Bonds!

[rogermunibond]

@wabuffo have you looked at what Bessent et al. are doing from the MMT perspective?

 

govt sector - increase deficits - reduce spending to rent seeking/maybe reallocate to more productive federal spend/attempt to increase private sector investment through dereg etc.

private sector - increase surplus - reduce taxes/decrease consumption (tariffs)/increase private sector investment

foreign sector - decrease surplus - tariffs/reduction in US consumption of imports

 

Does that somewhat simplistically describe their puts/takes in the MMT sectoral model?

[gfp]

Its good to follow Bill on twitter @wabuffo

 

Warren Mosler on twitter  @wbmosler

 

Mosler stuff

https://moslereconomics.com/mandatory-readings/

https://docs.google.com/document/d/1gvDcMU_ko1h5TeVjQL8UMJW9gmKY1x0zcqKIRTZQDAQ/edit?tab=t.0

http://www.collectedworksofwarrenmosler.com

 

L Randall Wray

Books:

Understanding Modern Money

Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems

Macroeconomics (textbook) by Bill Mitchell, Randall Wray, etc.

 

Like Bill says, ignore the policy suggestions like guaranteed government job bank, etc, etc, etc...  (the policy suggestions by some of the authors will end up turning you off and people then tend to throw the baby out with the bathwater on what is an accurate description of our current money system.)

 

 

[cubsfan]

3 hours ago, rogermunibond said:

@wabuffo  that's great for explaining this.

 

Definitely!!

[Dalal.Holdings]

On 7/13/2025 at 8:44 PM, wabuffo said:

Bottom line - receipts are up and staying up in 2025.  Mostly due to continued payroll taxes flowing into the US Treasury + strong quarterly individual estimated taxes and corporate taxes paid in June.  Yeah - duties helped but they weren't as big a factor and are drawing too much of the headlines, IMHO in terms of reasons for the unusually large June surplus.

 

 

So there is no reason we shouldn't expect continued surpluses ? Do I have that correct ?

[COBFInfinity]

On 7/15/2025 at 2:52 PM, Dalal.Holdings said:

 

So there is no reason we shouldn't expect continued surpluses ? Do I have that correct ?

 

Lol, there wasn't even a surplus this one time.

 

"The Treasury Department noted that the month benefited from calendar adjustments, without which the deficit would have been $70 billion."

 

Source: https://www.cnbc.com/2025/07/11/treasury-posts-unexpected-surplus-in-june-as-tariff-receipts-surge.html

[wabuffo]

The Treasury Department noted that the month benefited from calendar adjustments, without which the deficit would have been $70 billion."

 

It wasn't the US Treasury saying that - it was the Congressional Budget Office.  And they were saying that before the month even closed.  And of course, they're totally wrong.

 

But other than that....  I would caution reading anything written by interns on the CNBC website....

 

Bill

[changegonnacome]

@wabuffo you watching any of Warsh interviews....most recent one on CNBC was interesting and alluded to his plan for a plan for the Fed's role....now listen you need to be careful every interview is a job interview for him right now.....but he seems to be hinting at giving the Prez want he wants on short rates (to the extent he can)....where Bessent will continue to fund the Treasury & benefit lower funding costs.....and giving the economy/housing market relief at the 10yr most likely.....in what sounds like T & Fed coordination....by stopping b/s run-off for a time and/or targeting rolloff re-purchases at that 10yr.....he's talking about a Treasury-Fed accord....but what he really seems to be talking about is a transition period of quite deep monetary and fiscal coordination to help the fiscal get its house in order.....before the Fed balance sheet can be shrunk.....and in Kevin's view its true independence restored (as he views QE/QT as hybrid monetary/fiscal activities.....we are, in practise, talking about multi-year project here

 

Interested in your take.

[wabuffo]

I don't think Warsh is going to get the job.  He lost out to Powell the first time when Trump picked Jerome over him.   I doubt his odds improve the second time around.

 

To me, Bessent is the front-runner (if he wants the job). 

 

I think people vastly overstate the Fed's importance - so I view much of the hand-wringing about the Fed (and its independence) as much ado about nothing.   The US Treasury (via Congress) is the 800-lb gorilla on all things monetary as it pertains to its impact on the US economy.

 

If I could look into the future and I could be told either:

1) the rate that the Fed would set at each meeting for the next 5 years, OR

2) the size of the US Treasury deficit-as-a-%-of GDP.

