As prof. Steve Keen confirms, in examining the egregious effects of the most damaging mainsteam economic dogma in the world today, namely, money can only be created in private banks, not the nation's treasury: 

Triggering Crises by Reducing Government Debt.

Chapter 05 of Money and Macroeconomics from First Principles, for Elon Musk and Other Engineers

What Musk thinks will revive the economy is more likely to trigger a serious recession

The beliefs that the State faces a fiscal crisis if its debt gets too high, and that it is prudent for the government to reduce its debt by running surpluses rather than deficits, have existed since the dawn of the Republic. The empirical record of such attempts is definitive, and runs contrary to the expectations of governments at those times. A serious crisis, triggered by a private debt bubble and crash, has followed every sustained attempt to reduce government debt. This can be seen by comparing data on government and private debt back to 1834.

Sharp and sustained downturns in credit-based money creation—with credit turning strongly negative and staying so for years—occurred in 1837-1844, 1930-37 and 2007-2010. These are known respectively as the “Panic of 1837”, the Great Depression, and the Global Financial Crisis. All three crises were preceded by periods during which the government either succeeded in reducing its debt by running surpluses (the Panic of 1837 and the Great Depression), or attempted to, but was waylaid by other factors (such as the “War on Terror” which derailed the attempts by Clinton and G.W. Bush to run surpluses in the late 90s and early 2000s).

During the 1920s, President Coolidge deliberately reduced government spending each year, with the surplus averaging of 1% of GDP across the decade. His final State of the Union Address, 68F[1] on December 4th, 1928, lauded these surpluses as both the cause of the 1920s boom, and as a guarantee of continued prosperity.

<<"No Congress of the United States ever assembled … has met with a more pleasing prospect than that which appears at the present time…

Wastefulness in public business and private enterprise has been displaced by constructive economy… We have substituted for the vicious circle of increasing expenditures, increasing tax rates, and diminishing profits the charmed circle of diminishing expenditures, diminishing tax rates, and increasing profits.

Four times we have made a drastic revision of our internal revenue system… Each time the resulting stimulation to business has so increased taxable incomes and profits that a surplus has been produced. One-third of the national debt has been paid… It has been a method which has performed the seeming miracle of leaving a much greater percentage of earnings in the hands of the taxpayers 'with scarcely any diminution of the Government revenue. That is constructive economy in the highest degree. It is the corner stone of prosperity. It should not fail to be continued". {Coolidge, 1928 #6057. Emphasis added}>>

Ten months later, the Great Crash occurred, ushering in the Great Depression. While Coolidge had focused on reducing government debt, private debt, which was ignored by policy makers, rose substantially. Government surpluses of 1% of GDP, which reduced the money supply, had been offset by credit of roughly 5% of GDP, which increased it. Then credit turned strongly negative after the Great Crash, with the fall in private debt exceeding 10% of GDP in magnitude between 1930 and 1933. Despite this, the private debt to GDP ratio rose, because the fall in real output was amplified by deflation of 10% p.a., so that the fall in nominal GDP far exceeded the fall in private debt.

Irving Fisher argued that the crisis was caused by private sector deleveraging from a position of excessive private debt, coupled with deflation:

<<deflation caused by the debt reacts on the debt. Each dollar of debt still unpaid becomes a bigger dollar, and if the over-indebtedness with which we started was great enough, the liquidation of debts cannot keep up with the fall of prices which it causes.

In that case, the liquidation defeats itself. While it diminishes the number of dollars owed, it may not do so as fast, as it increases the value of each dollar owed. Then, the very effort of individuals to lessen their burden of debts increases it, because of the mass effect of the stampede to liquidate in swelling each dollar owed. Then we have the great paradox which, I submit, is the chief secret of most, if not all, great depressions: The more the debtors pay, the more they owe. {Fisher, 1933 #152`, p. 344}>>

Fisher was well aware of the importance of bank-created money in fueling both booms when it is rising, and slumps when it is falling:

<<A man-to-man debt may be paid without affecting the volume of outstanding currency, for whatever currency is paid by one, whether it be legal tender or deposit currency transferred by check, is received by the other, and is still outstanding. But when a debt to a commercial bank is paid by check out of a deposit balance, that amount of deposit currency simply disappears. {Fisher, 1932 #4878`, p. 15}>>

(cont.)

Paul Krugman ponders the likely outcomes of Trump's tariff policies for the US - but as a mainstream neoclassical economist, Krugman can't see the part his own profession played in creating the 'rust belt' in the US which Trump is railing about:

(Raw Story)

Trump's America is becoming a 'rogue nation' — and the world can make us suffer: economist

Nobel Prize-winning economist Paul Krugman argues that President Donald Trump is turning the United States of America into a "rogue nation," and he says that the rest of the world is actually well positioned to make the country pay.

