Please extend a warm welcome to Lynn Fries, a former producer for The Real News Network whose beat was global political economy. She’s produced an independent segment under her banner, GPEnewsdocs, which she is graciously allowing Naked Capitalism to release first, which is an exciting development. Please share this interview and give her helpful feedback.
I hope you will enjoy this discussion of the much-debated question of “How to pay for a Green New Deal”. We’ve embedded Lynn’s talk with political economist Ann Pettifor, whose latest book is The Case for a Green New Deal. We’ve had the pleasure of meeting Ann a few times at economics conferences, so it’s particularly gratifying to present her views here.
Readers here are so well schooled in MMT that they may find Ann’s tip-toeing into it via simply dismissing the loanable funds theory (that lending and investment come only from existing savings) and explaining that banks create spending out of thin air too cautious a formulation for their taste. But the Green New Deal is a hot topic, and most people have heard only the orthodox deficit scold story about government spending. So Ann may regard this as the most parsimonious way to make her case without getting into a long-winded tutorial on how currency issuers can net spend with their constraint being real resources (which means how they spend matters too).
RICHARD KOZUL-WRIGHT: The first question that we tend to get asked when presenting this is: This is all really very nice but we don’t have the money. Where’s the money? We don’t have the money.” It’s a funny argument given that we’ve spent twenty trillion dollars saving banks, which was more or less what we’ve done over the last 10 years. Twenty trillion dollars is at least the increase in central bank asset sheets. The idea that we don’t have the money just doesn’t ring true when you are trying to save the planet.
LYNN FRIES: It’s Global Political Economy newsdocs. I’m Lynn Fries. That clip was from a debate on how to finance a global green new deal at the Trade & Development Board Meeting at the United Nations, Geneva. The occasion was the presentation of the 2019 Trade and Development Report – Financing a Global Green New Deal. The clip featured at the open was of Richard Kozul-Wright, UNCTAD’s Chief Economist and lead author of the report.
On this occasion, at the invitation of UNCTAD, Ann Pettifor author of The Case for the Green New Deal was a key speaker. Ann Pettifor is the Director of PRIME, Policy Research in Macroeconomics and Research Fellow at City University, London. This newsdoc features the address presented by Ann Pettifor. We go now to the UN Geneva and our featured clips.
ANN PETTIFOR: For me what’s really important is we ought to understand the way the international financial system operates. I think there is limited understanding especially amongst economists who are predominantly micro-economists who are mainly concerned with the activities of the individual and the firm and not macroeconomists looking at the world in aggregate. Rana Foroohar is a columnist on the Financial Times and she’s written that: “To fix things we need to first tell ourselves the correct story of how we got here. Financialization is the least studied and least explored reason behind our inability to create shared prosperity – despite our [for example, Britain and the United States and others] being the richest and most successful nation(s) in history”.
And Gordon Brown recently complained that: “We are in a leadership world”. This point about the failure of multilateralism, the absence of international policy coordination, is a result of not having good leadership across the world. He argued that: “The cooperation that was seen in 2008 would not be possible in a post-2018 world both in terms of central banks and governments working together”. Now I want to dispute that because there was coordinated leadership between 2009 – 2018 but the coordinated leadership was by central banks whose purpose was to bail out the private finance sector not the world, right. So we have had leadership but it has not been for the rest of us. It’s been for the private finance sector.
This year, we reminded ourselves that it was a hundred years since the World War I declaration of armistice, the end of World War I. And when world leaders gathered in Paris to remember 100 years ago the Peace Treaty was being signed in the Hall of Mirrors in Versailles, France. John Maynard Keynes was there in 1919. It was chaos not just in France, of course, but across Europe. And it was clear to him that the leaders were not interested in helping Europe to recover. He also understood money as a social technology rather than the ‘real exchange’ based on barter. In the words of Joseph Schumpeter, money is nothing more than a promise to pay. That’s all it is. It’s a social construct and the way in which we manage it is managed as a part of social technology.
