The Trump Economy

[TPS]

It was effectively zero for the 7 years after Lehman collapsed and inflation remained below the Fed's target.  

Unless low (or zero or negative!) interest rates stimulate borrowing to purchase real things, the answer will be NO.  Hell, there are negative interest rates in more and more European countries now!

[keepthefaith]

1 hour ago, Deranged Rhino said:

 

 

 

 

Oh Donald

[TH3]

2 hours ago, Deranged Rhino said:

 

 

 

 

DT is an idiot....and choose who trust his business acumen are just as stupid... 

 

I look at proposed bank loans all day.....the interest rates now are so low that borrowing costs have very little effect on proformas....lowering them another 50 basis points will have no affect on proposed or active supply side business propositions....

Edited August 14, 2019 by TH3

[GG]

3 hours ago, TPS said:

Speaking of bull####, you stated in a previous post, "My entire point is that not all countries are the SAME."  

Yet, you now claim that a theory that says "the US and Argentina are NOT the same" is bull####.  Interesting....

 

Of course not all countries are the same, but you still failed to provide a coherent explanation of why the countries are not the same, other than a throwaway line about developed countries having sophisticated financial markets.  You have the cause and effect reversed, which is expected from a belief that government "deficit spending" creates vibrant economic growth. 

 

So we're treated to a dissertation of arcane Fed accounting as if it's the reason that US$ is the global reserve currency and the Treasury is the reference zero-risk investment.  In reality, it's the longstanding adherence to the rule of law, protection of private interests and freedom from government interferences that creates the foundation for those sophisticated financial markets to survive and continue to attract investors from around the world.  It's not an accident that all other countries that serve as currency benchmarks exhibit the same layers of investor protection.   

 

The only reason that MMT can work is under the assumption that the US$ will continue to be the dominant global economic leader and the explosion of US national debt will be sustainable because other currencies and national debts will always be an inferior investment.  That is a stupid basis for a monetary theory.  For the theory to be proven, it has to be replicable in other situations.  You can't cherry pick the results of the best economies and call it a theory.  If the theory doesn't work for other sovereigns that issue currency and debt, then there's a flaw in the theory, because you're only selecting the countries where MMT works.  In reality, it's not MMT that's working, but investors' appetite for those countries' debt and currency.

 

Just because Japan is getting away with insane debt/GDP ratios now doesn't mean it's sustainable over generations.  Somebody, at some point will have to pay the bill.  If China ever loses the Communist yoke, you can kiss Japan's days as the Asian bellwether goodbye.

 

Funny how the biggest MMT proponents on the campaign trail will be the first ones to strip away the foundations of the US private economy.

[row_33]

Oh no, it’s down to 25,500!!!!

 

whooooo, end of the world right here

 

 

[plenzmd1]

5 hours ago, TH3 said:

Hey - If the stock market reverts over the next 12 months....at least DT can run on his bank of promises and claims made and kept: Wall built and Mexico paid for it✔️, budget balanced✔️, national debt paid off✔️, ACA repealed and replaced with something better ✔️ and ✔️, illegal immigration under control✔️, Korean peninsula denuclearized ✔️, opiate problem solved✔️, trade balance with China down✔️, NAFTA renegotiated and enacted ✔️, new trade deal with China✔️.

 

All than and gerrymandering taken care of✔️ - Russians rebuked and tamped down when it comes to election middling ✔️...

 

I mean that pretty much will make his win loss record 13-1

it is quite funny we are not quite seeing the Trump is God support right now in this thread.

 

BTW, i was going to make a thread similar to the "what have the Dems done" with a "what has Trump Accomplished" thread..you nailed it above!

[OldTimeAFLGuy]

2 hours ago, row_33 said:

Oh no, it’s down to 25,500!!!!

 

whooooo, end of the world right here

 

 

 

...perhaps based on the financial outlook for "The Clinton Foundation"?............

[ALF]

China will wait until after the 2020 election to deal the tariffs. 

[DC Tom]

31 minutes ago, ALF said:

China will wait until after the 2020 election to deal the tariffs. 

 

They hope.  

 

It's what they're obviously holding out for, but they should ask Hillary about the certainty of elections first...

[3rdnlng]

27 minutes ago, ALF said:

China will wait until after the 2020 election to deal the tariffs. 

