Tuesday, February 16, 2010

Let's Get This National Debate Started















In segment 1 Warren Mosler presents a too brief but rational and accurate picture of our Country's Treasury and Central Bank Operations, and a specific proposal (Payroll Tax Holiday) for solving our nation's economic problems of inadequate output and employment. The CNBC anchors specifically prevent any mention of his book.

In segment 2, David Walker presents a demagogue's view of our Country's finances with inappropriate comparisons and non-specific remedies to his view of our nation's economic problems. He accuses the US authorities of "creative accounting practices", he cautions that the U.S. "could end up like Greece", we are borrowing from "foreign lenders", and that the Fed is "buying our debt at record rates to hold down interest rates" all of these claims are counter to any evidence. The CNBC anchors mention the title and wish him well with his new book, how nice.




23 comments:

Mike Norman said...

And please listen to David Walker get caught lying through his teeth when I interviewed him back in 2008 and he said, "Thre's no solvency isse. The checks won't bounce." David Walker caught lying through his teeth. Please forward this clip to your Congressional representative and as many of your friends and colleagues as possible. David Walker is the most dangerous man in America.

Matt Franko said...

Top left Drudge Report IN RED:

"Lone voice warns of debt threat to Fed"

Those of us here "in paradigm" are really up against a lot of opposing forces. It is never ceasing.

Mike Norman said...

Yes, this is un-winnable. Just try to make money from the inevitable economic collapse so you can have funds to protect yourself and your family if you need to flee or hire private security. It's not worth trying to fight against this or expendng the effort to change the belief systems of most people. It can't be done. Not in the short run. Maybe in 25 years or more. I don't know. But as it stands now, folks like David Walker, with their ignorant ideas, will change the course of this country for a long time to come. They already have. There is an unbelievable amount of misery and suffering already happening in America. It's a humanitarian disaster far larger than Haiti or the 2004 tsunami or Katrina. Millions upon millions of people without jobs, health care, homes, money for food, etc. America's a rich country, but so many of her citizens are in dire straights because we embrace the ideas of people like Walker. We listen to him, the media does too and the average American sees it the same way he does. It's a disaster. We are surely doomed.

TomatoBasil said...

Great post Mike. -- The anchor lady interjecting awkwardly about her checking account being overdrawn and the fellow trying to explain what Mosler was really saying but wasn't-- They were so uncomfortable with Mosler's ideas, it was as if he was Dr Ruth telling them about some deeply personal fact on national tv that they had never realized. I'd like to think it was that moment when they realized --right then and there-- that they had been reporting complete nonsense about the US defaulting on its "mountain of debt" and were embarrassed as hell for broadcasting it. But probably not.

bubbleRefuge said...

Klus, We should run higher deficits in order to eat up the slack in the economy right now. What is your counter argument?

Klusplatz said...

(This is a continuation from an email discussion between me and bR)

(…And I just have to laugh at Mike: he says The U.S. is in worse shape than Haiti. What a lunatic. I would also ask Mike how there will be an economic collapse, but he wouldn't be able to tell me.)

So running higher deficits in order to eat up slack in the economy:

Do to a lack of time, I will give my highest level response, and will then have to follow up to your responses this weekend.

The “slack” you refer to is merely a monetary phenomenon. It simply reflects a decrease in velocity due to the economic situation you Keynesians (I group you all under the same umbrella, since you all start from the same base, and all promote manipulation of the economy) have put us in. Real demand is a whole separate thing. There is never a reduction in real demand (even if people SAVE AND SPEND LESS!!!!!). The issue is not a lack of demand, but a lack of capital, due to the malinvestments you’ve created through printing money (catch-all term for creating money electronically and thus increasing the money supply) and government spending.

Government spending does not restore any real demand, only nominal monetary demand, which is completely unrelated to real production, the creation of goods and services, and the rise in real wages and the ability to consume real things (as opposed to a calculated GDP number).

Allow the economy to correct and right itself (allowing labor and capital to move where it would be if you were not artificially keeping it malinvested with your monetary and fiscal policies, and by allowing losses to hit balance sheets), and there would be, after a year or so, increased real production, increased real hiring and increased real wages (and take off wage price controls, and you would have full employment).

The thought that taking money from the productive sector (taking real capital) and using it to consume through spending can in turn create real wealth—real goods and services—is preposterous.

To fill in some blanks on what I’ve said, please refer to my previous comments on these matters in this post: http://mikenormaneconomics.org/ (No one really asked about what I said in that post or debated it then, so I don’t know why they would now. Mike attempted a weak debate but then learned he was over his head and just started calling names instead).

Klusplatz said...

P.S. What is absolutely true is that government spending CANNOT create savings. It, without a doubt, destroys savings.

