Lots of good comments.
Warren: Comes down to further purpose.
If the purpose is simply to show that one sector's increase in net financial assets have to come from another's decrease, 2 sectors are fine, and maybe 3 to further make the point and show the possibilities.
If you are trying to determine if the household sector is getting over leveraged, or is under leveraged and might be ready for a credit boom, you want to further subdivide the domestic sector into households and businesses, etc.
So subdividing sectors can be a tool of discovery.
And when looking at the euro, turns out the high deficit member nations have high household savings of net financial assets with a very low leveraged consumer, whatever that might mean. Again, it's all about your further purpose of analysis.
So I'd ask JHK, why do you care about 'savings per se' whatever that is? and 'what do you mean by 'the underlying savings dynamic' and why do you care about it?' and yes, corp savings can be 'condensed' to households, which is the argument for many things (including eliminating all corporate taxes) but what specifically are you trying to get at here? that is, what's the further purpose of you're inquiry? And high corporate liquidity probably isn't going to help someone make his mtg payment even though he is a shareholder via his pension plan, etc.
that is, JHK is stating a few things, obvious to some of us, not so obvious to others, but without some further purpose expressed it's not all that interesting and I don't see much to comment on?12:19 PMWinterspeak.com
Confused about MMR
by Winterspeak
9 comments:
Warren is so clear-eyed when it comes to understanding the dollar as a public monopoly.
...and at the end he knows how to get right back on message:
"And for all of it's natural wealth and small population, Canada's unemployment- those willing and able to work who can't find paid work- is a total disgrace."
All of this has the potential to distract from the main message to policy makers.... it needs to be shut down ASAP.
Resp,
My reflection (although I haven't followed debates closely):
Consider an economy where the Private Domestic Sector Net Financial Assets are not growing. MMT acknowledges that the economy can still grow. Economic growth can be supported by private sector credit expansion. I believe this is one of the points JKH is trying to get across. I don't think this is news for anyone though (not for me at least, and I wrote about this on the mmtwiki a long time ago).
However, MMT emphasizes that private sector credit expansion is not a sustainable growth path. Consider ever growing private credit expansion leveraged on top of a constant amount of Default Free Financial Assets (or Private Domestic Sector Net Financial Assets if you will. Eventually, this would presumably increase economic instability, with bubbles followed by recessions etc - and ultimately growth is inhibited. (Ok, that last sentence is my own interpretation - I haven't seen MMT'ers expand much on it.)
So: Yes MMR'ers, the economy can grow without increasing NFA. Real wealth can grow etc. But again, MMT says (I believe) it's not a sustainable growth path. (Granted - this is economic "theory" - not something MMR is likely to touch). It is rather the theoretical (yes, sorry) and practical norm that NFA would increase in a growing economy, and is theoretically likely to be healthier.
It's been said so many times by MMTers that it shouldn't have to be repeated.
In the wake of a massive, potentially economy-destroying, everyone's-wealth-destroying financial crisis/collapse, some people are still determined to argue that economic growth on the back of ever greater leverage and debt is just fine. All so that they can make a specious half-assed get-the-government-outta-my-economy argument with no real substance to it at all.
Hugo: Eventually, this would presumably increase economic instability, with bubbles followed by recessions etc - and ultimately growth is inhibited. (Ok, that last sentence is my own interpretation - I haven't seen MMT'ers expand much on it.)
This is Minsky's financial instability hypothesis, and it is core MMT when combined with vertical money and the sectoral balance approach. For example, MMT economists were out in front predicting what would happen consequent to the Clinton budget surplus as a result of financial instability. So I would say that they have said a lot about it.
@Both: Hmm, you're right.
Just fyi, NEP recently opened a forums discussion:
http://www.neweconomicperspectives.org/p/forums.html#/
Might be a good place to engage the core MMT developers directly on some of these issues. I was going to start a topic on why they keep using the word "the" in a sentence without ANY explanation whatsoever. But I'm gonna wait until there's more activity before getting kicked out. ;)
Thanks Trixie, I hadn't seen that! Will sign up (although I've recently not been engaging much).
Outstanding Hugo. I started an 'Introduction' topic (in the only way I know how) and fully expect you to participate with a link to all the work you've done on MMT Wiki. When you are so inclined, of course. Or, I will totally take credit. :)
Post a Comment