07 Mar 2018


Contra Krugman, Don Boudreaux, Economics, MMT, Scott Sumner, Shameless Self-Promotion, Trade 8 Comments

==> The latest Contra Krugman tackles Modern Monetary Theory (MMT).

==> Wendy McElroy writes about privacy and the (modern) connection to cryptocurrencies.

==> A few people on Twitter were giving me a high-five for my old article on trade deficits and fiat currency. I re-read it and thought, “I agree. That *was* a good article.”

==> Hey kids, don’t let me forget: Check out Don Boudreaux’s pushback against Scott Sumner, on the issue of whether the people in a country have to “pay back” trade deficits. I think this is a really interesting issue, and I see where both Scott and Don are coming from. (I mean, they’re both coming from Fairfax, but you get what I’m saying.)

8 Responses to “Potpourri”

  1. David R Henderson says:

    Scott’s not coming from Fairfax. He lives in southern California and, before that, was a long-time resident of Massachusetts.

    • Bob Murphy says:

      Hey David,

      I was referring to Scott being the head of this Mercatus chair. I think he actually physically went to Mercatus for a while, when they first took him on in this role.

  2. Tel says:

    Let’s suppose you exported valuable goods to Venezuela maybe sometime in 2010 before things got crazy, suppose you got paid in the local currency and put your money in a Venezuelan bank. Now you are thinking, “Hmmm, I should buy something with all those good honest Bolivars, backed by the wonderful bus driver republic, I wonder what I should buy?”

    You might discover that as it turns out those trade deficits don’t need to be paid back… but the lack of reciprocal payment is usually indicative of some other problem, and might cause a few red flags in terms of who will deal with the recalcitrant payer in future. Pretty sure no exporter on Earth would accept Venezuelan Bolivars today.

    Just for the record I do expect that the USD will lose some value in the next year or two, but not the kind of hyperinflation and currency destruction that Venezuela is going through. Americans will for the most part be paying back their trade deficits at some stage.

    • Tel says:

      From Sumner’s article:

      In the very, very long run, there are no deficits at all. The net present value of taxes from now until the end of time should equal the net present value of government spending from now until the end of time. And the same is true of trade deficits.

      Clearly this is not the case for any fiat currency where hyperinflation has destroyed the currency, as has happened a number of times in the past. Nor is it true for governments that issued a fiat currency and were then defeated or collapsed. For example if you own Confederate States dollars or French Assignats then other than as collector’s items they are not redeemable in any way.

      One way of looking at this is to consider that since from now until the end of time is a very long time indeed, we can safely consider every fiat currency will be destroyed by inflation sometime between now and then, possibly faster or slower on a case by case basis. The individual currency holder probably is not thinking along those lines, but that was Scott’s premise.

  3. Tel says:

    Regarding MMT, it’s got supporters all over the place, and I quote, “No serious economist denies this policy works!”


    Bob, you look a lot like a non-serious economist.

  4. senyoreconomist says:

    Why do you highlight *was* with asterix like that? Are you implying it is no longer a good article and that you now disagree with something in it?

    • Bob Murphy says:

      No, I was just highlighting the word for emphasis. Like Lois Lane saying, “You *are* Superman…” to Clark Kent.

      • senyoreconomist says:

        Thank you for clarifying that.

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