An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
wouldn't everyone but pure horizontalists and verticalists be "diagonlists"?
MMT is not "against" horizontal money flow. Warren is on the board of directors of a bank for crying out loud!!! This is somewhat silly but still valuable I suppose in thinking in terms of the degree to which a person or theory is weighted to h or v. None-the-less the point is what is the value and function of h versus v money and when is it best to increase or decrease one or another depending on the economic conditions.
These guys don't get it, do they? Where would be Goldman Sachs be without the absolute monopoly and coercive power of the federal government has over the dollar?
When everyone is dancing things don't matter a single bit: central banks don't control the money supply (they are delusional), but when things get ugly is when you see where the true power resides. So private sector can create fake money if it wants (limited by some laws and regulations), but they don't control the net creation of money.
If banks hadn't been bailed out in 2008 and more importantly, all the liquidity and deficit/spending, USA would be in a depression worse than that of the 30's if the government hadn't steep in to plug the black hole of unfunded liabilities with fresh printed money.
That's the total absolute monopoly over something: create something out of air that you only can create! But yes, the system is diagonal: banks have co-opted the system, where they hide behind this power of the state to create money at their demand when they have trouble with their "fake money" (aka horizontal, credit, money) because unfunded liabilities and deflating pressures.
You know Cullen, there is only one reason there can be deflation in the first place: because credit money is not the real deal. If you think about it a little bit you will understand that if the money supply was constant, there could NEVER be deflation, because all the money would be put to some use, so while you would get productivity gains and cheaper prices in some sectors, the money would flow towards other sectors or assets increasing the overall price level. As there is always appetite for money in a capitalist economy, money would keep flowing thought the economy keeping overall price constant eventually
But to get there though from the current state of affairs we would have to endeavour a period of painful deflation first so the system accommodates to the new monetary structure. Not making claims if this would be be better or worse, just trying to point why deflation is the cause of 'fake money' used by non-monopolists.
What you are reading may sound like science fiction to you, but is not, that's how humanity has liven for the most time, with fairly constant supplies of money (very slowly increasing or not at all in some instances) and no-growth or very slow growth. A period that illustrates this phenomenon quite well is the Middle Ages (a part) in Europe. There, deflation was never a big deal (despite savings desires by the rising merchant class), there was little spare money to accumulate, and that wealth was accumulated by some lords, kings etc. (while other spent). the system was fairly constant over centuries specially in the early and high middle ages.
The contrary can happen though: You could have structural inflation with a constant money supply though, because of slack of supply and falling productivity, and Europe suffered some of these too, supply shocks which caused famine, wars and other nasty stuff.
There is only deflation because non-monopolists are faking money! If they would be truly printing then the total of unfunded liabilities would be zero and deflation trends could never happen at all (also inflation would rise much quickly).
Obsession over public deficits and NAIRU are a ways of the fakers to control overall inflation by creating net money so they can print more fake stuff to earn profits, and indirectly they create these boom-bust cycles.
At one point in the interview she discusses a speech she’s been reading by a Bank of England member. She’s convinced it was written by Goldman Sach’s – his former employer. I get a similar feeling reading pieces like this from Cullen these days.
Cullen knows damn well why MMT’ers prefer vertical actions. Horizontal actions have winners and losers. Horizontal actions also change the behaviors of bankers and that isn’t necessarily a good thing. If you want to keep the banking system from blowing another bubble you need to tightly regulate it. If you want to tightly regulate it you need to provide much more interest rate stability for the bankers, which means less monkeying around with horizontal policy moves. There are logical reasons for the vertical preference, not just a desire to find a reason to have the “government” do it.
Horizontal actions REQUIRE vertical actions to be sustainable.
In a horizontal-only system the amount of money required to extinguish the liabilities created would exceed the amount created because of the interest.
Un-possible and doomed to fail (unless re-sets were built into the system, which is a vertical operation).
Vertical actions do not depend in any way on horizontal actions in a mathematical sense.
Apparently the blog swallowed my post, but this time I copied it first, you didn't get me!
These guys don't get it, do they? Where would be Goldman Sachs be without the absolute monopoly and coercive power of the federal government has over the dollar?
When everyone is dancing things don't matter a single bit: central banks don't control the money supply (they are delusional), but when things get ugly is when you see where the true power resides. So private sector can create fake money if it wants (limited by some laws and regulations), but they don't control the net creation of money.
If banks hadn't been bailed out in 2008 and more importantly, all the liquidity and deficit/spending, USA would be in a depression worse than that of the 30's if the government hadn't steep in to plug the black hole of unfunded liabilities with fresh printed money.
That's the total absolute monopoly over something: create something out of air that you only can create! But yes, the system is diagonal: banks have co-opted the system, where they hide behind this power of the state to create money at their demand when they have trouble with their "fake money" (aka horizontal, credit, money) because unfunded liabilities and deflating pressures.
You know Cullen, there is only one reason there can be deflation in the first place: because credit money is not the real deal. If you think about it a little bit you will understand that if the money supply was constant, there could NEVER be deflation, because all the money would be put to some use, so while you would get productivity gains and cheaper prices in some sectors, the money would flow towards other sectors or assets increasing the overall price level. As there is always appetite for money in a capitalist economy, money would keep flowing thought the economy keeping overall price constant eventually
But to get there though from the current state of affairs we would have to endeavour a period of painful deflation first so the system accommodates to the new monetary structure. Not making claims if this would be be better or worse, just trying to point why deflation is the cause of 'fake money' used by non-monopolists.
What you are reading may sound like science fiction to you, but is not, that's how humanity has liven for the most time, with fairly constant supplies of money (very slowly increasing or not at all in some instances) and no-growth or very slow growth. A period that illustrates this phenomenon quite well is the Middle Ages (a part) in Europe. There, deflation was never a big deal (despite savings desires by the rising merchant class), there was little spare money to accumulate, and that wealth was accumulated by some lords, kings etc. (while other spent). the system was fairly constant over centuries specially in the early and high middle ages.
