No Minister

$5,630,859,000,000

That’s what the US government has spent in the first ten months (October to July) of this fiscal year.

It hardly needs to be said that this is the largest amount of money that the government has ever spent.

The good news is that they collected $2,823,564,000,000 in taxes, also a record.

That’s also the bad news because of course it means that they’ve set a record deficit so far. Those “trillion dollar deficits” of the early Obama years?

HA! This year’s deficit is $2,807,295,000,000: a $2.8 trillion deficit. They’ll likely beat the $3 trillion mark before the fiscal year ends Sep 30.

The big spending components were:

  • $1,005,897,000,000 – Department of Health and Human Services
  • $ 915,775,000,000 – Social Security
  • $ 540,442,000,000 – Department of Defense spent
  • $ 309,415,000,000 – Net Interest

The following graph of inflows and outflows shows that this is an exceptional year, as it is for all nations, with that huge “Income Security” payout to try and compensate workers for their jobs being shut down by order of the fifty state governments – the extent of shut down differing by state. But even taking that element out we’re still talking record deficits and ones that will likely continue for years now.

The proponents of Modern Monetary Theory don’t see a problem with this of course, and it makes arguments about it almost a moot point, since the USA is effectively practising it right now. But they can only do this because, unlike a little nation like New Zealand, their currency is basically the world’s currency.

I don’t see how this can go on. But then I’ve been saying that for years now and somehow it does. Perhaps the figures just don’t mean anything to ordinary people any longer? Perhaps they don’t think it will affect them: that when the day of payment comes they’ll simply refuse and allow the institutions of federal government in far-off Washington D.C. to collapse?

See also:

The Great Crash of 2034

This is not going to get better.

Written by Tom Hunter

August 16, 2020 at 9:21 am

24 Responses

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  1. It’s OK Tom, Trump still has a few months left to reduce the deficit to zero, as per his campaign promise. Yeah, I know, that’s a joke.

    Under Trump’s last budget, the US won’t even begin to repay its debt for another 15 years! Some promise, eh?

    The proponents of Modern Monetary Theory don’t see a problem with this of course,

    If you understood MMT, rather than just having a knee jerk reaction as reactionaries always do, you would know that MMT proponents do see many problems with this.

    MMT does not require borrowings. Now, we know that isn’t popular with the lending classes, as they are used to their flow of risk-free rent seeking. But government borrowing is not a part of MMT.

    Some of us will also have an objection to the way the budget prioritises spending.

    unlike a little nation like New Zealand, their currency is basically the world’s currency.

    Again, that is not how MMT works.

    As a currency issuer, the NZ government can print whatever it needs (within the acceptable bounds of inflation) to fund all government expenditure. This is why the failed thinking that a government is like a household and needs to acquire money before it can spend it falls down. It is this antiquated thinking that holds back the full utilisation of economic resources.

    The main objective of MMT is to have a nation’s economy running at full capacity, with full employment. How can you disagree with that goal?

    Gustavo Frink

    August 16, 2020 at 10:32 am

    • I’ll deal with the farce of MMT later but for the moment let’s just say that if it worked then there never would have been hyperinflation in Weimar Germany, Zimbabwe and the Confederacy, all of whom had plenty of things they wanted and needed government money to be spent on.

      But in the meantime do you think you can dial down your excitement a little? In other words I don’t want to have go through more multiple comments from you. If it’s stuck in our spam filter just put up a brief comment to that effect and hopefully one of the authors will see that and get it out.

      And I need to also say that this shit …

      … no longer flies on our new platform. I know you had such fun with your 97 nyms and multiple IP addresses on our old Blogger platform but here, David, you’re now going to get caught.

      Wanker. 😃😃😃😃😃😃

      Tom Hunter

      August 16, 2020 at 1:21 pm

  2. It doesn’t matter because the Jewish-owned Fed Reserve will just print more money to prop up its mate. It’s smoke and mirrors stuff. Printing money is also fantastic for equity markets, as we have seen over the last few years.

    Nick K

    August 16, 2020 at 11:11 am

    • Jewish-owned Fed Reserve??

      Just what racist rock did you crawl out from under?