Writing on his Substack page, Krugman argues that "becoming a nation that can’t be trusted to honor agreements or follow the rule of law has to have monetary as well as political and diplomatic consequences."

What's more, he writes, the way the American economy is structured leaves "exposure to foreign revulsion" looming "quite large."

In particular, Krugman thinks that American allies will drastically pull back on their purchases of American-made military equipment now that they no longer trust the nation under Trump to serve as an "arsenal for democracy."

Krugman also thinks that America's higher education system, which has long been one of its greatest assets by attracting some of the brightest minds throughout the world, is also set to crater.

Added to this, stories about the Trump administration detaining even lawful permanent residents and deporting them will keep tourists out of the country for the foreseeable future.

"Trump’s belief that America holds all the cards, that the rest of the world needs access to our markets but we don’t need them, is all wrong," he concludes. "We are rapidly losing the world’s trust, and part of the cost will be financial."
........

Today I heard the interesting comment that "the US is the most self-sufficient nation on the planet", so will be the least harmed in a global trade war.......method to Trump's 'madness'?

Musk wants to cut the deficit and balance the budget while cutting taxes, but here's another $500 billion he will have to find even before he gets started, as IRS revenues fall:

(The Independent)

IRS braces for $500bn drop in revenue as taxpayers skip filings in wake of DOGE cuts at agency

The IRS is bracing for a $500 billion drop in revenue as an increasing number of taxpayers could skip submitting their filings in the wake of Department of Government Efficiency layoffs, according to a report.

Taxpayer behavior has changed since President Donald Trump took office and implemented sweeping federal cuts through Elon Musk’s DOGE. As a result, the IRS has “noticed an uptick of online chatter from individuals declaring their intention to not pay taxes this year,” the Washington Post reports, citing three people with knowledge of tax projections.

It added that individuals were “wagering that auditors will not examine their accounts” amid DOGE’s plans to downsize the IRS by nearly 20 percent by May 15.

New hires in taxpayer services and enforcement divisions have been targeted and the agency has dropped investigations of high-value corporations and taxpayers, according to the newspaper. The agency employs roughly 90,000 workers total across the U.S., according to the IRS data.

Treasury Department and IRS officials are predicting a decrease of more than 10 percent in tax receipts by the April 15 deadline in comparison to 2024 filings, which would amount to more than $500 billion in lost revenue, according to the Post. The newspaper said it spoke with officials who shared nonpublic IRS data.

To put the $500 billion in context, the U.S. military budget was about $820 billion last year.

The Independent has contacted the Treasury Department for comment.

IRS officials reportedly tried to warn the incoming Trump administration about DOGE’s planned staffing cuts in January. “Aggressive reductions to budget and personnel capacity risk backlogs, delays, reduced receipts, and diminished capacity to build next generation digital capabilities,” a presentation seen by the Post given by tax officials to Trump’s incoming Treasury Department team said.

Experts warned against reducing the IRS workforce earlier this month. Former IRS commissioners said it would render the IRS “dysfunctional” in an op-ed for the New York Times.

“Aggressive reductions in the I.R.S.’s resources will only render our government less effective and less efficient in collecting the taxes Congress has imposed,” the former IRS commissioners said.

There could be other factors at play contributing to the possible drop in revenue, including the Los Angeles wildfires. Taxpayers in wealthy areas affected by the fires could postpone filing until October, Timur Taluy, CEO of tax-prep service FileYourTaxes.com, told the Post. Some taxpayers may also opt for a penalty-free six-month filing extension during times of economic uncertainty.

Neither of these account for the $500 billion drop in revenue, however, experts told the newspaper.

.....

Oh dear - as we have seen in this thread, Steve Keen is trying to ease the ("mission impossible") balanced-budget task facing Musk, if he wants to avoid a revolt from social-payment recipients, that is.

As long as the currency-issuing  government is forced to fund itself from private sector bank-issued  money and private sector savings, the task will remain mission impossible.

Stay tuned.....

Let's see what a mainstream economist has to say about Trump's tariff policies:

(Alternet)

Economist Robert Reich warns Trump's trade war could throw us into recession — and says there's a better way

We are now in a trade war with the second-largest economy on Earth.

On Monday, China said it would raise tariffs to 20 or 25 percent on some $60 billion of American goods – already being taxed at 10 percent, in retaliation for Trump’s previous tariffs on Chinese goods.

China’s move came after Trump increased tariffs on $200 billion of Chinese goods to 25 percent on Friday.

