By L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute. Originally posted at New Economic Perspectives
I’ve seen some pretty bizarre claims about MMTers. They are “tea partiers”, “barely left of center”, who “are not interested in policy”, who “ignore inequality”, who “are only interested in reducing taxes”. “MMTers ignore the fraud of the banksters.” They are at best “one issue” advocates for a particular view on money, taxes, and employment. I have no idea where critics get this stuff. I’m convinced they make it up. Ignorance or dishonesty; probably both.
For anyone who wants to disabuse herself of such nonsense, please go to www.levy.org, click on scholars, click on my name, and find right in front of your face a few hundred pieces on policy that I wrote. Yes, inequality. Yes, the explosion of incarceration. Yes, the War on Poverty’s failure. And so on. Stephanie Kelton just reminded me of an interview I gave in December to Travis Strawn–who happens to be a former student. He was writing for the Seven Pillars Institute (full disclosure: I’m not sure what it is). Judge for yourself if this is garden-variety “liberal”, let alone “tea party”.
Travis Strawn: You and a small band of economists around the country are the vanguard of an economic theory called MMT, or Modern Monetary Theory. Can you give a simple description of this theory that may be understood by our educated, but not necessarily economically trained readers?
L Randall Wray: Well the most important thing, especially from the policy perspective, is the recognition that a sovereign government that issues its own currency is not like a householder or firm. So whenever you hear someone say you need to run the government’s budget the same way you would run a household budget, that cannot apply to a sovereign government like the United States. The analysis is completely flawed, even though that analogy is used all the time. You hear politicians saying, “well if I ran my household budget the way that the federal government is running it’s budget I would go bankrupt”, and of course that is true, the difference is that the household is not a sovereign government and it doesn’t issue its own currency.
TS: Why do you think that idea so pervasive in politics? I mean, I know exactly what you are talking about, I hear about that all the time, and it just seems like it’s common knowledge?
LRW: I think there are at least two, maybe three reasons. I think that some economists were trained a long time ago back when we had a gold standard or the Bretton Woods dollar gold standard and they were taught economics that was sort of appropriate to a gold standard. On a gold standard the government can run out of gold and if you link your currency directly to gold, in a sense you could say you can run out of your currency. It’s actually more complicated than that, but you could understand how someone who thinks along the lines of the gold standard would think there is a financial constraint facing even a sovereign government, but of course we abandoned Bretton Woods in the early 1970s; we are never going back there again. So it’s not applicable to the kind of currency system that we actually have in the real world. So that’s one reason.
The second is, a lot of people are just confused and the analogy of a household intuitively makes sense if you have not studied economics and don’t understand the difference between government and households. It is an analogy politicians use because it works, people understand it, it’s very simple and intuitively obvious although completely false.
Then the third reason is, I think, there is an attempt to use this analogy by people who know it is wrong in order to fool the public into doing things they don’t want to do, such as cutting social spending. I think the reason why this analogy has become so much more commonly used in the past thirty years is because we have had the takeover of all public debate about budgeting by the deficit hawk crowd most of whom I think, realize what they’re saying is pure nonsense. [It’s] politically expedient for them to say, “Uncle Sam has run out of money, therefore we need to cut social spending” – like food stamps, like support for the poor, and support for the aged. That I think, is pure politics.
TS: It does seem like MMT is a bit threatening to the economic establishment. Why do you think it seems like a threatening theory to the economic establishment?
LRW: Economists as a whole do tend to be politically conservative. Probably not as conservative as what people believe when they hear the likes of Pete Peterson, Robert Lucas, [and] Milton Friedman; those individuals are really outliers. Most economists are not that far to the right, but they do tend to be politically conservative and they worry about a government that is getting too big and too powerful and so they want to constrain it. If you say that the federal government actually doesn’t face a financial constraint; that it faces other constraints, but not a financial constraint, most economist are worried the population as a whole might exercise democracy and demand the government provide more. So I think that’s a big part of the reason.
Then you have to understand most economists don’t do macroeconomic theory. Most are focused on pretty narrow areas of economic discipline in microeconomics, applied microeconomics, and just applied economics in general. So they actually don’t know much about the monetary system, about the options available to currency issuers. They of course have had some macroeconomics and it could’ve been many years ago, but it’s not an area they work in. Finally, the younger economists out there may not have actually had any real macroeconomic theory in their courses, because over the past 20 to 30 years what is taught in Ph.D programs became ever more highly mathematical [and] esoteric, bearing no relation to the real world. If I tried to explain what they do, it just sounds impossible. It doesn’t sound like this could be something that people study in economics courses at the PhD level. It’s true that they use models that have one individual in them, who has an infinite lifespan, and whose only goal is to maximize something called utility through time. That is what they are studying, not in their micro-courses, they study that in their macro-course economies, with one person in them with no money, no financial institutions, no government. Those are the kinds of models that economists over the past 20 to 30 years have been trained to use even in macroeconomic courses, so they literally know nothing about macro-economics.
TS: Another related question. What do you think mathematics can contribute to an accurate description of economics? Do you think mathematics cannot really help explain the economy because the variables of human nature are just so complex and grand or do you think there is a place for mathematics that can actually provide a true description of the economy?
LRW: Well I think there are limited places where you can get some insights from mathematics. In fact when I took the calculus series of courses you know, when you learn about the difference between change and rates of change, that is a very important concept and that concept is important in economics. I think it is very useful to know a fair amount of math and even to use it occasionally. The problem is that economists get caught up in these extremely simplistic models. Simplistic in the sense of the kind of hypothetical economy they are modeling. Mathematically the models are very complex, and basically that is all they do. They then try to make policy recommendations based on these completely unreal and far too simplistic models. The Queen of England asked her economic advisers, “Why didn’t any of you [economists] see the financial crisis coming?” The reason is really obvious: [it’s] because they were using these models in which crises cannot happen.
So economists have models of economies that cannot exist.
TS: I think I saw a video with David Harvey kind of explaining that same thing – the Queen of England questioning economists [that were] saying it is systemic failure.
LRW: One common excuse is that it was a tail event; it is an extremely improbable once in a hundred thousand year event. They have this idea of the black swan event. But there were economists who saw it coming and explained in pretty good detail what we know after-the-fact, which actually fit what happened. These economists didn’t use these models, they used heterodox economics and they all saw it coming.
TS: [Who] were some of the economists that saw it coming?
LRW: I think there are two very important names. One is Hyman Minsky [who] saw it coming in the 1950s and that might sound absolutely bizarre, but Minsky started developing theory in the 1950s of the long-term transformation of the financial system from a very robust system, that we had in the early postwar period, to finally a highly fragile unstable financial system that we got in the 80′s, 90′s, and 2000′s. Minsky died in 1996 so he actually didn’t live to see this crisis, but all along he was updating his theories. His explanation of what was going on would allow anybody to see that a big crisis was going to occur.
So Minsky is one of the two names, the other is Wynne Godley. He is one of so-called wise men of the UK who gave advice to the UK treasury, was at Cambridge, and moved on to the Levy Economics Institute, where Hyman Minsky also was and where I spent time. So I would say Godley’s writings from ‘96 to about 2000 really spelled out in detail what was wrong and why the whole thing was going to crash. So he really focused on the processes that actually led directly to the crash. He did live long enough to see the crash so I think that he got the specifics right and Minsky got the general right.
TS: According to MMT, is the economy doomed to move in cycles of boom, bubbles, and bust?
LRW: I would say people who follow MMT would agree with that, but that idea comes from Minsky. He was my dissertation advisor and there are other business cycle theorists, but I think Minsky was the best.
TS: So you think that it is inevitable [that we move in cycles of boom, bubbles, and bust]?
LRW: Yeah, one of [Minsky’s] famous sayings was stability is destabilizing, so if you achieve economic stability, that itself will cause instability. The reason is because people change their behavior if they believe the economy has become more stable, more robust, with less likelihood of a deep crisis. They change their behavior and take on more risk so they create the instability. That’s exactly what happened. Chairman Bernanke in 2004 wrote a paper announcing that we’ve entered the period of the great moderation, central bankers are so clever now that they have managed to stabilize the economy, so that from now on you have a much more stable economy. We would still have some swings, but they wouldn’t be very big and of course, if people believe that, then they might take on more risks because there is less chance things might go bad. That’s exactly what they did and that led to the crisis.
It’s just like when Irving Fisher in 1929, I think in September, wrote that the stock market has entered a new permanent plateau and it would never go down and of course one month later it collapsed. Bernanke wrote this in 2004 [and] three years later we collapsed. Paul Samuelson wrote in, I think, 1968 that economists have figured everything out and government knew how to fine tune the economies so we would never have any more recessions or inflations and immediately of course, we got inflation and then a very deep recession. So whenever economists make statements like this we know we are looking at the beginning of the next crisis.
TS: Do you think if MMT was actually applied and used on a greater scale in economics, we could have a system that is generally more stable? Where people aren’t just unemployed and unemployment wouldn’t skyrocket, or you wouldn’t have recessions? Do you think it’s possible if MMT was more commonplace that recessions could be reversed more quickly I guess is my question, or that we could fine tune it a little bit better so things wouldn’t be so bad when recessions occurred?
LRW: We can’t eliminate the business cycle, but we can make the crisis much less severe. We can move to recovery a lot faster and most important we can prevent job losses. So eliminating instability is going to be impossible and that shouldn’t be our goal, but reducing instability is something we can do. We need to reform the financial system so that is a big area, not easy to do politically and there is uncertainty about the economics of doing that too. So that’s one big issue, harder to do.
Then the other is to change fiscal policy so that it adds to stability instead of adding to instability and that is actually relatively easy to do. What you need is for the government’s spending and taxing to move counter-cyclically. So you want taxes to go down and spending to go up when you are moving into a recession and the most important thing is to prevent unemployment from rising in recession. What we propose to do which handles all of the spending side is to have an employer of last resort, or job guarantee program, in place so that when people start losing their jobs in the private sector they can always go into the government direct job creation program, job guarantee, or employer of last resort, whichever you would want to call it. They don’t become unemployed and continue to earn some of their income which helps put a floor on how bad the recession will get and it helps the recovery begin because government spending automatically goes up as you hire those people. When the economy does recover the private sector will start hiring those people away from the government’s program. Government spending automatically goes down, so you get government spending going in the right direction counter-cyclically. The only other thing you need to do is have a progressive tax system that is based on the performance of the economy, so that when people’s incomes go up, you tax more and then when incomes stop rising or go down you tax less, which is a progressive income tax.
TS: What is MMT’s view on income inequality? Inevitable or avoidable with the right policies and what are these right policies, if they are avoidable?
LRW: Well it’s very easy to reduce the inequality that results from low income, from poverty, from low wages; all you have to do is offer jobs. Minsky did a calculation [in] 1974 and Professor Kelton and I did one around 2000. We showed that if you just give a job to anyone who wants to work you will eliminate two thirds of all poverty, even if you pay only the minimum wage. We would like to see the job pay more than that, but even at a minimum wage you eliminate two-thirds of all poverty. So most poverty is due to joblessness. People who cannot get jobs or maybe they get jobs that last a few months and then they are unemployed again. We need permanent jobs that pay a decent wage and you’ll eliminate most poverty. You’ll still need some kinds of anti-poverty programs but the jobs are the best anti-poverty programs there are, then you need something else to fill the gaps.
Now that still leaves inequality due to extremely high income at the top. This program by itself doesn’t address that kind of inequality. I do think you need to address that, not because a lot of progressives think we need to tax the rich in order to spend on the poor. That’s just wrong, we don’t need to tax the rich more to spend more on the poor, because our sovereign government can’t run out of money, it can always spend more on the poor without taxing the rich. You want to tax the rich because they are rich, you don’t tax them in order to give more to the poor. You tax the rich because they’re filthy rich and so you shouldn’t link the two in policy. In the public’s mind we need to do both, but they are separate policies. You set the tax on the rich not to equal spending on the poor. You set the tax on the rich and make it high enough so that they’re not rich. If that’s your goal – get rid of the excessive riches of the rich -you tax enough so they are not excessively rich. It’s an extremely hard thing to do politically. The final thing is rather than trying to do this with taxes, which is hard because once people have income, especially high income, they have an incentive to protect it, the means to protect it, the means to influence policy, and they are extremely powerful. In practice I think in the US, it is actually impossible to take away income from the rich through taxes because they buy off the politicians, they get special exemptions, they never pay high tax rates, they hide their income, they put it overseas, and so on. The only way that will work in a country like the U.S. is to prevent them from earning the income in the first place. You have to do something like set maximum pay for CEOs. There is no reason why a CEO should be earning 300, 500, or 600 times more than the average worker. Set a maximum and say if a corporation pays more than the maximum, it should not be more than 50 times the average employee. If a corporation pays more than that they lose their papers of incorporation.
TS: Do you think there is a relationship between the ability to have less income inequality and how democratic a government is? Do you think that they align together pretty closely? That is, if the country is more democratically accountable to its citizens income equality naturally occurs like let’s say in Europe, in places like Denmark?
LRW: Scandinavian countries are a good example of not very much income inequality and democratic governance participation by the population in the political process. Now I think there are cultural differences too and we are now talking political science and I am not a political scientist, but I think the relation is not quite as direct as you are implying in your question. I think we could still have a workable democracy with greater inequality then the Scandinavian countries, but what we have now I think is not workable. It is far too unequal and things are made worse by silly rulings that corporations are people. This is crazy. This is completely antidemocratic and allowing corporations to buy up as many politicians as they want obviously completely subverts democracy.
TS: I think that is a pretty popular opinion. On one of your blogs in New Economic Perspectives you described Wall Street as depraved. What do you think should be done to make Wall Street and high finance in general more virtuous?
LRW: Well you have to completely change the culture. The culture right now is that basically it’s anything goes. You can do anything you want to separate people from their money and that is basically what Wall Street does. It separates people from their money as Matt Taibbi said, it’s a giant bloodsucking vampire squid. So you have to change the culture and the first step is you start prosecuting for criminal activity. We haven’t done that at all. No top Wall Street person is being investigated much less charged with criminal activity. What they’re doing is just going after civil cases against their firms and the firms happily pay fines. Often they have insurance to cover the fines, which do not hurt their top management at all, so there is absolutely no reason to change the culture on Wall Street. You have to throw hundreds, maybe thousands of them into prison [and] that will change the culture very significantly. Say that criminal activity will not be permitted on Wall Street and right now that signal is exactly the opposite. Eric Holder has said we won’t do it. He said it would damage the reputation of their firms if we went after their top management for the criminal activity, in which we all know they have engaged. We have got their emails, and we know they have engaged in criminal activity, but Holder says we won’t prosecute them because it damages the reputation of their firms. This is absolutely ridiculous.
So that is the first step, it’s not enough; we need consumer protection laws, new ones, as well as enforcement of the ones we already have. We need to massively downsize Wall Street. The sheer size alone is probably most of the problem. We need to downsize finance sufficiently so that it becomes almost insignificant. That is where finance was in the early postwar period – finance was insignificant. It has become maybe, the most important sector contributing about 40% of corporate profits. There was a time when Wall Street was hiring the top students in every field from all the top colleges in the United States. That is where they all went. Again, that is crazy, you don’t need that much brainpower on Wall Street, except these guys are all trying to find clever new ways to suck economic rents out of the economy.
TS: Do you foresee another financial crisis in the near horizon?
LRW: Yes, very soon.
TS: Very soon? Why do you think that is? Just because of the accountability of fraud?
LRW: All we did was prop them from 2007 until today. All we have done is prop them up and told them to go back to doing what you they were doing. You were doing such a great job before the crisis so go back to doing it. There are some activities they have not been doing only because they can’t find a market for their products. The private labels home mortgage securitization market completely disappeared because we know the whole thing was completely fraudulent before, so no one would buy the securities. The only securities being sold are the ones that are government guaranteed. There are some things they are not doing, because we told them they can’t do them anymore, not because they do not want to do them. No one is to stupid enough to buy those products right now. They’re doing plenty of the other stuff they were doing before the crisis. All of that returned and the economy is not recovered. In fact it is now starting to slip back into recession, the evidence is accumulating things are getting worse fast.
TS: What’s the evidence?
LRW: Real estate markets. People proclaim that we had a recovery in real estate markets. Okay so what was this recovery? It was all based on hedge funds buying up real estate with the idea they would rent the properties for a while. So they would become slumlords, rent it back to the people who lost their houses, illegally by the way — all of those houses were stolen. They rent the houses back and wait for prices to recover and then sell them. So this was the idea. They have already exploited that strategy. That type of demand for housing is gone and it was the source of the real estate demand. This source is already exhausted, so real estate markets are going to start collapsing. Households still have almost as much debt as they had before the crisis. They are still massively over indebted.
TS: Do you think there’s going to be a collapse in commercial real estate? I have heard about commercial real estate as being a serious problem and I don’t know if it really collapsed during the recession. It was mostly just homes that collapsed during the recession. Is there a potential for commercial real estate to collapse and would that be more severe than the housing bubble collapse?
LRW: I have not studied commercial real estate as closely as the home mortgages, but I have always expected we were going to see the shopping malls fail. If you walk around shopping malls you see a lot of boarded up space so that can happen. Since consumers are not spending like they used to and I expect they are going to cut back spending. So we can see problems there.
TS: Do you think the financial crisis that’s near is going to be in housing specifically? That is where it is going to be centered?
LRW: No, I think that is a huge problem. Probably something like 50% of all homeowners are underwater, so there’s a huge problem. People cannot sell their houses, they can’t move. This prevents them from getting jobs, because they can’t move out of areas with no jobs to areas that might have some, and increases the incentive to walk away, to go ahead and default on the mortgages. So that is a huge problem. But student loans are a huge problem, that’s $1 trillion, credit card debt is $1 trillion, consumers are just over indebted and they can’t make the payments. So it probably will be across all of these sectors.
TS: What do you think of a mass debt forgiveness plan that the government could [create]? Do you think it is possible for the government to do something where it stimulate the economy, by forgiving large debts? I have heard that student loans are under the treasury accounting. Steve Keen was talking about it (http://www.youtube.com/watch?v=4IJjlYj4siU) and government does technically have the power to forgive all student loans. I don’t know if it is that way with credit card debt, but do you think that would fix things? Just an across the board debt-forgiveness?
LRW: I think that substituting student loans with college grants is a good idea, as well as forgiving loans that students have, maybe forgiving 50 cents on the dollar or something like that and lowering the interest rate. I went to college on 3% interest rate national defense student loans and 50% would be forgiven if you went into jobs with a public purpose, like teaching in public schools. They would forgive 50% of your student loans. I think those sorts of policies are good. I think we should add an immediate five-year moratorium on home foreclosures, just say zero. There will be no home foreclosures for the next five years. That would stop the home theft. I think most foreclosures are home thefts. The banks are making up the documents. There is no proof that anybody owes anything out there because the banks have destroyed all the documents. We don’t know who owns the property. We don’t know who holds the right to collect mortgage payments and we don’t know who, if anyone, has any actual legal right to foreclose on homes so we just need to stop those actions. It depresses home prices; it destroys communities when they foreclose, and of course it destroys the families too. So just stop it; and then we can work out how we can give debt relief on the mortgages.
TS: If you could be Fed Chairman what would your monetary policy look like right now?
LRW: I would dismiss 99.9% of all people who work at the Fed. I would have a robot that was programmed to keep the overnight rate at 50% of 1%, at 50 basis points, half of a percent interest. I [would] charge on loans of reserves by the Fed and pay 25 basis points on reserves held at the Fed, and that’s it.
That’s all we need. I would move all the supervising and regulating out of the Fed, because the Fed for the past three decades has shown no interest whatsoever in regulating and supervising financial institutions so we need to take regulating from the Fed and put it in the FDC and OCC at the Treasury. That would be the Fed policy. Don’t need anything else.
