Modern Monetary Theory has been revolutionary in economics, and its influence is — beneficially — ever-more pervasive. It has opened the eyes of a generation to a clear-eyed, accounting-based methodology that trumps dimensionless theory, and has brought a deep, nuts-and-bolts understanding of money, debt, and financial institutions to a discipline where that understanding has been inexcusably absent. Witness: a whole raft of papers from central-bank economists worldwide embracing MMT principles (though often not MMT by name), and eviscerating decades or centuries of facile and false explanations of monetary mechanisms.
But MMT’s terminology and associated accounting constructs remain problematic and contentious, even among some MMT supporters like the splinter group, the Modern Monetary Realists. Some of this contention results from the usual resistance to new ideas and ways of thinking. But some arises, in my opinion, because MMT terms and accounting constructs are indeed problematic. (The terminological confusion even causes some to object correctly, but for the wrong reasons — and vice versa!)….Longish and detailed post largely about accounting rules and terminology.
I find here a set of terms that I’m unable to resolve into a coherent set of accounting statements — despite years of diligent and highly motivated efforts to do so. (I’m an ardent MMT supporter; I wouldn’t be thinking these thoughts if it weren’t for the MMT cabal.)
The core problem is these measures’ opaque relationship to net worth, and change in net worth. The problem exists because they don’t incorporate the primary way that net worth (wealth) is accrued: market revaluation of existing assets, a.k.a. capital gains. Market runups increase private-sector assets, without increasing liabilities. Voila: higher private-sector net worth. “Money” created, ab nihilo.
MMTers seem to have these conceptual, terminological problems for the same reason as more traditional economists (and due to MMTer’s efforts at speaking in those economists’ language): they’re still “thinking inside the NIPAs” — despite MMTers well-founded devotion to the FOFAs.…
Asymptosis
Where MMT Gets Its Accounting Wrong — And Right
Steve Roth
Crossposted at Angry Bear
Update:
Eric Tymoigne replies to Steve Roth:
Comment on Where MMT Gets Its Accounting Wrong — And Right by Eric Tymoigne
Where MMT Gets Its Accounting Wrong — And Right
Steve Roth
Crossposted at Angry Bear
Update:
Eric Tymoigne replies to Steve Roth:
Comment on Where MMT Gets Its Accounting Wrong — And Right by Eric Tymoigne
Steve Roth replies to Eric
Steve also shut down discussion other than on the accounting relevant to the issues he brought up in the post.
Steve also shut down discussion other than on the accounting relevant to the issues he brought up in the post.
65 comments:
So yes: private bank loans create new private-sector assets, and they have the indirect economic effect of increasing net worth, but they don’t, directly and in and of themselves, increase private-sector net worth. Government deficit spending does. MMTers are right that it’s special in that way.
I don't entirely understand what this means. Yes, certainly private sector lending doesn't in itself increase private sector net worth. It expands balance sheets, creating offsetting liabilities and assets. But equally clearly, private sector lending is used to finance the production of real wealth from real assets, as Steve notes. Eventually some agent or agents end up with more valuable real assets on their balance sheets after the loans are repaid, assets that are not offset by liabilities. So why is this a particularly important thing to notice? This is just a restatement of the obvious long-time observation that new credit financing is a tool for the production of wealth, not new wealth itself.
Whether or not that process creates an increase in net financial assets is neither here nor there. Even if the net financial position of the private sector doesn't change, its wealth has increased. And if we had an entirely private financial system in which financial assets, including monetary ones used as media of exchange, were all issued by private sector entities and held by private sector entities, and backed by claims on real private assets, then the net financial position of the private sector would always be identically zero. But the private sector could still grow and develop.
When the government spends, that does not necessarily increase the real net worth of the private sector. Suppose the government buys a submarine for $2.5 billion. Then some private sector firm has $2.5 billion more dollars in it's account, but it has one less submarine it its inventory. If the government deficit spends to buy the submarine, then the financial assets of the private sector are not reduced, no the net financial worth of the private sector does decrease in nominal terms. But has it decreased in real terms? That's a difficult question. The securities issued by government are ultimately grounded in the real assets of the private sector. They are made good by the government's capacity to draw on real national wealth via the tax system. If the government pays its debts via inflation rather than taxing, then nominal claims are made good by a real reduction in the value of other nominal claims. If they are made good by just being rolled over indefinitely, then they are backed by the future real output and stored wealth of the economy. We should all be inherently suspicious of the idea that the government can make the aggregate population richer in real terms simply by handing out more nominal representations of wealth - whether these representations are in paper or electronic form.
n the public sector, or the public sector has a net financial claim on the private sector.
