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Economics

美国的债务与功能障碍

May 12, 2023 Michael R. Strain

华盛顿特区——美国政治是否失调到美国政府甚至无法按时付账的程度?这才是华盛顿上演的最新债务上限闹剧背后的核心问题。截至目前为止，提高该国借贷上限的努力显示答案很可能是“是”。

政治失调的第一个迹象是民选官员们才刚刚开始讨论债务上限问题。美国下个月将面临灾难性的债务违约，但乔·拜登总统、众议院议长凯文·麦卡锡和其他国会领导人直到5月9日才开会讨论相关状况，而且原定于5月12日举行的第2轮会谈也被推迟。

拜登拒绝谈判是另一个令人担忧的原因。他希望国会在不附带任何条件的情况下提高债务上限，而上述条件也包括削减联邦开支。尽管从是非曲直的角度看，拜登的要求或许有其合理性，但美国的政府系统却并不总是按照是非曲直来解决争端问题。

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0 Comments on this paragraph, 16 Comments on this article

Robert Wolff May 30, 2023

The Republican Counterrevolution against Socialism in America:

The World is so disturbed today that most Americans are just “Sticking their heads in the Sand”. My Brother-in-Law’s Catholic family is indulging themselves in metaphysics and he tells us, “It’s always been like this but in the end, everything turns out all right.”

My viewpoint is certainly quite different than most. What I see is that while Americans are ignoring reality, Socialism is advancing rapidly. The consequent rapid rise of China to World Power over the Western Capitalist-Based World Order is the event that most Americans are ignoring. Demagogic Republicans are purposely fomenting social disruption in America to stave off the takeover of Socialism in America by destabilizing American society. The next generation to come power is already leaning heavily towards Socialism.

The struggle between Capitalism and Socialism is highly dramatized in the Mainstream Media, with broadcasting networks like Fox and CNN polarized into supporting one ideology and condemning the other. Proud Boy and Antifa gangs become more hostile and violent. The number of severe mental and emotional disorders among the American citizenry have risen dramatically, especially among teenage girls, and deaths of despair due to opiate overdoses and suicides are growing, as are the frequency of mass murders – a new one almost every day, with Texas being the real hotspot (Texans always were crazy – I lived in Houston and San Antonio and Texas has always had an extremely socially conflicted and angry culture compared with other States).

I don’t believe Americans who want to ignore what is happening can continue for long to avoid the reality of the ideological conflict that is consuming America.

The Debt Ceiling Crisis is a significant event for the Republican counterrevolution against American Socialism. Its final solution will determine whether the revolutionary socialist “Deep State” which now controls the US Presidency and Senate can consummate its total control over the American nation. The GOP-controlled House of Representatives is now the central driving wedge for power by Republican counterrevolutionaries who are driving the effort to eliminate government funding for the continued rise of the USSA (United Socialist States of America).

In the past two years, Socialism has usurped political and economic control of South American and Central Asian nations under the leadership of China’s Xi Jinping. In the meantime, domestic American Capitalism is being seriously challenged by America’s internal Socialist Revolution. America is on the verge of being the last capitalist-controlled nation to fall to Socialism, and Republicans are the last bastion of counterrevolutionaries against the prevalence of worldwide Socialism while the Unipolar Western New World Capitalist Order disintegrates under the onslaught of the New Multipolar Socialist World Order.
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Frank Tuijn May 17, 2023

For another aspect of US political life see:
https://sonar21.com/the-corruption-of-america-takes-a-dangerous-turn/
This too makes reaching compromises more difficult.
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Rajiv Chopra May 17, 2023

This sort of crisis in America seems perennial. And, how much can they borrow?
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Barry Rosenfeld May 14, 2023

Many Americans also did not accept the result of the Presidential Election of 1860. And look what happened.
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vic lai May 13, 2023