China is in a pretty dicey situation. They would rather deal with any of the democrats than Trump after 2020. We hold the upper hand at present, but if Trump wins it will be even more so. China will be watching polls and  whatever to try to guess how that election is going to go and if it looks like Trump will win they won't be able to make a deal fast enough.

[Tiberius]

38 minutes ago, ALF said:

China will wait until after the 2020 election to deal the tariffs. 

Smart move. What choice do they have, Trump is a disaster that no one can deal with. He makes deals then watches Fox news and changes his mind because of something some right wing idiot says.

 

There is also the possibility that Trump has no clue at all about why free trade is so much better than protectionism. His tweets about tariffs indicate a deeply ignorant person. So what choice do Chinese have?

[TPS]

5 hours ago, GG said:

 

Of course not all countries are the same, but you still failed to provide a coherent explanation of why the countries are not the same, other than a throwaway line about developed countries having sophisticated financial markets.  You have the cause and effect reversed, which is expected from a belief that government "deficit spending" creates vibrant economic growth. 

This is the basic premise of MMT: A country that issues debt in its own currency can always pay off its debt--there is no financing constraint.  The constraint on using fiscal policy in this way is inflation. The institutional differences (regarding capital and labor markets, financial structure, and exchange rate regime) in countries impact the ability to use fiscal policy "financed" using the relationship between its central bank and- private banks.  Since Argentina issues debt in USD, it faces a constraint from investors in the FX market.  This is at least the third time I've said this to you--all countries are not the same. 

I have never said that deficits create vibrant growth, but I have said all deficits are not the same.  Deficits created from lower tax revenues during a recession are not the same as deficits created from supply-side policies during expansions. In the latter case, assuming levels of private spending are constant, Larger deficits will promote faster growth, just as they did in 2018. It is really matter of basic math: if you inject more spending into an economy than you are taking out in taxes, then demand and growth tend to rise (again, assuming no change in private spending).  In addition, what you spend on or who gets the tax cuts matter on the impact.

 

5 hours ago, GG said:

 

So we're treated to a dissertation of arcane Fed accounting as if it's the reason that US$ is the global reserve currency and the Treasury is the reference zero-risk investment.  In reality, it's the longstanding adherence to the rule of law, protection of private interests and freedom from government interferences that creates the foundation for those sophisticated financial markets to survive and continue to attract investors from around the world.  It's not an accident that all other countries that serve as currency benchmarks exhibit the same layers of investor protection.   

Having the reserve currency doesn't hurt, but it's not a necessary requirement.  Again, The constraint on using fiscal policy is its impact on inflation. If you don't have both excess capital and labor, any attempt to raise demand via deficits (financed by the central bank) will raise inflation. Kind of like what is happening in ARgentina.

 

5 hours ago, GG said:

The only reason that MMT can work is under the assumption that the US$ will continue to be the dominant global economic leader and the explosion of US national debt will be sustainable because other currencies and national debts will always be an inferior investment.  That is a stupid basis for a monetary theory.  For the theory to be proven, it has to be replicable in other situations.  You can't cherry pick the results of the best economies and call it a theory.  If the theory doesn't work for other sovereigns that issue currency and debt, then there's a flaw in the theory, because you're only selecting the countries where MMT works.  In reality, it's not MMT that's working, but investors' appetite for those countries' debt and currency.

 

Just because Japan is getting away with insane debt/GDP ratios now doesn't mean it's sustainable over generations.  Somebody, at some point will have to pay the bill.  If China ever loses the Communist yoke, you can kiss Japan's days as the Asian bellwether goodbye.

So you say it has to be replicable, then you reference Japan and use the same critique that people have been saying about US debt--some day....some day..

You say it's investor appetite, but half of Japan's debt is held by the BoJ, which is the point of MMT.  If its central bank holds more debt than the size of the economy, why isn't there any inflation?   All you have to say is...."some day.....there will be a day of reckoning.... some day....." 

There are quite a few countries that issue debt in the currency they control and maintain a floating exchange rate; all of these have the ability to "use MMT" like the US and Japan currently do.  However, the extent that they can "finance deficits" via their central banks is constrained by inflation. And, since ALL countries ARE different, their fiscal policy inflation constraints will be different.  

