Laurence Kotlikoff has been making waves by using “inter-generational accounting” and CBO and IMF data, to compute a fiscal gap of $202 Trillion in present value. He concludes that this gap shows that the US is “bankrupt” as of now. Evidently, publications like Bloomberg take this sort of thing seriously since they publish it. But Modern Monetary Theory (MMT) economists, think it’s nonsense, due to the inapplicability of inter-generational accounting to Governments sovereign in their own currency.
Mike Norman an MMT economist with a very good blog, got the chance to comment on Kotlikoff’s views, and also some nonsense of Tim Geither’s and President Obama’s at RT.com.
Mike has very emphatic views on Kotlikoff and inter-generational accounting. In addition, he doesn’t think much of the plans of Geithner and Obama to base our US economy on austerity and exports. In fact, his broad smile at the very mention of these ideas, along with his comments, tell the whole story. The idea that the US can or should have an export-led economy anytime soon is a recipe for economic disaster for ordinary Americans. As Mike makes clear, it asks us to forego receiving real wealth and live in poverty, while we send our own real wealth to foreign nations in return for their own non-convertible currencies.
The fact that Obama would even entertain such a policy for America indicates how wrong-headed and foolish the thinking of he and his economic team are. Anyway, enjoy Mike’s interview. He doesn’t pull his punches.
(Cross-posted at FireDogLake.com and Fiscal Sustainability).