According to the Sectoral Balance Equation, (S - I)/GDP = (G - T)/GDP + (X - M)/GDP, the US's perennial current account deficit, a result of the world's good old globalization configuration actively promoted by the US herself in the past decades, constantly requires the US federal government to have had to incur non-trivial budget deficit spending year-in and year-out, and hence higher and higher remaining total debts has to be incurred by the federal government over time, so that the right-hand-side injections into the aggregate demand is kept at a large enough positive level to be more or less equal to the left-hand-side concurrent leakage out of the aggregate demand, either to prevent
(a) a rise in unemployment, or
(b) an economic recession from realising, or even
(c) a financial crisis from developing in the country, or
(d) an overheated domestic economy and hence a non-trivial rise in (runaway) inflation.
---
In the years following the breaking-out of the Covid pandemic in the US, too much federal government deficit spending financed by the Fed's new-money-printing unlimited QEs, together with the US households' accumulated unspent savings during the lockdown periods and the subsequent global-supply-chains shock, have ended up releasing the inflation genie out of the US bottle, which today still refuses to go quickly back into the bottle.
-
This time is really different.
During the post-Covid years, the right-hand-side aggregate demand in the US has remained too high, causing the inflation specter to be coming out and is now still constantly flying high in the sky of the US.
And so, a harsher requirement imposed by today's congressional Republicans on the ruling Biden Administration, regarding the coming further uplifting of the federal government's debt limit, can prevent the incumbent vote-buying ruling Administration from keeping deficit-spending too much before the coming Presidential election near the end of 2024, which if not restricted will further invigorate the country's rampant inflation genie.
-
Which means, unlike in the previous years, the new "non-cooperation" attitude of today's US Congress will also help fight runaway inflation in the country as an unintended but beneficial side product, and so will actually be a blessing in disguise this time around.
---
- vic lai May 13, 2023
  
  Equally important as, or perhaps even more important than, the non-stop uplifting of the debt limit imposed by the US Congress on the US's federal government has been, and will continue to be, the means by which the US federal government's new deficit spendings are being financed.
  -
  Obviously, the means can't be increased taxation or reduced government expenditures, since, to both the ruling political party and the incumbent President, they are tantamount to a suicidal act.
  If the US federal government's much increased depression-fighting new deficit spending by both the Trump and the Biden Administrations, in response to the sudden breaking out of the Covid pandemic in the country, had mostly been financed not by the new-money-printing US Fed, but by
  (i) the unspent excess savings accumulated by both the US households and the US companies during the Covid-lockdown period,
  (ii) the country's commercial banks (and other government-treasury-investing financial entities like the money market mutual funds) using part of their customers' existing bank deposits, and/or
  (iii) the foreigners in their surplus-current-account countries,
  then the US's post-Covid inflation rates would mostly have remained at a not-too-high normal positive level, and the US inflation genie would still have remained inactively inside the bottle, without generating any recessionary pressure on the domestic macroeconomy.
  ---
  - vic lai May 13, 2023
    
    (a) Many Modern Money Theory people generally assumed in the good old days that the Fed's "new money printing" isn't inflation-prone, given the normal functioning of our world's global supply chains, and especially also given the overall global background of unhindered globalization on steroids.
    Today, after seeing what had been happening during the Covid global lockdowns, and thanks to the ongoing bifurcating international trading world, today's MMTers can no longer ignore the ensuing problem of runaway inflation when their favorite money theories are being put to the test in the real world.
    ---
    (b) Similarly, the US Treasury almost always assumed in the good old days that, any amount of riskless government treasuries of whatever maturities newly issued by her in the primary treasury market could always be all absorbed very smoothly by the market, without much affecting the prevailing treasury yields of the same maturities of US treasuries that were being traded in the secondary treasury market.
    But today, the assumption that the big buyers of her newly-issued treasuries will always be at the doorstep can no longer be taken for granted by the US Treasury, as shown vividly by Janet Yellen's frequently-suggested Treasury QE, since
    (i) many important foreign big central banks are now very busy buying gold instead, and China in particular seems to be also quite busy lending part of her ample US-dollar FX reserves out to some of her friendly EM countries, to perhaps prevent them from being once again "harvested" by the US during the Fed's ongoing rate-hiking cycle, and
    (ii) many US excess savings are now in the form of commercial-bank reserves and O/NRRP deposits all inside the Fed's balance sheet, earning higher and higher and completely riskless interests there, and so may be refusing to come out en masse to help finance the borrowing US Treasury in the primary treasury market.
    -
    Which means, the US's coming debt-ceiling problem isn't whether its new uplifting will once again be blocked by the congressional Republicans, since the chance should be very small, but rather whether there will be enough buyers around to fully satisfy all the coming financing needs of the US Treasury say in the second half of this year, and whether the prices of existing treasuries of similar maturities in the secondary market will be non-trivially bid up to a level commensurate with the expected (much) higher treasury yields soon to be offered by Yellen's Treasury in the primary market.
    -
    Note that the US 1-month treasury yield suddenly jumped by more than 20%, from 4.70 % on May 3 to 5.76 % on May 4, as a result of the US Treasury's new issuance of 1-month treasuries (maturing on June 6) at a record 5.84 % annual rate.
    Which means, the coming issuance of new treasuries by the US Treasury, after the debt ceiling is once again lifted eventually by the US Congress, will probably bid up the longer parts of the US's riskless treasury yield curve if more longer-maturity treasuries are issued by the US Treasury in the rest of this year, which will serve to
    (ai) uninvert to a certain extent the already highly inverted treasury yield curve in a Japan-like yield-curve-control manner, and
    (bi) absorb part of the remaining excess savings of the US households in the private market, which (before the US Treasury spends most of the newly raised money out ) in turn makes it easier for the Fed to force the inflation genie back into the bottle.
    -
    If a new black-swan event happens when the coming uplifting of the debt limit is blocked by the US Congress, the US Fed may consider issuing a suitable amount of new central bank bills, notes and bonds, of relevant maturities and at suitably high-enough interest rates, to attain both (ai) and (bi) just mentioned.
    ---
    - vic lai May 14, 2023
      
