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.
Keep up the good work Mike, your point of view makes a refreshing change to the usual miserable mean spirited buggers who talk about money and the economy!
Hi Mike. I totaly agree with your arguments, but disagree about the emotional ractions from you. Tone it down please. It is of importance to laugh at them not to be angry, because it comes up as ignorance to people that dissagree with you and are watching. I place the most importance to the viewers that need to be educated, not on your direct opponent or intervuer. Maybe just "we came off gold in 71 and Karl still doesnt recognise that" while laughing and then later just as you said "karl is placing importance on numbers, not real terms" while laughing at him. It will trow him of his piedestal and make some viewers think about it.
Mike, In the 2nd segment when the discussion was about education costs, I don't think you answered effectively. It is true that the cost of higher education has been increasing significantly, fueled by govt subsidy and student loans. The correct solution is to provide free education to all eligible students. As John Harvey says "The problem in a nutshell, is that not everything that is profitable is of social value and not everything of social value is profitable." http://www.forbes.com/sites/johntharvey/2012/10/05/government-vs-business/
Providing education and healthcare is of social value but not profitable.
It's great to see you on the airwaves. I hate to admit it but I think you would need to tone it down a bit. You have the facts on your side, but this isn't a presidential debate.
I can't believe we have idiots like Denninger out there. But I hope he loses money on his trades (is he any good at all?). I've also seen Lauren Lyster interview Steve Keen and she came across as if she had no idea what he was talking about, and I think I witness some of that intellect today. Too bad her intellect don't seem to match that sweet ass
I would still LOVE to see you on MSNBC or a talk show like Daily Show or real time. Fortunately, they don't have ditzy misinformed hosts
"I was under the impression that Bill Mitchell has always reconciled his theories with the equation of exchange MV = PQ."
He does, but his point is that there are (4) variables.
In order to get anyting out of the relationship you have to make assumptions for two of the variables (hold constant) in order to examine the relationship between the remaining two.
This is where the use of this identity goes off the rails, all four parameters are moving parts. It's pretty much useless, garbage in-garbage out.
"Last month Mrio Monti's government hiked its 2012 deficit target to 2.6 percent of gross domestic product from 1.7 percent, blaming a deeper than expected recession"
It looks like this only works (identification of a mathematical constant) for systems that we have no authority over...
Ideal Gas Equation: PV = nRT
R is the constant we can identify and then use math to work with these physical systems... we have no authority over these systems...
Gravity: F = ma
We can identify the constant a here on earth, ie 9.8 m/s2 and then use math to work with these physical systems... we have no authority over gravity...
Constants only apply in systems we have no authority over.... imo we have authority granted to us to operate our economic systems, therefore the concept of a mathematical constant DOES NOT APPLY in economics... WE make the laws... rsp,
"Constants only apply in systems we have no authority over.... imo we have authority granted to us to operate our economic systems, therefore the concept of a mathematical constant DOES NOT APPLY in economics... WE make the laws... rsp"
Matt, This is an interesting way of looking at the subject and I think i agree…
One "constant" or law that does apply though is that of closed systems.
The concept is embedded in systems we use every day but we don't notice. Accounting for example.
Some believe they are entitled to (should be allowed to) earn as much money as they can. They are apparently unaware that they can only earn what's in the system and once they have it all everyone else has nothing.
Ever notice that an hourglass works for a while then stops? Closed system. A reset means flipping it over and starting again. In economic parlance it means taking money from the rich and giving it to the poor.
Just like the hourglass there is no alternative. We are at the root of the problem.
Nothing else to earn unless the government injects it, or we are back to barter.
imo it's a LAW Paul (ie closed systems) that is imposed on us. It cannot be violated just like the LAW of Gravity...
I was talking specifically about the mathematical technique we often use to identify a 'constant' in systems we have no authority over ... this is different from a 'law'... rsp,
That is old data. Italy had their guy in there and they were muddling thru then (deficits high enough for small amounts of growth).... They bounced him and now the EU somehow got the goon in there to crack skulls with austerity and the deficits are increasing again as we speak... the Reuters link I posted above is from just the other day... rsp,
None of the four terms in the equation of exchange are constants. They are all variables. I prefer the MV = PT version of the equation. And if people want to focus on the dependence of price level on the quantity of money, you can rewrite the equation as:
P = M(V/T)
Obviously, those who support fiscal expansions leading to an increase in M usually do so because they think that the economy is operating well below capacity with many unemployed resources, and so the spending can increase output (and hence T) without increasing P.
"None of the four terms in the equation of exchange are constants. They are all variables."
That's the problem. They can all be changing at the same time. We have one equation with (4) unknowns.
The equation is indeterminate, unless at least (2) of the variables are set constant (not allowed to change) so that the relationship between the other two can be evaluated.
This requires assumptions that are not applicable to the real world. The assumptions end up being mutually exclusive.
So the question becomes, what problem are we solving with the identity?
Nothing useful can be gleaned from the identity, even though real-world events will always turn out to satisfy it.
Denninger is probably the biggest crackpot out there. The man passes himself off as an expert on virtually any topic one can come up with. One thing to keep in mind is that the man thinks he's so brilliant that he didn't hang around to receive a college degree. Likely thought he was more astute than his professors.
What kind of service are you doing for your viewers if you have folks on who describe economic events as "they evaporate into the ether"????
This is at best an irrational statement.
You are not providing your viewers with anything valuable if this type of literal nonsense is allowed to be paraded on YOUR program as legitimate and edifying analysis.... this is sad for you and RTtv.
2. I finally get the Mike Norman thing. Government spending out of thin air creates increasing wealth so there's more great stuff to buy with the diluted dollars so prices don't rise as fast as the money supply is diluted. Of course, the problems of economic calculation and wealth transfers to the elite this policy inflicts are ignored, but I finally get the gist of the theory. You guys need to be less opaque. Actually, I think you hide your basic (and silly and baseless) assumptions because you can't defend them. And, in your hearts, you know it.
3. As I predicted, Lauren Lyster was not taken in by the MMT nonsense.
"If it wasn’t for the Federal deficit, the debt-to-GDP chart would be declining even more precipitously, and the economy would be a disaster. Deleveraging is a painful process, and the Federal government is — rightly — easing that pain right now. And this is the gratitude it gets in return!"
@Bob Roddis "great stuff to buy with the diluted dollars so prices don't rise as fast as the money supply is diluted" PQ=MV Is there more stuff, or dilluted dollars? And nobody ignores the wealth transfer to elites, but you imagine that we do. That's why deficit spending employing unemployed will prevent dirket transfer to the elites.
We must differentiate factual allegations from theoretical allegations. One must differentiate a) MMT observations about the mechanics of credit and money creation in our criminally insane monetary system which are merely factual; and b) MMT Keynesian based theory about the impacts of this system of credit and money creation upon society. As John Carney said in a nice way:
I'm not trying to shoot down the core insights of MMT. In fact, I find them extremely valuable to my reporting and analysis.
But there are some statements coming out of MMT that are highly misleading or confusing to people. Much of this confusion stems from the impression people get reading MMT blogs and papers that saving requires deficit spending [I think that MMTers are saying this –BR]. This is wrong, of course. But many smart, intelligent folks think this is what MMT is claiming.
So they dismiss it as nonsense.
What I've been trying to do is explore what it is that makes people think this is an MMT claim and what must be said to clarify it.
Furthermore, I do think there's a problem with MMT that cannot be confined to confusion.
The problem is as follows: MMTer are so focused on sectoral balances and the interaction between the private domestic sector and the public sector that they often downplay the intra-sector dynamics [like human beings making and exchanging stuff – BR].
Finally, MMTers do not seem to fully appreciate the problems of ignorance and calculation that inform Austrian economics [MMTers do not understand this at all – BR]. They seem to recoil at even thinking about them because of the implications for the limits of political action. This also needs to be corrected.
http://tinyurl.com/7sycbey
Just because the government can never run out of "dollars" or because it can spend "dollars" into existence does not prove that the result of those procedures will be an ever more prosperous economy. That is the "theory" part of your presentation and it is a total crock. But you guys present it as if it is an axiom of reality that requires no proof or justification.
Dan K. I was under the impression that Bill Mitchell has always reconciled his theories with the equation of exchange MV = PQ.
MMT economists acknowledge that this is an identity. The problems for QTM arise from imputing causality to it falsely.
People surmise that if MV increases then Q remains the same so P increases. True at full output. At under full output the increase in effective demand means that Q (supply) expands to meet it without a change in price level P.
So betting on increasing CPI due to larger deficits is a poor strategy when there is an output gap, which is revealed by UE, i.e., idle resources.
"The Quantity Theory of Money which in symbols is MV = PQ but means that the money stock times the turnover per period (V) is equal to the price level (P) times real output (Q). The mainstream assume that V is fixed (despite empirically it moving all over the place) and Q is always at full employment as a result of market adjustments."
Bob, I don't think MMT makes any claims of "an ever more prosperous" economy. I think they claim that they can put idle resources to use. When all idle resources are put to use, prosperity will depend on productivity gains. As a side note, human beings have generally been pretty good at productivity gains.
Maybe people would be more open to your views if you argued against what MMT says instead of arguing against what you pretend it says.
Bob Roddis@October 25, 2012 10:17 AM " Of course, the problems of economic calculation and wealth transfers to the elite this policy inflicts are ignored, but I finally get the gist of the theory."
The "economic calculation" problem is either non-existent or grossly exaggerated.
Wealth transfers to elite?? In a system of progressive taxation and redistributive social security and welfare programs?
(2) the "inflation eroding the value of the dollar" argument is a red herring: for real wages and real living standards have soared since 1900. It's not just productivity growth and price falls in many individual goods.
Nominal and real wage increases and even nominal and inflation adjusted changes to transfer payments mean most people do not suffer from long term mild inflation, which is the historical norm post-1945.
(3) Denninger complains about money supply expansion. He seems utterly unaware that the private sector has always had the ability to expand broad money supply and contribute to inflation. Does he think private bank deposits, negotiable cheques, negotiable bills of exchange or negotiable promissory notes are all evil or immoral?
(4) Seriously, the US system of college education is one of the most privatised in the world. If you want inexpensive, good college education you fund it, subsidize it, or make it free for anyone gifted enough to go, just as they do in many social democratic European nations.
Also, Denninger parrots the Austrian nonsense about the recession of 1920-1921.
Mike Norman, you should call these people any time they cite that recession.
1920-1921 was not a severe debt deflationary crisis, as in 1929-1933. There was no banking crisis, no financial crisis.
The Fed lowered the discount rate from 1921 to stimulate recovery, and then conducted open market operations during the recovery that followed the recession:
Karl Denninger would limit credit creation for only those with assets that could be marked-to-market daily. Any other credit creation would be counterfeiting, according to Karl. But actually, ANY credit creation is a form of counterfeiting since the purchasing power for the new deposit is stolen via dilution from all other deposits or currency. So Karl is for counterfeiting, but only for those with marketable assets.