Tariffs are paid by American consumers and businesses. They function exactly like taxes. By imposing them, Trump has in effect raised taxes on most Americans by about $800 per household. China’s retaliatory tariffs will raise taxes further.

My comment: Trump expects his tariffs will move production back to the US, so it's prices for Americans, not taxes,  which will increase, when the jobs appear.

But the prospects of a recession before the jobs appear...oh dear; just a 'little pain', and then umlimited riches, according to Trump. 

Meanwhile in China tariffs will cause  loss of sales by Chinese companies, not higher taxes,  which will hurt Chinese companies. But China can increase sales in its own huge underconsuming market, by subsidizing consumption, given the Chinese economy's  so-called "overcapacity".   

Worse yet, such tariff taxes are regressive. The middle class and poor pay a larger percentage of their incomes on them than do the rich.

This trade war could also put us into a recession. The world’s other big economies are slowing. In 1930, congressmen Smoot and Hawley championed isolationist tariffs that President Herbert Hoover signed into law. They deepened the Great Depression.

Trump says the tariffs are necessary in order to get a deal with China in which China stops taking the technology of American business.

In reality, those “American” businesses are mostly global. Their technology doesn’t belong to the United States. It belongs to those corporations and their shareholders They develop and share it all over the world.

Up until now, most of these corporations have been willing to share their technology with China in joint ventures with Chinese companies because that’s the price of entering the lucrative Chinese market. They still come away making lots of money.

John Bolton, Trump’s national security adviser, has said the real issue is “a question of power,” and that China’s theft of intellectual property has “a major impact on China’s economic capacity and therefore on its military capacity.”

My comment: Bolton and Reich are too late, because
China is already ahead in EV, PV, robotics and drone technology, the only field left in which the US is more advanced is IC (chips) tech.

But if this is the real motive, there’s a far better way to protect national security that doesn’t impose such a large regressive tax on Americans and risk a global recession.

Trump should prohibit American corporations that possess technologies that are critical to national security from sharing them with China – even if that’s the price of gaining access to China’s lucrative market.

My comment: addressed above - it's too late to stop China's tech advance, given its current level of state- subsidized tech R&D.

The US is already banning chip tech transfer to the US; and even forcing companies in other countries, like Holland's  ASML, which makes the world's most advanced EUV machines (involved in the highest performing chip manufacture), to stop exporting to China (ASML's biggest market...which harms ASML of course).   

Bar them from entering into joint ventures with Chinese corporations, prevent them from teaming up with Chinese state-owned companies, and demand that they guard their technology.

American-based corporations might have to sacrifice some profits, but that’s too bad. It’s a far smaller price to pay than the cost of this global trade war.

So less profits, reduced wages, to 'contain China'. 

But it won't work; you don't need the most advanced chips to create the world's most lethal military.

Or at least,  the risks are too great, in the age of MAD....

So no real remedies from either Trump (as will likely be confirmed in the upcoming months), or Reich and Bolton.

Stay tuned....

Big Brother will fix it!!

"Poor" Trump, the mainstream economists are really ganging-up on him now:

(Raw Story)

'Biggest tax rise in history': Trump gets brutal coverage in conservative newspaper

The Telegraph, one of the most conservative newspapers in the United Kingdom, has published a scathing editorial from columnist Matthew Lynn that accuses President Donald Trump of leveling "the biggest tax rise in global history."

In his piece, Lynn makes the case that Trump's second term has gotten off to a much worse start than his first, which Lynn noted was marked primarily by traditional Republican policies of tax cuts and deregulation.

Now, he contends, Trump is putting his full weight behind tariffs aimed at America's own largest trading partners that will harm consumers.

"By far most likely ... is that much of the increased cost will be passed onto consumers in the form of higher prices," he writes. "Either they will be forced to pay more for imported goods, or prices may rise in general because U.S. companies have less of an incentive to improve productivity thanks to the protections afforded by that tariff wall. And if tariffs do raise $600 billion annually, that is no small sum of money, even for an enormous economy like the United States."

Lynn argues that the situation could grow even worse for the United States if Trump really tries to go through with his idea of using tariffs to replace the income tax.

"Even if we assume that Elon Musk manages to cut $1 trillion or more out of the budget, the tariffs would have to be at least five or six times larger than anything yet proposed to cover Washington’s annual expenditure," he notes. "They would need to be at least 100 percent and possibly more simply to replace the federal incomes tax. Tariffs at that rate would be off-the-scale, and would do huge damage to the global trading system. At risk of stating the obvious, if trade collapses to zero because of tariffs, then tariff revenue would also be zero."**

He also finds it troubling that Trump is going to enact these large tax hikes before even settling on any potential offsets in tax cuts in other areas to ease the pain for consumers and businesses.

