Robert Pearson

BREAKING: Abdul El-Sayed is expected to require ALL Michigan Elementary school students to learn ARABIC numerals. As a Jewish American I still support this 100%.

Pensions are ultimately a real resource problem, not a financial one. The real question is (pun intended): How will fewer productive workers produce enough real goods and services for a growing number of retirees? To free up real resources for retirees, the working demographic must obviously abstain from spending their entire income. Taxes (PAYG) is one way to achieve this. Forced private savings is another. But PAYG is vastly more efficient. Growing the FIRE sector to manage forced savings for future pensions actively worsens the real resource shortage by tying up productive capacity and labor. Ultimately, how much of current production should be redistributed to pensioners should be a democratic decision, and whatever level is decided it is always “financially affordable”.

We are seeing a total failure of MMT around the globe. QE and deficit spending (after 2008 and during COVID) was basically an attempt at Modern Monetary Theory (MMT). In a nutshell, MMT says that we can print and deficit spend at will without any fiscal or economic complications. So, central banks held interest rates at zero, forcing markets to accept absurdly low rates. At the same time, these central banks printed massive amounts of money and absorbed a lot of this new debt themselves. MMTers said we could do this with no inflation. Clearly they were wrong. Friedman taught us exactly what would happen, and it did. Inflation took off. The result, central banks were forced to raise rates and stop expanding their balance sheets. So far, governments have resisted fiscal sanity and are still running massive deficits even though central banks stopped funding them. The result? In the past 3 months, 10-year bond yields are up 50 bps in the UK, 90 bps in France, 72 bps in the US, and more than 40 bps in Germany. Governments were already too big in 2008, but this crazy experiment over the past 18 years has pushed things toward a breaking point. France proposes to freeze government pay and pensions, and raise some taxes and we should expect more movement toward austerity in other countries soon. MMT is basically Keynesianism on steroids. It didn’t work. The fix is a revival of Austrian, supply-side economics. Smaller governments, lower tax rates, tighter money, and less regulation. Some will say this is a pipe dream. But it is the only way out.

The presumption that the Fed raising short-term rates reduces inflation is predicated on the belief that higher rates reduce demand and investment. But what if higher rates don’t reduce demand and investment because the demand for intelligence and energy is unaffected by higher rates because winning the race for super intelligence has a near infinite ROI and the demand for compute will remain incalculable. Why won’t higher rates at this unique moment in history therefore lead to more inflation as interest costs are embedded in everything? And the problem is compounded as the more the Fed raises rates, the more inflation we will have and the more the Fed will need to raise rates further and so on. But what if the old models don’t apply to the current paradigm and the Fed is wrong? I think the Fed might have just made a mistake. Am I right or am I wrong?

Ekonomin behöver pengar denominerade i kronor. De kommer från banklån och offentliga underskott. Statsskulden är i praktiken de kronor staten har tillfört ekonomin genom sina betalningar men ännu inte skatta ut ur ekonomin. När staten bromsar pengaskapandet så landar mer av "bördan" hos bankerna. Statsskuld och privat skuldsättning är så att säga "kommunicerande kärl". Den höga privata skuldsättningen skapar instabilitet och fallhjöd. Hög statsskuld behöver inte vara ett problem - utan innebär bara problem om man av okunnighet gör det till ett problem. För statsskulden är inget lån. Det innebär inte att vi är skuldsatta. Tvärtom. Läs om stycke 2. Statsskulden är våra kronor. Vår finansiella nettoförmögenhet i kronor. Staten lånar inte kronor. Staten skapar kronor när den betalar. Detta håller numera till och med Riksgälden med om (efter lite begreppsmässig akrobatik). De kallar det "okontroversiellt". Läs min färska debatt med Klas Granlund från Riksgälden nedan: teapaw.org/ArnellOErik/status/209…

