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Deficit Deceit

John Rowland

Posted on April 27, 2019 12:36

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Everybody loves a free lunch, especially monetary monopolists and their enabling politicians. With Richard Cheney as one of their political godfathers, the admirers of huge fiscal deficits are on the prowl.

Remember Richard Cheney, master of the 13% approval rating? Well, his "deficits don't matter" nonsense is back. The Trump Administration's current fiscal deficit calamity seems to have piggy-backed on this unsustainable falsehood. Also adding to this noxious mix awhile back was Dylan Matthews of Vox.com, who doubled down on Cheney's kookery with a feature on rising deficits, "Does it even matter"?

While following in Cheney's footsteps is bad enough, Matthews frames his article within a constrained left-right political paradigm and is, at times, simply ridiculous. Matthews claims that robust economic growth can only be achieved with strong population growth, citing the post-WWII economic era. If it had been that simple, many Third World nations would be quite wealthy indeed.

But to help explain that era, Matthews makes no mention whatsoever of Bretton Woods, which gave birth to that gift that kept on giving for the US: the world's reserve currency. But it gets worse. Matthews outlines 2 crackpot economic viewpoints. The first is Larry Summers' "secular stagnation" -- an "excess of savings." For starters, there's no mention here of the Federal Reserve paying large banks interest on their enormous excess reserves, in effect, paying them not to lend.

Summers believes that too many little people are driving down "market rates of interest." Uniquely, interest rates are set by monetary central planners:  Monopolists, not the market. Certainly not small-time retail drones. Dysfunctionally married to Summers' hooey is also the cry of a "chronic lack of [domestic] demand and spending", a lack of "aggregate demand" -- Keynesian hot air.

Anybody have a chronic lack of demand? Nobody wants a better house, faster car, nicer clothes/jewelry, to travel, pursue a hobby, etc.? People not wanting more stuff seems absurd. Such blather is perhaps the product of too much sun on some remote beach.

But to Summers' credit, he at least dismisses Matthews' next theory which derives straight out of the 2009 Zimbabwe School of Economics: "Modern Monetary Theory." Its cited champion is Stephanie Kelton, a former Bernie Sanders staffer. This idea holds that we can all have a free lunch, "because modern governments control their own currencies." If paying $35 quadrillion for something at the Dollar Store sounds appealing, this theory's for you. Otherwise, it's pure quackery.

Two silly dogmas aside, plus a failure to acknowledge a deteriorating global reserve currency environment for the US dollar, Matthews grants Pentagon/military waste and fraud a free pass, claiming that "future deficits are likely to be driven substantially by factors other than the tax cuts and wars." Wars? $7-$10 trillions in squandered/stolen loot, no small factor . . . no big deal?

Unfortunately, the beat goes on as Pentagon pork drives the Trump deficits, a total fiscal lunacy.

John Rowland

Posted on April 27, 2019 12:36

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Source: WashPost
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