 

5 hours ago, GG said:

 

Funny how the biggest MMT proponents on the campaign trail will be the first ones to strip away the foundations of the US private economy.

Yes, we should all be very afraid of socialists who push policies that support the working class....We really should remain the only advanced country without universal healthcare because we are unique...

 

[row_33]

2 hours ago, OldTimeAFLGuy said:

 

...perhaps based on the financial outlook for "The Clinton Foundation"?............

 

Great day to buy tomorrow 

[row_33]

Still a 10 percent gain for the year to date

[SlimShady'sSpaceForce]

Doe down another 200 yesterday 

 

In the last month  -  25,479.42 ▼ 800.49 (3.05%)

 

Anyone else see a worrying trend?  

 

Stock market sinks on growing recession fears - CBS News

https://www.cbsnews.com/news/stock-market-today-drops-on-recession-fears-yield-curve...

21 hours ago · Stock market sinks on growing recession fears. Updated on: August 14, 2019 / 1:21 PM / CBS/AP Stocks drop over recession concerns . U.S. stocks …

Bank stocks take a beating as inverted yield curve fuels ...

https://www.marketwatch.com/story/bank-stocks-take-a-beating-as-inverted-yield-curve...

Aug 14, 2019 · Bank stocks take a beating as inverted yield curve fuels recession fears By Tomi Kilgore. ... as Citigroup’s stock led the banks lower. ... triggering bond-market recession indicator.

[SlimShady'sSpaceForce]

 

 

Trump just acknowledged that tariffs are paid by Americans, footwear trade group CEO says                         

 

https://www.yahoo.com/finance/news/footwear-distributors-retailers-america-trump-delay-tariffs-211032604.html

 

 

Well,  that is what the headline reads 

[SoCal Deek]

22 minutes ago, ShadyBillsFan said:

 

 

Trump just acknowledged that tariffs are paid by Americans, footwear trade group CEO says                         

 

https://www.yahoo.com/finance/news/footwear-distributors-retailers-america-trump-delay-tariffs-211032604.html

 

 

Well,  that is what the headline reads 

The concept is a simple one. If you want to buy stuff cheap you have to buy stuff from people who make stuff with cheap labor. Unfortunately that means you can’t make stuff in America. So you either lower your standard of living or pay more for some stuff. There’s no magic wand! Got it?

[Buffalo_Gal]

I'm not certain why people need a 15th TV set. It isn't as if Nikes are cheaper being made with sweatshop labor rather than New England union labor. And some of this stuff should be tariffed out the wazoo even if it makes things more expensive simply so the USA has more plants producing (steel, a rare earth plant, etc) for national security reasons.

I don't mind the tariffs with China. At all. I'd rather pay more to keep an American job in place than more in taxes for the government to pay people not to work because their jobs got shipped overseas . But hey, to each his own.
 

Edited August 15, 2019 by Buffalo_Gal

[GG]

I'll stick to using football analogies

 

11 hours ago, TPS said:

This is the basic premise of MMT: A country that issues debt in its own currency can always pay off its debt--there is no financing constraint.  The constraint on using fiscal policy in this way is inflation. The institutional differences (regarding capital and labor markets, financial structure, and exchange rate regime) in countries impact the ability to use fiscal policy "financed" using the relationship between its central bank and- private banks.  Since Argentina issues debt in USD, it faces a constraint from investors in the FX market.  This is at least the third time I've said this to you--all countries are not the same. 

 

It's like saying I'll take any quarterback for my team, as long as his name is Tom Brady, Aaron Rodgers or Drew Brees.

 

You haven't addressed the fundamental reason WHY countries are different and why the markets use different standards for the countries.  The entire point of countries' inability to issue debt in its currency is the lack of investor acceptance of its paper.  That's why MMT is a cockamaimie theory, because it self-selects countries that are the reference currencies.  MMT doesn't address the situation if those currencies fall out of investors' favor.   

 

It's like designing mortgage backed securities with the assumption that real estate values across the entire US would not fall more than 10%.  Just because it's rarely happened before, doesn't mean the probability is zero. 

 

MMT simply ignores that inconvenience.  If MMT was true, Argentina would simply issue more pesos, just like Mexico had to issue more pesos and devalued its currency in the '90s.  Do MMT proponents put George Soros's gambit against BOE into the deep memory banks?  How could one investment fund bring a developed country's central bank to its knees?  

