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Founder of Strubel Investment Management: Why The Experts Are Wrong About Govt Debt

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  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    Carlitos here with more MMT stuff. Very interesting and easy to read piece I want to share: http://www.valuewalk.com/2014/06/experts-wrong-govt-debt/

    Ben Strubel runs his own firm and I think he manages the accounts himself. Looks like he is in charge of about $7 million dollars over 69 accounts and earning a nice return for his clients. Interestingly, he does not charge commission fees. He takes a flat % on the amount in the account and only makes money if he makes the client money. He has embraced Modern Monetary Theory, as it is offers the most accurate depiction of the world he is operating in. He has set himself for failure if he tries to b.s. clients and lose their money.

    He understands that federal government spending is not operationally constrained by tax revenues or borrowing operations. Any school teacher who has operated a token currency system in the classroom knows this. How can the students get the token classroom currency to spend before the teacher "spends" them into existence by rewarding good behavior? Same exact thing is going on when it comes to the U.S. dollar. As legendary investor, leading progressive economist, and MMT founder, Warren Mosler says, "The funds to pay our taxes and/or buy government securities come from government spending/lending."

    This is all a point of basic logic that 90% of Americans get wrong. I don't blame them, they have been told the exact opposite by virtually every political leader and talking head they have ever heard speak. They all think the currency ISSUING federal government has to get the funds from the taxpayer to spend by either collecting taxes or borrowing dollars. If that were the case we would never have a U.S. dollar currency to begin with. Please note that U.S. banks are designated agents of the Treasury, and no U.S. bank could meet capital requirements without first acquiring dollars through initial government spending/lending. Meanwhile, banks could not clear the checks they are allowed to write if the government's banker (i.e. the Federal Reserve) did not create the reserves on its spreadsheet there would be no 'clearing balances' to clear U.S. bank checks at par and nor could Treasury securities be purchased with dollars.

    It is no surprise that all of our worst depressions and recessions have come on the heels of government surpluses or shrinking government budget deficits.

    1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
    1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
    1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
    1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
    1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
    1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

    See Sector Financial Balances: https://www.google.com/search?q=sector+finance+balances&rlz=1C1TSND_enUS568...

    To learn more about Modern Monetary Theory, please read Warren Mosler's free book to begin:
    http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

    And check out The Ever Expanding MMT Video Library: http://mikenormaneconomics.blogspot.com/2014/05/the-ever-expanding-mmt-video-li...l