The thylacine in the headline is the long sought and now extinct, budget surplus. My latest in Inside Story.
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The thylacine in the headline is the long sought and now extinct, budget surplus. My latest in Inside Story.
John Quiggin 
“Rather than worrying about absolute levels of debt, fiscal policy should be focused on the long-term real rate of interest. It’s this that determines whether long-term projects are sufficiently profitable to justify the necessary investment.”
As I have stated before the Australian Government has little influence over real interest rates which are globally determined and predominantly influenced by the monetary/fiscal policies of the large economies. You are confident about interest rates remaining low. I am not – they might but maybe they will take off. To guard against this risk prudent governments should target the level of debt, not its price – the former they can control, the latter they cannot.
On cryptocurrencies, I am less sure than you are that they are doomed to fail. They are certainly very hard or impossible to value but some of the new cryptos (Ethereum, Filecoin) offer intriguing technological possibilities. I probably won’t buy the coins associated with these blockchains but these technologies are being adopted by large companies like Visa and Microsoft.
“Rather than worrying about absolute levels of debt, fiscal policy should be focused on the long-term real rate of interest. It’s this that determines whether long-term projects are sufficiently profitable to justify the necessary investment.”
As I have stated before the Australian Government has little influence over real interest rates which are globally determined and predominantly influenced by the monetary/fiscal policies of the large economies. You are confident about interest rates remaining low. I am not – they might but maybe they will take off. To guard against this risk prudent governments should target the level of debt, not its price – the former they can control, the latter they cannot.
On cryptocurrencies, I am less sure. Some of the new cryptos seem interesting and their blockchains are being used by Visa and Microsoft.
The interesting cryptos seem to me to be blockchains that offer a service (e.g. storage) in addition to a store of value such as bitcoin. These include Ethereum and Filecoin. Clearly not for the fainthearted. You would have lost a lot if you had purchased 2 weeks ago and sold yesterday.
I’ll comment on this more when I can. Meanwhile, I am more one-eyed than ever. 😉 Just had emergency eye surgery to save sight in my left eye from a bad retinal tear caused by old age, nothing more. My wife has, for just the second time in her life, after a series of her own stressful events with my eye surgery being the latest, suffered a likely harmless but florid TGA (transient global amnesia) event. (No signs of stroke. I have done all the checks.) She can’t remember a thing from the last several days and maybe for up to 6 weeks except for snatches. Keeps asking me ten times an hour what is wrong with my eye and why I am laying down all day. Live-in adult son is taking up the slack. We are fine. Of course, full doctor’s checks for her will happen tomorrow.
My son has lost on cytpo in the last several days. He has cut his losses now. But overall his gain on crypto since Bitcoin inception (and Etheryeum) is off of the order of 25 times. He is out of the crypto market for the time being. More to say later. I am only permitted to be upright 15 minutes in the hour.
Look after both of you, Iko.
A footnote on perpetual bonds. She Britannia really did rule the waves, on a diet of rum, sodomy, the lash and Consols, the Treasury managed the last as a tap stock. When they needed to borrow some more to pay the armies of the latest coalition against Napoleon, they left the coupon at the 2.5% set fifty years before and sold the new bonds for
… whatever they could fetch. This saved on administrative costs. More important, it meant that all Consols were perfect substitutes, and the market for them was deep, liquid, transparent and hard to game.
Not impossible, though. Nathan Rothschild had a very good private news service – probably using carrier pigeons. So he was the first in London to hear of the victory at Waterloo. He rushed to the Exchange and *sold* stock. OMG Rothschild has heard of a great defeat! Sell! Allowing the great man to buy heavily using proxies, and making a huge profit when the public news caught up.
I have to be brief.
Crypto currency is an intentional scam by its creators and a proportion of its users. Believing that the creators of crypto(s) had any genuine idealistic intentions would be to be entirely credulous. Crypto creators wanted to take power and wealth from the established capitalist banks and from the nation states who create fiat money (and thus from the mass of the people if such states are social democratic). While the claim is made that this new form of capitalism will be an advance on existing capitalism, it will not be in moral and political economy terms. It is simply another higher stage of capitalism; higher than any of us over 40 or 50 years old ever envisaged. Each higher stage of capitalism is ipso facto worse and will prove worse for humans and nature.
Footnote: Mrs. Iko has recovered most of her memories. Her hippocampus simply had temporary read and write memory problems and the reasons are interesting but outside the scope of this blog. We are just biological machines when all is said and done; albeit we feel and feeling means moral philosophy is valid and indeed imperative.
