No, it's not back to the 1960s. No, serious people aren't saying "debt doesn't matter and there are no effective supply constraints." Yes, global capital flows, the international monetary system, history, & data are completely missing again.

Each of these pieces fails to take into account the 🇺🇸position in an era of unprecedented global finance & dollar hegemony. If you want to claim folks are ignoring debt sustainability & "supply constraints," you need to actually assess those seriously:

markcopelovitch.com/post/how-much-…
We're not 🇬🇷 or 🇮🇹. We're not even 🇯🇵. The reason people are saying "debt doesn't matter & there are no effective supply constraints" is that, at debt/GDP of 100% (or even 200%), the 🇺🇸is not remotely near them. They surely exist, but you can't even see them over the horizon.
Tl;dr: The debt and inflation concerns are the thing that's "overheated," not the economy:

Addendum: here are LT rates for 🇺🇸🇩🇪🇯🇵🇨🇦🇫🇷& 🇬🇧 since 1870. You can tell a horror story of the 1970s. Or you can note that rates rise & fall, with tradeoffs ensuing, but rich countries can always borrow & do so more cheaply than anyone else. Someone has to issue the safe assets.
This is where the historical record is crucial. Not just stories and fear mongering about the 1970s, but actually wrestling with the financial and monetary changes in the world since the end of Bretton Woods:

For the 🇺🇸 to face serious debt constraints, one or more of the following needs to happen:

- We adopt a fixed exchange rate
- The USD ceases to be a (not just <the>...a) major global reserve currency
- Global capital flows collapse back to 1960s levels

Absent those, carry on
Stories about the US facing debt problems are the "underpants gnomes" theory of macroeconomic policy:

- DEBT EXCEEDS 100% OF GDP!!!!

- [something something]

- HYPERINFLATION/SUDDEN STOPS/FINANCIAL CRISIS/CURRENCY DEBASEMENT

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Mark Copelovitch

Mark Copelovitch Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @mcopelov

18 Mar
I broadly agree w/ Kelton's conclusions re: debt & inflation for the US ().

But I confess, I remain puzzled by the need for/novelty of MMT. You get to exactly the same conclusions w/ standard open-economy macro for countries w/ floating exchange rates.
That the austerians & deficit hacks won the debate for so long is not a problem w/ economic theory. It's problem of politics & the media listening to the wrong economists. They could have listened to @paulkrugman or @martinwolf_ or @sjwrenlewis instead.

Or any number of Federal Reserve chairs in the last 15 years.

Read 5 tweets
18 Mar
Vos offers nothing more than Paul Ryan's rehashed talking points re welfare hammocks

He utterly fails the @froomkin test ("Who is proposing intelligent solutions? Who is blocking them? And why?)

And his implication is that universal health coverage is not one of his priorities
It's difficult to overstate how extreme a policy position this is. Per below, support for government involvement in providing health care is almost universal, once one accurately categorizes what that means:
Read 5 tweets
17 Mar
“Delicate moment”

“Shot higher”

The 🇺🇸 government must now pay a real interest rate of <checks notes> -1.76% to take your money for 5 years, and 0.14% to take it for three decades. Very delicate, indeed.
These rate increases are <exactly> what you want to see. The 2-10 year increases are evidence investors believe the pandemic economy will soon end & actually believe US fiscal policy won’t fail this time around. The ultra-low 0-2 year yields are evidence this will take some time.
Financial media seems to be missing the macroeconomic forest for the daily market movement trees. This is puzzling, since it obsessed about rate “normalization” a few years ago. Now it’s happening b/c we’re <finally> getting monetary & fiscal policy working together. Carry on.
Read 6 tweets
16 Mar
👇 This “no one knew” take is nonsense. On stilts.

Obama listened to Summers and Emanuel instead of Romer, and this turned out to be an economic and political error from which his presidency (and the US economy for a Lost Decade) never really recovered.

I mean, @paulkrugman spent most of 2009 saying variations of this.

knowledge.wharton.upenn.edu/article/nobel-… Image
Lots of things went wrong, and many besides Obama and his advisers are complicit. But this “no one could possibly have known the economics” view is simply not credible in 2021. We know and have lived through far too much to take this seriously.
Read 5 tweets
16 Mar
And here is the famous "currency debasement" letter, for which none of these individuals has apologized or admitted error, & which has apparently had absolutely zero professional consequence for reputations, speaker invitations, media appearances, etc.

Indeed, you can just keep getting access to the op-ed pages of the papers of record, with the exact same arguments, as if the past does not exist:

Read 6 tweets
8 Mar
Really great piece from @zackbeauchamp, w/ reference to lots of political science scholars & research. But I'd add, from the IPE perspective, that this might also/instead be mainly the political consequences of a decade-and-a-half of economic crises & their aftermath 1/
In the US, we had a decade of austerity from 2008-18, with massive material economic consequences for households across the country. The proxies used in the political science literature on "economic anxiety" vs "identity" don't necessarily measure this impact very well 2/
& we know material exposure to economic shocks can shift voters' preferences for redistribution. Sometimes, even, highly educated voters may shift to parties offering redistribution that they wouldn't otherwise support based on their identity/education 3/

Read 7 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!