Exactly! The main reason I googled the sh!t out of this and found Warren Mosler and MMT writings in the first place was because I didn't feel confident trying to grasp HB's assertion that t-bonds and T-bills were completely free of default risk and worth holding 50% of my freaking wealth in!Gumby wrote:Me too. While you had the ability to grasp this on your own, I needed to understand MR, and how the banking system worked, to help me see why LTTs are worth owning in a portfolio. Otherwise I probably would have been convinced to shun them and become a gold bug. My interest in explaining MR is often to make the case for LTTs.craigr wrote:That's why I stay agnostic and own LT bonds along with gold.
I think it's very easy for people to shun LTTs when they let their politics guide their investments.
And keep in mind that NOBODY was giving well-laid-out descriptions of how the monetary system functioned a few years ago. Not Paul Krugman (liquidity trap, etc)... definitely not Austrians (OMG printing money REVOLUCION!). HB was the closest thing to MR/MMT I had going for me, from the standpoint of investing in t-bills and calling it "cash."
I wasn't looking for a socialists guide to monetary control.
I just wanted to know that my goddamn bonds were going to get paid back no matter what, even if it was in inflated dollars . The last thing I wanted was default risk in my portfolio, and not have gold skyrocketing to make up for the loss.
If you think about it, the entire premise of the PP depends on MR being accurate. If t-bills actually do carry default risk, and aren't hot-swappable for cash on our balance sheets, then what the hell are we doing debating macroeconomics while 1/4 - 1/2 of our PP could perform WILDLY different than what we expect. We could have a deflationary credit collapse, and a self-fulfilling debt/interest-rate spiral in T-bonds/bills and be f'ked from all sides while gold falls too, a la 1981.
Little did I know that "t-bills are as good as cash" also might work on a macroeconomic scale a well when looking at the effects of "monetizing the debt," which makes one even more comfortable.
Guys... if we're having such a big issue debating MR, maybe we need to decide if the PP is even the correct investment strategy if we truly believe that 75% of our portfolio could nearly collapse in a debt crisis (not hyperinflation) without a corresponding reaction from gold, because our portfolio is friggin built on the idea that the treasury bonds we have are nominally risk-free. We could see a self-fulfilling deflationary depression with very little favorable reaction from gold.