (Granted, giving it to strangers is probably another step or more up on the altruism scale. Also granted, the rarity of people who don’t need the free money comes into play, and as you noted, it’s unlikely they’re anything beyond a drop in the bucket.)
DaveSchmidt said:
I agree it’s problematic that checks are going to people who don’t need them, but as someone mentioned earlier, how could the government determine an individual’s need in a timely way? Seems like it would require a messy, documented application process. Unless you went with already curated rolls like unemployment or SNAP — but then you’d still miss a lot of negatively financially affected people, I would think.
I guess we disagree as to the difficulty.
The ones who need it most are those who have lost their jobs. If you have lost your job, you apply for unemployment. Documentation.
I guess those in the shadow economy have more difficulty. Presumably those who are undocumented are in trouble in any scenario. I have less sympathy for those in cash businesses who screw the treasury on a regular basis.
I have confidence that a solution could be devised for anyone left.
cramer said:
jimmurphy - I think you're thinking of Paul Tudor Jones' philantropic foundation, the Robin Hood Foundation.
I was referring to Robinhood Trading, the zero commission trading app, not altrusitic at all.
"Stock trading app Robinhood also saw an uptick in activity. “What we have seen is an increase in the percentage of deposits equaling $2,100 or $2,400,” a company spokesperson said. “This was around the week of April 13, when people first started getting their stimulus checks.”
My mistake Cramer. Thanks for the supporting plank.
btw, if MMT is tripe, and deficits (of this level) actually matter, we're f***ed, right?
Depends on whether the adults prevail.
“Biden says to hell with deficits” is right up there with “Defund the Police” as an asinine political sound bite, hell-bent on delivering power to the other side.
jimmurphy said:
Depends on whether the adults prevail.
“Biden says to hell with deficits” is right up there with “Defund the Police” as an asinine political sound bite, hell-bent on delivering power to the other side.
not really. even if this plan doesn't pass, the deficits accrued in the last four years would still be enough to put us on the path to ruin, according to you, and the adults.
luckily, Biden appears to have booted the adults out of the room.
jimmurphy said:
The ones who need it most are those who have lost their jobs. If you have lost your job, you apply for unemployment. Documentation.
What if I had been laid off in March but found a job in November and left the unemployment rolls after eight months? I don’t get the latest check, and someone who had been working that whole time but was laid off last month does? Or what if my hours were slashed, so I never filed for unemployment? I’m probably still struggling. And the shadow economy, in terms of unemployment benefits, is not just gig workers but also freelancers and the self-employed, who had nothing to file for until the CARES Act created Pandemic Unemployment Assistance. Maybe they filed for that, or maybe they didn’t; in any case, many of them have found it almost impossible to get on the record books, because state systems were unprepared and overwhelmed trying to keep everything straight.
And then there are the 7.3 million who are out of a job, want to work but, for whatever reason, have stopped looking and therefore don’t get benefits.
One last thought: About 10 million Americans are on the unemployment rolls. A major reason for the two rounds of $1,200 and $600 checks was just not aid but economic stimulus. Ten million Americans won’t provide much stimulus on their own, even with that extra money.
As you said, Jim, we just disagree on the difficulty. On a less argumentative (not that I mean to be) note, here’s an article that doesn’t address my question about redistribution but does give a breakdown of how the first round of checks was spent, which speaks to your concerns about saving and debt reduction.
PVW said:
jimmurphy said:
nohero said:
Trump and the GOP gleefully handed over tax cuts, which made the rich richer, when there was nothing "in the vault" to pay for it - and there never was a "cost benefit analysis".
The proposal now is to provide financial support to those who need it, and who will spend it to support businesses which need customers - which seems the basic "cost benefit analysis" that explains the reasoning.
Agreed on the hypocrisy of the Republicans. Taxes should be raised.
Those who have not lost their jobs don’t “need it”. They’re often spending much less, saving, paying down debt.
General point. Deficits do matter. We can ignore basic laws of economics because it conveniently supports our progressive desires.