"But actually, ANY credit creation is a form of counterfeiting since the purchasing power for the new deposit is stolen via dilution from all other deposits or currency"
(1) it is isn't "counterfeiting": there is no fraud involved. Causing or contributing to inflation would be a negative externality, not fraud.
(2) if an act that contributes to price inflation is immoral (the assumption required the argument above once the fraud argument collapses), you then have the absurd consequence that practically any activity in a modern modern capitalist economy is immoral. Even changes in velocity of circulation of money (functionally equivalent to money supply changes) must be immoral.
This kind of libertarian ideology is ignorant and actually anti-capitalist, as it paints private business people creating and voluntarily accepting things as mundane as negotiable bills of exchange etc. as committing some horrible fraud on society. That is rubbish.
I hesitate to criticize Lauren because she's smart and she's gorgeous. She also deserves huge kudos for inviting guests who actually understand the US monetary system, like Mike "Stormin" Norman and Ed Harrison. But I'm sorry, when she started arguing based on her personal experience (in the segment on education), I lost a little respect. Solipsism at its best.
The right riposte to the the "deficit spending dilutes the money supply and inflates away my savings" is this: If govt spending dilutes the money supply, then govt taxes concentrates it. So if the govt takes your money away via taxes, it's actually making your existing savings worth more. So spending takes away and taxing gives. See total nonsense.
Furthermore, Denninger doesn't realize where his savings comes from. In order for him to earn more than he spends, another agent has to spend more than they earn.
And Mike, you should have mentioned credit expansion as an expansion of the money supply as well. So if govt spending dilutes and inflates my savings, why doesn't a bank loan do the exact same thing? (of course, Denninger doesn't understand bank loans either, still off the loanable funds model).
Since WII until recently, on average, more credit was taken out each year than was paid back. That's an important point.
The "economic calculation" problem is either non-existent or grossly exaggerated.
What a vacuous statement. You're essentially saying it either exists or it doesn't. Well duh. The "grossly exaggerated" bit is nothing but a rhetorical trick used to downplay the existence of it, by making reference to unnamed people against an unnamed standard of how it "should" be treated.
Wealth transfers to elite?? In a system of progressive taxation and redistributive social security and welfare programs?
Inflation typically enters the economy in the banking sector first. What you are talking about are secondary "endogenous" money transfers after the fact.
You can have both.
More seriously, the Denninger guy was terrible.
(1) the quantity theory of money is grossly flawed:
It doesn't hold that every increase in the money supply leads to rising prices. It holds that if there is an increase in the money supply, then given the demand for money is unchanged, then the purchasing power of money will be lower than it otherwise would have been.
(2) the "inflation eroding the value of the dollar" argument is a red herring: for real wages and real living standards have soared since 1900. It's not just productivity growth and price falls in many individual goods.
They have soared DESPITE the eroding value of the dollar.
Nominal and real wage increases and even nominal and inflation adjusted changes to transfer payments mean most people do not suffer from long term mild inflation, which is the historical norm post-1945.
That doesn't transcend the fact that the central bank injects money into distinct points in the economy, not everywhere.
(3) Denninger complains about money supply expansion. He seems utterly unaware that the private sector has always had the ability to expand broad money supply and contribute to inflation. Does he think private bank deposits, negotiable cheques, negotiable bills of exchange or negotiable promissory notes are all evil or immoral?
The private sector cannot keep increasing fiduciary media that is money under legal tender laws, without a corresponding increase of money from the central bank.
(4) Seriously, the US system of college education is one of the most privatised in the world. If you want inexpensive, good college education you fund it, subsidize it, or make it free for anyone gifted enough to go...
Like in North Korea.
Also, Denninger parrots the Austrian nonsense about the recession of 1920-1921.
You haven't shown it is nonsense.
Mike Norman, you should call these people any time they cite that recession.
He is as ignorant as you are.
1920-1921 was not a severe debt deflationary crisis, as in 1929-1933. There was no banking crisis, no financial crisis.
That's because there was not as severe a prior inflation.
The Fed lowered the discount rate from 1921 to stimulate recovery, and then conducted open market operations during the recovery that followed the recession:
The economy was already on the road to recovery by the time the Fed did that.
Technically, it was not even a "depression" - just a mild or moderate recession.
Semantics.
Also, it lasted 18 months - that is not short by any means, certainly not by standards of the post-1945 business cycle.
By the absurd GDP statistic? Please. If in a depression the state inflated and financed 100% of the population to build a giant pyramid for $10 trillion, that would show up as an increase in GDP, but the depression would still exist.
This kind of libertarian ideology is ignorant and actually anti-capitalist, as it paints private business people creating and voluntarily accepting things as mundane as negotiable bills of exchange etc. as committing some horrible fraud on society. Lord Keynes
Then let the banks carry on as purely private businesses without government deposit insurance and without a legal tender lender of last resort. What? They can't? Then banks are not truly private businesses.
Denninger and those apologists for him who have posted here are sadistic vipers. They would rather argue fringe ideology than address the needs of the millions of hurting people in our complex society. Thus they ignore the operational realities of the monetary system and instead front for a pie in the sky system that neither existed nor could properly exist in a modern industrial world. They would rather see millions of people suffer just so they could prove some dubious off the wall economic points they label as morally necessary.
The goal of any thoughtful person is to advocate for a system to maximize the well being of as many people as possible. Anarcho-libertarians extremists are the enemy not the saviors. Zealots who are blinded by ideology are the most dangerous among us. They would rather make and enact their cherished ideological points, even if it meant the certain suffering and destruction of millions of their fellow citizens. Sorry, but these fools are quite simply economic terrorists and should be dealt with as such. Enough of their venom.
I'm sure the butcher, baker, and candle stick makers have opinions on the economy and how they think it works but I certainly would consider having them on TV to debate an economist.
Mike, weren't you on Lauren's program before and didn't you go over the issues of inflation and hyperinflation the first time? And didn't she understand the issues better than now? Wonder if she's been talking to Karl too much?
Just watched this. People are right, Mike has facts on his side, he can afford to act with dignity, try to emulate Mosler. Do not cut in, do not shout when the other person is speaking, point out the math and facts calmly, again: you have facts on your side. You could defeat Denninger by pointing that *sometimes* more money allows more goods to be produced, not the same amount of goods to be priced higher. Same with interest rates: the government controls them, period.
I'm sure someone could formulate a version of MMT which always, always results in zero inflation, for all those people who just want to stuff their dollars in their mattresses and be safe in the knowledge that they will still have exactly the same value (if not more) 50 years in the future (without them having to be invested or anything).
For those types, this paper might be of some passing interest:
">The Fed lowered the discount >rate from 1921 to stimulate >recovery, and then conducted open >market operations during the > recovery that followed the > recession:
The economy was already on the road to recovery by the time the Fed did that."
No, it wasn't. The US economy was still contracting when the Fed began to lower the discount rate.
The problem is very simple. Karl is a)not very bright; b) ignorant of the MMT literature, which he does not appear to have bothered to study let alone fully think through and contrast with his current perspective; c) is a man whose mentality has fossilized around certain ideological axioms and conventional formulations; d) even if he did get it, his large ego would forbid admitting it--too many years being wrong. Therefore, a colossal waste of time.
As for Lauren, who is intelligent, she is probably too busy to study what she should study. So she relies too much on conventional formulations and her previous experience in finance. A pity.
As for Mike, he is not serving the cause with his lack of good manners and impatience. It just turns people off. Take a look at the way Marshall Auerback handles himself, for instance. To absorb MMT means a significant paradigm shift--it is not doable on TV clips. I am always amazed at the lack of awareness of intellectuals regarding the nature of the media and what they think can be accomplished on it. TV is essentially for entertainment, and is a very passive medium, unless you get an in-depth kind of situation such as Bill Moyers is famous for, and even then....
MMT professionals have yet to arrive at a convincing and concise manner of presenting their perspective, taking into account continually the perspective and key reference points of those whose minds they are trying to change.
"MMT professionals have yet to arrive at a convincing and concise manner of presenting their perspective, taking into account continually the perspective and key reference points of those whose minds they are trying to change."
There isn't a whole lot MMT professionals can do to change minds in any significant way. All they can do is make sure their arguments are factual and their analyses logically correct.
The worldview/beliefs of the public is mainly a function of authority. Whatever "authority" promotes as reality, that is the reality adopted by the masses.
To expect otherwise would be to require each individual to think for themselves…and that won't happen because it takes too much effort.
When the pain gets great enough, people will look for different authorities. Unfortunately, when backed into a corner it isn't guaranteed the right choices will be made.
"So if you emit "M" in the form of deficit spending then PQ must rise, but this does not change the actual amount of output, only the price."
same mistake as most economists, believing in baseless assumptions.
Why wouldn't output increase with an increase in money. If everyone got a free gift of $2,000 to buy only t.v.s, factories that have extra capacity wouldn't increase production to capture a greater portion of t.v. spending? They wouldn't expand their capacity to capture all the money pouring into the t.v. market? Are capitalists really just hopeless bunglers not able to respond to increase in demand.
using your assumptions about output, if there was only one dollar in the economy it would produce the same amount of goods as if there were 1 trillion. there would be no benefit for using money at all. A barter society would be just as efficient as one with a monetary system. So your assumptions on output are obviously incorrect.
mr norman ... at approx the 9 minute mark you engaged in a classic form of smoke and mirrors which thoroughly diluted value of your argument and anything else you might have offered. you suggest the USD isn't being devalued and that the DXY proves this. the DXY as you surely know is comprised of six other currencies [notably including the euro, yen and swiss franc]. what can we learn from comparing one unit of anything to six others which are behaving the same way? what commodities have not been increasing in price wrt these other currencies? so yes, the USD is more or less holding its own as measured by the DXY, but the components of the DXY are also declining in value.
if you and ben bernanke jumped off of a high-rise building together, and were falling at approximately the same rate, i doubt either of you would forgo the offer of a parachute on the grounds that your altitude was not decreasing [at an increasing rate, btw] wrt the other's. and THAT is what we're seeing in the DXY, as you well know.
so my only question is, why on earth would you offer so transparent a piece of misdirection to bolster your position?
michaelD
PS you don't do yourself any favors by acting so rude and ill-mannered. we have more than enough mud-wrestling in the media.
The whole crackpot MMT rests upon the preposterous assumption that creating funny money out of thin air creates wealth instead of distorting the pricing process and impairing wealth creation. Lauren Lyster is aware of the wealth impairing nature of funny money. If you think you are going to change her mind, you might start with addressing the distortion of the pricing process via funny money.
What's this non distorted pricing world you speak of, Bob? Where is it located? Fantasy land?
How would you create wealth, Bob? Would you make people needlessly suffer so you could stop the so called distorted pricing you claim is happening about?
How much government is too much, Bob? Where do you draw the line? Be precise so as to determine who the real crackpot is amongst us.
wealth is based on how much goods and services (G&S) one consumes (or could).
Since producers put more G&S on market when demand increases. Increased demand ( and therefor production of G&S (wealth)) leads to a higher standard of living or wealth.
the whole idea of economics is to find away to produce as much G&S as possible. Saving or hording money, gold, in order to produce things that do not require gold in the production process is counter- economic thinking
Stable prices maybe relevant to economics , but it is not the goal.