      Gustavo Frink

      August 16, 2020 at 11:14 am

    • Nick. You’ve been around the Interwebby thing long enough to know that sarcasm really doesn’t work on it.

      Assuming you were being sarcastic? 😳

      Tom Hunter

      August 16, 2020 at 11:55 am

    • Absolutely, a throw-away, tongue-in-cheek comment that a couple of snowflakes are having a cry over. Boo hoo to them.

      Nick K

      August 16, 2020 at 11:56 am

  3. Racist? WTF?

    Nick K

    August 16, 2020 at 11:31 am

  4. It was a tongue-in-cheek comment. People will look very hard to find “racism” in order to shout the loudest and win the debate. I will edit my comment anyway.

    Nick K

    August 16, 2020 at 11:53 am

    • For your viewing pleasure Nick!

      Tom Hunter

      August 16, 2020 at 12:01 pm

    • Yeah, but in the actual or perceived absence of “sarc/“ it was racism…and you didn’t have to look hard to find it.

      But fair enough, I once got picked up for using ((())) in sarcasm and as per Poe’s law,

      https://en.m.wikipedia.org/wiki/Poe%27s_law

      …there was a valid reason. Plus being the mother of all whack-job racist conspiracy theories, anti-Semitism is the canary in the cage. There were/are a couple of anti-Semitic idiots (they may actually be the same 50 year old underpants-wearing loser who jerks off in front of his compute screen while still living in his mother’s house, trying to make it look like there is some credible movement for his shit) who appear on Kiwiblog from time to time. Is actually a bit disturbing to see his preliminary bait gets heavily upticked.

      My wife picked up a few days ago on her (Muslim) sister referring in conversation to “Zionists” and “Yahudis”. Her sister is an impressionable idiot had no idea what either word meant other than some bogey men allegedly stuffing up the world, which she had imbibed by osmosis listening to the conversation of others.

      Kimbo

      August 16, 2020 at 12:39 pm

  5. they may actually be the same 50 year old underpants-wearing loser who jerks off in front of his compute screen while still living in his mother’s house….

    Good thing you went on to say “Kiwiblog” because on reading up to that point I’d thought you were talking about “Gustavo” and “Anne” here at NoMinister!!!

    And of course the whole thread immediately went => that way instead of focusing on the topic itself.

    Not that there’s much to be said further about the debt-fueled cluster fuck the USA is heading into. Probably best to forget about any proposed solutions and just speculate about how it ends!

    Tom Hunter

    August 16, 2020 at 12:46 pm

  6. Yahudi – The given name of a common household sprite.
    A miserly pinch-penny sprite, the keeper of the lamp.
    Yahudi now lives in the refrigerator.
    His purpose is to save electricity and wear and tear on the appliance bulb.
    When you open the refrigerator door he reluctantly turns on the light.
    When you close the refrigerator door he quickly turns it off again.
    If you open the door very, very, slowly, you just might catch him asleep.

    Gustavo Frink

    August 16, 2020 at 12:48 pm

  7. Um, back to the topic. Haven’t they be saying this about the burgeoning debt mountain in the USA since the New Deal. Except when they want money to fight Nazism, Fascism, Japanese Militarism, or Communism in Vietnam, or as per Ronald “I’ll cut taxes yet reduce the deficit even though it will increase on my watch” Reagan upping military spending to stare down the Evil Empire.

    But one presumes, as per Margaret Thatcher’s analogy that running a country is like a housewife spending the household budget, a day comes when the debtor comes a calling.

    Isn’t Japan’s 30-something year economic slump caused by debt-reservicing issues?

    kimbo

    August 16, 2020 at 12:56 pm

    • But one presumes, as per Margaret Thatcher’s analogy that running a country is like a housewife spending the household budget…

      That’s the problem with out dated “economic thinking”. A nation is not like a household.

      In a now-famous speech from 1983, British prime minister Margaret Thatcher declared that “the state has no source of money, other than the money people earn themselves. If the state wishes to spend more it can only do so by borrowing your savings or by taxing you more.”5 This was Thatcher’s way of saying that the government’s finances were constrained in the same way our personal finances are constrained. In order to spend more, the government would need to raise the money. “We know that there is no such thing as public money,” she added. “There is only taxpayer money.” If the British people wanted more from their government, they would have to foot the bill.

