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« Upside Risk | Main | Weighing the Week Ahead: The Fed Takes Center Stage »

February 18, 2010

Comments

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The deficit perspective extends beyond cognitive impairments to lifestyle barriers that may impede academic attainment such as marital and family obligations, demands of employment, or work-family conflict.

Rower32

Thanks for the link to Bill Mitchell's blog Prof! I second Mike C. I couldn't have said it better myself. The time between I clicked that link and the time I got back here is 3hrs and will do more reading there. I also have the same view as Bob McTeer that we can be Keynesians in the short-run and later focus on supply-side policies (http://taxesandbudget-blog.ncpa.org/fear-of-keynes/).

Mike C

Thomas M. Hoenig is president of the Federal Reserve Bank of Kansas City. Excerpted from his remarks Tuesday at a Peterson- Pew Commission on Budget Re form Policy forum.

http://www.nypost.com/p/news/opinion/opedcolumnists/debt_tastrophe_hHD96KIH4LmuaIGUGrzDjO

I'd love to be a passive observer of a conversation between Thomas Hoenig and Bill Mitchell.

Maybe I'm overreacting but it seems to me this issue of deficits and debt is the numero uno issue to get right, and getting it right depends on whose macroeconomic and monetary theory is valid and which is a crock of s**t. And frankly I have no idea.

In the next 6-12 months stocks can do anything and the technicals still suggest we are in an uptrend. The trend is your friend and all that.

But thinking about the future of our country and stocks over the next 10-20 years, what do I as hopefully a responsible citizen do in the next election? Vote for more stimulus and debt accumulation to sustain the economy or vote for the deficit hawks. Which is the right course of action for the long-term economic future? If the PhD economists can't even get a basic level of agreement on first principles, how can Joe Sixpack have any clue whatsoever what is the right thing to do for his and his children's future?

Mike C

Thanks for the link to Bill Mitchell's blog. I spent about 1 1/2 hours there last night after reading your post.

Wow. Much to process and digest, and it strikes at the core of questions that have been ruminating in my mind the last 18 months, ever since the fall 2008 financial crisis. What is "money" and "debt" in a fiat fractional reserve system? How exactly does our monetary/credit system operate?

I'm still processing much of what I read last night, but his views are so different from what I know as mainstream economic views. If I understand him and his MMT theory, then government debt and deficits are completely, absolutely, utterly irrelevant as the government doesn't get its funding from private enterprise but is actually the source and creator of all funding. I'm not sure I understand though why government goes through what appears to be the useless function or selling debt if they can simply print/create money to pay government expenses.

I plan to link to his blog over at David Merkel's because I am very interested to get his take on this issue.

This gets very complicated and intellectually frustrating. I can read 5 different PhDs in economics and get 5 different views/opinions/perspectives on issues like money, debt, inflation, etc. I'm not a trained economist but I've got a MBA in finance and consider myself a pretty smart guy but I can read Mitchell, then Keen, then Hussman, then Mankiw, then James Hamilton (Econobrowser) and have absolutely no idea whose theoretical description actually realistically describes the way the monetary and macroeconomic system operates. No wonder it is called the dismal science.

John the Cheap

Thanks for the link to Mitchell; I've already been reading McTeer as a result of an earlier link from you.

Good writeup; I hope you are correct that the commission is for show as I am definitely in the camp that thinks we need more stimulus, not a pullback.

In the long run I think our only hope to avoid an eventual real disaster (such as we fortunately seem to have missed this time around) is to have enough automatic negative feedback loops (what you economists refer to as counter-cyclical or stabilizers) as well as dampers (in the form of regulation) in place -- more than we now have. This has to include the ability to pay down the debt and even, if conditions are right, run a surplus (politically difficult -- recall Greenspan's comment on this!) in boom times. The US doesn't seem to have the policy consistency otherwise; at some point the political pendulum swing will be in the wrong direction to counteract whatever the crisis is at that time.

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