My understanding of how economic thinking has changed is that there's a broader understanding of deficits. Money owed by a government to its own citizens, denominated in its own currency, is different than money owed by a government to creditors in a different country, denominated in a foreign currency. Less ignoring basic laws of economics and more looking at countries running long-term deficits that haven't had runaway inflation and rethinking what our understanding of the laws of economics are.
I heard an interview with an economist in the MMT school the other day that I'm going to re-listen to, because I also have been skeptical of the way a lot of MMT is pitched, which can sound like "just print money!". My question has always been, what are the constraints here? I don't recall with enough precision to restate now, but I'll update when I've re-listened.
One thing I do remember is the interviewer asked about situations like hyperinflation in Zimbabwe, and the economist noted how with all the land confiscation food production actually dropped quite a bit, so giving people more money didn't help because there wasn't enough to actually spend that money on. I found that illuminating as it provided an explanation that still hewed to basic supply and demand, but expanded my understanding as I've always thought of inflation as an issue of expanding the supply of money, but hadn't though of the "demand" side much. I suppose one take away for our situation would be that Biden is basically claiming there's a lot of unmet demand in our economy, so increasing the money supply won't be inflationary. The debate then is if that is a true evaluation of the economy.
I found the interview, and a transcript of it:
https://hanselminutes.com/748/a-brief-history-of-the-deficit-myth-with-dr-stephanie-kelton#
(click the orange "podcast player with transcript" to show the transcript).
Turns out the economist is Dr. Stephanie Kelton, author of The Deficit Myth, whom DB has referenced multiple times. (I also found her referenced on MOL once back in 2012 -- archived thread so deep linking doesn't seem to work, but can ctrl-F for "Kelton")
On deficits, I found this a useful framing: "So for example, when I explain in the book that a government deficit is always mirrored, to the penny by a non-government surplus, the government's financial deficit appears in equal and opposite form; as a financial surplus on the other side of the ledger." It gets to that question of why it matters what currency a deficit is in, and to whom it's owed.
On what the actual constraints are: "So its really total spending that matters. It's not just government spending, which is a relatively small part of the total amount of spending our economy has to handle, but the government COULD increase its own spending and push the total beyond the economy's productive capacity. And the punishment for that would be some rising, a price that you would see inflationary pressures."
And more on inflation (my emphasis added): "And so a guy like Milton Friedman, you know, the 'Chicago school' economist who famously quipped that 'inflation is always and everywhere a Monetary phenomenon'. He so that you described it as too much money chasing too few goods. I think a lot of us tend to believe that inflation happens because of the too much money part. And most of the time when you get these hyperinflationary episodes, like what happened in Zimbabwe or even Weimar Germany; what have is the too few goods thing happening that there is something that happens on the supply side of the economy that undermines the productive capacity to produce the goods and services. And that gives rise to accelerating inflation."
So tl;dr for me is that the constraints are actually the productive capacity of the economy, not the debt or deficit per se. I'd imagine that a debate of spending in the MMT framework then wouldn't be whether, say the Biden plan is increasing the deficit unsustainably, but rather asking what the true productive capacity of our economy is.
I suspect we're well short of that limit currently. There's definitely been a huge drop in economic output, but if money is going to PPE and small business loans and other measures that make it safer for people to work and easier for businesses to keep people employed, that's increasing our productive capacity.
These are complicated issues, obviously, but we can always count on you to raise thoughtful points Dave.
As to the timing of the unemployment and the issuance of the checks, that issue goes away without the checks. More generous unemployment. Hours slashed should be a qualification.
Per your article (thanks), if 71 percent of the “stimulus” isn’t stimulating, how effective is it? Maybe debit cards would help direct more to consumption.
Ineffective bureaucracy shouldn’t be an excuse and failing to file shouldn’t be an excuse.
My NYT citation indicated that personal income went up by over $1T, yet demand went down by over $.5T and the markets soared. Where did the extra income go? The markets perhaps...
Raise the minimum wage. We can do that now, I think. Subsidize small business payrolls for a while.
Not so much sympathy for those who aren’t looking for a job. Maybe that’s cold.