What's this non distorted pricing world you speak of, Bob? Where is it located? Fantasy land?
In February, 2011, the American Economic Review (specifically Kenneth J. Arrow, B. Douglas Bernheim, Martin S. Feldstein, Daniel L. McFadden, James M. Poterba, and Robert M. Solow) named its top 20 articles of the last 100 years. Included therein was:
Hayek, F. A. 1945. “The Use of Knowledge in Society.” American Economic Review, 35(4): 519–30.
The “knowledge problem” is real and it ought to be understood. Hayek won the Nobel Prize in Economics for his work on the Austrian Business Cycle Theory and the "knowledge problem" especially the distortion of economic calculation induced by fiat funny money, is at the core of that theory. It is at the core of Austrian school thinking and is non-existent in MMT or Keynesianism for that matter.
You people purposefully pretend that the entire issue does not exist because it completely eviscerates your crackpot theories.
Would you make people needlessly suffer so you could stop the so called distorted pricing you claim is happening about?
Of course not. It's your crackpot fiat money theories that induce poverty and economic collapse by impairing the pricing process and economic calculation.
Karl Denninger has written an MMT "critique" on his blog:
Already critiqued here by several people including me. He assumes Q doesn't change, and so P must. False assumption when there is an output gap. He thinks that new factories will have to be built instead of realizing that presently idle resources will be brought on line.
Denninger's critique is quite good. He basically says what I've been saying for years: In the bizarro world of MMT, there are no human beings who engage in creating and exchanging goods and services in a universe where predicting the future and understanding current and past conditions is problematic.
No intelligent person could possibly fall for a ruse like MMT.
Let's get down to the brass tacks, Bob. Do the free markets you pine for distort prices? Are these free markets rational? Does government have any role in your ideal economic world? Do you believe in a humane social safety net? Give me one example of a non mixed economy that has produced more output/prosperity than ours?
...oh, and is the "mixed" Germany economy (arguably the best mix of labor, management, and government on the planet) lacking in price discovery? LOL.
"Already critiqued here by several people including me. He assumes Q doesn't change, and so P must. False assumption when there is an output gap. He thinks that new factories will have to be built instead of realizing that presently idle resources will be brought on line".
I didn't read the article. does he think that hyper inflation will insue before new factories are up and running. or does he just hate humanity and want then to be deprived of output in s deflationary crash, so his gold investments pay off.
"The whole crackpot MMT rests upon the preposterous assumption that creating funny money out of thin air creates wealth instead of distorting the pricing process and impairing wealth creation."
You seem to never learn. Wealth creation requires producing and SELLING the stuff, so it requires money. I showed you that for whopping 3000 years from 4000BC-800BC people used credit money that contracted and expanded, uncontrolled, as "funny money". This is how money has to work to be of any use: if you need more, you need to be able to produce more. And yes, every IOU that is created ex nihilo when peopke got loans back then "distorted the pricing process" (whatever that would even mean). I know, you would want a policeman in every market so that people don't dare to create money as needed.
Actually, WE are the ignoramus'…we keep trying to have a debate with a wall.
I think I'll go to work now and produce some stuff. Bob won't be able to buy it from me though because he doesn't have any of the "funny money" I require for my services.
Any form of non-fraudulent credit arrangement can be created and supplied by voluntary actors making enforceable agreements with each other. There is no necessity in this process for a bureaucracy backed by SWAT teams, paddy wagons and prisons to supply those services.
"In the bizarro world of MMT, there are no human beings who engage in creating and exchanging goods and services in a universe where predicting the future and understanding current and past conditions is problematic".
with war, raw resource supply considerations, consumer tastes, geopolitical alliances, natural disasters, new technology making your goods obsolete. population demographic changes. etc. Money even in our current system, is the most stable variable of future investment or production (economic calculation). The notion that capital is so perfect in their economic calculating, but yet can't adjust to a historically norm 3-8 percent increase in prices is the top delusion of the economic crackpot theory of economic calculation. Most of the time investment is chasing the hot new thing, that is why we have bubbles. they chase housing , cell phones, derivatives, tulips the last thing a calculating observer would accuse them of is careful calculation. That is the bizarre absurdity of Austrians
"Any form of non-fraudulent credit arrangement can be created and supplied by voluntary actors making enforceable agreements with each other."
Cool. So now credit is fine. Great!
How about that bad bad "Keynesian credit" you found so disgusting? Was it not between "voluntary actors"? Or was it "fradulent" because it was so Keynesian? I guess fraud existed in Mesopotamia too...
"The “knowledge problem” is real and it ought to be understood. Hayek won the Nobel Prize in Economics for his work on the Austrian Business Cycle Theory and the "knowledge problem" especially the distortion of economic calculation induced by fiat funny money, is at the core of that theory."
Nothing but an appeal to authority fallacy.
The vast majority of all Nobel *Memorial* Prizes* (made by the central bank of Sweden, and not even a real Nobel prize at all) go to idiot neoclassicals.
Occasionally some decent economists get one - like Gunnar Myrdal at the same time as Hayek since they were both *joint* winners of one that year (1974).
Does Myrdal's nobel prize prove his social democratic economics must be right? It doesn't do any such thing. Nor will it add any credence to Hayek's garbage business cycle theories.
*or the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel".
Bob Roddis said... Any form of non-fraudulent credit arrangement can be created and supplied by voluntary actors making enforceable agreements with each other. There is no necessity in this process for a bureaucracy backed by SWAT teams, paddy wagons and prisons to supply those services.
Yes, there is, idiot.
You need a police, justice and penal system to enforce private property rights and force people (debtors or creators of debt instruments) to honour their contracts and debts.
The only difference is your lunatic Rothbardian world would have a bureaucracy of *private* police goons or thugs, *private* SWAT teams, *private* paddy wagons and *private* prisons to supply those services.
There is no reason, frankly, why anyone should pay the slightest attention to "Bob Roddis" - his arguments are devoid of any merit, substance, or minimal intelligence.
I have no idea why people continue to try to convince Bob. There is an ideological override functioning. Let him keep on talking like a ranter in the park. People here treat him like an itch which you know shouldn't be scratched, but you feel compelled to do it anyway. Just ignore him and wait until he goes away--or let him stay and rant into the void. It doesn't matter. Rejoinders in terms of M, V, and P are ludicrous in this context. Paul has it right; it's like talking to a wall.
By the way, Bob, in your beautiful Rothbardian world, everyone can enjoy the right that police we have to torture mere suspects as long as they are later found them guilty:
" police may use such coercive methods provided that the suspect turns out to be guilty, and provided that the police are treated as themselves criminal if the suspect is not proven guilty. For, in that case, the rule of no force against non-criminals would still apply. Suppose, for example, that police beat and torture a suspected murderer to find information (not to wring a confession, since obviously a coerced confession could never be considered valid). If the suspect turns out to be guilty, then the police should be exonerated, for then they have only ladled out to the murderer a parcel of what he deserves in return;"
Stephanie Kelton: "The most empowering thing we can do for ordinary Americans is to provide them with a counter narrative that undermines, fundamentally, the government-as-a-household malarky. And we better do it quick, because America’s CEOs are already building their case against us."
Absolutely right. This is the central issue, and all energies of the MMT professionals--or inspired and educated amateurs--should be bent towards accomplishing this.
I don't share Rothbard's view on torture. I would never want to live where such a policy was in force and I fail to see how it necessarily flows from the non-initiation of force.
However, I would expect you to bring up such an arcane diversionary point so the focus would be off your failure to understand economic calculation.
We do understand economic calculation because we understand that we live in an world dominated by cultural convention and institutional arrangements that influence economic outcomes more than individual choice of supposedly free and rational agents, which psychology and evolutionary theory show to be an illusion. Moreover, it is world dominated by complexity, and as such unpredictable owing to such factors emergence and reflexivity.
Gosh, Malmo. I never realized that libertarians were not against work. I always thought they were. Obviously, all sane people are against work. Thanks for straightening me out.
Bob Roddis said... "your failure to understand economic calculation."
Oh, yes, this rubbish again:
(1) Mises' socialist calculation paper applies to communist command economies, not capitalist economies with Keynesian macro management.
(2) The ABCT is an utterly flawed and false theory. It's a testimony to your sheer stupidity that you keep parroting the idea that I don't understand that theory.
(3) the other economic calculation issue you parrot is the quote of Hayek recycling Walrasian GE theory - where flexible prices and wages clear markets. I have shown a long time ago you've no idea what you talking about here, especially when you ludicrously claim it is an "Austrian" idea that no one understands:
(4) You claim that government sending causes price distortions. Sure, it does, just as ANY spending does. The distortions are no worse (probably much less so) than what the private sector itself imposes on prices through price administration and price setting by businesses and industries:
LK refuses to comprehend that the analysis of the problems of economic calculation and miscalculation as caused and induced by Keynesian "macro management" are directly derived from the same concept as applied to the impossibility of calculation under socialism. That is both the theoretical and foundational basis of the ABCT AND why the ABCT is true. LK's attempts to deny both are increasingly pathetic.
"The ABCT is an utterly flawed and false theory. It's a testimony to your sheer stupidity that you keep parroting the idea that I don't understand that theory."
LK, the ABCT is dependent only on two things - the existence of credit expansion and the non-neutrality of money. Do you deny either of these are true?
The problems of economic calculation can plague a soviet socialist economy, an economy that is the victim of Keynesian macro management or even a single monopoly firm that lacks a market in factors of production. This has clearly been central to Austrian theory since Rothbard's "Man Economy and State" from the early 1960s.
Further, I’m fairly certain that I’ve previously directed LK to Peter Klein’s essay on entrepreneurship with its Rothbard quotes from MES around pp. 14-16.
We do understand economic calculation because we understand that we live in an world dominated by cultural convention and institutional arrangements that influence economic outcomes more than individual choice of supposedly free and rational agents, which psychology and evolutionary theory show to be an illusion. Moreover, it is world dominated by complexity, and as such unpredictable owing to such factors emergence and reflexivity.
That isn't an understanding of economic calculation. That is a misunderstanding of human life, which is then imposed on the Misesian concept of economic calculation as if it even applies.
1. "Cultural conventions" and "institutional arrangements" are derived from individual ideas and individual actions. To say that they influence economic outcomes more than individuals is to divorce creations from their creators. Marx's whole paradigm rested on that fallacy, and it too collapses like a house of cards when it was revealed that "technology" and "productive forces" are products of human life, not determinants of it.
2. Psychology and evolutionary theory have not shown individual learning and action, the bedrock of the concept of economic calculation, are "illusory". It requires an a priori insistence that humans are merely cogs in a grand cosmic teleology.
3. It is precisely complexity and emergence that explain why state management of money and hence interest rates leads to periodic booms and busts.
It seems that there is arrogance and pretensions to knowledge, and then beyond that there is MMT.
(1) The concept of economic calculation applies to Keynesian macro managed economies no less than socialist command economies. See Mises' Theory of Money and Credit.
(2) You have not shown how ABCT is "rubbish". You have only shown constant misunderstanding of it.