What worries me about all this monetary manipulation economics is that people attracted by the MMT picture of things are completely missing the real importance and role of government. It has little to do with the nominal accounting realities which are tracked by financial bookkeeping. Focusing too much on the division of things into sectors for the purposes of financial accounting and the conventional setup for the management of financial wealth misses most of the of the whole economy, public and private sector combined. Viewed organically, as part of the whole economy, the government is just an enterprise - or rather a collection of enterprises. These enterprises happen to be owned by the public as a whole, rather than concentrated private groups of owners. They are generally not run for market profit (for market revenues that exceed costs), but for the production of value that is delivered to some or all of the public via non-market means, and with an aggregate value that hopefully exceeds the cost of producing it. Because the government's enterprises include the ability to apply coercive force, where necessary, to move and employ resources on a large scale for large purposes, there are an enormous number of things that governments can do that the private sector can't do. It can generate gigantic forms of real wealth that that add value to the inputs employed and consumed in the production of that wealth. This is the case whether or not the government is running financial deficits, and whether or not the private sector has a net financial claim o
http://moslereconomics.com/2015/10/01/bank-capital-and-lending-comment/
Mosler on capital requirements.
"Then some private sector firm has $2.5 billion more dollars in it's account, but it has one less submarine it its inventory."
True, but it is not usually in the interests of firms to stockpile inventories.
Isn't this the M-C-M debate again.
Capitalists work for money and intend to make more money aka profit.
DK,
"If the government pays its debts via inflation rather than taxing, then nominal claims are made good by a real reduction in the value of other nominal claims. If they are made good by just being rolled over indefinitely, then they are backed by the future real output and stored wealth of the economy."
Could you expand on this further please?
My understanding is that when savings are spent and/or there is a credit bubble the government cuts spending and/or raises taxes if necessary.
But this is not "paying down the debt."
Dan-
The idea that a Govt can pay its debts via inflation is laughable. TSY CDs are always paid off the same way, a simple debit and credit on a balance sheet. Inflation has nothing to do with it.
My comment from over there about MMT's use of the term NFA:
"Great Post Steve.
I really enjoy your constructive criticisms of MMT doctrine. Question everything is usually the best philosophy.
My personal belief is that the importance of the NFA is different than you’ve portrayed it here. Yes, its limited because it is specifically limited to Govt IOUs, which even at ~$20 Trillion is just a small part of the entire US dollar economy worldwide. So while its true by definition and somewhat small in comparison to the whole (in nominal dollar terms, hell Fedwire settles $2+trillion a day!), the importance comes from the exogenous nature of fiscal policy. For example, there are many ways to boost private sector activity via macroprudential policy, but the results are conflicted. We could definitely increase home lending and thus construction by allowing then promoting no down payment mortgages, but is that the best way to increase spending and construction?
On the other hand, because fiscal policy expansion always creates NFAs, the two things are synonymous. So to say that the level of NFAs being created is too low is simply to say that the deficit is too small. So much so obvious. IMHO MMT harps on fiscal policy because they view it as the best way to increase aggregate demand, incomes, and wealth.
Yes, we could use monetary policy, QE and zirp has definitely increased the wealth of the private sector. But what has that accomplished except to exacerbate income inequality.
Yes, we could use regulatory policy. The financial deregulation policies of the late 90’s definitely led to increased private sector wealth as oil went to $140 a barrel when non-end users were allowed and encouraged to speculate in commodities markets. Allowing financial institutions to on-sell their loan assets to third parties definitely increased the number of loans made. But has any of this been an unambiguous net positive for society? I think the GFC proved that these arent good ways to increase spending via private credit expansion. Im sure we could all put our heads together and come up with changes that would indeed be a net positive, but thats not what has happened in the real world.
Now on the other hand, increasing private sector incomes via a FICA suspension or increased employment via infrastructure spending is a direct, simple, unambiguous good for society when we have lots of spare capacity. In this sense, MMTers focus on NFAs = fiscal policy because its by far the most effective and direct method for effective macro-economic outcomes. I humbly believe that this is obvious.
There is no downside to providing free university education with no tax revenue offset.
There is no downside to providing an employed buffer stock of employed labor instead of our current policy of maintaining 15 million unemployed people and all the bureaucracy that entails as an inflation anchor.
There is no downside to suspending FICA when demand is too low
Again, great article Steve."
