Yves here. This article focuses on the critically important of how the real danger to the economic welfare of young people is not the cost of retirement programs like Social Security and Medicare but the failure to generate enough jobs now and invest in infrastructure and education.
One thing I will child the MMT crowd for a bit, however, is that they sometimes exhibit a lack of sympathy for how hard it is for people who have grown up with the conventional narratives around how government funds itself to wrap their minds around MMT. It’s isn’t just different, it’s actually disorienting at the outset.
By Dr. Fadhel Kaboub, an Assistant Professor of Economics at Denison University (OH) and a Research Associate at the Levy Economics Institute (NY) and the Center for Full Employment and Price Stability (MO). His research focuses on job creation programs, monetary theory and policy, and the political economy of the Middle East. For more on his work, visit www.kaboub.com. Cross posted from New Economic Perspectives
The ongoing political deadlock over the U.S. government deficit and the national debt is slowly digressing into one of the most devastating economic pains that a financially sovereign government can inflict on itself and on its own people. With the exception of the readers of New Economic Perspectives and MMT-oriented blogs (here, here, here, here, here, and here among others), the vast majority of the public suffers from an acute form of deficit disorder, which can be diagnosed in a variety of ways, but most commonly you will notice that the subject is convinced that:
- the government should balance its budget and pay off its debt in the same way that responsible individuals, households, and businesses do;
- government deficits crowd-out private sector investments;
- government deficits cause inflation;
- government deficits promote inefficient and wasteful government programs; and/or
- the national debt is a burden on future generations and a form of taxation without representation.
The good news is that these deficit disorder symptoms can be easily relieved with a daily dose of MMT readings. For best results, abstain from consuming mainstream media deficit-propaganda during your MMT rehabilitation period. Warning: as you begin to heal from this deficit disorder, you may feel nauseated when exposed to mainstream news reports about the deficit. Do not panic, this is a natural feeling that most engaged citizens have once they heal from deficit disorder. When that happens, you are simply experiencing the urge to take action, educate, organize, and bring an end to this national deficit disorder.
On a more serious note, however, this national deficit disorder is blinding us from seeing the real infrastructure and education deficits that are slowly destroying quality of life for generations to come. Here, I want to argue that the real crisis ahead of us is going to be a crisis of healthcare provisioning with serious social and economic consequences for the U.S. and the global economy.
The long-term consequences of today’s deficit disorder will have a tremendous negative impact on many retirement-age vulnerable members of society after 2032. The lack of foresight that has overshadowed the public policy debate both at the federal as well as state and local government level is pushing the United States into a spending cuts frenzy aimed at balancing budgets and paying down the debt. This could potentially be the biggest mistake of our generation.
The U.S. workforce is going to experience a significant demographic change over the next 20 years. The pay-as-you-go social security system is structured in a way in which today’s workers pay for today’s retirees through a FICA tax directed into the Social Security Trust Fund and invested in AAA-rated U.S. government bonds. In 1960, there were 5 workers per retiree, and with the post-WWI “baby-boomers” effect, this ratio has been steadily declining to 3 workers per retiree today, and is expected to reach 2 workers per retiree by 2032. The only reason this decline has been manageable so far is because of increases in workers’ productivity and technological innovations. This demographic change will inevitably present a provisioning problem. Unfortunately, only the financing problem has gained so much attention by the general public, whereas the provisioning problem should be of much more significant concern to all of us today.
Deficit hawks have been arguing for increasing the retirement age and reducing retirement benefits in order to solve the financing problem, while the deficit doves argue for increasing the social security taxable income to close the financing gap. Regardless of one’s political inclination and tax-burden tolerance level, solving the financing problem will only put vulnerable people at a greater disadvantage in the future and will not make the provisioning challenge go away. Ignoring the provisioning problem creates a shortage of goods and services which will lead to inflation when the more affluent members of society outbid the poor in a fierce competition for scarce medical services, prescription drugs, retirement homes, and elderly care services.
The only way for society to offer a comfortable retirement to the elderly is by making sure that the workforce of 2032 is as skilled and productive as possible, and has access to the most up-to-date technological and logistical infrastructure, especially when it comes to medical services. The problem, however, is that such a sophisticated workforce can only be created if we invest in education, research and development, and public infrastructure today! This is exactly what we are not doing right now. Instead, we are slashing budgets for education and scientific research in the name of sound finance and fiscal responsibility. We can have all the money in the world in 2032, but it will not create a well-trained medical staff overnight, unless we recruit skilled workers away from other nations, which will shift the burden on the poorest countries that most desperately need their teachers, doctors, nurses, engineers, etc.
The American Society of Civil Engineers has identified an expected $3.6 trillion shortfall in public infrastructure investment that will result in the loss of 3.5 million jobs by 2020. That is a real deficit to be worried about.
Currently, nearly 22% of doctors practicing in the U.S. have received their medical degrees from other countries. According to the American Nurses Association, estimates show that by 2025 the U.S. healthcare system will experience a shortfall of 260,000 registered nurses. These are real deficits.
If we fail to make the right decisions today and if we give in to the current deficit hysteria, we will be guaranteeing that our current problems will be compounded many times over by 2032. It is the most vulnerable members of society that will end up suffering the most, namely the elderly, the poor, the homeless, the chronically unemployed, women, and ethnic minorities (not to mention the developing countries that will experience a more rapid brain drain). The solutions are available to us today. We must reset our economic and social priorities to alleviate the suffering of the poor in the short term and invest in science, education, innovation, and infrastructure in order to avoid a catastrophe in the long run.
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It seems to me that understanding the basic issues here really has nothing to do with MMT in any deep way. Before there was ever an MMT, many people nevertheless understood that to build future prosperity and satisfy our most ambitious plans, desires and commitments, we had to invest in the future. Many people understood that full employment should always be a top government priority. Many people understood that the national government, with its various highway programs, education programs, space programs, health research programs and defense programs was a key driver of economic progress and innovation. Many people understood that the youth of the country and the world were are key resource. Many people understood that building middle class prosperity and curtailing economic inequality was the key to durable national strength and success. Many people understood from experience that that the laissez faire institutions that had given us the Gilded Age and the Great Depressions had to be rolled up, and the economy had to be put in the service of the society and corporations under the thumb of political community. Many people understood that only a nincompoop would respond to challenges like the Great Depression and the rise of militant global fascism with a program of bean-counting and budget balancing.
MMT just adds a few wrinkles about the public financing system.
This is spot on.
I would like to add a few pieces to this (have not read through all of response before responding to Dan, so I apologize if it is repetitive).
First, we have to acknowledge those systems that market confusion or pernicious counter-factual propaganda (Bernays, Pete Petersen, Frank Luntz, Drunkenmiller).
One of the reasons why we do not have an economically literate (inclusive of MMT) populace is that there are forces who know what only Tony Benn (and few others)will say: an educated, health and confident population is harder to govern.”
Second, there is significantly more information about consumers than about elites. When one group with power is able to exploit knowledge, commerce, health, environmental resources as a pre-existing hierarchy not to maintain it, but according to Noreena Hertz, but to expand it, then we must not assume an arrogance that ordinary citizens have prioritized MMT in their top 10 to-do lists. I speak about this as someone who does have it on their top 10 to-do list.
This speaks to finding more translators of complexity, artists of communication, and architects of simple narratives to assist a saturated populace (Kenneth Gergen’s book here is relevant – Saturated Self).
This really requires reading Dan and understanding what he is saying here by all economists.
What would MMT say to Russell Brand?
http://www.correntewire.com/russell_brand_vs_jeremy_paxman_the_full_transcript
I’m not sure I understood what Brand was thinking of there. I guess it depends what he means by “deficit”.
Perhaps what Brand is really objecting to is a return to capital? That is, a share of the value added by a firm’s productive activities that goes to people purely by virtue of their possession of an ownership share in the firm, whether or not they contribute any work. Or maybe his view is that a firm should price its products at a level just sufficient to cover its costs and pay workers according to some fair value principle? He might be thinking that any value the firm retains in excess of that level is value that could have been retained by the public for free?
Not sure but I think that’s a bit down the rabbit hole for him? Is for me, anyway; not an economist. He’s out in the wide blue revolution skies and I’m kiting with him. The part of the interview around that quote, with “[…]” substituted for the bit I already quoted above:
Also there’s a question of whether he said “adminbots” or “Admin Bods” or if that makes a diff. Whatever they are, he says they shouldn’t get ahead of themselves. (But then that’s the whole purpose of our constitutional checks and balances, ambition countering ambition, the way I learned it.) Does MMT go there? How to implement policy and stop government from being turned to crap? Genuine alternatives to destroying the planet and creating a massive underclass, all furthered by an “indifferent system that really just administrates for large corporations and ignores the population that it was voted in to serve.”?
I hope I asked that sensibly. What’s the plan, how to get there? Not sure I ever see MMT discussing the “how to get there” part. Not sure if MMT likes Brand?
Right, I like the spirit of what he is saying and don’t want to be too fussy about the analysis. And I like the way he fights back against the interviewer’s attempt to marginalize him as a trivial person.
By “deficit” I took Brand to mean that customers and/or workers are getting ripped off when “profits” are made. I didn’t make a connection with government deficits.
this is what I took it to mean. that profit, anyone profiting regardless of how they justify it (my business, my machinery, my expertise, my capital entitles me to take much of what you produce) means that people who do the work aren’t getting paid properly, and their needs go mostly unmet.
the idea of ‘profit’ is insane when you think about it. it always seems to be some party justifying skimming off the cream for themselves, selling the gallon, and giving the worker the dregs.
I don’t even believe that individuals (workers) can’t afford profit anymore due to exploitation, even though that is a really LARGE part of my thinking. I believe society itself can’t afford it anymore. we can’t afford these huge numbers of extremely affluent people due to the chaos they produce, due to having a need for those resources much more important than someone’s own private island, and due to the fact that profit is a snowball that was either produced by, or produces crime. crime on individuals and crime on societies, through weirdo hoarding and psychopathology.
there are too many people in the world with too many needs going unmet, and too many negative externalities to this whole economic system which is done exactly FOR the purpose of profit. we need to redefine what profit really means for the human race and planet, or do away with it and find some better terminology to describe -resources, or ability to generate resources- held in reserve for future need/use.
While I agree wholeheartedly with Brand’s call for revolution and new systems, I have to wonder what the hell he means by profit is a filthy word. Is he including the “profit” he makes from his comedy ventures? Is he including the profits the sponsors use to pay the E! Network so that it, in turn, can pay Brand’s TV show salary? After all, E! is a unit of a mega-conglomerate corporation, and I’m pretty sure that if it didn’t have profits Russell would not have a salary.
I think there’s more to Brand than you’re seeing. Maybe his revolution essay in the New Standard is better place to look. He addresses his poor/rich perspective there, who is he to be listened to. It’s long, maybe start here:
and go at least this far:
I’d like to be pithy but I’m just too entranced by the whole.
Maybe this too (it’s in the info in a Chaplin youtube; not a Brand quote):
Dan,
I think you may be at cross purposes with your post. You are correct that MMT has little to do with the core issues, which you elucidated with your “Many people understood” list.
However, I think you are not, and will not be, achieving the goals youlaid out (which are good goals), because all of those goal solutions rely on government, regulation, and public finance.
I liked this statement:
“Many people understood that the youth of the country and the world were are key resource.”
Not in the factual statement, which is true, but in the nature of the word “resource.”
Young people today are indeed a “resource,” much like petroleum or rare earths; consumed by redistribution to the benefit of the elite.
Consuming the young to benefit those with power.
And thats what government has become, and will be as long as it has the power to enrich itself with financial or power gain by those who rule.
There was a great NYT piece that looked at the practice of “milker bills,” those bills that generate campaign contributions to support or deny, but never reach the floor. The mere threat results in money for the sponsors and the opponents.