The contrary can happen though: You could have structural inflation with a constant money supply though, because of slack of supply and falling productivity, and Europe suffered some of these too, supply shocks which caused famine, wars and other nasty stuff.
There is only deflation because non-monopolists are faking money! If they would be truly printing then the total of unfunded liabilities would be zero and deflation trends could never happen at all (also inflation would rise much quickly).
Obsession over public deficits and NAIRU are a ways of the fakers to control overall inflation by creating net money so they can print more fake stuff to earn profits, and indirectly they create these boom-bust cycles.
If we're talking about government policy, there there is no such thing as a horizontal action. As I understand it, when Cullen uses the word "horizontal", he is just referring to transactions between private sector entities, and when he uses the word "vertical", he is referring to transactions between the government and some private sector entity. So Treasury transactions with the private sector and Fed transactions with the private sector are both vertical transactions.
Both monetarists and MMTers propose policies - that is, government actions - that are designed to influence horizontal transactions. They just differ over the channels through which this government influence should be exerted and the transmission mechanisms that transmit government action into private sector effect.
"MMR" is a path? That makes it sound a bit like a religion.
"Horizontalists (circuit theorists like Marc Lavoie and Steve Keen for instance) will generally focus primarily on private credit and ways that policy can influence private credit."
I guess that means Cullen Roche hasn't read anything by Marc Lavoie then.
"MMR takes a more balanced approach to the monetary system"
No, "MMR" takes a more Cullen Roche approach to the monetary system. Stop confusing the two.
"The key here is understanding that we are not closed minded to monetary policy"
The key here is understanding that the MMT preference for ZIRP does not make them "closed minded".
"MMR does not embed specific policy in our approach"
You specifically reject certain policies and advocate others. So stop with the nonsense.
“better to have and not need than need and not have”.
Pointless catchphrase. A central bank does not magically lose the ability to set interest rates or conduct other forms of monetary policy once it opts for a ZIRP.
"we must acknowledge that we have a hybrid monetary system with a private credit system (the horizontal component) and the government (the vertical component)."
Really? Who would have thought?
"The horizontal component does not exist to serve public purpose."
Really? I thought the financial meltdown and rampant financial fraud was all about serving public purpose. How odd.
"Rather, it exists because the US monetary system is designed to disperse power away from a centralized government"
Ah, banks provide checks and balances to what would otherwise be government tyranny. Blankfein and Dimon are helping to keep us free from state oppression. Got it.
"(it just is what it is, whether workable or not, right or wrong)."
Yeah but you think it's right though, don't you? Stop pretending and just admit it, it's nothing to be ashamed of.
"In this regard, we find the idea of a “money monopolist” misleading and inapplicable to the way our monetary system is structured."
That's because you refuse to understand what Wray means when he uses the term. You're fabricating a stupid argument.
"This focus on a “money monopolist” conflates the design of our actual system and eliminates potentially useful policy responses."
Technically a meaningless sentence.
Yes MMTers tend to advocate ZIRP. No, they don't think changing interest rates is generally good policy. Yes they want to reform the banking system. Yes it's still possible to change interest rates and issue government debt within an MMT framework if you really want to. Yes there are alternative approaches to monetary policy that compatible with MMT. Is that reasonably clear?
Abba Lerner advocated that vertical and horizontal should be combined: put another way that monetary and fiscal policies should be combined. In other words he said that in a recession, the government / central bank machine should just create new money and spend it into the economy (and/or cut taxes). I agree.
I actually did a post on my own blog setting out sixteen reasons against implementing monetary or fiscal policy alone. See:
"…sixteen reasons against implementing monetary or fiscal policy alone…"
I don't think that's what the disagreement is about.
MMR seems to be promoting the idea that horizontal is the main mover and vertical operations should be on stand-by available when needed.
Horizontal DEPENDS upon vertical to function, otherwise it's a loser. The reverse is not necessarily true.
Horizontal actions to promote demand also seems like a bad idea. Basing growth on the spending of Income that hasn't been earned yet doesn't seem prudent. There is a hard ceiling in there somewhere. We've reached it.
For investment it's a different story, but by definition Investment is an extractive process that depends on vertical to succeed (In the aggregate).
"In a horizontal-only system the amount of money required to extinguish the liabilities created would exceed the amount created because of the interest"
Pretty powerful Paul.... sounds like a good reason to set the rate to zero.
"In a horizontal-only system the amount of money required to extinguish the liabilities created would exceed the amount created because of the interest"
This is what drives the treadmill of finance capitalism by creating debt serfs.
The dude just doesn't understand the important of Minsky. He's claimed multiple time to be working in the Minsky tradition, but I doubt he's read any of his work.
'MMR' is a 'path'? Makes it sound a bit like a religion or something.
"Horizontalists (circuit theorists like Marc Lavoie and Steve Keen for instance) will generally emphasize private credit and ways that policy can influence private credit."
I guess that means Cullen Roche hasn't actually read anything by Marc Lavoie then.
"MMR takes a more balanced approach to the monetary system."
No, 'MMR' takes a more Cullen Roche approach to the monetary system. Stop confusing the two.
"The key here is understanding that we are not closed minded to monetary policy"
The key here is understanding that advocating a ZIRP does not make you "closed minded".
"MMR does not embed specific policy in our approach"
You specifically reject certain policies and advocate others. So stop with the nonsense please.
"we take the approach of “better to have and not need than need and not have”."
Pointless stock phrase, pointlessly rolled out yet again.
A central bank does not magically lose the ability to change interest rates or engage in other forms of monetary policy just because they opt for a ZIRP. Your little catchphrase is wholly irrelevant.
"our focus on operational realities"
No, your focus on Cullen Roche's odd interpretation of 'operational realities'.
"we must acknowledge that we have a hybrid monetary system with a private credit system (the horizontal component) and the government (the vertical component)."
Really? Who would have thought?
"The horizontal component does not exist to serve public purpose."
