Monday, November 26, 2012

Bill Mitchell — Macroeconomic constraints render individual action powerless

When recessions become prolonged and long-term unemployment rises, the conservative denial machinery always scapegoats the most disadvantaged by recommending cuts to welfare to make people more desperate. This is dressed up in terms that attempt to make this sort of policy sound reasonable – like we should all be adventurous and entrepreneurial. The facts are that mass unemployment represents a macroeconomic failure that can be addressed by expansionary fiscal and/or monetary policy. It has nothing to do with the provision of the miserly amounts that are given to the unemployed via income support arrangements. Cutting those benefits will not cure involuntary unemployment. In all likelihood, cutting benefits will make the aggregate demand shortfall that caused the unemployment to worsen. The result is that the cuts will only make the lives of the unemployed more desperate than they already are. It is time that the conservatives learned about macroeconomic constraints....
Macroeconomics teaches us that individual choice can be rendered powerless as a result of the presence of macroeconomic constraints – most usually spending constraints on the product market that ration the number of overall jobs and working hours that will be on offer at any point in time to an economy.
Once an economy is operating under such a demand constraint, the supply-side of the economy loses traction – that is, no longer influences the market outcome, which renders much of the orthodox labour market analysis irrelevant, if not false.
Bill Mitchell — billy blog
Macroeconomic constraints render individual action powerless
Bill Mitchell

Ten dogs, nine bones.


33 comments:

Bob Roddis said...

Of course, this is why Ron Paul proposed slashing the military empire budget first. Just to harm poor people.

Rohan Grey said...

"first"...

So you're saying:

1. Paul axes the military, putting a lot of people who work there now out of a source of income (to then spend).
2. ???
3. Profit!

paul said...

"like we should all be adventurous and entrepreneurial."

Only a select few are adventurous and entrepreneurial…and for an entrepreneur to succeed he must utilize labor to multiply his individual capabilities.

It is a symbiotic relationship between the parasite (entrepreneur) and the host (workers). The entrepreneur is a parasite because his/her gains come at the expense of the host, not because he/she is a bad person. Extracting so much it kills the host is what moves them into bad territory.

Defining entrepreneurs as parasites isn't meant to imply they are bad, it's reality because mathematically that is the only option. Something cannot be created out of nothing.

It follows that since the host has no financial resources of it's own the government must provide them.

Bob Roddis said...

I finally get it. No matter how criminally insane a government spending program might be, putting an end to it will MAKE PEOPLE FIND ALTERNATIVE THINGS TO DO AND ALTERNATIVE WAYS TO MAKE A LIVING.

How cruel.

And, of course, peaceful, voluntary business relationships are parasitic. Relationships based upon the violent seizure of resources and enforced with the threat of prison (or worse) by SWAT teams are to be worshiped.

See. MMT is not a "MONETARY THEORY".

paul said...

Bob, you don't have a normally functioning mind.

"criminally insane" - government spending forthe goodof it's citizens is criminal and insane.

"violent seizure of resources" - Bob prefers a system where powerful forces work behind closed doorsto seize resources.

"peaceful, voluntary business relationships are parasitic." - yes, in the technical sense they are.

"MMT is not a "MONETARY THEORY" - Correct, MMT is not a theory, it's a description in mathematical terms of how the current system…WITHIN WHICH WE ALL LIVE…functions.

y said...

Bob seems to think that whatever someone says in the comments section here at Mike Norman is automatically "MMT".

Why do you only troll this MMT site by the way, Bob?

y said...

"criminally insane"

I think he means military spending, (though he probably means everything else as well)

paul said...

"Why do you only troll this MMT site by the way, Bob?"

By bothering to respond to his drivel we are tendering a certain amount of respect to him. He probably isn't treated this well at other sites…plus, when you get right down to it, MNE is where all of the MMT'rs hang out.

Too bad Bob can't bring himself to extend the same courtesy to us. He's downright insulting to Mike.

y said...

"the violent seizure of resources and enforced with the threat of prison (or worse) by SWAT teams"

HYPOCRITE!!!