The Fed can’t do any of the things that most pundits believe that it can do. It cannot fine-tune the economy, it cannot hit money targets, and it cannot hit inflation targets. Some people are proposing that it target nominal GDP, which is ridiculous, it can’t hit a target GDP. There is one thing the Fed can do. It can hit the overnight rate, that’s it, and monkeying around with that rate has been shown, without any question at all, as being not useful at all for influencing the economy in the direction that we want.
TS: So when [Paul] Volker (former chairman of the Federal Reserve) increased the interest-rate to reduce inflation does that goes against what you were saying? The Fed has the ability to…. I have heard Ben Bernanke say that if inflation got out of hand he would just increase the interest rate. Could he possibly do that to reduce inflation?
LRW: They can always increase the overnight rate.
TS: And that is what would reduce the inflation?
LRW: I don’t believe that it does. I don’t believe that there is any evidence that it does. If you are willing to go Volker on the economy and push the overnight rate above 20% you can cause a financial crisis and you can put debtors underwater. Make them insolvent because their interest payments explode upward. They can’t make payments and they start defaulting on loans so that can possibly cause a crisis deep enough to stop people from spending, which eventually can break inflation, but the cure is far worse than the disease.
Volker’s cure was far worse than the disease. The inflation we had when he came into office would have disappeared anyway. Inflation was dissipating already because it was due to food, energy and the shelter components of the CPI prices rising. Oil prices had quadrupled in 1979. It takes awhile for a huge increase of energy prices to run through the whole system. Obviously prices are going to go up if you quadruple oil prices, because oil goes into the production of everything. If you just give it time the inflation automatically comes down, just like it did in 1974. It took awhile, but inflation comes down. So fighting inflation caused by oil and food price shocks by causing a massive financial crisis that morphs into a very deep recession is a crazy way to fight inflation.
TS: I know a lot of Austrian economists are for no central banking. Do you oppose that or what do you think would happen if you got rid of the Fed or a central bank?
LRW: So I said we are going to program this robot, what we need then is the Fed has to be a lender of last resort. So you need a team of people who can provide reserves, which is done through keystrokes. You need people with an index finger so they can keystroke reserves into bank balance sheets. You need a lender of last resort to stop bank runs. This is not nuclear physics. This is simple. We know how to do it, we have known how to do it since the 19th century. The central bank lends without limit at a penalty rate against good assets and you stop a bank run by doing that. We still need to do that, and the other thing the Fed has to do is clear accounts.
The Fed operates the most important clearing mechanism so banks have to clear with each other and with the government. We still need to do that. The combination of these policies insures bank liabilities always clear at par, that is a one-dollar deposit at Bank of America equals a one-dollar deposit at Chase Manhattan. The Fed ensures that by providing reserves, the clearing mechanism and by being a lender of last resort when necessary. What the Austrians either don’t understand or think is not important is that without a central bank to do this, bank liabilities do not clear at par. We tried doing without a central bank in the US. We were the last major country to develop a central bank. We tried operating a banking system without a central bank and it was a disaster. You never knew how much a bank check would be worth. You didn’t have par clearing but you had bank runs. We had the worse banking crises because we didn’t have a central bank. I obviously am very critical of the Fed, but you have to have a central bank. We just don’t need a central bank to do what people think it is supposed to do – fight inflation for example; we don’t need a central bank to do that because they cannot.
TS: I read an article recently that in Canada [unlike] the US, they have never really had a financial crisis?
LRW: I could not comment on Canada’s history. It is true that the country came through the global financial crisis a lot better and it had much stricter regulations [and] much stricter supervision of their banks. Canada did have financial problems in its financial institutions that were not so heavily regulated. So in the FIRE (Financial, Insurance, and Real Estate) sector they did have problems but in the regulated commercial banking sphere they didn’t because their commercial banks were not allowed to do what ours did. We combined commercial banking and investment banking while Canada did not. So its commercial banks never got into the subprime mortgage backed security business at all.
TS: My last question is: there is no room for ethics and values in Modern Finance Theory (MFT) and neoliberal economics. What are the roles of ethics and values in economics and in MMT?
LRW: I can’t see the point in doing economics, or any social science, without values. I think the financial system is there to serve a public purpose. If it was not then there should be absolutely no government assistance and backup to the financial system. But we recognize that the financial system has to serve a public purpose and that is why we have a variety of backstops for the financial system. We have deposit insurance in case the assets are bad. We have lender of last resort in case there are problems of liquidity. We have lots of tax-advantaged schemes so that savers get a tax advantage, which encourages them to save more and run stuff through special tax advantage type savings schemes, retirement accounts, and so on. We do all that because we think there is a public purpose in the financial system. You know, providing retirement savings for example. So I think that you have to be looking at the public purpose.
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Canadian banks were bailed out to the tune of $125 billion. The Federal Reserve bought up $1.25 trillion in bad mortgages. Canada is 1/10th the U.S. population, so we equalled you in bailing out the banks.
Canada raised their mortgage amortization from 25 years to 30 years to 35 years, then to 40 years. We had no-doc, no down payment, cash-back, interest rate reductions, blah, blah, blah. We opened up our doors to anyone who could buy their way into the country, like say corrupt Chinese officials fleeing China with suitcases full of cash, who then proceeded to push our house prices up. It’s lights out in many of our high rises because nobody is home. They bought multiple units, hoping to see price appreciation, just like they did in China, London, New York, Tokyo, Sydney, etc.
Why would it be any different in Canada? These are banks we’re talking about. A snake is a snake!
Now, just like in the 1920’s, the problem has been cheap credit, next to nothing down, loans to anyone who could fog a mirror, HELOCS. Supply and demand pushed prices up. When credit is cheap, this is what happens.
“During the 30 months after the Fed’s first bubble splattered—the dotcom crash—-Greenspan foolishly cut money market interest rates over and over until the 6.5% cost of money on Christmas eve 2000 had been reduced to 1% by June 2003. Never before in the Fed’s 100-year history had rates been reduced by 85% in such a short interval with such reckless abandon. […]
Under a regime of free market interest rates $5 trillion of MEW [mortgage equity withdrawal]—that is, robbing from the future to party today—could not have happened. Long before the 2003-2006 blow-off top, mortgage interest rates would have soared to double digit levels, causing monthly debt service requirements to double or triple. Moreover, in an environment of market-set interest rates there would have been no Greenspan Put or ultra cheap wholesale financing that enabled Wall Street to fund mortgage boiler shops with warehouse credit lines and buyers of its toxic securitization products with cheap repo.”
http://davidstockmanscontracorner.com/chronicling-the-feds-follies-americas-housing-fiasco-is-on-you-alan-greenspan/
Business cycle? I don’t think so. Manufactured and engineered looting? Yes.
Under a regime of free market interest rates $5 trillion of MEW [mortgage equity withdrawal]—that is, robbing from the future to party today—could not have happened. Long before the 2003-2006 blow-off top, mortgage interest rates would have soared to double digit levels, causing monthly debt service requirements to double or triple.
We had a system of free market interest rate for over eighty years, and the result was six depressions, not to mention the other fifteen or so financial crises.
Markets do not and cannot avert financial instability, they can’t even detect it.
The Federal Government has never provided a convenient, risk-free alternative to the banks for the storage of and transactions with, what is, after all, ITS money, fiat. That dereliction of duty is a major implicit privilege for the banks and a major cause of instability since it allows the banks to essentially embezzle deposits.
The gold standard was another privilege for private banks.
The crash of Bitcoin is pretty instructive for both arguments for money: an exchange mechanism and a store of value. It’s just too bipolar. Storage can’t be risk free (enough to use for exchange) if value is to be stored yet be too inflexible for liquidity purposes. So if exchange and value are combined neither one can work. Too much wine here.
Ben – and I would argue that we HAVE NOT had a system of free market interest rates for over 80 years. I contend that interested parties have always had their hands in the cookie jar, causing one boom and bust after another.
MMT and Policy. I’ve been wondering when MMT would come out swinging. Just because the theory of modern money seems agnostic, don’t discredit agnosticism. A theory that establishes a way to finance things a modern government needs to finance and does so with flexibility as well as responsibility is a good thing, as Martha used to say. The resistance to anything this efficient is irrational until you consider just who is resisting it. When RW says that current goofy models “use one individual with an infinite life span whose only goal is to maximize utility thru time…” he is bringing down the old system. And we shouldn’t mistake talk about Minsky and bubbles as MMT’s acceptance of the devastation that goes along with “adjustments” – but as an illustration of how MMT can smooth these natural tendencies so they do not harm people or economies. So MMT could, in the end, prove their prophet wrong – if. as Minsky says, “stability is destabilizing,” we certainly should not take this to mean that it is to be ignored so the rich can get richer.
Ilargi: “I have often said that if you allow money into your political system, money will inevitably end up owning that system. And that is true for all resources too: in an economic perpetual growth model, money, if allowed to, will concentrate in just a few institutions and families and eventually own everything.”
Instead of monkeying around with tying CEO pay to X times the average worker’s wage, why not get to the heart of the matter? Get money out of politics. No more campaign contributions – period. Any politician caught receiving money for any reason gets to see the inside of a jail cell.
Rip up the tax code; get rid of it. No more write-offs, just a progressive tax system that’s fair for everyone.
Make the banks keep mortgages they write on THEIR books. That way they’ll be sure they lend responsibly.
That’s a start.
Instead of monkeying around with tying CEO pay to X times the average worker’s wage, why not get to the heart of the matter? Get money out of politics. No more campaign contributions – period. Any politician caught receiving money for any reason gets to see the inside of a jail cell.
Unfortunately we have a Supreme Court which is not going to play ball and the chances of a constitutional amendment are slim, to say the least.
Ben – what, and end of story? I’m quite certain that that could be gotten around. Vested interests have put the current Supreme Court there. Perhaps the people can elect to change this?
That way they’ll be sure they lend responsibly. backwardsevolution
Don’t be deceived. So-called “responsible” credit creation by government-privileged banks is still crooked and violates Equal Protection Under the Law in favor of the rich.
The following is why I don’t trust the MMT crowd or their policy solutions.
“So I said we are going to program this robot, what we need then is the Fed has to be a lender of last resort. So you need a team of people who can provide reserves, which is done through keystrokes. You need people with an index finger so they can keystroke reserves into bank balance sheets. You need a lender of last resort to stop bank runs. This is not nuclear physics. This is simple. We know how to do it, we have known how to do it since the 19th century. The central bank lends without limit at a penalty rate against good assets and you stop a bank run by doing that. We still need to do that, and the other thing the Fed has to do is clear accounts.”
The average person is in no danger of losing their entire savings as their checking, savings, and money market accounts are safe through the existence of deposit insurance. What Mr. Wray is really talking about is keeping the stockholders and the bondholders whole in a financial crisis. This is mostly a bailout mechanism for the privileged classes, the 1%. Which is why we’ve witnessed an explosion of inequality since the 2008 meltdown.
Any bailouts that happen should occur after stockholders have been wiped out and bondholders have taken a significant haircut. None of this cash for trash shenanigans that was utilized in the aftermath of the Lehman Brothers failure.
I think you are speaking of two different things. He is speaking of a short term liquidity crisis at a bank that is experiencing a run. You are talking about an insolvent institution and insisting its shareholders/bondholders take the hit. What’s the difference? Well, if you have corrupt shits like Geithner running things, you’d be led to believe there isn’t one. As Wray indicates, removing the corruption at the Fed by firing 99.9% of its staff is a precursor to the Fed responsibly stopping bank runs or alternately letting insolvent institutions default to their owners and creditors.
I happen to think this piece is brilliant, and prescribes THE obvious solution because it accurately describes the problems and the underlying system. Wray’s shredding of mainstream psuedo-scientific economics is devastatingly direct. I wonder how long the brahmins of our new economic dark age can prevent the light of truth from breaking through their cobwebbed cloisters when their students begin reading Wray and his colleagues.
Right, the idea Randy defends here is for the Fed to be a lender of last resort against good assets, not a giver of last resort. The Fed lends the troubled institutions the money, and the institution then pays them back. If they don’t pay back, the Fed gets the assets.
And if the central bank decides the troubled institution does not possess assets with a real value sufficient to secure the loan, then the institution has failed entirely, and it’s time to seize the institution altogether and wipe out its stockholders.
Right, the idea Randy defends here is for the Fed to be a lender of last resort against good assets, not a giver of last resort. Danny K
Sophistry and you darn well know that the Fed lends NEW FIAT INTO EXISTENCE, which would be counterfeiting if done by anyone else.
ROTHSCHILDS BROS. OF LONDON
“Those few who can understand the system (check book money and credit) will either be so interested in its profits, or so dependent on it favors, that there will be little opposition from that class, while on the other hand, the great body of people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear it burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” from http://www.trade2win.com/boards/foyer/12584-do-you-really-understand-money-banking-system.html *
* Note: Using a WEB site to obtain quotes in no way constitutes an endorsement by me.
“What’s the difference? Well, if you have corrupt shits like Geithner running things, you’d be led to believe there isn’t one.”
No, I just don’t expect Federal Reserve officials to know the difference. Have you read the FOMC transcripts from 2007? They were completely clueless with the possible exception of Yellen. Corruption is a systemic feature of a central bank.
As much as MMTers like to pretend that central bankers are impartial technocrats the Fed’s history and it’s incestuous relationship with Wall Street makes the quoted passage an example of fiction. The old populists/progressives weren’t fooled by claims of Fed neutrality in their day. Nor am I.
As much as MMTers like to pretend that central bankers are impartial technocrats the Fed’s history and it’s incestuous relationship with Wall Street makes the quoted passage an example of fiction.
MMTers don’t pretend this. In fact virtually every one I know wants to see a restructured central banking system greatly reducing the scope of its powers.
There is nothing special about Fed technocrats. They are just high level bank managers.
The thing is, the Fed system is not a bunch of independent private operators. It’s all one organically integrated banking system, run by a board of governors appointed by the President of the United States. The US has a centralized banking system, headquartered in both New York and Washington. Complaining about the Fed loaning money to one of its member banks is like complaining about a big company loaning money to its divisions or affiliates. If those operations are still performing a useful role, the company fronts them money if they run into operational difficulties. If not, the company should roll them up.
My personal preference would be to see the system centralized even further. Get rid of the system of private bank stockholders, who play no publicly useful role. And get rid of the system of member bank subscribed “shares” in the Fed, which also play no essential role. Turn the whole system into a publicly run enterprise, with some modest measure of individual bank autonomy to allow for healthy competition, with some pay differentials (not dividends) to reward and incentivize good management decision-making.
Then the Fed could more effectively implement government policy. It could even offer negative interest loans in areas where this is seen to advance the public interest and promote the kinds of capital development the nation decides it needs.
+360,000,000 plus all the unregistered immigrants and the thanks of future generations… so 360m plus interest.
@Ben Johannson
Maybe you’re right about that. It’s hard for me to reconcile the essentially technocratic language of “lender of last resort” and the house of horrors we’ve experienced. Keeping in mind that the United States has gotten off relatively easy compared to our European brethren.
@Dan Kervick
I see little point in supporting the reformation of an institution that has proven itself to be anti-democratic. If the essential functions of the central bank were transferred back to the Treasury Department we would retain the possibility of maintaining it under democratic governance. Whether this would produce better outcomes in the future I do not know.
Andrew, if the shareholder extractions from the banking system were eliminated and the Fed system were turned into a fully public institution rather than the public-private mix it is now, then I don’t think it would matter much whether the top desks were located in the Eccles Building or at 1500 Pennsylvania Avenue. But there would be further decisions to be made about the degrees of operational autonomy the heads of the central bank should exercise.
We’re at the point where they are meeting and indistinguishable. The banksters will just generate short-term liquidity crises when it pleases them…. which will leads to generalized insolvency.
I to liked Wray’s shredding of PhD level economic studies as well. Sort of sounds like they never learned what I was taught the first day of Freshman economics; in economics one builds models that assume players make rational decisions but never forget that the players will not make rational decisions.
While the Fed has, since the crisis, engaged in the “cash for trash” transactions that you mention, it wasn’t always thus, and needn’t be always thus. And as you bolded in Wray’s comment, the idea is to lend to banks against GOOD assets-namely gov’t debt.
You don’t trust these heterodox economists who are trying to beat some sense into the discipline…excuse me if I don’t care too much. Pray tell, why don’t you trust them? You perhaps think they are part of an evil plot to end unemployment…or is it just because you object to the idea of a central bank because the one we’ve got now (and those who run it) is corrupt and captured?
Someone once whacked me with a hammer–I didn’t come to the conclusion that hammers were therefore evil and distrust anyone who tried to explain to me what they were actually good for. Distrust should be reserved for those Petersons of the world who tell us that poverty and immiserisation are good for us. Attacking people who are trying to point out ways to alleviate poverty and impugning their motives is unhelpful, to say the least. Kinda makes me not trust you…
The average person is in no danger of losing their entire savings as their checking, savings, and money market accounts are safe through the existence of deposit insurance.
Yes, but they’re in danger of not being able to conduct transactions or get cash if the bank doesn’t have sufficient liquidity. Try paying your mortgage which has been sold to another bank when your own bank has insufficient reserves on hand to make the transfer. It won’t happen and then you’re screwed.
The average person is in great danger of losing their savings and earnings via debasement of the dollar. Inflation is the hidden tax on workers and savers. In spite of the official CPI, everyone who goes shopping knows that there has been significant inflation in the several years. Of course the CPI is accurate as long as you have no need for housing, energy or food.
I think it’s important to look at the causes of inflation. We’ve had asset appreciation hit housing costs and speculation hitting commodity prices. We could lower education costs by straight out subsidizing it rather than letting students build an unsustainable and destructive debt bubble. Housing prices should decrease now that we have exposed that loan debacle and the private equity rental program has run its course.
Unemployment can lead to inflation by a scarcity of goods and is a brutal way to control an economy. Money comes from governments and is the source of private wealth. This needs to be directed to people who need the basics. A good way of doing that is by establishing a living wage. If we reach full employment and this starts to be the driving force for inflation we can raise taxes
Lord Koos,
In my neck of the woods the consumer inflation seems to be more a factor of product tinkering, market dominance, and increasing net out flows – expenditures per house hold. I would proffer that the MBAs in each sector – individual actors with in a sector, are dialing in consumers for maximum extraction in an act of – institutionalized – quantity, quality, price setting.
At the end of the day all of this is done for the usual reasons i.e. equity buffing to justify the remuneration of the C-suite and buff credit risk mitigation e.g. interest rates on debt.
skippy…. soon to a movie theater near you – Attack of the Killer Numbers….
I love the work you are doing and also Bill Mitchell’s contribution in Australia. There is little I can think of that is more important
In case anyone was wondering:
http://sevenpillarsinstitute.org/
I agree with part of backwardsrevolution’s comment. Kleptocracy is the dominant economic system throughout the world today. Yet Wray totally ignores it. It goes to show how much MMTers buy into traditional economics. Wray worships at the altar of the business cycle but embedded in this concept is the idea that the economy is a largely autonomous, natural process. The economy obeys its own laws, the laws of the business cycle. Its relationship to the society we want for ourselves and each other is tangential to its workings instead of its raison d’être. Economic morality is relegated to providing a few backstops, nothing more.
Wray’s jobs guarantee is likewise primarily about stabilizing the business cycle, not about helping workers. A government jobs guarantee is not there to provide meaningful work to workers. It is there to be an employer of last resort, to soak up labor until it can be shunted back to the private sector as the great god business cycle moves from its descendent phase into its ascendent. Am I supposed to feel better about this kinder, gentler but equally degrading commoditification of labor when it comes from MMT as opposed to the neoclassical and libertarian economic wings?