So the problem that Europe faced a hundred years ago was that the Germans owed the British money but had no capacity to pay, nor capital to invest in reconstruction of those assets that would generate income and enable the country to pay. The British owed the Americans money but they had not capacity to pay unless the Germans paid – which they could not. So Keynes came up with a revolutionary plan. German would issue bonds up to one billion pounds roughly. They would pay interest on that of about 4% and there would be a sinking fund to retire debt by 1925. Seventy percent of the money raised would go back to the creditors as reparations and 30% would be used for reconstruction. But they key point about these bonds was that they were going to be guaranteed by Allied governments, by governments. Germany would promise to pay and Britain, the United States, France would stand behind that promise, would guarantee that promise. That would give the promise value. That would make the German bonds a valuable asset. So the bonds would have priority over all other German obligations. And enemy nations would guarantee them jointly and severally. And the League of Nations would impose a penalty if Germany foreclosed or defaulted.
So Keynes took his plan first of all to Lloyd George and to his surprise both the British Treasury and Lloyd George supported it and so did the French. And then he took it to President Wilson of the United States of America. President Wilson overturned his [Keynes’s] proposal immediately. A letter came back straight away and said: This is not possible. There is a historian, an economic historian, Eric Rauchway who can now reveal that the letter wasn’t written by President Wilson. And this was not known until quite recently, until Rauchway uncovered Wilson’s correspondence. The letter was written by this man, Thomas Lamont, Chief Executive of J.P. Morgan, who was an adviser to Wilson and who wrote the letter. So he argued that it was important for the finance for Germany to go through the “usual private channels”. So when he argued that, it was the usual private channels arguing that money should go through the “usual private channels”, right. In other words, he wanted Germany’s recovery to be financed by Wall Street not by the coordination of Allied governments.
So as a result, Keynes’s Plan which was for a redesign of the international financial architecture away from the gold standard, departing from the gold standard – and private authority over the financial system; in other words, then under the gold standard the international financial system was governed by Wall Street and by the City of London. And his revolutionary plan was to say no: Let’s reconstruct the international financial system so that it would be governed by public authority. It would be public authority that would guarantee the German loan. And this is the proposal that Wilson destroyed in his letter. Said no, the United States couldn’t back this. Instead Germany should rely on Wall Street.
The gold standard was: “A fantastic machinery of global self-regulation by international bankers and financiers…” The chaos was then caused by the restoration of the gold standard. The consequence of that was: We had passing of monetary hegemony to the United States; There was austerity between 1919-29; Central banks were made independent of political authority; Capital markets were liberalized; Money was expensive; Real high interest rates were charged by Wall Street and the City of London; And the UK’s colossal war loan of 2 billion pounds was issued at 5% which at the time was very high in real terms. That led to mass employment, deflation, industrial unrest in the ‘20s & ‘30s. The US depression of 1920-21 which many people overlook; the United States needed Europe to be able to trade. The United States needed Europe to recover but the bankers had undermined Europe’s recovery and that caused a depression in the United States between ’20 & 1921. Then there was in Britain the 1926 general strike. And then there was the roaring ‘20s; a massive credit inflation of debt which in 1929 deflated dramatically leading to the Great Depression of 1931. And with all that came the rise of fascism and another catastrophic world war. This was the consequence of leaving the international financial system to be governed by the private sector and by private authority and not by public authority.
The good news is that in 1933 Franklyn Roosevelt is elected as President. And he’s a monetary radical but in some senses is a fiscal conservative. He understood Keynes’s message of 1919. He understood the gold standard because he was governor of the state of New York house of cards collapsed in 1929. He watched as over 5000 American banks failed, an average of 100,000 jobs vanished each week and almost 25% of the American workforce was unemployed by the end of his governorship in 1932. So he lived through the crisis caused by a massive inflation of credit and then the debt deflation. So in his inaugural speech he talks about the: “Practices of the unscrupulous money changers [who] stand indicted in the court of public opinion, rejected [he said] by the hearts and minds of men [and women]…Faced failure of credit they have proposed only the lending of more money…The money changers [he argued] have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths”. This is his inaugural speech on the Saturday afternoon. On the Saturday night, he began the process of dismantling the gold standard. He said to his staff all the banks have to hand over their gold back to the US Treasury: We are not on the gold standard anymore. I want them to hand over their gold tomorrow. And they said: You can’t do it because it’s a Sunday. It’s a holy day. He said: Fine. We are closing the banks on Monday. On Monday the banks have to hand over their gold. From now on, the health of the US currency is going to be determined by the health of the US economy not by Wall Street financiers basing it on limited amounts of gold in the vault of banks. And then immediately began to alter, change the currency, the value of the currency and improve prices for the United States’ agricultural sector. So he began this process of ending what Keynes had called a barbaric relic; the private authority over the global financial system by private banks that was the globalized financial system.
