Monday , October 26 2020
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The Fiscal Folk Theorem — Brian Romanchuk

Summary:
In between editing my MMT primer, I read a burst of articles (20+) discussing government debt management in the current situation from non-MMT sources (have to see what the other side thinks). Mainly market commentary, but also op-eds from ivy league professors or other highly credentialed people, think tanks, maybe a rating agency, etc. -- but no journal articles (if one is sensitive to that sort of thing). As one would expect, the articles covered a wide range of political views and economic theory affiliations. What I realised (after the fact) was that the operational content of every single one of those articles collapsed to what I call the Fiscal Folk Theorem. It might surprise people to read this, but the folk theorem is correct. The issue is that the predictive content of the

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In between editing my MMT primer, I read a burst of articles (20+) discussing government debt management in the current situation from non-MMT sources (have to see what the other side thinks). Mainly market commentary, but also op-eds from ivy league professors or other highly credentialed people, think tanks, maybe a rating agency, etc. -- but no journal articles (if one is sensitive to that sort of thing). As one would expect, the articles covered a wide range of political views and economic theory affiliations. What I realised (after the fact) was that the operational content of every single one of those articles collapsed to what I call the Fiscal Folk Theorem. It might surprise people to read this, but the folk theorem is correct. The issue is that the predictive content of the theorem is limited, and if mis-applied, it leads to The Widowmaker Fallacy.
Bond Economics
The Fiscal Folk Theorem
Brian Romanchuk
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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