US Congress about to spend $2 trillion
"wait, I thought we didn't have money for universal healthcare, the homeless, or infrastructure? and now suddenly we have the money?"
...is a question I hear a lot these days, which politicians suck at addressing
***THREAD***
"wait, I thought we didn't have money for universal healthcare, the homeless, or infrastructure? and now suddenly we have the money?"
...is a question I hear a lot these days, which politicians suck at addressing
***THREAD***
It's a very complex question and I won't try to tackle all of its aspects here
Instead I will focus on two aspects:
(1) There is more flexibility with gov't spending than one typically thinks ...
Read @StephanieKelton's explanation as to why:
threadreaderapp.com/thread/1242165…
Instead I will focus on two aspects:
(1) There is more flexibility with gov't spending than one typically thinks ...
Read @StephanieKelton's explanation as to why:
threadreaderapp.com/thread/1242165…
Central banks can essentially print money at will (in various forms) and let their associated governments spend it. By design.
...however...
(2) Such spending flexibility works best when symmetrically implemented by ALL governments across the world at the same time
...however...
(2) Such spending flexibility works best when symmetrically implemented by ALL governments across the world at the same time
Such as right now, amidst a global crisis that concerns every country and everyone.
Why?
Because at the end of the day, a government's debt needs to be bought by some other government (I am simplifying here)
Why?
Because at the end of the day, a government's debt needs to be bought by some other government (I am simplifying here)
So when every government increases its debt at the same time as others and to the same extent, then the global debt ecosystem, if you wish, stays in equilibrium
This is what is happening these days. Every government is coming up with a HUGE spending package to restore trust.
This is what is happening these days. Every government is coming up with a HUGE spending package to restore trust.
It would be mistaken to believe that, because the US is spending $2 trillion now, they would have had those $2 trillion to spend **absent the #coronavirus crisis**
Because such a government spending would have been asymmetrical (the US is spending but not, say, the EU)
Because such a government spending would have been asymmetrical (the US is spending but not, say, the EU)
Asymmetrical spending messes up the equilibrium of the global debt ecosystem.
If one government overspends relative to others, it risks:
1. Currency depreciation
2. Higher interest on its loans
3. Capital flight
...and a few other things that aren't great...
If one government overspends relative to others, it risks:
1. Currency depreciation
2. Higher interest on its loans
3. Capital flight
...and a few other things that aren't great...
So both the "left-wing" folks (e.g. Democrats in the US) and the "right-wing" folks (Republicans in the US) are being partly honest, partly dishonest about this since they tend to speak only to the side of the story that's aligned with their political agenda and electorate
It is essential for #democracy that politicians (and economists) clearly explain, in plain language, why suddenly there are trillions available when two months ago we were told we were broke
Not everything has to be partisan or exploited for political motives😉
Thanks
// LA FIN
Not everything has to be partisan or exploited for political motives😉
Thanks
// LA FIN
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