(3) "Walrasian GE" is not what Austrians are talking about when they refer to the unhampered price system tending towards clearing the market.
(4) Government spending creates distortions separate from private sector spending, because government spending is not based on respect for private property, which is what is required in order for prices to even exist. Prices can only exist with private property exchanges. Any deviation away from this represents a distortion away from prices serving as informative signals of true private sector preferences.
(5) Cantillon Effects are very much valid in cases of IMPOSED currency standards. In a free market of money, if the Cantillon Effect is too burdensome on those who receive the new money last, then they are free to use other monies. The Cantillon Effect is not used as the sole argument against fiat money. It is used to explain why inflation distorts relative prices and doesn't just affect all prices equally as virtually all Monetarists and Keynesians presume.
1. "Cultural conventions" and "institutional arrangements" are derived from individual ideas and individual actions. To say that they influence economic outcomes more than individuals is to divorce creations from their creators.
Shows you know nothing of cognitive economics, institutional economics or behavioral economics.
Your argument fails because of the fallacy of the excluded middle, where are the relevant science lies.
2. Psychology and evolutionary theory have not shown individual learning and action, the bedrock of the concept of economic calculation, are "illusory". It requires an a priori insistence that humans are merely cogs in a grand cosmic teleology.
No dependence on a priori other than than math, and again, fallacy of the excluded middle.
3. It is precisely complexity and emergence that explain why state management of money and hence interest rates leads to periodic booms and busts.
It explains why the future is in math terms non-ergodic. Economic "rationality" upon which Mises theory of human action is based presumes ergodicity. There is no reason to think that either the type of monetary system or the type of distribution system will necessarily overcome the surprise effects of complex systems. Markets that are supposedly efficient are problematic in complex adaptive systems since efficiency is the enemy of resilience.
Economic "rationality" upon which Mises theory of human action is based presumes ergodicity. There is no reason to think that either the type of monetary system or the type of distribution system will necessarily overcome the surprise effects of complex systems.
That is such total nonsense. The unpredictability of the future is the precisely same for all human beings whether voluntary actors or state actors except that market prices provide everyone with invaluable information that state actors lack. Again, Keynesians, MMTers, monetarists and statists of all stripes do not understand the concept of economic calculation or the “problems of knowledge in society”.
That is such total nonsense. The unpredictability of the future is the precisely same for all human beings whether voluntary actors or state actors except that market prices provide everyone with invaluable information that state actors lack.
That is an assumption that happens to be false. The presumption that rational individual compete on a level playing field in financial and non-financial markets does not hold up to scrutiny. For example, human knowledge and markets are both imperfect. Moreover, complex institutional factors influence markets.
As far as state actors lacking knowledge, in the US and other developed countries it is the state that collects, processes and distributes the data upon which market decisions are taken, and most of the signifiant decisions are under the control of a very few people at the top, the CEO's of the multinationals and finance.
Pete Petepete said... "Government spending creates distortions separate from private sector spending, because government spending is not based on respect for private property, which is what is required in order for prices to even exist"
It is at this point that we see the whole laughable arguments come crashing down. Unable to provide any economic counterargument, it just reduces to: we don't like government spending because it is immoral!
"(3) "Walrasian GE" is not what Austrians are talking about when they refer to the unhampered price system tending towards clearing the market."
Garbage - certainly in the case of the prize ignoramus Bob Roddis and his stock quote here from Hayek:
"The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept." Hayek, Friedrich A. von. 1975. A Discussion with Friedrich A Von Hayek. American Enterprise Institute, Washington. p. 6–7.
This is cited by “Bob Roddis,” with the astonishing comment that it contains “simple basic [sc. Austrian] concepts that … all the other anti-Austrians refuse to comprehend.” (http://socialdemocracy21stcentury.blogspot.com/2012/01/menger-on-origin-of-money.html?showComment=1325791226773#c5523904434180746554)
However, it is not an “Austrian” idea at all: it is a Walrasian or neo-Walrasian neoclassical idea, straight from general equilibrium theory.
And the classic Hayekian ABCT is just another theory using GE ideas:
Bob Roddis said... LK refuses to comprehend that the analysis of the problems of economic calculation and miscalculation as caused... etc.
Like a parrot devoid of any actual intelligence.
In fact, even Mises said that a libertarian socialist/syndicalist system of production was possible: he admitted that rational economic calculation was possible under syndicalism since he argued that there was a group-collective private ownership of capital goods in such a system (Keizer, W. 1987. “Two Forgotten Articles by Ludwig von Mises on the Rationality of Socialist Economic Calculation,” Review of Austrian Economics 1.1: p. 114).
So why would a modern capitalist state with Keynesian macromanagement where private ownership of capital goods exists be affected by the original socialist economic calculation problems (as described by Mises in 1921) but a syndicalist economy would not be?
"LK, the ABCT is dependent only on two things - the existence of credit expansion and the non-neutrality of money. Do you deny either of these are true? "
No it isn't. The classic Hayekian theory is dependent of all sorts of unrealistic assumptions: real world tendency to GE, a high degree of non durable capital goods, a non existent natural rate of interest, etc.
The existence of credit expansion and the non-neutrality of money (which I accept) do not in any sense prove the truth of the ABCT.
This Bob fellow seems to have a (shiny golden) stick up his ass about fiat money. Wasn't this post about Mike's appearance on TV? Stop being distracted by Bob's (shiny golden stick up his) ass.
I agree with the other posters about your demeanour on the screen. I hate to criticize, because it is great to see you on the screen and I think you explain things well. But like the others here who are distracted by Bob's golden bum, it is easy to get distracted by the other guest. The audience and the host are key. That is who needs to be focussed on.
I don't say this to rag on you. I can only imagine how difficult it is. I say it as an interested viewer, and from the point of view of an audience member, seeing what I see, and how it plays out from this end. I think it looks better and is more persuasive to allow other guests, or even the host, to tee up the ridiculous and then calmly knock it aside. Keep your eye focus on the camera, and your rhetorical focus on the host and the audience. The ideas you are presenting are new to people. You are telling them that the world is not flat, when all they know is That's just my two (fiat) cents.
Keep at them. It's good to have you out there fighting the fight.
118 comments:
all Denninger had was parlor tricks with his $3 bill and other nonsense Mike...
Parlor Tricks? LOL
What is it with you guys who cannot be bothered to reconcile their theories with the canonical economic equation?
You know -- MV = PQ
That's not a suggestion, it's an equality.
M (Money and Credit) * V (Velocity) = P (Price) * Q (Quantity)
So if you emit "M" in the form of deficit spending then PQ must rise, but this does not change the actual amount of output, only the price.
Mike you are not good at math.
Don't worry I won't be comment again because I don't read bull.
Have a good time.
Joe, hope you aren't putting money out based on QTM. But it's your choice.
http://www.youtube.com/watch?v=wJaSEtTkpCk
***COMPLETE WITH CHARTS AND ADDITIONAL EDUCATION FROM OUR CHANNEL***
I was under the impression that Bill Mitchell has always reconciled his theories with the equation of exchange MV = PQ.
Hey, Joe...there are four variables, genius. So "V" is constant, huh?
Don't worry, Joe, I won't be commenting again--to you, anyway.
That's because I don't respond to morons.
Some context on Karl Denninger:
http://www.youtube.com/watch?v=YrWqsN5O2IU
Very deadly innocent fraud #6:
"Savings create investments."
Wall St loves it and will do everything to defend it.
Keep up the good work Mike, your point of view makes a refreshing change to the usual miserable mean spirited buggers who talk about money and the economy!
Hi Mike.
I totaly agree with your arguments, but disagree about the emotional ractions from you. Tone it down please.
It is of importance to laugh at them not to be angry, because it comes up as ignorance to people that dissagree with you and are watching.
I place the most importance to the viewers that need to be educated, not on your direct opponent or intervuer.
Maybe just "we came off gold in 71 and Karl still doesnt recognise that" while laughing and then later just as you said "karl is placing importance on numbers, not real terms" while laughing at him. It will trow him of his piedestal and make some viewers think about it.
Mike,
In the 2nd segment when the discussion was about education costs, I don't think you answered effectively.
It is true that the cost of higher education has been increasing significantly, fueled by govt subsidy and student loans.
The correct solution is to provide free education to all eligible students. As John Harvey says
"The problem in a nutshell, is that not everything that is profitable is of social value and not everything of social value is profitable." http://www.forbes.com/sites/johntharvey/2012/10/05/government-vs-business/
Providing education and healthcare is of social value but not profitable.
Oh, and I agree with Jure Jordan.
Need to win them over with logic, getting angry and talking over them doesn't get us anywhere.
Mike
It's great to see you on the airwaves. I hate to admit it but I think you would need to tone it down a bit. You have the facts on your side, but this isn't a presidential debate.
I can't believe we have idiots like Denninger out there. But I hope he loses money on his trades (is he any good at all?). I've also seen Lauren Lyster interview Steve Keen and she came across as if she had no idea what he was talking about, and I think I witness some of that intellect today. Too bad her intellect don't seem to match that sweet ass
I would still LOVE to see you on MSNBC or a talk show like Daily Show or real time. Fortunately, they don't have ditzy misinformed hosts
"So if you emit "M" in the form of deficit spending then PQ must rise, but this does not change the actual amount of output, only the price."
And therein lies the religious belief.
I find the equality is so much more obvious if you write it
QP = VM
I can't get past Denninger's gas price bullshit. Did Bernanke not just recently start QE 3? Why are gas prices falling?
Mike Norman,
I thought the budget deficits in Europe were shrinking?
Why did you say they are growing?
y,
Do you have other data?
http://online.wsj.com/article/SB10000872396390444860104577560860867437208.html
looks like they are growing... rsp,
Butch,
Petroleum is a cartel/monopolist market. ie OPEC apparently Denninger doesnt know this... rsp.
Matt, I was looking at the charts on www.tradingeconomics.com
You can look at individual countries and the eurozone as a whole.
Have a look - to me it looks like deficits are shrinking, whilst unemployment is rising.
"I was under the impression that Bill Mitchell has always reconciled his theories with the equation of exchange MV = PQ."
He does, but his point is that there are (4) variables.
In order to get anyting out of the relationship you have to make assumptions for two of the variables (hold constant) in order to examine the relationship between the remaining two.
This is where the use of this identity goes off the rails, all four parameters are moving parts. It's pretty much useless, garbage in-garbage out.
y,
"Last month Mrio Monti's government hiked its 2012 deficit target to 2.6 percent of gross domestic product from 1.7 percent, blaming a deeper than expected recession"
Italy:
http://www.reuters.com/article/2012/10/23/italy-finances-cenbank-idUSL5E8LNBIQ20121023
Dont see how fiscal deficits can be falling in the importing nations who are also implementing austerity....
Can you post a link to the specific report you are viewing... rsp,
Paul,
"hold constant"
It looks like this only works (identification of a mathematical constant) for systems that we have no authority over...
Ideal Gas Equation: PV = nRT
R is the constant we can identify and then use math to work with these physical systems... we have no authority over these systems...
