Seeking Alpha has the article Bad News – The U.S. Government Posts A $214.25 Billion Budget Surplus For April 2018

Here is one of the introductory bullet points.

Net financial assets in the private sector declined by $214.25 billion in April and have prolonged the current stock market retrace.

This article is a 9 page dissertation in how Modern Money Theory (MMT) justifies the title of the article.

This is an ideal example of where MMT goes way off the rails. I have read the book Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems and much more about MMT. I don’t need 9 pages in this article to see the hole in the argument, when they emphasize the flaw in one of the bullet points.

Here is where the flaw in the analysis is buried “Net financial assets in the private sector declined by $214.25 billion in April and have prolonged the current stock market retrace.”

When you only talk about net assets, you exclude the counting of borrowed assets like money because the borrowed money is cancelled by the debt in the static analysis of net assets. But that does not mean that the borrowed money during the life of the loan isn’t producing economic benefits. It doesn’t mean that the benefits disappear when the loan is paid back.

When any entity borrows money and puts it to productive use, the borrowed money is producing profits that exceed the cost of borrowing the money. It’s called leverage. If people don’t think that the use of leverage is economically important, they haven’t understood the mantra of “buy now, pay later.” Surely borrowing can lead to trouble if the purchase doesn’t more than pay for itself, that’s why leverage is risky. However, well calculated risk usually has big rewards.

So the bullet point is right that net assets, more accurately called high powered money in MMT lingo, has been removed from the economy. However, they are failing to take into account the private lending can, under the right circumstances, replace the missing high powered money with low powered money created in the private sector through the making of loans. If you only look at a one piece of the economy, you cannot always predict what the consequences will be.

I haven’t even thrown in the mark-to-market asset valuation technique that also has huge economic impacts. Can one tulip bulb really have a value that was placed on it during the Dutch Golden Age?

Robert Kuttner asks Will Barack Obama Commit Industrial Policy?

Finally someone is making the case for alternative views of how to run an economy. I have been saying for years that the complainers about other country’s industrial policies are wrong that these countries are being unfair.

There should be no rule that you can’t have an industrial policy. If their way of playing the game is so much better than ours, don’t force them to play as badly as we do. Why don’t we try to play as well as they do?

Paul Krugman’s column, Franklin Delano Obama?, explains a lot about what did and didn’t happen during Franklin Roosevelt’s attempt to solve the Depression era economic crisis.  We are probably going to hear a lot of attacks on Roosevelt’s record.  It is nice to keep in mind what were his true successes and failures.

I have heard the right wing attacks that Krugman debunks.  This is the first time I have heard a rebuttal from someone that I can believe.

Follow this link to a Minyanville article that explains why hyperinflation in  the United States is not of concern in the near future.

One of the explanations in the above article for there not being a worry about inflation corresponds to my previous post Central Bank Rate Cuts Will Not Work.

There is also mention in the Minyanville article about why deflation might not be such a bad thing. If you think of high tech electronic products like personal computers, cell phones, and digital cameras, they have been sold in an environment of deflation for these products for years.  In other words, the cost for an equivalent amount of functionality in these products has been rapidly declining ever since these products have been on the market.  The makers and sellers of these products have found a way to survive and even thrive in such an environment.  It isn’t easy, but it is possible.

Another gem has been brought to my attention by Deb, one of my contacts. Click on the image below to get to the web page that has the interview.

This is an interview of Robert Kuttner by Terry Gross on the program Fresh Air from WHYY as heard on National Public Radio.  The interview is 38 minutes.  It provides the reason to believe that Barack Obama has a chance of solving the country’s economic problems.  Robert Kuttner provides the facts and figures that dispel the notion that we don’t have the resources to solve these problems.

He also explains how we need Obama’s great skills to educate the public on what needs to be done and why. Once the public understands, then it is going to require the public’s pressure on the rest of our leaders to support Barack Obama’s policies.

The need for this public pressure is exactly why it was so important that Obama built such a huge following in his election campaign and he did his best to avoid alienating people who have not yet come on board. The need for the voters’ involvement has not ended with Obama’s election.

If you understand Kuttner’s argument, then you will see why John McCain would have been a total disaster as President during these economic times.

Just to do a little bragging on my part, Kuttner provides the meat behind the ideas that I have been promulgating on previous posts such as When Consumers Capitulate, Why Do We Have Government, The Economy Looking Forward, Greenspan – I Was Wrong About the Economy. Sort Of, McCain Hesitates as Bernanke Revives Stimulus Debate, Balancing the Federal Budget During a Recession, What Does Ben Bernanke Know About The Great Depression?, and others.

By the way, as an application of Greenberg’s Law of The Media, no wonder Terry Gross cannot get her head around such large numbers as trillions.  She thinks a trillion is a billion billion, when actually it is only a thousand billion.