>   
>   (email exchange)
>   
>   On Tue, Oct 12, 2010 at 11:31 PM, Michael wrote:
>   
>   Thought you might like this. There is a hugely strong relationship between deficit
>   spending and corporate profits 1 year later. This is corporate profits with a 1
>   year lag, regressed against Quarterly debt to GDP.
>   

Yes, the old Levy profit equation from the 30’s maybe!

>   
>   From 1970 on, this is a strong relationship, except for a few quarters around 1997.
>   I’ll follow with another chart in a minute.
>   
>   The Senate run is improving your visibility – plus I am seeing Chartalism everywhere
>   now. It used to be fringe, now many people use it as a given…
>   

Good to hear it, thanks!

6 Responses

  1. Hi Warren – great blog, and very informative posts. Glad to see you are getting the word out on the realities of how our monetary system operates.

    I have a question on what seems like your relative buliishness on the equity markets. Completely agree the deficit has been supporting corporate profits for sometime now, and we are in no position to start contracting fiscal policy. However, it appears policymakers have other ideas, and are set on shrinking the deficit hurting equity valuations. My fear is policymakers will use the eventual announcement of QE2 as cover to start cutting spending, hurting stocks.

    Do you disagree we will get a contraction of fiscal policy at some point in the next few months/quarters? Or is there another side to your bullishness on equities, and I just missed the post?

    Thanks, and good luck with the Senate run. If Obama had any sense, you would have replaced Romer 🙂

  2. My feeling is that chartalism is considered “fringe” by lay people but that inside the economics profession there is some degree of understanding that it’s an accurate model. People’s beliefs about it tend to be shot through with weird misconceptions, but in the end the closer the person I’m talking to is to being a “real” economist, the more they seem to subscribe to the basic principles of chartalism, if not all of its conclusions.

    Maybe this is a bit different than the past, though; I’m not that old.

    APS

    1. The blogs likely have something to do with this perception. Not only is the information getting out in places like this, but an army of MMR’ers commenting on economist’s and financial blogs has raised the specter among some of the “illuminati” that they may be in the dark about operations, forcing them to recalibrate or look foolish (heaven forbid). I have been noticing a gradual shift of positions, too. The yeast seems to be working and the bread is rising. But we need to keep kneading it.

      1. Well, two steps forward ,one step back. This morning, Simon Johnson (who’s so good on bank reform issues) dropped this…
        No one is yet seriously proposing to address our underlying budget issues. There are certainly people who claim to be “fiscal conservatives” – some of the right and some on the left – but none can yet be taken seriously. The implications are very bad for our fiscal future.
        http://baselinescenario.com/2010/10/14/there-are-no-fiscal-conservatives-in-the-united-states/#comment-67925

        Down hill from there, but it was nice to see his comments page disagreeing with him. This is what I wrote–

        Simon, you’re a good guy but seriously, Bretton Woods is dead. Its time to reject Pete Peterson and all his works and embrace Warren Mosler. :o)
        http://moslereconomics.com/

      2. I just went and added my voice to those trying to spread the word at the “Baseline Scenario” blog. You’re right Beowulf, the functional finance people are coming out of the woodwork. First time I’ve ever seen this on “Baseline”. We need to keep up the momentum and get the word out!

Leave a Reply