American Economics Thread

[horse]

The scary thing is many Americans believe in Modern Monetary Theory which claims that the US can print money indefinitely because it's a reserve currency and fiat currency.

Now's the best time to take out loans and mortgages and lock in interest rates before they go up. It's strange but debt is becoming an asset and cash and savings are a liability due to the USD's depreciation.

I do not really understand it myself, the Modern Monetary Theory.

There probably is a really difference that we should acknowledge.

MMT provides credit, this credit comes from the state.

In the old days, this credit came from bankers or rich people. The state would borrow from the bankers or rich people.

The state, now having gotten some money, goes does what it wants. The usual expectation is to build roads, hospitals, schools, or lend it to industry.

The idea is where does this credit come from, the bankers rich people or MMT. And this credit is to do domestic initiatives, such as public goods or build up some domestic industries.


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I guess a philosophic question is whether the state should be allowed to create credit? Why not? Isn't that what China has been doing for thousands of years?

If the state creates credit and gives out loans, that is not really too different than the current practise of the banking system in western countries creating credit and giving out loans.

The key point, theoretically speakings, is how this credit is applied in the general economy.

The state would like to see this credit applied to productive areas.

Nowadays, the credit created by American banks or by Janet & Jerome MMT, that all mostly goes to the financial markets and 1% according to rumour.

It's a rumour because no one really understands this stuff and what they are really doing.

 

[steel21]

No way he will let it blow now, before the midterms Congress elections

If he does, then the Democrats are toast and expect Pompeo/Cotton making a run for the presidency in 2024

Which is why the latest relax on mask rule.

The hope is the the economy, and especially the service sector can be rekindled, consuming much of the excess dollars floating in the asset and equity market as well as generating employment.

But there was still +762 COVID deaths and +39825 new cases in the US yesterday. While the deaths are 1/2 of what it was mid may last year, the new cases was actually lower this time last year. So the wiser amongst us will know to continue our precautions, especially with all the crazy variants out there.

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So there is a chance that Biden is reopening prematurely, and running risk of a minor replay of India's calamity in June.

However, the economy and politic can't wait. Inflation will kill recovery before it gains momentum, so US has to reopen, NOW NOW NOW.

Biden has perhaps 3 months window to see the economy regain steam or stagger back due to new infections. If by JUL-AUG, things are looking up and up, then he is in deep trouble. American's have a ridiculously short memory and will accuse democrat of tax and spend. If Biden crashes the mid-term, he will be obstructed all the way to 2025, when we will get another Trump.

Shit, by 2025, all this semiconductor tech war will be over. It wouldn't matter who is president, the game would be set. The competition phase would be over and America could enter a phase of crash and burn as reality slowly sets in.

And then the loan servicing cost and the boomer social security bills come due in 2030........

 

[voyager1]

I do not really understand it myself, the Modern Monetary Theory.

There probably is a really difference that we should acknowledge.

MMT provides credit, this credit comes from the state.

In the old days, this credit came from bankers or rich people. The state would borrow from the bankers or rich people.

The state, now having gotten some money, goes does what it wants. The usual expectation is to build roads, hospitals, schools, or lend it to industry.

The idea is where does this credit come from, the bankers rich people or MMT. And this credit is to do domestic initiatives, such as public goods or build up some domestic industries.


---------- ---------- ----------


I guess a philosophic question is whether the state should be allowed to create credit? Why not? Isn't that what China has been doing for thousands of years?

If the state creates credit and gives out loans, that is not really too different than the current practise of the banking system in western countries creating credit and giving out loans.

The key point, theoretically speakings, is how this credit is applied in the general economy.

The state would like to see this credit applied to productive areas.

Nowadays, the credit created by American banks or by Janet & Jerome MMT, that all mostly goes to the financial markets and 1% according to rumour.

It's a rumour because no one really understands this stuff and what they are really doing.

Terrible policy to let the Gov create money instead of the central bank. Let politicians go near the treasury and they will loot in 10 years time. The market *rightly* doesn't trust politicians to control their urges to create money out of thin air and throw it around like candy

IMO the central bank as an "independent" (take note of the quotes here lol) institution in controlling credit growth is much more trustworthy than the politicians

 

[horse]

Terrible policy to let the Gov create money instead of the central bank. Let politicians go near the treasury and they will loot in 10 years time. The market *rightly* doesn't trust politicians to control their urges to create money out of thin air and throw it around like candy

IMO the central bank as an "independent" (take note of the quotes here lol) institution in controlling is much more trustworthy than the politicians

Yeah but, I don't disagree with what you are saying, the main point is someone must provide the credit.

