Most of you by now have already seen this, I’m sure:
(I saw that particular video linked from EPJ, but it’s all over the place.)
Now lots of people are (rightly) flipping out over Greenspan’s move into MMT territory. But what I want to focus on is his absurd claim that there is “zero probability” of default.
Yet even if we focus exclusively on the United States, Greenspan is telling us that when we had about 2 days to go and no debt ceiling deal, that there was a 0% probability of default?! Does he know what “0%” means?
It’s one thing to say that the Fed has the technical ability to create an unlimited amount of dollars. It’s another to predict that that’s what will happen.
By the same token, I could say, “The federal government has more than $2 trillion coming in through tax revenues. So the government just has to cut spending to less than that, and interest payments are fine. There is therefore a 0% probability of default.”
My hypothetical analysis is only slightly less ridiculous than Greenspan’s.