AXEC: New Foundations of Economics: Search results for label:Debt

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August 1, 2026

Occasional X: How it works (CDXCVIII)

“Argentina's Milei Borrows Warren Buffett's Idea To Punish Deficit-Spending Politicians.” (zerohedge)

Javier Milei never understood profit, and by logical consequence, how the economic system works. He bases his policies on Austrian economics. Austrianism has always been…
— AXEC (@EgmontHandtke) August 1, 2026

July 31, 2026

Occasional X: There is an absolute limit to the growth of public debt (V)

“Interesting new research by Barry Eichengreen et al.: governments undertake fiscal consolidation not when public debt is high, but when debt-service costs become burdensome.” (Phillip Heimberger)

Even people who are not very intelligent should have understood this from the post…
— AXEC (@EgmontHandtke) July 31, 2026

July 22, 2026

Occasional X: How it works (CDXCII)

“Becoming wealthy is relatively easy. It requires hard work and discipline.” (Michael Arouet)

Wealth has not much to do with 'hard work and discipline'. Michael Arouet never understood profit and, by consequence, how the economic system works.

The U.S. economy is known to run…
— AXEC (@EgmontHandtke) July 22, 2026

Occasional X: How it works (CDXCI)

“The final stages of capitalism, Karl Marx predicted, would be marked by global capital being unable to expand and generate profits at former levels.” (Chris Hedges)

Actually, Capitalism can produce macroeconomic profit at will.

Chris Hedges does not understand profit, and by…
— AXEC (@EgmontHandtke) July 22, 2026

July 9, 2026

Occasional X: How it works (CDLXXXIX)

“There are only two options for France, Italy and Belgium: 1. They cut spending and implement business friendly pro-growth policies 2. They will face a debt crisis. The first Euro crisis was about hundreds of billions, the next one will be about trillions. Which one will it be?”…
— AXEC (@EgmontHandtke) July 9, 2026

July 7, 2026

Occasional X: How it works (CDLXXXVII)

“The greenback is no longer a reserve currency — it has become a vehicle for unfettered capital accumulation.” (Adam Tooze)

The U.S. economy runs on profit. Macroeconomic profit is given by the axiomatically correct Profit Law / Balances Equation…
— AXEC (@EgmontHandtke) July 7, 2026

June 30, 2026

Occasional X: How it works (CDLXXXVI)

“The greatest Ponzi scheme in history was invented and covered up by the French state.” (Auguste Bardamu)

The greatest Ponzi scheme in history is currently being performed before all eyes by President Trump.

The free-market economy runs on profit. Macroeconomic profit is given…
— AXEC (@EgmontHandtke) June 30, 2026

June 18, 2026

Occasional X: How it works (CDLXXXIV)

“The $1.5 trillion investment in our defense in FY27 is a MESSAGE TO THE WORLD.” (Pete Hegseth)

The message is that Pete Hegseth doesn't understand how the economy works.

(i) The increased military spending will increase the public deficit.

(ii) Macroeconomic profit Qm is…
— AXEC (@EgmontHandtke) June 18, 2026

June 13, 2026

Occasional X: How it works (CDLXXXIII)

“If you have any doubt about the mainstream econ psychosis, or in Romer's words, their 'noncommittal relationship with truth,' read their cultish rants about the Guardian piece. We are drowning in debt, fascism is rising and clowns warn about 'the danger of degrowth for…
— AXEC (@EgmontHandtke) June 13, 2026

June 10, 2026

Occasional X: The history of economic thought is the history of scientific failure (XLIV)

“… but that’s bookkeeping, not causation. ” (MacroMadeSimple)

(i) That's one of the dumbest sentences in economics. The speedometer shows exactly the speed of a car, but does not cause it. Likewise with accounting, it shows exactly the amount of macroeconomic profit, which is…
— AXEC (@EgmontHandtke) June 10, 2026