Klusplatz said...

bR, since yo want to isolate the issues, why don't you pick one specific thing I said to drill down on. Once that one is resolved (if it is), we can move on to my next previous point.

That way, we won't be arguing multiple points simultaneously

Mike Norman said...

Klutz is back! What happened? All out of parties?

Matt Franko said...

klus,
Real quick: Can we both agree that David Walker is full of S__T?
Resp,

Mike Norman said...

Klutz,

A half-wit gave you a piece of his mind and it looks like you held on to it!

TomatoBasil said...

Keeping track of which goods and services were purchased because of "nominal monetary demand" and "real demand" would be a nightmare. I'll bet the money that Kluspitz receives in his business is the real thing and the money I receive is that fake kind. Kind of hard to tell the difference between the two.

Mike Norman said...

I've met people like Klutplatz before, but I had to pay admission.

Klusplatz said...

Mikey Mike! What a funny guy! It's a battle of wits and you came half prepared.

Yeah brother, I'm between parties so I'll hit you all fast in my following posts so I get back to gettin down with the hotties.

Klusplatz said...

Hey Matt, sorry to disappoint you, but he's pretty right on the debt issue (though I see no problem with massive foreign purchases or our debt. It's just that the who thing is rigged due to our monetary system).

I don't agree with him on economic remedies, but sure, there is massive off-balance sheet stuff not reported, and funny business with the numbers. And yes, we can get into a situation like Greece. And printing ourselves out of it is not the answer. Nor are deficits-they can't help an economy.

Klusplatz said...

TomatoeBasil: you're thinking too hard about this. There are 1) real things produced, and there is 2) the MONETARY VALUE of things produced. The numbers attached to each do not move in synch.

The first is the basis of real demand, the second is affected more by inflation than by the underlying numbers of units produced. You can produce the exact amount this year as last, increase the money supply by 10%, throw in a GDP deflator that deflates 7%, and presto!, you've got nominal GDP growth of 3% -- all with no real increase in real production or, say it with me now: real demand.

Obviously, we can't identify how much has really been produced, because we can't add cars, oranges, steel pipe, and Valium.

Klusplatz said...

Later guys. Gotta roll.

Klusplatz said...

Sorry, let me clarify something.

You can't COUNT how much real stuff was produced, but you can know if more was produced than consumed because if that's the case, prices will fall. In world of printing money it means that real wages rise, since the supply of goods is increasing faster than the supply of labor.

Mike Norman said...

Keep talking Klutz, eventually you'll say something intelligent.

bubbleRefuge said...

Ok, I pick this one:

Government spending does not restore any real demand, only nominal monetary demand, which is completely unrelated to real production, the creation of goods and services, and the rise in real wages and the ability to consume real things (as opposed to a calculated GDP number).

Ok so now you are on record as saying
1) The government can spend in unlimited amounts.
2) Fiscal policy increases GDP
You are now more than halfway to agreeing with the people who frequent this web site.


The crux of your argument seems to be that fiscal policy increases only nominal GDP and not Real GDP. This may be true only when the economy has reached full capacity, that is, when all workers are employed, factories are humming, trucks are full, etc. Real GDP is the Nominal GDP minus the inflation rate. Since we are not in an inflationary environment at this moment we are currently witnessing real GDP growth albeit not enough to reduce unemployment because productivity has been increasing.

You write that fiscal policy cannot create demand for "real" things. This seems nonsensical and irrational to me. A few real world examples:
1) if the federal government reduces my taxes by
600 dollars this month and I spend that 600 bucks on a couple of bikes for my kids, then I have increased real GDP by 600 bucks. This is real. The bikes are real; we are not in some twilight zone.
2) If the federal government buys two bicycles for 600 bucks and gives them to the President's daughters, then real GDP has also increased by 600 bucks. Both are examples of fiscal policy.

bubbleRefuge said...


The thought that taking money from the productive sector (taking real capital) and using it to consume through spending can in turn create real wealth—real goods and services—is preposterous.


The government doesn't take real capital. If you are referring to taxes, we've already established that the government doesn't tax in order to spend. It just spends and taxes afterward. You haven't made any case at all for why its preposterous.

Matt Franko said...

K,
Ive edited one of your paragraphs to help you understand:

You say: "The thought that taking money from the productive sector (taking real capital) and using it to consume through spending can in turn create real wealth—real goods and services—is preposterous."

I say:
"The thought that the govt sector taking money from the non-govt sector (taking taxes) and using it to redistribute through spending in a "pay-go" fiscal policy can in turn create net financial assets—is preposterous.

See?

Mike or JC correct me here if I mis-used the term "NFA". Resp

Mike Norman said...

Klutz, never enter a battle of wits unarmed!