Thread by @ideafaktory

MAGIC MONEY FOREVER (thread)
This is really important and everyone should understand how economists are directing the US economy effectively towards MMT (eg unlimited money printing).

I'll take this on point by point.
theatlantic.com/ideas/archive/…

Until now, we've been living under perverted Keynesianism, where govt spends during busts but fails to save during booms.

The prevailing alternative, austere Austrian economics of limited debt & balanced budgets got hot air, but no liftoff.

https://mobile.twitter.com/ideafaktory/status/1100436534271066116

Even perverted Keynesianism once feared inflation. Print too many dollars, prices go up, interest rates skyrocket, debt servicing becomes impossible & we default. This has not happened for many reasons. The biggest is debt & $'s are our #1 export.

https://mobile.twitter.com/ideafaktory/status/1149640422869762049

The more countries, companies, institutions & individuals use $'s & hold USDebt, the less they want these assets to tank. Reserve currency status, without more stable alternatives, gives the US a singular chance to spend **virtually** unlimited cash.

https://mobile.twitter.com/ideafaktory/status/1240756950490656779

Now EVERYONE-even slowpoke economists, who missed ALL the BLATANT signs of the Great Recession (or were actively complicit), woke up to our magical reality. So they've re-written the rules of macroeconomics, captured in this Atlantic piece I'll break down.
theatlantic.com/ideas/archive/…

#1 "most important is to run a deficit. ..US should abandon the goal of balancing its budget when the economy is good, and it should run deficits, sometimes large deficits, in perpetuity."

It's true, we can run big deficits for as long as $'s are the reserve currency.

This masks a slow-motion economic collapse: Ageing, hollowing out of the middle class, trade deficits, borrowing to fund basic expenses & failure to address root causes.

https://mobile.twitter.com/ideafaktory/status/1240756950490656779

#2 "Forget about Debt as a share of GDP"

Yes, Japan has dragged along w/a dying population & stratospheric debt/GDP for decades (albeit w/more domestic creditors).

If they can, we can too. But surviving isn't thriving. It is a disincentive to fix underlying problems.

#3 Instead measure interest owed as % of GDP

This is the macroeconomic equivalent of going from a balance sheet to a cash flows statement. As long as rates stay low, we'll make our monthly payments and can buy groceries.

Inspired yet?

#4 "Use deficits to fuel growth"

This I agree with. This is something we should have been doing for decades - investing in revenue-generating activities.

The problem is...

https://mobile.twitter.com/ideafaktory/status/1279894506540761096

Why haven't we invested in growth so far?

Because our capital is wasted. We're barely making the rent, so to speak. Most of our spending goes to entitlements (Medicare, Medicaid, SS) & military. Very little to address poverty, healthcare, education, drug addiction & GROWTH.

We also give away billions a year in tax breaks & loopholes to politically-connected corporations & wealthy people with no justifiable upside. The 2017 tax cuts did more of that (but did reduce mortgage & state tax deductions, which were regressive).

We're not good at asset allocation & stimulating growth. I broke down our government's spotty history in stimulating industry in episode 3 of my healthcare podcast series.
ideafaktory.com/health3

So where's this going? As much as I hate to say it, towards MMT.

MMT (Modern Monetary Theory) basically argues we (esp US) can solve all problems through money printing.

An in a way, they're right...

https://mobile.twitter.com/ideafaktory/status/1238888243397038085

But there's a litany of problems with MMT. I captured 5 big ones in this thread:

https://mobile.twitter.com/ideafaktory/status/1100436533151256577

So what should we do?
The good news is we have the time and resourced to fix our problems.

What we don't have is the sense of urgency or talent to do it.

Our current system is bogged down with mismanaged programs, corrupt cronies & lack of vision.

But if we could...

My draft economic prescription:
1-Massively increase immigration+assimilation
2-Pro-family policies/birth incentives
3-Private job training/apprenticeship incentives
4-Co-fund entrepreneurs, R&D
5-Untether healthcare from jobs ideafaktory.com/health1

6-Prison/poverty job/rehab incentives ideafaktory.com/unbanked
7-Free land in dying cities (Detroit) for path to citizenship
8-Align financial interests of big business & US citizens (more on this soon)

Globally:

https://mobile.twitter.com/ideafaktory/status/1097338411839500288

Related

https://twitter.com/TheEconomist/status/1337041932082614278?s=20