Yes, we can resume that Austrianism is failed/fake science and that Austrians are dumber than a sack of rocks.
— AXEC (@EgmontHandtke) June 10, 2026

June 7, 2026

Occasional X: How it works (CDLXXXII)

“Billionaires increased most in the two places where the economy grew and poverty drastically went down: South Asia and East Asia. The best solution to poverty is a freer, growing, dynamic economy.” (Luis Garicano)

Luis Garicano never understood profit and, by consequence, how…
— AXEC (@EgmontHandtke) June 7, 2026

May 27, 2026

Occasional X: How it works (CDLXXVIII)

“I APPLAUD DAVID (SACKS’) NOBLE EFFORTS... BUT AT THE END OF THE DAY, IF YOU LOOK AT OUR NATIONAL DEBT... IF AI AND ROBOTS DON’T SOLVE OUR NATIONAL DEBT, WE’RE TOAST.” (Elon Musk, quoted by Vivek Sen)

AI and robots can't solve the debt problem.

The free-market economy runs on…
— AXEC (@EgmontHandtke) May 27, 2026

May 17, 2026

Occasional X: Clueless economists / Breakdown (XXVI)

“Your grandchildren won't even pay off Labour’s 100bn debt. The interest alone costs us about 5bn every single year. What did we get for all that money?” (NuZillund)

NuZillund has no clue how the economy works.

The free-market economy runs on profit. Macroeconomic profit Qm is…
— AXEC (@EgmontHandtke) May 17, 2026

May 14, 2026

Occasional X: Clueless economists / Breakdown (XXV)

“Japan carries the world's highest debt-to-GDP ratio (~260%). As rates rise, the cost of servicing that debt becomes alarming, and investors are demanding a risk premium.” (Tobias Carlisle)

If you didn't see this coming since 2020‡, you are scientifically incompetent.

The…
— AXEC (@EgmontHandtke) May 14, 2026

May 7, 2026

Occasional X: There is an absolute limit to the growth of public debt (IV)

“Debt by itself is a lousy guide. A $500,000 mortgage can be manageable or terrifying depending on salary, rates, and future earnings. Same with countries: the real question isn’t 'how much debt?' but 'can they carry it?' (Justin Wolfers)

That's a lousy answer. Private…
— AXEC (@EgmontHandtke) May 7, 2026

May 5, 2026

Occasional X: How it works (CDLXXV)

“There is only one way to fix the US debt problem: to invoke Article V of the US Constitution and amend it to include a debt brake.” (Steve Hanke)

Economic policy has no valid scientific foundations. Psychological plausibility is not the same thing as scientific validity.…
— AXEC (@EgmontHandtke) May 5, 2026

April 28, 2026

Occasional X: The futile attempt to recycle MMT (CXCVI)

“Therefore: bonds are not 'lending' the govt its own currency. They are a savings scheme for people with excess income.” (Richard Phillips)

Another example of the stupidity of MMTers.

The free-market economy runs on profit. Macroeconomic profit is given by the axiomatically…
— AXEC (@EgmontHandtke) April 28, 2026

The art of propaganda in general, and of MMT in particular, is to sandwich a lie between two truths.

Not all MMT statements are false. What MMTers hide is that Public-Deficit-Is-Private-Profit. This is, in essence, what the current economy drives. POTUS is on track to deliver…
— AXEC (@EgmontHandtke) April 28, 2026

April 17, 2026

Occasional X: How it works (CDLXXI)

“Students are 'arriving to campus not only skeptical of free markets, but openly embracing democratic socialist ideas. The problem isn’t that students have rejected capitalism. It’s that many have never been taught how it works or why it matters.'” (Steve McGuire, quoting WSJ)…
— AXEC (@EgmontHandtke) April 17, 2026

April 16, 2026

Occasional X: Economists still can't get the sectoral balances right (VI)

“We're repeating it for the umpteenth time to see if some people will stop being economic flat-earthers: Public debt is not debt; it is simply the amount of money injected by the States through their public spending and which becomes savings for families and businesses.” (Eduardo… pic.twitter.com/xVljXhFVRy
— AXEC (@EgmontHandtke) April 16, 2026

Occasional X: Clueless economists / Science (CCXCXXII)

“Public debt is not debt; it is simply the amount of money injected by the States through their public spending and which becomes savings for families and businesses.” (Eduardo Garzon, quoted by ?whispers?)