Either the state provides the credit, or the US banking system provides the credit.

For the past decades, US bank lending apparently just for real estate and finance games. None of that lending goes to plant and equipment, compared to real estate and finance games.

MMT is suppose to address that, that the credit (which is capital when it is lent out), the state will make sure that credit will get to industry to expand factories and increase production in the nation.

However, the way the Americans are currently doing MMT, it appears to be exactly the same as the old system with the US banks, where the credit all winds up in real estate, financial instruments, you know, cough cough, the 1% still gets most of the money.

That is why we should close our eyes and buy!

Buy the dips.

 

[voyager1]

Yeah but, I don't disagree with what you are saying, the main point is someone must provide the credit.

Either the state provides the credit, or the US banking system provides the credit.

For the past decades, US bank lending apparently just for real estate and finance games. None of that lending goes to plant and equipment, compared to real estate and finance games.

MMT is suppose to address that, that the credit (which is capital when it is lent out), the state will make sure that credit will get to industry to expand factories and increase production in the nation.

However, the way the Americans are currently doing MMT, it appears to be exactly the same as the old system with the US banks, where the credit all winds up in real estate, financial instruments, you know, cough cough, the 1% still gets most of the money.

That is why we should close our eyes and buy!

Buy the dips.

Ofc the state is providing the credit. The central banks are nothing by themselves. Their whole ability to print money is by having the country's economy use the currency and thus create "demand" for it.

Now officially the central banks are supposed to be independent but...whatever, I think you get my meaning..

It is a modern game that the central bank is giving credit and the states "borrows" from it.

Now for MMT, lmao for people believing at it. I would x100 believe the delusional FED about "transitory" inflation than MMT working kn the real world.

Can you imagine Govs dramatically raising taxes to remove the excess liquidity from the system hahaha

 

[In4ser]

Based upon my understanding of Modern Monetary Theory (MMT), it's proponents argue that when done correctly, the overabundance in supply will tap into suppressed demand and the insatiable foreign demand for the USD ensure any price instability will be transitory, especially when the excess USD is invested into technology and infrastructure to boost productivity and causes deflation.

I disagree with MMT’s “if you build it, they will come” mentality because it will only work if productivity continues to rise to act as a counterbalance to the increase of supply which is not guaranteed. In reality, productivity growth is hard to achieve as US productivity growth has been on the decline since the mid-2000s and staying below 2.5% since the 1970s.

Moreover, the US having reserve currency status means very little because the USD is no longer on the Gold Standard and most major currencies are no longer pegged to the USD. Global Reserve status simply means that other countries accept and hold the USD more than other currency which makes it less volatile and risky. However, the very reason why other countries hold onto USDs is because of the presumption of it being is a safe haven from risk and volatility. Therefore, it is foolish to expect that foreign demand to persist when the currency’s value is being quickly depreciated by money printing. Any stimulus provided by MMT will be temporary as easy credit will be quickly priced into the market and will require more and more to achieve the intended affected while causing massive psychological damage to the USD’s creditability.

 

[LesAdieux]

I think that it is up to Biden to figure out which strategy to follow. He could either let it fail fast and fail big while it is still possible for him to pin the problem (rightly) on Trump or he could keep the current policy till the next election and hope it doesn’t blow up before then.

Biden does not have control over the fed.

bad data keep coming. another miss: retail sales in April was flat against March, no growth. the core retail actually drops by 1.5%. it was again totally ignored by the stock market.

 

[Tyler]

Biden does not have control over the fed.

bad data keep coming. another miss: retail sales in April was flat against March, no growth. the core retail actually drops by 1.5%. it was again totally ignored by the stock market.

The stock market had already tanked for a couple of days. It is just rebounding from an oversold situation.

 

[LesAdieux]

The stock market had already tanked for a couple of days. It is just rebounding from an oversold situation.

oversold? are you sure? they got a mechanism turns any news into good news: bad news means fed will keep the QE longer, market soaring..

the only thing matters is inflation, which means regime change.

 

[broadsword]

It's a bullet proof stock market.