Fiscal Sustainability Teach-In

Fiscal Sustainability Teach-In (Session 1)
Bill Mitchell
Research Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW Australia, and blogger at billy blog.

Fiscal Sustainability Teach-In (Session 2) -
Stephanie Kelton
Associate Professor of Macroeconomics, Finance, and Money and Banking, Senior Scholar at The Center for Full Employment and Price Stability (CFEPS), University of Missouri – Kansas City, Research Associate at The Levy Economics Institute of Bard College, and blogger at New Economics Perspectives

Stephanie Kelton:
"One of the things I wanted to raise, Bill, related to your discussion, that you posed to your students: “What do you think of the of the government deficit? where do you want the government to be?” I do exactly the same thing with my students in Kansas City. I say “Do you want the government to balance its budget, or do you want it to run a surpl—, a deficit?” And they have this in their mind, they think the responsible thing to do is to have the government run a federal budget surplus. And I say “Okay, you realize what this means for you?”

And they don’t.

I think this is one of the most effective ways that we can push back against this call for fiscal responsibility and governments to live within their means and balance their budgets is to say that there are two sides to the ledger, and if the government takes the surplus position, guess which side you take. You take the deficit position. You are the non-government sector. And so, by accounting logic, if the federal government is running a surplus, the non-government sector will be in deficit. ..."

Scott Pelley (60 minutes): “Is that tax money that the Fed is spending?”

Ben Bernanke: “It's not tax money. The banks have accounts with the Fed, much the same way you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of an account that they have with the Fed.”

"[A] government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit.
Alan Greenspan, 1997

Bill Mitchell:
In ’90–’96 we elected in Australia a conservative government ... and for the next ten out of eleven years they ran surpluses increasing, and they sold it to the public as rail bridges started to crumble, public education started to crumble, hospital waiting lists started to increase, they sold it to the public as getting the debt monkey off their backs, and because they were now obviously retiring debt as it became due, and by 2001 the bond markets were so thin that there was a huge outcry.

Now who did the outcry come from? Well, it came from the Sydney futures exchange at the beginning, and all of the other traders that were using the government debt as what I call corporate welfare, basically as a guaranteed annuity in which they could price their risk off, and this led to the government having an official inquiry ...

they had an official inquiry onto what the size of the bond market should be, and they were blithely running surpluses all the time, and they agreed, they caved into the pressure particularly from the Sydney futures exchange, they caved into the pressure and announced that they would continue to issue debt at an agreed amount, they came up with an agreed amount of millions per quarter, even though they were running surpluses, they continued to issue debt.

The second brief story is it’s very interesting now with Basel 3 about to emerge which will change some of the rules relating to the quality of assets having to be held by banks under the capital adequacy regulations, the banks are starting now to suggest that the deficits aren’t going to be high enough to produce enough debt for them to satisfy their requirements, and they’re starting to pressure the Basel process to allow commercial paper to count as high-quality assets in the capital-adequacy calculations.
The Deficit, the Debt, the Debt-To-GDP ratio, the Grandchildren and Government Economic Policy (Session 3)
Warren Mosler
International Consulting Economist and blogger at The Center of the Universe

Inflation and Hyper-inflation (Session 4)
Marshall Auerback
International Consulting Economist, blogger at New Deal 2.0 and New Economic Perspectives

Policy Proposals for Fiscal Sustainability (Session 5)
Randall Wray and Pavlina Tcherneva
L. Randall Wray, Professor of Economics, Research Director of CFEPS at the University of Missouri – Kansas City, and Senior Scholar at The Levy Economics Institute of Bard College and
Pavlina Tcherneva, Assistant Professor of Economics at Franklin and Marshall College, Senior Research Associate at CFEPS and Research Associate at The Levy Economics Institute of Bard College. Both blog at New Economic Perspectives

“The Conservative belief that there is some law of nature which prevents men from being employed, that it is rash to employ men (or women) and that it is financially ’sound’ to maintain a tenth of the population in idleness is crazily improbable, the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years.”

"the wealth of a nation rests within its people"
Adam Smith


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