 

Quote

I have never said that deficits create vibrant growth, but I have said all deficits are not the same.  Deficits created from lower tax revenues during a recession are not the same as deficits created from supply-side policies during expansions. In the latter case, assuming levels of private spending are constant, Larger deficits will promote faster growth, just as they did in 2018. It is really matter of basic math: if you inject more spending into an economy than you are taking out in taxes, then demand and growth tend to rise (again, assuming no change in private spending).  In addition, what you spend on or who gets the tax cuts matter on the impact.

 

Again with the supposition that deficits promote faster growth.  Yeah, it's not the private sector left to its own devices, but government running a deficit that's responsible.

 

It's like saying that the Bills defense promotes other teams to score points.

 

Quote

Having the reserve currency doesn't hurt, but it's not a necessary requirement.  Again, The constraint on using fiscal policy is its impact on inflation. If you don't have both excess capital and labor, any attempt to raise demand via deficits (financed by the central bank) will raise inflation. Kind of like what is happening in ARgentina.

 

So you say it has to be replicable, then you reference Japan and use the same critique that people have been saying about US debt--some day....some day..

You say it's investor appetite, but half of Japan's debt is held by the BoJ, which is the point of MMT.  If its central bank holds more debt than the size of the economy, why isn't there any inflation?   All you have to say is...."some day.....there will be a day of reckoning.... some day....." 

There are quite a few countries that issue debt in the currency they control and maintain a floating exchange rate; all of these have the ability to "use MMT" like the US and Japan currently do.  However, the extent that they can "finance deficits" via their central banks is constrained by inflation. And, since ALL countries ARE different, their fiscal policy inflation constraints will be different.  

 

And you still haven't explained (or admitted) the root cause of why second & third world countries lack access to capital.  Hint, what's consistent across the reference currency countries?  Why is Yen free floating, but Yuan is pegged, despite having a larger economy?

 

As always, you have cause and effect reversed.

 

Yes, some day!!  You cannot outrun fundamentals.  Japan's finances will be in deep ***** if China takes a more capitalist turn.

 

That's why conservatives are arguing the technical merits of loose policy and leftists are pointing to past history as if it's destined to continue indefinitely.   

 

At some point even Tom Brady will get old.

 

Quote

Yes, we should all be very afraid of socialists who push policies that support the working class....We really should remain the only advanced country without universal healthcare because we are unique...

 

What can possibly go wrong when you nationalize private enterprises worth trillions?  Let's try an experiment of forcing a national economic plan from a central government.  And because short-term thinking of corporate boards is bad for the workers, let's put in rolling 5-year plans!!   Forward!

[3rdnlng]

Just now, Buffalo_Gal said:

I'm not certain why people need a 15th TV set. It isn't as if Nikes are cheaper being made with sweatshop labor rather than New England union labor. And some of this stuff should be tarrifed out the wazoo even if it makes things more expensive simply so the USA has more plants producing (steel, a rare earth plant, etc) for national security concerns.

I don't mind the tariffs with China. At all. I'd rather pay more to keep an American job in place than more in taxes for the government to pay people not to work because their jobs got shipped overseas . But hey, to each his own.

China gets tariffs thrown at them so they devalue their currency to make their product more competitive. Then they cut off purchasing our agricultural products in return. So, we sell our soybeans to Canada and they resell them to China.

[GG]

3 minutes ago, Buffalo_Gal said:

I'm not certain why people need a 15th TV set. It isn't as if Nikes are cheaper being made with sweatshop labor rather than New England union labor. And some of this stuff should be tarrifed out the wazoo even if it makes things more expensive simply so the USA has more plants producing (steel, a rare earth plant, etc) for national security concerns.

I don't mind the tariffs with China. At all. I'd rather pay more to keep an American job in place than more in taxes for the government to pay people not to work because their jobs got shipped overseas . But hey, to each his own.

 

Ben Shapiro was on point on the issue.  Most people see things as you described, but that's not how Trump has been spinning it.  This is the first week that he's acknowledged that the US consumers would bear the brunt of his trade policies.

[Buffalo_Gal]

6 minutes ago, 3rdnlng said:

China gets tariffs thrown at them so they devalue their currency to make their product more competitive. Then they cut off purchasing our agricultural products in return. So, we sell our soybeans to Canada and they resell them to China.