Really? I thought the financial meltdown and rampant financial fraud was all about public purpose. How strange.
"it exists because the US monetary system is designed to disperse power away from a centralized government"
Ah, so the banks provide checks and balances on what would otherwise be government tyranny. Blankfein and Dimon are helping to protect our freedoms against state oppression. Got it.
"(it just is what it is, whether workable or not, right or wrong)."
Yeah but you actually think it's right, don't you? Stop pretending and just admit it. It's nothing to be ashamed of.
"we find the idea of a “money monopolist” misleading and inapplicable to the way our monetary system is structured."
That's because you refuse to understand what Wray means when he uses that term. You are fabricating a daft and irrelevant argument, as usual.
"This focus on a “money monopolist” conflates the design of our actual system and eliminates potentially useful policy responses."
Pretty meaningless sentence.
Yes MMTers generally advocate a ZIRP. No MMTers do not think changing interest rates is generally good policy. Yes MMTers want to reform the banking system. Yes it is still possible to change interest rates, issue government debt or engage in other forms of monetary policy within an MMT framework if you really want to. Yes alternative forms of monetary policy are compatible with MMT. Is that reasonably clear?
I think we're ignoring the political dimension. MMT is too progressive for the MMR folks. They want to minimize the role of government in the economy. They want to retain MMT's insights about how the money system works, but also to provide reasons for using the vertical component of the system as little as possible while hyping the horizontal component dominated by the financial types as the real engine of growth and change.
So, in grabbing onto the term "diagonalist" they're promoting a new label for people who share their view that it's good to limit vertical activity and keep it on standby. They're trying to say that MMTers aren't diagonalists because they emphasize the vertical component too much.
But really both approaches recognize the vertical and horizontal aspects of the system. the difference is normative and political. The MMR people want to normatively and politically constrain the Government spending, like the neo-liberals. MMT has no such bias. It's economics for the public purpose without worrying about whether Government is important in solutions or not.
‘MMR’ is a ‘path’? Makes it sound like a religion or ideology or something.
“Horizontalists (circuit theorists like Marc Lavoie and Steve Keen for instance) will generally emphasize private credit and ways that policy can influence private credit.”
I guess that means Cullen Roche hasn’t actually read much of Marc Lavoie’s work then.
“MMR takes a more balanced approach to the monetary system.”
No, ‘MMR’ takes a more Cullen Roche approach to the monetary system. Stop confusing the two.
“The key here is understanding that we are not closed minded to monetary policy”
The key here is understanding that advocating a ZIRP does not make you “closed minded”.
“Although MMR does not embed specific policy in our approach”
You specifically reject certain policies and advocate others. So stop with the nonsense please.
“we take the approach of “better to have and not need than need and not have”.”
Pointless stock phrase pointlessly rolled out yet again.
A central bank does not magically lose the ability to change interest rates or engage in other forms of monetary as a result of opting for a ZIRP. Your little catchphrase is wholly irrelevant.
“our focus on operational realities”
No, your focus on Cullen Roche’s odd interpretation of “operational realities”. Stop confusing the two.
“we must acknowledge that we have a hybrid monetary system with a private credit system (the horizontal component) and the government (the vertical component).”
Wow, really? Who would have thought?
“The horizontal component does not exist to serve public purpose.”
Really? I thought the financial meltdown and rampant financial fraud was all about public purpose. How strange.
“it exists because the US monetary system is designed to disperse power away from a centralized government”
Ah, so banks provide checks and balances to what would otherwise be government tyranny. Blankfein and Dimon are helping to protect our freedom from state oppression. Got it.
“(it just is what it is, whether workable or not, right or wrong).”
Yeah but you actually think it’s right, don’t you? Stop pretending and just admit it, it’s nothing to be ashamed of.
“we find the idea of a “money monopolist” misleading and inapplicable to the way our monetary system is structured.”
Because you refuse to understand the way in which Wray uses the term. It’s really not that complicated. Whether you disagree with Wray’s use of the term or not really has very little to do with whether the JG or other MMT policies are a good idea or not.
Just try actually thinking about it for a minute.
“This focus on a “money monopolist” conflates the design of our actual system and eliminates potentially useful policy responses.”
Pretty meaningless statement.
Yes MMTers generally advocate a ZIRP. Yes MMTers think that changing interest rates is generally not good policy. Yes MMTers want to reform the banking sector. Yes it’s possible to change interest rates, issue government debt, and engage in other forms of monetary policy within an MMT framework if you really want to. Yes alternative approaches to monetary policy are compatible with MMT.
Is that reasonably clear, or do you need more help?
‘MMR’ is a ‘path’? Makes it sound like a spiritual quest or religion or something. Or perhaps an ideology.
“Horizontalists (circuit theorists like Marc Lavoie and Steve Keen for instance) will generally emphasize private credit and ways that policy can influence private credit.”
I guess that means Cullen Roche hasn’t actually read much of Marc Lavoie’s work then.
“MMR takes a more balanced approach to the monetary system.”
No, ‘MMR’ takes a more Cullen Roche approach to the monetary system. Stop confusing the two.
“The key here is understanding that we are not closed minded to monetary policy”
The key here is understanding that advocating a ZIRP does not make you “closed minded”.
“Although MMR does not embed specific policy in our approach”
You specifically reject certain policies and advocate others. So stop with the nonsense please.
“we take the approach of “better to have and not need than need and not have”.”
Pointless stock phrase pointlessly rolled out yet again.
A central bank does not magically lose the ability to change interest rates or engage in other forms of monetary as a result of opting for a ZIRP. Your little catchphrase is wholly irrelevant.
“our focus on operational realities”
No, your focus on Cullen Roche’s odd interpretation of “operational realities”. Stop confusing the two.
“we must acknowledge that we have a hybrid monetary system with a private credit system (the horizontal component) and the government (the vertical component).”
Wow, really? Who would have thought?
“The horizontal component does not exist to serve public purpose.”
Really? I thought the financial meltdown and rampant financial fraud was all about public purpose. How strange.