"Bob Roddis is the only candidate for Michigan Supreme Court who supports enforcement of the US Constitution."

www.roddisforjustice.com

US Constitution:

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States"

"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration."

Therefore Bob Roddis SUPPORTS the so-called "violent seizure of resources and enforced with the threat of prison (or worse) by SWAT teams"!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

PeterP said...

I liked geerussell's 5 stages of grasping MMT:

geerussell said...

For me [grasping currency operations] was like the five stages of grief.

Denial: MMT is crazy and wrong.

Anger: MMT is just a plot to push (insert political agenda).

Bargaining: OK, they make some good points but they overlook interest rates or China or (insert doomsday scenario).

Depression: MMT has it right and there's no hope of changing the policymakers who are torturing the economy for kicks.

Acceptance: Talk about MMT as the operational reality it is and get used to people thinking I'm crazy.

Looks like Bob Roddis is at stage 2.

paul said...

"Looks like Bob Roddis is at stage 2"

I'm afraid Bob is trapped in an infinite loop at stage 2.

y said...

Anyway how is collecting taxes "violence"?

If you abide by the law, there is no violence involved.

If you choose to break the law, then the law is usually enforced, though this doesn't necessarily involve any violence either.

Only if you're Peter Schiff's dad and you can't read, and hate tax so much that you're willing to physically fight with the police over it, then the law enforcement will probably involve some physical force or violence.

y said...

I just had to make a picture inspired by Bobworld and Austro-libertarian neofeudal weirdness:

http://www.flickr.com/photos/90510624@N03/8224577102/in/photostream

(Not to be taken too seriously)

Matt Franko said...

y,

"HYPOCRITE!!!"

Right... you see this where with hypocrisy, it is based on an inability to discern contradiction...

this inability seems to be a common behavioral pattern you can see in those unable to see things from within the MMT paradigm....

rsp,

PeterP said...

Yeah funny. Does Bob support the constitution or not? Constitution gives the state power to enforce taxes, pretty funny. Bob Tax Collector Roddis?

JK said...

Bob Roddis for judge??

That's rich.

I wonder how he feels about "activist" courts? Presumably it's an outrage unless its in the spirit of his worldview. From his website, A Judge's Duty…

"When an unconstitutional law comes before a judge, whether passed by Congress, a state legislature or a local council, it is the duty of such Judge to strike it down as null and void."

Buuuuuuttt…. there are different interpretations of the constitution. For example, the line before the above quote: "An important reason for this sad state of affairs is the failure of judges on all levels to protect the essential Constitutional mandates of individual liberty, private property, sound money and freedom of contract."

Is the phrase "sound money" on the constitution?

Bob's interpretation.

Tom Hickey said...

Of course, this is why Ron Paul proposed slashing the military empire budget first. Just to harm poor people.

Cutting military spending in a country where the economy has become dependent upon it, with military contractors is virtually all congressional districts would be suicidal economically and for politicians unless done is a coordinated way. The US ramped up for the Cold War. Now it needs to stand down but not in a way that damages the economy. This is going to be very tricky socially, politically and economically, which is a big reason that no one in power wants to rush into it. The US has created a snake pit for itself and it will not a simple matter to unwind it. So far, there has been just about zero debate about the real issues in this regard.

Tom Hickey said...

Only a select few are adventurous and entrepreneurial…and for an entrepreneur to succeed he must utilize labor to multiply his individual capabilities.

And only a select few entrepreneurs become successful in starting business that last. Most fail in the first year and the five year rate is abysmal. That means the investment goes down the drain and debts are settled in bankruptcy.

y said...

"Is the phrase "sound money" on the constitution?"

Austro-libertarian so-called "constitutionalists" like to point to:

"The Congress shall have Power...
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures"

As proof that 'paper money' is unconstitutional.

But they ignore:

"The Congress shall have Power... To borrow money on the credit of the United States... To provide for the Punishment of counterfeiting the Securities and current Coin of the United States"

!!!!