Yeah, unfortunately. Although with the weather this past spring, I do wonder how many soybeans American farmers produced. Hubby has bags and bags that never made it into the ground, and that is just one hobby-schlump; the floods in the Midwest were no joke and really decreased planting, and harvest. @Foxx and I had discussed a thread simply for - what we expect to be - rising food costs due to the horrible spring and lack of productions (several pages back). Neither of us did anything about it though. ?

When President Trump declared them a currency manipulator (and some think inflated, some think deflated) that opened up a lot of avenues to what he could do to them. I am assuming there is a long-play in place, but do not know that.

And, to complete things, the world's economy is sucking hay. How long can the US stand above everyone else in a "global economy"?

 

Edited August 15, 2019 by Buffalo_Gal

[RochesterRob]

41 minutes ago, Buffalo_Gal said:

I'm not certain why people need a 15th TV set. It isn't as if Nikes are cheaper being made with sweatshop labor rather than New England union labor. And some of this stuff should be tariffed out the wazoo even if it makes things more expensive simply so the USA has more plants producing (steel, a rare earth plant, etc) for national security reasons.

I don't mind the tariffs with China. At all. I'd rather pay more to keep an American job in place than more in taxes for the government to pay people not to work because their jobs got shipped overseas . But hey, to each his own.
 

  It's a Brave New World out there economically.  We have spent many decades trying to outrun inflation but the end result is always the same.  The bottom 95 percent of America has its pay raises wiped out by other activity in the general economy.  

[SlimShady'sSpaceForce]

1 hour ago, SoCal Deek said:

The concept is a simple one. If you want to buy stuff cheap you have to buy stuff from people who make stuff with cheap labor. Unfortunately that means you can’t make stuff in America. So you either lower your standard of living or pay more for some stuff. There’s no magic wand! Got it?

The magic wand 

 

MAGA....   America first ...   I'm still waiting 

 

[TH3]

16 hours ago, plenzmd1 said:

it is quite funny we are not quite seeing the Trump is God support right now in this thread.

 

BTW, i was going to make a thread similar to the "what have the Dems done" with a "what has Trump Accomplished" thread..you nailed it above!

"I can walk down Fifth Avenue and shoot someone....and my supporters will still love me" 

[row_33]

1 hour ago, TH3 said:

"I can walk down Fifth Avenue and shoot someone....and my supporters will still love me" 

 

No context provided that led to that

 

must have been one heck of a context

 

 

[TH3]

15 minutes ago, row_33 said:

 

No context provided that led to that

 

must have been one heck of a context

 

 

Connecting 2 very close dots is hard work

[B-Man]

Good Lord some people are dense.

 

It's NOT   "will still love me"

 

(took all of 5 seconds)

 

Trump blurted that out in Iowa to show his confidence in winning the upcoming caucus.

 

From Reuters January 2016

 

 Confident Trump says could 'shoot somebody' and not lose voters

 

PELLA, Iowa /ANKENY, Iowa (Reuters) - U.S. Republican front-runner Donald Trump expressed confidence on Saturday that he could push back attempts by his rivals to knock him off his top perch, saying he could stand on New York’s Fifth Avenue “and shoot somebody,” and still not lose voters.

Trump and Cruz, Trump’s chief obstacle to a victory in Iowa, held competing rallies across the state while in New Hampshire, other candidates battled for votes in that state’s Feb. 9 first-in-the-nation primary for the Nov. 8 election.

Trump, the New York billionaire and former reality TV star who has been virtually impervious to attacks from his opponents, pushed the limits of his political rhetoric again in Sioux Center, Iowa.

“I could stand in the middle of Fifth Avenue and shoot somebody and I wouldn’t lose any voters,” he said.

Trump has been a difficult target for criticism from his rivals because not all of his supporters are conservatives and many are most interested in his projection of strength, not where he stands on a particular issue.

 

 

I do like this line from further in the article.

Trump did not repeat the “shoot somebody” line at a later rally in Pella, while stressing to the crowd there that he would tone down his rhetoric as president.......?