Holyy crap are Cullen Roche and Ramanan some dishonest assbags. Look at this comment:
"The whole point of that discussion was to emphasize that the govt is actually a much smaller player in all of this than some people imply. And when you link the pieces of that equation you realize that taxes don’t “drive” money. There is no money “monopolist”. The private sector doesn’t “leverage” NFA. Basically, MMT has huge holes in it."
There is no MMTer that says the Govt is the MONEY monopolist. Quite the opposite actually, MMTers say anyone can create money because its just an IOU. Exactly the opposite of this bullshit claim.
And as if taxes dont drive the acceptance of state currency. This is something with thousands of years of history behind it.
And as if TSY CDs arent a hugely important source of private sector wealth and financial savings. I bet Cullen is one of the people that thinks QE is bad because it removes TSY CD opportunities from the private sector causing financial fragility, wait that exactly what he posted about today. That the Fed has caused financial instability with its policies (what else could that be but QE and zirp). I for one would be more than happy to have the Fed buy all $18 trillion TSY CDs outstanding and see how these financial trader types like it. After all, TSY CDs arent important, just ask Cullen.
Dan-
Because increased nominal demand necessarily causes more real production below capacity, its clearly obvious that Govt can increase the real wealth of society simply by increasing nominal representations of financial wealth.
"What worries me about all this monetary manipulation economics is that people attracted by the MMT picture of things are completely missing the real importance and role of government."
10-4 Dan....I can assure you that such a concern is about 30,000 ft. over someone like Roth's head....
I just updated the post with links to Eric Tymoigne's comment and Eric's reply to it.
Steve has also shut down comments not directly relevant to the accounting issues he broached.
I'm ignoring all of this discussion. After 6 or 7 years of trying, I've concluded that MMT is bulletproof. Of course, there are inept MMT supporters and shrewd MMT detractors, but the MMT people basically nailed how the economy works.
TSY CDs are always paid off the same way, a simple debit and credit on a balance sheet. Inflation has nothing to do with it.
Simple debits and credits, conducted without any discipline, can lead to a large net increase in the money stock, and inflation.
Of course MMT has no theory of prices, so has nothing to offer really in this area.
Because increased nominal demand necessarily causes more real production below capacity, its clearly obvious that Govt can increase the real wealth of society simply by increasing nominal representations of financial wealth.
There is nothing "necessary" about it Auburn. How much is produced, and by whom, and who participates in the markets for produced goods, and how those goods are priced are complex social facts that can't be deduced from crude macroeconomic observations about gross aggregates and some kind of hydraulic demand theory. There is no necessary fact that the injection of money into one section of an economy will result in more production - even if more production is possible - rather than a bidding up of prices or just a reduced velocity of money.
Lord Keynes, Post Keynesian Price Theory 101
_________, Gardiner Means on Administered Prices
Fred Lee taught in the UMKC econ department. Gardiner Means was an institutionalist. MMT is selectively built on Post Keynesianism and Institutionalism.
Reynold F. Nesiba, Do Institutionalists and post-Keynesians share a common approach to Modern Monetary Theory (MMT)?
Sorry Dan but if more people hhave more income and go to more restaurants, more food and drinks will be ordered and produced. If people have more money and buy more shoes more shoes will need to be produced. Mark-up pricing and supply expanding before price is a firmly established fact in the post-keynesian world. Where do you get this stuff? If Congress orders 10 more planes from Boeing, 10 more planes will be produced.
Eric Tymoigne, Two Theories of Prices (wonkish).
If Congress orders 10 more planes from Boeing, 10 more planes will be produced.
Sure, in an under-capacity economy. But that is true even if the way the government gets the planes produced is by taxing the monetary savings of people who are not spending those savings.
It is also the case that if Southwest Airlines orders 10 more planes from Boeing, 10 more planes will be produced. This has nothing to do with the nature of the financial instruments that are used.
Over the long run, it is very dodgy to think that the reason economies suffer periods of under-production and under-employment is because there is some kind of monetary shortage.
"Simple debits and credits, conducted without any discipline, can lead to a large net increase in the money stock, and inflation."
Not without velocity.
"Of course MMT has no theory of prices, so has nothing to offer really in this area."
It's not a problem in nominal terms, but in real terms. There. How's that?
"How much is produced, and by whom, and who participates in the markets for produced goods, and how those goods are priced are complex social facts that can't be deduced from crude macroeconomic observations about gross aggregates and some kind of hydraulic demand theory."
Thank God. Otherwise yurass would be totally owned by a spreadsheet.
"When the government spends, that does not necessarily increase the real net worth of the private sector."
That's because the Gov't doesn't spend real net worths, it spends it's own fiat tax credits.
"Simple debits and credits, conducted without any discipline, can lead to a large net increase in the money stock, and inflation."