No, that's decrepid macroeconomics. The axiomatically correct… pic.twitter.com/UOP4NeVPpS
— AXEC (@EgmontHandtke) April 16, 2026

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Knowledge only — no opinion

Science does not explain everything, but non-science explains nothing.

Neither orthodox nor heterodox economics satisfies the scientific criteria of material and formal consistency.

Economists cannot explain how the economy works. The Profit Theory is false since Adam Smith. There is much opinion and little knowledge.

Opinion is the realm of political economics, knowledge is the realm of theoretical economics.

Political economics is scientifically worthless.

Theoretical economics is built upon clearly stated premises, i.e., upon a set of axioms.

Orthodoxy got the axiomatic foundations wrong and Heterodoxy has none at all.

Economics is a failed science. Economists are incompetent scientists.

Profit

Neither Classicals, nor Walrasians, nor Marshallians, nor Marxians, nor Keynesians, nor Institutionialists, nor Monetary Economists, nor MMTers, nor Austrians, nor Sraffaians, nor Evolutionists, nor Game theorists, nor EconoPhysicists, nor RBCers, nor New Keynesians, nor New Classicals ever came to grips with profit. Hence, they all fail to capture the essence of the market economy.

Because of this, economists have nothing to offer in the way of a scientifically founded economic policy guidance.

The hybrid science

As a first approximation, one can agree on the general characteristic that the economy is a complex system.

However, with the term system one usually associates a structure with components that are non-human. In order to stress the obvious fact that humans are an essential component of the economic system the market economy should be characterized more precisely as a complex hybrid human/system entity.

The scientific method is straightforwardly applicable to the sys-component but not to the hum-component. While it is clear that the economy always has to be treated as an indivisible whole, for good methodological reasons the analysis has to start with the objective system-component.

In gestalt-psychological terms the economic system is the foreground, individual behavior the background. Common sense wrongly insists that the hum-component must always be in the foreground. This fallacy compares to geo-centrism. The economic system has its own logic which is different from the behavioral logic of humans. The systemic logic is what Adam Smith called the Invisible Hand.

There are systemic laws but no behavioral laws. Systemic laws have the same methodological status as physical laws.

Neither Orthodoxy nor Heterodoxy can tell what the systemic laws of the actual monetary economy are.

Whether the outcome of the human/system-interaction is good or bad is a politcal question that lies outside of theoretical economics. Theoretical economics explains how the actual economy works - no less, no more.

Narrative vs.Theory

Psychological, sociological or behavioral assumptionism cannot yield anything other than a gossip model of the world. Second-guessing the agents is not economic analysis.

Science deals exclusively with propositions that can in principle be decided by objective means. The rest is opinion, faith, phantasy, motive speculation, allegation, hallucination, myth, paranoia, ink-blot association, psychology, philosophy, in one word: storytelling.

Storytelling is the original mode of communication in the social realm — except science.

Political economics is storytelling and, by default, the natural habitat of confused confusers. Walrasianism, Keynesianism, Marxianism, Austrianism are social narratives and not scientifically valid representations of reality.

"The truth is, most persons, not excepting professional economists, are satisfied with very hazy notions." (Fisher)

In marked contrast, theoretical economics lives up to the standards of material and formal consistency. A scientific theory is the best mental representation of reality that is humanly possible.

Theory starts with a set of objective and consistent axioms.