Such is government. The laudable goals you cite will not come to pass for this reason. I think you should add this line:
“Many people had understood that government was not their savior; but they were made to change their minds.”
The debate should be over what kind of a society we want and how to get there. Everything else comes after.
“The lack of foresight that has overshadowed the public policy debate both at the federal as well as state and local government level is pushing the United States into a spending cuts frenzy aimed at balancing budgets and paying down the debt. This could potentially be the biggest mistake of our generation.”
It’s not a mistake. It’s kleptocracy. Or as we often say, this is not a bug, but a feature.
The number of workers per retiree misses the point. Yes, income caps should be taken off the payroll tax, and the tax should be extended to all income from whatever source, capital gains, deferred income, etc. But if gains in productivity over the last 35 years had gone to labor instead of capital, to workers instead of the rich, worker/retiree ratios would be irrelevant.
“If we fail to make the right decisions today”
“We” are not the ones making the decisions. The reason there is no investment in the future, no discussion of the kind of society we should have, no stop to the outsourcing of jobs, their crapification, and reduction in wages, is kleptocracy. It is about the looting. Kleptocracy does not do “right” decisions and wise choices in the public interest. It does unremitting looting for the benefit of a few. And they are the ones making the decisions.
The relevance of the number of workers per retiree the author is discussing here isn’t economic, it’s practical. It’s a function of too many patients and not enough providers to take care of all of them.
Well, this is an interesting question.
Today, we could probably provide living standard of about 100 years ago with a trivial workforce (but rememeber, amongst other things, it would mean no access to antibiotics or pretty much all of the modern medicine). We could, probably (I would have to run the numbers), provide living standard of immediately-post WW2 with only a fraction (significant, but still just a part) of the workforce (hey, 1945 lifestyle was provided by a fraction of workforce since a large chunk of prime-age was either in the armed forces or dead!).
It’s an idea that Keynes probably was most vocal on (or rather well known for), but dates well pre-Keynes, i.e. if we continue increasing productivity, what happens? We either waste it (which seems to be the case right now, with bullshit jobs), or we would have to redesign our society from grounds up (which is hard, since earning our bread “by the sweat of your brow” has been with us for thousands of years).
So I’d argue it’s less about providing the jobs is secondary to the above.
Most of the productivity gains are thanks to oil… even better, thanks to emerging markets subsidizing oil by leveraging up their balance sheets over the last couple of decades.
This current system we are basking in got set up when oil was at 18$ a barrel. I believe that the world is still in the midst of adjusting to 100$ oil. Lower rates, lower DD&A thanks to lower investments, lower taxes, lower wages, emerging market subsidization have all offset the rise in the oil price. It always takes a decade or so for fundamentals to really catch up.
The next decade will determine how oil and resource use get redistributed throughout the planet. And all these MMT money injections based on an abundance of oil and resources will get quite scary when the currency wars push everyone into an increasing number of materialistic projects.
We need to GDP growth but this growth MUST reduce its dependency on energy intensive endeavours. And everyone is still functioning as if energy going forward is not an issue.
Energy use will not be an issue going forward if MANY more countries fall like Greece.
Not a rosy picture.
You are correct. It is obvious to me that the surest sign the economy is slipping is that here in Western Massachusetts gasoline prices have been falling for two months. Since the entire shale oil farrago can only happen at prices well in excess of $80 a barrel, and the government garners huge tax returns on gasoline sales, and the profits of the American oil giants are tied to high prices, all the systemic pressure is on gasoline prices to rise. However, gasoline prices are falling (at least around here and across the border in New York). This can only mean that global demand is falling, and the speculators can’t even keep prices up.
And falling energy consumption usually translates into falling standards of living. We are on the downhill slide.
“Deficits” – We have a 6 trillion deficit masquerading as a social security/medicare deficit. Our representatives are so ignorant they can’t even be bothered to read the facts. Why do we need them? The clear answer is that we do not need them; they cause us extreme harm. We need to get rid of the House of Representatives, basically on the grounds that they are far too ignorant to learn and facilitate innovation. And this is only the tip of the American iceberg.
Nonsense.
• Moneta says:
If that’s true, then why aren’t oil-rich countries like Mexico, Venezuela, Russia and Iran the most productive countries in the world?
• Moneta says:
That may describe part of the MMT crowd, but I don’t think it describes all of it.
For instance, it doesn’t seem to describe Dan Kervick, who proposes a “post-carbon technological infrastructure” :
A unit of GDP growth towards the post-carbon economy is the same as a unit of GDP growth twards the carbon economy.
There are different layers to those productivity gains:
1. The largest group in the population moving towards their most productive years.
2. Energy crisis in 70s which promoted huge oil drilling which gave us at least 2 decades of oil at 20$
3. Energy crisis led to more technology increasing energy-efficiency… but total US energy burned did not shrink.
4. Transfer of oil consumption from developed countries to emerging countries to produce goods which used to be produced in US… but in the end US still consuming the end result of that burned oil.
4. This leads to the US, over 3 decades, using its overvalued reserve currency to live 3 decades of material excess promoting planned obsolescence.
Conclusion:
Printing using a reserve currency can easily make it appear as if a country is productive and that can last a few decades until the all the goodwill gets sucked into an endless stream of bad projects.
Looking at those productivity gains is like looking in the rear view mirror. The oil has been burnt, the houses are too big, the dumps are overflowing, etc.
• Moneta says:
This is not true. The low oil prices did not result because of increased supply (that is, because of “huge oil drilling”), but because of demand destruction.
World oil consumption dropped from 64.0 millions barrels per day in 1979 to 57.6 million in 1983. Recall that there was a severe worldwide recession at this time. Saudi Arabia, the swing producer, cut production from 9.8 million barrels per day in 1979 to 3.6 million barrels per day in 1985 in an attempt to keep prices up, but in 1986 abandoned this strategy and increased production to 5.2 million barrels per day. Oil prices dropped from $26.50 per barrel in December 1985 to $11.00 per barrel in January 1986.
• Moneta says:
Again, this is simply isn’t true, as this graph illustrates:
http://2.bp.blogspot.com/-05V_8byL6Mo/T4Mi1CDv8yI/AAAAAAAAHEE/K6WvDMWoSqg/s400/Oil+Consumption.jpg
U.S. oil consumption fell off a cliff beginning in 1979, and did not reach 1979 levels again until 2000.
US natural gas consumption also plummeted from 55.5 BCFPD in 1979 to 46.1 BCFPD per day in 1983. It would not recover to the 1979 level until 1993.
US total energy consumption fell from 1878.6 million tonnes oil equivalent in 1979 to 1672.5 million tonnes oil equivalent in 1983. It would not recover to the 1979 level until 1988.
You are mixing up production and consumption.
Non-OPEC started drilling, with the goal of reducing its dependence on OPEC and increased production while OPEC was forced into reducing its output, essentially becoming the swing producer.
http://www.iea.org/publications/freepublications/publication/KeyWorld2013_FINAL_WEB.pdf
I did not say oil, I said energy. There was some switching. And yes, oil consumption dropped as measured by your chart but this chart does not include all the oil that was used elsewhere to produce all the US imports that started to soar at the exact same time.
Many times, I’ve explained that the US effectively consumes more oil than appears in its stats because that oil is used in foreign countries to produce the goods it consumes and to ship those same goods.
If that’s true, then why aren’t oil-rich countries like Mexico, Venezuela, Russia and Iran the most productive countries in the world?
——–
Because their gains have been sucked up by the developed world. The oil was not for them to consume, and they were paid peanuts… US dollars that the US is thinking of devaluating thanks to printing or MMT. Productivity can look quite good when you don’t have to pay foreigners fairly for their work.
Nobody seems to realize how much energy is needed to keep up the US system… energy to keep it working + keep it growing.
Moneta says:
Well again, this simply isn’t true. You seem to be the purveyor of a great deal of misinformation.
For instance, the full title of L. Randall Wray’s book is Understanding Modern Money: The Key to Full Employment and Price Stability.
Right on. The most valuable resource we have is time. The pressing question of our time, so to speak, is what to do with our time.
Jobs are the means, not the end; the activity to minimize, not maximize. That’s the real paradigm shift to a post-industrial society – less aggregate employment, not more! That’s the whole point of retirement and vacations and community service and civic engagement and raising children – getting out of work to do something more productive.
@Moneta, I’d say oil’s benefits are oversold (although I do agree that the money printing is having some rather predictable results on the dollar price thereof). Oil allows a wasteful, disgusting sprawl of McMansions and national security state and factory farming and so forth. Sure we need some oil, but excessive oil consumption is necessary only for the predator class, the bloated administration rotting our institutions in academia and medicine and law and media and finance and real estate and so forth. This oil usage doesn’t actually go toward increasing the standard of living of the bottom 80% or so of the population.
This oil usage doesn’t actually go toward increasing the standard of living of the bottom 80% or so of the population.
——-
If you want to see how oil helps, look at how the lower classes in Indian and China live and compare that to the bottom 80%.
I am sure that a significant percentage of the lower classes suffer in America but a large segment of the US population still benefits significantly from the oil situation.
No, that’s simply not true. Doing what’s good for GM helped GM, not the country.
Most Americans would be better off with a return to trains being a bigger part of both passenger and freight transportation. The car culture helped only a relatively small number of people, and those were predominantly at the top, not the bottom. Two income households and the associated need for two cars is not a good system for all but those who skim the productivity of wage stagnation of the past few decades.
Then there’s the authoritarianism and oppression of the national security state, which both uses oil directly and exists to protect oil and associated interests. The vast majority of Americans would be better off with a much smaller war government.
Watch Slumdog Millionaire and tell me with a straight face that a large percentage of Americans do not benefit from oil.
If you step back, all retirement planners say if you start saving when you are twenty you only need to save 10 percent a year.
Well beteen the employee’s 6% and the company’s 6% that is 12 percent for SS, so what’s going on that SS doesn’t work out at even a 1 to 1 relationship?
The answer is they only invest in government bonds! The whole 10% thing is predicated on diversification accross asset classes with a weighting torwards stocks for most of the duration.
I know everybody is going to throw stones at me for saying this, but the SS trust fund should be a real segregated trust fund that is operated as the worlds largest sovereign wealth fund free to invest in bonds, stocks and heaven forbid infrastructure projects, that could have tolls such that there would be a significant return on investment, ballooning that 12% a year savings into millions as a true retirement nest egg instead of the current pyramid scheme system. You wouldn’t even need individually managed 401K funds and IRAs!
Tim, for my two cents, several things have changed. Among them:
First, 10% was a rule of thumb, not a hard mathematical constant. It’s a round number that gives people a general target; individual goals and circumstances dictate the particular math.
Second, that was developed back when rule of law meant something. Now, political and legal risk makes the risk-reward return of stocks considerably less, from specific frauds like Enron to more general collapses as corporate looters garner immunity from prosecution.
Third, wage stagnation means that the purchasing power of a median wage today is less than a couple decades ago (thus necessitating a higher percentage saving rate for the same outcome at a time when saving a higher percentage is even more difficult).
Fourth, the 10% rule is premised upon being complementary with Social Security. It’s the three legged stool – personal savings + social security + employer pension. Knock any one leg out and the stool collapses. This is the great long-term collapse that makes it obvious our current system is unsustainable. Almost no one under about 40 today has a meaningful employer pension; the retirement part of the American dream has already collapsed, like house prices in 2006-2008.
Fifth, big ticket costs have increased dramatically in price over the past couple decades, particularly healthcare and higher education. This has had cascading effects on everything from workers’ ability to save to the expenses that people face once they’re able to retire. The cost of long-term care alone can make the difference between a comfortable retirement and dying bankrupt.
Finally, there is a problem of scale with equity investing. Almost all retail equity investing happens in secondary markets (buying a stock from someone else, not from the company). If passive investors are a small portion of a company’s ownership, then those investors can free-ride on the backs of the rest of the ownership. But as we have funneled trillions of dollars into equity markets, we have created companies who have no meaningful ownership interests, no one actually running the company.