So his actions are often interpreted as ‘fixing the banks’. But he did far more. By dismantling the gold standard he transformed the international financial system. And it was system change that enabled him to ‘fix the banks’. But more importantly the United States was facing an ecological crisis; it was called the dust bowl. They had a big crisis in the Southern states where they had eroded the soil. They had over-farmed the soil. People were migrating in thousands away from the South. It was a massive problem. Under Roosevelt the finance was raised to plant 3 billion trees and restore the health of large sections of the United States. Now there is a lot that’s wrong about the New Deal but it was a green New Deal because it addressed an ecological crisis as we are today addressing a much bigger one. And he was only able to do that because the international finance sector had been subordinated to the authority of elected democratic governments and his government, first of all. Subsequently other governments followed and the gold standard collapsed in 1933. And then began a process of recovery and prosperity until unfortunately the war broke out. The reason I tell you this story is that it is so relevant to where we are today. Roosevelt achieved the restoration of public authority over the international financial system. That success had evaded Keynes in 1919. And so, we had twenty years of chaos as a result. So then we get in 1945, the Bretton Woods system which is not exactly what Keynes wanted. It’s far from what he wanted but it’s a beginning of a process which restores recovery.
This is a fantastic chart of private debt from 1740 onwards. And you can see how private debt in the 1920s, that spike just before the Great Depression…how the private authority over the financial system inflates credit massively until it peaks in 1929 and implodes and deflates and comes down. And then we see a period between 1940 and 1960 where the Bretton Woods system is introduced and there is public authority over the international financial system and the debt levels stay low. The gradually the bankers chip away at the system. They chip away and they try and break it up and they eventually and they eventually succeed and we see credit inflating massively once again until 2007-09. What we have seen now as a result of this private authority of the global financial system is volatile capital flows, illicit financial flows, phantom FDI [Foreign Direct Investment], international corporate tax [regimes] outdated and the rise of the digital economy and so on. But mainly we see this dramatic and so on. But mainly we see this dramatic number of phantom FDI.
We have to remember what Alan Greenspan told us. And he spoke the truth in 2005 when he said: “Thanks to globalization: Policy decisions in the US have been largely replaced by global market forces. National security aside it hardly makes any difference who will be the next President. The world is governed by market forces”. And that is the truth. The government of our international financial system is by something called the ‘invisible hand’; unaccountable invisible hand which is causing chaos as it did then. And as it did in the 1920s & ‘30s is leading to political insurgencies and the rise, let’s be frank about this, of a form of fascism in some countries. It’s a threat that arises from the economic failures of the globalized system which has led to political uprisings. He argued: “Let ideas be international, goods homespun, but above all, let finance be national”.
And that is a message I think we have to take if we want to know how to finance the Green New Deal. Now I want to argue that financing the Green New Deal is utterly affordable. We’ve been told that it would cost about 90 trillion dollars according to the Global Commission on the Economy and Climate or about 8.2 trillion dollars p.a. over 11 years. There are only two sources of finance. The first is credit, the promise to pay. When you spend on your credit card, there is no money in your credit card account. You haven’t put your savings in the credit card account. You are promising to pay. You take your credit card and spend and then use income to repay. That’s the magic of the credit system. That’s the power of it and why it’s so important that it should be managed. Savings are a consequence of credit, of the ability to raise finance, to spend it, especially in employment. We all know from our own experience that if you get a job, you get income at the end of the month. Employment creates income. Not just for the employee but also for the government because people who are employed pay taxes both VAT both also income taxes. That goes back to the government as revenue to pay for the credit. That’s how the system is supposed to work if it is to be balanced but unfortunately what we have the moment is a massive inflation of credit but it is not invested in employment for the creation of income and the repayment of the debt. And so we have massive imbalances in the global economy but also in domestic economies.