No it can't. Not when replacing a Treasury. Otherwise the Treasury would have created inflation already.
Unless you're one of those people who believes in the mystical power of government bonds.
There seems to be rather a lot of it around at the moment. They can prevent inflation. They stabilise financial markets. It won't be long before they make tea and crumpets before bringing about World Peace.
Apparently government bonds are required to keep pension funds stable. But never any mention about the change from defined benefit to defined contribution systems that created the instability in the first place.
Of course the real reason financial types want government bonds is the freebie zero-risk income attached to them. And they are spending a lot of time trying to justify why they should get their government subsidy.
Just like everybody else in receipt of a government subsidy does.
"And as if taxes dont drive the acceptance of state currency. "
Taxes are a sufficient reason for the acceptance of a currency but not a necessity. It's important to note the distinction.
A state can *force* the use of its currency if it wants to, but it doesn't have to. In a stable system where people trust the currency because they do and there is sufficient saving, you can envisage a working system with hardly any taxes at all.
"There is no necessary fact that the injection of money into one section of an economy will result in more production - even if more production is possible - rather than a bidding up of prices or just a reduced velocity of money."
Yes there is. Any entity that produces more will undercut and out-compete any other entity that doesn't.
So if you have a genuinely competitive market an injection into that sector will generate more production - because that is the best way to get bigger market share and higher profits.
Which is why any injection carrot should be couple with the stick of a competition investigation, break up and, where necessary, state intervention in the form of a subsidised producer, should there be any price increases.
"Over the long run, it is very dodgy to think that the reason economies suffer periods of under-production and under-employment is because there is some kind of monetary shortage."
Depends on context. It can be a an actual supply side problem, a parasitic private sector plagued with inefficient dysfunctional sectors, a co-opted government full of corruption, resource constraints, etc. But more often that not is a demand side problem, sometimes households are too leveraged proportionally to their incomes to consume, incomes are poorly distributed, productivity gains are not shared by all the population, etc., it can be as simple as that.
Demand side problems are monetary shortages of one type or other, monetary stocks are potential inflation but not necessarily, as price and quantity are two different things, distribution of that stock and propensity to spend that stock also matters. All is tied with the actual underlying structure of the economy, the micro-behavior of the economic actors: individuals and institutions, public and private. Some MMT'ers can be amazed by how reluctant has been the Greek population to dump the euro despite evidence, but it's very easy to understand when you are familiar with the micro behind the dynamics of how the system works over there.
Money printing is no magic Dan, we all know that, fixation over monetary schemes is problematic, I don't think anyone denies that, it's not a magic fix that will solve all our problems. But when you look at the problems we have, a lot of them come from the 'scarcity mindset', and are indirectly created by that mindset. I'm talking about 'money scarcity' mindset, not about 'resource constraints'. Think about how tragic is that humanity is constantly fighting over money tokens. It's tragicomic. A big deal of the wars in the XX century can be tracked down to that, including the two World Wars.
Corruption (in a broad sense) is a response to scarcity, is a survival strategy, corruption at all levels also creates systematic market failures. It introduces incompetency deliberately because resources are not put where they should, instead they are put where they favor the status quo to keep being the status quo, until it all breaks down. Is the history of mankind.
Everyone in this blog is familiar with that context because we are not brainless mainstream economists who don't understand how the real world works with their monetarists shambles, out-of-paradigm Say's law, and have overall higher realism and pragmatism which unlike economists and bureaucrats can get us to acknowledge actual supply side problems (I would include in this category anything related to resources, commodities, environment, population, etc.) if those exist.
...
...
Usually is a mixture of things, too high leverage, pro-cyclical policies by governments and even supply side problems like dependence on certain goods which are a disproportionate part of the basic consumer basket (renting/mortgage, energy expenditure, food, etc.). IMO the world right now is heading towards this context as is highly dependent on certain commodities while the economic activity is depressed due to high leverage over the system, poor wealth distribution etc. and we have been muddling through on it for certain time. Fictionalization and ponzi schemes (.com bubble, now we have a new tech bubble with impossible valuations of startups and repeated housing bubbles) are plaguing the economy and all those derive from th corruption I was talking about before, all are built on top of a dysfunctional political system which is unable to provide real fixes to problems, and all come down in one way or an other to the 'monetary scarcity' mindset. Putting more money on the table in the hands of a dysfunctional system is not going to fix it, but is a necessary part of whatever fixing we come with.