      It can be summarised as (TAB)S: taxing and borrowing precede spending.

      In practice, governments never raise sufficient money via taxation.

      Warren Mosler, was a successful Wall Street investor who penned a little book “Soft Currency Economics”. In it, Mosler writes the government spends first and then taxes or borrows. That sequencing turns Thatcher’s dictum completely around, reordering the mnemonic to give us S(TAB): spending before taxing and borrowing. By Mosler’s reasoning, the government doesn’t go around looking for someone else to pick up the TAB, it just spends its currency into existence.

      Gustavo Frink

      August 16, 2020 at 1:12 pm

    • Isn’t Japan’s 30-something year economic slump caused by debt-reservicing issues?

      It’s a pretty good “slump” when you still have the world’s third or 4th largest economy, depending on GDP or PPP.

      Gustavo Frink

      August 16, 2020 at 1:14 pm

  8. Modern QE should be inflationary but it isn’t because all economies are doing it. It is also held together by low unemployment and plenty of consumerism, meaning the excess M3 is exhausted through consumption and the purchase of goods using the printed money. It will continue as long as everyone sings to the same tune. Reserve Banks aren’t worried about it because it’s not inflationary for the above reasons, but as soon as it starts to become inflationary, and interest rates increase, that’s when the faeces will hit the oscillator. For now, the facade continues. Our Treasury will ask for $100bn and the Reserve Bank will just create it from their computer. We might be told that the RB is buying Treasury-issued bonds on the secondary market, but it isn’t: Taxpayers aren’t repaying ourselves. There is no “debt” because we owe the money to ourselves, but left wing politicians won’t miss the opportunity to raise taxes.

    Nick K

    August 16, 2020 at 1:44 pm

    • Modern QE should be inflationary…

      It’s also a question of what prices one actually measures for inflation. People who look at the falling cost of computers and ignored soaring house prices.

      Not to mention the bloody stockmarkets: all the QE credit has certainly been going some where in the economy, and it shows all right.

      Tom Hunter

      August 16, 2020 at 3:29 pm

  9. I’ll deal with the farce of MMT later but for the moment let’s just say that if it worked then there never would have been hyperinflation in Weimar Germany, Zimbabwe and the Confederacy,

    None of which were operating under MMT.

    You really don’t have a clue.

    Gustavo Frink

    August 16, 2020 at 2:09 pm

    • Pfft. I studied this crap three decades ago: it’s not new and I probably should devote a post to it since it’s being touted by some on the Left as part of their “new” solutions to “neo-liberal” economics. Like AOC and the stupid Green New Deal. Two trillion dollars you say? No problem, MMT will supply it.

      The primary problem with it is not the shell game of “fiscal policy” – “fiscal” that ultimately means monetary as the government sells bonds to a Central Bank, just as the USA is doing in extremis now.

      No, the problem that has always bedevilled these schemes is the one that Social Creditors refused to accept: that there is simply no way that a government can know enough about the economy at any given point to be able to calibrate its spending and taxing precisely enough that things don’t spin out of control.

      It’s a fiscal version of the same problem the communists faced in trying to precisely control an entire economy. It either gets out of control or you lock it down to an extent that you can control it – but then end up with exactly the sort of sclerotic, wasteful, damaged economy that the USSR and friends lived with all its life.

      Just as one example is the assumption that zero or near-zero interest money will make the economy zoom along as businesses gorge themselves on it to use for R&D, building factories and so forth. The demand for base money at (or very near) zero interest is not without limit and we can see that with one type that exists now – cash. Hell, even here in NZ it took this bloody pandemic to boost the circulation to $1 billion per year, something it had never come close to earlier.

      The MMT/Social Credit folks have the same basic misunderstanding in that they think because they’re technically correct – the State can print currency or create commercial bank deposits with the central bank, or have other ways of issuing base money at will – that it also means that control is not a huge and unsolvable issue. Hayek killed that key aspect to the theory decades ago.