So the great thing about a monetary economy, the great strength of it is that we do not need savings. It is not necessary to go with a tin and ask for somebody’s savings in a monetary economy. That’s why a monetary economy is such a civilizational advance. What we need is credit- the promise to pay and we need that credit to be backed up by guarantees. In the case of rich countries, it’s backed up by…in my country Britain it’s backed up by 30 million taxpayers. In the United States it’s backed up by 140 million taxpayers, people who are employed and pay their taxes. In poor countries we need more people to be employed in order to provide the tax revenues which provide the guarantee for a monetary system. So society is no longer dependent on those with savings or surpluses for finance or credit. Those with accumulated capital, they are no longer the sole providers of finance in a monetary economy. Credit creates savings. Spending generates income. Part of income generated is used to repay debt and keep the credit system in balance but only of spending generates employment and with it income.
So we’ve seen, as Richard has said, central bank balance sheets expand massively. I thought it was $13 trillion, he said it’s $20 trillion. These are numbers beyond our comprehension. But we know that governments have got savings. We know that pension funds have got $40 trillion in savings. That asset management funds globally have $87 trillion in savings. And according to the Financial Stability Board in 2019, global financial assets – any they may be savings but they may also be phantom – amount to something like $377 trillion. So, the idea that there is no money for a Green New Deal is utterly ludicrous. We know the shadow banking system has a $185 trillion. And that also National Development Banks have access to savings and that there are other savings institutions.
So there is no argument about how we can finance the Green New Deal. The argument must be what are we going to spend it on? How are we going to be it a labor intensive transformation? How are we going to substitute labor for carbon? Because we can’t burn carbon, we are going to have to in Britain grow our own green beans. We won’t be able to import them from Kenya in the future. But we are going to have to be more self-sufficient but it’s going to have to be labor intensive. It’s going to have to be an employment rich economy, a green economy. And in that sense, I think the Green New Deal offers a great deal of hope to the people of low income countries because it promises a transformation which will bring greater prosperity to millions of people not just to the few. Thank you very much.
LYNN FRIES: We have to leave it there. Thank you for watching and for your interest in this segment of GPEnewsdocs coming to you from Geneva, Switzerland.
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“And Gordon Brown recently complained that: “We are in a leadership world”. This point about the failure of multilateralism, the absence of international policy coordination, is a result of not having good leadership across the world.”
2008 – “Oh dear, the global economy just blew up”
2019 – “Oh blimey, nothing is really fixed and the central banks can’t normalise interest rates”
You can’t find a leader, when no one actually knows what they are doing.
2008 was the wakeup call our policymakers and experts slept though.
Thanks for this, a very lucid overview. I hadn’t known the story about Keynes proposals for war debt. There seems few problems in the worlds economy where a solution can’t be found by reading some Keynes.
The issue of ‘gently’ introducing people to the idea that sovereign governments don’t need to tax or ‘borrow’ to fund such vital spending is very difficult – I find myself throwing it in randomly in conversations where it seems relevant to see the reaction. Its probably my poor explanatory skills, but it can be extremely difficult to fight against the ‘common sense’ of the household balance model for governments.
I agree it is extremely difficult. It is deeply embedded in our psyches that the false commodities that Marx identified – land, labour and money – are real, that any argument to the contrary is met with a look of incredulity. That old saw ‘ money doesn’t grow on trees ‘ was dinned into us by our parents, and their parents before them . Like you PK I try to slip it in to conversations from time to time that the truth is even simpler than that and have never once had anyone so much as voice the possibility that what I am saying might be true. Even my stumper ‘ so where do you think that the money comes from in the first place to pay the taxes that you think pay for this or that blah, blah…….’ fails and we move on to a ‘ what we did on our holidays ‘ type of subject. But I keep trying……..
I remember at around 12 years old an adult (it might have been a teacher, I can’t quite remember) saying to me ‘money doesn’t grow on trees, you know’ and I said ‘but money is made from paper, isn’t it’. ‘yes of course, was the reply’. And I said ‘and paper is made from trees…’.
I’d love to say I was precocious in my understanding of MMT, but I was really just an annoying little git.
I wrote a short story about this years ago. At a gathering, one person complained that the “value” of the Canadian dollar was lower that the US dollar, and it made us Canadians feel inferior. His interlocutor said< "Why don't we just change the name? Make it the LEAF. Every province could have its own version: for example, the Petroleaf for Alberta, the Fleur-de-Leaf for Quebec. Just imagine a father responding to an entreaty from a child for an increase in allowance with, "Leaves don't grow on trees, you know!"
love your story PK
Same here, PK. My kids and their spouses now steer clear of any topics of conversation that remotely resemble finance, government, The Economy, ever since the evening when, after two glasses of wine, I launched into an explanation of why taxation is not necessary to finance federal government spending. It is kind of funny to watch them tiptoeing around so as not to set Mum off again.
