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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for July 29th, 2011

The Fed can prevent default

Posted by WARREN MOSLER on 29th July 2011

QE 0: The Fed offers to buy all Treasury securities and coupons at par at maturity

Posted in Fed | 73 Comments »

The elders of Jonestown contemplating the Kool-Aid mix

Posted by WARREN MOSLER on 29th July 2011

The actual problem with the US economy is the federal deficit is way too small given current credit and global demand.

That should be a good thing.

Congress should be arguing over whether we need tax cuts and/or spending increases.

But instead they all have the misguided idea that we are at immediate risk of some kind of unknown financial crisis
that would cause us to suddenly be unable to fund ourselves, much like Greece, and be faced with the choice of default or hyperinflation.

It’s all inapplicable nonsense. There is no such thing as the issuer of a currency running out of money, or being dependent on foreigners or anyone else for finance. And inflation from over spending comes from trying to buy more than there is for sale, which is hardly the case right now. But the President and members of Congress believe what they believe, however misguided, as do the majority of the voters, and are acting accordingly as they attempt to pass measures to make the federal deficit smaller.

And doing nothing makes the federal deficit smaller still, making the economy that much worse, as doing nothing means the debt ceiling is not raised and the Treasury goes cold turkey to balance.

So the actual best case for the US economy is that they get a bill to the President that he signs, and the deficit reduction and economic harm will at least be less than the catastrophic deficit reduction from doing nothing.

But for too many in power, the best case is doing nothing.

It’s all like drilling holes in the bottom of a sinking ship to let the water out.
The more you drill, the worse it gets.
Unfortunately, it’s now drill, baby, drill!

Posted in Deficit | 57 Comments »

Spain Placed by Moody’s on Review for Possible Downgrade

Posted by WARREN MOSLER on 29th July 2011

They all quickly go to junk if the US goes cold turkey to a balanced budget

> Spain Placed by Moody’s on Review for Possible Downgrade
> 2011-07-29 05:20:32.543 GMT
>
>
> By Maria Ermakova
> July 29 (Bloomberg) — Spain’s Aa2 ratings were placed by
> Moody’s Investors Service on review for possible downgrade.
> The country’s Prime-1 short-term ratings are unaffected by
> today’s action, Moody’s said.

Posted in Deficit, EU | No Comments »