 

 

Edited August 15, 2019 by B-Man

[row_33]

12 minutes ago, TH3 said:

Connecting 2 very close dots is hard work

 

Far easier to just cherry pick a comment

 

a doozy of a comment though 

 

A bit more honest than making up a comment, the usual MSM method

[Buffalo_Gal]

NYT
:

</snip>
 

Data showing U.S. retail sales increasing by more than expected last month pushed yields a little higher from their lows. The retail numbers suggested fairly robust consumer spending that should help ease worries about a potential U.S. recession.
 

U.S. retail sales rose 0.7% in July. Economists polled by Reuters had forecast retail sales would rise 0.3%. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 1.0% last month after advancing by an unrevised 0.7% in June.
 

</snip>

 

[TPS]

5 hours ago, GG said:

I'll stick to using football analogies

 

 

It's like saying I'll take any quarterback for my team, as long as his name is Tom Brady, Aaron Rodgers or Drew Brees.

 

You haven't addressed the fundamental reason WHY countries are different and why the markets use different standards for the countries.  The entire point of countries' inability to issue debt in its currency is the lack of investor acceptance of its paper.  That's why MMT is a cockamaimie theory, because it self-selects countries that are the reference currencies.  MMT doesn't address the situation if those currencies fall out of investors' favor.   

 

It's like designing mortgage backed securities with the assumption that real estate values across the entire US would not fall more than 10%.  Just because it's rarely happened before, doesn't mean the probability is zero. 

 

MMT simply ignores that inconvenience.  If MMT was true, Argentina would simply issue more pesos, just like Mexico had to issue more pesos and devalued its currency in the '90s.  Do MMT proponents put George Soros's gambit against BOE into the deep memory banks?  How could one investment fund bring a developed country's central bank to its knees?  

 

 

Again with the supposition that deficits promote faster growth.  Yeah, it's not the private sector left to its own devices, but government running a deficit that's responsible.

 

It's like saying that the Bills defense promotes other teams to score points.

 

 

And you still haven't explained (or admitted) the root cause of why second & third world countries lack access to capital.  Hint, what's consistent across the reference currency countries?  Why is Yen free floating, but Yuan is pegged, despite having a larger economy?

 

As always, you have cause and effect reversed.

 

Yes, some day!!  You cannot outrun fundamentals.  Japan's finances will be in deep ***** if China takes a more capitalist turn.

 

That's why conservatives are arguing the technical merits of loose policy and leftists are pointing to past history as if it's destined to continue indefinitely.   

 

At some point even Tom Brady will get old.

 

 

What can possibly go wrong when you nationalize private enterprises worth trillions?  Let's try an experiment of forcing a national economic plan from a central government.  And because short-term thinking of corporate boards is bad for the workers, let's put in rolling 5-year plans!!   Forward!

You have an issue with selective reading....

Let me try to simplify/abstract the discussion for you (another dissertation coming...). 

In essence, MMT is saying that government can spend by printing the money it controls.  This is both an old and "modern" concept. Historically, governments printed money to fund wars, but they can spend the money they create and control on anything. You (and everyone else) will freak out and say "but that's inflationary!"  It can be, but doesn't have to be.  Most domestic inflation is caused by too much spending relative to the ability to produce and supply goods.  Which is why available capital--physical capital, not financial capital (which you seem to think I mean) and labor are the REAL constraints on government spending.  This is also ONE of the main characteristics that is important when talking about "all countries are different."  Modern Advanced countries tend to have excess capital and labor, and rarely approach capacity.  For example, currently the US is using 77.5% of its industrial capacity and the "official" unemployment rate is 3.7%.  This suggests there is still room for Trump to "deficit spend" without causing an acceleration of inflation. However, since I'm generalizing at a macro level, it will be much more complicated based on capacity utilization of those goods that influence consumer inflation. This is why it's so difficult to generalize about all countries.  Each country has specific attributes that influence its inflation rate.  Given that, here is what MMT would state: if you have excess capacity of real resources, and inflation is currently low , then you can increase government spending (call it deficit spending or money printing) until inflation begins to rise beyond your target level. 

Government (deficit) spending puts "idle" resources to work, meaning more output will be produced by the private sector.  And, the impact will depend on what you spend on or who gets the most benefit from tax cuts.  You don't think government spending can influence "wealth creation."  Lockheed-Martin's market cap is over $100 billion and they derive over 90% of their revenues from government sales.  What would their market cap be if you took away government sales....hmmm....