This vacuum – what I like to call the Vanguard externality – is one of the major problems in corporate governance today. If the OASI, DI, HI, and other trust funds shifted resources into stocks (like the Federal Thrift Savings Plan for federal employees’ individual retirement accounts), you would have the government de facto owning many publicly traded companies. Nevermind the pure economics, that’s not a politically sustainable position.
In 1946 America was the richest most productive country on Earth. It embarked on a sixty-five year binge of military idiocy and consumerist debauchery, with socialism for the rich and free enterprise for the poor, combined with a few hand outs to obscure what was going on, all of it financed with borrowed money which the wealthiest have refused to support in the only way that matters, by paying taxes. Today, the game is kept going by imperialist adventures and domestic boondoggles sold to the public as ‘national defense’ and ‘homeland security’. ‘Health care’ is another boondoggle, engineered to benefit insurance and pharmaceutical companies. It rewards doctors on the basis of the number of patients they speak to during a day, hospitals on their imaginative billing procedures, all the while destroying lives and ripping off everyone not protected by his own insurance scam. There is nothing about the system worth saving. Nothing. There is no possible way to save it. The only question is how bad will things become before the society implodes, and how long will it take.
Selling the idea that the government should simply print money has come one hundred sixty years too late. It was a good idea when Lincoln did it. That’s why they shot him, and Garfield too, perhaps even McKinley, since it paved the way for Morgan’s boy, TR.
‘the subject is convinced that … government deficits cause inflation. This national deficit disorder is blinding us from seeing the real infrastructure and education deficits that are slowly destroying quality of life for generations to come.’
Whether deficits cause inflation (as Dr. John Hussman asserts), or are merely financed by monetary expansion as the true root cause of inflation, makes little difference.
In practice, Usgov is locked into perpetual deficits and perpetual monetary expansion in the range of $1 trillion annually, or 5-10% of GDP.
Dr. Kaboub [can I call you ‘Shish’?] probably is using ‘real’ [bolded in the quote above] to mean ‘actual,’ but its economic meaning of ‘after inflation’ is more pertinent here.
Sooner or later, a country financing a perpetual deficit with perpetual monetary expansion is going to experience an inflationary runaway. No rational player will commit to long-term investment in such a clearly unsustainable economy.
With ‘deficits don’t matter’ already being the de facto standard, the terrible irony is that the U.S. will get progressively LESS rather than more educational and infrastructural investment, owing to the grotesque mismanagement of the public sector of its economy.
Government is the problem, not the solution. If this disturbs you, take an MMT blue pill and escape into a hallucinatory fantasy land where money grows on trees.
So, Jim, how are we gonna pay for Fukushima? Do you actually think that “free” enterprise is gonna pony up for this sort of emergency survival stuff? Don’t kid yourself too long. Those bomb shelters will be very expensive when you finally wake up. And to carry the point to a better conclusion: it’s not just emergencies like Fukushima – it’s all of our toxic civilization that needs to be remedied and it just doesn’t make sense to call in the perps to fix it.
Great question, I sincerely hope Jim Haygood replies to your comment to tell us what he thinks should be done about this.
• Jim Haygood says:
And who do we owe the “deficits don’t matter” nonsense to? It certainly isn’t Keynesians or MMTers. It was none other than [drum roll]: Richard Nixon. By 1970 the Keynesianism of John Maynard Keynes had been sufficiently perverted and lobotomized so that Nixon could proclaim that “we’re all Keynesians now” and to usher in an era of supply-side tax-cut theology and monetarist faith in currency expansion and shrinkage.
• Jim Haygood says:
I’ll rejoin with something from a recent post by Ian Welsh:
“inflationary runaway” is the Armageddon promised by self-described conservatives and likely what they put on their sandwich boards as they walk urban streets preaching their unique morality based sermons.
IN the meantime everyone must suffer (except the wealthy and powerful) because that is their predestined desert. Cratchit and Tiny Tim must slave and suffer because inflationary runaway would surely kill us all (Weimar! Zimbabwe!) were Cratchit to be paid fairly (Weimar!Wheelbarrow of marks to buy a loaf of bread!) or Tim to be healed of his ailment (Zimbabwe!) or provided for (Mass starvation and riots!).
When MMTers condemn talk of inflation to be heresy, they become their own worst enemies. The real world just isn’t that simple.
Take this statement by Kaboub, for instance:
What Kaboub gives us here is sloganeering: a manifesto of what I call “Nixonian MMT” or “Friedmanite MMT.”
Now granted, in our current economic situation in which the economy is operating well below its potential, it is indeed pretty safe to proclaim that government deficits will neither “crowd-out private sector investments “ nor “cause inflation.” However, that is not always the case, as L. Randall Wray makes clear here:
I am very much in agreement with Wray’s claims, whether we call them MMT or Keynesianism or whatever. I am very much in disagreement with Kaboub’s claims, again whether we call them MMT or Keynesianism or whatever.
But it gets worse. In reaction to Nixonian or Friedmanite MMT we get statements like this:
This is almost a true statement. Nixon, Carter, and Reagan progressively increased the size of government (from 19% of GDP under Nixon to 24% under Reagan) with flat or reduced taxes, which meant progressively increasing deficits (from a $3.2 billion surplus in 1969 to a $155.2 billion deficit in 1988), and they did this concomitantly with tight monetary policy, which according to monetarist theology is supposed to control inflation. What this policy combination produced first was stagflation, and then the worst recession since the Great Depression in 1982. The policy combination is what I call Nixonian or Friedmanite MMT or Keynesianism. It seems to be designed with only one objective in mind: to lower taxes on the rich or shift them to the lower orders of society.
Now we’re trying to do just the opposite: run expansive monetary policy concomitantly with tight fiscal policy. This is also failing, as this policy combination is not having the desired effect, but is producing, or at least prolongin, recession.
So what Nonanonymous says is, in essence, what Wray says:
If we slightly modify Nonanonymous’s statement to the following, it conforms to Wray’s claims:
Nonanonymous then follows his earlier statement up with this:
So now, in reaction to Nixonian or Friedmanite MMT Nonanonyous gives us its opposite myth: austerianism.
But instead of taking the time to point out to Nonanonymous where his thinking conforms to MMT and where it departs from MMT (of the L. Randall Wray variety), one of the MMTers instead rejoins him with his own exaggerated claim, this because Nonanonymous’s claim is not at all “wild” given the historical context and all the confusion over what MMT really means:
You’re asking the right question. What kind of society do we want to create? Yes, we have an oligarchical form of government which is moving us into a neo-feudal set of arrangements and yes, there is a strong kleptocratic element to it. But, honestly, I believe that is what most of us want unconsciously. Perhaps to relieve us of responsibility for running our lives or whatever–people do not support what you and I might call a progressive society of with the goal of full participation where the winners do not grab everything and the losers are allowed to find a way to win in their own way. We require, it seems, misery, stress, jealousy, anger, and the stunning pettiness that makes up our discourse and culture.
Here, at NC and other fora it is always about the oligarchs having their way against the will of the American people. I’ve been around for awhile and, for the most part, the rightward shift since midway through the Carter administration has come because that is what the majority wanted–they wanted “morning in America”; they wanted “downsizing government” they wanted diet soda; they wanted to have America strut on the world stage with “shock and awe” displays of stunning cruelty. The American people wanted to eliminate trade barriers so they could have their endless cheap toys and clothing; they wanted huge vehicles and cheap gas, they wanted to be perpetually at war with “terror” and needed no evidence as to who the perpetrators were on 9/11 they just wanted to kill somebody, anybody, in fact would do–they just wanted an opportunity to let out one big war-cry to frighten the world. The fact of the matter is the oligarchs and their agents (the politicians and “reporters”) knew all this and played the con. To have a good con you need the suckers to be greedy.
The problem we have is, as I’ve said here, societal and cultural. We still have to political ability to reverse this but choose not to.
I think we may be finally getting it right. People don’t want to do anything and Congress reflects that. People don’t want Congress to say “no”, they don’t want Congress to say “yes”. That shows genuine confusion and a chaotic inner psychology to this culture–this means people are becoming more open to alternative perspectives–will we be able to offer them something to chew on?
It all boils down to advertising and propaganda and public relations. What people want is irrelevant. What people are is anesthetized. They aren’t even conscious of participating in political processes, except to the extent of choosing between a number of candidates, soap powders, automobiles, etc. It never occurs to more than a tiny minority that all the choices are worthless. What we have is a sham democracy running interference for a corporate plutocracy. The plutocrats have stopped letting anyone else in on the game. The corporations are simple looting operations leaving even shareholders with a handful of dust.
If you want to take Chomsky and Herman and Kolko and Mike Davis seriously, the 1960s showed that large numbers of people taking to the streets scared the hell out of the Powers That Be. They’ve aimed for a demobilization of the population since the times of Byron White’s memo to the Chamber of Commerce and Sam Huntington’s report to the Trilateral Commission on “the excess of democracy.” So I do thing that an informed and angry citizenry does matter.
You are right, though, to point out that what we’ve gotten since the 1970s is a frightened population that is grossly ill informed. This has been by deliberate policy. Like Banger, I don’t let the people off the hook–many collaborated in their own disenfranchisement because they found it easier that way, or they could take advantage of the opportunities this situation created for them (think talk radio and the NRA). And the wonder of the thing was that the more frightened and alienated people felt, the easier it was to manipulate them and work on their atavistic instincts. Now instead of hating their masters, they identify with their power and privilege. How we shatter this condition of psychic weakness and false identification I do not know. But it has to be done.
I think the time is ripe now. I believe the people are just hugely bummed out at this point and thoroughly confused. Any voice that can be heard above the media din that has some sense of authenticity will have a chance to make its case if it is done right. We do still have some collective common values–we need to find out what they are and begin to focus there.
I question whether we have collective common values. It’s not just the media that’s to blame — an entire culture has grown up around pushing the oligarchs’ party line, and it’s completely embedded in people’s social networks, their churches, their workplaces. It’s a seamless bubble, and to step out of it would mean having to break with a way of living, not just a way of thinking. For example, I know several who are educated, working solid white-collar jobs, and they don’t believe in global warming. They believe it’s all a liberal conspiracy to take away jobs and productivity and subjugate the entire world to a tyrannical reign of green bureaucrats. They also believe the illegals are taking all the benefits and jobs and that the U.S. should be run as a Christian theocracy. I can understand having a difference of opinion on policy, but what can you say to people who believe garbage and don’t want to listen to anything else? It’s not like they’ve never heard the opinions of the other side — they have, and they’ve rejected them.
Besides, according to one of these folks, God controls the weather and it’s folly for people to think they can predict it or change it. I don’t know how he decides whether to take an umbrella in the morning, maybe God gives him his own forecast directly, but certainly those heathen meterologists have nothing useful to say.
My guess is if you ask those people if they believe in mathematics most will say “yes.” If they believe in mathematics they also believe in logic–one may quibble around the edges but logic is fairly clear-cut and most people theoretically accept it. The reason these people believe weird sh!t is because they don’t talk to anyone else because they are emotionally frightened of modernism and, indeed, logic. They will say they are logical–however you can, through Socratic dialogue, get them to accept ideas that are deeply troubling emotionally if you use a step-by-step logical approach. Rather than calling each other names this is the patient steps that we ought to take. I’ve been advocating for years that the left ought to be the part of the population that represents logic and science–we know that compassion is not possible for most people on the right because of the fear factor, other than in their own families perhaps, but logic is something not many will reject.
I think the majority of the American people accept that the Earth goes around the Sun–if they can do that they can move to other realizations.
I’d like to think you’re right. Maybe I just need to see it in action first.