Wray then goes on to make the truly incredible, and not in a good way, claim that giving anyone who wanted it a shit job paying the minimum wage would eliminate two-thirds of poverty. Of course, Wray does not tell us what he means by poverty or if his “economic” definition of poverty has anything to do with the real world experience of poverty, one element of which is working deadend, shit jobs at minimum wage.
It is all a mishmash. On the one hand, Wray contends that progressive taxation won’t work because the rich can hide their income and buy the politicians to keep their rates low. On the other, he blithefully suggests totally changing Wall Street culture. But if progressive taxation is a non-starter how is downsizing and transforming Wall Street any less quixotic?
Finally, Wray ignores a standard criticism of MMT, that is that it ignores in its monetary manipulations the actual resources upon which the economy, and our society, depends.
Finally, Wray ignores a standard criticism of MMT, that is that it ignores in its monetary manipulations the actual resources upon which the economy, and our society, depends.Finally, Wray ignores a standard criticism of MMT, that is that it ignores in its monetary manipulations the actual resources upon which the economy, and our society, depends.Finally, Wray ignores a standard criticism of MMT, that is that it ignores in its monetary manipulations the actual resources upon which the economy, and our society, depends.
MMT focuses almost entirely upon real resources. No one else does.
Yes, that is a confused criticism from Hugh, but I don’t think “MMT focuses almost entirely on real resources” is quite right, for that has the classical traps that Hugh falls into.
The trap of focusing on the real (Schumpeter’s “Real Analysis”) is that it ignores the monetary and so implicitly suggests that the monetary has no effects – that Schumpeter’s “Monetary Analysis” (Keynes, MMT) is pointless. In spite of this being prima facie absurd, that’s most of economics – which then tends to confuse real and monetary concepts, define everything incoherently and incomprehensibly if at all and ultimately get everything backwards. And a great deal of other criticism here (e.g. Washunate, Moneta too) frequently has this kind of assumption underlying it.
MMT (and a few economists through the ages) distinguish between the nominal/financial/monetary and the “real”/physical/resources. Studies both the “subjective” & the “objective” and their relations. MMT says both are real, both are important, both are necessary to understand what the hell is going on – and they should not be carelessly identified.
Do you really think it’s a good faith argument to throw out numerous unfounded accusations as you have here? Wray provided you with a source for hundreds of pieces he’s written on these issues yet you’ve totally ignored them and made the same inaccurate criticisms you always do.
Yours is the same kneejerk defensiveness that always characterizes any critique of MMT. I point to what Wray actually says here, and you give the standard oh no, you have to have read everything that he has ever written to comment. I wonder in how many instances other than MMT you apply such an absurdly high bar to discussion. There is more flexibility in discussing Holy Writ than there is in MMT. Turning MMT into a elitist cult is not going to aid in popularizing it. Rather the reverse.
Seeking perfection without conceptualizing the transition can be argued as bad faith, the kind that can lead to insurmountable obstacles.
Skippy… I look forward to your tabled offer.
This has been one of the most interesting discoveries in looking into MMT. It seems that some people who advocate MMT ideas get upset when you actually quote Wray and Mitchell directly. That’s why I enjoy pieces from Wray himself, because there he is, in black and white, saying things like:
“We showed that if you just give a job to anyone who wants to work you will eliminate two thirds of all poverty, even if you pay only the minimum wage.”
I have found that when people oversell a good idea, it’s a good idea to explore the claim in more detail. And when you encounter resistance, it’s a good sign to continue exploring.
For example, one of the core issues here is of semantics. How does Wray define anyone? If someone could get out of prison by expressing a desire to work, that would certainly improve things. But the benefit comes from getting the person out of prison, not from the work.
I think most of the academic MMTers are agreeable types personality wise (most of the MMT defensiveness/stridency I read comes from message board posters, not the academics). However, when it comes to understanding and empathizing with real flesh and blood people the almost always defensive Wray comes off as impatient and condescending. His style virtually dooms any policy advancement in the MMT debate; at least as it relates to his efforts alone. IMHO, Alt, Kelton and Mitchell are far more agreeable and certainly less caustic in furthering the cause. To be sure MMT isn’t perfect, even absent Wray’s indelicate style. But if it is to go anywhere at all on the policy front, I believe strongly that it needs a more agreeable torchbearer than Mr. Wray.
I think you are sort of missing the real meaning of that statement. It is a shame that Wray did not explain it further. If someone (the government in this instance) were to step in and give everyone that is unemployed (or underemployed) a full time job, even at minimum wage, this would have a huge ripple effect upon wages. Labor is subject to supply and demand just as goods are. In this scenerio, the government would create demand and essentially wipe out the oversupply of labor. This in turn would force everyone that wants to hire someone to become more competitive in their offers to attract labor. This would push up all other wages across the board. This in turn would create more consumer demand, and would then further increase economic activity. Many organizations would have to hire even more people to meet the new demand, and at this point, the employer of last resort could start letting the former supplus labor go so that it could return to the private job market.
You should also quote him in full: ” We showed that if you just give a job to anyone who wants to work you will eliminate two thirds of all poverty, even if you pay only the minimum wage. We would like to see the job pay more than that, but even at a minimum wage you eliminate two-thirds of all poverty.”
The study was based on the minimum wage, but he clearly states that he would like to see people paid at a higher rate (you kinda left that part out). So he clearly would like to do more than just let people “out of prison” to work.
Could we adopt a better system than this? I am certain that we could, but it seems even the above is a pipedream in this political climate, so radical political/economic changes that could really solve inequality are not just off the table, they are not even in the building.
No. The worker gets lost in all this. What is the difference between the government offering workers minimum wage meaningless shit jobs and the private sector doing so. Rather than creating a push for higher wages, it would do the reverse, incentivizing employers to offer wages as close to the minimum wage as possible. Serfs for the government or serfs for the private sector.
If you want to make private employers raise wages and benefits, government would need to offer meaningful work paying a living wage and benefits.
I also have to point out that you would need to overcome Fed policy of the last 35 years which has prosecuted a relentless war on increases in workers’ wages, treating them as inflationary and to be combatted with higher interest rates.
Finally, as I said above, Wray does not define his use of poverty. If he is using the Federal poverty line, it is important to realize that is completely arbitrary BS measure untethered from reality. It is a number made up decades ago. Even the Census when it uses it adds notes admitting this.
Hugh: MMT supports a Job Guarantee, not a “meaningless shit” Job Guarantee. If you were in charge of the JG, wouldn’t you decide to offer good, decent, productive jobs instead of “meaningless shit” jobs? Or do you think the current, or an Austrian neoclassical laissez-faire economy is perfect and the government cannot offer anything but “meaningless shit” jobs?
Wray’s point was that 2/3 of poverty could be wiped out if the JG offered a wage as low as the current minimum wage. He may confuse people here who don’t understand that the JG MUST be a minimum wage job – it is not an option that could be changed, for the JG sets the minimum wage. The academic MMTers tend to be very conservative in their estimates and assumptions, so I would wager that it would wipe out more than 2/3.
If you want to make private employers raise wages and benefits, government would need to offer meaningful work paying a living wage and benefits.
Yes, that is called “The JG”.
You are simply making things up. Wray said what he wanted to say the way he wanted to say it. This is substantially different from your formulation. It is another example of why debate with MMTers is pointless and why MMT will and should remain marginal to economic discussions. You keep shifting the target. I address what Wray actually said and then you come along and say on who knows what basis that he meant something else.
There are a whole host of these unreconciled propositions that come across as both arrogant and intellectually sloppy.
MMT is a monetary theory. No, it’s more than a monetary theory.
It’s purely descriptive. No wait, it’s prescriptive too.
The JG is about a minimum wage. No, a living wage. The JG is supposed to be temporary and just uncomfortable enough to push workers back into the private sector as soon as possible. No, it’s about providing meaningful jobs.
MMT is a description of fiat money. No, it is a resource theory.
And now to top it off, Wray has added this gem that for some BS definition of poverty a minimum wage (which for most of us means $7.25/hour) will be able to reduce it by two-thirds.
Seriously, the best way to discredit MMT with all its retained neoliberal elements is simply to let you talk, exhibit your arrogance, and trip over your myriad internal contradictions.
No, Hugh, I am not making things up. Every one of my statements is easy to back up with dozens of citations from MMT books and papers. ALL the MMT economists support a living wage JG. You misunderstand Wray, and miss how his post clearly contradicts your misinterpretation.
Minsky did a calculation [in] 1974 and Professor Kelton and I did one around 2000. We showed that if you just give a job to anyone who wants to work you will eliminate two thirds of all poverty, even if you pay only the minimum wage. We would like to see the job pay more than that, but even at a minimum wage you eliminate two-thirds of all poverty. So most poverty is due to joblessness.
People often forget the multiplier effect – the “even at minimum wage” job targetted at the poor will cause much more employment and economic activity, much at higher wages. And unlike the MMTers, many do not see how desperate many are for any job, any money.
MMT is a description of fiat money. No, it is a resource theory. As I explain above replying to Ben, it is both.
I agree with one of your last criticisms – characterizing JG jobs as “transitional” as Mosler does is a terrible idea, theoretically, practically and morally, and contradicts the actual content of the proposal The JG is a plan to give a real job with decent working conditions to everyone who wants it at a living wage and benefits. Period. It is the least “transitional” job there is. If someone wants to work for the JG from 21 to 65, more power to them.
In the theoretical world (good for economists I guess) sure the jobs could be good, meaningful, jobs not “shit jobs” as after all we’re dealing with economists hypotheticals and there is no reason in theory they couldn’t be. Whether one can make the U.S. government deliver such jobs is the problem.
In actual reality I suspect the best chance of getting good meaningful jobs is worker ownership. Because who is in the best position to have all the motive and knowledge in the world to want to make work safe and healthy and meaningful and rewarding and renumerating? Those who would WORK the jobs of course! Not academics or politicians, they’ll NEVER have to work such jobs anyway!!! They’re pretty far removed even when they mean well – in fact I doubt they are even fit to fully judge what a “good job” is – that takes walking in those shoes.
But such worker ownership “can’t possibly work”. That may be, though there are some counter-examples, I’m not sure it’s usually allowed to even be tried (really lots of repression of leftist movements everywhere. Who represses leftist movements worldwide? Well the self-same U.S. government that we hope will deliver us meaningful jobs does, that’s who! Did it create the neo-liberal world?).
Maybe it’s only the threat of such a system that will make a job guarantee possible. In that case if the only way to get a job guarantee with “good jobs” which MMT advocates claim they want is to advocate socialism of some form, then MMT ironically stops short of being sufficient help.
Who said they had to be shit jobs? You did.
Provide people with the necessary resources such as land and a guaranteed living income and they can find THEIR OWN meaningful, by definition, work to do.
It’s coming anyway, at the Second Coming, which many seem determined to hasten – often at their own eternal peril.
There will always be toilets to clean and diapers to change. Shit jobs will never go away. And with MMT, these jobs will need to get de more often.
Who gets them? Has MMT created some kid of formula to make sure the CEOs or MMT money printers take part in those?
Shit jobs should pay the most. I’ll clean toilets for $200/hr and enjoy it (for maybe an hour or two.)
As for diapers, I’ll change my own babies for free and enjoy that too!
Shit and minimum wage go together. Joe Firestone, I would like to think with a little influence from me, is the only MMTer I know who modified the original Jobs Guarantee proposal for these jobs to pay a living wage and be meaningful. I have never seen the likes of Mosler, Wray, Auerback, etc. adopt Joe Firestone’s formulation. Wray certainly doesn’t here. His focus is the business cycle. He is very upfront about that. There is nothing worker centered in what he has to say about any of this. My point has been for some time that while MMTers see themselves as rebelling against the neoclassicals and libertarians they are blind to the amount of baggage from these theories they still carry. The Jobs Guarantee they propose, with the exception of Joe Firestone, is a perfect example of this.
Yeah, he’s an economist. Who do you think should determine public purpose? Randall Wray? No. That would be you and me, right? Who said JG had to be minimum wage just because some academic said so? Their authority goes to the idea, not the implementation, which is up to us.
(I’m not sure you’re right that it’s only Firestone. I know that Mosler is on the minimum wage end of things, but I don’t believe Mitchell is.)
That’s exactly the problem. MMT as a monetary theory is consistent with both ‘shit jobs’ and ‘non-shit jobs’.
In other words, it doesn’t provide any additional guidance on how scarce resources ought to be allocated.
MMT does not account for the fact that the US is part of a planet. The assumption is that the American garbage man (but if I understand correctly there will be no shit jobs) will have a decent life while the garbage men across the planet might live in the dumps.
This would imply huge unfair global discrepancies and MMT proponents assumes that these huge unfair discrepancies will not impact the US.
In other words, it doesn’t provide any additional guidance on how scarce resources ought to be allocated.
And why should it? The main point of MMT is – “Stop destroying resources. Stop economically sabotaging your own society. Stop attacking the weak just because you like torturing them.” But the hard part is getting people to see what is in front of their noses – this colossal destruction, sabotage and torment.
“Allocating scarce resources” is not what economics is traditionally about. It is a relatively recent and misleading definition due to D. H. Robertson. Economics since Smith has been more about the division of labor. The short story is – division of labor means/presupposes/ leads to credit. Credit means money. Money means markets and MMT. MMT is just about doing accounting correctly, understanding what you are doing, what you are accounting for.
Huh. I missed MMTs main point, I guess. So when does propping up the financial system turn into all that other good stuff? Oh, right. The MARKET GODS.
Where do MMT economists say the financial system should be propped up? Or anything about Market Gods? They just say that people who put their hard-earned money in a bank shouldn’t be robbed of it. And sometimes that “monetary reform” plans are just a pointless distraction, that usually use Martian accounting.
that usually use Martian accounting. Cal
Accounting works fine unless government privileges render it almost meaningless, e.g. government deposit insurance and the lack of a convenient risk-free storage and transaction service instead of a government privileged banking cartel.
Ya see, Cal, liabilities should actually be liabilities and not virtually non-existent as they are with the banking system as a whole.
The good intentions of Dr. Wray are no protection against the possibility that MMT would be co-opted by TPTB to “do policy”, but the opposite of what Dr. Wray intends.
The nightmare scenario is that the idea that the government doesn’t need to tax in order to fund spending would be used to justify reducing taxes across the board, including (especially) on the wealthy. Then the spending would be directed not on support for the poor but on waging war and other means of funneling money to the wealthy. The net result would be that our quasi-progressive tax system would be replaced by the flat tax of inflation, and the burden of financing wars would be taken (even more) off the shoulders of the wealthy.
The multi-pronged approach of:
Would be replaced eventually by:
Cynical, I know, but you rarely go wrong being cynical about politics.
It seems to me that there is a principle that you can only get as much reform as is supported by the outrage and vigilance of the people. Unfortunately the people are too propagandized and distracted to be outraged to the right degree in the right direction, so MMTists are understandably hoping to bypass this principle with a sneak attack of sorts. I wish the attack could succeed, but I don’t see the wealthy and their minions sleeping through it without realizing what’s going on and how to subvert it.
You wrote:
The multi-pronged approach of:
1. Tax the wealthy to reduce inequality, not to fund spending.
2. Spend on the poor through money creation.
Would be replaced eventually by:
1. Don’t tax anyone to fund spending. (Flat tax of inflation.)
2. Spend on the wealthy through money creation.
Any system can, and likely will, become corrupted over time. No system is perfect or thoroughly immune to gaming. MMT is not a total response to political corruption, its an economic description of how a modern economy functions and how to improve it with the goal of broad-based prosperity.
I may have been overly cautious in saying “eventually”.
Without the countervailing effect of taxing the wealthy to reduce inequality, the money creation aspect of MMT amounts to a regressive flat tax, a policy goal of the “taxing the wealthy is a holocaust” crowd. In fact, the best strategy for implementing MMT might be to approach Grover Norquist and explain that money creation is a flat tax in disguise.
But if we can’t successfully argue now that we should “tax the wealthy to help the poor”, we can’t expect to successfully make the more difficult argument that we should “tax the wealthy to hurt the wealthy,” so I find it hard to imagine how we would end up with anything but the regressive aspect.
In general, if someone proposes a multi-pronged policy some prongs of which are poison to the poor and pleasing to the powerful and some prongs of which are the opposite, it’s fair to ask how do we know we won’t just end up with the poison to the poor prongs.
Everybody is looking to a few professors from UMKC to build a theory that can’t be co-opted. This is the stupidest, and most self-defeating, idea that I’ve heard in a long time. If Marx — check me if I’m wrong on this, but I think Marx was about as “worker-centered” (Hugh’s term) as it’s possible to be — can be co-opted, and he surely was, if not by the German Socialist parties (who voted for WWI) then by Stalin, for pity’s sake, then can we not conclude that any theory can be co-opted?
It is up to politics as practiced by us to prevent the co-opting. Looking to magical theories that can only come true, if only we can browbeat other people into thinking harder for us, is a counsel of despair. On these threads, it’s a terrible time sink.
And here I was thinking everybody was trying to figure out how to salvage a theory that allows control fraud to flourish in the financial SECTOR. How could I be so clueless?
I’m not asking that build a theory that can’t be co-opted, but it would be nice if they built one that didn’t seem to be designed to be co-opted.
Hugh, here’s a description of how job guarantee might work. It is not making work for its own sake but for the sake of the community:
“Guaranteed Work for Everybody
“Unemployment blows. The easiest and most direct solution is for the government to guarantee that everyone who wants to contribute productively to society is able to earn a decent living in the public sector. There are millions of people who want to work, and there’s tons of work that needs doing – it’s a no-brainer. And this idea isn’t as radical as it might sound: It’s similar to what the federal Works Progress Administration made possible during Roosevelt’s New Deal, and Dr. Martin Luther King, Jr. vocally supported a public-sector job guarantee in the 1960s.
“A job guarantee that paid a living wage would anchor prices, drive up conditions for workers at megacorporations like Walmart and McDonald’s, and target employment for the poor and long-term unemployed – people to whom conventional stimulus money rarely trickles all the way down. The program would automatically expand during private-sector downturns and contract during private-sector upswings, balancing out the business cycle and sending people from job to job, rather than job to unemployment, when times got tough.
“Some economists have proposed running a job guarantee through the non-profit sector, which would make it even easier to suit the job to the worker. Imagine a world where people could contribute the skills that inspire them – teaching, tutoring, urban farming, cleaning up the environment, painting murals – rather than telemarketing or whatever other stupid tasks bosses need done to supplement their millions. Sounds nice, doesn’t it”?
( http://neweconomicperspectives.org/2014/01/growing-recognition-need-job-guarantee.html )
If jobs were created that only protected the environment, that could account for hundreds of thousands of jobs: park rangers, research on environmental concerns, planting trees, caring for animals, providing environmental data for policy, drawing up ideas based on data, protecting water systems from mining, etc. The list could be very long indeed in a place like Canada where we are trying to destroy the environment at the fastest pace possible.
And, of course, *** crickets ***.
“[A}ble to earn a decent living” should blow the stupid sucky jobs argument out of the water, though of course it won’t.
Looking at this a couple days later, this has got to be one of the most commented upon articles at NC in months. Maybe years?
So not sure what you mean by crickets. Some people think unemployment is the core issue we face today. Others think it’s a symptom of the actual disease of mismanagement.
You wrote a lot, most of it incorrect. I will pick one section and show how you are wrong:
“Wray’s jobs guarantee is likewise primarily about stabilizing the business cycle, not about helping workers. A government jobs guarantee is not there to provide meaningful work to workers. It is there to be an employer of last resort, to soak up labor until it can be shunted back to the private sector as the great god business cycle moves from its descendent phase into its ascendent.”