Gravity: F = ma
We can identify the constant a here on earth, ie 9.8 m/s2 and then use math to work with these physical systems... we have no authority over gravity...
Constants only apply in systems we have no authority over.... imo we have authority granted to us to operate our economic systems, therefore the concept of a mathematical constant DOES NOT APPLY in economics... WE make the laws... rsp,
Matt,
Italy's budget deficit in 2011 was 4.6%, down from 5.4% in 2010.
http://www.tradingeconomics.com/italy/government-budget
"Constants only apply in systems we have no authority over.... imo we have authority granted to us to operate our economic systems, therefore the concept of a mathematical constant DOES NOT APPLY in economics... WE make the laws... rsp"
Matt, This is an interesting way of looking at the subject and I think i agree…
One "constant" or law that does apply though is that of closed systems.
The concept is embedded in systems we use every day but we don't notice. Accounting for example.
Some believe they are entitled to (should be allowed to) earn as much money as they can. They are apparently unaware that they can only earn what's in the system and once they have it all everyone else has nothing.
Ever notice that an hourglass works for a while then stops? Closed system. A reset means flipping it over and starting again. In economic parlance it means taking money from the rich and giving it to the poor.
Just like the hourglass there is no alternative. We are at the root of the problem.
Nothing else to earn unless the government injects it, or we are back to barter.
"One "constant" or law"
imo it's a LAW Paul (ie closed systems) that is imposed on us. It cannot be violated just like the LAW of Gravity...
I was talking specifically about the mathematical technique we often use to identify a 'constant' in systems we have no authority over ... this is different from a 'law'... rsp,
Matt, I agree with that.
As with all things abstract I have to chew on it a while before I truly "see" it.
y,
That is old data. Italy had their guy in there and they were muddling thru then (deficits high enough for small amounts of growth).... They bounced him and now the EU somehow got the goon in there to crack skulls with austerity and the deficits are increasing again as we speak... the Reuters link I posted above is from just the other day... rsp,
None of the four terms in the equation of exchange are constants. They are all variables. I prefer the MV = PT version of the equation. And if people want to focus on the dependence of price level on the quantity of money, you can rewrite the equation as:
P = M(V/T)
Obviously, those who support fiscal expansions leading to an increase in M usually do so because they think that the economy is operating well below capacity with many unemployed resources, and so the spending can increase output (and hence T) without increasing P.
What's up with the $3 Obama Buck thing getting cut with a scissors???
I'm getting another weirdo-rama vibe off that...
Then he says that "the rest evaporates into the ether"... Whaaaaaatt????
"None of the four terms in the equation of exchange are constants. They are all variables."
That's the problem. They can all be changing at the same time. We have one equation with (4) unknowns.
The equation is indeterminate, unless at least (2) of the variables are set constant (not allowed to change) so that the relationship between the other two can be evaluated.
This requires assumptions that are not applicable to the real world. The assumptions end up being mutually exclusive.
So the question becomes, what problem are we solving with the identity?
Nothing useful can be gleaned from the identity, even though real-world events will always turn out to satisfy it.
It's a paradox.
Denninger is probably the biggest crackpot out there. The man passes himself off as an expert on virtually any topic one can come up with. One thing to keep in mind is that the man thinks he's so brilliant that he didn't hang around to receive a college degree. Likely thought he was more astute than his professors.
Lauren,
Hope you see this....
What kind of service are you doing for your viewers if you have folks on who describe economic events as "they evaporate into the ether"????
This is at best an irrational statement.
You are not providing your viewers with anything valuable if this type of literal nonsense is allowed to be paraded on YOUR program as legitimate and edifying analysis.... this is sad for you and RTtv.
You can do better than this...
rsp,
Denninger just wrote this at his blog:
"There will be no economic recovery until deficit spending ends."
...And he called Mike "insane" last evening at his blog. Denninger need only look in the mirror to witness who's really laboring under condition.
"We will run out of air unless we stop breathing" - paul
1. For the record, Denninger is not an Austrian nor is he considered a libertarian by libertarians so don't attempt to attach him to me.
http://www.economicpolicyjournal.com/2011/12/vox-popoli-gets-caught-in-denninger.html
http://www.economicpolicyjournal.com/2011/12/denninger-attacks-wenzel.html
2. I finally get the Mike Norman thing. Government spending out of thin air creates increasing wealth so there's more great stuff to buy with the diluted dollars so prices don't rise as fast as the money supply is diluted. Of course, the problems of economic calculation and wealth transfers to the elite this policy inflicts are ignored, but I finally get the gist of the theory. You guys need to be less opaque. Actually, I think you hide your basic (and silly and baseless) assumptions because you can't defend them. And, in your hearts, you know it.
3. As I predicted, Lauren Lyster was not taken in by the MMT nonsense.
" As I predicted, Lauren Lyster was not taken in by the MMT nonsense."
I don't know, she's had Ed Harrison on her show several times.
He's both an Austrian and an MMT'er.
Off topic:
Felix Salmon bashes deficit hawk CEOs.
http://blogs.reuters.com/felix-salmon/2012/10/25/ceos-self-serving-deficit-manifesto/
"If it wasn’t for the Federal deficit, the debt-to-GDP chart would be declining even more precipitously, and the economy would be a disaster. Deleveraging is a painful process, and the Federal government is — rightly — easing that pain right now. And this is the gratitude it gets in return!"
@Bob Roddis
"great stuff to buy with the diluted dollars so prices don't rise as fast as the money supply is diluted"
PQ=MV
Is there more stuff, or dilluted dollars?
And nobody ignores the wealth transfer to elites, but you imagine that we do. That's why deficit spending employing unemployed will prevent dirket transfer to the elites.
"That's why deficit spending employing unemployed will prevent dirket transfer to the elites."…
…but they eventually end up with it anyway. That's why it is so important that we make the tax system much more progressive.
Think of it this way, money is piling up in rich people's pockets like waste is piling up at the dump.
Eventually we will run out of room.
We must differentiate factual allegations from theoretical allegations. One must differentiate a) MMT observations about the mechanics of credit and money creation in our criminally insane monetary system which are merely factual; and b) MMT Keynesian based theory about the impacts of this system of credit and money creation upon society. As John Carney said in a nice way:
I'm not trying to shoot down the core insights of MMT. In fact, I find them extremely valuable to my reporting and analysis.
But there are some statements coming out of MMT that are highly misleading or confusing to people. Much of this confusion stems from the impression people get reading MMT blogs and papers that saving requires deficit spending [I think that MMTers are saying this –BR]. This is wrong, of course. But many smart, intelligent folks think this is what MMT is claiming.
So they dismiss it as nonsense.
What I've been trying to do is explore what it is that makes people think this is an MMT claim and what must be said to clarify it.
Furthermore, I do think there's a problem with MMT that cannot be confined to confusion.
The problem is as follows: MMTer are so focused on sectoral balances and the interaction between the private domestic sector and the public sector that they often downplay the intra-sector dynamics [like human beings making and exchanging stuff – BR].
Finally, MMTers do not seem to fully appreciate the problems of ignorance and calculation that inform Austrian economics [MMTers do not understand this at all – BR]. They seem to recoil at even thinking about them because of the implications for the limits of political action. This also needs to be corrected.
http://tinyurl.com/7sycbey
Just because the government can never run out of "dollars" or because it can spend "dollars" into existence does not prove that the result of those procedures will be an ever more prosperous economy. That is the "theory" part of your presentation and it is a total crock. But you guys present it as if it is an axiom of reality that requires no proof or justification.
Dan K. I was under the impression that Bill Mitchell has always reconciled his theories with the equation of exchange MV = PQ.
MMT economists acknowledge that this is an identity. The problems for QTM arise from imputing causality to it falsely.
People surmise that if MV increases then Q remains the same so P increases. True at full output. At under full output the increase in effective demand means that Q (supply) expands to meet it without a change in price level P.
So betting on increasing CPI due to larger deficits is a poor strategy when there is an output gap, which is revealed by UE, i.e., idle resources.
Ok, Bob, then what system do offer as the best in your perfect world? Anarcho-capitalism?
Here's what Bill Mitchell says about TQTM:
"The Quantity Theory of Money which in symbols is MV = PQ but means that the money stock times the turnover per period (V) is equal to the price level (P) times real output (Q). The mainstream assume that V is fixed (despite empirically it moving all over the place) and Q is always at full employment as a result of market adjustments."
Bob, I don't think MMT makes any claims of "an ever more prosperous" economy. I think they claim that they can put idle resources to use. When all idle resources are put to use, prosperity will depend on productivity gains. As a side note, human beings have generally been pretty good at productivity gains.
Maybe people would be more open to your views if you argued against what MMT says instead of arguing against what you pretend it says.
"Q is always at full employment as a result of market adjustments."
Right, they think this is the best we can do, ie NAIRU... or "natural" rate of unemployment: This is a denial of human authority.
And this is revealing from Bob wrt John Carney: "because of the implications for the limits of political action. This also needs to be corrected."
Carney seems to be some sort of radical anarcho-libertarian/slavertarian and CNBC has him right there on their TV all the time.... scary!
rsp,
Bob Roddis@October 25, 2012 10:17 AM
" Of course, the problems of economic calculation and wealth transfers to the elite this policy inflicts are ignored, but I finally get the gist of the theory."
The "economic calculation" problem is either non-existent or grossly exaggerated.
Wealth transfers to elite?? In a system of progressive taxation and redistributive social security and welfare programs?
More seriously, the Denninger guy was terrible.
(1) the quantity theory of money is grossly flawed:
http://socialdemocracy21stcentury.blogspot.com/2010/07/quantity-theory-of-money-critique.html
(2) the "inflation eroding the value of the dollar" argument is a red herring: for real wages and real living standards have soared since 1900. It's not just productivity growth and price falls in many individual goods.
Nominal and real wage increases and even nominal and inflation adjusted changes to transfer payments mean most people do not suffer from long term mild inflation, which is the historical norm post-1945.
(3) Denninger complains about money supply expansion. He seems utterly unaware that the private sector has always had the ability to expand broad money supply and contribute to inflation. Does he think private bank deposits, negotiable cheques, negotiable bills of exchange or negotiable promissory notes are all evil or immoral?
(4) Seriously, the US system of college education is one of the most privatised in the world.
If you want inexpensive, good college education you fund it, subsidize it, or make it free for anyone gifted enough to go, just as they do in many social democratic European nations.
Also, Denninger parrots the Austrian nonsense about the recession of 1920-1921.
Mike Norman, you should call these people any time they cite that recession.
1920-1921 was not a severe debt deflationary crisis, as in 1929-1933. There was no banking crisis, no financial crisis.
The Fed lowered the discount rate from 1921 to stimulate recovery, and then conducted open market operations during the recovery that followed the recession:
http://socialdemocracy21stcentury.blogspot.com/2012/10/the-recovery-from-us-recession-of.html
http://socialdemocracy21stcentury.blogspot.com/2012/10/rothbard-on-recession-of-19201921.html
Technically, it was not even a "depression" - just a mild or moderate recession.
