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Much More Money

"Much more". That's a rough estimate of what Nancy Pelosi needs to hear from Steve Mnuchin if The White House really wants to strike a deal with Democrats on another round of virus relief prior to the election. The two sides are either miles apart or arguing over nothing, depending on how you conceptualize deficits, debt, and government spending. On Monday evening, House Democrats unveiled a "new" $2.2 trillion proposal, as expected. As discussed here over the weekend, there's a sense in which bickering over whether to keystroke $1.5 trillion into existence or conjure $2.2 trillion out of thin air is wildly ridiculous when viewed through an MMT lens. Inflation is nowhere near the Fed's target (figure below), we still have no way to quantify the scope of the structural damage from the pandemic, and if NAIRU actually were observable, it's safe to say we couldn't see it from way up here. “We can get this done", Pelosi told MSNBC on Monday. "But he has to come back with much more money". "He" could refer to either Mnuchin or Donald Trump. One of those two men has plenty of money, both personally and in his capacity as head of the government agency that mints it. The other wonde
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5 comments on “Much More Money

  1. mfn says:

    The problem with running the economy “hot” (4 percent over a number of years) is that the Fed will eventually be forced to quash it with rate hikes — and, as we’ve seen on many occasions over the last four, five years, anything over 2.5% on the Fed Funds rate tips us into recession; anything over 4% plunges us into the worst depression…well, maybe ever.

    • runamok says:

      Yes, exactly. Rate hikes any time thinking about thinking about soon == recession/depression. For years yet, they are not going to be able to raise rates. The next direction for rates is down. The charts of the 2, 5, 10, and 30, are pinned flat. Next move is down. I should go out and buy me some TLT to celebrate the final trade in this 35+ year bull market in bonds.

  2. runamok says:

    imagine the negotiations. Munchin is probably falling on his sword for every demand he has.

    Call me a jaded cynic, but I think the battle is over picking the winners and losers. Who to bail out, who to let go insolvent, which industries to bail out, which to let go of. Hey, at this point, if they want to bail out some oil refiners, go for it. I can imagine the negotiations. Munchin is probably falling on his sword for every demand he has.

    We’re in a new realm now where the government picks the winners and losers.

  3. Mark Brown says:

    It’s clearly in Trump’s interest to goose the economy. He never cares about the long run, and will
    do or say anything to win. So why hasn’t he agreed to the Democrat plan up to now? I suspect the
    roadblock wasn’t the sticker price, but rather giving money to state and local governments, money
    for election security, for the post office, and for testing. He chooses to be at war with the blue states,
    and until his announcement today about testing, didn’t want increased testing as it leads to increased
    positives which looks bad for him.

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