Stabilizing the business cycle by providing living wage work to those who need it is all about helping workers. A government jobs guarantee can be designed a lot of ways. It should be designed so that the work that is offered is at a living wage and is useful to society. This is not an impossible goal. Nobody is claiming the business cycle is “the great god”. But unless we are going to radically alter our economic system, abandon capitalism and come up with something else that will work better, its what we’re stuck with for now. Get back to us when you’ve designed a system less prone to corruption and superior to capitalism with its business cycles and other attendant garbage. Economic freedom is a form of freedom. Being free to create a business or invent a product, provide a service or whatever, in exchange for money, is a practical freedom that most want to enjoy in one way or another. Communism didn’t offer that. It offered a jack-boot on the neck for those who didn’t “support the revolution”. Our system is a horribly corrupt kleptocracy that needs massive reform. But under “communism” as it existed in the real world, we couldn’t even have this conversation right now, so the idea that reform would be possible under such a system is ridiculous. So yes, we live under the worst system except for all the others. Reforming it and improving it are our best chances. Violent revolution just replaces one set of thugs with another. MMT is a sober and thoughtful response to the world we live in, not some utopian dream of yours that the rest of us are just too impure to live up to.
Nowhere in his interview does Wray mention a living wage.
Thanks too for stating so succinctly the lesser evilism implied by Wray’s embrace of the business cycle.
“Get back to us when you’ve designed a system less prone to corruption and superior to capitalism with its business cycles and other attendant garbage.”
The introduction of the Communist strawman is a trifle too obvious though. You laud “economic freedom” as opposed to this strawman and then note in passing that in the kleptocracy we live under we don’t have it anyway. It is hard to see what your point is.
“Violent revolution just replaces one set of thugs with another.” So I suppose we should be grateful for the thugs we have. More lesser evilism. Your invocation of purity is another classic tell of the lesser evilist approach. But seriously, what has lesser evilism gotten us. It is precisely lesser evilism which has landed us in the mess we are in.
As for violence, the current system we live under practised enormous violence against us. It kills tens of thousands every year through shutting them out of healthcare. And no, the corporatist wet dream of Obamacare is not going to change that. It steals from hundreds of millions. It throws tens of millions out of work or shunts them into poor paying crap jobs. It has seized the homes of millions. It has defunded education, seeks to privatize K-12 and reduce the university educated into a state of debt servitude. And it does so much more to impoverish and immiscerate the vast majority of us. All this is violence. Violence that happens everyday, year in and year out.
I would say to you that we are already in a violent revolution whether you like it or not, whether you realize it or not. We can choose to resist or we can become serfs. The problem with lesser evilism is that it won’t save us from our approaching serfdom. Because it prevents the formation of effective opposition and alternatives, it, in fact, hastens this outcome.
Hugh writes: “Nowhere in his interview does Wray mention a living wage.” Here’s what Wray actually said:
So, I think “nowhere does Wray mention” is quibbling. First, “we would like to see the job pay more than that,” which should put a stake in the heart of this “crap minimum wage” argument. Second, eliminating two-thirds of all poverty is the kind of meliorism I find attractive, especially when the alternatives posed are (a) what we have (b) the JG proposal and (c) some undescribed but way better thing to be achieved by who knows what.
Actually Frank, they did have conversations like this in the Soviet Block and a healthy Samizdat. I wouldn’t disagree that it was a mostly lousy society, but a few of us did teach there. My lectures were not censored there. Cops were sent in in Turkey (1997) and I got a (drunken) warning from a Middle Eastern under-secretary (though the prime minister then offered me a job helping to clean up their finance ministry). The fear of their highly prominent secret police was much worse than here though. Even in Iran I was asked to introduce and chair a debate on the Jewish holocaust. Public discourse was admittedly subject to different rules.
I can hardly begin to tell how savagely the communist apparatchiks did not believe the drivel they put up in public discussion and nearly all were models of hospitality behind the scenes. The problem underlying all social (economic) solutions is “policing”. This affects what MMT is saying as much as Hugh’s version. Dictators whether corporatist of state capitalist are no good for us. Missing the policing aspect of all this leaves us forever discussing chatter-theory rather than practical policies.
I see MMT as the same sort of incrementalism as Obamacare. The JG sounds an awful lot like the same sort of sparkle pony as the public option.
MMT leaves money creation in the hands of the banks, who offer leverage to financiers to manipulate the markets with little restraint. The federal reserve provides no control over the abuses and acts more like part of the private sector than public. If coin currency can be created, as it has been throughout history, why not paper/electronic debt-free fiat?
I think Huber’s criticism of MMT need to be considered and The Chicago Plan looked at again. We are too far gone for incrementalism.
The Chicago plan that does not understand reserves, built without a thorough understanding of modern banking?
“Now once the banks are transitioned to this 100% reserve scenario, what happens?
The primary function of reserves is as the currency of the payments system. Our ability to use debit cards and have our paychecks clear depends on the availability of reserves.
Because we are now adding a reserve requirement to lending (which does not exist now), reserves will have an added, competitive function.
Banks have to decide how much of their reserves to commit to executing the payments system versus backing lending. The payments system is nonprofit for a bank, but lending is definitely a profit center.
I’m guessing that banks will favor keeping reserves on hand to meet lending requirements, and will care a great deal less about the payments system than they do now.
One thing that makes the payments system go is the willingness of banks to make unsecured loans of reserves to each other in order to clear all payments daily. In the first place, interest rates would have to rise in order to accommodate the new demand for reserves required to back loans. That would ripple throughout the term structure. Even though the relative supply and demand for consumer and homeowner loans may not change, interest rates would have to rise because of the new costs of interbank lending as a result of the new scarcity of reserves.
While interest rates would surely rise, the first thing to go is probably debit cards, since they are entirely creatures of the payments system, and depend on the ability of banks to borrow reserves from each other in the interbank fed funds market. I suspect that banks would be unwilling to lend to each other for anything like the rates they do now. If they don’t just get rid of ATM cards, they would have to radically raise the transaction fees they charge for them.
I think the Chicago Plan was based on some fundamental misunderstandings about the operation of the banking system. Without having thought this through completely, I can see problems arising for which Chicago Plan advocates really have only vague, wishful answers.
When we confuse deposits with assets and just don’t understand that reserves are not demand deposits, I think we have great potential for making serious errors. I’m sure the heart of the Chicago Plan is in the right place, but I think it’s quite a dangerous idea.” – H/T LET
So can you see that is a bit of a half gold standard thinking and half cash and carry all smashed together.
skippy… In 1930 it might have been the OK, not so much now.
I just posted this on yesterday’s links by accident, sorry for double post but it makes no sense there.
Availability of reserves would not a concern if citizens had interest free fiat storage with the US government, at the federal reserve or through postal banks. Those that want to risk their money in the markets could use the private banking system.
MMT has much more wishful thinking involved, imo, like seigniorage based on debt money, particularly when private banks are in control of endogenously creating our money and the debt component comes only after these banks have created new deposits. Having the government underwrite TBTF banking activities is a subsidy that MMT does not concern itself with. Real seigniorage would come from government issued debt free fiat, imo, which has nothing to do with a gold standard.
http://www.bloombergview.com/articles/2013-03-27/the-best-way-to-save-banking-is-to-kill-it
Availability of reserves would not a concern if citizens had interest free fiat storage with the US government, at the federal reserve or through postal banks. Those that want to risk their money in the markets could use the private banking system. spooz
Nailed it!
Interest free is just another cognitive left over from the commodity money theory [lifetime store of value], yet, your still left with a monopoly paradox.
I see you did not address the issue with payment systems nor the confusion wrt deposits and assets, but, just repeating the same canned free market talking points i.e. subsidy’s et al. Hint the government subsidizes everything from the fact of being a sovereign. Now if you want to get into disbursements we’ll have to talk politics.
The thing that tickles my cortex is how the same ideologues that have been playing around since post WWII cold war, fighting evil commies, are now struggling to adapt – transition the system they created – to fight – the evil commies.
Skippy… “Availability of reserves would not a concern if citizens had interest free fiat storage with the US government” – and where pray tell do you supply the evidence for that proclamation in toto.
Because the fiat deposits at a Postal Savings Service or with the monetary sovereign would ALWAYS be available on demand since those deposits would NEVER be lent out.
Let 100% private banks with 100% voluntary depositors attempt to create money by borrowing short to lend long and let them be ruthlessly liquidated when their 1st check bounces.
What, specifically, are you referring to regarding “payment systems” that you think the government would be unable to work out. India has ATMs for their postal bank; I don’t think people being able to access their government bank accounts would be a problem.
You seem to be the one who can’t think outside the box; you seem to have no clue what debt free fiat would look like. What, specifically, are these “free market talking points” that you refer to? I was unaware of any talking points at all, certainly not “free market” ones.
I discussed disbursements in another comment below, in the form of a citizens dividend issued in debt free government issued fiat.
All in all, you seem rather clueless about the topic and I would suggest you do some research before commenting. You might start with Kumhof’s IMF paper revisiting The Chicago Plan, then for something more recent, look at Huber’s comparison of his New Currency Theory to MMT. Your not having “thought it out thoroughly” seems like an understatement.
India? You use a neoliberal conclave like India as an example of a working model[?], a place that makes American corruption look good? A place that enshrines corporatism in its caste system like its part of its history.
BTW for banks to function in your model the saving rate would have to have be around 25% at minimum. How do you propose to bring about that niggling necessity.
If you don’t know what I mean, when I say payment systems, that would suggest you are the one that requires additional knowledge.
skippy… the blind side to yours and beardos wants is largely do to lack of accounting knowledge, something most economists and money cranks are woefully lacking in.
BTW for banks to function in your model the saving rate would have to have be around 25% at minimum. How do you propose to bring about that niggling necessity.. skippy
A universal, equal and metered bailout with new fiat could provide just the right amount of new savings for 100% reserve lending. I’ve mentioned this numerous times but you either can’t or won’t remember.
What’s the matter? Don’t like helping the poor? Even if it can be done without significant price inflation risk?
You lefties. What good are you?
The actual resources upon which our economy responds is the environment which has been heavily depleted. So technically the remaining resources should be worth more than gold. The only other, higher, resource we have is more efficient technology. We do still have that resource but due to vested interests it has not been invoked. Too bad. So vested interests are the cause of inflatlion? Or what?
I’ll address only one point, which doesn’t mean I agree with the rest.
“Kleptocracy is the dominant economic system throughout the world today. Yet Wray totally ignores it.”
Assuming, arguendo, that this claim is true (I don’t agree) it’s not clear to me why Wray should address it; it reminds me of an old National Lampoon cartoon where William Howard Taft asks: “If my opponent [Bryan] is serious, why will he not engage me in a pie-eating contest?” And why should Bryan have to do that?
MMTers are not obliged to account for the nature of the political economy in which their model is embedded. Demanding such an account is a category error, because MMT is not a “complete system” of political economy like, say, Marxism at least gave the impression of being.
So far as I can tell, there’s no reason why MMT’s propositions wouldn’t hold true in an aristocracy or a democracy as much a kleptocracy; fiat money, as money, would work the same way regardless, no? Much in the same way that plumbing is plumbing, whether the nobility, the people, or thieves are sovereign.
MMT critics who make demands like this are really demanding that MMT ratify their own notions of what our political economy should be. But rather than do the work of propagating that model themselves, they would prefer that MMTers do it for them. Not only, as I have said, is this a category error, it’s a purely negative contribution. Little wonder such commentary gets no traction, since it verges on trolling.
If a military historian discussed military conflicts of the early 1940s and ignored the Second World War in that discussion, it would come across as at best irrelevant and at worst ridiculous. Modern orthodox and heterodox economics swim in an ocean of kleptocracy which define them and yet which they do not see. Wray is committed to stabilizing a business cycle, but the primary purpose of that cycle is looting. That is a rather important oversight.
As for what MMT is, good luck with that. I have gone round and round with them for the last few years about what it is. If it suits their argument to say it is just a monetary theory, then it’s that. If I then look at MMT as a monetary theory, I get hit by MMTers with the assertion that it is so much more and that it is effectively a complete economic theory. But even if I accept here to answer you that it is a monetary theory, any worthwhile theory needs to be aware of and consistent with the political economy in which it exists, and let’s face it in today’s world that means kleptocracy.
Actually, the debate within echo-nomics is pretty polemic. Here’s a recent anti-abstract.
Eric Tymoigne and Randall Wray’s (T&W, 2013) defense of MMT leaves the MMT emperor even more naked than before (excuse the Yogi Berra-ism). The criticism of MMT is not that it has produced nothing new. The criticism is that MMT is a mix of old and new, the old is correct and well understood, while the new is substantially wrong. Among many failings, T&W fail to provide an explanation of how MMT generates full employment with price stability; lack a credible theory of inflation; and fail to justify the claim that the natural rate of interest is zero. MMT currently has appeal because it is a
policy polemic for depressed times. That makes for good politics but, unfortunately, MMT’s policy claims are based on unsubstantiated economics.
http://www.boeckler.de/pdf/p_imk_wp_132_2014.pdf
Palley goes on to say, ‘Unfortunately, their response is a lengthy (fifty-three page) restatement of MMT that largely fails to address the issues raised by critics.’ I haven’t noticed Randall doing anything different in the post.
I disagree purely from this statement “old is correct” wrt to your comment and
“Proponents of MMT have a professional obligation to provide such a model to help understand and assess the logic and originality of their claims.”
From the Thomas I. Palley [New America Foundation] paper.
skippy… for an old lefty I must say your vibe is off in my thinking.
New America Foundation?
Thomas Palley is a United States-based economist who has served as the chief economist for the US–China Economic and Security Review Commission. He is currently Schwartz Economic Growth Fellow at the New America Foundation.
The New America Foundation is an American non-profit, nonpartisan public policy institute and think tank focusing on a wide range of issues, including national security studies, technology, asset building, health, energy, education, and the economy. The organization is based in Washington, D.C., in addition to having a significant presence in New York City.
In 2007, Steve Coll, a former managing editor of The Washington Post, became President of the New America Foundation.[1] Google’s Executive Chairman, Eric Schmidt, is chairman of the foundation’s board of directors.[2]
In 2013, Anne-Marie Slaughter became President of the New America Foundation, replacing Steve Coll.[3]
The New America Foundation was founded in 1999 by Ted Halstead, Sherle Schwenninger, Michael Lind and Walter Russell Mead as a non-profit, public policy institute whose stated mission is to “invest in new thinkers and new ideas to address the next generation of challenges facing the United States.”[4] The organization has a staff of over a hundred employees and fellows with offices in Washington, D.C., and New York City.
The organization continues to “emphasize work that is responsive to the changing conditions and problems of our 21st-century information-age economy” with “big ideas, impartial analysis and pragmatic solutions”.[4] Newsweek’s Howard Fineman called New America a “hive of state-of-the-art policy entrepreneurship”.[5]
Economics
New America’s Economic Growth Program, directed by New America co-founders Sherle Schwenninger and Michael Lind, aims to take a policy look at America and the world’s economic problems. The program commissioned a paper “The Way Forward: Moving From the Post-Bubble, Post-Bust Economy to Renewed Growth and Competitiveness”[8] which warned of the severe economic problems America would face if continued on its current path. The program does not believe in immediate government deficit reduction; it believes that will only make the situation worse. Instead, as stated in the paper, it has other suggestions, including investing in a sustained infrastructure program, lasting from five to seven years, to create jobs and demand.
Formerly, the Committee for a Responsible Federal Budget was a part of New America until it separated to become the Fix the Debt campaign. The bipartisan Committee ran a number of projects, including U.S. Budget Watch (www.usbudgetwatch.org), a project funded by Pew Charitable Trusts which reports on important fiscal issues relating to the 2008 election and afterwards. One of its most recent initiatives is the “Go Big” initiative, which was created after the Budget Control Act of 2011, enacted in early August to raise the debt-ceiling and avoid default. The effort urged a bipartisan 12-member Joint Congressional Committee on Deficit Reduction, also known as the Super Committee, with finding an additional $1.5 trillion in deficit reduction by November 23.
Maya MacGuineas, who has worked at the Brookings Institution as well as on Wall Street, led the Committee and now leads Fix the Debt. After advising politicians from both parties, she serves as a trusted mediator on budget talks between Democrats and Republicans.[9] In addition, in April 2010 the Committee’s policy director, Marc Goldwein, joined President Obama’s bipartisan Fiscal Commission.[10] Goldwein, 26, was also named one of the Forbes’ “30 under 30”.[11]
skippy… Corporate thinktankistan strikes again… soon to be just one big quivering mass.
Thanks. I thought the context was something like that.
I suppose it’s OK that Palley is an “independent researcher,” so many of us are. That said, I got this far:
And stopped reading, because it pins the bogometer.
You have to sell it to me. As was noted above, there are people today, some very serious people, with beards, who claim the moral authority over any discussion and frame it as they wish.
These very serious people, with beards, follow the very complex school of thought know as “the wigs”. They all post on the internet under pictures of even more serious looking, very old European Burgers wearing wigs. They must know what is going on. They took this stuff seriously! Kiss the wig, bitch!
Not sure what you’re saying; perhaps my bogometer is still veering wildly.
* * *
It’s kinda like flipping open a book on astronomy, and finding a paragraph claiming that the sky is a big blue sphere with a big light outside it, and when holes got poked in the sphere, the light shines through them, and we call those holes “stars.” (“But why won’t you keep an open mind on what’s in the rest of the book?”) The wig interpretation of astronomy, I guess….
Ha beat you, and it was sitting there for an hour whilst I nicked out.
Ummm… Andrew Haldane, who is well known among readers as being one of the most outspoken and truthy central bankers in the world, will become Bank of England’s Chief Economist in June. That fact is what makes his comments – however factually honest – extremely uncomfortable for the Keynesian status quo DSGE modelers alive and well in every central bank in the world. To summarize his thoughts in the following letter – the models are useless and it’s time to rethink everything…
Skippy… Lambert can you hear the sound of bubble wrap exploding across the tubes? I can.
To summarize his thoughts in the following letter – the models are useless and it’s time to rethink everything… skippy
Yes, central banking is only 320+ years old; it just needs a few more centuries and World Wars to work out the kinks. /sarc
Meanwhile, working from the Bible (especially Matthew 22:16-22) I have rethunk things and you pan my efforts.
But we’ll see since the general drift these days appears to be in my favor which should not be a surprise since I aim for truthiness myself and truth does win out in the long run at least.
Over 2000 years of institutionalized poverty vs 320 years of financial groping exacerbated ignorance, I take the latter any day over the formers track record.
Lets not forget the priests silo was the first bank in history, food for labor and worship.
“But we’ll see since the general drift these days appears to be in my favor which should not be a surprise since I aim for truthiness myself and truth does win out in the long run at least.”
And why am I not surprised at your claim to truth and knowledge of out comes. Yes, yes, you have read the final chapter on the Universe, written by some guy high on moldy rye bread.
Remember that South Park episode [you like that cartoon] where they went to Ethiopia. The White picket fence church in the middle of all the starvation with the black board inside, informing the natives that “Jesus equals Food”. That about sums up the last few thousand years imo.
Skippy…. truthiness coming from someone that trots out DVDs of chariots at the bottom of the red sea, from a known conman and refuted academics that bastardize everything to suit personal tastes, is conflating truth with belief.
The White picket fence church in the middle of all the starvation with the black board inside, informing the natives that “Jesus equals Food”. That about sums up the last few thousand years imo. skippy
I thought you said you read the Bible? Then why have you forgotten this:
If a brother or sister is without clothing and in need of daily food, and one of you says to them, “Go in peace, be warmed and be filled,” and yet you do not give them what is necessary for their body, what use is that? Even so faith, if it has no works, is dead, being by itself. James 2:15-17 New American Standard Bible (NASB) [bold added]
That’s not a category error. A category error would be something like “A Critique of Plumbing Under the Hapsburgs.” Which is what you’re doing. First, you argue that MMT can be put to bad use by a political economy that, well, puts things to bad use. And then you go one step further and demand that MMT explain how it’s going to fix the entire political economy of which it is only a part. But that’s not their job, any more than it’s a plumbers job to fix whatever’s wrong with the Austr-Hungarian Empire. It’s yours (and mine). Second, the concrete policy prescriptions that the poster advocates can serve as a vehicle to improve the political economy, given that they offer concrete material benefits.
