Saturday, March 31, 2012

Mike Norman on the US Budget Deficit

Mike Norman gives an MMT perspective on the US debt and budget deficit. A great interview.

Video streaming by Ustream


  1. Horrible interview. Look up Kyle Bass, Bob Janjuah,Reggie Middleton,and David Einhorn if you want a honest and enlightening account of whats going in the global economy.

  2. Kyle Bass discussing the Keynesian endpoint...

  3. MMT is lunacy. If it's so great, why did Krugman and Delong both trash it?

  4. It was a good interview. Mike did a nice job of putting out those counterintuitive insights of MMT.

    The interviewer?...................... Well she IS blonde! But its absolutely staggering the number of financial people who continue ask things like
    "How are we gonna pay for it" or "China might stop buying our debt"

    We are making progress though. Slowly the insights of Warren Mosler are getting into some peoples heads like John Carney at CNBC.

    Truth will win.

  5. Jan said:Thank you Lord Keynes.Mike Norman is always refreshing to listen to.A fellow swede Lars Pålson Syll
    Professor at Malmö Högskola,a Post-Keynsian economist have a very intersting blog.He made some interesting post on Steve Keen,(that he independenly have came to in much same conclusion as)and some very intersting articles on MMT, Herman Minsky and irrelevance of the IS-LM model,and some interesting points about the "New-Keynesian´s" stubborn avoidence to leave the model.My best regards!

  6. The interviewer asked about why do we need all this government debt to grow, since we also had growth when the government was running a balanced budget, and even surpluses.

    Norman didn't answer that question. He said it was a great question, but he didn't answer the question. He just re-iterated his belief that government debt can be as high as anything, and cannot be a problem.

    Norman also claimed, incorrectly, that we had growth because of inflation beyond a certain pattern, when a stronger case can be made for the idea that we had growth despite all the money creation beyond a certain pattern.

  7. Norman clearly doesn't understand economic coordination in a division of labor.

    He believes that as long as money is flowing from the Fed, at a pace that won't make prices rise too much over time, then the "problem" of lower productivity is the fault of investors who are "thinking too much about the dollar."

    But how can investors compete and end up coordinating their investments to make a sustainable, cohesive capital structure in the division of labor, when they have to work with interest rates that are not a product of real saving, but of monetary inflation?

    Production is not actually maximized with plenty of "manageable" and "healthy" inflation from the Fed. Norman sees inflation as only providing investors and consumers with a medium of exchange. OK, sure, but that doesn't mean that millions of people in a complex division of labor can coordinate their plans in such inflation.

    The less than an individual's actions have on interest rates and spending (because his behavior is offset by the Fed's inflation), then the less his actions can be communicated to other individuals. When 300 million people are in the same predicament, then it is almost impossible for coordination in the whole economy to take place. To this extent inflation isn't helping us, it is harming us. Even if there are people without jobs, and capital goods just lying around, the problem of inflation on coordination is still there. It's not true that inflation doesn't affect the capital structure of the economy as long as there is "slack", such that inflation doesn't make consumer prices rise very much. The process of economic growth in inflation, cannot be considered "good" economic growth.

    Norman says investors want all that government debt. But they don't want the debt, they want the essentially risk free profit from reselling the debt back to the Fed. The $36 trillion redemption number contains a lot of this treasury flipping.