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More evidence the economy is about to blow.

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  • Strongly Liberal Democrat
    Dallas, TX
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    At Mike Norman Economics Blog:

    "Gov't deficit probably too small to ensure system stability

    Matt Franko has been posting updates from the Daily Treasury Statement that show Dec and the current month running well shy of the deficit levels needed to ensure sufficient $NFA's to keep the system stable. In December, Treasury ran a $20 bln surplus and so far this month Treasury is running a meager -$29 bln deficit. This is far below the historical average of the past year of -$90 bln deficit per month. A surge in bank credit likely reflects people and firms grasping for some liquidity. Banks may continue to provide this, it's hard to say, but the longer we go like this the greater the likelihood of some "liquidation event" that brings the system back into equilibrium. Remember, too, that higher tax demands as of Jan 1, mean that the historic -$90 bln deficit per month is probably low." -Mike Norman

    Mike Norman is the chief economist at John Thomas Financial and an MMTer. JTF is a Republican dominated firm. Mike Norman is not a Republican. The fact that he's still working there shows the value of MMT. Anyways, it's his job to pay attention to this stuff. Fact is, we're not running an adequately sized government deficit needed to support the private credit structure, and this can't continue. Unfortunately, it's only going to get worse. Government debt is the equity of the non government. With savings demands at all time highs, we need a much larger fiscal deficit, or all that savings ends up as fiscal drag, especially with taxes going up on those with the highest propensity to spend (FICA holiday expiration).

    Obama White House needs to pick up the phone and talk to Warren Mosler and MMT et al. immediately.

    Here's the White House phone number for comments: 202-456-1111