Solutions are not going to happen without major changes in attitude, beliefs and political changes. There is no magic bullet. But sure as hell solving the 'money problem' is part of the solution right now. There needs to be a change in focus, and the good part about MMT is that it shifts the focus from monetary fixation to real resource constraints. It let's us focus on fixing the actual system.
But as Matt says, 30,000 ft over others heads. Most of the people is not talking on this level, they need a change in perception first. Until that's done we are doomed.
"Of course MMT has no theory of prices, so has nothing to offer really in this area."
I'm surprised to see you repeat this tripe, put out by the likes of Sumner and Rowe years ago.
First off the monetarists theory of prices (of which most are a derivative of) is a laughable kindergarten level analysis;
"Take the number of dollars, divide them by the number of things and you get the price level for things in dollars, now if you increase the number of dollars without increasing the number of things you will get inflation....... next question!!"
Actually though MMT does have a theory of the price level and it has to do with the rate that the govt pays for things. Its not as simple as looking at what the govt pays for F15s or oil or even labor and extrapolating to a price level, especially in the face of a govt which has over the last 30 years been more and more based on the idea that it is getting its money from the private sector first, but even monetarists look at things like FFR and IOR and suggest that those metrics have a great effect on price levels by affecting the amount of reserves (high powered money!!!!) in the system. They just don't think the Fed is part of the govt. Thats a huge part of the disagreements in the current environment, the place of the fed within or outside govt.
"Over the long run, it is very dodgy to think that the reason economies suffer periods of under-production and under-employment is because there is some kind of monetary shortage."
Er no. Why is it "dodgy"? Because it does not fit in with your pre conceived beliefs?
Look at Bill Mitchell's work.
Since at least the 1980s austerity has been pursued and government spending demonized.
"They just don't think the Fed is part of the govt. Thats a huge part of the disagreements in the current environment, the place of the fed within or outside govt."
The other is failing to understand that part of 'M' is static and does not flow in an accounting period. The concept of 'M' all flowing is of course the loanable funds assumption - which we know is completely false.
Monetarists and most of the Keynesians, including a good portion of the Post Keynesians, are Central Bank Supremacists. They really believe that the world would be a much better place if the central bank was given to them with all necessary powers and they ran the show forever - with no possible change of direction.
And we've seen how that belief pans out with the ECB actions in Greece.
"Simple debits and credits, conducted without any discipline, "
What do you mean by "discipline"? Does the Treasurer have to be caned before crediting a bank account?
Sometimes its revealing to look into the etymology...
"Money" started as a transliterated figure of speech from the name of Moneta which was the goddess of the Temple in Rome (TIP: not Jerusalem...) where the Roman coins were struck, wiki on goddess Moneta:
https://en.wikipedia.org/wiki/Moneta
So fist came the figurative metaphor (Moneta) then came the metonym (money) ...
Then the word may have been modified via a metalepsis which is another type of figure of speech (a derivative of a first metonomy) we can see, here is the wiki on metalepsis:
https://en.wikipedia.org/wiki/Metalepsis
Here: "metalepsis is a figure of speech in which a word or a phrase from figurative speech is used in a new context......
For the nature of metalepsis is that it is an intermediate step, as it were, to that which is metaphorically expressed (the goddess name was our (TIP: non-Israelite) pagan ancestor's original metaphor for currency authority), signifying nothing in itself (Hellooooo!!!), but affording a passage to something. It is a trope that we give the impression of being acquainted with rather than one that we actually ever need. (Helllllooooo!!!!) — Quintilian[2]
But the sense is much altered & the hearer's conceit strangely entangled (Hellllooooo!!!!) by the figure Metalepsis, which I call the farfet, as when we had rather fetch a word a great way off than to use one nearer hand to express the matter as well & plainer.(Helllllooooo!!!!) — George Puttenham[3]
In a metalepsis, a word is substituted metonymically for a word in a previous trope, so that a metalepsis can be called, maddeningly (Hellllloooooo!!!!) but accurately, a metonymy of a metonymy.(helllllooooo!!!!!) — Harold Bloom
Key take away: "used in a new context" (hellllooooo!!!!!)
So the word "money" picked up a new context (beyond its original metonym figure of speech for the various denominations of our (non-Israelite) state currency) and was made to apply to valuable things in general) and we can see people, of imo lesser intellects, today arguing constantly over the scope/applicability of the new context ...
So I for one dont have a lot of intellectual respect for people today that think it is a good idea to be arguing or debating about the scope of meaning and context of derivative words and/or second order figures of speech of figures of speech...
As far as our economic system, I'd rather spend time in quantitative and qualitative analysis of our actual real material provisioning system operations and that system's inter-relationship with our state currency systems in our separately administered nations...