“it exists because the US monetary system is designed to disperse power away from a centralized government”
Ah, so banks provide checks and balances to what would otherwise be government tyranny. Blankfein and Dimon are helping to protect our freedom from state oppression. Got it.
“(it just is what it is, whether workable or not, right or wrong).”
Yeah but you actually think it’s right, don’t you? Stop pretending and just admit it, it’s nothing to be ashamed of.
“we find the idea of a “money monopolist” misleading and inapplicable to the way our monetary system is structured.”
Because you refuse to understand the way in which Wray uses the term. It’s really not that complicated.
Whether you disagree with Wray’s use of the term or not really has very little to do with whether the JG or other MMT policies are a good idea or not.
Just try actually thinking about it for a minute.
“This focus on a “money monopolist” conflates the design of our actual system and eliminates potentially useful policy responses.”
Pretty meaningless statement.
Yes MMTers generally advocate a ZIRP. Yes MMTers think that changing interest rates is generally not good policy. Yes MMTers want to reform the banking sector. Yes it’s possible to change interest rates, issue government debt, and engage in other forms of monetary policy within an MMT framework if you really want to. Yes alternative approaches to monetary policy are compatible with MMT.
Is that reasonably clear, or do you need more help?
Apparently the blog swallowed my post (for the third time), but this time I copied it first, ha!
These guys don't get it, do they? Where would be Goldman Sachs be without the absolute monopoly and coercive power of the federal government has over the dollar?
When everyone is dancing things don't matter a single bit: central banks don't control the money supply (they are delusional), but when things get ugly is when you see where the true power resides. So private sector can create fake money if it wants (limited by some laws and regulations), but they don't control the net creation of money.
If banks hadn't been bailed out in 2008 and more importantly, all the liquidity and deficit/spending, USA would be in a depression worse than that of the 30's if the government hadn't steep in to plug the black hole of unfunded liabilities with fresh printed money.
That's the total absolute monopoly over something: create something out of air that you only can create! But yes, the system is diagonal: banks have co-opted the system, where they hide behind this power of the state to create money at their demand when they have trouble with their "fake money" (aka horizontal, credit, money) because unfunded liabilities and deflating pressures.
You know Cullen, there is only one reason there can be deflation in the first place: because credit money is not the real deal. If you think about it a little bit you will understand that if the money supply was constant, there could NEVER be deflation, because all the money would be put to some use, so while you would get productivity gains and cheaper prices in some sectors, the money would flow towards other sectors or assets increasing the overall price level. As there is always appetite for money in a capitalist economy, money would keep flowing thought the economy keeping overall price constant eventually
But to get there though from the current state of affairs we would have to endeavour a period of painful deflation first so the system accommodates to the new monetary structure. Not making claims if this would be be better or worse, just trying to point why deflation is the cause of 'fake money' used by non-monopolists.
What you are reading may sound like science fiction to you, but is not, that's how humanity has liven for the most time, with fairly constant supplies of money (very slowly increasing or not at all in some instances) and no-growth or very slow growth. A period that illustrates this phenomenon quite well is the Middle Ages (a part) in Europe. There, deflation was never a big deal (despite savings desires by the rising merchant class), there was little spare money to accumulate, and that wealth was accumulated by some lords, kings etc. (while other spent). the system was fairly constant over centuries specially in the early and high middle ages.
The contrary can happen though: You could have structural inflation with a constant money supply though, because of slack of supply and falling productivity, and Europe suffered some of these too, supply shocks which caused famine, wars and other nasty stuff.
There is only deflation because non-monopolists are faking money! If they would be truly printing then the total of unfunded liabilities would be zero and deflation trends could never happen at all (also inflation would rise much quickly).
Obsession over public deficits and NAIRU are a ways of the fakers to control overall inflation by creating net money so they can print more fake stuff to earn profits, and indirectly they create these boom-bust cycles.
Whatever diagonalism is, he's certainly going on about it. 95 out of 233 posts from the great man himself on the MMR site. Wouldn't it just be easier to write a book or something?
Everyone, the time has come for me to declare with parting of ways with Copernican Heliocentrism.
Consistent with Copernicus' findings I still acknowledge that the Sun is the centre of the Solar-system, however I find myself incapable of embracing the unpalatable notion that the Earth has been relegated to 3rd place from the Sun.
The Earth should rightly be regarded as occupying first place, with Mercury in 2nd and Venus in 3rd. Moreover, I also find it unacceptable that our Earth is not the largest planet and thus my own heliocentric theory of the universe also advocates the the Earth is the largest planet.
I thereby declare my new theory to be called, Heliorealism.
Over at MMR Cullen Roche has claimed that he began deleting my comments because I "went insane" there one day.
This is a lie.
I described Cullen Roche's method of systematically misrepresenting MMT positions as 'repellent'.
I called Cullen Roche an "absolute hypocrite" because that is what he is, unfortunately.
Cullen Roche later began deleting my comments because he was fed up with my line of argument, not as a result of these observations (although he also deleted these comments at the time).
Cullen Roche does not like it when others refuse to agree with everything he says.
Which is a problem, because much of what he says is either incorrect, false, misleading, distorted, ignorant, incoherent, insulting or nonsensical.
Looks like another post in the genre "We are weely weely different from MMT" over at the MMR... MMT knows WHY and WHEN horizontal transactions are necessary and vital, but this is not what matters in MMT. Discussion with somebody hell-bent on seeing stuff that is not there is a waste of time...
29 comments:
wouldn't everyone but pure horizontalists and verticalists be "diagonlists"?
MMT is not "against" horizontal money flow. Warren is on the board of directors of a bank for crying out loud!!! This is somewhat silly but still valuable I suppose in thinking in terms of the degree to which a person or theory is weighted to h or v. None-the-less the point is what is the value and function of h versus v money and when is it best to increase or decrease one or another depending on the economic conditions.
Tom, What don't you understand?
"Diagonal."
