US News

Hudson does a good job explaining the limits of MMT here https://www.nakedcapitalism.com/2023/06/michael-hudson-on-the-us-economy-surprisingly-resilient-or-potemkin-village.html

But if we take a look at the national debt, for example, the US federal government budget deficit hit $1.1 trillion in the first half of this fiscal year. The Congressional Budget Office predicts that this problem is only going to get worse over the next decade as interest rates go up. I guess this begs the question: how sustainable is the US federal deficit and how much longer can the US keep up the seemingly unlimited spending that we’ve become accustomed to?

To an infinite amount as long as the debt is in its own currency, and as long as you print the currency, you can print however much you want. You’ll never default because you can just create the credit. That’s what the Federal Reserve did with its zero interest rate policy. It distorts the economy, and the economy can shrink and be torn apart, but the government can always pay its debt by simply printing the money. The problem that is tearing the American economy apart is not the government debt — it’s the private debt that is leading to a default. When you default on your debt, you forfeit you property to the creditors. So, what you’re seeing now is a large scale transfer of property, a transfer of real estate, a transfer of cars that people had bought, but couldn’t keep up the payments on, a transfer of income from the 90% to the 10%. That’s private debt. That’s where the real problem is. And as long as the television programs can keep talking about the government debt, not the private debt, people are somehow not going to see that the problem that is tearing their own personal life apart is actually the problem that’s tearing the whole American economy apart.

So would you say that the government debt is not a problem and that Americans shouldn’t really worry about that?

That’s right. It’s all just a made up. When they talk about cutting back the government debt, what they mean is cutting back social services. They would like to do what Biden and Obama wanted to do after 2009. They want to cut back Social Security. They want to privatize it as if that will somehow solve the problem. They want to cut back medical care. They want to cut back most social programs so that the money that the government does spend will be exclusively to support the financial sector, the military sector, the insurance sector, and the real estate sector. That’s where the property owning classes, the ‘rentier economy’, the rent recipients who make money from stocks and bonds and real estate and monopolies. The government will help the top 1% at the cost of the 99%, but it need to pretend that it’s forced to do this because there’s a government deficit. The only government spending they really want to cut back of the spending on the 90%. They want to cut back Social Security, Medicare, local social spending, support for local cities and states. Everything that made America more democratic and strong in the past.

But how much longer can the US just keep printing money in order to service this government deficits? Is this really sustainable indefinitely?

Well, what usually stops a situation like that is a political revolution. The answer is it’s sustainable until people fight back, until there is a revolution. But as long as you have a political system where you have only two parties that are really the same party, and as long as you have the Democrats as the only alternative to the Republican Party, it can go on indefinitely because people will not have a political alternative to vote for. There is no alternative. You’re going to have elections bouncing back and forth, from Republicans to Democrats to back. And yet neither of them are an alternative to the whole financialization of the economy that’s been taking place really since World War Two and especially since the 1980s. So, America is ending up looking like England under Margaret Thatcher and even worse, Labor Party that followed her.