Paradigm Shift

"The problem is not just to say that something might be wrong, but to replace it by something — and that is not so easy." (Feynman)

"As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction." (Nell)

"The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory." (Blaug)

"Is it not a fact, which stares at us from the histories of all sciences, that it is much more difficult for the human mind to forge the most elementary conceptual schemes than it is to elaborate the most complicated superstructure when those elements are well in hand?" (Schumpeter)

"The task of producing knowledge against the grain requires imagination." (Mirowski)

"A new idea is extremely difficult to think of. It takes a fantastic imagination." (Feynman)

"The scientific imagination dreams of explanations and laws." (Peirce)

"It is brilliance of imagination which makes the glory of science." (Evans)

"... we know little more now about ‘how the economy works,’ ... than we knew in 1790, after Adam Smith completed the last revision of The Wealth of Nations." (Clower)

Selftest and to watch for

You apply one of these items

• supply-demand-equilibrium,

• general equilibrium,

• marginal utility,

• well-behaved production functions,

• total income = value of output,

• total income = wages + profits,

• I=S,

• wage rate down - employment up,

• behavioral axioms?

Then you are out of science because of unnoticed material or formal inconsistency.

Every economist who uses the concept of equilibrium is scientifically incompetent because she/he failed to notice that equilibrium is an economic nonentity.

Practically this means: as soon as the word equilibrium appears in an economic text it can be thrown into the waste basket. The same holds for all other nonentities.

The vast majority of economists deals mainly with nonentities. This is why Walrasianism, Keynesianism, Marxianism, Austrianism is scientifically worthless.

Since Adam Smith, economic policy guidance has no sound scientific foundations.

To be replaced (1)

The core premises of Orthodoxy are uncertain and false and this fully explains the failure of the research program.

“As with any Lakatosian research program, the neo-Walrasian program is characterized by its hard core, heuristics, and protective belts. Without asserting that the following characterization is definitive, I have argued that the program is organized around the following propositions: HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

The inescapable Paradigm Shift consists of the move from this obsolete hard core to the superior set of structural axioms.

To be replaced (2)

The fundamental equations of macroeconomics have been formulated by Keynes in two lines.

"Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment."

This elementary syllogism is demonstrably false. The demonstration consists in the proof that Keynes could not solve the Profit Puzzle. Neither did Post-Neo-New-Keynesians.

In the most general terms, the economics Paradigm Shift consists in switching from the behavior-centric bottom-up approach to the structure-centric top-down approach. This is comparable to the Copernican turn from geo-centrism to helio-centrism.

Consensus

Economics is a science without scientists. Because they are ignorant of the elementary difference between profit and income, the present generation of economists has not made and cannot make a significant contribution to the discussion about how the actual economy works.

Every orthodox or heterodox economist can convince himself/herself that their profit theory is defective.

Every non-economist can — by applying elementary logic — convince himself that conventional profit theories are false. See 'How the intelligent non-economist can refute every economist hands down'.

Because the profit theory is false the whole of conventional economic theory has to be rejected.

"What is now taught as standard economic theory will eventually disappear, no trace of it will remain in the universities or boardrooms because it simply doesn’t work: were it engineering, the bridge would collapse." (McCauley)

No scientist will ever accept Walrasianism, Keynesianism, Marxianism, or Austrianism. These approaches are logically and/or empirically refuted. This is the actual methodological state-of-art. Walrasians, Keynesians, Marxians, or Austrians are still at the proto-scientific stage. These approaches cannot be improved, only abandoned.

Economists are a public nuisance because they have an opinion on everything but knowledge of nothing.

About me

“Bottom line is that your profit law is just a definition you made up nobody else agrees with, nobody. You are all alone with your precious tautology.” Barkley Rosser

“In any event, your entire theory is based on you doing macro accounting in wacky fashion that nobody agrees with.” Brian Romanchuk

"Your stuff is at least original: it's quite cool after a couple of decades at this to see a fresh Economics. But real promises are not advanced: they were around for millennia until the Greeks obscured them with Metaphysics." Chris Cook

"No mate, they're you-blockers. You have all the personality traits of a crank, and the rest of them have tired of you. You could be 100% right, and you'd still die as your only follower." Steve Keen

"What you are doing fills is all with joy, your constructive critique is most welcome!"

