I sent an email to Caroline Baum today. She's a columnist for Bloomberg.com. (Bloomberg is notorious for their terribly misinformed economic "columnists" and Baum is a good example.)
I was responding to an article she wrote entitled, "Rear-View Mirror Can’t Forecast 2011 Economy."
In the article she attempts to argue that the 1.8% Q1 GDP growth was an aberration. According to her, one of the reasons why we should be getting ready for boom times is because (sigh), finally that darned, growth killing fiscal stimulus will soon end.
This is her "logic"...
|"Finally there are the waning effects of “fiscal stimulus,” or government spending by another name. Since one dollar can’t be spent by two entities at the same time, government spending can only substitute for private spending. Any resulting increase in GDP is temporary."|
So, being the masochist that I am, I decided to send Ms. Baum an email and ask her to clarify.
Here's how it went:
Me: "How does the “non-government” get the dollars to satisfy their tax liabilities or, to “net save” in that unit of account?"
(Sorry for the formatting. Baum writes in all CAPS, like an angry pwerson, so that's why the formatting is like this)
C. Baum : "I DON'T UNDERSTAND THE QUESTION BUT I SUSPECT YOU ARE ONE OF THOSE MMTERS."
Me: LOL!!! YOU RESPOND TO MY QUESTION WITH A SNARKY REMARK. OKAY.
SO, THE QUESTION SEEMS TO BE PRETTY SIMPLE. HOW DOES THE NON SOVEREIGN, I.E., THE PRIVATE SECTOR GET THE DOLLARS TO SATISFY THEIR TAX LIABILITIES? WHERE DO THEY GET THOSE FROM? IT HAS TO COME FROM SOMEWHERE? YOU SAY THE GOVERNMENT AND THE PEOPLE CANNOT SPEND THE "SAME DOLLAR." WHAT IN THE WORLD DOES THAT MEAN? DOES THE GOV'T HAVE TO GET BACK THE DOLLARS IT ISSUES IN ORDER TO BE ABLE TO SPEND? IS THAT WHAT YOU ARE SAYING?
C. Baum: I'M TALKING ABOUT BASTIAT'S BROKEN WINDOW. ACTUALLY AFTER BEING ATTACKED BY MOSLER FOR A SPELL, I FINALLY UNDERSTAND AFTER READING ROBERT MURPHY ON MISES YESTERDAY WHAT MMT IS ALL ABOUT. NOW IT REALLY MAKES NO SENSE. I DON'T NEED THE GOVT TO SPEND SO I CAN SAVE. THAT'S LUDICROUS. I CAN'T IMAGINE ANY SMART PERSON CAN THINK THAT. MAYBE YOU CAN ANSWER A QUESTION: WHY IS IT CALLED MMT SINCE IT'S ABOUT FISCAL POLICY.
Me: MOSLER ATTACK?? HARDLY. HE'S THE MOST RESPECTFUL AND POLITE PERSON I HAVE EVER MET. THAT "ATTACK" WAS YOUR OWN COGNITIVE DISSONANCE. (CREATES STRESS, INTERNAL CONFLICT. MAY HAVE CAUSED YOU TO PERCEIVE IT AS AN ATTACK.)
MURPHY'S PIECE MAY WELL DESCRIBE AN ECONOMY OF PRIVATE ACTORS WHERE THERE IS NOT AN AUTHORITY THAT IMPOSES A TAX THAT CAN ONLY BE PAID IN UNITS OF ITS OWN CURRENCY. IF A WORLD LIKE THAT EXISTS, PLEASE LET EVERYONE KNOW IN A NEW COLUMN. I CERTAINLY AM NOT AWARE OF ONE.
I BELIEVE THE TERM MMT CAME ABOUT FROM A BLOG POST BY SOMEONE BACK IN THE 1990S AND IT WAS NOT AN MMTER. (DON'T QUOTE ME.) HOWEVER IT CAME ABOUT, THE NAME STUCK.
C. Baum: MOSLER USED TO SEND ME NOTES AND SEND TO HIS ENTIRE DISTRIBUTION, SO THEN I HEARD FROM THEM. WHAT IS HIS MOTTO? THERE IS NO PROBLEM THAT CAN'T BE FIXED BY MORE GOVERNMENT SPENDING? C'MON.
Me: NO, THAT IS CERTAINLY NOT HIS MOTTO. YOUR STATEMENT SHOWS THAT YOU HAVE NOT EVEN TAKEN THE TIME TO INVESTIGATE MMT. YOU CRITICIZE IT WITHOUT EVEN UNDERSTANDING IT.
C. Baum: B/C THERE IS NOTHING TO UNDERSTAND BUT SOME ACCOUNTING TAUTOLOGY. I DID LOOK AT IT AT THE TIME. SO PLEASE DON'T ACCUSE ME.
MOSLER'S LAW: THERE IS NO FINANCIAL CRISIS SO DEEP THAT A SUFFICIENTLY LARGE TAX CUT OR SPENDING INCREASE CANNOT DEAL WITH IT.
THE GIST IS THE SAME
Me: THAT'S RIGHT, READ WHAT YOU WROTE:
YOU SAID THAT MOSLER STATES, "THERE IS NO PROBLEM THAT CAN'T BE FIXED BY GOVERNMENT SPENDING."
YET WHAT HE SAID (FROM THE ACTUAL QUOTE FROM HIS WEBSITE, WHICH YOU INCLUDED IN YOUR EMAIL TO ME) IS, "THERE IS NO FINANCIAL CRISIS SO DEEP THAT A SUFFICIENTLY LARGE TAX CUT OR SPENDING INCREASE CANNOT DEAL WITH."
TWO DIFFERENT THINGS.
ANYWAY, NICE CHATTING WITH YOU. GOOD BYE.
You get the "gist" of it. ;)
Oh yes, the "elites" are getting nervous now. We have entered their domain and one by one they are getting picked off. They've already lost Goldman, Morgan Stanley and the other smart ones among their ranks will soon become converts, too! Baum will certainly be among the last to turn, if ever.