I just know, in the case of my friend who thinks God controls the weather (and therefore humans will never suffer from catastrophic, human-caused climate change because God will save us, or maybe God will save the elect and let the unrighteous suffer, I don’t know), that his wife, his family, everyone in his church, and most of his other friends believe the same thing. Even if he changes his opinion on this one subject, he’d find himself in disagreement and what would probably become a painful discord with them, because he can’t just change his mind on one issue without repudiating the entire mindset. The cognitive dissonance would be too much. And all he has to do to maintain both his relationships and his worldview is glom onto the conveniently furnished crap “science” that disproves global warming, and say that he’s just being logical, there’s disagreement among scientists, etc. etc.
Well, that’s exactly where I don’t agree with you. Yes, the oligarchs act like oligarchs but they are allowed to do this by the people as a whole. The propaganda, like any con, cannot work unless the people want to believe this crap. We have to present an alternate vision and the left has failed in that department–it is not enough to simply blame oligarchs, it’s like blaming the rain for the fact we are getting wet–what we need to do is just get a f!cking umbrella!
I don’t disagree with the collusion of culture, desires/drives and all of this.
but come on-the constant “Oligarchs say: the public MADE me do it.” is false and tiresome.
it was a deliberate campaign. the fact that our ‘culture’ was always a fertile breeding ground due to protestant work ethic and coming to this country deliberately to economically get ahead is a giant cop out.
this whole website points out nearly all of the time that this was a deliberate scheme, but those in power to entrap those with comparatively less do to their bidding. why? because you can’t have 1, 3, or 8 billion people all doing their own bidding and get rich off of it. the giant MINDf@ck trick has been to con people out of their own intelligence, out of their own sense of purpose, and out of their own agency so that you can bridle them and use them as workforce to pile up wealth AND power (what good is one without the other? actually, they’re mutually necessary and sufficient, it seems) instead of everyone doing their own thing.
it has allowed concentrated use of man&mind power. It has served a few good purposes (knowledge expansion being one) but was always a deliberate campaign to trick the lower, more gullible classes out of self-sufficiency and into insecurity, passivity, apathy, and shame.
and here you are yet again saying the Oligarchs hands were forced. who shaped the culture this way from the beginning of the enlightenment? heck, who probably shaped the culture from the beginning of the development of agriculture.
as soon as we had made a surplus, in some ways we were doomed. the first wiseguy realized what could be done with it, and just had to set up the proper religion and tithing and so on, and make war against some neighbor to justify piling up resources mostly for himself and give him something to do while standing around wearing colorful feathers.
good lord, your apologizing for the overlords is detestable, even if I DO agree that people have been a party to their own destruction.
I don’t get how what I say is detestable. What does that mean? How am I “apologizing” for the oligarchs? Look, I’ve known all kinds of people including smooth operators in the oligarch class and I’ve know professional criminals–there is not a whole lot of difference between the two other than better taste in liquor and women.
They are what they are, is what I mean, castigating a thief for being a thief is pointless. Of course they act in anti-social reprehensible ways. What do you expect? Look at our movies, our mythologies, they are pathetic. We are so disempowered that in the simplistic comic-book movies so many people love about “good” and “evil” we always have to be saved by absurd super-heroes in funny costumes or superheroes that have the ability of making all bullets miss (Bruce Willis et. al.)and so on. People go to these movies–no one forces them to emotionally stay stuck in being 10 year olds. The oligarchs don’t force people to act stupid and be obsessed with Beyoncee of Miley Cyrus. How is it reprehensible to point out the absurdity of our culture?
Oligarchs always reflect the culture–in times when virtue was something important in life powerful people came to power who did great things for the people and not just for themeselves–history is replete with these people. FDR, for all his faults, represented a genuine stream in the American oligarchy as did many oligarchs up until the 70s and 80s when we changed into the culture of narcissism. Mind you many of these guys were deeply wrong–but they had some interest in the well-being of the country.
And you know what? It doesn’t add to anything to use such negative tones as I tend to get over here questioning my motivations because I don’t see things in simple black and white, i.e., that we live in a world of good guys and bad guys–the world just isn’t that way.
We waste our time on the left looking for villains–that’s what the right does–why mimic them.
Entertainment does seem to matter. Indeed, it is a large part of the advertising, public relations, propaganda world, the all purpose anesthetic dribbled out between the messages to a population too exhausted by work and child care and household chores for any further activity beyond absorbing what is pumped electronically into their homes. Whether it’s games or celebrity or comedy or drama, the product is bland and phony and designed to stifle thought, and it works. You can see this all come together in the constant messaging about our military ‘heroes’ and their selfless defense of ‘our freedoms’.
who made western women smoke in great numbers, even though it was known before the time of scientific proofs that it was harmful for your health? do you think they were crying out for cigarettes? or was it conveyed as ‘cool’?
you and I have both been around long enough—who ‘sold’ the microwave? and why? did you ever meet anyone before the period of the microwave oven that stood around going “I think I need something to heat my leftovers up for lunch and, darnit, I just don’t have that nameless Something”? did we need it? no, but they sold it. now there’s an entire industry of microwave convenience foods. bad for you, bad for the environment and yet….saves time! how splendid. my time is the most valuable thing in the universe, yes? no one needed it before. now just look in your own neighborhood for a home without one.
instant mashed potatoes, the list goes on. there are endless things that were sold as ‘convenient’ ‘time saving’ ‘time maximizing’ that no one ever needed before. the potato peeler (not that over-engineered plastic, so-called ‘ergonomic’ one from Target) was a marvelous invention. whomever did that, bless you! the instant mashed potato? who needed it?
we bought a lot of crap we shouldn’t have. who wanted to sell it? what caused some of the earlier depressions in the industrial era? lack of purchasers. once everyone has a toaster, who needs that?
I commend you on your realization that thieves are thieves. our ‘culture’ allows them the power to stand on the tallest soapbox by virtue of their money and command over the media, enlist an army of intelligent people to do their bidding (behavioral scientists work in droves for corps in advertising and elsewhere simply to figure out what makes common man tick so that you can sell him something) and then invests their profits from this into organizations that mold culture and politics even more. and yet you say they are blameless? it is only the system at fault? who would WANT to control countless people’s lives? only an insane sociopath. and yet we should hold these people, who are in control, totally blameless?
I don’t want to string them up. you persist in playing ignorant with me, saying we give them the power that they have. that might be true, but once they have it they make sure that a)they can keep it and b) they and their progeny/class can exploit the rest of us even more.
have you read at all Yves’ various expose’s on how the enclosures went down and were justified? that is the master race speaking, saying “common man, you waste your time doing your own thing. I throw you off the land and then you’ll come to me starving and begging for scraps (a job). don’t cry about it. you’re lucky I give you enough to survive on. that’s exactly what you had before, and yet you were happy. what’s the problem?”
and you don’t see any moral difficulty with saying that people who WANT to come out on top of this system are in less control than the rest of us? only mass uprising, without the constant harassment of survival nipping at our heels will allow us to even figure OUT how we’ve been screwed.
do you blame domestic animals for their fate as well? do you blame a cow, pig or chicken for not vaulting his ass over the barnyard fence and hightailing it? because humans have been domesticated in this crucible of culture, ideology, religion, economic dogma callitwhatyouwill for the last 5-10 thousand years!
Right again, Hugh, first things first. I’m glad to see you enter early.
It’s critical to recognize that the public investment starvation of classic penny-wise/pound-foolish thinking wrought by deficit disorder and ignorance of “Fed” perfidy, is not an unintended consequence, not a side effect, and not a mistake. It is not the result of shortsightedness, ignorance, or incompetence. It is the intentional manifestation of power-madness—a feature of neoliberal economics, not a bug.
Quite reasonable, even obvious. But this does not begin to acknowledge the true nature of the problem — that disempowerment and inequality are intentional, and that catastrophe is a tool of disaster capitalism and Shock Doctrine on a global scale. In the great game of empire, relative wealth is far more important than total wealth because relative wealth rules over poverty with near absolute power, the ultimate goal — and the penultimate narcotic of plutocrats.
IMO, we must recognize this first and foremost — that our elite “leaders” are far too corrupt, dishonest, and self-serving, or worse, malevolent — to ever implement self-evident solutions of posts like this no matter how reasonable, logical or well-argued they are. This is the key to the problem; this is the problem, identifying the enemy. Pointing out obvious budget-funding solutions without first confronting the evil of the current regime is pointless. It’s just spitting into the wind.
“One thing I will child the MMT crowd…”
Should be chide, yes?
one more gold star for you!
MMT is a utopian vision. Keynes is all we needed, yet government didn’t contract during periods of prosperity. Therein lies the rub.
The FACTS are, expanding and contracting the money supply accomplishes little if their is no public spending constraint. If there was, we wouldn’t be in the situation we’re in now.
The FACTS are, public spending HAS replaced private investment. The US Federal government is completely out of control, and the Greatest Recession can easily turn into the end of Western Civilization as we know it.
We recognize the same symptom, youth employment. The problem is we’ve reached peak employment and boomers are hanging on.
The system can be tweaked to work. The problem is it’s tweaked to work for the 1%, by politicians and bureaucrats who’re beholden to the 1/10 of 1%.
We can’t fix youth employment without fixing wealth disparity, and the rules we live under.
It requires wisdom and a knowledge of the truth of God’s Word to know what is right and fair.
“My people are destroyed for lack of knowledge” (Hosea 4:6a, ESV) of God’s Word. We’re all gods, but there is only one true God, the God and Father of the Lord Jesus Christ.
Without a knowledge of God’s Word, we cannot set the world right, since there is also a Devil who is set on destroying what God created. Jesus Christ exposed his kingdom not quite two thousand years ago, and we are fighting the same enemy today.
Without a knowledge of God’s Word, and the practical application of it, Wisdom, we’re consigned to repeat the mistakes of history. So be it, and let the redeemed say, Amen!
The Fact is that putting FACT in front of a wild claim does not make it a FACT.
Ok phew… in the most simplistic non fog based rational (oxymoron) logic (double entendre) praxeology means “Gawd is inside my ( “I” ) head” and he says we don’t need no stinking evidence or empirical stuff because I’m always right!!!
skippy… bloody Milton thought a deity was in his head, MMT is anti deity in peoples heads, hence the rub with it.
A utopian vision? Why don’t you just dismiss MMT before you even read it? Oh wait, you already did.
MMT is not any kind of vision. MMT is an accounting-consistent description of how monetary systems work. No other macroeconomics is accounting-consistent. Not one. If you don’t like accounting-consistent macroeconomics, take it up with your CPA. Tell him his double-entry bookkeeping is garbage, because that’s all MMT is: By-the-rules bookkeeping for the macroeconomy.
People have an almost religious belief that the US government is the sole creator of dollars in the world. Pay this off and only a fraction, ~35%, of the money supply problem is addressed. What about private credit? Banks extend loans to businesses or people, and this expands the money supply. Financial instruments purchased on margin also expands the money supply. Government deficits are not the sole or even major cause of the financial/debt crisis. Somehow paying off the entire government debt and balancing EVERY public budget will still leave unsustainable PRIVATE debt.
I’ll argue that writing off private debt, even just a fraction of it, would produce a spending boom that would create jobs and pay down a large part of the public debt even without modifying the tax systems. I have no proof that this will work, but I have at least as much proof as those who think austerity will improve things.
And speaking of religious beliefs, Jesus whipped bankers and befriended tax collectors – not the other way around.
Yeah, but fundamentally, the US government is the only creator of dollars. When push comes to shove, private credit creation is only worth what the government will enforce/guarantee/subsidize/etc. Bailouts are a policy choice, not a law of nature.
Take a look at Karl Denninger’s chart (because I am too lazy to make my own):
http://market-ticker.org/akcs-www?get_gallerynr=4612
Private credit is private creation of currency – the money did not exist before the loan was made. Denninger’s chart is nice because it lays out all of the money supply over time broken down by source. Take away all of the government (including State/local) debt and the bubble is still there, and it is still huge.
