ckaihatsu wrote:Steve -- devil's advocate here -- would you like to address the fact that debt is a real quantity, and that creditors have an interest in collecting on their loans? (Also that overextended assets / bad loans / toxic debt / junk bonds, will be less attractive to buyers going-forward.) (March 2020.) The same goes for the U.S. balance sheet.
Now that the U.S. and other countries have rapidly increased their debt in the past few years, what do you think about *solvency* concerns among such nation-states, and how might all of these national balance sheets be resolved internationally, do you think?
Is it time for another Plaza Accord?
The US Gov's creditors do always get paid. Always. However, they only get paid with dollars that the US Gov. borrows from someone else. MMTers assert that because thee US Gov. and Fed issue the dollar, there is zero risk of non-payment. This means that US bonds are the opposite of junk bonds. MMTers deny the truth of the money theory of inflation. They assert that economic historical data show no relation between the money supply and inflation.
Solvency is a big problem for nations in the EU and especially the euro zone. The latter have to get euros from someone else. Nations not in the EZ, but that are in the EU are constrained by EU rules, so they have more of a solvency risk.
. . . MMTers assert that there is zero risk of insolvency for nations that issue their own currency, float that currency, and never borrow in any other currency. However, there is risk of inflation, so they do have a limit.
. . . MMTers point out that banks create more money in most years than the Gov. of most nations do. Banks create more in the boom years and less in recession years. But, the total over decades is more than the nation's Gov. has created. Yet, economists never stress about this newly created money, they only stress about it when a gov. is doing it.
. . . IMHO, this is because MS economists don't care a gnats ass about 'truth'. They only care about how their theory helps the rich get richer, because the rich are their paymasters.
I'm not sure what you are talking about when you say 'balance sheets', but I'll try to reply.
. . . The balance sheets are a problem because of economists refusal to address the problem that international trade is a zero-sum game. That is, for some nation to be a net exporter, some other nation must be a net importer.
There can be no flexibility at all. . . . Prof. Steve Keen has proposed debt forgiveness. He points out that the Bible talks about this when it talks about a jubilee every 50 years.
https://www.jubileeusa.org/faith/faith- ... -norm.htmlThe Plaza accord is all about the US Gov. devaluing the dollar. Two years later there was another accord to stop the devaluation.
. . . Today most gov. float their currencies. They do not peg them, so more such accords are off the table.
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