Since at least the 1980s austerity has been pursued and government spending demonized.
That has nothing to do with whether or not there is a money shortage.
What do you mean by "discipline"? Does the Treasurer have to be caned before crediting a bank account?
I mean that a government that resorts to much too manufacturing the money it spends because it does not have the political balls to tax people when it needs to taxing them is behaving in an undisciplined way.
Deficit spending is a useful countercyclical tool. But permanent structural changes to government outlays should be matched by permanent structural increases in revenues, because those higher outlays will take place during both boom times and bust times.
Dan they wont get elected on a tax increases platform...
People want to save because the leading flow for things like healthcare, college education, retirement incomes, etc are too small...
So if govt (under current %'s) comes in and tries to take away the voters ability to save, by proposing tax increases, then they rightly get thrown out of office...
The 1% is 1%.
You need 51% to win.
If quality/accredited public University was offered for no student tuition, and public retirement income was raised along with full provision of quality healthcare THEN people would not feel like they would have to save as much...
Right now university is through the roof, retirement income is shitty and Medicare is under constant assault, many less than retirement age have no healthcare...
So you come into this environment, and say "we need to raise taxes!" and you get thrown right the hell out...
This just happened in my state, (Maryland) OMalley was a pretty effective governor with a squeaky clean administration in a huge Democrat state, buthe put thru a bunch of nickel/dime tax increases and the Democrat candidate for Gov to replace him got blown out in a landslide by a GOPer in a huge majority Democrat state...
I have some close friends who are state Democrat insiders and they said they just couldnt overcome the negative view of OMalley in this regard and got wiped out...
I forgot who said it it might have been someone over at Neil's but it may be an easier explanation of MMT than trying to explain to someone why their taxes have to go up...
Dan is saying that MMT is out of paradigm with conventional paradigms and, of course, we agree with him.
I agree that MMT as a fix within the status quo is a palliative that won't fix the underlying problems that are cultural and institutional rather than economic since, being an economic solution, it doesn't address the underlying factors that are chiefly operative.
The economics of a society flows from the cultural and institutional structure. The dominant cultural structure in the US is liberalism based on rugged individualism and this translates into an institutional structure in which private property rights are superior to human rights and civil rights and the environment viewed as private property can be used by property owners independently of externality.
The central purpose of the American Empire is to impose this cultural and institutional structure on the rest of the world monolithically. This is going to end in a great battle unless the Empire peters out for other reasons. One reason would be changing the economic status quo, so there will be immense pushback against that ever happening democratically.
Universal Medicare would actually reduce health care inflation and total health care industry spending. Isn't that the point, tp bring spending down to like 12% of gdp instead of 18%. That's almost a trillion in savings. So you implement Medicare for all and stand ready to increase the Medicare tax portion of fica if the resultant increase in consumer spending becomes too great due to increases in disposable iincome from health care spending personal outlays . it makes no sense to increase taxes at the start of the program since we have no idea how the macro effects will play out. Downsizing the health insurance industry by hundreds of billions a year will have huge de flationary bias.
Likewise with free university tuition. There is o reason to believe a $80 billion permanent increase in govt spending will be inflationary. So why include taxes to pay for it (which are irrelevant to the spending anyway)?
Gee, thanks for that note of optimism, Tom.
When you see a presidential candidate and a US senator calling for the president to order the US military to shoot down Russian planes over Syria, I don't think I am exaggerating.
HRC and McCain on board too.
Clinton, Cotton, McCain & Fiorina call for no-fly zones against the Russians
Draw your own conclusions.
Does Putin believe he can play in America's sandbox without repercussions? Shooting down Russian planes is an option. And if a Russian pilot were to fall into the hands of the opposition... ouch!
Does MMT 'accounting' add up to full employment? That is Prof. Mitchell's focus, in a manner of speaking, and it is mine.
Does Putin believe he can play in America's sandbox without repercussions? Shooting down Russian planes is an option
More indication that a great battle is coming.
BTW, notice how Obama is not taking about Syria as a matter of US national security or even vital interest. He is talking about removing a "dictator" unilaterally because the UN security council will never approve it, even though the Syrian president is elected and the Saudi royal family calling for Assad's removal is not. And who are logical replacements for Assad. Everyone involved admits, it's terrorists.
Why would the US really being doing this, since the putative reason is so clearly BS and there are so many consequences that are obvious to anyone paying attention?
The US is backing Sunnis against Shi'ites in a religious conflict that goes back to the Battle of Karabla in 680 CE. Why, one wonders.