Backfire effect, Dunning-Krueger, Gell-Mann amnesia, and confirmation bias. I like to call them the Four Horsemen of every human apocalypse. I have a hypothesis that humans aren’t an intelligent species. These neurological tics – if you will – act as a bit of a firewall. They keep us from saying, “Sure, sounds neat, let’s try that!” to every half-decent idea half-thought-through, and I suspect without them we would never have survived the Younger Dryas. They also seem to be the source of our pig-ignorant stubbornness – all apologies to the pigs.
What I’m saying here is that it isn’t you, PK. There appears to be a scientific explanation as to why people won’t listen.
We always make money the problem.
Zimbabwe has got a problem, they have printed too much of the damn stuff.
Zimababwe has lots of money and it’s not doing them any favours. Too much money causes hyper-inflation.
You can just print money, the real wealth in the economy lies somewhere else.
Alan Greenspan tells Paul Ryan the Government can create all the money it wants and there is no need to save for pensions.
https://www.youtube.com/watch?v=DNCZHAQnfGU
What matters is whether the goods and services are there for them to buy with that money. That’s where the real wealth in the economy lies.
Money has no intrinsic value; its value comes from what it can buy.
Zimbabwe has too much money in the economy relative to the goods and services available in that economy. You need wheelbarrows full of money to buy anything.
It’s that GDP thing that measures real wealth creation.
Money comes out of nothing.
Private Banks can create it for bank loans.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
The central bank create it for the Government to spend, they don’t have to give it all to the bankers.
What is the important thing?
The amount of money should correspond to the goods and services in the economy.
Too much and you get inflation/hyper-inflation.
Too little and get deflation/debt deflation.
Money is just an instrument for carrying out transactions in the economy, it comes out of nothing.
Today’s globalised world is very interconnected, but in the past different regions of the world were quite separate.
In the past, very different things occurred in Japan that no one noticed as Japan was so far away.
Japan didn’t need the Marshal Plan to reboot after WW2 even though it was in the same state as European nations.
The BoJ cleared all the bad war debt from the banks, and made them whole again with money they created out of nothing. The banks were then ready to lend into the economy again as if nothing had happened.
The BoJ could create money for the Government to spend into the economy to aid recovery, and Japan was soon back on its feet again. Japan didn’t start issuing bonds until 1965, as the BoJ just created the money for the Government to spend. Not paying interest also helped Japan’s recovery.
There were no financial problems as both Government spending and private money creation from banks were carefully controlled.
The money supply should correspond to the amount of goods and services being produced in the economy.
Too much money and you get a Zimbabwe (inflation / hyperinflation).
Too little money and you get a Greece (deflation / debt deflation)
The Japanese controlled private money creation with credit / window guidance to direct bank lending into business and industry and away from real estate and financial speculation.
The extra money required was given to the Government to spend into the economy.
We are just making things too hard.
We are causing financial crises by not directing bank lending into activities that grow GDP.
We are causing public debt problems when this is totally unnecessary.
It’s not as hard as we currently make it look.
Economists learn from past mistakes, but their memory is short.
After the Keynesian era, the big concern was consumer price inflation.
Our policymakers fuss over consumer price inflation and public debt.
The black swan flies in under their radar, as it is emerging in private debt and asset price inflation.
These are the older problems of neoclassical economics that they used in the 1920s.
1929 and 2008 look so similar because they are.
https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
At 18 mins.
Richard Vague has analysed the data for 1929 and 2008 and they were even more similar than they initially appear.
Real estate lending was actually the biggest problem in 1929.
Margin lending was another factor in 2008.
Add some Wall Street leverage to take out the global economy. It multiplies the profits on the way up and losses on the way down.
This is why they invented GDP.
They believed in the markets in the 1920s and after 1929 they had to reassess everything. They had placed their faith in the markets and this had proved to be a catastrophic mistake.
This is why they stopped using the markets to judge the performance of the economy and came up with the GDP measure instead.
In the 1930s, they pondered over where all that wealth had gone to in 1929 and realised inflating asset prices doesn’t create real wealth, they came up with the GDP measure to track real wealth creation in the economy.
