Comments on: Why the public debt should be treated as an asset

By: Spencer

Spencer — Fri, 18 Jan 2019 16:34:00 +0000

Is it not the size of the debt per se but the rate at which the debt is increasing that should be cause for concern?

The books cannot be balanced when there is merely a £2billion surplus (2018).

Interest-only debt repayments are currently £53Billion (2019)

Does that not mean a surplus of £51billion is now needed just to balance the debt interest book this year? Merely to service the loan?

The rate at which the debt is increasing is now over £5000 per second.

At this rate there will be a further £147billion in interest added pushing the debt, and the repayments, ever higher.

Am I missing something here?

By: Egmont Kakarot-Handtke

Egmont Kakarot-Handtke — Sat, 22 Sep 2018 11:04:00 +0000

Why the MMT benefactors of humanity never talk about profit
Comment on John Weeks on ‘Why the public debt should be treated as an asset’

The most curious thing about economics is that most models ― Walrasian, Keynesian, Marxian, Austrian does not matter ― do NOT contain macroeconomic profit in explicit form. And when it appears occasionally it is misspecified.#1 This is why economics is a failed/fake science. MMT is no exception.

In John Weeks’ post about the mistreatment of public debt as perennial problem instead of a long term benefit, the word profit does not appear once. The bottom line of his argument is that the public debt is not as massive as everybody thinks and on closer inspection, not a burden but, on the contrary, has a lot of advantages for WeThePeople. In detail he argues:

• People are told that public debt 1) must be repaid, 2) threatens the country with bankruptcy, and 3) is a burden on future generations. All these arguments are wrong.

• The British government can never default on its debt.

• A good portion of the national debt is held by the public sector, i.e. Bank of England, this is what the public sector owes itself.

• The interest paid on debt held by pension funds is income to retired households.

• At the end of 2016, private corporate and foreign gilts holders owned 41% of the UK’s national debt. Only the £524 billion of gilts held by foreign creditors could be considered a “burden” in that the associated interest payments are from UK taxpayers to non-UK creditors.

• A fair and progressive taxation system could ensure that interest payments to domestic bond holders don’t have negative redistribution effects.

• Sound management of the national debt means more public borrowing for investment and current expenditure, which is justified by the modest size of the effective debt.

The whole argument boils down to a plea for more deficit spending/money creation. This is what MMT policy guidance is all about.

Fact is:

• MMT is a macroeconomic theory that is refuted on all counts.#2

• John Weeks does not mention once the profit effect of deficit-spending/money-creation.#3

• From the scientifically correct Profit Law follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.#4

• MMT economic policy boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.#5

• All the social benefits MMTers promise are paid in real terms by WeThePeople themselves via stealth taxation.#6

• Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon. Public debt is NOT an asset but a time bomb.

MMT claims to push the agenda of WeThePeople but in fact pushes the agenda of WeTheOligarchy. MMT is failed/fake science and the proponents of MMT are NOT benefactors of humankind but quite ordinary political swindlers.#7

Egmont Kakarot-Handtke

#1 For details of the big picture see cross-references Profit
http://axecorg.blogspot.com/2015/03/profit-cross-references.html

#2 For the full-spectrum refutation see cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html

#3 Keynes, Lerner, MMT, Trump and exploding profit
https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html

#4 Down with idiocy!
https://axecorg.blogspot.com/2017/12/down-with-idiocy.html

#5 MMT: Redistribution as wellness program
https://axecorg.blogspot.com/2017/10/mmt-redistribution-as-wellness-program.html

#6 MMT, money printing, stealth taxation, and redistribution
https://axecorg.blogspot.de/2017/11/mmt-money-printing-stealth-taxation-and.html

#7 MMT: academic snake oil for the people
https://axecorg.blogspot.com/2018/02/mmt-academic-snake-oil-for-people.html

By: William MacDougall

William MacDougall — Fri, 21 Sep 2018 21:08:00 +0000

I agree; the harm of debt is often exaggerated, and indeed was by some in the aftermath of the financial crisis, when counter-cyclical expansion was needed. But that crisis was ten years ago, and Britain now has record employment; it would be dangerous to run large deficits in the UK today.

By: Ralph Musgrave

Ralph Musgrave — Fri, 21 Sep 2018 19:05:00 +0000

I basically agree with John Weeks. My only slight quibble is that I go along with the idea put by Milton Friedman and Warren Mosler (founder of Modern Monetary Theory) that there should be no government debt in the sense that the only liability that government and central bank should issue should be zero interest yielding base money. I go into the reasons for that idea in much more detail here:

http://www.openthesis.org/document/view/603834_0.pdf

Week’s article features on an MMT site (link below) and there’s a comment by Andrew Anderson saying much the same as me, i.e. that there should be no debt of the interest yielding variety.

http://mikenormaneconomics.blogspot.com/2018/09/john-weeks-why-public-debt-should-be.html

By: Ralph Musgrave

Ralph Musgrave — Fri, 21 Sep 2018 18:51:00 +0000

Several Western countries have bought up billions if not trillions of their own debt over the last five years. As predicted by me and others, and contrary to the predictions of some “eminent” economists, there’s been little effect on inflation. But clearly, as you suggest, the printing can go too far.

By: William MacDougall

William MacDougall — Fri, 21 Sep 2018 09:56:00 +0000

You say Gilts are not a problem because they can be repaid by printing money, but surely if done too much that will cause inflation. We can argue about what “too much” is and about how much inflation is a difficulty, but they clearly are problems as Venezuela is discovering.