      It’s actually the flip side of the Friedmanites who think that Monetary Policy is all you need to stabilise an economy. When interest rates go to zero you’ve pretty much hit that theory’s envelope.

      Or for that matter the so-called “neo-Keynesians” of the Kennedy Administration, who figured that if Keynes theory could reduce unemployment down to 5% there was no reason why more Keynesian stimulus couldn’t soak up that last portion. An economy running at 100% all the time. BZZZZZTT: hitting-the-edge-of-the-envelope time again and Hello, late 60’s US inflation.

      Tom Hunter

      August 16, 2020 at 3:04 pm

  10. there is simply no way that a government can know enough about the economy at any given point to be able to calibrate its spending and taxing precisely enough that things don’t spin out of control.

    None of us has a crystal ball as accurate as that, Tommy Dearest. I am sure you have no ideas about what you will receive for milk solids in 2025, or what your input costs will be, but I am equally sure you will continue feeding and milking your cows.

    There can be many confounding factors, but the current economic policy isn’t doing any better. World wide economies are slowing or stagnating, wages are refusing to budge, consumers aren’t consuming.

    Just as one example is the assumption that zero or near-zero interest money will make the economy zoom along as businesses gorge themselves on it to use for R&D, building factories and so forth.

    Zero interest rates are a sign the economy is floundering. Businesses will not “gorge” themselves on low cost money unless there is a market for their product/service. The poor market performance is a sign that there is too little money circulating in the economy, not enough “stuff” being sold and bought. Just the same as lowering labour costs doesn’t increase employment. Businesses will only employ the staff they need, regardless of the cost.

    An economy running at 100% all the time. BZZZZZTT: hitting-the-edge-of-the-envelope time again and Hello, late 60’s US inflation.

    A large pool of unemployed is what helps underpin current economic theory. Full employment without inflation is possible. The economy of the ’60s is not the economy of today, and the factors that led to 1970’s style inflation have gone.

    You may not like it, but right now, most of the developed world’s economies are only surviving due to the gradual acceptance of MMT as the only way forward. Central bankers are trying to move the inflation lever higher to get growth happening.

    Gustavo Frink

    August 16, 2020 at 4:12 pm

    • A large pool of unemployed is what helps underpin current economic theory.

      Leftists have been over-stating the meaning of the simplistic Phillips Curve since the 1980’s. No economy needs a large pool of unemployed to control inflation, and the last few years, especially in the USA, have proven that.

      Full employment without inflation is possible.

      That’s what the Kennedy neo-Keynesians thought too, to their regret. And in any case “full employment” is a very flexible term, as it should be. There is no system, whether of man’s creation or nature’s, that can crank at 100% for more than a few, brief bursts of time. Whether it’s Thermodynamics or Information Theory, there are built-in aspects of systems that prevent that.

      The economy of the ’60s is not the economy of today,…

      And the economy of the 1860’s was not that of the 1960’s in terms of technology, communication, energy production and distribution. But those are just technical aspects. The optimum application of scarce resources, whatever they are at any given moment, is what still rules. That is economics.

      .. and the factors that led to 1970’s style inflation have gone.

      You’re talking oil crisis, with increases of 300-400% in 1973/74 and 100% plus in 1979. But they were not present in the mid-1960’s when inflation first started cranking up in the Western economies, and those factors were still present in the 1970’s, as they are today even while lying quiescent. They’ll be back.

      … right now, most of the developed world’s economies are only surviving due to the gradual acceptance of MMT…

      Well yes, I think I made that point above, at least where the USA is concerned.

      However, it’s not going to be a permanent mode as you think or hope it will be. Depending on the degree they think they can, most nations will start paying pulling back their deficits by cutting spending, even if not real “austerity”, and then paing down their debt loads to a reasonable % of GDP. New Zealand and Australia will certainly be among them, so I think you’ll be shit out of luck pushing MMT to the Finance Ministers of the major parties in those countries.

      Try Belarus. They’ll be keen. Even desperate.

      Tom Hunter

      August 16, 2020 at 4:42 pm

  11. Jesus you lot need to fix your filters.

    Gustavo Frink

    August 16, 2020 at 4:12 pm


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