‘Whenever you hear someone say you need to run the government’s budget the same way you would run a household budget, that cannot apply to a sovereign government like the United States.’
Ol’ Huey Long used to promise, ‘Every man a king.’ If he hadn’t been shot, and we’d ALL become sovereigns, then household budgets would be a useless anachronism.
It is deeply satisfying to see my own well-coiffed portrait on my thousand-dollah bills. Have a cigar.
I guess humanity will never truly shake off the “protestant work ethic” given the idea of “employer of last resort”.
This is a good point but the employer of last resort offers a job to anyone who wants one. I see the ‘protestant work ethic’ as representing exploitation of labor. Employer of last resort also strives for a living wage with benefits and there is lots of useful work to be done.
I think Pavlina Tcherneva gave us some good insights when she asked people employed under Argentina’s temporary work program what they liked most about their jobs. In order of importance.
1) I can do something
2) I work in a good environment
3) I help the community
4) I learn
5) I have an income
http://neweconomicperspectives.org/2014/01/job-guarantee-2.html
also good
http://www.economonitor.com/lrwray/2014/01/05/push-for-job-guarantee-gains-momentum/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+GreatLeapForward+%28Great+Leap+Forward%29
Push for Job Guarantee Gains Momentum
05 Jan 2014
“”2. Jesse Myerson, from “Five Economic Reforms Millennials Should Be Fighting For”, Rolling Stone
It’s a new year, but one thing hasn’t changed: The economy still blows. Five years after Wall Street crashed, America’s banker-gamblers have only gotten richer, while huge swaths of the country are still drowning in personal debt, tens of millions of Americans remain unemployed …Unemployment blows. The easiest and most direct solution is for the government to guarantee that everyone who wants to contribute productively to society is able to earn a decent living in the public sector. There are millions of people who want to work, and there’s tons of work that needs doing – it’s a no-brainer. And this idea isn’t as radical as it might sound: It’s similar to what the federal Works Progress Administration made possible during Roosevelt’s New Deal, and Dr. Martin Luther King, Jr. vocally supported a public-sector job guarantee in the 1960s. A job guarantee that paid a living wage would anchor prices, drive up conditions for workers at megacorporations like Walmart and McDonald’s, and target employment for the poor and long-term unemployed – people to whom conventional stimulus money rarely trickles all the way down.””
A guaranteed job is not a counter to guaranteed injustice such as results from government-backed credit creation.
It’s not jobs people need but justice. Then they can find their own meaningful, by definition, work to do.
Employment at meaningful tasks is good for people. It has nothing to do with protestantism or work ethics. For those who don’t want to work or cannot work there should also be a living wage, but it should not come and go with the business cycle. A very slim minority of people don’t want to work at all. Most don’t want to work at the soul-sucking bullshit jobs on offer, but they do want to do things to improve the lot of their families and fellow women. I too despise the protestant work ethic that prizes “work”, which they seem to define as something that immiserates oneself, above all else and consigns to hell those who lack proper “industry”. It the perfect religion for creating serfs and slaves. Protestantism generally, with its lack of intellectual curiosity, unquestioning respect for authority and denial of the joy of life and human contact is a misery machine that causes incalculable damage. But lets not confuse their insufferable work “ethic” with the true ethic of performing tasks that improve the human condition.
Victor Frankl would agree.
Perhaps it was a poor choice of label (and a reason for the quotes).
I just do see that this will become any more than the piles upon piles of busy work that the capitalist world is already filling to the brim with.
One aspect of this is how intertwined work and social life is. After leaving school, the major source of social interaction is the work place these days.
And supposedly once we hit a certain level of income [was it $10000 or something?), the people we socialize with are more important to our sense of wellbeing than money.
If sovereign governments are not constrained by any limits on their own currency, why do they create it by selling treasury bonds which they and future citizens will have to pay back? Why not just create the needed money and avoid the inconvenience of having to pay it back?
Yep. Sovereign borrowing is welfare for the the rich. Professor Bill Mitchell calls it “corporate welfare.” But welfare should be proportional to one’s need, not proportional to one’s money hoard.
That’s the point of MMTers… it’s based on jingoism… only other countries have constraints… Americans are the kings of the world so the rules of import/export don’t apply to them.
What? Nonsense. MMT proposes the basic notion that a country that prints its own currency can never run out of its own currency, and that it doesn’t have to tax or sell bonds to create more currency. That applies to any nation that is sovereign in its own currency. In other words, this is not applicable to much of the EU because they gave up their sovereign currencies when they joined the Euro. Its does apply to the UK, USA, and most other nations that didn’t foolishly give up the power to print their own money.
The facility of printing is quite obvious. What seems to be less obvious to MMTers is the fact that printed money does not naturally flow to productive projects that increase wealth. In fact, the faster a country prints, the more debauchery it generates.
You continue to troll against MMT without any sort of idea of what you are talking about. MMT post? Here’s Moneta and his completely debunked monetarism.
This is just slander- “MMTers is the fact that printed money does not naturally flow to productive projects that increase wealth”
As opposed to the current status quo, where all money flows, benevolently, to the most “productive” projects, increasing wealth for those that have political power.
When has money ever flowed to productive projects that increase wealth? And, if it did, given your monetarist beliefs, wouldn’t all that productive wealth be printing it’s own money? I think there’s a inflationary boogie man under your bed.
I don’t do MMT either. I do think they may be telling us something of what money might be. I can’t see why we can’t modularise money, making the stuff I spend on ‘beer’ different from money invested in something like massive green energy projects. Imagine a big sea power project in Scotland. Once built it’s just a maintenance cost. Why does that influence the price of fish? Why can’t we agree to the strategic build of such across the world with government money that doesn’t demand a return, just efficient maintenance? I reckon we could scale down such to Lambert-sized environmental living communities too. Given modern spreadsheet ability we could start doing the right things in building capacity capital not in the competitive money scramble.
Gustavo – pretty much the only reason to issue the kind of money called “bonds” instead of the kind of bond/debt called “currency” is to encourage saving, which in turn is usually only sensible in a white-hot, chock-full employment economy.
Moneta:What seems to be less obvious to MMTers is the fact that printed money does not naturally flow to productive projects that increase wealth.
No, that is something that distinguishes MMT/Keynes vs. Old “Keynesianism”, who argued more or less that way, that economies could be fine tuned by printing and spending the exactly right amount of money – given to the usual suspects, who trickle it down.
Contrarily, Keynes & MMT argue for targetted spending, particularly on those who need and don’t have money. This is socially defined by and defines “productive.” MMT/Keynes spending tends to lead to lower deficits than “Keynesianism” which in turn leads to lower deficits than austerity. So the result is the exact opposite of the reputation and appearance.
Also, MMT recommendations apply to every country, and need no modifications, no “concerted action”. Following MMT recommendations benefits everyone not just the country following MMT – so much so that Abba Lerner called them “international responsibilities”. The point is that often, “the rules of import/export” are, like most “economics” just insane raving. Saw a great Keynes quote a few days ago on that – can’t remember where – saying that in international economics, countries usually do the exact opposite of their own interest.
That’s the thing to love about MMT. It is not gold. Thank god. MMT is you and me agreeing to print money to accomplish a common goal. That is why our money is not a good medium to store value – although it is not a bad one either. Money should never accrue interest because it isn’t really worth anything but the purpose for which it was issued.
Money creation for public purpose. I have a very hard time understanding why that arouses such resistance. Not.
Government and government-enabled/backed money creation should ONLY be for the general welfare – not for the most so-called “creditworthy.”
What part of that don’t you understand?
Huh? Where did I bring “creditworthy” into it?
OK, I’ll concede that was unfair. Sorry. But LR Wray conflates public purpose with credit creation for private purposes.
Please explain the “rules of import/export”. If you do it correctly, you may actually learn something.
Then again, are these the “natural, monetarist rules” or are these the accounting rules? Very different things.
Exactly. That’s one of the main points of MMT.
Because borrowing money, rather than simply issuing it, provides a huge subsidy for banksters. Just another way to redistribute income upward.
Actually, the winners are the first to get the easy money. With MMT and no treasuries, some group will still end up first in line, with an even greater amount.
Now you’re a seer! Predicting the future! With absolute certainty!
And you’re not?
I know you are but what am I?
Give it a rest.
Good Lord. Now we have Cantillon’s Law as a speech crime!
The point of MMT, the JG is:
a) Yes, the first winners are the people who are first in line: the poor, the unemployed. Why is this a bad thing?
b ) the next winners are the people they spend this money on.
c) there are no losers. It is a free lunch.
If people who say “there is no such thing as a free lunch” understood what they were saying, how contrary to logic, how contrary to common sense and common experience, how self-contradictory that statement is as it is usually meant.
Well, they would stop saying it.
I wouldn’t say “free lunch.” More like a successfully bootstrapped lunch, with the Power Switch being the job.
There will always be need to clean toilet bowls and change diapers. MMT will create even more demand for these.
So why would one show up to clean toilets and change diapers if money could just be printed out of thin air? If they have to do that shit job to get that cheque, it means that some group would be getting a free lunch and someone cleaning up after it.
All the theoretical stuff sounds good but when you start to think of practical applications, it falls apart.
We need a change in paradigm in how we treat eachother and what we expect out of life. Changing the money system without a change in values will not change anything.
LRW: We can’t eliminate the business cycle, but we can make the crisis much less severe.
Sure you can eliminate the business cycle which is more properly called the government-backed-banking cycle by eliminating all privileges for the banks, both explicit and implicit, and by removing all penalties on the use of common stock as private money.
Why? Because common stock is spent into existence and therefore the total volume of it need never shrink which means no busts are built-in.
I’ve enjoyed learning more about MMT on this website. Monetary policy and the nuances of how a national bank’s Open Market Operations actually work have always been difficult subjects, so any well-explained information is appreciated.
From reading reviews of Picketty’s new book, one policy prescription that is getting some attention is to use taxes (especially wealth taxes) to fund government operations, rather than rely on debt financing. Since the interest paid by governments to finance its debt is mostly paid to the wealthy (who own a large part of government debt), I’ve never understood why liberals, progressives or the general “left” support deficit financing. And considering that much of the government interest paid to the wealthier families is either tax-free or taxed at a very low rates (foreign investors often pay a minuscule 5% tax on interest received from US based debt), deficit financing seems like a great policy for the wealthy, but not so great for the lower and middle-income families who either have to pay higher taxes to make up the difference, or who receive fewer government goods and services since national income (output) is being diverted to bondholders. Many governments are paying upwards of 15% of total expenditures to wealthy families and large business enterprises to finance government debt. It seems absurd that wealthy governments like the US or northern Europe, or even China and Japan, would need to use debt financing at all, except maybe in times of significant unforeseen events such as natural disasters.
As I understand it, one MMT theory tenet is that government deficits are irrelevant since the government has the power to issue currency directly to pay for its goods and services. Thus, debt financing is not needed. If true, many of us in the general public may remain skeptical based on what has happened in countries that continued to issue new currency but saw its value decline over time. There are too many historical examples where purchasing power has been sharply degraded by sharp and sudden devaluations, or where a national currency was replaced altogether. These devaluations often affect the lower and middle income groups the hardest when food prices, energy, rent and other consumables take a larger share of take home pay after the devaluation.
MMT doesn’t ignore the possibility of inflation. What it does do is explicitly lay out under what conditions inflation will and won’t be an issue. A nation that finds itself stuck in recession, with a lot of unemployment and where production of goods/services is not at full capacity, can print money to stoke demand and make the economy move again. Once the economy starts to reach full capacity printing money can lead to inflation, and so it must be constrained.
YankeeFrank – “A nation that finds itself stuck in recession…” And how did the nation get itself into this recession? Is it because recessions are preceded by too much money created out of thin air, way too much leverage?
So you want to rush in after the orgy and essentially bail out again? If deflation is so unacceptable, then maybe inflation is too. When you bail one side out, you hurt another.
Take a look at the big picture. I can see that Mr. Wray does not do this.
The ETHICAL way to preclude much price inflation in fiat is:
1) Eliminate all government privileges for banks.
2) Reduce fiat to legal tender for government-debts only.
3) Allow genuine private currencies for private debts only to compete with fiat for the payment of private debts.
The above would limit price inflation risk to government and its payees and so encourage both that the monetary sovereign should spend wisely and sufficiently tax too.
I can’t think thru this. It’s like the difference between private and public money is like the difference between fresh water and salt water and there will have to be a brackish level to mediate the two. So what happens there?
Fiat could be sold for private money and vice versa.
MMT, doesn’t ignore the possibility of run amok inflation, but right now, that isn’t really an issue. And the reality of those situations are peculiar to themselves when they happened. That can happen to any group of unscrupulous people, no matter what they call their “ism”..
But really assuming best intentions, the problem with MMT ,is that it assumes a better world through the sovereignty of the gov’t to issue it’s own money.Aside from the wholly separate issue of whether that money would be well spent ,and on what, and to whom,and what parasitical relationship will that engender,and all that.There is the simple fact that the relationship between the federal reserve, and the us gov’t isn’t free.Just like a gov’t engendered healthcare system will create its own systems with preferred clients in a perpetual orbit,the monetary system of this country is run by the wealthy elites who decide the politics,and the business cycles, and the legal frameworks everyone else has to abide by.They do this by sheer momentum.Of their sizable and vast assets.They are getting to be like a black hole where their combined gravity is sucking everything else in .Not even the light of good information is getting out to the earthlings.
What is needed along with Modern monetary theory, is the solid monetary history, like over at the American monetary institute.The history of money, shows, we have all been here before people.The simple questions of what if, show all kinds of things. But they never show we should trust any of the powers that be to administer our money for us.We always get screwed that way.In the light that the current monetary system we have was created by the banking elite to serve them, I think people need to inform themselves of the movements for monetary reform,in the past.Over a century ago, a public monetary system was being debated.Not anymore.Now we have MMT’ers saying we need to just assume the relationship between the fed and the gov’t is peachy, and no one need to look under the hood….there is nothing to see here folks…lets just keep on the “proud” path.
There has been a milestone.
In the 112th congress, dennis Kucinich was able to introduce a bill called “the need act” HR 2990.
The ideals of a “good” modern monetary theory…. coupled with the power of a solid historical context,with the intention of the advancement of a decisive step towards that better society.DAMN the bankers.Let the gov’t create the money.And the banks do banking.
The problem is government-backing for the banks which enables them to front-run and indeed cause the price inflation that is then blamed on direct money creation by government.
Government backing for the banks, including implicit privileges such as the lack of a Postal Savings Service, has to go!
What the Austrians either don’t understand or think is not important is that without a central bank to do this, bank liabilities do not clear at par. We tried doing without a central bank in the US. We were the last major country to develop a central bank. We tried operating a banking system without a central bank and it was a disaster. You never knew how much a bank check would be worth. You didn’t have par clearing but you had bank runs. We had the worse banking crises because we didn’t have a central bank. I obviously am very critical of the Fed, but you have to have a central bank. LRW
Who needs banks? The monetary sovereign ITSELF should provide a risk-free storage and transaction service for its fiat and that service should make NO LOANS and pay no interest.
Let banks be for 100% voluntary depositors and let them be 100% private. And sure, their checks will not clear at par but that’s the way IT SHOULD BE!
Besides, common stock is an ideal endogenous money form – one that shares wealth and power rather than rely on government privilege to steal and concentrate it.
I go with the spirit of this Beard. There are other ways of deciding how we get things done.
There would be other ways – if the banks were not privileged by government.
To think that progress requires oppression of the poor is blasphemy – against God certainly and against sound economic reasoning too.
He who oppresses the poor to make more for himself or who gives to the rich, will only come to poverty. Proverbs 22:16
That applies to nations too. So Wray, do you wish to make the US and the rest of the world poor?
Style note: I like a paraphrase with the cite as a parenthetical better. Lowers the temperature.
Who needs banks [corporations!] creating private currency [equity {errr???}].
Skippy…. are you like the second coming of Mises or what.
The government-backed banking cartel already creates “private” money (credit) and uses it to drive us into debt.
I’m in mo*eration so I refuse to engage you further.
Point being – is – you just concoct your own labels had slap them where ever it suits your agenda i.e. free market silliness. Hence why I point out your Austrian economic [sociopolitical] bent.
Try reading Kelton’s hierarchy of money, your still clinging to debunked thunkit.
The MMT crowd has yet to concede that endogenous money can be shares in equity.
I’d say they are the blind ones, to miss such an obvious point – spiritually blind – and it’s extremely ironic that Progressives hate sharing and equity.
Yves has pointed out, how many times, that equity is at the bottom of the barrel wrt to lawful rights. Maybe that’s why MMT does not give it any thought, that and Legal tender laws. You should probably inform yourself to the latter imo.
skippy… “spiritually blind” cute breado, what you really mean is obey my gawds dicta. When are you going to understand, get it through your thick head that – myself – finds it abhorrent and that your screwing around with language to dress it up only increases disdain towards you. Something about being disingenuous.
Yves has pointed out, how many times, that equity is at the bottom of the barrel wrt to lawful rights. skippy
Yes, but only if a company has any Liabilities. And the government-backed counterfeiting cartel insures that most DO have liabilities because to not borrow is to be outbid by those who do borrow – that “dance to the music” thingy.
And I have no apologies for the “spiritual blindness” remark since my God condemns oppression of the poor and insists on honest dealing while the MMT crowd is intent on saving the government-enabled counterfeiting cartel from itself. That is spiritual blindness indeed.
Your use of “government-enabled counterfeiting cartel” is just sloganeering.
Look the objectivists blew themselves up via deregulation and rational expectations drivel and now need a scape goat. That they now try and forward their agenda [free markets] by their previous failures is just plain old sick twisted stuff. Personally I’m comforted by the fact that your not going to get what you want, tho’ the friction you try to create will only hurt others.
Your canons say a lot of things, quite a lot of horrific stuff too, so whats your point in cherry picking data to support your argument. I can appeal to the sun, tho it does not validate my statement in in anyway shape or form.
skippy…. look if you can’t get human nature right the whole thing is just a joke, that you persist is just a factor of belief, too the detriment of this whole planet [Co2 is plant food et al].
Deregulation will never work unless government privileges are removed too. I said that in the 1980’s with the Savings and Loan scandal.
We’ll see if we move to ethical money creation or towards further centralization ala “666.” In either case, I will have done my duty in opposing systematic oppression of the poor.
Sloganeering or not, it’s true that government privileges for the banks enable them to leverage much more than they would otherwise be able to.
It appears you are behind the times since government privileged endogenous money creation is just one conceptual step from “government-enabled counterfeiting” and Wray knows it; hence his defensiveness.
I really enjoyed this Q&A. I think Wray gets at the real issues better than some of the people who have taken theoretical MMT ideas and tried to gain traction in specific political discourse. But it’s not just high value platinum coins and net deficit spending as savior with which I disagree. I reject the premise that unemployment is the cause, rather than an effect, of our social problems.
Hugh covered above the most important aspects on looting and crap jobs. I would perhaps just add that work in America is even more bleak and authoritarian and destructive of our environment and our humanity than even Hugh presents. We have a fundamental breakdown in management that perhaps economists are just not trained to see?