Also, it lasted 18 months - that is not short by any means, certainly not by standards of the post-1945 business cycle.
http://socialdemocracy21stcentury.blogspot.com/2010/10/us-recession-of-19201921-some.html
Karl Denninger would limit credit creation for only those with assets that could be marked-to-market daily. Any other credit creation would be counterfeiting, according to Karl. But actually, ANY credit creation is a form of counterfeiting since the purchasing power for the new deposit is stolen via dilution from all other deposits or currency. So Karl is for counterfeiting, but only for those with marketable assets.
"But actually, ANY credit creation is a form of counterfeiting since the purchasing power for the new deposit is stolen via dilution from all other deposits or currency"
(1) it is isn't "counterfeiting": there is no fraud involved. Causing or contributing to inflation would be a negative externality, not fraud.
(2) if an act that contributes to price inflation is immoral (the assumption required the argument above once the fraud argument collapses), you then have the absurd consequence that practically any activity in a modern modern capitalist economy is immoral. Even changes in velocity of circulation of money (functionally equivalent to money supply changes) must be immoral.
This kind of libertarian ideology is ignorant and actually anti-capitalist, as it paints private business people creating and voluntarily accepting things as mundane as negotiable bills of exchange etc. as committing some horrible fraud on society. That is rubbish.
I hesitate to criticize Lauren because she's smart and she's gorgeous. She also deserves huge kudos for inviting guests who actually understand the US monetary system, like Mike "Stormin" Norman and Ed Harrison. But I'm sorry, when she started arguing based on her personal experience (in the segment on education), I lost a little respect. Solipsism at its best.
Here's a page on Denninger's academic background in economics:
http://www.denninger.net/resume.html
LOL.
Denniger is the one that believes in free lunches when he expects more prosperity than what productivity can produce.
The right riposte to the the "deficit spending dilutes the money supply and inflates away my savings" is this: If govt spending dilutes the money supply, then govt taxes concentrates it. So if the govt takes your money away via taxes, it's actually making your existing savings worth more. So spending takes away and taxing gives. See total nonsense.
Furthermore, Denninger doesn't realize where his savings comes from. In order for him to earn more than he spends, another agent has to spend more than they earn.
And Mike, you should have mentioned credit expansion as an expansion of the money supply as well. So if govt spending dilutes and inflates my savings, why doesn't a bank loan do the exact same thing? (of course, Denninger doesn't understand bank loans either, still off the loanable funds model).
Since WII until recently, on average, more credit was taken out each year than was paid back. That's an important point.
LK:
The "economic calculation" problem is either non-existent or grossly exaggerated.
What a vacuous statement. You're essentially saying it either exists or it doesn't. Well duh. The "grossly exaggerated" bit is nothing but a rhetorical trick used to downplay the existence of it, by making reference to unnamed people against an unnamed standard of how it "should" be treated.
Wealth transfers to elite?? In a system of progressive taxation and redistributive social security and welfare programs?
Inflation typically enters the economy in the banking sector first. What you are talking about are secondary "endogenous" money transfers after the fact.
You can have both.
More seriously, the Denninger guy was terrible.
(1) the quantity theory of money is grossly flawed:
http://socialdemocracy21stcentury.blogspot.com/2010/07/quantity-theory-of-money-critique.html
That is not the quantity theory of money.
It doesn't hold that every increase in the money supply leads to rising prices. It holds that if there is an increase in the money supply, then given the demand for money is unchanged, then the purchasing power of money will be lower than it otherwise would have been.
(2) the "inflation eroding the value of the dollar" argument is a red herring: for real wages and real living standards have soared since 1900. It's not just productivity growth and price falls in many individual goods.
They have soared DESPITE the eroding value of the dollar.
Nominal and real wage increases and even nominal and inflation adjusted changes to transfer payments mean most people do not suffer from long term mild inflation, which is the historical norm post-1945.
That doesn't transcend the fact that the central bank injects money into distinct points in the economy, not everywhere.
(3) Denninger complains about money supply expansion. He seems utterly unaware that the private sector has always had the ability to expand broad money supply and contribute to inflation. Does he think private bank deposits, negotiable cheques, negotiable bills of exchange or negotiable promissory notes are all evil or immoral?
The private sector cannot keep increasing fiduciary media that is money under legal tender laws, without a corresponding increase of money from the central bank.
(4) Seriously, the US system of college education is one of the most privatised in the world.
If you want inexpensive, good college education you fund it, subsidize it, or make it free for anyone gifted enough to go...
Like in North Korea.
Also, Denninger parrots the Austrian nonsense about the recession of 1920-1921.
You haven't shown it is nonsense.
Mike Norman, you should call these people any time they cite that recession.
He is as ignorant as you are.
1920-1921 was not a severe debt deflationary crisis, as in 1929-1933. There was no banking crisis, no financial crisis.
That's because there was not as severe a prior inflation.
The Fed lowered the discount rate from 1921 to stimulate recovery, and then conducted open market operations during the recovery that followed the recession:
The economy was already on the road to recovery by the time the Fed did that.
Technically, it was not even a "depression" - just a mild or moderate recession.
Semantics.
Also, it lasted 18 months - that is not short by any means, certainly not by standards of the post-1945 business cycle.
By the absurd GDP statistic? Please. If in a depression the state inflated and financed 100% of the population to build a giant pyramid for $10 trillion, that would show up as an increase in GDP, but the depression would still exist.
This kind of libertarian ideology is ignorant and actually anti-capitalist, as it paints private business people creating and voluntarily accepting things as mundane as negotiable bills of exchange etc. as committing some horrible fraud on society. Lord Keynes
Then let the banks carry on as purely private businesses without government deposit insurance and without a legal tender lender of last resort. What? They can't? Then banks are not truly private businesses.
Denninger and those apologists for him who have posted here are sadistic vipers. They would rather argue fringe ideology than address the needs of the millions of hurting people in our complex society. Thus they ignore the operational realities of the monetary system and instead front for a pie in the sky system that neither existed nor could properly exist in a modern industrial world. They would rather see millions of people suffer just so they could prove some dubious off the wall economic points they label as morally necessary.
The goal of any thoughtful person is to advocate for a system to maximize the well being of as many people as possible. Anarcho-libertarians extremists are the enemy not the saviors. Zealots who are blinded by ideology are the most dangerous among us. They would rather make and enact their cherished ideological points, even if it meant the certain suffering and destruction of millions of their fellow citizens. Sorry, but these fools are quite simply economic terrorists and should be dealt with as such. Enough of their venom.
I just looked at his resume!
Why would anyone interview him about economics?
I'm sure the butcher, baker, and candle stick makers have opinions on the economy and how they think it works but I certainly would consider having them on TV to debate an economist.
Was there any point to this?
What Malmo's Ghost said:…+1
Good job, Mike. Dude was clueless.
Mike, weren't you on Lauren's program before and didn't you go over the issues of inflation and hyperinflation the first time? And didn't she understand the issues better than now? Wonder if she's been talking to Karl too much?
Denninger is not an Austrian and he's not a libertarian. He has no defenders. He has no minions. He represents no one. Get over it.
Lauren Lyster still pwnd Mike Norman as I predicted she would.
Just watched this. People are right, Mike has facts on his side, he can afford to act with dignity, try to emulate Mosler. Do not cut in, do not shout when the other person is speaking, point out the math and facts calmly, again: you have facts on your side. You could defeat Denninger by pointing that *sometimes* more money allows more goods to be produced, not the same amount of goods to be priced higher. Same with interest rates: the government controls them, period.
I'm sure someone could formulate a version of MMT which always, always results in zero inflation, for all those people who just want to stuff their dollars in their mattresses and be safe in the knowledge that they will still have exactly the same value (if not more) 50 years in the future (without them having to be invested or anything).
For those types, this paper might be of some passing interest:
http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf
Pete Petepete said...
>Also, it lasted 18 months -
>that is not short by any means, >certainly not by standards of the >post-1945 business cycle.
By the absurd GDP statistic? Please.
I see! So in rejecting GDP you have no basis or evidence that real output even recovered at all in 1921, thereby destroying your own position.
You're clearly an idiot of the highest order "Pete Petepete" (aka Major_Freedom).
">The Fed lowered the discount
>rate from 1921 to stimulate
>recovery, and then conducted open
>market operations during the
> recovery that followed the
> recession:
The economy was already on the road to recovery by the time the Fed did that."
No, it wasn't. The US economy was still contracting when the Fed began to lower the discount rate.
The problem is very simple. Karl is a)not very bright; b) ignorant of the MMT literature, which he does not appear to have bothered to study let alone fully think through and contrast with his current perspective; c) is a man whose mentality has fossilized around certain ideological axioms and conventional formulations; d) even if he did get it, his large ego would forbid admitting it--too many years being wrong. Therefore, a colossal waste of time.
As for Lauren, who is intelligent, she is probably too busy to study what she should study. So she relies too much on conventional formulations and her previous experience in finance. A pity.
As for Mike, he is not serving the cause with his lack of good manners and impatience. It just turns people off. Take a look at the way Marshall Auerback handles himself, for instance. To absorb MMT means a significant paradigm shift--it is not doable on TV clips. I am always amazed at the lack of awareness of intellectuals regarding the nature of the media and what they think can be accomplished on it. TV is essentially for entertainment, and is a very passive medium, unless you get an in-depth kind of situation such as Bill Moyers is famous for, and even then....
MMT professionals have yet to arrive at a convincing and concise manner of presenting their perspective, taking into account continually the perspective and key reference points of those whose minds they are trying to change.
"MMT professionals have yet to arrive at a convincing and concise manner of presenting their perspective, taking into account continually the perspective and key reference points of those whose minds they are trying to change."
There isn't a whole lot MMT professionals can do to change minds in any significant way. All they can do is make sure their arguments are factual and their analyses logically correct.
The worldview/beliefs of the public is mainly a function of authority. Whatever "authority" promotes as reality, that is the reality adopted by the masses.
To expect otherwise would be to require each individual to think for themselves…and that won't happen because it takes too much effort.
When the pain gets great enough, people will look for different authorities. Unfortunately, when backed into a corner it isn't guaranteed the right choices will be made.
LK,
"So in rejecting GDP you have no basis or evidence that real output even recovered at all in 1921, thereby destroying your own position."
LOL... They are truly insane morons ... great stuff!
rsp,
@ joe mama
"So if you emit "M" in the form of deficit spending then PQ must rise, but this does not change the actual amount of output, only the price."
same mistake as most economists, believing in baseless assumptions.