 

The second reason countries differ is their trade and exchange rate policies.  Many developing countries export low value-added goods and import high value-added goods--they import  durable goods and industrial machinery, etc., and export raw materials and labor-intensive goods.  Since advanced countries manufacture those goods, developing countries need hard currencies to pay for imports.  So, to purchase those imports, many countries issue bonds in hard currencies (USD), NOT THEIR OWN (one of the requirements of MMT).  Since they need USD to pay off the debt, it ADDS A FINANCIAL CONSTRAINT FROM FOREIGN EXCHANGE MARKETS.  As you suggested, they could print their own currency to buy USD, but that would cause their currency to depreciate leading to a spike in the price of those important imported goods, leading to higher inflation (the ultimate constraint according to MMT). In addition, as I stated, in the FX markets they are at the mercy of investors--you should be happy here.   The depreciation of the domestic currency could also spark a run from the currency, so their options are limited.  

Note, this also answers your question about Soros.  At the time, the UK was going to join the European Exchange Rate Mechanism, so the BoE was targeting the pound to the DM.  Guess what that does?  It puts a financial constraint on the BoE.  When investors sell (short) the pound, the BoE must buy with hard currency reserves.  The BoE can only print pounds, not $s or DMs.  When you run out of reserves, you can't maintain your peg any longer.  They were forced to let it float.  Moral of the story, if you have an exchange rate policy that targets or pegs your exchange rate to a particular hard currency, then you better have a boatload of that currency in reserve...

 

Regarding the yen-yuan....

The yuan has been pegged to the USD because of China's export-led growth strategy.  They accumulate USD from their trade surplus (our deficit) with US.  If they sell those USD off, then the $ would weaken making their goods more expensive in USD, instead they invest those accumulated $s in US assets (mostly treasuries). This is the main issue underlying the China-US trade dispute--they ARE a currency manipulator.  They are not holding $s because it's the reserve currency, they are holding them as an exchange rate management policy to sell goods into (what is still) the largest consumer market in the world.  Japan usually lets its currency float, but they manage it quite often as well. They are threatening to intervene now, just as they did in 2011 when the yen strengthened against the $. As they showed in 2011, they have unlimited capacity to keep the yen from rising, since they can sell any amount of yen they want (they own the printing press) into the market to buy $s (why do you think the BoJ of is the second largest holder of treasuries?).  Why do they do it? Because they are also dependent on exports for growth. 

 

I certainly respect your understanding of financial markets, but your inability to understand MMT is related to a limited understanding of what causes inflation, the causes of which can be very complex, which is why you can't make simple generalizations about MMT (which is really the ability to use fiscal policy--deficit spending--to stimulate the economy).  Again, in essence, MMT simply says a government that controls its own currency does not have a financing constraint--it does not have to borrow the currency it controls in order to spend; it can simply create it and spend it. 

Three examples we've discussed:

1. The US. QE did not cause inflation because the majority of the assets (over $2 trillion in treasuries) it bought remained on bank balance sheets as dead reserves, with Fed now paying interest on those reserves, they are much like holding treasuries.  I would not deny that being the largest economy in the world and the reserve currency is certainly a benefit to the US--characteristics specific to a country do matter, but that is not the reason QE did not lead to inflation.

2. Japan. The BoE has purchased 120% of Japan's government debt, which means they hold 20% more than the size of Japan's economy. Why no inflation?  I can't talk to specifics about what the deficit spending is targeted at, but I do know that the Japanese have a very high propensity to save, so that attempts to bolster income of Japanese households tend to lead to higher domestic savings, and not fuel significantly higher consumption demand which would fuel inflation.  Important point: causes of inflation are specific to each country's characteristics.  Note, the yen is not the world's reserve currency, but the BoJ can carry more debt than the Fed without causing inflation. It doesn't matter what investors think here.

3. Argentina. Their central bank has funded large government deficits for years, fueling inflation.  In this case, MMT would argue their deficits have been excessive.  One also has to look at their specific characteristics for the causes of inflation. I mentioned the fact they issue bonds in USD, which puts an additional constraint on their central bank.  They can't simply print pesos to buy USD because the depreciation of their currency would fuel inflation by raising the cost of imported goods.  There are many other issues that influence domestic inflation. For example, given their current inflationary spiral, the current conservative regime is going to raise the minimum wage as a political ploy. Conclusion: Given Argentina's specific inflation characteristics, their ability to "use MMT" (print money) is very limited. 