Probably just liked using the new term to say that both h and v are good with him.
I agree with Chris Wroth. I think Cullen is using "diagonal" as suggested by Chris: not in any very scientific or precise sense.
Maybe if we just grant banks the power to impose a tax we can straighten out the MMR guys again
hasn't he heard of a fiscal multiplier?
These guys don't get it, do they? Where would be Goldman Sachs be without the absolute monopoly and coercive power of the federal government has over the dollar?
When everyone is dancing things don't matter a single bit: central banks don't control the money supply (they are delusional), but when things get ugly is when you see where the true power resides. So private sector can create fake money if it wants (limited by some laws and regulations), but they don't control the net creation of money.
If banks hadn't been bailed out in 2008 and more importantly, all the liquidity and deficit/spending, USA would be in a depression worse than that of the 30's if the government hadn't steep in to plug the black hole of unfunded liabilities with fresh printed money.
That's the total absolute monopoly over something: create something out of air that you only can create! But yes, the system is diagonal: banks have co-opted the system, where they hide behind this power of the state to create money at their demand when they have trouble with their "fake money" (aka horizontal, credit, money) because unfunded liabilities and deflating pressures.
You know Cullen, there is only one reason there can be deflation in the first place: because credit money is not the real deal. If you think about it a little bit you will understand that if the money supply was constant, there could NEVER be deflation, because all the money would be put to some use, so while you would get productivity gains and cheaper prices in some sectors, the money would flow towards other sectors or assets increasing the overall price level. As there is always appetite for money in a capitalist economy, money would keep flowing thought the economy keeping overall price constant eventually
But to get there though from the current state of affairs we would have to endeavour a period of painful deflation first so the system accommodates to the new monetary structure. Not making claims if this would be be better or worse, just trying to point why deflation is the cause of 'fake money' used by non-monopolists.
What you are reading may sound like science fiction to you, but is not, that's how humanity has liven for the most time, with fairly constant supplies of money (very slowly increasing or not at all in some instances) and no-growth or very slow growth. A period that illustrates this phenomenon quite well is the Middle Ages (a part) in Europe. There, deflation was never a big deal (despite savings desires by the rising merchant class), there was little spare money to accumulate, and that wealth was accumulated by some lords, kings etc. (while other spent). the system was fairly constant over centuries specially in the early and high middle ages.
The contrary can happen though: You could have structural inflation with a constant money supply though, because of slack of supply and falling productivity, and Europe suffered some of these too, supply shocks which caused famine, wars and other nasty stuff.
There is only deflation because non-monopolists are faking money! If they would be truly printing then the total of unfunded liabilities would be zero and deflation trends could never happen at all (also inflation would rise much quickly).
Obsession over public deficits and NAIRU are a ways of the fakers to control overall inflation by creating net money so they can print more fake stuff to earn profits, and indirectly they create these boom-bust cycles.
Did anyone see Ann Pettifor’s interview…
http://www.nakedcapitalism.com/2012/05/the-renegade-economist-speaks-with-ann-pettifor.html
At one point in the interview she discusses a speech she’s been reading by a Bank of England member. She’s convinced it was written by Goldman Sach’s – his former employer. I get a similar feeling reading pieces like this from Cullen these days.
Cullen knows damn well why MMT’ers prefer vertical actions. Horizontal actions have winners and losers. Horizontal actions also change the behaviors of bankers and that isn’t necessarily a good thing. If you want to keep the banking system from blowing another bubble you need to tightly regulate it. If you want to tightly regulate it you need to provide much more interest rate stability for the bankers, which means less monkeying around with horizontal policy moves. There are logical reasons for the vertical preference, not just a desire to find a reason to have the “government” do it.
"…Horizontal actions have winners and losers…"
Horizontal actions REQUIRE vertical actions to be sustainable.
In a horizontal-only system the amount of money required to extinguish the liabilities created would exceed the amount created because of the interest.
Un-possible and doomed to fail (unless re-sets were built into the system, which is a vertical operation).
Vertical actions do not depend in any way on horizontal actions in a mathematical sense.
That alone should seal the deal.
Apparently the blog swallowed my post, but this time I copied it first, you didn't get me!
These guys don't get it, do they? Where would be Goldman Sachs be without the absolute monopoly and coercive power of the federal government has over the dollar?
When everyone is dancing things don't matter a single bit: central banks don't control the money supply (they are delusional), but when things get ugly is when you see where the true power resides. So private sector can create fake money if it wants (limited by some laws and regulations), but they don't control the net creation of money.
If banks hadn't been bailed out in 2008 and more importantly, all the liquidity and deficit/spending, USA would be in a depression worse than that of the 30's if the government hadn't steep in to plug the black hole of unfunded liabilities with fresh printed money.
That's the total absolute monopoly over something: create something out of air that you only can create! But yes, the system is diagonal: banks have co-opted the system, where they hide behind this power of the state to create money at their demand when they have trouble with their "fake money" (aka horizontal, credit, money) because unfunded liabilities and deflating pressures.
You know Cullen, there is only one reason there can be deflation in the first place: because credit money is not the real deal. If you think about it a little bit you will understand that if the money supply was constant, there could NEVER be deflation, because all the money would be put to some use, so while you would get productivity gains and cheaper prices in some sectors, the money would flow towards other sectors or assets increasing the overall price level. As there is always appetite for money in a capitalist economy, money would keep flowing thought the economy keeping overall price constant eventually
But to get there though from the current state of affairs we would have to endeavour a period of painful deflation first so the system accommodates to the new monetary structure. Not making claims if this would be be better or worse, just trying to point why deflation is the cause of 'fake money' used by non-monopolists.
What you are reading may sound like science fiction to you, but is not, that's how humanity has liven for the most time, with fairly constant supplies of money (very slowly increasing or not at all in some instances) and no-growth or very slow growth. A period that illustrates this phenomenon quite well is the Middle Ages (a part) in Europe. There, deflation was never a big deal (despite savings desires by the rising merchant class), there was little spare money to accumulate, and that wealth was accumulated by some lords, kings etc. (while other spent). the system was fairly constant over centuries specially in the early and high middle ages.