Achim Truger,

German Council of Economic Experts,

in a failed attempt to be ironic

"200+ years of thought and yet you are the only one who gets it—or even understands your argument. Thank god we have you, pseudonymous Twitter user. Otherwise no one would know."

William Luther

Assistant Professor of Economics

in a failed attempt to be funny

"Egmonts profit law is the perfect equation that demonstrates this in action. Put the equation into a spreadsheet and then add government spending and watch how it flows into profits. Enter in some debt (-Sm) and watch too how that flows into profits. It can't go anywhere else."

Dean

About the rest of economics

Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, Pluralism are mutually contradictory, axiomatically false, materially/ formally inconsistent. Economics is a failed science.

“There are three classes of people: those who see. Those who see when they are shown. Those who do not see.” Leonardo da Vinci

In economics, the overwhelming majority belongs to Class III. This explains why economics is after 200+ years still at the proto-scientific level.

The obvious task for every economist is to advance from cargo cult science and political agenda-pushing to science. This is absolutely beyond the means of Class III people.

For 200+ years now, economists are not scientists but agenda pushers, useful idiots, clowns in the political Circus Maximus.

Nopopop

This blog does not add to any popular/un- popular opinion.

This blog does not hand out advice about how to avoid taxes, to get rich on the stock market, to be successful in business, to increase the wealth of nations, to run an economy, to maximize welfare, to prevent national/global bankruptcy, to improve the institutional setup of society, to get out of national/global depression, nor about how to save humankind or any subgroup thereof.

This blog is about the true theory of the actual monetary economy.

"In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion." (Stigum)

Focus

Science is of primary interest and importance. Scientists are of secondary interest.

With regard to science, most people lose focus easily because of a natural preference for anecdotes and gossip over facts or subjectivity over objectivity.

Hence, Schumpeter once considered it necessary to remind his habitually disoriented fellow economists: “Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.”

Science is about true/false and nothing else.

Disclaimer

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Texts: Parts of arbitrary length of any of the author's texts is and will be used again by the author in papers, books, websites, blogs, and other media without explicit reference. The right to make corrections or minor textual improvements on reutilization is reserved. Therefore, it is always a good idea to double-check for the latest version.

Caution: Do not expect a corroboration of your political view. Neither a refutation. Political economics has been scientifically worthless since Adam Smith. Politics has to be separated from economics because it is categorically different from science. The best science can do and has always done is to prove beyond reasonable doubt that you have been objectively wrong or ignorant until now. Science goes beyond the naive common sense of today and becomes the sophisticated common sense of tomorrow.

See also Terms of Use and Legal at www.AXEC.org

Outlook

To recall, while political economics is storytelling, theoretical economics adheres to scientific standards.

The first task of theoretical economics is to get the axiomatic foundations right. This is what J. S. Mill called the opus magnum. Neither Orthodoxy nor Heterodoxy came up with a reasonable solution to this day. This explains the secular stagnation of economics.

There is no serious alternative to structural axiomatic economics. This is not a matter of opinion but of proof. The sole criteria are material and formal consistency.

All of economics has to be reconstructed from the ground up.

Major economic policy implication

The price mechanism does not work as standard economics hypothesizes. The axiom-based Employment Law states that overall employment increases if the average wage rate increases relative to average price and productivity. This gives one the lever to improve the employment situation all over the world and to fend off deflation without rising debt and without artificial capacity growth. To increase the average price relative to the average wage rate and productivity increases unemployment.

Right policy depends on true theory.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

Lacking the true theory, economists promote for more than 200 years opinion instead of knowledge.