Thursday, March 29, 2012

More fear mongering on Bloomberg



Caroline Baum is a Bloomberg.com columnist who writes about bonds, banks, budgets and bubbles, of which she seems to know nothing. Maybe that's because Ms. Baum has a degree in poliitical science and cinema studies (which I guess qualifies her in the eyes of Bloomberg to write about bonds), but I'm not here to cast aspersions.

In her most recent piece, "Four Numbers Add Up to an American Debt Disaster," Ms. Baum has produced a real doozy. In that column she basically states that the United States is facing a "crisis" and a "disaster" becauase a lot of its debt is short term debt and $5.9 trillion of it is going to have to be rolled over five years from now.

Here's an excerpt:

"In plain English, the Treasury’s reliance on short-term financing serves a dual purpose, neither of which is beneficial in the long run. First, it helps conceal the depth of the nation’s structural imbalances: the difference between what it spends and what it collects in taxes. Second, it puts the U.S. in the precarious position of having to roll over 71 percent of its privately held marketable debt in the next five years -- probably at higher interest rates."

"In plain English??"

"Issuing short term debt helps to conceal the depth of the nation's structural imbalances??"

What the hell does that mean?

"Puts the U.S. in the precarious position of having to roll over 71% of its privately held marketable debt?"

Oh really?

Even if Ms. Baum were not well versed in MMT, or if she didn't understand the fact that there is never a problem rolling over debt denominated in a nation's own currency, she still could have gone to the Treasury's website and had a look at the amount of debt that the Treasury rolled over, successfully, last year. Had she done that Ms. Baum would have found that the Treasury rolled over $64 trillion of debt last year (see chart below) without so much as a hiccup. And, by the way, interest rates went down all along the yield curve, the Fed funds rate remained at zero, the dollar went up, stocks rallied, the economy grew, etc, etc, etc. In short, no disaster, no crisis, even though the amount rolled over was more than 10 times the amount that Ms. Baum tells us will produce a disaster.

And that's just the tip of the iceberg because in the past 10 years the Treasury rolled over $473 TRILLION of public debt (almost 80 times Baum's disaster-triggering-quantity), once again without any problem whatsoever. Rates even came down.

Just by looking at the data any reasonable person would have had to question their premise that a $5.9 trillion rollover five years from now would be something that triggered a crisis and a disaster. However, Caroline Baum did not bother to check. Ms. Baum prefers to engage in fear mongering.

I cannot tell if this is ignorance or subversion, but I'll give Ms. Baum the benefit of the doubt and call it ignorance. Whatever it is, it's fear mongering and It's completely irresponsible. It's also terribly shoddy journalism because the facts are easily available to anyone who would take five minutes to go get them.

From the Daily Treasury Statement of Sept 30, 2011


11 comments:

Tom Hickey said...

Judging from Mayor Bloomberg's handling of recent events under his charge, the employment of a stooge at the supposedly professional publication bearing his name fits right into the scenario. Corporate media = propaganda machine. Bloomberg is clearly in bed with Peterson, the Kochs and he rest of the elite manipulating public opinion through disinformation.

Mike Norman said...

I just had my second meeting with Bloomberg TV execs about doing a show. There seemed to be interest, but it was lukewarm at best. Today I called one of the producers and proposed coming in as a guest to debunk the notion that a debt rollover is sufficient to trigger a crisis. He said he'd "give it some thought." I don't expect to hear back. Baum's article is an embarrassment.

Mike Norman said...

And another thing...I wrote a comment in the comment section, pointing to these numbers ($64 trillion rollover last year, etc) with links, but they haven't published the comment.

Matt Franko said...

" they haven't published the comment."

Censorship!

PS Mike great job with Larry K last night.... muddle through looks like it can work for corporate profits... and the oil Cos. really seem to be in the driver's seat for now...

Resp,

Mike Norman said...

Thanks, Matt.

Unforgiven said...

There's an obsession with this nonsense. It sells and Boobberg likes that just fine.

Matt Franko said...

Mike,

Maybe she would meet with you in NYC for lunch or something and you could explain things to her....

Although currently extremely misguided on fiscal, she seems to be "of the left" and apparently a tough "broad" (FD: I dont use that term here meaningfully/literally/no disrespect intended), she doesnt seem to shrink from controversy:

http://newsbusters.org/blogs/justin-mccarthy/2008/09/18/bloomberg-columnist-explains-pds-uses-vulgarity

Seems like (based on her politics exemplified here) she would prefer to know the truth about our govts fiscal options.

Just a suggestion... ;)

Resp,

Mike Norman said...

I've had conversations with her via email and she comes across as very arrogant. I'm sure she sees herself as being way to self important to have lunch with me, nor do I think that she would even entertain the idea that I could teach her anything. (After all, she does have a degree in cinema!) Maybe SHE even censored my comment. Who knows? (It's still not up.)

As far as being on the left, she is on the left like other Progressives and liberals in that they mainly want to defend social issues. However, when it comes to economics and/or tying economics to social issues, she fails like all other Progressives in that they have totally bought into the fake, "out of money" dogma that Conservatives have used to justify tearing down Social Security and other social programs. Liberals will argue for it on moral grounds, but then they'll just cave in and justify the dismantling of these programs based on the fake "we have no money" argument unless we tax teh rich. In that sense she's right when she says, Democrats are "bankrupt" when it comes to ideas.

As far as the tits comment, she's obviously a die-hard feminist who hates Palin and the comment was meant to demean.

Mike Norman said...

I spoke to a Bloomberg producer who told me he has "reached out" to Caroline Baum to debate me on air. Let's see if she accepts.

Ryan Harris said...

So One by one you guys are converting all the old guard journalists and economists into integrating MMT money systems into their undefensible economic theories. Its fascinating watching people pick pieces here and there and change their stories.
While Baum completely misunderstands monetary policy she is one hell of a journalist. Did you read her TSA Boob article? Or her fracking article. She pokes fun and mocks liberals in the same way Jon Stewart does to all the Republicans. I'll be shocked if you crack this nut.

Letsgetitdone said...

I'm hear to cast aspersions; Ms. Baum's views on debt rollover are mindbogglingly stupid! And that's a fact!