The contrary can happen though: You could have structural inflation with a constant money supply though, because of slack of supply and falling productivity, and Europe suffered some of these too, supply shocks which caused famine, wars and other nasty stuff.
There is only deflation because non-monopolists are faking money! If they would be truly printing then the total of unfunded liabilities would be zero and deflation trends could never happen at all (also inflation would rise much quickly).
Obsession over public deficits and NAIRU are a ways of the fakers to control overall inflation by creating net money so they can print more fake stuff to earn profits, and indirectly they create these boom-bust cycles.
If we're talking about government policy, there there is no such thing as a horizontal action. As I understand it, when Cullen uses the word "horizontal", he is just referring to transactions between private sector entities, and when he uses the word "vertical", he is referring to transactions between the government and some private sector entity. So Treasury transactions with the private sector and Fed transactions with the private sector are both vertical transactions.
Both monetarists and MMTers propose policies - that is, government actions - that are designed to influence horizontal transactions. They just differ over the channels through which this government influence should be exerted and the transmission mechanisms that transmit government action into private sector effect.
"the path we’ve chosen"
"MMR" is a path? That makes it sound a bit like a religion.
"Horizontalists (circuit theorists like Marc Lavoie and Steve Keen for instance) will generally focus primarily on private credit and ways that policy can influence private credit."
I guess that means Cullen Roche hasn't read anything by Marc Lavoie then.
"MMR takes a more balanced approach to the monetary system"
No, "MMR" takes a more Cullen Roche approach to the monetary system. Stop confusing the two.
"The key here is understanding that we are not closed minded to monetary policy"
The key here is understanding that the MMT preference for ZIRP does not make them "closed minded".
"MMR does not embed specific policy in our approach"
You specifically reject certain policies and advocate others. So stop with the nonsense.
“better to have and not need than need and not have”.
Pointless catchphrase. A central bank does not magically lose the ability to set interest rates or conduct other forms of monetary policy once it opts for a ZIRP.
"we must acknowledge that we have a hybrid monetary system with a private credit system (the horizontal component) and the government (the vertical component)."
Really? Who would have thought?
"The horizontal component does not exist to serve public purpose."
Really? I thought the financial meltdown and rampant financial fraud was all about serving public purpose. How odd.
"Rather, it exists because the US monetary system is designed to disperse power away from a centralized government"
Ah, banks provide checks and balances to what would otherwise be government tyranny. Blankfein and Dimon are helping to keep us free from state oppression. Got it.
"(it just is what it is, whether workable or not, right or wrong)."
Yeah but you think it's right though, don't you? Stop pretending and just admit it, it's nothing to be ashamed of.
"In this regard, we find the idea of a “money monopolist” misleading and inapplicable to the way our monetary system is structured."
That's because you refuse to understand what Wray means when he uses the term. You're fabricating a stupid argument.
"This focus on a “money monopolist” conflates the design of our actual system and eliminates potentially useful policy responses."
Technically a meaningless sentence.
Yes MMTers tend to advocate ZIRP. No, they don't think changing interest rates is generally good policy. Yes they want to reform the banking system. Yes it's still possible to change interest rates and issue government debt within an MMT framework if you really want to. Yes there are alternative approaches to monetary policy that compatible with MMT. Is that reasonably clear?
Abba Lerner advocated that vertical and horizontal should be combined: put another way that monetary and fiscal policies should be combined. In other words he said that in a recession, the government / central bank machine should just create new money and spend it into the economy (and/or cut taxes). I agree.
I actually did a post on my own blog setting out sixteen reasons against implementing monetary or fiscal policy alone. See:
http://ralphanomics.blogspot.co.uk/2012/03/sixteen-reasons-why-mmt-is-right-on.html
"…sixteen reasons against implementing monetary or fiscal policy alone…"
I don't think that's what the disagreement is about.
MMR seems to be promoting the idea that horizontal is the main mover and vertical operations should be on stand-by available when needed.
Horizontal DEPENDS upon vertical to function, otherwise it's a loser. The reverse is not necessarily true.
Horizontal actions to promote demand also seems like a bad idea. Basing growth on the spending of Income that hasn't been earned yet doesn't seem prudent. There is a hard ceiling in there somewhere.
We've reached it.
For investment it's a different story, but by definition Investment is an extractive process that depends on vertical to succeed (In the aggregate).
"In a horizontal-only system the amount of money required to extinguish the liabilities created would exceed the amount created because of the interest"
Pretty powerful Paul.... sounds like a good reason to set the rate to zero.
Resp,
"In a horizontal-only system the amount of money required to extinguish the liabilities created would exceed the amount created because of the interest"
This is what drives the treadmill of finance capitalism by creating debt serfs.
The dude just doesn't understand the important of Minsky. He's claimed multiple time to be working in the Minsky tradition, but I doubt he's read any of his work.
"the path we’ve chosen"
'MMR' is a 'path'? Makes it sound a bit like a religion or something.
"Horizontalists (circuit theorists like Marc Lavoie and Steve Keen for instance) will generally emphasize private credit and ways that policy can influence private credit."
I guess that means Cullen Roche hasn't actually read anything by Marc Lavoie then.
"MMR takes a more balanced approach to the monetary system."
No, 'MMR' takes a more Cullen Roche approach to the monetary system. Stop confusing the two.
"The key here is understanding that we are not closed minded to monetary policy"
The key here is understanding that advocating a ZIRP does not make you "closed minded".
"MMR does not embed specific policy in our approach"
You specifically reject certain policies and advocate others. So stop with the nonsense please.
"we take the approach of “better to have and not need than need and not have”."
Pointless stock phrase, pointlessly rolled out yet again.
A central bank does not magically lose the ability to change interest rates or engage in other forms of monetary policy just because they opt for a ZIRP. Your little catchphrase is wholly irrelevant.