Why wouldn't output increase with an increase in money. If everyone got a free gift of $2,000 to buy only t.v.s, factories that have extra capacity wouldn't increase production to capture a greater portion of t.v. spending? They wouldn't expand their capacity to capture all the money pouring into the t.v. market? Are capitalists really just hopeless bunglers not able to respond to increase in demand.
using your assumptions about output, if there was only one dollar in the economy it would produce the same amount of goods as if there were 1 trillion. there would be no benefit for using money at all. A barter society would be just as efficient as one with a monetary system. So your assumptions on output are obviously incorrect.
mr norman ... at approx the 9 minute mark you engaged in a classic form of smoke and mirrors which thoroughly diluted value of your argument and anything else you might have offered. you suggest the USD isn't being devalued and that the DXY proves this. the DXY as you surely know is comprised of six other currencies [notably including the euro, yen and swiss franc]. what can we learn from comparing one unit of anything to six others which are behaving the same way? what commodities have not been increasing in price wrt these other currencies? so yes, the USD is more or less holding its own as measured by the DXY, but the components of the DXY are also declining in value.
if you and ben bernanke jumped off of a high-rise building together, and were falling at approximately the same rate, i doubt either of you would forgo the offer of a parachute on the grounds that your altitude was not decreasing [at an increasing rate, btw] wrt the other's. and THAT is what we're seeing in the DXY, as you well know.
so my only question is, why on earth would you offer so transparent a piece of misdirection to bolster your position?
michaelD
PS you don't do yourself any favors by acting so rude and ill-mannered. we have more than enough mud-wrestling in the media.
The whole crackpot MMT rests upon the preposterous assumption that creating funny money out of thin air creates wealth instead of distorting the pricing process and impairing wealth creation. Lauren Lyster is aware of the wealth impairing nature of funny money. If you think you are going to change her mind, you might start with addressing the distortion of the pricing process via funny money.
What's this non distorted pricing world you speak of, Bob? Where is it located? Fantasy land?
How would you create wealth, Bob? Would you make people needlessly suffer so you could stop the so called distorted pricing you claim is happening about?
How much government is too much, Bob? Where do you draw the line? Be precise so as to determine who the real crackpot is amongst us.
Karl Denninger has written an MMT "critique" on his blog:
http://market-ticker.org/akcs-www?post=213147
@ bob
wealth is based on how much goods and services (G&S) one consumes (or could).
Since producers put more G&S on market when demand increases. Increased demand ( and therefor production of G&S (wealth)) leads to a higher standard of living or wealth.
the whole idea of economics is to find away to produce as much G&S as possible. Saving or hording money, gold, in order to produce things that do not require gold in the production process is counter- economic thinking
Stable prices maybe relevant to economics , but it is not the goal.
What's this non distorted pricing world you speak of, Bob? Where is it located? Fantasy land?
In February, 2011, the American Economic Review (specifically Kenneth J. Arrow, B. Douglas Bernheim, Martin S. Feldstein, Daniel L. McFadden, James M. Poterba, and Robert M. Solow) named its top 20 articles of the last 100 years. Included therein was:
Hayek, F. A. 1945. “The Use of Knowledge in Society.” American Economic Review, 35(4): 519–30.
http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.101.1.1
The “knowledge problem” is real and it ought to be understood. Hayek won the Nobel Prize in Economics for his work on the Austrian Business Cycle Theory and the "knowledge problem" especially the distortion of economic calculation induced by fiat funny money, is at the core of that theory. It is at the core of Austrian school thinking and is non-existent in MMT or Keynesianism for that matter.
You people purposefully pretend that the entire issue does not exist because it completely eviscerates your crackpot theories.
Would you make people needlessly suffer so you could stop the so called distorted pricing you claim is happening about?
Of course not. It's your crackpot fiat money theories that induce poverty and economic collapse by impairing the pricing process and economic calculation.
Karl Denninger has written an MMT "critique" on his blog:
Already critiqued here by several people including me. He assumes Q doesn't change, and so P must. False assumption when there is an output gap. He thinks that new factories will have to be built instead of realizing that presently idle resources will be brought on line.
Denninger's critique is quite good. He basically says what I've been saying for years: In the bizarro world of MMT, there are no human beings who engage in creating and exchanging goods and services in a universe where predicting the future and understanding current and past conditions is problematic.
No intelligent person could possibly fall for a ruse like MMT.
Karl Denninger has written an MMT "critique" on his blog
I knew it would be dumb, I read it anyway... and it was dumb. I need better impulse control.
Let's get down to the brass tacks, Bob. Do the free markets you pine for distort prices? Are these free markets rational? Does government have any role in your ideal economic world? Do you believe in a humane social safety net? Give me one example of a non mixed economy that has produced more output/prosperity than ours?
...oh, and is the "mixed" Germany economy (arguably the best mix of labor, management, and government on the planet) lacking in price discovery? LOL.
"Already critiqued here by several people including me. He assumes Q doesn't change, and so P must. False assumption when there is an output gap. He thinks that new factories will have to be built instead of realizing that presently idle resources will be brought on line".
I didn't read the article. does he think that hyper inflation will insue before new factories are up and running. or does he just hate humanity and want then to be deprived of output in s deflationary crash, so his gold investments pay off.
"No intelligent person could possibly fall for a ruse like MMT."
Hell, a whole bunch of us already have.
millerB,
"so his gold investments pay off"
If he was only that smart. rsp,
Bob,
"The whole crackpot MMT rests upon the preposterous assumption that creating funny money out of thin air creates wealth instead of distorting the pricing process and impairing wealth creation."
You seem to never learn. Wealth creation requires producing and SELLING the stuff, so it requires money. I showed you that for whopping 3000 years from 4000BC-800BC people used credit money that contracted and expanded, uncontrolled, as "funny money". This is how money has to work to be of any use: if you need more, you need to be able to produce more. And yes, every IOU that is created ex nihilo when peopke got loans back then "distorted the pricing process" (whatever that would even mean). I know, you would want a policeman in every market so that people don't dare to create money as needed.
You are an ignoramus, sadly.
"You are an ignoramus, sadly."
Actually, WE are the ignoramus'…we keep trying to have a debate with a wall.
I think I'll go to work now and produce some stuff. Bob won't be able to buy it from me though because he doesn't have any of the "funny money" I require for my services.
Any form of non-fraudulent credit arrangement can be created and supplied by voluntary actors making enforceable agreements with each other. There is no necessity in this process for a bureaucracy backed by SWAT teams, paddy wagons and prisons to supply those services.
"In the bizarro world of MMT, there are no human beings who engage in creating and exchanging goods and services in a universe where predicting the future and understanding current and past conditions is problematic".
with war, raw resource supply considerations, consumer tastes, geopolitical alliances, natural disasters, new technology making your goods obsolete. population demographic changes. etc.
Money even in our current system, is the most stable variable of future investment or production (economic calculation). The notion that capital is so perfect in their economic calculating, but yet can't adjust to a historically norm 3-8 percent increase in prices is the top delusion of the economic crackpot theory of economic calculation. Most of the time investment is chasing the hot new thing, that is why we have bubbles. they chase housing , cell phones, derivatives, tulips the last thing a calculating observer would accuse them of is careful calculation. That is the bizarre absurdity of Austrians
Bob,
"Any form of non-fraudulent credit arrangement can be created and supplied by voluntary actors making enforceable agreements with each other."
Cool. So now credit is fine. Great!
How about that bad bad "Keynesian credit" you found so disgusting? Was it not between "voluntary actors"? Or was it "fradulent" because it was so Keynesian? I guess fraud existed in Mesopotamia too...
"Any form of non-fraudulent credit arrangement can be created and supplied by voluntary actors…"
I don't accept "Bob-Bucks".
"The “knowledge problem” is real and it ought to be understood. Hayek won the Nobel Prize in Economics for his work on the Austrian Business Cycle Theory and the "knowledge problem" especially the distortion of economic calculation induced by fiat funny money, is at the core of that theory."
Nothing but an appeal to authority fallacy.
The vast majority of all Nobel *Memorial* Prizes* (made by the central bank of Sweden, and not even a real Nobel prize at all) go to idiot neoclassicals.
Occasionally some decent economists get one - like Gunnar Myrdal at the same time as Hayek since they were both *joint* winners of one that year (1974).
Does Myrdal's nobel prize prove his social democratic economics must be right? It doesn't do any such thing. Nor will it add any credence to Hayek's garbage business cycle theories.
*or the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel".
Bob Roddis said...
Any form of non-fraudulent credit arrangement can be created and supplied by voluntary actors making enforceable agreements with each other. There is no necessity in this process for a bureaucracy backed by SWAT teams, paddy wagons and prisons to supply those services.
Yes, there is, idiot.
You need a police, justice and penal system to enforce private property rights and force people (debtors or creators of debt instruments) to honour their contracts and debts.
The only difference is your lunatic Rothbardian world would have a bureaucracy of *private* police goons or thugs, *private* SWAT teams, *private* paddy wagons and *private* prisons to supply those services.
There is no reason, frankly, why anyone should pay the slightest attention to "Bob Roddis" - his arguments are devoid of any merit, substance, or minimal intelligence.
I have no idea why people continue to try to convince Bob. There is an ideological override functioning. Let him keep on talking like a ranter in the park. People here treat him like an itch which you know shouldn't be scratched, but you feel compelled to do it anyway. Just ignore him and wait until he goes away--or let him stay and rant into the void. It doesn't matter. Rejoinders in terms of M, V, and P are ludicrous in this context. Paul has it right; it's like talking to a wall.
By the way, Bob, in your beautiful Rothbardian world, everyone can enjoy the right that police we have to torture mere suspects as long as they are later found them guilty:
" police may use such coercive methods provided that the suspect turns out to be guilty, and provided that the police are treated as themselves criminal if the suspect is not proven guilty. For, in that case, the rule of no force against non-criminals would still apply. Suppose, for example, that police beat and torture a suspected murderer to find information (not to wring a confession, since obviously a coerced confession could never be considered valid). If the suspect turns out to be guilty, then the police should be exonerated, for then they have only ladled out to the murderer a parcel of what he deserves in return;"
http://socialdemocracy21stcentury.blogspot.com/2011/10/rothbard-on-torture.html
Bad luck for the innocent victims of private police brutality, though! Still, they can always sue - after losing an eye or body part to torture.
Correction:
"that police will have to torture mere suspects as long as they are later found guilty:"
Stephanie Kelton:
"The most empowering thing we can do for ordinary Americans is to provide them with a counter narrative that undermines, fundamentally, the government-as-a-household malarky. And we better do it quick, because America’s CEOs are already building their case against us."
Absolutely right. This is the central issue, and all energies of the MMT professionals--or inspired and educated amateurs--should be bent towards accomplishing this.
A primer on these anarcho-libertarian nut jobs:
http://www.inspiracy.com/black/abolition/libertarian.html
LK:
I don't share Rothbard's view on torture. I would never want to live where such a policy was in force and I fail to see how it necessarily flows from the non-initiation of force.
However, I would expect you to bring up such an arcane diversionary point so the focus would be off your failure to understand economic calculation.
failure to understand economic calculation
We do understand economic calculation because we understand that we live in an world dominated by cultural convention and institutional arrangements that influence economic outcomes more than individual choice of supposedly free and rational agents, which psychology and evolutionary theory show to be an illusion. Moreover, it is world dominated by complexity, and as such unpredictable owing to such factors emergence and reflexivity.
Gosh, Malmo. I never realized that libertarians were not against work. I always thought they were. Obviously, all sane people are against work. Thanks for straightening me out.
Bob Roddis said...
"your failure to understand economic calculation."
