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Utility of balance sheet consolidation

Hi Cullen.  Saw your piece. Thanks!  I agree 100% with the limitations of noting that financial saving nets to zero (at face values). It is usually changes in the gross balance sheet which gives us insight, not looking at net numbers.

However, I still find it useful.  For example, mainstream economists believe that financial saving finances investment - and this relationship is very important to them.  However, if financial saving =zero, then their belief can be easily debunked. So that's an example of its usefulness. In reality, as you know, investment IS saving - saving in real stuff-which the mainstream does not seem to understand.  So I find pointing out that net fin. saving = zero useful in that context. Does that make sense to you?.  thanks!

 

 

 

Hi Charles,

Yeah, it’s useful in certain contexts. I just don’t like the way MMT people use it to convey the idea that the govt is the only entity that can provide “net” financial assets. Their depiction of these things is misleading as it’s used to depict the govt as something more important than it is.

Of course, mainstream Econ also has a long history of downplaying the importance of endogenous money creation. So I am not sure where this all leads us. The mainstream view is incomplete and the MMT view takes things too far. So here we are....

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Cullen thanks for the prompt response.   Agreed.

MMT people consolidate the Fed into the government to make the Fed appear subservient to the Treasury. This not only misconstrues the actual monetary flows (as Cullen correctly notes), but it is an attempt to make monetary policy appear less powerful than it is and make fiscal policy appear more powerful than it is. It is a hierarchical misrepresentation of the entities in a direct attempt to make the state theory of money appear more relevant than it is.

I’ve never seen a bigger group of ideological idiots than these MMT advocates. They’re so blinded by politics that they can’t even see why their theory is wrong.