"the director of the Congressional Budget Office, Phillip Swagel, issued a stark warning that the United States could suffer a similar market crisis as seen in the United Kingdom 18 months ago, during former Prime Minister Liz Truss’s brief stint leading Britain - which briefly sent yields soaring, sparked a run on the pound, led to an immediate restart of QE by the Bank of England and a bailout of various pension funds, not to mention the almost instant resignation of Truss - citing the nation’s "unprecedented" fiscal trajectory. "

Severe austerity is inevitable in USA, regardless of whether the Democrats win the next election. Soc-dem is hopium and economic conditions in USA will worsen.

  • FuckyWucky [none/use name]
    ·
    9 months ago

    That is not true. Inflation has been lower after supply side shock due to Ukraine War. Of course it doesn't change that real wages were eroded because of lack of Government intervention.

    MMT doesn't advocate money printing, its just another way of looking at how money works. Most MMT economists advocate for achieving full employment instead of arbitrary deficit targets.

    What matters more is where the money is going. If the money is going into unproductive sectors like military and there is an external squeeze (due to decline of the dollar), US will suffer from inflation.

    Increased spending isn't a thing advocated for by MMT economists. Michal Kalecki said it a long time ago, in the gold standard era

    .—It may be objected that Government expenditure financed by borrowing will cause inflation. To this may be replied that the effective demand created by the Government acts like any other increase in demand. If labour, plant. and foreign raw materials are in ample supply, the increase in demand is met by an increase in production. But if the point of full employment of resources is reached and effective demand continues to increase, prices will rise so as to equilibrate the demand for and the supply of goods and services. (In the state of overemployment of resources such as we witness at present in the war economy, an inflationary rise in prices has been avoided only to the extent to which effective demand for consumption goods has been curtailed by rationing and direct taxation.) It follows that if the Government intervention aims at achieving full employment but stops short of increasing effective demand over the full employment mark, there is no need to be afraid of inflation.

    https://drive.google.com/file/d/1UwOlvs_Q2_VUDvkQ63NNg0oUeViY0BfO/view

    It is clear that US is nowhere near full employment. It can make use of its resources and labor if it wants. But there are reasons it doesn't, Kalecki discusses it in the article.

    In contrast, countries like China have managed to make use of most of the available resources. You've seen business mags criticize Chinese HSR for being run on Government debt (through state owned banks) but there is nothing wrong with that.