 

To those following along, the key to understanding the nuances of the argument is to understand what causes inflation, which is much more complex than Milton Friedman's simple phrase, "Too much money chasing too few goods."  

 

I can't wait for the season to start....

 

 

 

Edited August 15, 2019 by TPS

[row_33]

Did the world end today? Massive recession globally?

 

 

[KRC]

5 minutes ago, row_33 said:

Did the world end today? Massive recession globally?

 

 

 

Nope. They are waiting for a Friday night rollout.

[Buffalo_Gal]

16 minutes ago, row_33 said:

Did the world end today? Massive recession globally?

 

 

It's on hold after the July spending numbers. Even the NYT couldn't hide it. ?‍♀️

 

[TPS]

22 minutes ago, Buffalo_Gal said:

It's on hold after the July spending numbers. Even the NYT couldn't hide it. ?‍♀️

 

As is always the case, there are many factors influencing the economy. On the negative side is manufacturing from the trade war; on the positive side are government spending increases and consumer spending buoyed by higher employment.  Unfortunately, much of the boost from consumers will be spent on imports since we make very few consumer goods here.  Again, this is what the current showdown is all about, but in the meantime, the GDP growth numbers will most likely stay in the Obama range....

[GG]

My names is GG and I approve this message.

 

Quote

 

Economics is the study of allocating scarce resources. While it is true that the U.S. can now spend money it doesn’t have, it is also true that if this were a reliable path to prosperity, no country would ever lose its reserve-currency status. The civilizations based in Athens, Rome, Constantinople, Florence, Amsterdam, Madrid and London all learned that painful lesson the hard way.

 

There is really nothing modern about Modern Monetary Theory. No one running for president in 2020 will tell you this, human nature being what it is, but Washington will overextend its exorbitant privilege too someday. The question is when. Promising unlimited government spending without any concern for how to pay for it will hasten that day.

 

 

[plenzmd1]

2 hours ago, Buffalo_Gal said:

It's on hold after the July spending numbers. Even the NYT couldn't hide it. ?‍♀️

 

Just remember this..as in anything, you fade the public like a champ. 96% of the public on the Vikings, take the Bills. Public sells stocks in 2008? buy like it is going out of style. .Public spends like drunken sailor cause they think the economy cant be stopped.but capital expendituress and spending on business inventories are down?  GDP growth slowing like a champ..and if one takes out the increase in governmentt spending would be below 2%...but all is well, Trump tells me so!

Edited August 15, 2019 by plenzmd1

[DC Tom]

24 minutes ago, plenzmd1 said:

Just remember this..as in anything, you fade the public like a champ. 96% of the public on the Vikings, take the Bills. Public sells stocks in 2008? buy like it is going out of style. .Public spends like drunken sailor cause they think the economy cant be stopped.but capital expendituress and spending on business inventories are down?  GDP growth slowing like a champ..and if one takes out the increase in governmentt spending would be below 2%...but all is well, Trump tells me so!

 

The only certain indicator of the market that I've ever seen is "Do the opposite of what my mom does."  

 

Seriously, the dingbat has timed the market buying high and selling low for some 30 years now.

[Chef Jim]

18 minutes ago, DC Tom said:

 

The only certain indicator of the market that I've ever seen is "Do the opposite of what my mom does."  

 

Seriously, the dingbat has timed the market buying high and selling low for some 30 years now.

 

Ok. What is she doing now?  

 

Wait....that sounded creepy. ?

[RochesterRob]

2 hours ago, GG said:

My names is GG and I approve this message.

 

 

  Economics will change over time.  Where that goes is anybody's guess.  Was not that long ago that the concept of Keynesian economics was unheard of.  I used to worry about the deficit in terms of repayment but have come to the conclusion of regardless of Democrat or Republican it is not getting repaid.  Like I said earlier today it is a Brave New World out there.  For much of mankind's history the value of currency has been tied to things such as precious metals hence the concept of scarcity.  Humanity is taking the move of uncoupling currency from scarce items whether that is readily seen by most of the population.  In part this most likely had to happen since population is growing faster than currency with no respite from long term inflation.  

Edited August 15, 2019 by RochesterRob