The Federal Government is not, nor has it ever been, the sole source of currency in the US since bankers create dollars out of bookkeeping entries whenever they extend credit.
I agree with the technical observation. I’m just trying to convey a more fundamental point. Money is just an idea, a means of valuing labor and transporting that value across time. It’s a common denominator so that a chicken farmer can give eggs to a barber to get a haircut at a fair price for both producer and consumer so that the barber can buy a car so that the car salesman can make some scrambled eggs. We need currency because those eggs would go bad long before they reached the car salesman’s breakfast table, not to mention the impracticability of taking thousands of eggs to the car dealership.
Every category on that chart is dependent upon the government. Banks are dependent upon the credit of the people they lend to. That is the constraint on the private creation of dollars – the borrower, not the lender, has created the credit from the sweat of his brow, either in the past as savings of excess labor or in the future as a promise to provide additional labor. A loan is a transfer of credit from borrower to lender; nothing in the currency world is created in aggregate unless government recognizes the currency creation. The most obvious places to see this currently are student loans and home loans, but the less direct arrangements are no less necessary to transform the credit of a borrower into new dollars.
The reason you get credit card offers in the mail all the time has nothing to do with Visa’s ability to print unlimited amounts of dollars. Rather, it has to do with Visa’s ability to successfully access the legal system on profitable terms. As a simple thought exercise, imagine that the government limited credit card interest rates to an APR of 1%. How much money would the credit card companies lend out under that law? Probably not much more than what they can charge merchants for transactions from people who pay off their balance every month.
because jesus, unlike some people, could tell who was in control of whom within that power relationship.
just like we need to befriend the police, the military, and the less paranoid of the NSA people. and I don’t mean ‘befriend’ as in brainwash.
I do agree, but God is not what Christians think He is. The real God is Allah. Or Vishnu. Or those aliens that put us on Earth. Or… Anyway, once we’ve sorted that out, we’ll know what to do.
I think you mean Zeus.
Zeus is a dialectal variation of theos, god. This deity was often referred to as god the father, hence in Latin ju, a variant of deus, and piter, a variant of pater, Jupiter or god the father.
here’s a few that already sorted ‘it’ out:
RICHES, n. (devils dict.)
A gift from Heaven signifying, “This is my beloved son, in whom I am well pleased.”
—John D. Rockefeller
The reward of toil and virtue.
—J.P. Morgan
The savings of many in the hands of one.
—Eugene Debs
Let me add one more:
” A Depression is when assets return to their rightful owners.” – Andrew Mellon
She is the Sumerian Beer Goddess, Ninkasi.
http://en.wikipedia.org/wiki/Ninkasi
Being first does count for a lot.
Yves, I have to disagree with this idea that there will be less workers supporting more retirees in the future. If 3 workers support today’s retirees, then in the future, when the author states there will only be 2 workers, where did that 1 job go? That implies a major economic contraction, or an increase in retirees above those that are already working. If there are retirees that are not currently working, but will add to the over 65 pool, then they must already be drawing SS and thus are not a factor.
Again, I am assuming a continuing to grow economy. So when today there are 1 million jobs, tomorrow there should be 1 million plus 1. I think the bigger fear for elites is that the worker shortage will cause a strain on the wage market. With fewer workers than jobs, employees again have the upper hand. So if SS is cut, it has several effects on the bargaining power of workers.
It’s just a demographic phenomenon: we can already know at this point how many people there will be in 20 years in various age groups above age 20, etc.
There needn’t be an economic contraction in absolute terms: If the population grows you can have an increase in both working age and retirement age individuals, but if the ratio of retirees to workers grows, productivity must increase in order for those workers to maintain their standards of living – and the standards of living of the retirees they are supporting.
The worker/retiree ratio is just another scary story the Peterson crowd uses to spook everyone.
The projections show that SS payments only increase from 5% of GDP now to 6% peak over the next 75 years. A whopping 1% of GDP! Medicare is much worse – but at least we know what the problem is there…don’t “we”?
The other thing they fail to mention is retiree consumption will certainly go down, seeing how the average SS payout is something like $1500/month, and a good portion of that is maintaining a roof over one’s head – sumthin that should be towards the more benign end of the spectrum in resource use.
‘Course if the economy collapses from any of another myriad of reasons, then the projections probably don’t work anymore. For any of the 99.9%.
Actually people are neither “workers” nor “consumers” they are people living in a complex culture. We need to get away from these term because they re-enforce our obsession with the 19th century–we need to get out of that mind set it is drastically destructive to any possibility of constructing some kind of sustainable human society.
In fact, “workers” can also be robots–we are at the cusp, right now, of a new age of robotics–they will start to displace human involvement in many areas as they should in order to liberate us to pursue all the higher human interests that most people agree on. Love, loafing, art, music, sex, consciousness expansion, creative flights and so on just to touch on the possibilities. Why should we be continue with the 19th century model of life?
Eveyone, not just retirees should retire, should loosen up. We have the technology to have enough food for most people alive today, we can create cheap structures that would meet our needs for shelter rather than the absurd palaces we seem to crave for status.
People work and people consume. That makes them workers and consumers.
Are you feeling okay?
Actually I am in a particularly good mood today. I find those terms misleading–I honestly see those designations as misleading and value laden, IMHO. There is much more to life.
“One thing I will child the MMT crowd for a bit, however, is that they sometimes exhibit a lack of sympathy for how hard it is for people who have grown up with the conventional narratives around how government funds itself to wrap their minds around MMT. It’s isn’t just different, it’s actually disorienting at the outset.”
Absolutley correct!!! After earning several degrees in mainstream economics it took me at least 6 months of daily head banging to finally unlearn the mistakes that had been drilled into me. I also work for a bank so I had the benefit of actually studying the opeations of the organization in lending and clearing and settling inter-bank payments. That’s a luxury most people don’t have.
Yes, Loans Precede Deposits.
That must have been a life changing revelation for you, as it was for me:)
Everyone should read Steve Keen’s article entitled The Roaming Cavaliers of Credit to understand the mechanics of this process.
I had the same experience as you. While I didn’t have the advantage of working for a bank, I also didn’t have the drawback of years of economic orthodoxy to unlearn, so it probably nets out.
It took a long time for me to let go of the household debt analogy. Once I finally understood, I came up with an alternative analogy of maintaining a lake at a consistent level by adjusting the rates of flow in and out. I’m sure this one has drawbacks as well but I find it a much more useful mental model.
Thanks for posting this great piece, Yves.
I think if we can get Democrats and Republicans to understand that excessive fiscal austerity causes and prolongs economic downturns, we’ll have done enough.
P.S. That will include convincing Democrats that federal tax increases qualify as fiscal austerity and convincing Republicans that federal spending cuts also qualify as fiscal austerity.
Amerikan politicians are perfectly aware that austerity under the present circumstances is destructive. You aren’t telling them anything they don’t already know.
They are also aware that austerity serves the goal of completing the redistribution of wealth from the general population to TPTB. And there is no other goal.
If you want to change that you will have to replace the membership of congress, not educate it. For the most part congress isn’t at all motivated by facts and reason.
Thanks, Walter. One can’t point this out often enough. Convincing scorpions (Democrats and Republicans) of the harm they are doing do is fruitless.
So far as the masters of mankind are concerned, these are solutions in search of problems that don’t need fixing.
TPTB have no interest in the “economic welfare of young people” and no interest to “invest in infrastructure and education.” They can rent labor from third-world countries for pennies on the dollar at most and have more infrastructure than they need. The TPTB are only interested in developed countries as markets to be exploited, and for the current quarter those markets serve well enough as victims of their avarice.
With all due respect, the problem of the rapacity of the rich has to take priority because it will render infeasible any approach to the problems of infrastructure and education. The way things are, the upcoming generation in Amerika is on course to find out what it’s like to live in Haiti without ever having to move.
You point out the lunacy of the people at the top, but their idiotic short-sightedness doesn’t nullify the problem. Even if the Power Elite can’t see it, unemployment, underemployment, and crap wages are undermining the long-term viability of the system. You can only drive down the costs on the “supply side” so far. The system needs demand. And instead of producing demand, the people in charge horde personal wealth. But if older people are not to be cast adrift, we need to do something to boost the numbers of the employed and their wages. Waiting for things to go to hell so that we can grab that wealth in one orgy of righteous looting isn’t a really good plan for a sustainable economy.
The Power Elite are uninterested in the long-term viability of the system. They are quite prepared to rob it until there is nothing left to steal.
“The Power Elite are uninterested in the long-term viability of the system. They are quite prepared to rob it until there is nothing left to steal.”
I have to agree with WP on this. We are talking about plantation owners here. They don’t give a sh*t about anything beyond themselves.
Currently employed people earning under $113,000.00 pay 6.2% of their income towards Social Security. If you are earning more than $113,000.00 your percentage rate of money paid towards Social Security falls dramatically as your income exceeds the $113,000.00 cap. The solution to secure Social Security funding for all time, regardless of numbers of workers, is to levy a fair and consistent tax rate to all people regardless of income levels without a $113,000.00 cap.
“What is true of government as a whole is also true of particular programs. Social Security and Medicare are government programs; they cannot go bankrupt, and they cannot fail to meet their obligations unless Congress decides–say on the recommendation of the Simpson-Bowles Commission–to cut the benefits they provide. The exercise of linking future benefits and projected payroll tax revenues is an accounting farce, done for political reasons. That farce was started by FDR as a way of protecting Social Security from cuts.” ~ James Galbraith
Every person and every entity that is a collection of persons needs self-restraint. To say that an entity cannot go bankrupt is simply setting up that entity to go bankrupt. It is as foolish as saying that one will live forever. It is an enabling exercise just as one would enable a drunk by providing him drinks. The only infinite entity is God. Everything else that claims infinite status is merely a god.
Don Levit
Hi Don,
Here’s a free book you may like: http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
The U.S. workforce is going to experience a significant demographic change over the next 20 years. The pay-as-you-go social security system is structured in a way in which today’s workers pay for today’s retirees through a FICA tax directed into the Social Security Trust Fund and invested in AAA-rated U.S. government bonds. In 1960, there were 5 workers per retiree, and with the post-WWI “baby-boomers” effect, this ratio has been steadily declining to 3 workers per retiree today, and is expected to reach 2 workers per retiree by 2032. The only reason this decline has been manageable so far is because of increases in workers’ productivity and technological innovations.
———-
On top of the oil factor, I believe another reason for the productivity boost was the population pyramid where over the last few decades there has been significant growth in the 35-55 cohort. The 35-55 cohort is theoretically at its peak in earning power and productivity. This will not last as Gen-X and Gen-Y go through the pipeline since after the Baby Boom we got a decade of baby bust.
This means the boomers will be depending on an already dwindling and overleveraged group to pick up the bâton.
Using Census bureau data,http://www.census.gov/population/international/data/idb/informationGateway.php
Here are some quickly calculated numbers:
Dep/35-55 65+/35-55
1980 246% 53%
1990 194% 50%
2000 162% 42%
2010 169% 47%
2020 197% 65%
2030 211% 79%
We are only starting to see the effects on Gen-X and Gen-Y
That’s how they’re going to get rid of SS, Medicare, and every other social program that reduces the profits and power of the rich: destroy the work force that supports them.
You might think I’m exaggerating, but really, you get to watch the U.S. turn into a larger version of Haiti in real time. Numerous locations have already completed the transition. The rest are progressing adequately.
I have come across information about a man who has studied the effects of health on the populations of various countries. His ideas are enormously instructive and he even has some good suggestions on how to combat the inequalities of wealth:
His name is Michael Marmot.
See: http://www.who.int/social_determinants/thecommission/interview_marmot/en/index.html
http://www.who.int/social_determinants/thecommission/marmot/en/
Higher government debt means higher interest amounts being paid to the mostly (very) wealthy families who own a large part of overall debt. Government debt has been one of the best investment classes over the past 10 years. These out-sized gains have mostly benefited Wall Street and the so-called 1%ers who own much of the debt. From my perspective, anyone who proposes to issue more debt, which also leads to higher interest rates as well as higher overall debt payments, is fighting for the wealthy bondholders who receive billions of interest income and Wall Street that earns millions in fees buying and selling the debt.