Maybe I’m being naive and without direct checks you’d never get the votes in Congress. I just hate the idea of public debt being taken on to further exacerbate inequality and put money in the pockets of the relatively wealthy.
Edited to add: And again, it was the thread title that really pushed my buttons..........
(Ellipses added in remembrance of Author)
PVW said:
I found the interview, and a transcript of it:
https://hanselminutes.com/748/a-brief-history-of-the-deficit-myth-with-dr-stephanie-kelton#
(click the orange "podcast player with transcript" to show the transcript).
Turns out the economist is Dr. Stephanie Kelton, author of The Deficit Myth, whom DB has referenced multiple times. (I also found her referenced on MOL once back in 2012 -- archived thread so deep linking doesn't seem to work, but can ctrl-F for "Kelton")
Anyway, the biggest question I always had with MMT was what the actual constraints were. Something that sounds too good to be true almost always is, and as jimmurphy put it "We can’t ignore basic laws of economics because it conveniently supports our progressive desires." There were a few exchanges from the interview that I found helpful on that question.
On deficits, I found this a useful framing: "So for example, when I explain in the book that a government deficit is always mirrored, to the penny by a non-government surplus, the government's financial deficit appears in equal and opposite form; as a financial surplus on the other side of the ledger." It gets to that question of why it matters what currency a deficit is in, and to whom it's owed.
On what the actual constraints are: "So its really total spending that matters. It's not just government spending, which is a relatively small part of the total amount of spending our economy has to handle, but the government COULD increase its own spending and push the total beyond the economy's productive capacity. And the punishment for that would be some rising, a price that you would see inflationary pressures."
And more on inflation (my emphasis added): "And so a guy like Milton Friedman, you know, the 'Chicago school' economist who famously quipped that 'inflation is always and everywhere a Monetary phenomenon'. He so that you described it as too much money chasing too few goods. I think a lot of us tend to believe that inflation happens because of the too much money part. And most of the time when you get these hyperinflationary episodes, like what happened in Zimbabwe or even Weimar Germany; what have is the too few goods thing happening that there is something that happens on the supply side of the economy that undermines the productive capacity to produce the goods and services. And that gives rise to accelerating inflation."
So tl;dr for me is that the constraints are actually the productive capacity of the economy, not the debt or deficit per se. I'd imagine that a debate of spending in the MMT framework then wouldn't be whether, say the Biden plan is increasing the deficit unsustainably, but rather asking what the true productive capacity of our economy is.
I suspect we're well short of that limit currently. There's definitely been a huge drop in economic output, but if money is going to PPE and small business loans and other measures that make it safer for people to work and easier for businesses to keep people employed, that's increasing our productive capacity.
Thanks for looking for that PVW, and for actually considering implications.
In the long run, raising the productive capacity of the economy should absolutely be the goal. Targeted investment and subsidization of emerging clean technologies and infrastructure improvements via deficit spending is absolutely warranted.
Raising the minimum wage to increase demand would go a long way.
Will digest a bit more. Watching the playoffs.
Oh no - not debit cards - rife for corruption and exploitation!! Read up a little on our INDUE Card mess, that we probably now won’t be able to get rid of for at least a generation despite credible research from government’s own commissioned companies as well as academics demonstrating they help neither consumer nor merchant.
ETA: I’ve put off job seeking due to cancer treatment. Have no idea how long it’s going on for, and it’s pretty brutal.
joanne said:
Oh no - not debit cards - rife for corruption and exploitation!! Read up a little on our INDUE Card mess, that we probably now won’t be able to get rid of for at least a generation despite credible research from government’s own commissioned companies as well as academics demonstrating they help neither consumer nor merchant.
I meant a pre-funded card, more akin to a gift card, rather than a check that could more easily be used for debt reduction rather than spending.
Does that still give you pause Joanne?
But it’s only people who made less than $75,000 in 2019, getting the stimulus checks. Not the wealthy, nor the undocumented. I don’t really get this whole argument about giving people a measly 600 bucks.