Federal Reserve notes are "obligations of the United States", that is, government debts, or government securities!

www.law.cornell.edu › USC › Title 12 › Chapter 3 › Subchapter XII

They can be redeemed on demand for Treasury Coin (a form of government 'equity'), and Treasury coins can be made from either 'precious' metal or 'base' metal.

The Austro-libertarians have nothing. In fact they are enemies of the Constitution, starting with the very beginning: "We the People". There is no "we the people" in austro-libertarian dystopia world, only "We the Proprietors".

http://wiki.seasteading.org/index.php/Constitution_of_the_Autonomous_Freezone_of_Aquia





Tom Hickey said...

Looks like Bob Roddis is at stage 2.

Bob is a utopian idealist who thinks that the only practical option is to enter his version of utopia.

I have no argument with utopian idealists since I am one myself. I believe that humanity can and will rise to greater heights, but gradually.

Bob seems to think that humanity at just transform itself all at once. That is naive in my view. Moreover, I see Libertarian utopias as a retreat rather than an advance.

But I would rather be with impractical utopians with whom I disagree than practical hypocrites that say one thing and do another.

paul said...

"That means the investment goes down the drain and debts are settled in bankruptcy."

This is likely a net good for the economy since no profit is extracted and banks and investors are forced to dis-save. It creates flow.

It isn't like we need the production any longer, we are way past that.

Basically what you are describing is creative destruction, whereby comanies that produce less useful products or are poorly managed are replaced by other companies that produce better products.

Bob Roddis said...

I realize that no fact can dent the tiny mind of an MMTer but…

The Articles of Confederation granted Congress the power to Emit Bills of Credit, which meant issue paper money. The Constitutional Convention debated in detail a motion striking that clause/power and voted to remove it. Thus, the US Government has no power to issue paper money.

A further debate ensued and it was determined that there would be an absolute ban on any state emitting bills of credit. The Feds were denied the power, the states were prohibited from exercising such power.

This resulted in “The Congress shall have Power To...coin Money, regulate the Value thereof, and of foreign Coin....

Under Article I, Section 10, the states are not permitted to "coin Money; emit Bills of Credit; [or] make any Thing but gold and silver Coin a Tender in Payment of Debts.."

“Coin money” means just that, making coins from precious metals.

I realize that facts such as this do not matter in MMT-land.

y said...

updated:

http://www.flickr.com/photos/90510624@N03/8223606309/in/photostream/

paul said...

"US Government has no power to issue paper money."

Settled law disputes that, so good luck. Further, we aren't likely to recede backwards into the stone ages where people used rocks for money.

paul said...

"I realize that facts such as this do not matter in MMT-land."

You are entitled to your own opinions but not your own set of facts.

y said...

"the US Government has no power to issue paper money."

Bob, you Joker. You're in your own little world. There are no facts in your arguments!

Tom Hickey said...

"That means the investment goes down the drain and debts are settled in bankruptcy."

This is likely a net good for the economy since no profit is extracted and banks and investors are forced to dis-save. It creates flow.

Basically what you are describing is creative destruction, whereby comanies that produce less useful products or are poorly managed are replaced by other companies that produce better products.


Yes, but the argument was that the jobless should create jobs through entrepreneurship. That is just bonkers given well-known results. It would actually work the other way for most, since most would fail and many would find themselves in bankruptcy court.

This is nothing againsts entrepreneurship, of course. Jus' sayin' that as a macro solution to UE it's silly.

Tom Hickey said...

Bob, take is up with the courts all the way to the US Supreme Court, if you can convince them you have standing. This has already been long settled in law.

paul said...

"Yes, but the argument was that the jobless should create jobs through entrepreneurship."

Agreed, that is about as far from reality as one could get. Thats royalty (or what passes for it) for you.

Bob Roddis said...

Fred Korematsu thanks you for your wisdom.

JK said...

As a judge...

Give us a Tom Hickey, i.e. someone with an appreciation for perspective and practicality, over the self-righteous Bob Roddis who sees pink-morons in people who don't support "perfect liberty"

Bob, did you have a very strict father and submissive mother?

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

still no comment from bob regarding his blatant and repeated hypocrisy regarding tax and the Constitution...