Ikon, hope you and Mrs Ikon fully recover. Not much chance of recovering from old age. MacIkon it seems can afford you both a new electric vehicle.☺
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JQ said “That requires public investments with returns large enough to service the debt. ”
Where is the list of public investments with returns large enough to service debt?
Research? Dedicated site? Government report?
Ala “shovel ready” – “serviiceable public ready” list? With private vs public split, as I also want to know who is biasing / bleeding the flow.
I agree with Ikon that virtually all cryptos are a scam. The only exception I would make is for the original – bitcoin. Bitcoin is uniquely placed to become the worlds hardest asset, being absolutely scarce. It will be extremely volatile for a while yet ( volatility is going down slowly ) but could eventually take its place alongside gold. All other cryptos ride on the coat-tails of bitcoin, which is obvious when you look at the graphs. People will buy into bitcoin at the price they are comfortable with and therefore the majority will miss out on the huge gains. Even many early fans mostly sold after 10x to 100x gains. Now some institutions are buying bitcoin ( NOTE: virtually none of the others ) and eventually even Central Banks probably will. Recently the main Singapore Sovereign Wealth fund started accumulating and Australia should do the same.
Contrary to FUD, use cases are slowly growing as well, though this isn’t a real requirement for it as its asset properties will be enough.
Best wishes to you and your wife, Iko
Good luck with the recoveries, Iko.
Joe Blow: I don’t understand how Bitcoin expects to pay miners once the supply of new coins dries up. At that point transaction costs will have to go up and looking at the transaction volumes they will have to go up a lot. So, just like states dependent on stamp duty revenue, the bitcoin operators will have to find ways to stimulate the trading market rather than just the book value of the coins.
My little crypto speculating bot would lose a fortune if I was paying even $1000 per transaction. But right now BitCoin is burning ~200TWh/year to support ~10M transactions/year. Even using new build windfarms at ~$20/MWh that’s $400 per transaction right now. To assume that cost will drop means you’re assuming that mining will become dramatically cheaper or electricity will do.
Sorry, slipped a decimal in my guesstimaths: 300k transactions a day is ~100M/year, so each bitcoin transaction only burns $40 worth of electricity. Makes buying a pizza with bitcoin much more affordable…
Moz – these are all good questions, but have been answered endlessly by bitcoiners over the years. In fact bitcoin had a hard fork several years ago over this very question ( sort of ). That is why the BTC chain limits block size, to keep it decentralized and enable reasonable miner compensation via highish transaction fees. Despite what some pundits and detractors say, bitcoin is not designed to pay for coffees, second layers will do that. Bitcoin is like TCP/IP of the internet, a base layer that is designed to do one thing well and not change much. Everything else will/is being built on top of that.
Also pundits and detractors alike tend not to understand that the energy used for bitcoin is to protect the network from attack, not for transactions. The greater the perceived threat, the more energy required. State level attacks are already probably too difficult, but we will see. Think of it like a ‘force field’ protecting around $1 trillion.
I still remember how years and years ago I read for the first time in my life an explanation of futures trading. I can’t remember all the details, but I remember how the journalist began with an anecdote about receiving a phone call from somebody who made him a pitch about how coffee prices were about to skyrocket. He went on to say that what he usually did when somebody explained to him how it was the ideal time to buy (any kind of investment) was check into whether it was in fact the right time to sell, and how shortly after he received this pitch the prices of coffee actually slumped.
So when I saw an outdoor advertising poster on a bus shelter saying that when you saw posters about Bitcoin it was time to buy, the thought that came into my head was that surely when you saw posters advertising Bitcoin it was time to consider selling.
I’d never get into the cryptocurrency market myself, long or short, but I suppose advertising posters like that wouldn’t go up if the pitch they made didn’t affect some people. Only, why?
On the main part of the original post. I think hardcore MMT theorists like Bill Mitchell can give themselves a pat on the back. They have been basically right. But Keynesians and Chartalists also said much the same thing from long ago to recently albeit in different terms. What the MMT theorists added was a dramatic new rhetorical spin. However, in the end it was not MMT rhetorical arguments which changed the world but a crisis which could not be ignored. This meant a policy of spend, spend, spend or else face a massive revolt from the (eventually) starving masses. The PTB decided that deficit spending was going to be less painful than being lynched.