 

I'd pick #2 as much, much, much more important than #1

 

Bill

Edited July 18, 2025 by wabuffo

[cubsfan]

1 hour ago, wabuffo said:

The Treasury Department noted that the month benefited from calendar adjustments, without which the deficit would have been $70 billion."

 

It wasn't the US Treasury saying that - it was the Congressional Budget Office.  And they were saying that before the month even closed.  And of course, they're totally wrong.

 

But other than that....  I would caution reading anything written by interns on the CNBC website....

 

Bill

 

Damn - thanks for clearing that up!

[Dalal.Holdings]

So @wabuffowe should expect surpluses for at least the next few months, correct ?

[wabuffo]

we should expect surpluses for at least the next few months, correct ?

 

No - deficits (maybe big ones in Jul, Aug).  We'll see about September (see below).

 

The structure of the US Treasury's cash flows are generally as follows:

 

1) You have spending every month that is more or less regular but growing a bit over time.

2) You have payroll taxes every month that are also more or less regular but also growing over time.  The issue is that these payroll taxes, while supplying most of the receipts, only cover ~70% of monthly spending.

3) Finally, you have certain months where individual income taxes, estimated taxes and corporate taxes are due.  This makes receipts lumpy.  When there is a large amount of these taxes paid (like April of course), monthly surpluses occur.  But you also have Jan, Mar, Jun, Sept where other taxes are due like estimated taxes and corporate taxes.  Sometimes these are enough to put receipts over the top and these months produce small surpluses, sometimes not, and we get small deficits.  This is where September will be (small surplus or deficit).

 

Of course, a recession can spike unemployment, produce business losses and cause receipts to fall quickly and as a big percentage of what they were in a healthy economy.

 

Bill

[changegonnacome]

1 hour ago, wabuffo said:

Bessent is the front-runner (if he wants the job). 

 

and what would you expect a former Treasury secretary who'd most recently felt the pain of financing the treasury to do to help out the budgetary math of his replacement and his former boss (before he became independent of course)......going for cuts at the short end is obvious......you have any sense the next Fed chair is going to go for YCC......or YCC-lite which would be to pause QT...and target all roll over purchases at one point on the curve....the 10yr being the obvious number you'd like to artificially depress by purchases or forward guidance around bands the Fed deems acceptable before interventions.....going Japanese is an obvious next move for the US that cant quit 7% budget deficits!

[Munger_Disciple]

On 7/14/2025 at 9:31 AM, gfp said:

Its good to follow Bill on twitter @wabuffo

 

Warren Mosler on twitter  @wbmosler

 

Mosler stuff

https://moslereconomics.com/mandatory-readings/

https://docs.google.com/document/d/1gvDcMU_ko1h5TeVjQL8UMJW9gmKY1x0zcqKIRTZQDAQ/edit?tab=t.0

http://www.collectedworksofwarrenmosler.com

 

L Randall Wray

Books:

Understanding Modern Money

Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems

Macroeconomics (textbook) by Bill Mitchell, Randall Wray, etc.

 

Like Bill says, ignore the policy suggestions like guaranteed government job bank, etc, etc, etc...  (the policy suggestions by some of the authors will end up turning you off and people then tend to throw the baby out with the bathwater on what is an accurate description of our current money system.)

 

 

 

Is Stephanie Kelton's book any good?

[Munger_Disciple]

10 hours ago, wabuffo said:

I don't think Warsh is going to get the job.  He lost out to Powell the first time when Trump picked Jerome over him.   I doubt his odds improve the second time around.

 

To me, Bessent is the front-runner (if he wants the job). 

 

I think people vastly overstate the Fed's importance - so I view much of the hand-wringing about the Fed (and its independence) as much ado about nothing.   The US Treasury (via Congress) is the 800-lb gorilla on all things monetary as it pertains to its impact on the US economy.

 

If I could look into the future and I could be told either:

1) the rate that the Fed would set at each meeting for the next 5 years, OR

2) the size of the US Treasury deficit-as-a-%-of GDP.

 

I'd pick #2 as much, much, much more important than #1

 

Bill

 

If treasury is way more important than the Fed, why would Bessent want the Fed job?

[gfp]

7 hours ago, Munger_Disciple said:

 

Is Stephanie Kelton's book any good?

 

I haven't read it.  I did see her short movie "finding the money."  I assume the book has a lot of policy ideas in it and would turn most people off for that reason.  If it doesn't - if it is just a straight intro to MMT aimed at average folks - maybe it is worth reading. 

