Comment on Matt Franko on ‘Treasury issuance’
The macroeconomic 4-sector Profit Law reads Q≡(G−T)+(I−S)+(X−M)+Yd. Let us reduce it to 3 sectors (household, business, government, and Yd=0, I=0), i.e. to Q≡(G−T)−S. In plain language it now says: The profit of the business sector Q is equal to the government's budget deficit (G−T)>0 minus the household sector's saving S.
So, if the budget deficit (G−T) increases and household sector saving S remains unchanged the business sector's profit Q increases by the same amount. The Profit Law implies Public Deficit = Private Profit. That's pretty straightforward. So, what can be expected from the increased deficit-spending/money-creation that has been started by Mr. Trump and is continued by Mr. Biden is a profit explosion subject to the secondary condition that household sector saving S and the foreign trade balance (X−M) remain fairly stable.#1
The business sector can hold the increased monetary profit as cash/deposit or buy interest-bearing bills/notes/bonds. Figure 6 shows how every single item increased in 2020.
Source: MNE Matt Franko
Matt Franko comments: “You can see how Treasury issuance has been exceeding non-govt savings (ofc unqualified call this “the debt!”) starting last year after shutdown policy was implemented and still being maintained at > $1T... And it has largely been accomplished by increasing issuance of bills... So govt has been forcing the non-govt to save in an additional $1T + balance of short-term Treasury Bills that the non-govt neither wants or needs.”
The peculiarity of Matt Franko's comment consists of the fact that he does NOT differentiate between household sector and business sector but talks of the non-government sector aka private sector and that he does not differentiate between household sector saving and business sector profit. The business sector vanishes, three sectors are reduced to two: govt and non-govt. By collapsing the household and the business sector to the non-gov/private sector, MMTers let the profit-rabbit vanish in the macroeconomic top hat.
In formal terms, Matt Franko takes the Profit Law Q≡(G−T)−S and rewrites it as Q+S=(G−T), and calls the left-hand side (Q+S) non-government saving. Thus, the business sector and profit vanish and he ends up with the MMT slogan Public Deficit = Non-Government Saving or as Stephanie Kelton is wont to say: The government's red ink’ becomes our ‘black ink’. What people always overlook is that “our” does not mean WeThePeople but WeTheOligarchy.#2
The false We/Our and the rewriting of the Profit Law are the semantic and formal tricks that MMTers use to deceive WeThePeople. The rest of the economics profession is either too stupid to check the fraud or complicit.#3
Egmont Kakarot-Handtke
Related 'Proving Bill Mitchell wrong ― burying MMT for good' and 'How MMT fools the ninety-nine-percenters' and 'MMT: The new Center of the Universe of political fraud' and 'MMT: fundamentally false' and 'Down with idiocy!'.
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REPLY to Matt Franko on Feb 21
You say: “Everyone already knows that business makes bazillions of USDs all the time it’s not unique or interesting ...”
Agree, but why then does profit Q (= balance of the business sector) not appear in the MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0? #1
Could it be that then even the blind could immediately see that Public Deficit = Private Profit and that MMTers are NOT the nice-progressive-humanitarian-righteous champions for WeThePeople but rather the rotten-mendacious-stupid-corrupt agenda pushers for the Oligarchy?
#1 Google pics
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