      A book written by Matthew Desmond, which "highlight(s) the issues of extreme poverty, affordable housing, and economic exploitation in the United States," shows that there were 37 million US people living under the poverty line in recent years, which was almost equivalent to the whole population (38.25 million in 2021) of Canada.
      -
      This poverty problem will be aggravated by the requirements imposed by today's Republican Congress people on the Biden Administration in the ongoing one-year debt-ceiling-raising fiasco, which include reducing the government's expenditures on housing, education, medical care, and environmental spending, and raising its expenditures on the development of fossil energy.
      -
      In the US, poverty has become the 4th biggest killer in the country, after heart disease, cancer, and smoking.
      In 2019, 183,000 people died directly of poverty.
      It seems that the US democracy has been favoring more the big banks and the rich people than the small banks and the poor people.
      The worsening problem of inequality between the rich and the rest in the US will keep on increasing the government's cost of governing the whole country.
      ---
      - vic lai May 14, 2023
        
        The latest sudden and unexpected 8-hour-long meeting in Vienna between US national security adviser Jake Sullivan and top Chinese official Wong Yi has caught almost every global political commentator by surprise, since the meeting had been kept strictly confidential by both countries.
        ---
        What the US wants from China in this face-to-face meeting should include China's coming promise of continuous non-trivial buying of US government treasuries newly issued by Yellen's Treasury Department in the primary market, after this year's debt ceiling has once again been raised by the US Congress, given the fact that the US Fed can no longer use a new round of QE to buy those new treasuries during the central bank's ongoing inflation-fighting QT cycle.
        -
        It doesn't matter to the US any more even though China immediately resells all those newly-bought US treasuries in the secondary market, since fresh new funds have already been gotten by the US both to help maintain the domestic financial stability of the US and to say keep funding the highly-expensive war in Ukraine.
        ---
        In return, China in the meeting should want from the US
        (i) a certain degree of real (not oral) concessions given by the US regarding the heated Taiwan issue in Asia, and
        (ii) the abolition of the recent claims by both Janet Yellen and Jake Sullivan that the US's investments in China in the fields of advanced semiconductors, artificial intelligence related to military and surveillance, and quantum computing have to be strictly restricted.
        ---
        
        vic lai May 15, 2023
        
        According to a Taiwan political commentator, the aims of the US in the latest US-China meeting in Vienna should also include China's quick release of some US "citizens" detained by China during the failed November 2022 "White Paper" demonstrations in China's cities of Shanghai, Beijing, Chengdu, and Wuhan, which was obviously another (white) color revolution manufactured by the US in China, following the US's instigated (dark) color revolution in Hong Kong in 2019.
        -
        That the US politicians related to the US Department of State haven't retaliated so far, say by detaining an equal amount of Chinese citizens in the US in response, shows that those detained US "citizens" in China have in fact been CIA-related intelligence people sent to China last year to organize the color revolution there.
        ---
        