The third piece I would add as a point of contention is the notion that a government budget isn’t like a household budget. This is a rather bizarre extrapolation of the important observation that a currency issuer can issue infinite currency units. In real terms, in terms of the ability to employ someone else’s labor, government faces exactly the same kinds of constraints as a household. In the short term, deficits are irrelevant. But over time, the debt has real consequences. It matters how the money is spent, whether labor is directed in productive or wasteful ways.
The fourth observation I would make is that there’s considerable talk in here about student debt forgiveness, mortgage foreclosures, and so forth. There’s a very obvious question here that is talked around:
Why do things cost so much?
I like to give these following ideas (first one descriptive, the second prescriptive) some exposure:
1. We are a monetary sovereign (of the people, for the people, by the people).
2. Money creation via the (little) people spending it into existence.
It follows that the (little) people, collectively, can never run out of money, with or without full employment.
Let’s call it OM (the Other MMT).
I find a citizens dividend more appealing than a JG, and prefer bottom up to of trickle down.
I like the idea of debt free fiat and having the Federal Reserve serve as the money printing branch under the Treasury. MMT seems a more incremental approach, tweaking the status quo. Give me more reformist measures.
OM is a bottom up approach.
I know. Just wanted to add my 2 cents.
Thanks.
Good to see like minded people and I would also welcome comments from all.
For example, I would like to know if ‘money creation via the government (which branch, the judicial branch?) spending it into existence’ is something we accept without questioning?
Is there an alternative to that ‘descriptive fact?’
Can we, sir, have another bowl of gruel, slightly less oppressive, like ‘via the little people spending it into existence?’
Yes, there is an alternative. But the alternative – “Money creation via the (little) people spending it into existence.” – is a horrible idea. It is what we have far too much of right now. Money created by little people = debt they owe to big people. Money is debt. Always was, always will be. For if little people can issue as much “money” as they want, set their own units of account, it becomes worthless pretty fast, and nobody, little or big, will accept it.
Instead, give me “the little people” combining together in a democratic state (liberty, equality, fraternity) to issue their money for the little peoples benefit, ultimately backed by the labor of all the little people – the only thing that has ever backed any money. That’s something like what the US had from 1933-1973 or so, or postwar the world round.
That’s something like what the US had from 1933-1973 or so, or postwar the world round.
Except for redlined black people and other non so-called creditworthy.
Colonial scrip in the US was debt free fiat, for one, so you are wrong that money must be debt.
And a citizens’ dividend would be issued with government issued debt free fiat to each citizen. Who said anything about people creating their own units of account.
The “money must be debt” argument has been destroyed since common stock as private money requires no debt and even some fiat can be debt-free if the monetary sovereign never borrows and never runs budget surpluses.
But like a zombie from Hell (it’s likely origin) the “money must be debt” argument refuses to stay dead.
Colonial scrip in the US was debt free fiat, No, it wasn’t, not by the universally understood dictionary meaning of “debt” – the scrip itself, the money itself was the debt. Debt free money is a contradiction in terms and has never existed anywhere, any more than debt-free debt has.
So I take it you see no possibility of the platinum coin style debt free money either? No vision at all, I see.
Wrong. Common stock, shares in Equity, need not have ANY debt associated with it. Or have you never seen a balance sheet?
Also, some essentially debt-free fiat can accumulate in the economy if the monetary sovereign never borrows and never runs budget surpluses and has no central bank to muddle things.
“Money must be debt” reeks of diabolical dogma to me and I’m not exaggerating. You should wonder who you’re serving.
No, I am saying that the phrase “debt-free money” isn’t really speaking English. The platinum coin is a debt. Bonds and currency are one and the same thing – which is debt = credit.
I know what you mean by saying “debt-free money” – just printing/issuing it into existence. Sure I am for that more or less. But the trouble is that people can’t see that is what we do right now. And that issuing bonds is not very meaningful or different one way or another. Such fake “monetary reform” is about as important as changing the pictures on the currency.
All a bond is, is a dollar bill with a date in the future printed on it. This is supposed to make things magically different?
All a bond is, is a dollar bill with a date in the future printed on it.
That pays a risk-free return, i.e. welfare, and not for those who need it most but for those who need it least!
The New York Times disagrees with you:
“Since the Federal Reserve buys coins at face value, this gave the Secretary of the Treasury the power to create debt-free money at will.
To create this debt free money, the Secretary of Treasury must instruct the mint to produce a platinum numismastic coin with, say, a $1 trillion denomination. This coin can then be deposited at the Federal Reserve, and the Fed will credit the account of the U.S. government for the face value of the coin. ”
http://www.nytimes.com/roomfordebate/2013/01/13/proposing-the-unprecedented-to-avoid-default/platinum-coin-would-create-a-trillion-dollar-in-funds
If the NYT said 2+2=5, would that make it true? The phrase “debt-free money”, understood by analyzing it into its parts, is gibberish. The right way, the easy way, the natural way to look at what you & the Times & Beard call “debt-free money” is as a credit-debt relationship. “Debt” for short. This is consistent with the dictionary and good economists and philosophers. The contrary position is like saying 2+2=4, but insisting that 2 is not a number, and should not be called a number – while saying 1,3,4,5,6 … etc are numbers. This makes no sense at all and just means the person saying it isn’t thinking through what he is saying in sufficient detail.
So the best you can do is an ad hom attack and some gobbletygook?
Site me some credible source that describes the platinum coin as debt. If it is debt, why did economists and business analysts endorse it as a way to counter threats by Republicans to force the country into default by refusing to raise the debt limit?
Cal’s “money must be debt” argument is based on double-entry accounting and it even fails there!
Ya see, shares in Equity is the premo money form for the wealthy while the rest of us must sweat to earn the debt-money they create with our own stolen purchasing power – being unwilling to share with those they can fool instead.
What ad hominem? What gobbledygook? My source is any MMT or creditary economics work, or the dictionary. Geoffrey Ingham’s The Nature of Money or Mitchell-Innes papers, printed in the 2004 book on Mitchell-Innes are excellent sources. Money is nothing but negotiable credit/debt. Joe Firestone is the biggest pusher of the coin, and we agree. It is debt, just not debt-subject-to-the-debt-limit. Just as if a bunch of economists agreed that savings bonds were “not debt”, “not bonds” – that would not make it so. They would just be making a crazy and confusing terminological change. The problem is that the crazy terminology is everywhere now.
Its not “crazy” Calgacus, its with intent to forward a political agenda full stop. More Milton type redefining of the Universe.
skippy… at some point you just have to accept certain party’s are impervious to any thing outside their “beliefs”, full stop, even if it kills them [to bad for the others standing to close].
even if it kills them skippy
Like the 50-65 million the banking cartel killed in WW II alone?
“Like the 50-65 million the banking cartel killed in WW II alone?” – beardo
Demonstrably wrong beardo. That you [and posses] need to rewrite history to forward an agenda is some desperate stuff. Everything is Zimbabwe to you, all human history boils down to this cognitive bias, mental optics and filters. No matter what or has occurred it all passes thought this framing and always comes out the same.
skippy…. second coming fear mongers the lot. Reminds me of how the keepers of the writ must of felt when after 1,200 years the banned for – common eyes – writ was made public. Tho’ that had consequences too, then everyone had an opinion, lots of fighting ensued… eh. WWII deaths have nothing on that action.
Lameo skippy! You’re drowning and know it.
From an old comment of mine:
1) Ben Bernanke agrees that the Fed caused the Great Depression:
“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve System. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.” Remarks by Governor Ben S. Bernanke at the Conference to Honor Milton Friedman,University of Chicago, Chicago, Illinois,” federalreserve.gov (2002-11-08) Commenting to Milton Friedman’s public statement that the Great Depression was caused by the Federal Reserve Bank
(from http://en.wikiquote.org/wiki/Ben_Bernanke [bold added])
2) The Great Depression was a major cause of WWII:
“The main causes of World War II were nationalistic tensions, unresolved issues, and resentments resulting from World War I and the interwar period in Europe, in addition to the effects of the Great Depression in the 1930s”. from http://en.wikipedia.org/wiki/Causes_of_World_War_II
Note also that the Fed financed US entry into WWI which led to an unjust Armistice which was another major cause of WWII (“and resentments resulting from World War I and the interwar period in Europe”).
The wiki article on the major cause of WWII has since been amended to blame it all on a single man!!!
And I never mention Zimbabwee except to point out that it is the banking cartel that is the true cause of hyperinflation.
@Calgacus Debt free money is a contradiction in terms and has never existed anywhere, any more than debt-free debt has.
Not ever gold, silver, cigarettes, salt or potatoes?
Money is a means of exchange, store of value, and unit of account. Whether as the good itself, or as the promise of a good or service, i.e. a debt.
Not ever gold, silver, cigarettes, salt or potatoes? Nope, never, not ever. If there were a wedding party and these things were exchanged, would that make them be the marriage? Even if they were part of a dowry or brideprice? No, of course not. Money, finance, credit/debt is not like these “things”, but is a social relation like “marriage”.
Money is a means of exchange, store of value, and unit of account. There is no means/medium of exchange. A crucial point. See Mitchell-Innes and Geoffrey Gardiner’s explication in the M-I book.
Whether as the good itself, or as the promise of a good or service, i.e. a debt. The way I read that, that is not the fundamental meaning of “debt” or “obligation” in any human language. Some MMT fans make it too, and thus make hash out of the theory.
“Credit/Debt” is a 100% abstract relation between 2 persons. Not a “debt for” – which is the combination of a debt and an agreed on “price for” in terms of the debt.
Your response to the quote from the New York Times was ad hominem. I don’t trust them either, but my critical thinking skills help me sort through the propaganda well enough that I can risk reading the NYT.
So glad “we” agree on your gobbledygook. So the coin is debt, just not debt-subject-to-the-debt-limit. That makes perfect sense. To you.
Since the idea of the coin was introduced in 2011, I doubt either of your 2004 references mention anything about it, so I won’t bother digging through them to find support for your contentions.
You might want to read some more recent work on debt free fiat, like Kumhof’s IMF paper or Huber’s criticism of MMT. Or Martin Wolf’s “Strip Private Banks of their Power to Create Money” from yesterday’s Financial Times.
It just gets stranger by the day, people having issues with defining broad money and liquidity effects.
Per the PM theory you will find ‘money’ is quickly changed to ‘deposits’ e.g. hard money.
Next per beardos equity plan the equity becomes nothing more than a free floating loan, yet the issuer the all rights [to claims] of productivity pursuant to that process, which they can just park somewhere at interest.
They are the ones who will be the only guys who can do the term deposits with the money they have already “earned”.
Its all part of the cry “Without what you call “privileges”, banks go away.” trope. Which then just makes the issuers of company script lords over their employees as they issue economic rights, in lieu of government [group rights].
Skippy… everyone you name above is an objectivist, you know that right?
I believe TBTF subsidies and the general corruption of the financial system are irreversible within the current monetary system.
The kind of reform I prefer goes much further than MMT style tweaks and it would be nice if it were considered BEFORE the next meltdown. Of course, with the ongoing success of the Fed’s QE/ZIRP, perhaps the financial markets are now bulletproof! Animal spirits!
What I find strange is how you need to drag Beard into our conversation. Its like you keep trying to change the subject.
Your proposal The Chicago Plan has a massive inception period which more than likely would gut economy’s world wide. Have you folks even consulted social psychology wrt the consequences. Thought out the incoherence of saying I distrust the corporate sectors [+banks] influence on government yet secure the rights of the corporate sector via sole issuance by the government.
skippy… Strike down citizens united [$$$ = votes], remove lobbying [bribes] and then hold an election. Then some sort of Chicago Plan might be worth considering after stabilizing society.
PS. Beardo is just an example reductive logic applied to a complex problem, same goes for the Chicago plan in my view. Hence my lumping them together.
Which then just makes the issuers of company script lords over their employees as they issue economic rights, in lieu of government skippy
You keep ignoring that I also call for:
1) Land reform.
2) The abolition of a lot of private debt via a universal distribution of new fiat.
3) The equal distribution of the common stock of all large corporations.
Radical? Yes, but not nearly so radical as what the Second Coming will entail if we, as a society, don’t repent.
I think our economy NEEDS a certain amount of gutting, which is what real reform is about. Endless growth based on nothing more than “growth is good” isn’t sustainable. QE/ZIRP isn’t working to stimulate the economy in the ways economists thought it would, so maybe they should reexamine some of their assumptions. Credit bubbles don’t provide sustainable economic growth and competitive devaluation often leads currency wars. If globalization means rule by globalists who want us all to become global worker units with one world currency, no thanks. I’d rather see tougher regulation on large corporations and a more laissez faire environment for small business. In any case, another financial crisis will probably call for another round of bailouts to avoid armageddon and the whole corrupt process will repeat as the middle class is eliminated.
One of my biggest problems with MMT is the ballooning debt we are forced to create, the juice on which subsidizes the corrupted financial industry, eating up ever bigger portions of our budget. And despite MMTs insistence that this can never be a problem, there will always be those who perceive it that way and will have an excuse to base public policy on reducing deficits. The Chicago Plan would end such confusion, and is nothing like a Gold Standard. There are no constraints on the amount of debt free fiat that can be created.
Many intelligent economists, starting with Fisher in 1933 and more recently Kumhof at the IMF and others who have read his paper, like Martin Wolf, don’t find The Chicago Plan to be reductive at all.
Have you read ANYTHING on it other than criticism from the MMT crowd?
Martin Wolf is a recovering Randian – gold bug.
Kumhof’s paper – Disclaimer: This Working Paper should not be reported as representing the views of the IMF.
That you find it necessary to pound this paper with the IMF tag and with out the disclaimer is troublesome at best, lacking in good faith imo. Plus as perilously pointed the demand for graphics is a coffin nail from the onset.
Yes I have conferred with others over the Chicago concept, especially people that work in pay systems – accounting for decades.
skippy… BTW whats with the “Many intelligent economists” trope shtick.
So, ad hom again with Wolf. I discuss economics with the Mises folks over at ZH from time to time, and they like that technique too.
And since its only a “working paper” you have no interest in anything that might shake your own status quo.
Oh, and as for the accounting stuff, that happens to be my background. It seems to me the FASB has been more than willing to play ball with financiers regarding fair value, and forget about accounting integrity for multinationals. Too many places to hide the trickery.
What exactly is it that you have problems with, accounting wise, with The Chicago Plan? Maybe I can give you some insight.
Pointing out Wolfs history is not an ad hominem its a statement of factual record, one that points to institutionalized bias.
But I would remind you of your own personal slagging on this thread, persistent comes to mind.
FSAB is beholden to its masters e.g. a political problem and not a monetary one imo. Yet something had to be done to keep the system from blowing sky high, something that took 40 odd years of devolution to spark imo and again was a political issue.
I. E. the Chicago plan – 100% banking, money multiplier, and the faulty models. It would seem incumbent upon you to unpack the need for 100% banking, especially when its not really 100% to start with.
http://www.standardandpoors.com/spf/upload/Ratings_US/Repeat_After_Me_8_14_13.pdf
Did a bunch of criminals blow up the joint, yeah, does that mean we have to completely change the system… no.
Skippy… that this plan has been dusted off after the last implosion of fraud – criminality is just surreal.
For a bit more granularity spooz –
1) It is a total centralization of monetary policy and all banking under one central committee, which would be just as subject to corruption as any other organization, with what I see as very little justification. They don’t cite any credible harm that can be overcome no other way – they are angling for a specific result.
2) It’s explicitly monetarist. Their only concern is the quantity of money, and the centralization above is supposed to achieve complete control over the quantity of money in order to create a measured, methodical increase in the money supply with no market elasticity (private lending would be restricted by time deposit savings). While they pander to the idea that deficit spending is the way to increase the money supply, their clear objective is to hit a quantity of money as a target rather than full employment or anything else.
3) Its 100% reserve restraint is the wrong restraint. Capital constraints, properly implemented, place the underwriting risk on bank shareholders. The proposed reserve constraint places the risk on bank depositors. 4) It introduces a competing use for reserves which puts the payments system at risk. By requiring that reserves back loans, the banks now have to choose between the most profitable possible uses for reserves. Because lending is more profitable than things like ATM cards, which cost banks money, and lending is severely restricted under the plan, it’s foreseeable that banks will stop offering things like debit cards which increase payments system demand on reserves in favor of using them to enable lending.
Skippy… OK now its your turn to refute those points, working with in our present day enviroment and not in some reductive vacuum of supposition.
slagging, huh? I am trying to have a conversation with somebody who would rather throw around ad homs than respond; pot, meet kettle.
1) I am more concerned about the total centralization in the hands of private bankers than I am in hands of a democratically elected government, regardless of its weakness. The private sector has NOBODY to answer for.
The need for 100% reserve banking is to keep the private banking sector from having control of our money supply by endogenously creating money and manipulating the financial markets with their leverage.
2) You accuse the plan of being monetarist. The Federal Reserve’s QE program and inflation targeting are arguably working out worse than monetarism. In any case, under TCP the Federal Reserve would not be doing the usual market interventions to prop up the private banking system. The problem, as with MMT, is in thinking that the financial sector can be indirectly controlled through Fed policy.
3. The bank depositors should have a choice of risk free fiat storage with the fed or postal banks, complete with ATM cards. I don’t see the payment system being at risk, only money in private banks. The private banking system would still be regulated, but risk would not be backed by the government.
“total centralization in the hands of private bankers” – is a false assertion unless you can point out their HQ and the Fed does not count. That congress is uninformed of the facts does not negate them.
The markets did not fail in 08 due to reserve issues, it was plain old criminal fraud. Something reserves would not address in the slightest, see history.
QE is a portfolio swap and yes I do have a problem with the evaluations.
Lastly the government back stops every thing, even your plan is back stopped by the government. So whats your point there.
As far as ” bank depositors should have a choice of risk free fiat storage” your example of India is all I have to say, neoliberal examples are not compelling nor is the competition fixes everything meme.
skippy.. when are your stripe ever going to let go of the free market jingoism.
The Fed is a puppet of the banks who control it.
If fraud were confined to the private banking system, those whose savings were in public bank accounts would not be at risk.
QE propping up of of private banking system did not stimulate the economy, and is suspected by many of driving the increase inequality.
There would be no pressure for the government to bail out the private banking system, and the TBTF subsidy could end under TCP, since the government banks would still provide liquidity.
The US has already had a successful postal savings bank from 1911-1967, so you can quit worrying about India not being a good example.
spooz
What free market jingoism? If anything, allowing the private banking system cowboys to rule the “free market” financial system is one of my biggest issues with status quo. So that stripe is on you.
All this jawboning, when all you had to say is your part of the End the Fed gang.
Hint the Fed is just an institution, what fills that institution is what governs the results. For 40ish years that would be liberalism. Maybe that’s where your ire should be focused, it was the catalyst for all the criminality imo.
skippy… the ideologues are the problem not the institution imo.
skippy… the ideologues are the problem not the institution imo.
Reeks of just kill enough bad people and the “New Soviet Man and Woman” will emerge. How many kulaks did Stalin starve to death in line with that theory?
And careful what you wish for since Malachi 4 envisions something similar. But will you survive or be among the ashes of the arrogant and the evil-doers?
And meanwhile, skippy, you are blind to how a wicked system can trap good people into unnecessary conflict and even murder as the banking cartel did re the Great Depression and WWII and even now via unnecessary, destructive austerity.
Hint the Fed is just an institution, what fills that institution is what governs the results. skippy
Do you even believe that crap?! The Fed creates LEGAL TENDER but not for the general welfare ONLY but to further enrich bank owners and the so-called creditworthy which always includes the rich!
You should be ashamed to defend an INTRINSICALLY evil institution.
“Reeks of just kill enough bad people and the “New Soviet Man and Woman” will emerge. How many kulaks did Stalin starve to death in line with that theory?”
Whats with your bias projection dial always set at commie death camp. Don’t you ever get tired of using that emotive ploy instead of an actual argument.