 

If you understand the reflection of the deficit like a reflection in a lake already, you probably get the gist of Kelton's book

 

[wabuffo]

If treasury is way more important than the Fed, why would Bessent want the Fed job?

 

Ego.   Who gets more press - the Fed Chairman or the US Treasury Secretary?   Can you name the last 4-5 Treasury secretaries?  But I bet you can name the last 4-5 Fed Chairs.

 

Bill

Edited July 19, 2025 by wabuffo

[cubsfan]

10 minutes ago, wabuffo said:

If treasury is way more important than the Fed, why would Bessent want the Fed job?

 

Ego.   Who gets more press - the Fed Chairman or the US Treasury Secretary?   Can you name the last 4-5 Treasury secretaries?  But I bet you can name the last 4-5 Fed Chairs.

 

Bill

 

Now that makes perfect sense.

[Munger_Disciple]

2 hours ago, wabuffo said:

If treasury is way more important than the Fed, why would Bessent want the Fed job?

 

Ego.   Who gets more press - the Fed Chairman or the US Treasury Secretary?   Can you name the last 4-5 Treasury secretaries?  But I bet you can name the last 4-5 Fed Chairs.

 

Bill

 

Guess so. But there were many famous treasury secretaries in the past; Alexander Hamilton, Andrew Mellon, etc. However you are right that the idiots on CNBC & other media like to talk endlessly about the Fed, which Fed sort of encourages with their press conferences and leaks to WSJ reporters, thus creating a runaway feedback loop promoting their own importance. 

Edited July 19, 2025 by Munger_Disciple

[Munger_Disciple]

4 hours ago, gfp said:

 

I haven't read it.  I did see her short movie "finding the money."  I assume the book has a lot of policy ideas in it and would turn most people off for that reason.  If it doesn't - if it is just a straight intro to MMT aimed at average folks - maybe it is worth reading. 

 

If you understand the reflection of the deficit like a reflection in a lake already, you probably get the gist of Kelton's book

 

 

I listened to Kelton on a podcast once. Prior to that, I was under the impression that she was totally insane but my opinion of her changed after listening to her. I still don't agree with all her her policy ideas but she was a lot more impressive and intelligent than I thought before. 

[Spekulatius]

Inflation in Japan is in the 3%+ range, higher than in the USA. Interest rates on longer term bonds in Japan are rising accordingly, Looks sticky to me too:

https://tradingeconomics.com/japan/core-inflation-rate

 

 

 

Edited July 20, 2025 by Spekulatius

[Dalal.Holdings]

So, uhhh if IEEPA tariffs are ruled unconstitutional, Federal gov't loses a big source of revenue and deficits go even higher from already sky high levels...that's nothing to be alarmed by ???

 

We've gone from "deficits don't matter" to "deficits are good"

[TwoCitiesCapital]

3 hours ago, Dalal.Holdings said:

So, uhhh if IEEPA tariffs are ruled unconstitutional, Federal gov't loses a big source of revenue and deficits go even higher from already sky high levels...that's nothing to be alarmed by ???

 

We've gone from "deficits don't matter" to "deficits are good"

 

If you think that's alarming, wait until you hear about what the recent tax cuts are going to do ...

 

 

[Dalal.Holdings]

21 minutes ago, TwoCitiesCapital said:

 

If you think that's alarming, wait until you hear about what the recent tax cuts are going to do ...

 

 

 

Oh, I'm well aware of the tax cuts. Most of them are just extensions of the 2017 cuts anyway.

 

I'm mainly pointing it out on this thread because there seems to be consensus now that "deficits don't matter" or even "deficits are good" and many folks are piling into long duration bonds all for a measly few basis points of yield...

 

 

Edited September 2, 2025 by Dalal.Holdings

[gfp]

Just checking in with my bond bears..  What ever happened to @Blake Hampton ??  

 

Were 5% yields a risky place to buy treasury securities or did they just magically balance the budget or what?  (also sorry Cubsfan for recommending you to close out your position a little early - I honestly am expecting a re-acceleration in PMI type real economy mo-mo) 

 

 

Edited September 10, 2025 by gfp

[cubsfan]

10 minutes ago, gfp said:

Just checking in with my bond bears..  What ever happened to @Blake Hampton ??  

 

Were 5% yields a risky place to buy treasury securities or did they just magically balance the budget or what?  (also sorry Cubsfan for recommending you to close out your position a little early - I honestly am expecting a re-acceleration in PMI type real economy mo-mo) 

 

 

 

I was delighted with your suggestions, so no apology necessary. I piled it into IVES and DKNG - which has worked out well!