wat0n wrote:Sort of. I agree that the US has plenty of room to spend more, at least for now.
But those three things you mention happen precisely because the US has generally tried to keep its public finances in relatively decent shape. They happen because the US never fails even a single bond payment and because it also doesn't experience runaway inflation.
One good thing though is that we can actually see when should the US government become less fiscally expansionary by simply looking at the bond markets. Right now, inflation adjusted rates are at super low levels relative to historical trend:
https://www.treasury.gov/resource-cente ... alyieldAll
So I'd not worry about it too much for now. Yet at some point, these rates could go up if it looked like the US government will have trouble keeping its finances under control at some point.
@SueDeNîmes as @Rugoz and @JohnRawls said, the institutional arrangement is important here. The Fed is independent from the federal government and as such it makes sense to treat it as a different entity or branch for practical purposes.
Sir, once people hold dollars, they must do something with them. Parking them in US bonds at least earns interest. If the bonds are worth 10 cents on the dollar, the dollar will also have crashed. The US can create dollars to pay interest and principal, so zero risk of default.
. . . On the other hand, the dollar can drop on the international money market. This will be because of inflation. It will cause inflation in things we buy from the world, but it will make stuff we sell be cheper to foreigners.
. . . MMTers assert that inflation is THE CONSTRAINT. That, it *must* be contained,
if it starts. It asserts that you must wait until it starts though, because the mass of the people will benefit from deficit spending unless it is given to the rich directly (as the Repuds have done many times lately).
. . . MMTers assert that right now there is room for what you will see as MASSIVE deficit spending. This is because we start from the Neo-liberal limit on deficit spending; once we reach the MMT limit, the Gov. will have to reduce the deficit a lot (more taxes and/or less spending).
. . . MMTers also point out that Neo-liberal capitalists see efficiency as a good thing and inefficiency as a terrible thing. BUT, they ignore the massive economic inefficiency that is 15% unemplotment, for example in Spain. Or the 8% under-employment that we had in Jan. 2020 before covid. They ignore it because it only hurts the poor, and it massively benefits the rich. [But then, I see most economists as having been trained to be sociopaths who are trolls or shills for the rich and have been, at least, since 1880, i.e. for 140 years.]
.