Ibland känner jag att vi borde instifta en ny lag där vi förbjuder nationalekonomer att uttala sig om saker som har med valutor och statsfinanser att göra. De förstår av allt att döma mindre om dessa ämnen än någon helt outbildad. Mitt flöde är fullt av framstående nationalekonomer som uttalar sig om Frankrikes, Japans, USAs och Sveriges situation och de har alltid mer fel än rätt. Statspapper finansierar INTE statsskulden FFS! Den utgörs INTE av lån. En monopolistisk valutautgivare får INTE sin valuta från marknaden. En statsobligation fungerar INTE som en företagsobligation. Exemplet i SVD-artikeln (som Olovsson delar), med Lena som köper en statsobligation och därmed “lånar ut” till staten, beskriver INTE förfarandet rätt. Så här fungerar det i verkligheten: 1. Staten betalar (för löner, pensioner, etc) genom att öka saldot på bankernas transaktionskonton hos Riksbanken (genom att, i egenskap av valutautgivare, skapa/ge ut svenska kronor). 2. Betalningar till staten (av t.ex. skatter) minskar samma saldo (raderar svenska kronor). 3. Om staten under en period har haft större utbetalningar än inbetalningar har staten gått med underskott. Mer kronor har skapats än raderat. Saldona på bankernas transaktionskonton har ökat. 4. Staten säljer då statspapper till bankerna motsvarande detta underskott. Bankerna betalar med de svenska kronor som underskottet lämnade på deras konton. Det som ekonomerna kallar att staten lånar är inget annat än en flytt av de nya kronor bankerna nyss fått från staten, från ett konto till ett annat. Från transaktionskonton till sparkonton. Statspapper är inget finansieringsinstrument utan ett sparinstrument. Japan och Kina är inte USAs finansiärer – de har inte försett USA med USD för att USA ska kunna betala. De har genom export tjänat USD som de sedan SPARAR i amerikanska statspapper. Det är USAs underskott som har försett utlandet med USD som utlandet sparar – INTE tvärtom. USA, och Sverige mm, LÅTER marknaden bestämma räntan på dessa statliga sparkonton. Det är INTE marknaden som egentligen bestämmer hur mycket ränta de ska få på utestående valuta. Självklart kan valutautgivaren bestämma hur mycket ränta den vill betala till innehavarna av den valuta den har gett ut – DET ÄR JU INGET LÅN. Hög statsskuld är inte ett problem i sig. Hög statsskuld kan bli ett problem om staten VÄLJER att betala hög ränta. Slut på rant.

The bad news for the mainstream economics cabal is that their entire propaganda machine has been built around the claim that US debt is “unsustainable,” Treasury yields are “too high,” and the “market” is furious with the US government and is therefore forcing interest rates higher- has been busted once again! 🤡 And then comes the reality check. The US Treasury, backed by a currency-issuing government, steps in and actively manages its outstanding debt, including buying back longer-term Treasuries and influencing the composition and pricing of its liabilities. So much for the fairy tale that the “market” independently dictates what interest rates the sovereign government must pay! The real question isn't “Will the US run out of dollars?” It is what interest-rate structure the government chooses and what real economic consequences follow from its spending and monetary operations. The mythology says the market controls the sovereign. The monetary reality says the sovereign can control the parameters within which the market operates. 💥

This confuses real wealth with financial claims. MMT does not claim that “adding zeros” creates real wealth. It distinguishes nominal financial capacity from real productive capacity. Government spending can create financial assets; whether it creates real wealth depends on the labour, energy, materials and productive resources mobilised. And Mosler’s objection to “monetarily sovereign” does not support your argument. He eschews the term because it is vague. His preferred distinction is operational: currency issuer vs currency user, together with whether the currency is convertible or floating. That is precisely the point. Accounting is not the whole of economics, but economics that contradicts the monetary system’s accounting and institutional structure is bad economics.

Bitcoin-hoarding firm says it sold the cryptocurrency to fund distributions on preferred stock on.wsj.com/4dJvYge

UK borrowing costs soar. 30-year bond yield close to all-time high and crisis level. The disastrous Reeves and Starmer budgets have demolished the prospects of public account sustainability. And Labour contenders want to spend even more. No one resigns.

Hawtrey explains bank intermediation and its constraints. Currency and Credit, 4th (1950) ed. pp. 98-99

Treasury Secretary Scott Bessent said his department is prepared to alter the types of US Treasury securities it sells in response to evolving patterns of investor demand bloomberg.com/news/articles/…

🚨 BREAKING: In a major development, Treasury Secretary Scott Bessent confirms the PRICE OF COFFEE will go down after an impending announcement for tariff relief "You're gonna see SUBSTANTIAL announcements over the next couple days for things we don't grow in the U.S. Coffee, bananas, other fruits, things like that. That will bring the prices down VERY quickly." HUGE!