“Ben Bernanke Great Depression”
“wicked system can trap good people into unnecessary conflict and even murder as the banking cartel”
I thought that little commission caught a bunch a bunch of upstanding Christians and White people engaging in massive fraud, ripping off their own citizens for fun and profit. Did the Fed [the devils play pen] make them do that[?] or was it just that all the screwing around trying to deny the facts of the savagery that lead to so much capital destruction. Only to be somewhat addressed at the 11th hour.
“banking cartel did re the Great Depression and WWII and even now via unnecessary, destructive austerity.”
WWII was a direct result of the political events that instigated WWI [Monarch scrap] which then became a ethnic scrap. The numbers were just a way to keep score.
“You should be ashamed to defend an INTRINSICALLY evil institution.”
“Intrinsically ebvil institution” That’s quite the proclamation beardo, I could just as easily say the same about your institution, just lump you all together for simplicity’s sake. The blind followers and the leaders. 40ish years of neoliberal ideology sure is white washed out of the picture, tho your mob does eat its own.
Skippy… your issue with the rich is hilarious, prosperity – mega churches, free market wealth growth over spiritual growth, free will, self determination, all wrapped up in the knowledge that your beliefs got its start as – a tool of the wealthy – rich – in antiquity, as it validates that condition.
Yes, WWI was a cause of WWII because the Fed financed US entry into WWI broke the stalemate and resulted in Germany’s humiliation.
And I don’t defend Christendom, I defend the Bible or rather let it defend itself.
“Yes, WWI was a cause of WWII because the Fed financed US entry into WWI broke the stalemate and resulted in Germany’s humiliation.”
You have to be kidding… right? You do realize mania is quite myopic, the need to utilize singularization in the binary sense to establish good verses ebvil to everything you see.
Hate to be the one to inform you beardo, but, even with out the FED we still would have gone to war. You seriously need to stop the object fetishes and look long and hard at the ideological precursors.
skippy… the “chosen people” is a good historical example.
Mere implausible conjecture since an inflation tax is unavoidable while persuading voters to pay higher taxes so their sons can get killed or become killers is a very hard sell.
A citizens dividend is more appealing if one is not sure what kind of jobs are going to be provided for us (I don’t necessarily mean that they will be WORSE than current private sector jobs – but if they are equally bad it’s not much of a “better world is possible”).
And is also not sure that we wage slaves are the ones who do or will have much say over the government that provides those jobs (goes to the oligarchy conversation I guess). In fact IF the oligarchs are indeed the main influence on government, oligarchs who in many places in the world employ near slave labor, what makes you think improving general jobs conditions via job guarantees or otherwise is any goal they are at all interested in?
I wonder if we get any of this right. I suspect the oligarch-kleptos have had their time because we could now organise projects and work much better now than in the past. Countries across the world could now be organising work that needs to be done to save the planet in order to break the groaf-jawbs vicious circle and that of the old model of comparative advantage.
It’s easy to create money. The hard part is getting others to accept it. So how does #2 work?
washunate – “The fourth observation I would make is that there’s considerable talk in here about student debt forgiveness, mortgage foreclosures, and so forth. There’s a very obvious question here that is talked around: Why do things cost so much?”
Bingo. Rampant inflation is the cause. Unemployment and deflation are the effects. Nobody likes to talk about how to stop inflation. They don’t seem to mind that (must be all debtors). They only want to talk about how to stop deflation.
Interesting.
I just love the echonomists’ defintion of inflation – totally irrelevant to someone who has lost their job and is now doing a part-time jawb.
From what I have read, if one listens to the word ‘inflation’ repeatedly, it will start sounding like music.
Perhaps like this Beef – https://www.youtube.com/watch?v=8gym81fY460
My plan would start by having decision-makers living on average wages only during office and for the next 10 years. Anyone who won’t take that has dubious ethics.
We could give property to the people living in it and build for those without homes. That we don’t isn’t a matter of economics. It doesn’t suit the “rubber-faced aliens” running the planet not to keep some poor pour encourager les autres. Echonomics is just the language skill they give their overseers to use while they slip klepto-bromide in our tea.
MMT obviously comes to an end when it comes to buying-in resources outside the currency. This is the Mugabe Effect, leaving a few with fleets of Mercedes to keep henchmen and mistresses happy. Lambert probably thinks a village weasel stomp will sort this out. I sort of agree, as Mugabe could easily be mistaken for a weasel. We don’t stomp weasels in civilised countries. We ‘tease’ them (wearing thick gloves), though our local weasel-teaser does it barehanded. ‘No Thumbs Hank’ is a popular local character. And the only person here giving ‘thumbs up’ to MMT. The USA is suspected of doing covert MMT with gunboats, much as Britain once did with gunboats and China White.
The above is a serious point, made in jest, on the nature of “espoused theories” in a world of theories-in-use (Chris Argyris about 1974). Understanding money is just issued (with Moneta’s cautions on what happens next) is not enough. Of course MMT goes further than this. Lord, I can get most students who can mist the mirror to write down 10 salient points on Kelton and Wray. This ain’t where we need to go. It’s Mugabe stupid! I’d guess there are 174 countries around the world “(plus that colony on Europa for the aliens)”. They are all run by Ebagums (think Yorkshire). And we are lackeys to the Ebagum. We write in supplicant-mode on our bellies. The Ebagum laugh all the way to the bank. There is no monetary policy for us, only them. What can we write about monetary policy in the dream of fair government?
C’mon. “ZOMG!!!!! Zimbabwe!!!” has been thoroughly debunked, albeit this comment puts the same point in fancy dress.
You missed the point last time Lambert. It has nothing to do with the vile creature (possibly a good man gone wrong – this was Tutu’s statement when I met him) himself. Getting stuff done with money is a bit like De Sade’s description of the bribing needed to organise a decent orgy. The issues I provoke again are not dealt with. I can argue the case in great detail, but would want to butter some parsnips to put that effort in.
Well, when you have a coherent position worked out, perhaps I’ll be clear on what your point actually is.
One thing I have noticed is how theoretical the whole MMT discussion is. And if you can`t make a point without a citation, you are a know nothing. But as soon as you start to apply it to real life situations, it falls apart. For example, shit jobs will always exist no matter how much one wants to deny this. Furthermore, MMT does not deal with the supply constraints in the short term. It is said that inflation would control it, but how could it, if you can just print some more? Believe it or not, during episodes of hyperinflation, the general population always complains that not enough money is being printed. So if too many projects are going on all at once, and workers are not showing up for the shit jobs, we will end up with even more instability and environmental degeneration.
The reason why we can say MMT is descriptive is because we have, over the last 3-4 decades, essentially broken the rules of checks and balances (which have accelerated the rise in wealth inequality) and MMT proponents want to go even further down that path.
It just seems to me that MMT is one step further in the decline of the American Empire and MMT might be coming whether we like it or not.
I’d rather see stuff debated in this language. I can usually follow the so-called theoretical debate, but frankly it works by excluding the obvious, such as people doing shit jobs, let alone how we will get them done once the ‘paradise machine’ is running.
“Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits.”
Sir Josiah Stamp – then Governor of the BoE and second richest man in the world (1920s).
“The study of money, above all other fields is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple that the mind is repelled” – JK Galbraith (1975)
Even if we produced a decent theory of money, we are likely to be in the same position of someone with the best wordprocessor – but one that doesn’t work on Windows, Google or Linux. And trying to run MMT on 174 Ebagum systems looks impossible to me. The operating system itself is already full of fiddle factors and wiggle room. Look how old the debate is (Stamp, Knapp, Weber – lytric systems). I’d throw in a bit of a study of Mefo bonds in Schacht’s Germany on how money is channelled where it ain’t supposed to go.
There has to be policy on the kleptos and hot money.
Not clear, amid the colorful wording, why MMT is not “a decent theory of money.” And if “there has to be policy on the kleptos and hot money” (sure, why not?) that is exactly the same category error that Hugh falls into. The passive voice (“there has to be”) is extremely revealing. It seems that MMT fails as a theory because nobody (one assumes) has created the policy that you feel should be created. I’d suggest, as an alternative, that you stop slagging MMT and find or create the policy. Organize, as Stoller said in another context.
It’s not slagging dear chap. I write academic papers and include MMT in some lectures. This is hardly a format in which one can get much information over. Not sure on the passive voice. I tend to a lot of first person to avoid feigning what we might call ‘third person polemic’. A psychopath might have other reasons! Theories always rely on something outside, can contain internal inconsistencies (more or less Godel) and logic and consistency can be difficult to maintain at the same time. We are going to find counter-examples. Zimbabwe is surely one – how many of the other 173? We often just strike these out (normalise, re-normalise) but attempt to find out why they are counter-examples and whether a better theory would subsume them. We question whether we have an intact core programme and whether we can continue with it against counter-examples and anomalies. We make complex decisions on approximation in our maths and measurement problematic and what other areas have data and theory our work should fit with. We look at whether our new theory reduces to previous theory and data (reduces is too complex to explain here).
Your slagging says something rather loud to have come from considerations above. I actually assume MMT internally consistent. In science one often finds dozens of theories that seem this way but are wrong and don’t fit what one tries to do by experiment and thinking through. Now MMT has as much chance of working with Mugabe (he was a teacher once) as sending him $100K and a note saying ‘give this to the poor, not a Mercedes salesman’. That’s not the point. Finding out why it won’t work with 174 – x Ebagums would be the start. And in finding out one also has some questions about the theory. It ain’t giving you, say, tensor equations that work everywhere-time in the universe. So what might the Ebagum factors be beyond Mugabe being a shit that rule out periphery MMT?
Another approach is metaphor – just what is MMT and what are its root metaphors? I suggest it may be a program in search of an operating system, but this is one of many suggestions we might come up with, addressing what it ‘is’ rather than root metaphors immanent in its internal structure or drawn in from the outside.
This, of course, is hardly a start. I hope everyone would understand MMT is not a formal system and there are many competitors. This rather leaves us with analysis rather than interpretation – a similar situation to that of probability. Given we know MMT is not Ebagum-proof, we know in principle it is subject to collapse. I’m merely suggesting, hopefully in a provocative way, we look further into this, perhaps engage some parology at the boundary. There are many ways to go from here, perhaps to the best arguments and a viable good practice theory. Perhaps to the conclusion MMT is just chatter by people who have seen we live in a kleptocracy and choose to live on their knees rather than feel the duty to revolution.
Have you seen ‘Night-train to Lisbon’ Lambert? I was there when the Portuguese finally had enough of Salazar. I expect we’d have been on the same side. Sometimes argument collapses to the easy decision of not wanting to live a coward the rest of your life. So tell me how a monetary theory is going to fix the real world, perhaps starting with why one never has?
I don’t know what else you do in your real life. All I can go by is what you write here. If you don’t want that labelled slagging, don’t slag. My dear chap.
Do you really believe you argue anything Lambert? Or have done enough self-analysis to really distinguish between figuring in speech and your own projection? One can only prompt/provoke in the space here. What you should pick up on is how long these “arguments” have been around with very little change and a whole load more. IN this period of a hundred years ask whose hands the policy-making has been in. Indeed any substantial argument in comments seems to disappear.
This pudding has no theme.
Adding… A lot of good minds seem to lose it completely where MMT is concerned. I don’t know why this is.
MMT should be used to euthanize the government-backed banking cartel, not enable it to survive and thrive (at the expense of the poor).
Also, a JG is an insulting substitute for justice. Theft requires restitution, not make-work.
I understand your point on insulting. On the other hand, considering concrete material benefits at the bottom of Maslow’s hierarchy vs. self-actualization at the top, which is it really more righteous to provide?
Since land and income streams were stolen via the government-backed credit cartel, it is simply justice to return them. Then people can find their own meaningful (by definition) work to do – meaningful beyond the low level requirement of avoiding starvation and homelessness.
But paying people to waste their time is not only insulting but demoralizing. Just give em their pay checks and send them home. Better, don’t even require them to show up for “work.”
This is not to say we should not spend generously on infrastructure. But let’s not pay 10,000 people with teaspoons to do the work of a single bulldozer as Milton Friedman quipped to the Red Chinese.
“Paying people to waste their time.” Don’t most of the great religions forbid outright lying? There’s nothing intrinsic in the JG that jobs have to be meaningless, any more than the other Big Lie that keeps getting pushed, that the jobs have to be minimum wage. Enough with the any stick to beat a dog stuff.
Yes to your reply to Beard of course, but the JG must be at the eventual minimum wage. The JG wage sets the true minimum wage. This is not an option. There is no other choice possible for the government. Because the other side of the wage bargain, the people, the workers, always choose “More Money” over “Less Money”.
There is no requirement that JG jobs be at the current minimum wage. All the MMTers say it should be at a living wage, not the current minimum. Hugh and others seem to be unable to see numerous plain statements contrary to their preconceived notions.
Two things are needed:
1) Sufficient income
2) Meaningful work.
Gift people an adequate income and they then can afford to purchase meaningful work, such as getting their teeth fixed.
So where’s the need for a job guarantee? There is none unless you wish to intentionally misallocate resources.
Calvinism without God is particularly revolting. And don’t think you’re doing His will should he happen to exist because He is not a God of cruelty but of justice and mercy.
There is no “Calvinism” in the JG. Just logic.
So where’s the need for a job guarantee? The need is because neither you nor anyone else is God. All the systems you design are going to leave people out. Not give them the money they want, they need, the income they think is adequate – ACCORDING TO THEM, NOT YOU, the omniscient designer. So they are tyrannical – unlike the JG, which is people getting together to decide on the meaningful work they want to do, distributing rewards and responsibilities together. Yes, from the perspective of designers who think themselves omniscient, their allocations perfect, I do “wish to intentionally misallocate resources.” Long live misallocation!
You say people could work for you for free if they “want” to work. That is slavery.
I say that anybody who needs money, needs something purchasable – has every moral, every logical right to “steal” from the designers/imposers of a JG-less system.
And I’m the workerist, puritan work ethic Calvinist?
Are ye daft? I say give people a sufficient income (and land) and then they can afford to work for free DOING WHAT THEY WANT and not what you and LR Wray think they should be doing.
What part of “gift people an adequate income” don’t you get?
And if people want even more income then they can work their land or on it or work for someone else for wages.
Your JG is thus a solution looking for a problem except the real purpose as Wray tacitly admits is to create disciplined wage slaves for the private sector.
No, and you need to read his book, Understanding Modern Money, to see the basis for his reasoning. It is that setting the price of money is inefficient, and if the government is going to intervene in the price of anything, it should be labor, by letting people have jobs if they want to work at a decent wage.
If you bothered to familiarize yourself with the government jobs created in the Great Depression, they were not junk jobs and they also utilized the talents of many people who had special skills, particularly artists:
The government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York’s Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown. It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.
Your presentation of the Job Guarantee is a straw man. If you can’t beat its case on its merits, you need to stop talking about it, period.
I don’t know who you’re taking to Yves but I’ll assume moi.
I’m for GENEROUS infrastructure spending but if you’re going to pay artists to be artists then why not pay anyone who needs an income TO BE THEMSELVES? Huh?
And since the government-backed counterfeiting cartel has systematically looted the population, especially workers, then RESTITUTION is called for, not implicit blame of the victims.
And Wray does blame the victims when he says a purpose of a JG is to create a buffer stock of disciplined workers for the private sector.
Put the policy in place. Who cares what it’s called? IMNSHO, “restitution” would be a hard sell. But if you want to put that frame out there, and people go for it, have at it, say I.
And why weren’t the other 40% hired? Because only make-work was left? Until WWII produced full employment?
And the 1930s were far less automated than today so even more make-work will be necessary such as substituting shovels for bulldozers.
And face it, automation will soon (<40 years) replace most of us and you'll be forced to admit that justice and restitution are what is needed, not the same ole unprincipled Progressive pragmatism that got us in this mess in the first place!
Restitution is exactly what conservatives cannot fight without being hypocrites.
Yes, it would be a hard sell but I don’t have to sell anything; I need merely wait and try to avoid being among the ashes when Justice does arrive. And that later option is becoming more attractive – especially when my comments are deleted.
If meaningful work is not being done now, and much isn’t, it’s because people can’t afford to pay for it! Example: How many people aren’t getting their teeth fixed BECAUSE THEY CAN’T AFFORD IT?!
So just give people the money and new dental jobs will appear and do the MEANINGFUL work of fixing people’s teeth.
Still think I’m using any stick? Besides, I don’t beat animals.
There is something of a rule in taking on bureaucracies. Write them a couple of lines that demand loads of effort on their part and keep it up until you bore/frustrate them into giving up what you want.
Think of something like a critical path analysis of MMT. Real of such might be taking a drug through approval to manufacture, planning a ship or skyscraper build, sending a ship to land on Europa. You’ll use theories in this outside MMT or production planning, quantity surveying, civil engineering or rocket-space-ship technology. And quirky stuff like the only way to get certain needed materials at a viable price involves road transport through a junction of certain dimensions that may mean your ship/scraper build starts with a road-widening. The three-body maths for Europa is done, but I’d guess gravity and radiation issues near Jupiter ain’t.
So do we have anything like this for MMT? What I see is people with vested interests arguing what is easy, not the best arguments. Believers of one kind or another who project, straw man, construe what others say as hostile … and miss what the gadd-fly sting might mean. We could both presumably set and mark a 2000 word essay on ‘critically evaluate MMT’. One submitted to me recently started, ‘I was surprised when my lecturer accepted my idea to bring actor-network theory to bear on this problem and use my engineering experience to relate my critique to the use of theory in the real world’. She had 8 references in this opening line. And she finished with one on ‘enforcers of the party-line’ – http://wer.worldeconomicsassociation.org/papers/how-the-culture-of-economics-stops-economists-from-studying-group-behavior-and-the-development-of-social-cultures/
You don’t seem to grok that the Mugabe observation is to be made sense of rather than slagging or ‘sensible-in-itself’. It’s more like wondering whether you see an electron or a positron going backwards in time. And maybe seeing MMT as a form of data concerning a small bunch of people about a plan to influence billions. The idea is to avoid essentialist approaches to events, planned futures or innovations and to understand the combinations and interactions of elements that make such successful, rather than saying this is “true” and others are “false”. Colourful language is colourful against what (think Derrida or how they do jawbs-groaf as though its sensible)? Moneta couldn’t even quote Cantillon’s Law without it being a speech crime. Hugh, I think, is only wondering on the control mechanisms, and really I’m just wondering on losing them in a ship not protected from Jupiter radiation (i.e. real world factors) we can predict and shield against. And all this in shorthand.
I think, in all this, it would be simpler just to make the point rather than making points about points that might, at some point, be made. If “the idea is to avoid essentialist approaches to events” then it might be useful to relate that idea (whatever it means) to actual comments or the posts. Whatever one might “think” Hugh says, if you only “think” he’s saying that, perhaps it’s not clear. (I believe he is quite clear, and I disagree with him, for reasons stated.)
“[R]eally I’m just wondering on losing them in a ship not protected from Jupiter radiation.” C’mon. Now you’re just toying with us.
I agree, Lambert. I would welcome something more forthright from allcoppedout. You are absolutely right about MMT & plumbing. All MMT is saying, all the JG is – is the observation is that you shouldn’t connect the drinking water to the sewage pipe. While insanestream economics has fuddled entirely empty nonsense into everyone’s ears for years & years – decades and centuries – that catastrophe ensues if common sense and common decency is followed.
allcoppedout: Just what is the Mugabe observation? That governments can cause or be involved in (hyper)inflation? That is well incorporated into MMT thought – not so well in some critics’. For instance, some here suggest a citizens dividend instead of a JG. If this means the BIG of the original academic Basic Income Guarantee – give enough money for a middle class existence, to everyone, adjusted for inflation – then MMTers are perhaps the most prominent critics of this hyperinflationary nonsense that would not fool most children.