The US is also defending the interests of Israel hardliners who are siding with the Sunnis. There is the added benefit that Sunni terrorists are enemies of Russia and China, which the US has declared as its chief adversaries geostrategically.
None of these actors are threatening US security or vital national interests. This is purely an imperial adventure to expand sphere of influence and control.
Why has the Middle East been a focus since WWI? It is energy-rich.
Empires are willing to go to war over this. A coalition is now building to take the American Empire and its vassals on.
Read the tea leaves.
Dan is saying that MMT is out of paradigm with conventional paradigms and, of course, we agree with him.
More than that Tom. I'm saying important parts of MMT are either confused or just wrong. Of course, many of the conventional "paradigms" are wrong too.
For Syrians, it will be a great battle. Between the US and Russia it will be more symbolic. Russia's demonic status will be reaffirmed, and the Cold War will resume in earnest. All of the destruction wreaked by American foreign policy in the Middle East will be forgotten and excused by the average American citizen.
I don't believe the Russian naval base in Tartus is important enough to risk a bigger confrontation. This isn't Ukraine and the Russians don't have enough skin in the game to be willing to call America's bluffs. It is up to Assad's supporters to fight to the death or flee for their lives.
Perhaps this could be the beginning of a great schism, which will reinforce a multi-polar world.
The US is backing Sunnis against Shi'ites in a religious conflict that goes back to the Battle of Karabla in 680 CE. Why, one wonders.
As was stated elsewhere, there are no moderates in Syria (or in the Middle East). Hence the conditions exist for war, chaos and unending bloodshed.
If Russia and the BRICS want to challenge American domination in the area, they will need to find moderates they can work with. Assad-types won't cut it for them in the long run.
Dan More than that Tom. I'm saying important parts of MMT are either confused or just wrong. Of course, many of the conventional "paradigms" are wrong too.
Who do you think is correct?
@ Bob
We'll see. Lines being drawn in the sand and neither Russia nor China bluff. They just send in the military. Is the US ready to risk WWIII over this?
Depends on who is in power. I doubt that Obama is.
If McCain were president, we would already be fighting it if we can take his word. And based on what the candidates are saying now, we will be after the election. Of course, campaigns are long way from reality.
What do you mean? Obama is in power until 2017, next election is on Nov 8, 2016. Events appear to be moving more swiftly than that timetable.
It's necessary to understand that Russia and China, as well as Iran, view this as an existential threat to their respective countries. Is the US and NATO ready for a war with Russia, China, and Iran.
The US and NATO may see the handwriting on the wall and want to move now before Russia, China and Iran get any stronger.
Over the next couple of years the window of opportunity will be closing as Russia and China build out their militaries and form strategic alliances, for example, with Iran.
There are already three powder kegs, MENA, Eastern Europe and the South China Sea. Won't take much to touch one off and then the others will likely go off, too. Wars are destabilizing and unpredictable once they start. This is what happened in WWI, for instance. An incendiary situation got out of hand.
Too late to erect a no-fly zone in Syria. While the US was talking about it, Russia already set one up.
http://fortruss.blogspot.com/2015/10/russia-does-not-discriminate-between.html
A no-fly zone to protect their own forces, or to prevent anyone from carrying out air strikes over Syria? The article is not clear on this.
If it's the latter, US officials will start shrieking about it. This means war!
Doesn't mean that the Russians would necessarily prevent the US military from flying over Syria. It just means that the US cannot do it exclusively or with impunity, or establish an exclusive US no-fly zone. NO, the Russians are not going to be shooting down US planes. They are just letting the US know they can. Consider it FYI.
At a minimum the US and its allies will do the same. They'll want to protect their terrorists but will claim that this is part of collaboration with the Russians. But they're already pushing for an exclusive zone in the court of public opinion.
More subterfuge will be directed to the ground war. Need some incidents to paint the Russians as the bad guys. This is going to be escalated or resolved on Obama's watch.
Here is another tack - no-fly zone in the interest of saving lives:
http://www.huffingtonpost.com/rabbi-shmuly-yanklowitz/syria-no-fly-zone_b_8223916.html
Followed by an escalation of the ground war.
"I agree that MMT as a fix within the status quo is a palliative that won't fix the underlying problems that are cultural and institutional rather than economic since, being an economic solution, it doesn't address the underlying factors that are chiefly operative."
Warren says that as you get more granular about the specifics of the economy, political preferences emerge more and more. (paraphrased)
Warren says that as you get more granular about the specifics of the economy, political preferences emerge more and more. (paraphrased)
Right, and that is the problem. Reforms to the degree they take place are merely superficial window dressing that creates a façade to fool the rubes. Nothing actually change unless it changes for the worse as far as reform goes.