"our focus on operational realities"
No, your focus on Cullen Roche's odd interpretation of 'operational realities'.
"we must acknowledge that we have a hybrid monetary system with a private credit system (the horizontal component) and the government (the vertical component)."
Really? Who would have thought?
"The horizontal component does not exist to serve public purpose."
Really? I thought the financial meltdown and rampant financial fraud was all about public purpose. How strange.
"it exists because the US monetary system is designed to disperse power away from a centralized government"
Ah, so the banks provide checks and balances on what would otherwise be government tyranny. Blankfein and Dimon are helping to protect our freedoms against state oppression. Got it.
"(it just is what it is, whether workable or not, right or wrong)."
Yeah but you actually think it's right, don't you? Stop pretending and just admit it. It's nothing to be ashamed of.
"we find the idea of a “money monopolist” misleading and inapplicable to the way our monetary system is structured."
That's because you refuse to understand what Wray means when he uses that term. You are fabricating a daft and irrelevant argument, as usual.
"This focus on a “money monopolist” conflates the design of our actual system and eliminates potentially useful policy responses."
Pretty meaningless sentence.
Yes MMTers generally advocate a ZIRP. No MMTers do not think changing interest rates is generally good policy. Yes MMTers want to reform the banking system.
Yes it is still possible to change interest rates, issue government debt or engage in other forms of monetary policy within an MMT framework if you really want to. Yes alternative forms of monetary policy are compatible with MMT. Is that reasonably clear?
I think we're ignoring the political dimension. MMT is too progressive for the MMR folks. They want to minimize the role of government in the economy. They want to retain MMT's insights about how the money system works, but also to provide reasons for using the vertical component of the system as little as possible while hyping the horizontal component dominated by the financial types as the real engine of growth and change.
So, in grabbing onto the term "diagonalist" they're promoting a new label for people who share their view that it's good to limit vertical activity and keep it on standby. They're trying to say that MMTers aren't diagonalists because they emphasize the vertical component too much.
But really both approaches recognize the vertical and horizontal aspects of the system. the difference is normative and political. The MMR people want to normatively and politically constrain the Government spending, like the neo-liberals. MMT has no such bias. It's economics for the public purpose without worrying about whether Government is important in solutions or not.
The marriage of personalities over there reminds me of James Carville and Mary Matalin.
What do they see in each other?
“the path we’ve chosen”
‘MMR’ is a ‘path’? Makes it sound like a religion or ideology or something.
“Horizontalists (circuit theorists like Marc Lavoie and Steve Keen for instance) will generally emphasize private credit and ways that policy can influence private credit.”
I guess that means Cullen Roche hasn’t actually read much of Marc Lavoie’s work then.
“MMR takes a more balanced approach to the monetary system.”
No, ‘MMR’ takes a more Cullen Roche approach to the monetary system. Stop confusing the two.
“The key here is understanding that we are not closed minded to monetary policy”
The key here is understanding that advocating a ZIRP does not make you “closed minded”.
“Although MMR does not embed specific policy in our approach”
You specifically reject certain policies and advocate others. So stop with the nonsense please.
“we take the approach of “better to have and not need than need and not have”.”
Pointless stock phrase pointlessly rolled out yet again.
A central bank does not magically lose the ability to change interest rates or engage in other forms of monetary as a result of opting for a ZIRP. Your little catchphrase is wholly irrelevant.
“our focus on operational realities”
No, your focus on Cullen Roche’s odd interpretation of “operational realities”. Stop confusing the two.
“we must acknowledge that we have a hybrid monetary system with a private credit system (the horizontal component) and the government (the vertical component).”
Wow, really? Who would have thought?
“The horizontal component does not exist to serve public purpose.”
Really? I thought the financial meltdown and rampant financial fraud was all about public purpose. How strange.
“it exists because the US monetary system is designed to disperse power away from a centralized government”
Ah, so banks provide checks and balances to what would otherwise be government tyranny. Blankfein and Dimon are helping to protect our freedom from state oppression. Got it.
“(it just is what it is, whether workable or not, right or wrong).”
Yeah but you actually think it’s right, don’t you? Stop pretending and just admit it, it’s nothing to be ashamed of.
“we find the idea of a “money monopolist” misleading and inapplicable to the way our monetary system is structured.”
Because you refuse to understand the way in which Wray uses the term. It’s really not that complicated. Whether you disagree with Wray’s use of the term or not really has very little to do with whether the JG or other MMT policies are a good idea or not.
Just try actually thinking about it for a minute.
“This focus on a “money monopolist” conflates the design of our actual system and eliminates potentially useful policy responses.”
Pretty meaningless statement.
Yes MMTers generally advocate a ZIRP. Yes MMTers think that changing interest rates is generally not good policy. Yes MMTers want to reform the banking sector. Yes it’s possible to change interest rates, issue government debt, and engage in other forms of monetary policy within an MMT framework if you really want to. Yes alternative approaches to monetary policy are compatible with MMT.
Is that reasonably clear, or do you need more help?
“the path we’ve chosen”
‘MMR’ is a ‘path’? Makes it sound like a spiritual quest or religion or something. Or perhaps an ideology.
“Horizontalists (circuit theorists like Marc Lavoie and Steve Keen for instance) will generally emphasize private credit and ways that policy can influence private credit.”
I guess that means Cullen Roche hasn’t actually read much of Marc Lavoie’s work then.
“MMR takes a more balanced approach to the monetary system.”
No, ‘MMR’ takes a more Cullen Roche approach to the monetary system. Stop confusing the two.
“The key here is understanding that we are not closed minded to monetary policy”
The key here is understanding that advocating a ZIRP does not make you “closed minded”.
“Although MMR does not embed specific policy in our approach”
You specifically reject certain policies and advocate others. So stop with the nonsense please.
“we take the approach of “better to have and not need than need and not have”.”
Pointless stock phrase pointlessly rolled out yet again.