And when I hear “infrastructure” here in California, it means more government financed roads to build more housing subdivisions, strip malls and office parks, destroying some of the world’s more fertile land, open space and wildlife habitat. The 1950’s dream interstate highway system has forever scarred million of acres of the state and many parts of the west, yet the road and bridge programs keep coming, vastly enriching the adjacent landowners wherever the government directs the transportation projects. Now high-speed rail is being pushed, which will ensure one giant sprawl throughout the entire CA central valley where a vast number of crops are currently grown on some of the richest soil. Government roads, rail and bridges keep destroying the land, not enriching it. Society would be much better off if we just paid people to sit around rather than fund these environmentally destructive road, rail and bridge projects.
Over the past 50 years the US has become a country where 40% of our income goes to combined federal, state and local taxes (for many of us at the lower and middle incomes anyway), and another 40% goes to pay rent or mortgage and assorted housing costs. It’s become a neo-feudal society, with kings replaced by thousands of government agencies and lords replaced by savvy real estate speculators and landlords along with the Wall Street bankers who finance them.
There is never an unemployment problem since total jobs is mostly an accounting allocation issue. If large employers were required to offer their employees part-time work, millions of people would take 2 or 3 days of work to free up time to pursue other interests. This would instantly create 10’s of millions of jobs. Large government employers could offer maximum 25 hour work weeks, which would also create millions of jobs. If there’s still significant unemployment, the work-week is reduced even more until everyone who wants a decent job has one. Technology and the destructive nature of capitalism destroy jobs all the time as part of their role in the economy; it’s just a matter of reallocating the work to accommodate the changes.
The social security funding issue can be addressed by adding taxes to the groups that have benefited the most from past government economic practices: the large landowners and the wealthiest shareholder families. If social security included a graduated surtax of 10% – 35% on families with passive incomes greater than $1 million (interest, dividends, rents and capital gains), along with graduated gross rent taxes of 10-25% on any rent income received over $100,000, these two taxes would raise significant funds to cover social security solvency. Better yet, these two funding sources represent wealth that was actually created by all of society, unlike the current SS payroll taxes that only taxes labor.
There is time to battle over details of this or that policy but we are now at a point where we have to question all assumnptions. Sadly most of the left are simply stuck on blaming oligarchs for our problems–our role ought to be to question assumptions using the rules of logic not just making fun of things on Comedy Central. The Tea Party people are questioning assumptions–they are asking why government? Why have it do anything? We ought to be asking questions like you are–why develop high speed rail? Why more shopping centers? Why the whole culture of jobs–in the long term do we need to continue the 19th century forever? I don’t have any definitive answer one way or the other but these questions need to be asked and debated.
they are asked every day on this very website, and if not here then on one of the related or linked websites.
your issue with “blame” is psychological. replace “blame” with finding root causes. if A is sufficient to cause B, should B prove undesireable, is not the most direct remedy to remove A?
this is where you and I start to get into a chicken or egg dispute over whether it was individuals who wanted it, or those who wanted to profit.
if power relationships are not examined and resolved, we will be doomed to repeat them, and then wonder why there are so many of us that are slaves to some grindstone or other.
that is enough. i’m done with dense.
Dense? Why don’t you cool it on the insults, it diminishes whatever it is you’re trying to say.
blocking out these ‘arguments’ and dancing around each other is dense.
also, my wording is dense. i don’t write well when calm, much less when someone who appears reasonable appears to also be playing dumb.
you don’t seem dumb, so….you either really believe that individuals drove this process and oligarchs simply ‘won’ (i may be mis-stating you. correct if necessary) or you don’t find that to be too much of a problem.
here’s a question: do you think that think-tanks and massive ‘not for profit’ foundations founded by rich former and current oligarchs are not studying how to and investing in changing the culture, the power structures etc. in order to fulfill either some strange vision they have of the future, or ensuring that the power structures they themselves were a part of continue to thrive and grow? what are those foundations/thinktanks for, then?
do you understand that the individual, driven by desires and needs and with poor education, is putty in the hands of someone with power, money and offering to take ‘your pains away’, yet might really be offering a cure that is self-serving? how do individuals solve this problem? in economics, this is symbolized by the information asymmetry problem. in economics, perfect info is assumed. in person vs. mr. “let me give you a job. (we won’t mention that it won’t pay enough to let you live on, much less thrive)”, the individual does not have the power often, the time usually, or the training to say “NO!” or figure out how this long-game will screw them in the end. all they know is, they need to eat today. they need to get dinner on the table today, for those hungry kids. they need to try to be in 5 places at once, doing 50 things at once.
they might band together and complain about it, but it is the reality they live in. religions have been built up to justify it (economics, for one). and you want to blame the individual for not bucking the trend? those who are on top must have a clearer view of how the system works in order to benefit from it, and you want to absolve them? miscasting them as ‘thieves’ implies that we’re all lying around with our doors open and jewels on the coffee-table. that isn’t how this society/culture works. most don’t know that they are getting screwed. they believe the lie (everything i have, i EARNED!—yeah, right. could you have made all of that stuff yourself? no…your slaves are more skilled than you are) and they believe in their place in the great chain of being==the lesser and the greater and the religion of striving for some kind of heaven or something.
so, i’m with you and i’m not with you. it is the culture. but who is in control of the culture? one individual or one family or one group very rarely have the opportunity to change the culture at large. they just come off as eccentric hippies living on their co-op farm in the woods, tilling their fields naked by the moon and such.
The biggest issue is that global GDP growth is principally based on energy dependent materialistic endeavours.
Most money injection is based on hard assets as collateral.
As long as we are going through a recalibration of the resource distribution on global scale and that we keep on focusing on solutions that only increase our energy dependency, the problems will intensify.
You can’t fix a system where people withdraw $300,000 more in benefits than what they put in as contributions.
yes, so how can that be resolved, even though it is a total non-issue.
20k per year SS x 15 years of retirement (made up # to satisfy ‘average’)=300,000 total withdrawn. for simplicity, we will not include medical costs, only annual living -income-.
300k / 40 years working (if you can keep working that long, or steadily enough to, in the aggregate, work 40)= 7,500 per year.
SS taxes 6.5% of income? is that true? so if 6.5% were equal to that 7,500 per year, then annual income would be approx. $115,384.
so, what is the solution? pay people more? have them work until they drop? encourage self-euthanasia? encourage large families, so that grandma can go on an annual tour like Queen Elizabeth 1st used to do, staying in each of her (rich lords) subject’s grand homes and driving them into bankruptcy?
the issue is not money. the issue is, are there enough resources to take care of everyone alive even without all of them constantly working.
Your employer kicks in another 6.5%.
Plus money in the trust fund gets paid interest – presently a little above 4%.
Plus the Trust Fund IS there – $2.7T of it.
When they do the projections (with assumptions for demographics and GDP growth), it takes until the 2040-2050 timeframe for payments to grow from the present 5% of GDP to grow to 6% of GDP. Then it peaks and drops a tad for the 75 year time frame they say is so important to maintain a look of “solvency”. (for people that generally believe in pension fund concepts – guv or private)
The $300K is just another scary number thrown about by the Peterson crowd.
It would be scarier, methinks, to tell people they don’t get that if we do away with SS, and they will have to save that on their own now. Plus what you need on top of that ’cause we’ve been told all along that SS isn’t really enough.
Maybe someone will do a baby boomer death chart – plot how many years it takes for quintiles of 80 million boomers to drop dead after reaching 65, or early retirement, for that matter. I bet 20% are gone in the first year.
But then we may find out Medicare is ok again.
ahh, yes. I knew I was forgetting something (been a looong time since I had a ‘standard’ paycheck with that ‘work in lieu of rent’ scheme known as neo-serfdom or “property management”) so, lower that annual salary down to about $62k or so. it’s still way more than most people are making.
was just doing it to prove a point. if they truly believe what they truly believe, then they’d have to justify allowing people to drop dead earlier (or, egads, forcing them too), being ok with them dropping dead while on the job (and probably in much physical and emotional misery well before then, making effectiveness at work nearly zero), or pay people more money. something’s gotta give.
The median family income is a tad over $50K, so the very crude estimate here is not off by that much. The sophisticated projections done by the SS Admin and vetted by lots of people show that under current levels of FICA, the Trust Fund runs out in 2032 and it isn’t until then that current withholding levels fall short of meeting outflows. At that we only need an additional 1% of GDP to cover the system. (we spend 24% of all income tax – personal and corporate on defense)
So the fix to SS would be small, especially if implemented soon – like remove the cap or a small increase to FICA. (maybe all on the corporate side?) The only problem there is the gubmint might try and steal it someday, of course.
Or better yet, TPTB could stop fighting poverty in Asia and stop giving tax breaks to our Asian poverty fighters.
After all, GE’s biggest tax bill IS FICA.
“You can’t fix a system where people withdraw $300,000 more in benefits than what they put in as contributions.”
Of course you can. Thisson, did you actually read the post? Are you following any of this discussion at all?
SS is not an insurance scheme, it is pay as you go. You paid for your parents, and your kids will pay for you.
But even that is a fiction. Because there is no money. There is an accounting system. All that counts is who is in charge of it. Everything else is fantasy.
“One thing I will child the MMT crowd for a bit, however, is that they sometimes exhibit a lack of sympathy for how hard it is for people who have grown up with the conventional narratives around how government funds itself to wrap their minds around MMT. It’s isn’t just different, it’s actually disorienting at the outset.”
Actually there’s one MMT website in particular that hurls constant invectives at those who have doubts about MMT, which they do with virtually every post on the subject. Other than it, most MMT sites or MMT proponents are very professional and patient with those trying to glean the ins and outs of MMT.
…BTW, Yves does not link the objectionable MMT site I’m alluding to in her blogroll.
Perhaps a three-day Forex course will make you see the light. ;)
…did I guess it?
It’s interesting reading these pieces because the problem is not one of technical understanding or public opinion. Rather, it is that our political leadership fundamentally doesn’t care about what is in the public interest.
***
As for specifics, I disagree wholeheartedly with that list.
1. Not true – nobody believes government should act exactly like households and businesses. In fact, the public doesn’t even care about short-term deficits. Neither do Republican leaders. Or Democratic ones. The federal government has deficit spent more dollars into existence in the Bush-Obama years than in the entirety of the history of the republic before them.
2. Government does crowd out private sector activity. This is good when the government activity has benefits that outweigh the costs (such as universal unemployment insurance or a national passenger rail system or shifting auto workers to making wind turbines). This is bad when the government activity is unconstitutional or makes us worse off (like airport molestation or the drug war or warrentless spying or prisoner abuse).
3. Inflation is a huge problem. Stagnating wages and rising costs is the mechanism by which the elites are robbing the rest of us; it’s how they skim productivity growth off the top. Prices in the real economy have risen dramatically over the past couple decades. The blindness of upper middle class liberals to the unprecedented surge in prices, completely detached from wages, is staggering.
4. There is massive waste and ineffeciency, not to mention unconstitutionality and authoritarianism, in the federal budget today. Ending these programs is a key part of restoring our system of political economy.
5. Long term, debt is a burden. The almost religious belief to the contrary is fascinating. Debt is only useful where the return is greater than the investment. Furthermore, the lack of sufficient taxation on the rich is one of the primary causes of wealth concentration. Higher taxes today would make our society better off, not worse off.
Well, I’m following the post and the comments, and there is a huge, huge disconnect between the MMTers and the economic ideas that folks on the street have about debt and deficits. It will not be, cannot be bridged overnight.
