November 14, 2018

The MMT defenders of interest on public debt: stupid or corrupt or both?

Comment on Clint Ballinger on ‘Decouple Spending From Bond Sales’

Blog-Reference and Blog-Reference

MMTers tell everyone that public debt is nothing to worry about and that deficit-spending/money-creation is the method of choice to do away with unemployment and most other social ills.

One critical argument against a permanently rising public debt is that interest payments to the holders of the public debt rise automatically depending on the current rate of interest. This interest effect could, in principle, be greatly reduced if the government/central bank (i) does not issue bonds, to begin with, and (ii) keeps the interest on bonds as close as possible to zero.

What exactly happens if the government runs a deficit in an elementary production-consumption economy? From the general macroeconomic Profit Law Qm≡Yd+(I−S)+(G−T)+(X−M) follows that Public Deficit = Private Profit if all other variables are taken out of the picture.

So, at the end of the first period, the business sector’s deposits at the central bank are equal to the government’s overdrafts. If deficit spending is repeated period after period, then the government’s debt in the form of overdrafts grows permanently and the same holds for the business sector’s deposits. Under the assumption that the interest rate is zero for overdrafts and deposits at the central bank, there is NO interest effect and no interest burden on public debt.

However, if deficit up ⇒ profit up ⇒ cash up ⇒ the business sector’s need for interest-bearing/riskless/liquid assets goes up under the condition that profits are not distributed or reinvested. Solution: the government/central bank issues bonds. Extra benefit: interest on Gov-Bonds redistributes income from WeThePeople via taxes to the Oligarchy.

Needless to emphasize that the useful idiots of the Oligarchy have a number of arguments why riskless Gov securities with a juicy return are good for the economy, the proletariat, and the little man who needs to beef up his pension.

There are two factions among MMTers: one is content with the profit effect and opts for the abolition of bond issuance which amounts to the limitless growth of zero-interest overdrafts at the central bank, the greedy faction wants all, that is, profit plus permanent interest on a permanently growing debt.

Clint Ballinger and Richard Murphy are two of the really hard pushers of Wall Street’s agenda.#1

Egmont Kakarot-Handtke


#1 Richard Murphy: the MMT fraudster dressed up as realist

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REPLY to Alan Longbon on Nov 14

You say: “The Federal Government Deficit = Private Sector Surplus, these are accounting identities true by definition.”

This is the foundational blunder of MMT. Time for you and the rest of retarded MMTers to do some scientific homework. The correct relationship is given with Public Deficit = Private Profit.

There is the household-, business-, government- and foreign trade-sector. The “private sector” is a swindle. For details see


Unfortunately, MMTers are too stupid for the elementary mathematics that underlies macroeconomics. This holds without exception.