The INDUE Card is a pre-loaded (by the govt) debit card which is limited to purchase of certain goods only. So you can’t get booze, tobacco, too much sugary stuff (only kinds), takeaway pizzas, secondhand furniture or bicycles, clothes, various medicines... worth reading up on.
joanne said:
The INDUE Card is a pre-loaded (by the govt) debit card which is limited to purchase of certain goods only. So you can’t get booze, tobacco, too much sugary stuff (only kinds), takeaway pizzas, secondhand furniture or bicycles, clothes, various medicines... worth reading up on.
Ok thanks. Will do.
good explainer on what taxes are actually for
https://neweconomicperspectives.org/2014/05/taxes-mmt-approach.html
BTW, this stuff isn't new. The link above (6 years old) references papers from the 40's.
Sure, as long as you can wish away the idea of inflation and skyrocketing interest rates, it’s a great theory.
https://blog.usejournal.com/whats-wrong-with-mmt-a41e10c7203b
jimmurphy said:
Sure, as long as you can wish away the idea of inflation and skyrocketing interest rates, it’s a great theory.
https://blog.usejournal.com/whats-wrong-with-mmt-a41e10c7203b
Who the hell is Reginald Glenn?
drummerboy said:
Who the hell is Reginald Glenn?
A pseudonym for someone who says he’s a former econonomic postgraduate student and now a software engineer.
jimmurphy said:
Sure, as long as you can wish away the idea of inflation and skyrocketing interest rates, it’s a great theory.
https://blog.usejournal.com/whats-wrong-with-mmt-a41e10c7203b
also, why aren't we experiencing either of those things now? According to the "adults" we're already at unsustainable levels of debt.
cramer said:
DaveSchmidt said:
jimmurphy said:
Those who have not lost their jobs don’t “need it”. They’re often spending much less, saving, paying down debt.
I imagine that a not-insignificant number of them are redistributing the federal checks on their own, to out-of-work relatives, food banks, their favorite local businesses, etc.
Or opening accounts at Robinhood.
And buying Bitcoin.
"Analysts for the digital-asset firm ByteTree noted this week that blockchain data appear to show a high concentration of bitcoin purchases in the amount of $600 - the same amount as the American stimulus checks sent out in the latest U.S. coronavirus emergency aid package."
https://www.coindesk.com/why-is-bitcoin-going-up-and-will-it-crash
drummerboy said:
That was kind of rhetorical.
You piqued my curiosity. Like I wasn’t going to share all my hard work?
jimmurphy said:
Why can’t Mexico just print money? Or Argentina?
From PVW’s posts, I gather the answer to that one would be along the lines of, as he summed it up, “the constraints are actually the productive capacity of the economy, not the debt or deficit per se.”
DaveSchmidt said:
jimmurphy said:
Why can’t Mexico just print money? Or Argentina?
From PVW’s posts, I gather the answer to that one would be along the lines of, as he summed it up, “the constraints are actually the productive capacity of the economy, not the debt or deficit per se.”
The fact that you ask that question means you know even less about MMT than I do, so maybe you shouldn't be trashing it until you understand it better.
just sayin'
The constraints that Dave mentions only come into play if a country can employ MMT policies in the first place, as explained below.
Modern Monetary Theory (MMT) is a heterodox macroeconomic framework that says monetarily sovereign countries like the U.S., U.K., Japan, and Canada, which spend, tax, and borrow in a fiat currency they fully control, are not operationally constrained by revenues when it comes to federal government spending.
This is the central tenet of MMT, from which everything else flows.
I don't believe Mexico or Argentina meet this criteria, though I could be wrong.
Mexico and Argentina are sovereign nations with their own currency.
Sponsored Business
Promote your business here - Businesses get highlighted throughout the site and you can add a deal.
For Sale
Garage Sales
-
Multi Family Garage Sale Sale Date: Apr 20, 2024
More info
I agree it’s problematic that checks are going to people who don’t need them, but as someone mentioned earlier, how could the government determine an individual’s need in a timely way? Seems like it would require a messy, documented application process. Unless you went with already curated rolls like unemployment or SNAP — but then you’d still miss a lot of negatively financially affected people, I would think.