Thread by @jlounsbury59

@johnakhibijnr @Schuldensuehner We are in a debt-deflation end game - that'll see a much "stronger" dollar as assets deflate. Saudi Arabia does not understand it is just playing into the teeth of a tempest it cannot defeat.
@scientificecon @ProfSteveKeen @GTCost @GeorgeSelgin @paulkrugman @dandolfa
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@johnakhibijnr @Schuldensuehner @scientificecon @ProfSteveKeen @GTCost @GeorgeSelgin @paulkrugman @dandolfa 2/n
Controlling this deflation without severe economic damage requires monetary and fiscal actions not heretofore pursued (except to a limited extent in Japan).

Some combo of the following:

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@johnakhibijnr @Schuldensuehner @scientificecon @ProfSteveKeen @GTCost @GeorgeSelgin @paulkrugman @dandolfa 3/n
1. Debt jubilee where creditors eat losses through writedowns. See econintersect.com/pages/opinion/…

2. Massive central bank balance sheet expansion with direct purchase of assets from the real economy (not by the expansion of excess reserves for banks).

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@johnakhibijnr @Schuldensuehner @scientificecon @ProfSteveKeen @GTCost @GeorgeSelgin @paulkrugman @dandolfa 4/n
3. "QE for the people", either by central bank infusion of money to the "real economy" or by making direct payment fiscally through deficit spending. Universal Basic Income and Job Guarantee are forms of this.
@Frances_Coppola has a good book: amzn.to/3cye9il
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@johnakhibijnr @Schuldensuehner @scientificecon @ProfSteveKeen @GTCost @GeorgeSelgin @paulkrugman @dandolfa @Frances_Coppola 5/n
Other variations (and possibly other actions) are possible. Key is extent of actions must be balanced such that pain and relief is distributed, ie:
-Lenders suffer some loss of principle
-Debtors suffer some loss of asset value w/o loss of assets*
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@johnakhibijnr @Schuldensuehner @scientificecon @ProfSteveKeen @GTCost @GeorgeSelgin @paulkrugman @dandolfa @Frances_Coppola 6/n
*eg:
Mortgage balances are written down only to the extent of asset price decline. Deflation pain is shared between creditors and debtors:
-Banks see balance sheets contract both sides of the ledger (assets and liabilities).

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@johnakhibijnr @Schuldensuehner @scientificecon @ProfSteveKeen @GTCost @GeorgeSelgin @paulkrugman @dandolfa @Frances_Coppola 7/n
-Homeowners' mortgage balances are written down only in proportion to real estate market value.

Similar actions needed to resolve corporate debt issues.

OR

We can just let the economy collapse.

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@johnakhibijnr @Schuldensuehner @scientificecon @ProfSteveKeen @GTCost @GeorgeSelgin @paulkrugman @dandolfa @Frances_Coppola 8/8

A couple of recent posts on this subject:

Combating The Economic Devastation Of A Pandemic econintersect.com/pages/opinion/… by @ProfSteveKeen

Deflation And The Pandemic econintersect.com/pages/investin… by @RickAckerman

@asymptosis @interfluidity @Amdalleq @clintballinger

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@johnakhibijnr @Schuldensuehner @scientificecon @ProfSteveKeen @GTCost @GeorgeSelgin @paulkrugman @dandolfa @threadreaderapp unroll