I had read some pretty crazy budget analyses in the last week. Take the New York Times article (March 18, 2013) Paul Ryans Ax Isnt Sharp Enough by a Republican congressman Paul C Broun, Jr.
He considers the ultra mad budget proposal from his fellow Congress member the former (failed) Republican Presidential running mate Paul D. Ryan to be a Keynesian, if not socialist path to disaster.
We read that the most pressing problem facing our nation (the US) is wait for it:
runaway government spending
He wants to:
stop spending money we dont have, an idea I promote every chance I get.
From which I conclude he lies a lot when he is talking to people.
Remember the Speech that the current Governor of the Federal Reserve Ben Bernanke in 2002 to the National Economists Club
Deflation: Making Sure It Doesnt Happen Here. The Governor said:
But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.
And, remember the 2009 interview that Ben Bernanke gave Scott Pelley from the US program 60 Minutes. The interview was largely a litany of mainstream statements but at one point the Chairman gives the game away to the interviewer Scott Pelley.
If you listen to
the interview (the link will take you to the video and the transcript) you will realise that at around the 8 minute mark Bernanke starts talking about how the Fed (the US central bank) conducts its operations.
Interviewer Pelley asks Bernanke:
Is that tax money that the Fed is spending?
Bernanke replied, reflecting a good understanding of what we call central bank operations (the way the Fed interacts with the member banks):
Its not tax money. The banks have accounts with the Fed, much the same way that 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 the account that they have with the Fed.
Please read my blog
Bernanke on financial constraints for more discussion on this point.
I know some people out there will say well, so what, we all know the government can issue currency at will, why do the proponents of Modern Monetary Theory (MMT) always bang on about that?
To which I always reply then stop saying the government can run out of money, or is spending money we dont have and other versions of the same. Stop claiming that the national, currency-issuing government has financial constraints.
Then they say but that will just be hyperinflationary. To which I reply okay, now the discussion is on sensible grounds under what conditions will government spending be inflationary? And at that point, when you indicate how much excess capacity the economy is enduring they just mouth some historical revisionist ravings about Germany in the 1920s a moment or two before they introduce the Zim-case. At that point also, I conclude the battle is over, they know nothing.