I agree that jumping on critics, like Moneta, who I hope will become an MMTer – especially since reading he has a math degree – is deplorable. As for Palley’s critique, it is sad to see a decent economist say what he says.
Proponents of MMT tend to be against mathematical modeling. One reason is that economics has become over-mathematical, pushing it to the frontiers of nonsense. I agree with this sentiment, but refusal to model is not the right response. Indeed, by promoting confusion, refusal to model plays into the hands of those who model to excess. The right answer is to use good judgment so that modeling clarifies but resists mathematical excess. A second reason for MMT opposition to modeling is that proponents do not believe in models. That reason is entirely specious as textual arguments also embed models. However, the assumptions, logic, and implications tend to be less transparent.
In addition to making patently false statements about MMTers dislikes – this article by Wray cites two such modellings for support, Palley’s view of math just ain’t mathematical.
Of course “textual” arguments embody models (or theories, which is generally the better term). But they make things less transparent than when they are compressed (often lossy compression as mathematicians know better than anyone) into mathematical form and notation? No mathematician would say such a thing. I suggest Jack Schwartz’s The Pernicious Influence of Mathematics on Science (1962) – who could not find a better source than Keynes to quote from, for Keynes was a mathematician and got math. MMT wisely follows Keynes, and not the antimathematicians he criticised, so they have not wasted much time on such things. The more “mathy” a piece of purported economics is, the less mathematical it looks like to a mathematician. Mathematicians can tell what is mathematical and what is not – and a thinker can be wrong even about himself, even in the opposite direction from the charlatans of economics. Clifford Truesdell pointed out that Michael Faraday was a mathematician, even though he himself was probably unaware of this fact. I’ve been pointing out the same thing to MMTers.
Thanks, Calgacus. As a poster and an admin I’m always pressed for time, so I’m glad you were able to invest more in this interchange than I was.
then MMTers are perhaps the most prominent critics of this hyperinflationary nonsense that would not fool most children. calgacus
Hyperinflation is driven by unlimited credit creation by the banks since obviously a steady income stream from the government (a BIG, for example) by itself would at most create a steady inflation rate but more likely a one-time increase followed by a declining inflation rate as production caught up to the new demand. But with MMT folks, the government-backed credit cartel is a given that even the monetary sovereign must bow to.
And make-work does not decrease price inflation, it increases price inflation by paying people to waste their time, energy and resources!
you shouldn’t connect the drinking water to the sewage pipe
————–
Maybe we should. And the one doing the connecting should be forced to drink the water. Imagine the innovations that would happen in such a case.
One good reason why I have trouble accepting MMT is because I am not American. It is based on Americans consuming and everyone else stuck protecting themselves form the bond vigilantes…. which includes Canada.
Canada is monetarily sovereign so it can tell the bond vigilantes where to stick it! That is, if you have the guts.
The last time our government went on a binge, our dollar tanked to 63 cents which made our wood products so cheap that the Americans declared we were dumping on tapped on some tariffs t penalize us.
You should have reigned in your banks at the same time to prevent them from front-running the new fiat.
Actually we did. They tried to merge, so they could compete with the global banks, and our Prime Minister stopped them dead in their tracks.
Americans should live outside the US for a few years so they could better appreciate how their policies and way of life impact the ROW.
I should have used the word “hobble” instead of “reigned in.”
It does not matter if I am on board. Something tell me MMT is coming whether we like it or not. Why? Because the first one with the money is the winner… and this would be the US.
The other thing, is that energy is power. No country will reduce its energy consumption unless it is forced to. So the US will keep on cornering the energy and resource markets as along as it can.
Like I said, it’s just the next step in the natural evolution of empires.
Moneta, MMT is here, and has been for a long time. Millennia. You are mistaken about what MMT is. Like many critics you make wild and unsound leaps of logic based on bad monetary theory. They may look obvious – but aren’t. From the right perspective they are obviously wrong. Just go slower & you will understand. Money is not a thing. Money is a social relationship.
Changing the money system without a change in values will not change anything. MMT recommendations are about changing values. The most important recommendation is the JG. People who say they understand MMT and don’t see how necessary, how great the JG is don’t understand MMT & money. The JG makes the obviously true statement to everyone – “your labor is not worthless. You are not shit.” Monetary economies without a JG or equivalent are insane. Based on absurd lie, based on valuing people at nothing.
MMT is NOT about changing the money system, but understanding how the one we have works. Positive money, “debt-free” money, Chicago plan, AMI, is about half-baked, cosmetic or pointless changes to monetary systems. The major MMT monetary system change is just to make banking more honest and boring. Printing money – sure – but who cares? – we print money right now. We print bonds too.
One good reason why I have trouble accepting MMT is because I am not American. It is based on Americans consuming and everyone else stuck protecting themselves form the bond vigilantes…. which includes Canada.
MMT has absolutely nothing to do with the USA or favoring the USA over other nations. Bond vigilantes don’t exist. One of the worst evil things that the USA does is propagate preposterous anti-MMT “economics”.
Every sovereign state has the right to print its own money, its own bonds. There is no need to become indebted in foreign currencies – there is a need not to. The first recipients of the Canadian money will be of course Canadians. All that Canada has to do to get low inflation, full employment, broad prosperity is to decide to. The whole world, including Canada, did it for three decades after 1945. Just by deciding to. And not listening to “economics” which makes no sense.
Every country benefits from other countries adopting the common sense MMT = Functional Finance recommendations. Modern economies are almost always demand-constrained. Canada benefits from US using Functional Finance & vice versa.Many people used to understand this. IMHO, the best thing to read on international economics is still the end of Abba Lerner’s 1951 Economics of Employment.
So why would one show up to clean toilets and change diapers if money could just be printed out of thin air? Money is printed out of thin air. That is how it works now. That is how it has always worked. Has nothing to do with cleaning toilets and changing diapers. It’s like asking “If wheels are round, who will clean the toilets?”
If they have to do that shit job to get that cheque, it means that some group would be getting a free lunch and someone cleaning up after it. A good society has everybody getting a free lunch some times, and cleaning up at other times. Should infants change their own diapers?
Because the first one with the money is the winner… and this would be the US.
That depends on how much people want to save in US dollars. While in the postwar era the US was the least “Keynesian” major country, allowing the highest unemployment levels, in the Great Stagnation era since the 70s-80s, it has been about the most Keynesian, deciding to have lower unemployment than Europe. Accumulating the currency of a less suicidal country is not a crazy idea.
The point is, there are no losers when some country decides to stop sabotaging its own society. Canada is better off when the US has full employment. Sure, some will win more than others. Why is it wrong for the initial winners to be the ones who are left out? The poor, the homeless, the unemployed?
When I was in grade 4, this guy in my class kept on stealing my pencils. They were pink and purple with my name on them. Yet he kept on denying they were not his.
Right now, I feel the same frustration which just brought back this memory from long time ago.
Just how is the USA stealing Canada’s pencils (or money)? When did the US Army cross the border after 1812? You can come up with metaphors, but do they fit?
Money is not pencils. Nobody prints Canadian money, causes Canadian unemployment, creates Canadian inflation, determines Canadian interest rates, but Canada itself. Back when you were getting your pencils stolen, there were people in high places in Canada and elsewhere who understood this. That’s why there was postwar prosperity.
Did the kid hypnotize you into thinking that if you held your breath until you were blue, you would magically get pencils, toys, magical strength and money? That is the parallel to the beliefs and actions of Canada and everywhere else in the last 4 decades.
:-)
He would not give them back but it was obvious they were mine. And my schoolmates just looked as if nothing was going on. I had to wait until he took one out during class to get up and walk over to his desk and grab it… to my teacher’s surprise.
The whole situation was absurd like this whole debate. IMO, I guess.
It’s not worth the waste of breathe, but this was posted by Stephanie Kelton (though written by someone else). http://neweconomicperspectives.org/2012/05/the-semantic-problem-with-mmt-an-exercise-in-framing.html
“I just woke up in the middle of night (3:30 AM) realizing that my wife’s sudden anger explains a lot of mysterious things, and poses a special problem that MMT has to figure out how to solve. The mystery it explains is why the mainstream media and politicians insist on believing and behaving as if tax dollars pay for federal expenditures—and why, as a result, mainstream economists and pundits (who actually have an inkling about how the money system works) are so tied up in knots trying to explain the economy to us. It appears we are ALL engaged in a massive cultural self-deception. The deception “explains” and gives meaning to something we’re required to do every month that’s very painful: pay taxes. The story we’re telling ourselves to alleviate this psychological pain —that our taxes pay for federal spending—is rooted in what I have referred to as Neandertal (or gold-standard) Economics”
The turn here is similar to that in probability analysis when we consider the subjective. It’s obvious from this piece and 150 comments that MMT itself is neither censoring framing debate, nor as functionalist in argument.
When you write:
I understand neither the literal meaning of your words and cannot guess the implications of what you say. “[A]s functionalist in argument” as what? What “turn”? And so forth. Adding after minor tinkering … Please clarify.
* * * Crickets. * * * Can’t imagine why.
Didn’t have time to write a short comment, so I wrote a shorter one.
Is that an example of dog poetry? Or was it a late night at the pub before typing?
Or both! :-)
Or, perhaps an experiment in post-Modernist narrative construction for academic publication in a journal of critical cultural studies — if they still publish that sort of thing. I don’t know if people have been beaten up enough yet or not. LOL.
I travelled rather well on that meal-ticket Craazy. There was a brief flash of time when a few of us thought we might make some political sense from language analysis – a ‘moment’ in the lingo. In the drift of time, conferences ceased to be held in ‘Sunderland’ with the real debate over a few beers, to schemes that started in Athens (away from the smog) and broke to a week’s sailing (as workgroups of course) to a beach hotel in Turkey for ‘part two’. Some of the journals are well into the surreal. Alan Sokal’s hoax with Social Text is worth a look.
Calgacus has an awful lot right. Students are often entirely frustrated by literature with which one seems to be able to support anything (and thus nothing except rhetoric skills). The brighter ones notice in post-Modernism, that if it was real, a consequence of the legitimation crisis would be the question ‘so how come we still submit papers to you for marking Boss’? And with Gramsci they notice ‘hegemony explains everything’ and that there are many intellectual traditions in which to play the game, all of which have some core academic narrative one must stick to. The argument issues in this go back at least to Sextus Empiricus. You can usually make equally powerful yet conflicting argument on almost anything.
Key pedagogic issues in this are the tolerance of ambiguity and lust for the rush to knowledge and “clarity”. Flowery language plays a role, because we always find a mobile army of metaphors and need to recognise such in the cool language of control, which always contains desire.
So one must be clear on Mugabe? One might ask ‘why me’? If we turn his name round to Ebagum (a Yorkshire term of ironic surprise when confronted with the bleeding obvious) and start to recognise that discourse relies (always) on far more than any single person’s meaning. Why would any theory need to defend itself against Ebagum? We are hardly likely to parcel up our beloved MMT and hand it to Mugabe, saying ‘apply that and save Zimbabwe’ – though “we” have form for packaging Chicago school monetarism and handing that over to the equally spurious looter Pinochet (plus air strikes, CIA and overthrowing an elected government, killing off economic dissent).
Now where does anyone get the notion MMT fails because it can’t just be handed over to Mugabe and save Zimbabwe? Or whatever other projections fly around that I may be dumb enough to think the ‘Ebagum test’ is a theory-killer? Do you not know, that in science, we do a lot of testing to establish what kind of theory we have? Much of such testing is by thought experiment on whether we have the right definition of the problematic at all – much to prevent us thinking the of the systems in front of us conform to common sense experience,
So think how you are going to convince me MMT is a good theory. Send me to the journals, all peer reviewed? Well, I do that for a living and have never found a satisfactory solution or even much decent information over more than 20 years. And remember, echo-nomics has been dominated by clown theories for years. Are the heterodox free of whatever ‘disease’ caused the neo-classical farce? Calgacus quickly (and rightly) jumps on Palley, but I chose him from 100s to exemplify the eristic strand of much of the so-called peer reviewed debate. How right is the excellent statement, “While insanestream economics has fuddled entirely empty nonsense into everyone’s ears for years & years – decades and centuries – that catastrophe ensues if common sense and common decency is followed.”
Well it’s pretty common sense and common decency to recognise handing over our ‘MMT disk’ to Mugabe just condemns his people and others in Africa to squalor and death. So who would leap to stuff on hyper-inflation from this other than blinkered echo-nomists – or blinkered MMT bible carriers (most in the club are not this).
Mugabe type issues are political in nature in the first order of events, not monetary, so if you can’t expand your optics to include all the data its a self inflicted wound. Can you unpack the events from the political precursor, the stuff that happened which lead up to your pet data point or just point at the one that best forwards your opinion.
That you deploy mobius strip thought projection to fog the facts – is quite the rhetorical ploy.
Indeed Skippy. I’m up late marking scripts ‘cos me best mate is sick, and dwabbling in the odd blog for relief. Been at it nearly a week as said mate had hidden crates of unmarked papers in his garage before getting hauled off in the big yellow taxi. Bit rusty on strategic management and need brain fog to turn pages.
1. Moneta’s made a key point on who gets first use. This is no standard koala and defo in the actor-network ‘agency’ platypus divining level of the inter-subjective power pond.
2. What can we detect by absence and response? Well it’s pretty obvious most in here know little sociology or social psychology, or much about argument as a subject-in-itself. Lambert seems to think he knows and can direct me to do it. These kinda things are important i dealing with inter-subjective pond life – the platypus has a sixth sense, but we mere humans need a theory to construe in.
3. Not wanting to get to Jupiter environs before discovering lack of insulation from the dirty old (new) world. I’ve seen economists close up and wouldn’t trust them to fix the brakes on my bike. So where is their working computer simulation? To be agile in actually controlling printing you’re going to need a robust computer system. Standing and contingency plans …
4. Do we need any of this at all? One minute we cite a learned article, then next find its counter and make declarations on crapness (yet with what knowledge do we detect this) – on weight of such worthiness in vanity publishing the non-MMT people are still winning. A lot of equations I’d regard as irrelevant are intercoursed and none of them concern the inter-subjective actor-network pond of real people down in the hole. Do we need these economists at all? Any of them? I’d need rocket scientists to land on Europa Do we need these lubbers to work out we can just print money?
I don’t know Skippy – I sense some club bullies I guess and a for the new technology needed, no one seems to know. Just hitting the coffee curve before the last 20 scripts and a day in the pub.
Can you unpack the events from the political precursor, the stuff that happened which lead up to your pet data point or just point at the one that best forwards your opinion.
Yes or No
skippy… the over blown deflection with the one salient point sociology or social psychology [source required to establish origin of inquire] is nothing more than obfuscation.
“This is no standard koala and defo in the actor-network ‘agency’ platypus divining level of the inter-subjective power pond.”
Stylish, I grant. Although I prefer Ulysses to Finnegan’s Wake. Perhaps it’s just me.
Now you’re getting to the important margins. For what might be scribbled there that changes a whole slice of the learning continuum? Banger should have ridden in by now under flag of all economics being politics, to lift this siege of poor Mugabe. I had a pair of kangaroo mittens once and thus may have known Skippy’s forebears. In Ulysses I would have been hand in glove with his mother.
I doubt any of us would have any difficulty filling in the missing letters t**t on a hangman board with the clue Mugabe. For those struggling think the first two letters of a five letter word for corporation pop. Last script marked here, so I lack motivation to continue. I remain interested in why you should have trouble seeing your own obvious mistakes. Didn’t Wittgenstein tell us the circularity of language was therapy? Soon the fuggy muggy of the welcome behind the pub door and what a laugh radical humanist mates crying in their beer over you functionalist wastrels there will be. ‘Did they ever get to the point’, me mate Cornelius Stitt will ask, waving the poker at the red bit of the fire? I’ll sigh and take another pint, offered in sympathy for spending me time in uneducated company. ‘What was it they couldn’t realise of themselves’, me marra Drew will query? ‘Why everything’, Cornelius will crop in, ‘That’s obvious for sure’.
There is more on Ebagum beyond the tar-baby thrown to those who rush to knowledge. He was not unlike Hugh in view as a younger man before the plate cracked. Where is the ethnomethodology of the system of MMT production? How is it indexed? ‘Politics’, the ghost of my dead friend John Hughes will ask? ‘Do they not do soft systems analysis’? You see, if John and I were designing a money system we would not assume:
1. one size fits all
2. that we should design the system without equal access
3. that the technology could run isolated from its socially constructed environment
4. that this socially constructed environment would be uniform across the planet
5. that white guys are necessarily different from Mugabe
6. that leakages from money systems are not subject to Ebagum (hidden Mugabe) everywhere
7. that economists (or us) have any more right to design the system than people working in it or should benefit from it equally
8. that it would be a good idea to implement a system people had not had a chance to understand and review or clearly misunderstood
The list goes on a lot. Depends on what you mean by politics Skippy. To some of us its just routine systems analysis and part of the technology. The famous paper on this was by Habermas in 1970. ‘Technology is the ideology’ or somesuch. In short, with thanks for putting up with the tour, I suspect MMT and heterodox economics are by no means as pluralistic as they think and inadequately open to the world of the ordinary girl and her bloke. Genuine thanks for ‘being there’ through the script marking.
“routine systems analysis and part of the technology” a la Jürgen Habermas
Well that explains a lot wrt rationalization, as falsely assumed progress, negative and dehumanizing effects on society. All the out put conjured through Kant and Weber until the world bends to McDonaldization and Rationalized education. Then we have his students like Hans-Hermann Hoppe [anarcho capitalist – Survival of the Fittest Spencer badge]
and Hans Joas
[Pragmatists contend that most philosophical topics—such as the nature of knowledge, language, concepts, meaning, belief, and science—are all best viewed in terms of their practical uses and successes rather than in terms of representative accuracy]
Jürgen had a unfortunate childhood, seemingly a common thread with philosophers of this bent. Maybe that’s what happens when your living in Kant’s and Calvin’s reality.
Wittgenstein’s formative years is another classic example of what societal environment factors can produce, beating kids for bad math.
Its extraordinary the lengths of verbiage you go to…. just to hide the little ex nihilio axiom nugget buried under all of it… self determination at the cost of others… just to feel good about yourselves.
Skippy…. no thanks… you can have your philosophy cranked out by abused individuals, which in turn institutionalize it as some quasi religious cult, dressed up as academic intellectualism. Our species has been playing that game for a long time imo. I’ll stick to social psychology, biology, forensic anthro and neuroscience… too – seek -reality. The mystics can go F#@K themselves.
The mystics can go F#@K themselves. skippy
Oh yeah, “Thou shall not steal” is sooo mystical. Like wow, man!
You won’t be condemned for having a sound mind or using it but indifference to injustice is another matter.
Come on Skip – “extraordinary verbiage” – have you read Habermas? He’s an agony mate, perhaps because he was sent off to die at 15 in the Hitler Youth, The fact remains, in the teasing, that we may be being had by MMT and not realise there are many other approaches to monetary theory not constrained by general functionalist language and elite-arse-licking echo-nomics. And if you really want more science-like social science as you claim, give me one example of such use in MMT. I was dragged up in joint honours biology-chemistry and became a cop for life experience. Still (partly) do the academic thing, but resigned over fees (its immoral to live on the back of this debt).
And think about the academy that supports Habermas, Lyotard, Derrida (and there are many worse), all with their little claques. Are you so sure MMT is any different? Has the look of a book-puffing ring for sure. And a smiling brotherhood who take critique as a spit in the eye.
As for the mystics mate, I can hardly see you or I thinking they have a shag left in them. Ever done a policy implementation? I screwed a few of them past half-baked action plans. MMT looks less than half-baked.