        vic lai May 15, 2023
        
        The genuinely effective or binding restraint on the higher and higher propensity to deficit-spend of the democratic US's vote-buying ruling administration isn't the Congress's yearly debt ceiling per se, since the ceiling is almost always eventually further raised when the country is getting closer and closer to the day-of-reckoning deadline ------ the true restraint should actually be the US's current main economic problem of (runaway) inflation, especially if the government's new non-trivial deficit spending is once again mostly financed by the Fed's new new-money-printing QE.
        ---
        (i) Since old (spending) habits always die hard, (without government's help) most of the spend-spend-spend US households can hardly increase their average savings rate over time, and so the aggregate leakage of (S - I)/GDP on the left hand side of the above Sectoral Balance Equation will not gradually or suddenly prop up (too much) in the foreseeable future.
        -
        (ii) Given the US's post-pandemic serious effort of reshoring and import-substitution re-industrialization, the aggregate leakage of (X - M)/GDP on the right hand side of the Sectoral Balance Equation should get smaller and smaller in the future years.
        -
        (iii) For both sides of the Sectoral Balance Equation to remain more or less the same, and hence without generating any or too much recessionary or inflationary pressure on the domestic US macroeconomy,
        (a) the US government's yearly deficit spending will have to increase at a decreasing rate, or even diminish, over time, and hence
        (b) the total remaining debt incurred by the US federal government will also commensurately increase at a decreasing rate, or even diminish, over time.
        -
        (iv) Which means, the political fiasco of the (yearly) debt-ceiling imposed by the US Congress on the US Treasury Department will pale into insignificance over time.
        ---
        
        vic lai May 16, 2023
        
        During wartime, say when today's US is helping Ukraine in the ongoing expensive war in Europe, the US federal government's deficit spending has to non-trivially increase, or has to be kept at a high-enough non-diminishing level, in order to be able to win the war, and so the further raising of the debt ceiling by the US Congress will become more urgent than before, especially when the ruling Biden administration has also been deficit-spending a lot at the same time to enact say the CHIPS and Science Act and to forgive students' loans.
        -
        A coming US war with China in Asia, if any, will force the US to suspend the debt-ceiling restriction for an extended period of time, to help finance and eventually win the war there, while the government is also imposing price and wage controls at the same time to prevent the price-wage spiral from ravaging in the country.
        ---
        
        vic lai May 16, 2023
        
        During non-war peaceful time, fiscal austerity, typically promoted by neoliberalism, shouldn't be the goal in and of itself, since the whole macroeconomic context of the country, represented by say the Sectoral Balance Equation, has to be taken into account.
        -
        (a) If recessionary pressure is developing in the economy, more government deficit spending should be pursued, and hence higher debt ceiling of the government should be allowed, to prevent the domestic economy from quickly falling into a new high-unemployment recessionary trap, especially if the inflation genie is still inside the bottle.
        (b) If (runaway) inflation is the main problem, less government deficit spending should be allowed, and hence coming (much) higher debt ceiling should be discouraged, to avoid further invigorating the inflation monster.
        ---
        In the European Union, an EU country's current account has to be taken into account as well when the neoliberal policy of fiscal austerity is being considered or enacted.
        -
        (i) In a more competitive current-account-surplus country like Germany, fiscal austerity should be a good economic policy, since the right-hand-side injection into the aggregate demand coming from the surplus current account will be tempered by the right-hand-side withdrawal from the aggregate demand coming from the government's surplus budget, to keep the domestic economy from becoming overheated.
        -
        (ii) In a less competitive current-account-deficit country like Greece, fiscal austerity should usually be a bad economic policy, since the right-hand-side withdrawal from the aggregate demand coming from the deficit current account will combine with the right-hand-side withdrawal from the aggregate demand coming from the government's surplus budget, to further lower the country's aggregate demand to a too-low level, thereby forcing the country to have to use painful and persistent internal devaluation to try to regain external competitiveness, in the form of a less-deficit or more-surplus current account, so as to raise the injection into the aggregate demand on the right-hand side and to reduce the recessionary pressure in the country.
        -
        (iii) Since, in the yearly intercontinental trades between say Germany and Greece, Germany's surplus current account has to come from Greece's contemporaneous deficit current account ------ where else can it come from ? ------ Germany in the EU therefore shouldn't wrongly force Greece to imitate herself by "responsibly" engaging in fiscal austerity every year to try in vain to solve the government debt problems in Greece, without generating serious economic recession and high youth unemployment there.
        ---
        Similarly, the IMF shouldn't force those EM countries in big trouble to keep pursuing fiscal austerity no matter what, to try, usually in vain, to enable those countries to repay their debts owed to her.
        ---
        