The transfer of existing assets, like stocks and real estate, doesn’t create real wealth and therefore does not add to GDP. The real wealth creation in the economy is measured by GDP.
Inflated asset prices aren’t real wealth, and this can disappear almost over-night, as it did in 1929 and 2008.
Real wealth creation involves real work, producing new goods and services in the economy.
This is why real estate valuations keep collapsing
1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan
2000s – Iceland, Dubai, US (2008)
2010s – Ireland, Spain, Greece
Get ready to put Australia, Canada, Norway, Sweden and Hong Kong on the list.
Inflated asset prices are just inflated asset prices, nothing more.
Except as Michael Hudson has pointed out ‘economic rent is not isolated in the NIPA’s (National Income and Product Accounts) breakdown of GDP. Such rent is the blind spot of today’s macroeconomics.’ So we are essentially under a system of national (international?) control fraud accounting, denying the existence of the free lunch the FIRE sector receives. Weapons of math (data) destruction.
Sorry, here is the link for his paper NC posted a little while back – https://michael-hudson.com/wp-content/uploads/2019/10/Hudson_FMM-Berlin-Conference-October2019__24september.pdf
GDP was the solution to the problems of neoclassical economics.
It could probably be refined to make it better, but we must not forget the problems it was designed to fix.
I hear talk of replacing it, but that would be terrible if we didn’t know what it was trying to do in the first place.
I am actually an engineer, which probably gives me a different perspective and an ability to see things differently as the conventional wisdom is not so deeply ingrained as the trained economist.
Zimbabwe collapsed its farming sector, its major economic sector. They had little to nothing to sell.
If your country has little to nothing to sell, what value is your country’s currency? What will it purchase?
You can’t find a leader, when no one actually knows what they are doing. SoS
Being indifferent to ethics and justice, the MMT based “solutions” proposed thus far may or may not kick the can down the road a bit longer but it’s for sure they are no long term solution.
Really great and happy to see the “n” in the upper right corner! Thank you Lynn Fries for a great product, and Anne Pettifor for a cogent macro view. I hope there will be more…
This followed my other two comments that have gone, but you may need it.
Economists learn from past mistakes, but their memory is short.
After the Keynesian era, the big concern was consumer price inflation.
Our policymakers fuss over consumer price inflation and public debt.
The black swan flies in under their radar, as it is emerging in private debt and asset price inflation.
These are the older problems of neoclassical economics that they used in the 1920s.
1929 and 2008 look so similar because they are.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
At 18 mins.
Richard Vague has analysed the data for 1929 and 2008 and they were even more similar than they initially appear.
Real estate lending was actually the biggest problem in 1929.
Margin lending was another factor in 2008.
Add some Wall Street leverage to take out the global economy. It multiplies the profits on the way up and losses on the way down.
This is why they invented GDP.
They believed in the markets in the 1920s and after 1929 they had to reassess everything. They had placed their faith in the markets and this had proved to be a catastrophic mistake.
This is why they stopped using the markets to judge the performance of the economy and came up with the GDP measure instead.
In the 1930s, they pondered over where all that wealth had gone to in 1929 and realised inflating asset prices doesn’t create real wealth, they came up with the GDP measure to track real wealth creation in the economy.
The transfer of existing assets, like stocks and real estate, doesn’t create real wealth and therefore does not add to GDP. The real wealth creation in the economy is measured by GDP.
Inflated asset prices aren’t real wealth, and this can disappear almost over-night, as it did in 1929 and 2008.
Real wealth creation involves real work, producing new goods and services in the economy.
This is why real estate valuations keep collapsing
1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan
2000s – Iceland, Dubai, US (2008)
2010s – Ireland, Spain, Greece
Get ready to put Australia, Canada, Norway, Sweden and Hong Kong on the list.
Inflated asset prices are just inflated asset prices, nothing more.
This is excellent with very good historical background. And simply explained by Pettifor. It is very clear that only strong government intervention can provide what is needed for a GND. It is also frustrating to see how current leaders are still married with the market fix. It is not only the financial side –treated here very well– but regulatory measures that have to force the change. Now, only voluntary decisions of very few go in the correct direction.
The ‘where is the money?’ excuse must be fiercely fought.