Oh, yes, this rubbish again:
(1) Mises' socialist calculation paper applies to communist command economies, not capitalist economies with Keynesian macro management.
(2) The ABCT is an utterly flawed and false theory. It's a testimony to your sheer stupidity that you keep parroting the idea that I don't understand that theory.
(3) the other economic calculation issue you parrot is the quote of Hayek recycling Walrasian GE theory - where flexible prices and wages clear markets. I have shown a long time ago you've no idea what you talking about here, especially when you ludicrously claim it is an "Austrian" idea that no one understands:
http://socialdemocracy21stcentury.blogspot.com/2012/07/is-this-what-vulgar-austrians-mean-by.html
(4) You claim that government sending causes price distortions. Sure, it does, just as ANY spending does. The distortions are no worse (probably much less so) than what the private sector itself imposes on prices through price administration and price setting by businesses and industries:
http://socialdemocracy21stcentury.blogspot.com/2012/07/more-on-prices-in-real-world.html
That does not stop the private sector from creating strong real output growth.
(5) finally, on other occasions you point to Cantillon effects, but argument won't work either:
http://socialdemocracy21stcentury.blogspot.com/2011/09/are-cantillon-effects-argument-against.html
LK refuses to comprehend that the analysis of the problems of economic calculation and miscalculation as caused and induced by Keynesian "macro management" are directly derived from the same concept as applied to the impossibility of calculation under socialism. That is both the theoretical and foundational basis of the ABCT AND why the ABCT is true. LK's attempts to deny both are increasingly pathetic.
Round and round again, the same tedious idiotic Bob Roddis routine.
"The ABCT is an utterly flawed and false theory. It's a testimony to your sheer stupidity that you keep parroting the idea that I don't understand that theory."
LK, the ABCT is dependent only on two things - the existence of credit expansion and the non-neutrality of money. Do you deny either of these are true?
" the other economic calculation issue you parrot is the quote of Hayek recycling Walrasian GE theory - where flexible prices and wages clear markets"
1) The idea of market clearing is not a *general* equilibrium concept, nor is this a purely Walrasian concept.
2) Economic calculation has nothing to do with equilibrium. The fact that you think it does indicates your lack of understanding of the concept.
The problems of economic calculation can plague a soviet socialist economy, an economy that is the victim of Keynesian macro management or even a single monopoly firm that lacks a market in factors of production. This has clearly been central to Austrian theory since Rothbard's "Man Economy and State" from the early 1960s.
Further, I’m fairly certain that I’ve previously directed LK to Peter Klein’s essay on entrepreneurship with its Rothbard quotes from MES around pp. 14-16.
http://tinyurl.com/9mvdkd9
Tom Hickey:
We do understand economic calculation because we understand that we live in an world dominated by cultural convention and institutional arrangements that influence economic outcomes more than individual choice of supposedly free and rational agents, which psychology and evolutionary theory show to be an illusion. Moreover, it is world dominated by complexity, and as such unpredictable owing to such factors emergence and reflexivity.
That isn't an understanding of economic calculation. That is a misunderstanding of human life, which is then imposed on the Misesian concept of economic calculation as if it even applies.
1. "Cultural conventions" and "institutional arrangements" are derived from individual ideas and individual actions. To say that they influence economic outcomes more than individuals is to divorce creations from their creators. Marx's whole paradigm rested on that fallacy, and it too collapses like a house of cards when it was revealed that "technology" and "productive forces" are products of human life, not determinants of it.
2. Psychology and evolutionary theory have not shown individual learning and action, the bedrock of the concept of economic calculation, are "illusory". It requires an a priori insistence that humans are merely cogs in a grand cosmic teleology.
3. It is precisely complexity and emergence that explain why state management of money and hence interest rates leads to periodic booms and busts.
It seems that there is arrogance and pretensions to knowledge, and then beyond that there is MMT.
Lord Keynes:
(1) The concept of economic calculation applies to Keynesian macro managed economies no less than socialist command economies. See Mises' Theory of Money and Credit.
(2) You have not shown how ABCT is "rubbish". You have only shown constant misunderstanding of it.
(3) "Walrasian GE" is not what Austrians are talking about when they refer to the unhampered price system tending towards clearing the market.
(4) Government spending creates distortions separate from private sector spending, because government spending is not based on respect for private property, which is what is required in order for prices to even exist. Prices can only exist with private property exchanges. Any deviation away from this represents a distortion away from prices serving as informative signals of true private sector preferences.
(5) Cantillon Effects are very much valid in cases of IMPOSED currency standards. In a free market of money, if the Cantillon Effect is too burdensome on those who receive the new money last, then they are free to use other monies. The Cantillon Effect is not used as the sole argument against fiat money. It is used to explain why inflation distorts relative prices and doesn't just affect all prices equally as virtually all Monetarists and Keynesians presume.
1. "Cultural conventions" and "institutional arrangements" are derived from individual ideas and individual actions. To say that they influence economic outcomes more than individuals is to divorce creations from their creators.
Shows you know nothing of cognitive economics, institutional economics or behavioral economics.
Your argument fails because of the fallacy of the excluded middle, where are the relevant science lies.
2. Psychology and evolutionary theory have not shown individual learning and action, the bedrock of the concept of economic calculation, are "illusory". It requires an a priori insistence that humans are merely cogs in a grand cosmic teleology.
No dependence on a priori other than than math, and again, fallacy of the excluded middle.
3. It is precisely complexity and emergence that explain why state management of money and hence interest rates leads to periodic booms and busts.
It explains why the future is in math terms non-ergodic. Economic "rationality" upon which Mises theory of human action is based presumes ergodicity. There is no reason to think that either the type of monetary system or the type of distribution system will necessarily overcome the surprise effects of complex systems. Markets that are supposedly efficient are problematic in complex adaptive systems since efficiency is the enemy of resilience.
Economic "rationality" upon which Mises theory of human action is based presumes ergodicity. There is no reason to think that either the type of monetary system or the type of distribution system will necessarily overcome the surprise effects of complex systems.
That is such total nonsense. The unpredictability of the future is the precisely same for all human beings whether voluntary actors or state actors except that market prices provide everyone with invaluable information that state actors lack. Again, Keynesians, MMTers, monetarists and statists of all stripes do not understand the concept of economic calculation or the “problems of knowledge in society”.
That is such total nonsense. The unpredictability of the future is the precisely same for all human beings whether voluntary actors or state actors except that market prices provide everyone with invaluable information that state actors lack.
That is an assumption that happens to be false. The presumption that rational individual compete on a level playing field in financial and non-financial markets does not hold up to scrutiny. For example, human knowledge and markets are both imperfect. Moreover, complex institutional factors influence markets.
As far as state actors lacking knowledge, in the US and other developed countries it is the state that collects, processes and distributes the data upon which market decisions are taken, and most of the signifiant decisions are under the control of a very few people at the top, the CEO's of the multinationals and finance.
Pete Petepete said...
"Government spending creates distortions separate from private sector spending, because government spending is not based on respect for private property, which is what is required in order for prices to even exist"
It is at this point that we see the whole laughable arguments come crashing down. Unable to provide any economic counterargument, it just reduces to: we don't like government spending because it is immoral!
"(3) "Walrasian GE" is not what Austrians are talking about when they refer to the unhampered price system tending towards clearing the market."
Garbage - certainly in the case of the prize ignoramus Bob Roddis and his stock quote here from Hayek:
"The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept."
Hayek, Friedrich A. von. 1975. A Discussion with Friedrich A Von Hayek. American Enterprise Institute, Washington. p. 6–7.
This is cited by “Bob Roddis,” with the astonishing comment that it contains “simple basic [sc. Austrian] concepts that … all the other anti-Austrians refuse to comprehend.” (http://socialdemocracy21stcentury.blogspot.com/2012/01/menger-on-origin-of-money.html?showComment=1325791226773#c5523904434180746554)
However, it is not an “Austrian” idea at all: it is a Walrasian or neo-Walrasian neoclassical idea, straight from general equilibrium theory.
And the classic Hayekian ABCT is just another theory using GE ideas:
http://socialdemocracy21stcentury.blogspot.com/2012/01/hayeks-trade-cycle-theory-equilibrium.html
"(2) You have not shown how ABCT is "rubbish". You have only shown constant misunderstanding of "
Sure - despite the fact that even you admit that Hayek's unique natural rate of interest does not work or exist.
More sheer nonsense from you.
Bob Roddis said...
LK refuses to comprehend that the analysis of the problems of economic calculation and miscalculation as caused... etc.
Like a parrot devoid of any actual intelligence.
In fact, even Mises said that a libertarian socialist/syndicalist system of production was possible: he admitted that rational economic calculation was possible under syndicalism since he argued that there was a group-collective private ownership of capital goods in such a system (Keizer, W. 1987. “Two Forgotten Articles by Ludwig von Mises on the Rationality of Socialist Economic Calculation,” Review of Austrian Economics 1.1: p. 114).
So why would a modern capitalist state with Keynesian macromanagement where private ownership of capital goods exists be affected by the original socialist economic calculation problems (as described by Mises in 1921) but a syndicalist economy would not be?
"LK, the ABCT is dependent only on two things - the existence of credit expansion and the non-neutrality of money. Do you deny either of these are true? "
No it isn't. The classic Hayekian theory is dependent of all sorts of unrealistic assumptions: real world tendency to GE, a high degree of non durable capital goods, a non existent natural rate of interest, etc.
The existence of credit expansion and the non-neutrality of money (which I accept) do not in any sense prove the truth of the ABCT.
This Bob fellow seems to have a (shiny golden) stick up his ass about fiat money. Wasn't this post about Mike's appearance on TV? Stop being distracted by Bob's (shiny golden stick up his) ass.
I agree with the other posters about your demeanour on the screen. I hate to criticize, because it is great to see you on the screen and I think you explain things well. But like the others here who are distracted by Bob's golden bum, it is easy to get distracted by the other guest. The audience and the host are key. That is who needs to be focussed on.
I don't say this to rag on you. I can only imagine how difficult it is. I say it as an interested viewer, and from the point of view of an audience member, seeing what I see, and how it plays out from this end. I think it looks better and is more persuasive to allow other guests, or even the host, to tee up the ridiculous and then calmly knock it aside. Keep your eye focus on the camera, and your rhetorical focus on the host and the audience. The ideas you are presenting are new to people. You are telling them that the world is not flat, when all they know is That's just my two (fiat) cents.
Keep at them. It's good to have you out there fighting the fight.
How interesting that "xan" uses an image of a mass murdering tyrant.
http://www.huffingtonpost.com/thor-halvorssen/an-open-letter-to-urban-o_b_1895353.html
Such an interesting association for a Leninist creed like MMT.
Do you have an alternate logo with Reinhard Heydrich that you use on rainy days?
"Such an interesting association for a Leninist creed like MMT."
Not entirely certain why want everybody to have a Job, income and access to sufficient resources to live a life is such a bad thing.
MMT makes the current economic system work. And that is why it frightens the zealots on all sides. It's viciously pragmatic.
The Marxists and the Austrians have more in common than they care to admit. Much like Communists and Facists.
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