I would be very cautious when it comes to the US dollar, debt, debt ceilings, etc. I mean there’s a ton of videos on modern monetary theory that can explain it better than I ever can. I’ll just say theory is misleading because it’s not a theory as in “I have a theory that George HW Bush shot JFK…” more in the scientific theory way and just a description of policy the US government already follows and has followed for a long time. The important part, I suppose, is capitalists (yahoo finance) will sell it like US debt and budgets must be or should be treated like household budgets, but that’s not how this works. China certainly doesn’t operate on that principle and we can all see their economy is blowing the back out of the US currently- and it has nothing to do with debt. It’s more important to analyze where the money printed is going (infrastructure spending vs defense contractors which is essentially just waste and only enriching Boeing, Raytheon, etc. stockholders not increasing economic production and such).
So, tldr, countries that print and use their own currency, US, Japan, China, etc., should not consider national debts for… basically anything under the current economic structures in the world.
And of course this is inherently a capitalist, bourgeois outlook on the world. The world is currently dominated by capitalist, bourgeois governments. My point is yahoo, et al. are not offering legitimate criticism, but just arguing for austerity while simultaneously also arguing for an ever-ballooning budget which pumps cash into the MIC and all its various subsidiaries. They know how MMT works, they know how the federal reserve works and will continue to work (until it doesn’t) and they want to hoard as much of that cash for themselves instead of “the poors” getting any, so they pretend there’s an arbitrary limit on it or that it will result in a large future bill for American children when that just isn’t the case.
Anyway, MMT has been implemented by the US for a long-ass time, and it’s just funny how if you google it you get a bunch of critiques as if it just popped into existence in 2020. A lot of this is overly complicated (on purpose, it should be stated) but a lot of the analysis comes down to “gold bugs” being butthurt over the gold standard not being adhered to by literally any modern nation for, again, a long-ass time. Officially the US ended it completely in the 1970s, most people know this I think, and FDR started the process way back in the 1930s.
None of this should be taken as a defense of current financial systems. Obviously there are many criticisms of them, but one thing I can say with absolute confidence is that anyone proposing the gold standard or lamenting moving from it is… not a serious person. These aren’t the only people criticizing MMT (again, the US, China, etc. already operate under the conditions that MMT describes), but, they are the loudest and dumbest for sure. Aka most right wingers in the US. They think the US dollar (or Euro or Yuan or Yen, etc.) are backed by assets such as gold when, again, this is objectively not true and hasn’t been for a long time. Cryptobros are just more “modern” and “sophisticated” “gold bugs” btw. For whatever that matters. They’re also obsessed with currency being backed by more than just some abstract idea of stability, whatever that entails.
Anyway, yahoo is full of shit, the US debt basically doesn’t matter, there’s a ton of other shit that does matter that they ignore (like how the US gov chooses to print money to pay Lockheed Martin contracts instead of to build high speed rail… hmm…).
Hudson does a good job explaining the limits of MMT here https://www.nakedcapitalism.com/2023/06/michael-hudson-on-the-us-economy-surprisingly-resilient-or-potemkin-village.html
But if we take a look at the national debt, for example, the US federal government budget deficit hit $1.1 trillion in the first half of this fiscal year. The Congressional Budget Office predicts that this problem is only going to get worse over the next decade as interest rates go up. I guess this begs the question: how sustainable is the US federal deficit and how much longer can the US keep up the seemingly unlimited spending that we’ve become accustomed to?
To an infinite amount as long as the debt is in its own currency, and as long as you print the currency, you can print however much you want. You’ll never default because you can just create the credit. That’s what the Federal Reserve did with its zero interest rate policy. It distorts the economy, and the economy can shrink and be torn apart, but the government can always pay its debt by simply printing the money. The problem that is tearing the American economy apart is not the government debt — it’s the private debt that is leading to a default. When you default on your debt, you forfeit you property to the creditors. So, what you’re seeing now is a large scale transfer of property, a transfer of real estate, a transfer of cars that people had bought, but couldn’t keep up the payments on, a transfer of income from the 90% to the 10%. That’s private debt. That’s where the real problem is. And as long as the television programs can keep talking about the government debt, not the private debt, people are somehow not going to see that the problem that is tearing their own personal life apart is actually the problem that’s tearing the whole American economy apart.
So would you say that the government debt is not a problem and that Americans shouldn’t really worry about that?
That’s right. It’s all just a made up. When they talk about cutting back the government debt, what they mean is cutting back social services. They would like to do what Biden and Obama wanted to do after 2009. They want to cut back Social Security. They want to privatize it as if that will somehow solve the problem. They want to cut back medical care. They want to cut back most social programs so that the money that the government does spend will be exclusively to support the financial sector, the military sector, the insurance sector, and the real estate sector. That’s where the property owning classes, the ‘rentier economy’, the rent recipients who make money from stocks and bonds and real estate and monopolies. The government will help the top 1% at the cost of the 99%, but it need to pretend that it’s forced to do this because there’s a government deficit. The only government spending they really want to cut back of the spending on the 90%. They want to cut back Social Security, Medicare, local social spending, support for local cities and states. Everything that made America more democratic and strong in the past.
But how much longer can the US just keep printing money in order to service this government deficits? Is this really sustainable indefinitely?
Well, what usually stops a situation like that is a political revolution. The answer is it’s sustainable until people fight back, until there is a revolution. But as long as you have a political system where you have only two parties that are really the same party, and as long as you have the Democrats as the only alternative to the Republican Party, it can go on indefinitely because people will not have a political alternative to vote for. There is no alternative. You’re going to have elections bouncing back and forth, from Republicans to Democrats to back. And yet neither of them are an alternative to the whole financialization of the economy that’s been taking place really since World War Two and especially since the 1980s. So, America is ending up looking like England under Margaret Thatcher and even worse, Labor Party that followed her.
I swear if it weren’t for Michael Hudson’s writings & interviews, I wouldn’t understand half the things I do. He’s an invaluable resource on domestic & international economics (and politics, and history for that matter).
Yeah, he’s very good at contextualizing this stuff and giving a lucid explanation of the dynamics behind western financial capitalist system. I find Radhika Desai is also excellent. I love the show they do together.
Playlist for anyone interested: Radhika Desai & Michael Hudson - Geopolitical Economy Hour
Shhhh, the USA only implements MMT for military spending
So you’re saying we get a free lunch!?
What a deal! I was always told there was no such thing.
Did you not get lunches in middle school?
As someone who works in a middle school, the students very much have to pay for them too
In some places school lunch debt is a thing, so maybe not.
It’s only free if you don’t consider the fact that the rest of the world pays for it. The US can create money out of thin air without negative consequences to themselves, but only because they offload those consequences onto everyone who uses the dollar as reserve currency and settlement of international trade.
This will no longer be possible to do once that global financial hegemony is eroded. Then the US will finally have to pay for its own lunch.
I had hoped that this community is more skeptical of thatcher economics.
I only see people disagreeing with the article. Am i taking crazy pills?
That’s a big bubble… Would be a shame if somebody were to poke it.