One issue, one question I would toss back to Dr. Kaboub about Social Security, is one I don’t hear very often. We hear about the ratios of active versus retired workers, the austerity proposals from the Right and Center, and the mildly left proposal to raise the cap on taxable earnings, but never this: isn’t the amount that the payroll tax brings in – listed right there on our paychecks, at a fixed rate of deductions – a flat tax, no? – deeply, deeply affected by the failure of the minimum wage to rise over the past 30 years to keep up not just with inflation, but with the overall productivity gains in the economy, which labor is not getting.
Dean Baker, especially, has written that if the minimum wage is adjusted for both inflation and those missing productivity gains it should be between $16.00 and $21.00 per hour. Now assuming that the hours worked are held constant, doesn’t that double the amount the 28 million in the workforce who are earning $9.89 per hour or less would contribute to the Social Security fund? Isn’t the great wage inequality and unfairness hurting that fund?
That’s my take on real “provisioning,” in addition to addressing future productivity enhancers.
The Social Security tax is actually worse than a flat tax. It’s nakedly regressive because It’s not imposed on income over a certain level (around $100,000, though it goes up each year). Check out this graph and weep: http://en.wikipedia.org/wiki/File:Effective_Payroll_Tax_rate_for_Different_Income_Percentiles_%282010%29.gif
Most MMTers hate the FICA tax, and a lot of them focus on it pretty heavily. Warren Mosler in particular has made permanent repeal of FICA a major plank of his policy proposals, and it’s something he talks about pretty frequently. Obama was crazy to reimpose it while we’re still in a recession. Even populist conservatives could get behind the idea of increasing the take-home pay of every single wage-earner in the country, but alas…
Your argument about raising the min. wage to help pay for social security is right, I think, but unnecessary in MMT’s view. But MMTers tend to emphasize that a lot of the programs they advocate would actually help reduce the deficit, not grow it. Like Randy Wray has said that the job-guarantee program would mostly like cut the deficit because of what it would add to aggregate demand.
Repealing FICA is effectively a minimum wage hike, anyway, though it has the benefit of hiking everyone else’s pay at the same time. Personally, I’d say we should raise the minimum wage and repeal FICA, but obviously that won’t happen any time soon.
I agree wholeheartedly with your first point, by the way. But I do think reprogramming average people to understand debts/deficits in terms of MMT is possible. It’s the kind of argument we can win.
Raising the minimum wage removes jobs from the economy. Raising the price of a good or service reduces the quantity demanded, whether for Labor or anything else. This problem is compounded when interest rates are repressed, because it makes it cheaper to get machines to do the work instead of people. Increasing minimum wage just accelerated the process. Raising the real wages and share of production by the laboring class must be done by other means, such as by not favoring one type of income (capital gains, carried interest, dividends, etc.) over another (wage income).
Thisson:
“Raising the minimum wage removes jobs from the economy. Raising the price of a good or service reduces the quantity demanded, whether for Labor or anything else. This problem is compounded when interest rates are repressed, because it makes it cheaper to get machines to do the work instead of people. Increasing minimum wage just accelerated the process.”
Nonsense, from where are you getting this nonsense? Labor is not the problem. What is the problem is the skewing of productivity gains away from Labor to Cpaital. Productivity gains which go to Non-Labor Investment as seen on Wall Street by TBTF.
How often does the U.S. government do something that benefits the billionaire class at the expense of the general population?
How often does the U.S. government do anything that supports the general population at the expense of the billionaire class?
What’s the ratio between the two? 100:1? 1000:1?
The billionaire class is desperate for more money. Yours will do just fine.
So the Americans are starting to realize how bad is the system at their home. And you still pretend to lecture the Europeans how to handle with these deep problems?
Please, you can not publish my comment but I am laughing about you. Lets not forget that some years ago I was saying some things that you are saying now and you made censorship on my comments because you supported the bashing of the European strategy to fight this crisis.
But do not forget this. Specially to you Yves. In the past who didn’t support the critics of the bad monetary management by the Federal Reserve of this crisis and call them crazy or pro-Tea Part. Yes, I was crazy them and you are crazy now, crying after the destruction of the international monetary system. As the Brazilian Manteiga warned you but, hey! He is from a third world and he is brainless, right?
Here from Europe, we have already the popcorn and very comfortable to see the end of the movie: “The Economic Implosion of the American Empire.”
RIP United States of America.
Have a nice day.
Software OxyMoronFuel
If you look at your history books again, you will see that the empire requires other people’s free land, sufficient for an aspiring middle class to exploit, to reboot the capital ponzi. There is no such land available of sufficient scale, which was the point of the Internet, from the perspective of capital.
The problem, as is always the problem for empire, is that it needs confidence in control of RE, which is why the dc computer was chosen over the ac computer, with the standard assumption of a closed system. The empire is always a dead end of increasing scale; it can only ride decreasing quality and increasing price, prerequisites for the credit ponzi, so far.
As ACA demonstrates, again, dc cannot tolerate mixed messages the way a human automaton can. It reaches its terminal velocity constant, engaging the clutch with no where to go, much faster, through the very same law of diminishing returns. ACA is purported to be about affordable healthcare for all; its reality is eliminating beneficiaries, with hidden agendas, hunting down contributors, with capital controls, and increasing the tax base, by favoring selected medical hoarders.
While capital and middle class have been busy pouring all their resources into making the disposable dc system work one more day, labor has been building out the ac transmission mechanism, which creates an empire sunk cost beyond its computational capability. DC is a sub-component of AC. Just because you wish AC away does not make it so.
The little components in that wafer that you cannot see are still components. They get hot, and they get hot in a particular manner, associated with the mentality of their users, which cannot be altered in real time. That burning tank becomes a bomb, in all kinds of ‘unexpected’ ways, upon recognition, which the empire can only avoid until the last minute, the timing of which is beyond its control.
Labor doesn’t let capital assume control to load the spring by accident, and the middle class assumes that control will lead to security relative to its position, increasing pressure on decreasing volume, to chaos. Software salesmen are like a cross between lobbyists and used car salesmen. They lead you to a bipolar extortion economy every time, temporary relief of induced anxiety for a price – the future.
First, they tell the politicians how smart they are. Then they allow the politicians to shop from among a wish list of internally inconsistent specifications, creating every possible opportunity for change orders. Then the software managers split the work up among programmers, walled off from each other with certified security, creating a relatively infinite number of change order possibilities to bleed the cow, because at this point the sunk cost is beyond contemplation of all the participants.
When the project hits the wall of recognition, it’s like any other bankruptcy. The 75% of specifications completed becomes the kernel for the next iteration, a scapegoat is offered, quite often the participating whistleblower, and the process starts all over again, along the same curve of diminishing returns, with an increasing focus on minutia. The Microsoft/Boeing model of development is currently the biggest scam ever perpetrated by empire, and nearly everyone is participating in one manner or another.
No, I am not a stupid Unabomber. The problem the empire has with me is that it needs what is in my head to reboot. I’m going to bomb all the participants, in one way or another. Their choice is whether they want to be dead cattle, or just sheared, to grow wool another day. I don’t care what they choose to do to themselves. Buffet can corner all the track he wants, so communities can frack all they want, so Chinese bureaucrats can consume all they want, so Buffet…
Like the man said, “nature takes care of its own,” nature provides. If you accept the good and evil, divide and conquer model, you will be ruled and you will toil, in vain and in pain, for empire property and income. As a community, you may wish to define prosperity another way, and build your feedback signal to discount the empire accordingly, to ignore ignorance and provide an appropriate exit from the noise.
I don’t have to do anything to blow up planes, trains and automobiles. The empire does it for me, with increasing COLLATERAL damage. From the perspective of its software, I am a ghost, collecting bits of bits to threshold. All you have to do to avoid me is value people over property and income. Turn the hourglass privately, beyond your public profile, to reboot the secondhand beyond its perception.
Let capital assume control, until you don’t. Labor has no interest in government granted rights. Control blows itself up; just get out of the way when you are ready to enter your development. I have no interest in the tree of knowledge and there is nothing Yellen, Brown or anyone else can do to persuade me otherwise. As you can see, I am spelling it out and the NSA automatons still have no idea what I am talking about.
Toyota kicked GM’s A, which is why Japan earns a higher debt/GDP credit and supplies hot money. Its problem, triggering a defense escalation, is that homogeneous miniaturization has reached the wall of diminishing returns. An empire is a cash cow, dependent entirely upon labor to accept its money. All it really has in its arsenal, that you don’t put there, is the threat of a self-destructive lockout, an artificial crisis. An empire is an emotional damsel, always in distress.
Ever notice how FB participants advertize material prosperity, derivatives, as blessings? Nothing worse than a drive-by-Christian, robot replicating machine, fueling itself. FB is just another iteration of the bipolar, keep-up-with-the-Jones, self-fulfilling, rigged lottery, fueled by the Fed, because all the participants are clueless, including the Fed. That’s what the data tells you. The Fed is the derivative, not the integral.
The majority chooses to herd in numbers on the assumption of insurance, subjecting and blinding itself to the law of diminishing returns. Capital predation, with a bait and switch, insurance promissory ponzi, is a no-brainer. The problem with paper leverage is that its foundation is arbitrary. Both collapse with the ingoing and outgoing tides.
What does a measuring device, employed by a measuring device, inside a measuring device, measure? What is timedistance bias? Follow a Seattle cop sometime; you become what you fear, with myopic observation contraction.
It is as sheep I send you out amongst the wolves. How you complete the circuit is up to you. Each event horizon has a terminal velocity, like the speed of light. Anonymity is a false assumption of democratic money. An empire cannot escape zero monetary velocity on the margin.
Seek your own truth, and the intent of others becomes irrelevant; they cancel each other out in the wash. Shepherd, and the empire blinders disintegrate, like a cheap sweater.
cannot afford to await…
Software OxyMoronFuel
If you look at your history books again, you will see that the empire requires other people’s free land, sufficient for an aspiring middle class to exploit, to reboot the capital ponzi. There is no such land available of sufficient scale, which was the point of the Internet, from the perspective of capital.
The problem, as is always the problem for empire, is that it needs confidence in control of RE, which is why the dc computer was chosen over the ac computer, with the standard assumption of a closed system. The empire is always a dead end of increasing scale; it can only ride decreasing quality and increasing price, prerequisites for the credit ponzi, so far.
As ACA demonstrates, again, dc cannot tolerate mixed messages the way a human automaton can. It reaches its terminal velocity constant, engaging the clutch with no where to go, much faster, through the very same law of diminishing returns. ACA is purported to be about affordable healthcare for all; its reality is eliminating beneficiaries, with hidden agendas, hunting down contributors, with capital controls, and increasing the tax base, by favoring selected medical hoarders.
While capital and middle class have been busy pouring all their resources into making the disposable dc system work one more day, labor has been building out the ac transmission mechanism, which creates an empire sunk cost beyond its computational capability. DC is a sub-component of AC. Just because you wish AC away does not make it so.
The little components in that wafer that you cannot see are still components. They get hot, and they get hot in a particular manner, associated with the mentality of their users, which cannot be altered in real time. That burning tank becomes a bomb, in all kinds of ‘unexpected’ ways, upon recognition, which the empire can only avoid until the last minute, the timing of which is beyond its control.
Labor doesn’t let capital assume control to load the spring by accident, and the middle class assumes that control will lead to security relative to its position, increasing pressure on decreasing volume, to chaos. Software salesmen are like a cross between lobbyists and used car salesmen. They lead you to a bipolar extortion economy every time, temporary relief of induced anxiety for a price – the future.
First, they tell the politicians how smart they are. Then they allow the politicians to shop from among a wish list of internally inconsistent specifications, creating every possible opportunity for change orders. Then the software managers split the work up among programmers, walled off from each other with certified security, creating a relatively infinite number of change order possibilities to bleed the cow, because at this point the sunk cost is beyond contemplation of all the participants.
