Thursday, May 31, 2012

Bill Mitchell — The New Economy cannot flourish with fiscal austerity

I support the New Economy initiatives but implore the leading lights to educate themselves about MMT and why macro matters.
Read it at Bill Mitchell — billy blog
The New Economy cannot flourish with fiscal austerity
by Bill Mitchell

"The New Economy" is the latest hot thing among progressives. Bill has that it is basically a good idea but needs to be better informed economically. MMT does that.

17 comments:

Dan Kervick said...

Great piece - as usual for Bill.

Don't know how he manages to write these powerful tomes day after day.

Dan Kervick said...

The New Economy series is very good as well.

Trixie said...

For me, great discussion here (from Krugman's blog):

http://www.bbc.co.uk/news/business-18281669

This is what I want to hear: point-counterpoint on our economy, here and now. The discussion ends with the example of Estonia as an example of successful austerity.

Tom, or anyone else, any insights on Estonia's economy?

Leverage said...

"Estonia as an example of successful austerity"

Whoever is serious about that must be a retard and not looking at data.

And I'll add more you can talk about austerity and ignore migratory flows. How good is austerity if you are losing your population at record speed?

This is a defacto decapitalization of a nation and a complete disaster.

Tom Hickey said...

I don't know much about the European economies but I do know some Europeans. I was just talking to a Bulgarian whose father was a central banker there and who majored in finance as an undergrad. Even though he is well-off and well-connected there, he sees no future in Bulgaria and wants to come here. I told him that I am advising young people to bail out of here, but he is willing to take his chances since he sees Europe tanking.

We were talking about ways he might do that, which boils down to 1) applying to grad school, 2) buying a small US business that hires Americans, or 3) trying to find a position in finance (he is fluent in English and Russian in addition to Bulgarian). Lemme know if you have any leads for him.

money4nothingchicks4free said...

Trixie,take a look at this chart
http://www.tradingeconomics.com/estonia/unemployment-rate
Do you see that 20,1% unemployment rate? Guess how many people that represents? About little over 100 000, ferry ride to Finland takes about 1,5 hours. A lot of people work in Finland, Sweden etc, and pay their mortgages in Estonia. They generally work for cheaper wages in Finland than the finns do. Is this the path to follow for America? Unemployment is still high and this thing is not over yet. Estonia didn't have to bail out banks like Latvia did, that's why It has been even worse in Latvia. Banks are Swedish here any way.
Krugman was pretty good in this one, thanks. Yet he still doesn't get to the main point and leaves the door open for deficit terrorists. Government is a score keeper, not like household, It can never run out of money. That's why the deficit terrorists hate MMT so much. To Krugman they can always say that he is not responsible person and he doesn't think about tommorrow... and he is out, every American house wife is convinced.

Trixie said...

Thanks for the input all.

"Krugman was pretty good in this one..."

Krugman confuses the hell out of me. Because many of the policies he proposes are the correct ones, imo. When he talks about addressing deficit issues in the future once the economy recovers, isn't he basically following sectoral balances logic? The deficit will be dramatically reduced all on its own and people will move on to hyperventilating about other issues.

Given the political climate, not a bad strategy, if that is indeed what Krugman is doing. Hard to know.

money4nothingchicks4free said...

to Trixie:
I've been thinking the same way about Krugman. He is not stupid. In this video he is almost giving MMT lines. May be he is afraid of being labeled radical.

Trixie said...

Completely agree. On some levels Krugman makes a better politician than economist. He addresses deficit hawks by promising to "address" the deficit in the future. And we both know that conversation will never be had if unemployment is tackled.

Rinse and repeat. Stealth MMT!

Tom Hickey said...

Trixie: "When he talks about addressing deficit issues in the future once the economy recovers, isn't he basically following sectoral balances logic?"

Yes, but... PK knows that to be taken seriously one has to take the debt and deficit seriously because all serious people do. But instead of just saying that as recovery kicks in tax revenue increases, employment rises, and unemployment benefits and other safety net programs contract with the expansion. There, it's not so hard, is it?

Trixie said...
This comment has been removed by the author.
Trixie said...

Exactly, Tom. It's all smoke-and-mirrors. I already knew basic math deficit before discovering MMT. Which is why I came unglued as I looked at unemployment figures (did the math) and then watched politicians blame public school teachers, NPR, the elderly, Planned Parenthood, and 'teh gay' for the deficits. Bankers laughed (and still are) all the way to the[IR OWN] bank.

It's maddening. And it's because of MMT I understand the mechanics MUCH better, but my initial assessment hasn't changed any.

Clonal said...

I just posted a comment in the OWS thread on an excellent presentation by Prof. Mitchell given almost a year ago on full employment.

JK said...

"...PK knows that to be taken seriously one has to take the debt and deficit seriously because all serious people do."

ha. Indeed.

Anonymous said...

On your point, Tom, of PK needing to stay in the 'serious people' paradigm to be heard, can you just imagine the monumental change of thought that would accompany a luminary such as PK adjusting his view.?

If he were to actually believe some of the MMT concepts, he has unimaginable power to make it a front line discussion, and have the entire mainstream question their own beliefs, why they hold them and so on. The question is, does he? I'm not so sure.

apj

Tom Hickey said...

I agree, apj, PK is a sincere and honest person and if he were convinced of MMT he would say so at least implicitly. I think a lot people are beginning to see the light but still have reservations, and I suspect that PK is one of them. And if he embraces MMT explicitly, it will be Krugman MMT, that is, he'll write up a paper on his view of monetary economics, instead of just saying that someone else is right.

David said...

It seems pretty obvious that we need good macro to go with the micro. I agree with Mitchell that the "new economy" stuff is interesting but not enough. I think the "small," "green," "local" folks should aquaint themselves with rent theory, along with MMT. With no understanding of how economic rent operates, these movements will achieve no better outcomes than previous decentralizing techno-utopias have. They will find, to their surprise, that such benefits as there are, will have accrued to a very few.