Yes, Pettifor tells a good story that makes the workings of macro-economics and money very accessible. Much like Mark Blyth, she emphasizes the narrative, rather than slinging out great plates full of mathematical formulae. Like the Protestant Reformers, they work to ‘translate’ macro into a common language that everyone can read, rather than leaving it all in an incomprehensible and mystical math, that requires credentialed ‘interpreters.’
Ann Pettifor isn’t discounting MMT, she is merely explaining what money is. It is, per Keynes, a social construct. And Credit is the System without a policy to guide it. Becauset it is private credit, based on a public promise and, just as in MMT spending directly into the economy, it is credit based on the full faith and credit of the American taxpayer. Pettifor is absolutely correct that the thing that is messing up the balance as well as the promise to pay is private banking – it is out of control and it has no policy to create an economy invested in employment – the old fashioned way. That has evolved because of the incredible productivity gained by using carbon based industrialization. (Steve Keen here). So when she says we need to replace carbon with manpower she is going straight to the problem. Carbon has not only skewed formerly balanced economies – it has screwed the environment. The only thing she skims over is what Gail Tverberg says about oil (too expensive and nobody buys it; too cheap and nobody pumps it) – but she is definitely calling for a system to replace the one we have. Her quotes of the various trillions stashed away as proof that there is plenty of savings to offset any spending for a GND is valid if you are looking at calming old fears about the value of money. Which is the big argument right now amongst the Lilliputians. And stopping to consider this amount of “savings” – it was created by all the surplus we gained from using carbon energy. So if we want to rebalance or at least have a balanced monetary spirit, the solution now is to use that fund of industrial excess as collateral. And prevent private banking from getting their nose under then tent by imposing strict public policy spending guidelines. I kinda like what she’s saying. If we don’t do good policy we will still be adrift at sea with money money everywhere but not a dime to spend, while at the same time consumers will be the commodity and only neoliberal credit will be the system.
Yes, Susan, I was struck by her comment that we need to replace carbon with manpower. As one of the links last week, on fire, comments, the fossil-fuel-based insecticides, herbicides and fertilizers that have taken over agriculture, but have resulted in major environmental pollution and degradation, must be replaced by alternative practices.
I do feel some trepidation about substituting ‘labor for fossil-fuel.’ Manual labor in our society has become a class marker; you’re a ‘ditch digger’ only because you’re too dumb to get a job that allows you to sit at a computer all day. I watch the lycra-clad joggers who run around Seattle’s Green Lake every day, before or after work. I would bet that very few of them replace carbon with walking or biking to work, nor would they consider a job scything wheat or swinging a pickaxe to break up old concrete roadways. To make the replacement of ‘labor for fossil fuel’ work, we have to first shift our values.
Eclair
Some carbon can be replaced with manpower; I expect that really heavy labour will always be mechanized. Of course at least some of that can eventually be replaced with electrically-powered labour in place of carbon, provided the electricity is generated by hydro or some other.
The city of Vancouver is contemplating the banning of gas-powered leaf blowers.. Of course they are getting push-back from the lawn and garden care companies. They would take longer to do their work, they claim. The city has suggested electric or battery blowers as replacements. My own observation is that clearing leaves is not an onerous exercise. We and our neighbours on southern Vancouver Island, if we just have city lots, can certainly invest in the minor cost of a leaf rake to do the work, and do that really light exercise. But too many of the neighbours bring out the blowers, blowing the leaves onto the streets where they clog the catch basins causing rainy day street flooding. Then they proceed to complain that the municipality did not get the streets cleaned. They’re the saame ones who bring out the pressure washers in summer drought to wash their asphalt driveways, or their cars, disregarding municipal water restrictions
I didn’t say she was discounting it. I said she was tip-toeing. She gave the most parsimonious explanation possible so as to try to navigate the deeply embedded and incorrect assumptions of most people.
I’ve always liked her because she is so clear. When you first introduced her I used to wonder if she had an opinion on MMT – but I always liked her regardless because she is so close to the same reality imo.
So cool to see video content being produced explicitly for NC! Thank you Lynn!
Small matter, very BASIC question about a Michael Hudson quote on hyperinflation. https://commons.commondreams.org/t/wheres-the-party-come-on-man-biden-claims-democrats-not-down-for-aoc-style-progress-like-medicare-for-all/70824/97