When the project hits the wall of recognition, it’s like any other bankruptcy. The 75% of specifications completed becomes the kernel for the next iteration, a scapegoat is offered, quite often the participating whistleblower, and the process starts all over again, along the same curve of diminishing returns, with an increasing focus on minutia. The Microsoft/Boeing model of development is currently the biggest scam ever perpetrated by empire, and nearly everyone is participating in one manner or another.
No, I am not a stupid Unabomber. The problem the empire has with me is that it needs what is in my head to reboot. I’m going to bomb all the participants, in one way or another. Their choice is whether they want to be dead cattle, or just sheared, to grow wool another day. I don’t care what they choose to do to themselves. Buffet can corner all the track he wants, so communities can frack all they want, so Chinese bureaucrats can consume all they want, so Buffet…
Like the man said, “nature takes care of its own,” nature provides. If you accept the good and evil, divide and conquer model, you will be ruled and you will toil, in vain and in pain, for empire property and income. As a community, you may wish to define prosperity another way, and build your feedback signal to discount the empire accordingly, to ignore ignorance and provide an appropriate exit from the noise.
I don’t have to do anything to blow up planes, trains and automobiles. The empire does it for me, with increasing COLLATERAL damage. From the perspective of its software, I am a ghost, collecting bits of bits to threshold. All you have to do to avoid me is value people over property and income. Turn the hourglass privately, beyond your public profile, to reboot the secondhand beyond its perception.
Let capital assume control, until you don’t. Labor has no interest in government granted rights. Control blows itself up; just get out of the way when you are ready to enter your development. I have no interest in the tree of knowledge and there is nothing Yellen, Brown or anyone else can do to persuade me otherwise. As you can see, I am spelling it out and the NSA automatons still have no idea what I am talking about.
Toyota kicked GM’s A, which is why Japan earns a higher debt/GDP credit and supplies hot money. Its problem, triggering a defense escalation, is that homogeneous miniaturization has reached the wall of diminishing returns. An empire is a cash cow, dependent entirely upon labor to accept its money. All it really has in its arsenal, that you don’t put there, is the threat of a self-destructive lockout, an artificial crisis. An empire is an emotional damsel, always in distress.
Ever notice how FB participants advertize material prosperity, derivatives, as blessings? Nothing worse than a drive-by-Christian, robot replicating machine, fueling itself. FB is just another iteration of the bipolar, keep-up-with-the-Jones, self-fulfilling, rigged lottery, fueled by the Fed, because all the participants are clueless, including the Fed. That’s what the data tells you. The Fed is the derivative, not the integral.
The majority chooses to herd in numbers on the assumption of insurance, subjecting and blinding itself to the law of diminishing returns. Capital predation, with a bait and switch, insurance promissory ponzi, is a no-brainer. The problem with paper leverage is that its foundation is arbitrary. Both collapse with the ingoing and outgoing tides.
What does a measuring device, employed by a measuring device, inside a measuring device, measure? What is timedistance bias? Follow a Seattle cop sometime; you become what you fear, with myopic observation contraction.
It is as sheep I send you out amongst the wolves. How you complete the circuit is up to you. Each event horizon has a terminal velocity, like the speed of light. Anonymity is a false assumption of democratic money. An empire cannot escape zero monetary velocity on the margin.
Seek your own truth, and the intent of others becomes irrelevant; they cancel each other out in the wash. Shepherd, and the empire blinders disintegrate, like a cheap sweater.
Just reset the D labor/rent ratio to 4 and get on with your life. The last thing Petaluma needs is the county’s one-way road to empire RE price inflation.
In the best of times, industrial enterprises run continual and increasing deficits which must be made up with credit. Industries produce repeat versions of simple-to-duplicate items and by doing so reduce the unit cost of these items relative to their being made by hand.
By way of this process, the handwork of a community is centralized within a firm, the profits of an entire community fall to the firm owner. That is, the owner can borrow what the community either individually or together cannot because his firm is collateral, not the product.
Unemployment is baked into the industrially produced cake because the workers are expenses, they are not collateral, either.
The product of any firm is the good intended for sale, it must also be the gainful employment of others.
The debt is a ticking time bomb crowd tries to keep the public focused on the financial shortfall by misdirection. Dr. Kaboub brings the message to the public that the amount of money available is only one part of the equation. If there are fewer people working to support a growing retired population, it is not money that will be in short supply, but more importantly, the things that money can buy will also be in short supply. Things like food and medicine. As we know from previous political battles, the American public does not have to be convinced anymore that it can’t eat money or burn it stay warm through the winter. Especially when the things you need are no where to be found, having been consumed and you have to wait until more is manufactured and placed on the shelves. Think WWII rationing. Lots of jobs, lots of pay, nothing to spend it on. Think dust bowl depression. No rain, no harvest. Even if you had savings, crop failures or not enough laborers to harvest presents a problem.
The falling dollar contributions to the Social Security Trust Fund due to wage suppression, unemployment, underemployment, capital gains from stocks being completely excluded and the famous income cap on FICA, are all contributing to the fund being weakened. The demographic argument, while eye opening should be alarming to the entire business community, because what it says is that the workforce is shrinking while its social obligations are growing, that is the care of children as well as parents at the same time they have to work to support themselves. The workforce will not be large enough or capable enough to raise productivity levels to increase profits and produce enough goods and services that everyone needs to live, much less relax in their leisure time.
If you see a continuous disinvestment in public education, health care, public health initiatives, such as clean air and water programs, the entire population will not have the capacity as the preceding generations who benefited from the continuous investment in them. Giovanni Arrighi points out why China has been so successful, as compared to Brazil or India, which both have dirt cheap labor, is that in China, the CCP spent decades investing in the education and health of the rural peasantry, developing the human capital first, and only afterwards, the industrial manufacturing capital once enough people were capable of operating an advance industrial social system. China was measurably the poorest area in the world in 1949, more so than Africa. It took a while to socialize the people to work together on the village and town level to take care of themselves by means of organized educational and public health programs. This developed an educated workforce used to following routines, managing projects, and taking care of the tasks to successful completion. From there, introducing them to industrialized manufacturing, large scale construction was within reach because the people had practiced nation building on themselves to feed, house and educate themselves to a basic level.
They did what Bismarck did and what we did with a vengeance after WWII. Today, with equal vengeance, the reactionary right wing philosophy of austerity, with get out of debt as a battle cry is pursued FALSELY as THE rational solution to demographically determined, scientifically valid, structural problems with our economy. As prosperous life was in America during the post war boom, the reverse engineering of a politically derived economic success story will play out in the coming years in America with each dollar withdrawn from public schools, each kid dropping out of college due lack of tuition, and each rust belt popping up from sea to shining sea.
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Here is a discussion of Arrighi’s final book, “ADAM SMITH IN CHINA”.
http://voiceimitator.blogspot.com/2009/06/giovanni-arrighi-adam-smith-in-beijing.html
“The workforce will not be large enough or capable enough to raise productivity levels to increase profits and produce enough goods and services that everyone needs to live, much less relax in their leisure time.”
one worker can’t produce enough to have goods for themselves and 2 other people (child and parent)? impossible? what is the point of increasing ‘productivity’ then? in an insane calculation pitting various industries and workers and levels of development against each other, how many humans does our current level of productivity support? 1 to 2? how can it be raised?
does it even NEED to be raised, if you see what i’m saying? is someone skimming off the ‘profit’ that should be going towards supporting everyone at a reasonable level? 5 starving grannies to one modestly affluent person?
long time back now we should’ve been reducing the population. this means eventually dealing with more grannies than susies.
rest of the things you posted seemed reasonable.
Enough of the bullshit. Let’s cut to the chase:
http://theanarchistlibrary.org/library/bob-black-anarchy-101
elaborate on ‘bullshit’. I mean, i’d like to be larnin’ heah. when I make ‘statements’ as above, they are not necessarily proclamations of fact. quite as often, they are puzzling through the complexities of the thought processes of the post, or previous post, or state of reality (if that is a thing at all? or, probably not one single thing).
so, enlighten me. I mean, aside from “anarchy” being the answer. what was the question?
I don’t mean to get personal. That was not my intention with you. Everyday life is mostly anarchical. That’s the point. All the rest is bullshit.
See Walter Map’s cogent comments above. The rich don’t give a damn about the long term. They’re in it for the NOW. As in “Let them eat cake.”
By 2032, there is no doubt in my mind that computers, robotic doctors if you will, will at least be an alternative to traditional medical diagnosis and treatment. Set in a chair, stick your arm in a sleeve, blood is drawn and analyzed by the machine, merged with your medical history, and diagnosis and treatment given. You may not even interact with a human medical professional in most cases. Maybe even as a drive through service. It may not be ideal, but will be affordable for the average citizen.
Thank you for the links on MMT because I would really like to learn what makes the MMTer’s tick. It seems ludicrous to me that a money system is built on debt. The government should just issue Greenbacks in a ratio relate (maybe inversely) to wheat, steel, housing, international shipping or rail tonnage, and other appropriate indices. Get rid of the bankers as we know them because QE(n) is just transfering wealth to the 1% and doing nothing for the real economy.
Also, “pay for today’s retirees through a FICA tax directed into the Social Security Trust Fund and invested in AAA-rated U.S. government bonds” is a joke. This is another means of stealing from the productive and giving the parasitic banks. .25% interest for the retirees – whoopee!!!
could be wrong about this—lord, i am an ignorant sucker!–but the SS bonds are not the same bonds that are sold to the public.
the SS bonds are special, intergovernmental bonds that can only be exchanged between the two parties–SSA and USGov.
so, it is even MORE ridiculous, because what UsGov is saying is essentially that they will eventually bring enough in in taxes to not only cover the deficit bonds, but these bonds as well.
simple MMT for dummies question: who printed the original money? meaning, the gov did not have to set up bonds to dish out money initially, or how would it have -paid- any interest on them? how can you pay interest without making any additional money? by waiting for all of the money to flood back in the door? how would that have worked? wouldn’t that mean that the society/economy using that money would have to give up all of their money (plus be negative or balance due from the outset) in order to pay the interest? perhaps not all at once, but eventually. why would any private party have the right to ‘loan’ the government its own money before it had even created any? this was probably harder to discern when we were on gold. you could conceivably borrow gold from the public.
these are the questions that resulted from my intro to Macro-Econ classes, which made the concept of fiat absurd and made me wonder about the goldbugs. but their argument was not quite convincing either. an economy can’t be limited by the amount of gold in the drawer, not when there are productive resources that could be marshaled to purpose. why would anyone let the amount of gold in the drawer dictate what could be accomplished when you already have the land, labor, etc. ready to go? you wouldn’t. neither will all the gold in the world by itself produce one loaf of bread. so…
anway. perhaps you’re more confused now. sorry!
so 2,3,4 are incorrect?
seriously?
if a million tonnes of steel are used up by the deficits for military industrial complex, those million tonnes of steel resource are still available to other sectors?
I never knew that the Fed was the fourth branch of our government. Well, sometimes a shell game merely serves to mask a bigger con.
Disorienting? In a constantly disorienting world of nominal propaganda that leaves citizens confused, distracted, divided and conquered?
Understanding the basic currency operations – aka, MMT – is the only orienting reference available.
Methinks you inverted the message here, Yves. MMT helps disoriented citizens find their orientation.
Making sense of what, profligate public spending which has replaced private investment? Brilliant!
We don’t need a school of thought to establish right and wrong. The bible is the only truth that is necessary, and the practical application of it.
Oh, for a return to the days of Judges, when god fearing men applied God’s law judiciously. But the people of Israel weren’t satisfied with this system, so they demanded a king, and the first king lost his sanity. This is history. Right and wrong hasn’t changed since the birth of civilization. Evil existed before man, and without a knowledge of the truth of God’s word, it’s impossible to counter it. Those who deny God deny themselves.
The financial ruin foisted upon man is of his own doing, by worshipping that which was created above him who created.
Whether Keynes or MMT matters little if one ignores the truth.