“It’s about 3-4% of GDP. Savings is higher. It’s about 6% of GDP. So, right now if the Gov were to accommodate both, then we’d be running a 10% budget deficit or $1.6 T, rather than closer to $1.1 T.” (emphasis added)

Your math must be wrong. The government has to accommodate both, by definition.

Now let’s say we reduced the CAD to 1%, then we’d still need a 7% deficit. If we wanted to maintain that 6% savings, then we’d need a current account surplus of 6% to justify a balanced budget. That’s a shift of 10% of GDP from where we are now. very heavy lifting, especially since nations that now operate with a current account surplus would fight us very strongly.

Since exports are real costs and imports are real benefits, fighting the kind of trade war that would imply would mean joining a race to the bottom and lowering the standard of living of Americans. We don’t need that.

What we should do instead is use the situation we have now as an opportunity. Except for those areas where we need to produce for reasons of national security or future economic sustainability (like solar and wind) we should let other nations produce our stuff if they want to, and use deficits to create full employment on value-producing activities within the United States that make us more economically sustainable for the future. Working on energy foundations, infrastructure, health care, and education are the most important of these.

Perhaps you should have included the fact that Fed liabilities are US government liabilities in your ‘contingent approach’ paper.

That might have helped to clarify things.

@Gary:

Hmmm. The article is less than clear, but I had heard that the Shell CEO actually predicted that the US would be energy independent (in the sense that all of its energy would come from North American sources) within 15 years.

From what I’ve read, it’s plausible, but it would probably require a President Romney for the next 8 years.

It’s obviously price dependent too. At $100/barrel, the US is probably moving steadily towards energy independence. At $50/barrel, we would be probably be moving away. At $150/barrel, we would probably be energy independent in 10 years. That’s why the goal of energy independence is stupid. Only the price matters.

JKH, here are the only references I’ve seen.

Please supply any relevant references later than these.

“The Treasury tax and loan account system was designed as a mechanism for minimizing the dislocations on bank reserves and the money market arising out of the sizable and irregular transfers between the Government and the public.”
Treasury tax and loan accounts and Federal Reserve open market operations
http://www.newyorkfed.org/research/quarterly_review/1978v3/v3n2article7.pdf
TTL Note Accounts and the Money Supply Process
http://research.stlouisfed.org/publications/review/79/10/Accounts_Oct1979.pdf

You may want to subtract the bonds held by the trust funds from the $ 15 trillion.

That part is funded by cumulative SocSec (and Medicare) tax surpluses (so far), meaning it doesn’t correspond to NFA.

The trust fund bonds are an internal funds transfer mechanism between taxes and spending.

The debt net of that non-NFA generating piece will be closer to $ 12 trillion, which is true NFA.

It’s just a detail, but the result is a few trillion closer to the penny.

:)

P.S.

I never got an answer from anybody on MMT high regarding my question passed on to you all by Tom Hickey:

Are Treasury auctions settled through TGA or through TTL?

(Wray (and Kelton previously) describe them as settled directly through TTL)

My understanding is that it’s TGA.

(And it matters because facts matter, not because it couldn’t be done either way.)

thx

Many thanks. Will try to absorb and adjust.

@Sdvan:

“However Obama has claimed his number one priority is energy independence. This would do more for world peace than anything else and shows the depth of Obama’s insight.”

Not sure why energy independence is desirable, since oil is a global commodity, and the price will be independent of whether or not the US is independent, but the US is well on its way, no thanks to Obama who opposes the production and use of fossil fuels in any ways he can.

“People should think not of Obama failures without thinking how much worse things would have been under McCain Palin.”

Well, I’ll tell you one way things would have been better under McCain. The mainstream press would be a watchdog rather than a lapdog. Obama is the most authoritarian president since FDR, perhaps since Woodrow Wilson, and it’s because the press covers for him.

I guess another way things would be better is that the person who is currently a heartbeat from the Presidency wouldn’t be completely unqualified for the job.