"So Trump is about to impose a huge tax rise, and the blunt truth is that like any other tax rise it will crush the American economy," he concludes.

** a bit like the tax on cigarettes paradox: the less 'legal' smokes people buy,  the smaller the government revenue collected - while black-market crime soars.

Of course the RBA's mainstream 'efficient free market' economists can't see their part in the responsibility for Trump's 'Liberation Day' turmoil:

(News Wire)

RBA’s stunning Trump warning for Aussies

US President Donald Trump’s trade war could trigger cascading disorder in the global economy and pummel Australians, the Reserve Bank of Australia warns.

The alarm bell, delivered in the RBA’s April Financial Stability Review, arrived just hours after Mr Trump’s self-proclaimed “Liberation Day”, or the confirmation and imposition of sweeping tariffs from the US on all major economies.

“Ongoing uncertainty surrounding the imposition of tariffs and other trade restrictions between the United States and other major economies could have a chilling effect on business investment and household spending decisions, and pose substantial headwinds to the outlook for global economic activity,” the RBA’s report states.

“There is also considerable uncertainty about the effects of possible fiscal, regulatory and other government policy changes on global growth and inflation.”

And adding to the Trump risk, the RBA warns Australian households confront three other pre-existing risks, namely vulnerability in key international financial markets, a shaky Chinese banking sector and “operational vulnerabilities” rising from digital interconnectedness.

In effect, a cyber attack on digital infrastructure could cripple key financial systems.

“Elevated geopolitical and policy uncertainty in major economies has the potential to interact with existing vulnerabilities and cause risks to rapidly materialise,” the RBA states.

The RBA notes China’s banking system holds substantial exposure to the country’s unstable property market.

"The most recent stress testing by the Chinese authorities shows that some domestically systemically important banks would be vulnerable to a sudden credit deterioration.”

China is Australia’s largest trading partner and financial instability in the Middle Kingdom would damage Australian business.

“A shock to the Chinese financial system is unlikely to have a direct impact on financial stability in Australia as the financial links between China and Australia are limited,” the report states.

“The key channels of transmission of financial stress in China to Australia would likely be via increased risk aversion in global financial markets, a sharp slowing in global economic activity, lower global commodity prices and reduced Chinese demand for Australian goods and services.

“In turn, this could spill over into weaker spending by Australian consumers and businesses.”

The central bank also flags some domestic threats to Australia’s financial stability, chiefly the rolling cash flow pressures on Australian households.

“Real disposable income per capita – that is, income after tax and interest payments andadjusted for inflation – declined notably over 2022 and 2023 as inflation picked up and interest rates and tax payable increased,” the report states.

“More recently, real disposable incomes have stabilised at around pre-pandemic levels, supported by Stage 3 tax cuts and easing inflation.”

But despite the warning, the RBA stresses the Australian banks are well-capitalised and well-positioned to weather an economic downturn.

It also says Australian mortgage holders are not at risk of widespread defaults, despite cash flow pressures.

“Around 3 per cent of borrowers are currently estimated to be experiencing a ‘cash flow shortfall’, putting them at risk of falling behind on their loan repayments,” the review states.

“Although this percentage is higher than before the pandemic, it is notably lower than the peak observed prior to the Stage 3 tax cuts and a further moderation in inflation over the second half of 2024.

“The share of borrowers at greater risk of falling behind on their loan, those estimated to have both a cash flow shortfall and low buffers, has decreased to around 1 per cent of all variable-rate owner-occupier borrowers.”

The review follows the Board’s decision to hold the cash rate at 4.1 per cent this week.

In a press conference following the rate decision, RBA governor Michele Bullock said the Board would consider slashing interest rates to defend the Australian economy if President Trump’s global trade war crushed growth.

“When we went into the pandemic, interest rates were about 1.5 per cent,” she said.

“They’re now much higher than that.

“If it turns out that there is a big growth impact on Australia, we do have room to move the exchange rate to support.

“Now, it does depend on what happens.”

Rate cuts generally trigger economic growth because it becomes cheaper to borrow money, encouraging investment and spending.

Ms Bullock also said the Board was “gradually getting more confidence” in its fight to return inflation sustainably to the 2-3 per cent target band.

“We haven’t got 100 per cent confidence, but if you look at our forecasts and you look at how inflation is tracking, relative to forecasts, we’re

actually doing pretty well,” she said.

She also said the Board did not forecast a recession in Australia over the next 12 months.

NewsWire asked Ms Bullock whether market forecasts of three rate cuts between now and mid-2026 were still in play in light on Trump’s protectionist policies and their inflationary impacts.

Cont.