I have already noted this morning the imminent shutdown of the US Federal government as a result of Trump and Musk demanding that the US Congress block spending plans for 2025.
Now we know that Trump's own plan, which was put to the House last night, has also been rejected. Mayhem will ensue. A pattern for the next four years is being set.
However, I wanted to note some other dimensions to this.
First, the House is effectively refusing to increase the level of US national debt. Doing so, it is acknowledging that US debt funds the government.
It is also acknowledging that money is created by the national debt.
And it is recognising that it is government-created money and not tax that funds US government spending.
In other words, it is noting that the US government works as modern monetary theory describes, just as the UK government also does.
There is little comfort in the mess that Trump is already creating, but this is nonetheless worth noting.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
All of what you say is correct.
Two trends supported by assorted American imbeciles (far too many to name) include:
bitcoin instead of the $$ and a move back to gold.
This shows that the loonies are trying to take charge of the asylum.
It will be interesting to see how the forthcoming arguments and wrangling that the advent of Trump brings will be presented and explained in the MSM, and by our beleaguered political class.
But as you have shown today, it does present opportunities to put forward the realistic hence more sensible analysis, and associated points of view.
Thank you, Richard.
Say it Loud and say it Clear: Modern Money Theory is a better description of how modern economies operate than anything that ensues from wordsmiths aand charlatans who promote massive lies around ‘black-holes’ and ‘book-balancing’ – even when they contort their CVs to suggest they are accomplished ‘economists’. Thing is, this foundational lie can never be admitted without economies becoming seen as houses of cards. Dangerous.
It’s not just a problem that most people don’t understand how their country’s monetary system works there are three other failures – recognising free market capitalism often lacks compassion – that the reason for this is a lack of social intelligence – which in turn stems from poor nuturing as a baby and child. A properly functioning democracy would recognise all four of these issues.
Amazingly the Guardian tries to pretend it wears its heart on its sleeve but continues to fail to understand money is a form of messaging which enables compassion given resource availability much of which is human labour:-
https://www.theguardian.com/business/2024/dec/20/lift-for-rachel-reeves-as-uk-borrowing-hits-three-year-low
This https://consciousnessofsheep.co.uk/2024/12/19/it-isnt-only-labour/ is all too true, alas!
That’s a good one.
Unfortunately, I do think 2025 is going to be a very difficult year as, at some point, “The End of the Everything Bubble” is inevitable. As I have said before, forecasting is a mug’s game, but your just have to open your eyes and see. Yesterday, we collected our youngest from Uni and had lunch and wandered around Leamington Spa before heading home.
The journey up the M5 and A46 was the quietest we have had. There were 10 other diners in the excellent restaurant we chose. The thing is, Leamington Spa has the air of being well-heeled but it was very quiet. Very quiet indeed. I spoke with the proprietor of an independent shop selling “up-market” clothing, and she said that trade had been really dire this month – “I don’t even think my rent will be covered, let alone my drawings”. I noticed big markdowns in “boutique” shops and the chain eateries were utterly deserted at lunchtime on the Thursday before Christmas. Even the volunteers in Oxfam said sales were sharply down.
I think we are suddenly seeing what Dr. Tim Morgan describes as “discretionary compression” meaning that we are having to spend more and more each month on “essential” costs, leaving less and less for discretionary spending.
I’m not a gloom-spreader, but simple observation tells me that we are in big trouble.
I admit Ely seems to be doing better than that. Peak times at premium prices are heavily booked. But that said, discounting is definitely happening already.
With regards to Trump and his actions it is all about doing anything to get his face on TV and have everyone on social media talking about him. He really believes that any publicity is good publicity. Trump thrives on chaos. This is not a bad idea when your business is developing and managing luxury resorts and luxury condo projects because it is FREE publicity. However, this insecure behavior, and make no beans about it as Trump is a very insecure person, is not a way to run a government.
Trump is going to be in big trouble in about six months as nothing he is doing will deliver “direct tangible financial benefit” to individual households. Delivering “direct tangible financial benefit” to individual households or the promise to do as such is what won him the election. This is gonna be BREXIT 2.0 or really BIDEXIT. Voters are already expressing ‘buyers remorse” but all the Trump chaos is keeping them distracted for the moment.
BBC doesn’t agree https://www.bbc.co.uk/news/business-50504151
Oh dear…
Interestingly it doesn’t seem to identify the author of the article. Perhaps too embarrassed to admit their misunderstanding and confusion…
This stuff is complete drivel
There is no shortage of drivel, here’s today’s ration.
https://www.theguardian.com/business/2024/dec/20/rachel-reeves-may-have-to-u-turn-over-no-more-tax-rises-warn-economists-slowdown-borrowing-costs
I particularly liked the bit at the end where they admit that the bulk of government “debt” and the associated interest burden is with the government owned Bank of England.
That is utter drivel.
I thought maybe the way the US agrees every now and again to “lift the debt ceiling” was exactly how MMT operated. Now. maybe you could explain why many many countries especially in the south that are increasingly in horrible debt have to go to the World Bank, IMF etc to borrow more money and get even more into debt…. why don’t they just set up their own currencies and go MMT? This is a serious question… I don’t know how to understand it.
Countries in what you call the South have the same problem that you have if you produced your own currency – which is getting someone to accept it. That is their whole problem.
There is good information here:
https://debtjustice.org.uk/
We rich countries could have dealt with this decades ago, but we prefer to keep the poor in debt bondage, so they do our bidding.
On X Elon Musk is making numerous tweets about the huge recent rise and ‘unsustainability’ of the US debt and only displaying half of the true picture. He displays the bar chart of the deficit and debt but fails to display the other half of the chart which is the private savings. In the video ‘Finding the Money’, Stephanie Kelton displays the full chart showing the mirror image of the debt on one side and the private and foreign savings on the other side. I’ve tried sending that to Musk, but of course he’ll never read it.