A central bank does not magically lose the ability to change interest rates or engage in other forms of monetary as a result of opting for a ZIRP. Your little catchphrase is wholly irrelevant.
“our focus on operational realities”
No, your focus on Cullen Roche’s odd interpretation of “operational realities”. Stop confusing the two.
“we must acknowledge that we have a hybrid monetary system with a private credit system (the horizontal component) and the government (the vertical component).”
Wow, really? Who would have thought?
“The horizontal component does not exist to serve public purpose.”
Really? I thought the financial meltdown and rampant financial fraud was all about public purpose. How strange.
“it exists because the US monetary system is designed to disperse power away from a centralized government”
Ah, so banks provide checks and balances to what would otherwise be government tyranny. Blankfein and Dimon are helping to protect our freedom from state oppression. Got it.
“(it just is what it is, whether workable or not, right or wrong).”
Yeah but you actually think it’s right, don’t you? Stop pretending and just admit it, it’s nothing to be ashamed of.
“we find the idea of a “money monopolist” misleading and inapplicable to the way our monetary system is structured.”
Because you refuse to understand the way in which Wray uses the term. It’s really not that complicated.
Whether you disagree with Wray’s use of the term or not really has very little to do with whether the JG or other MMT policies are a good idea or not.
Just try actually thinking about it for a minute.
“This focus on a “money monopolist” conflates the design of our actual system and eliminates potentially useful policy responses.”
Pretty meaningless statement.
Yes MMTers generally advocate a ZIRP. Yes MMTers think that changing interest rates is generally not good policy. Yes MMTers want to reform the banking sector. Yes it’s possible to change interest rates, issue government debt, and engage in other forms of monetary policy within an MMT framework if you really want to. Yes alternative approaches to monetary policy are compatible with MMT.
Is that reasonably clear, or do you need more help?
Apparently the blog swallowed my post (for the third time), but this time I copied it first, ha!
These guys don't get it, do they? Where would be Goldman Sachs be without the absolute monopoly and coercive power of the federal government has over the dollar?
When everyone is dancing things don't matter a single bit: central banks don't control the money supply (they are delusional), but when things get ugly is when you see where the true power resides. So private sector can create fake money if it wants (limited by some laws and regulations), but they don't control the net creation of money.
If banks hadn't been bailed out in 2008 and more importantly, all the liquidity and deficit/spending, USA would be in a depression worse than that of the 30's if the government hadn't steep in to plug the black hole of unfunded liabilities with fresh printed money.
That's the total absolute monopoly over something: create something out of air that you only can create! But yes, the system is diagonal: banks have co-opted the system, where they hide behind this power of the state to create money at their demand when they have trouble with their "fake money" (aka horizontal, credit, money) because unfunded liabilities and deflating pressures.
You know Cullen, there is only one reason there can be deflation in the first place: because credit money is not the real deal. If you think about it a little bit you will understand that if the money supply was constant, there could NEVER be deflation, because all the money would be put to some use, so while you would get productivity gains and cheaper prices in some sectors, the money would flow towards other sectors or assets increasing the overall price level. As there is always appetite for money in a capitalist economy, money would keep flowing thought the economy keeping overall price constant eventually
But to get there though from the current state of affairs we would have to endeavour a period of painful deflation first so the system accommodates to the new monetary structure. Not making claims if this would be be better or worse, just trying to point why deflation is the cause of 'fake money' used by non-monopolists.
What you are reading may sound like science fiction to you, but is not, that's how humanity has liven for the most time, with fairly constant supplies of money (very slowly increasing or not at all in some instances) and no-growth or very slow growth. A period that illustrates this phenomenon quite well is the Middle Ages (a part) in Europe. There, deflation was never a big deal (despite savings desires by the rising merchant class), there was little spare money to accumulate, and that wealth was accumulated by some lords, kings etc. (while other spent). the system was fairly constant over centuries specially in the early and high middle ages.
The contrary can happen though: You could have structural inflation with a constant money supply though, because of slack of supply and falling productivity, and Europe suffered some of these too, supply shocks which caused famine, wars and other nasty stuff.
There is only deflation because non-monopolists are faking money! If they would be truly printing then the total of unfunded liabilities would be zero and deflation trends could never happen at all (also inflation would rise much quickly).
Obsession over public deficits and NAIRU are a ways of the fakers to control overall inflation by creating net money so they can print more fake stuff to earn profits, and indirectly they create these boom-bust cycles.
Whatever diagonalism is, he's certainly going on about it.
95 out of 233 posts from the great man himself on the MMR site.
Wouldn't it just be easier to write a book or something?
Everyone, the time has come for me to declare with parting of ways with Copernican Heliocentrism.
Consistent with Copernicus' findings I still acknowledge that the Sun is the centre of the Solar-system, however I find myself incapable of embracing the unpalatable notion that the Earth has been relegated to 3rd place from the Sun.
The Earth should rightly be regarded as occupying first place, with Mercury in 2nd and Venus in 3rd. Moreover, I also find it unacceptable that our Earth is not the largest planet and thus my own heliocentric theory of the universe also advocates the the Earth is the largest planet.
I thereby declare my new theory to be called, Heliorealism.
Over at MMR Cullen Roche has claimed that he began deleting my comments because I "went insane" there one day.
This is a lie.
I described Cullen Roche's method of systematically misrepresenting MMT positions as 'repellent'.
I called Cullen Roche an "absolute hypocrite" because that is what he is, unfortunately.
Cullen Roche later began deleting my comments because he was fed up with my line of argument, not as a result of these observations (although he also deleted these comments at the time).
Cullen Roche does not like it when others refuse to agree with everything he says.
Which is a problem, because much of what he says is either incorrect, false, misleading, distorted, ignorant, incoherent, insulting or nonsensical.
Looks like another post in the genre "We are weely weely different from MMT" over at the MMR... MMT knows WHY and WHEN horizontal transactions are necessary and vital, but this is not what matters in MMT. Discussion with somebody hell-bent on seeing stuff that is not there is a waste of time...
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