        vic lai May 16, 2023
        
        It's said that no new government policy that hasn't first been approved by national security adviser Jake Sullivan can be sent to the desk of President Biden inside the Oval Office of the White House in Washington.
        -
        Given
        (i) the recent anti-neoliberalism and pro-industrial-policy "New Washington Consensus" newly embraced and advocated by Sullivan and hence by the incumbent ruling Biden administration, and
        (ii) the need for the entrepreneurial-state-like US federal government to deficit-spend much more than before in the coming years to help crowd-in much more private real innovative investments of all kinds so that the Godot-like 4th Industrial Revolution on this planet will mostly and formally break out in the US alone,
        the good old debt ceiling currently being imposed by the US Congress on the US federal government is not only anachronistic, but is also detrimental to the US in her coming fiercer and fiercer geopolitical and economic competitions with quickly-rising China, especially given China's persistent heavy use of government-subsidized (national) industrial policies to enable many of her old and new domestic industries to more quickly and easily climb up the global value-added supply chains.
        ---
        
        vic lai May 16, 2023
        
        Should China "help" the US this time around by buying en masse the new treasuries to be issued en masse by Yellen's Treasury Department, and hence helping to remove the highly damaging expected illiquidity in the coming US government treasury market, after the debt ceilling has once again been lifted in the near future ?
        ---
        According to a Chinese commentator, China's answer should be no, in case the Biden government, after having been fully funded once again, quickly turned around and imposed even more sanctions and other troubles on China.
        ---
        In the US TV series "Breaking Bad," Hank Schrader tried to do everything he could to hunt down Walter White, the ultimate drug boss, even though Hank and his wife Marie one day discovered that it's actually White's family that had been financing almost all of his very expensive medical bills such that he himself could walk naturally once again.
        -
        The TV series hasn't shown any gratitude on the part of the Schrader family toward Walter White and his wife Skyler whatsoever, which I think shouldn't be an immoral "error" made by the TV producer, but was actually reflecting the one typical trait of the US's traditional "lawful" culture.
        -
        Which means, it's quite natural for today's China not to help such an ungrateful country.
        China's US dollars should better be lent out to some of her friendly EM countries, to prevent them from being "harvested" by the US once again in the coming years.
        ---
        
        vic lai May 17, 2023
        
        While many or most US watchers have been viewing the ongoing debt-ceiling predicament as another good old political fighting between the two alternately-ruling political parties in the US, to me this debt-ceiling fiasco can also be viewed from other much-more-important points of view.
        ---
        The renewed raising of this good old debt ceiling in the near future, or perhaps the coming tempering of (the importance of) this ceiling over time, can be viewed as
        (a) a gradual and eventual transformation of today's US, from mainly a pro-neoliberalism pro-free-market state to mainly an entrepreneurial bigger-public-spending state, and
        (b) a much bigger financial assistance provided by the bigger-public-spending US government to the country's lack-of-money innovative private market, to help today's US to eventually nurture the Godot-like 4th Industrial Revolution mostly in the US alone, rather than in China or in other foreign countries.
        -
        Since the 4th Industrial Revolution (however suitably defined) will be geometrically much more sophisticated and complicated than each of the first 3 ones, its quicker and formal eventual arrival on this planet has to require the full cooperation in all dimensions of each and every participating and competing countries under the sun.
        -
        Today, it seems to me that the US alone can no longer be populous and skilful enough to nurture this brand new revolution solely in her own country, without the assistance of other countries as well (think
        China's Huawei 5G, and Taiwan's manufacturing of the most-advanced semiconductor chips).
        -
        Which means, the relatively late formal arrival of the 4th Industrial Revolution on our planet is perhaps reflecting the ongoing increasingly bifurcating and fracturing geopolitical, macroeconomic, and technological world we're all living in today.
        ---
        
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美国的债务与功能障碍

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