That is inevitable when a country is governed by those that own it instead of the people that populate it. In a nutshell that is the difference between capitalism and socialism.
No time to say more right now, but Tom is wrong here. (I must reserve "very wrong" for Dan :-) ) Think things through, like the plutocrats do. Don't ignore the obvious. They know, have always known that a JG kills them dead, changes the structure of the economy, addresses the "underlying factors" directly. Cultural & institutional factors cannot be separated from economic ones the way Tom did.
Cultural & institutional factors cannot be separated from economic ones the way Tom did.
That's why I am a socialist socially, politically and economically, and you are a capitalist, Calgacus and others who think that the JG alone is sufficient to bridle capitalism. :)
"Lerner's mistake" was being influence by his teacher, Hayek, to the degree he abandoned socialism for capitalism, believing it is possible to domesticate a wild beast.
I am willing for an experiment conducted by instituting MMT policy to see how long it takes for capitalism to throw it off again.
Well if that is what being a capitalist means, then I am one, and I had better inform my bank and get a loan for an undertaking of great profit, no one to know what it is. Marx at times said that a JG was enough, so he was then also such a capitalist. He also stupidly called it "a pious wish", based on superior magical rainbow unicorn thinking, of course the great majority of Marxisms following the latter. And of course the capitalists themselves are such capitalists. They know what the real enemy of wild beast capitalism is - universal offer of living wage employment not-through-them. It is time for everyone else to be in on their secret.
I am willing for an experiment conducted by instituting MMT policy to see how long it takes for capitalism to throw it off again.
Alas, I don't think you have a medium sized country to institute one in. I would bet my life that you would admit you were wrong if you did. That that time period is the same one it is taking to formally reinstitute chattel slavery.
I, as well, want to kill "wild beast capitalism". And basically the bleeding-heart liberal MMT academics & Mosler do too. But I don't think it is aids discusion to label those who suggests MMT & the JG "is enough" "a capitalist". While those who say the JG is a "palliative" & that some other "strong medicine" is needed are "socialists".
I, for one, say that these other polices are the palliatives. That they have shown themselves to be such both in theory and a great deal of experience of the past two centuries. All of them put together, in the absence of an implicit (or far better explicit) JG are "not enough". So then in my view, you are prescribing "reforms", a palliative merely labelled "strong medicine" and are thus the "capitalist", while MMT/the JG is "revolutionary", "socialist". Even more, to anticipate an objection, that this is not a matter of "presuppositions" or "viewpoints" but something that any careful and serious person is forced to conclude is dictated by logic & experience, as much as any accepted scientific theory relied on by any user of modern technology is. Sufficiently many experiments have already been conducted.
Europe vs the USA is such a real experiment that I claim supports my side. Without full employment, any trace of the JG, European Social Democracy showed itself to be empty and led to a more unequal, economically anemic continent in comparison even to the armed madhouse that is the USA.
Without the alternative of a gift economy, I would have to agree with Calgacus.
That's for your views, Calgacus. The way I read Marx, his solution was worldwide worker revolution, not a JG. Let's be serious about the political economy proposed by Marx. It was control of the means of production by the people that use them rather than the people that own them. Perhaps I misunderstood him?
Without the alternative of a gift economy, I would have to agree with Calgacus
A high proportion of the informal economy, which is the second largest in the world, is a gift economy. It's been in place millennia before the formal economy began to develop.
The potential is there, but it has to be an alternative for the unemployed and the poor. Transitioning from capitalism to "upper stage" communism is theorized to require generations. Until the pervasive mindset of reciprocity withers away, what do we do?
I like Professor Mitchell's argument because it challenges the notion that unemployment is needed to control inflation. It claims to be a workable alternative. It's realization requires a much shorter transition.
Longer term, raise the level of collective consciousness, but if we don't start now it will just take longer to get there and given current conditions, there may be no longer term if we continue on the present course.
Always and everywhere, the wise have counseled that there are not problem in the world. The problems originate in the mind through ignorance owing to the blinders of self-interest and from the heart owing to narrow desire. Ignorance in this sense is essentially referring everything to the limited self, which is a form of idolatry, and idols have feet of clay resting on sand.
Raising collective consciousness means expanding apprehension and feeling for universality.
The problem with liberalism is confusing freedom with license to pursue self-interest. This is the basis of economic liberalism aka capitalism. It is not only doomed owing to its internal contradictions, but it dooms those who follow it to destruction, not only their own but also any system based on it.
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