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.
Mike Norman: "no, that doesn't happen either. In fact, the opposite happens...when the money is paid to people and firms to create more goods and services the supply of goods, services, and real assets increases along with the money supply and prices don't rise...as long as the supply of stuff increases at a rate equal to or faster than the growth in the money supply there cannot be inflation."
Congratulations. You just erected another straw man mike. What a leap you just made. Indeed, if money (and by the way, your definition of money is incomplete as you obsess over money created by the Fed, and not by the banking system) is financing the creation of more goods and services that people want and need and the growth in the supply of these exceeds growth in the supply of money, all other things being equal, you would have deflation.
Problem is Mike, you live in la la land. Like any ideologue, you had a "come to jesus" moment with MMT where you apparently realized that base money is created through government deficits (too bad you forgot about the money created by the banking system which doesn't require government expansion in order to increase loans and thus create deposits which are MONEY for all practical purposes), and after that you decided to skip every other rational step in economics and business and arrive to the conclusion that running deficits until unemployment hits zero is the way to go. All these factories sitting idle, all these hands fidgeting about without a shovel... No problem! Deficits to the rescue baby!!
Have you thought this through at all? Are you completely incapable of understanding the difference between monetary mechanics and value creation? Yes Mike, you can run deficits forever in nominal terms, and the government will never run out of dollars. Forget inflation. I don't even CARE about that. I'm talking about sustainable businesses Mike. You know, the kind that ACTUALLY CAN GO BANKRUPT? You ever heard of those? Those businesses are the ones that hire the workers that you are talking about, and those businesses have to invest in plant and equipment, train and hire labor, and create goods and services that will pay them back enough money to make it worth their while. They have to run a profit in other words Mike. Running a profit is HARD. You can't just make a profitable investment by spending money willy nilly. What on earth gave you the idea that a lack of money and credit is the reason why we don't have sustainable growth? This is nuts! Yes, there are times in a business cycle when credit availability is sub-optimal, just like there are times when credit is excessive. You seem to think that, as long as unemployment is above zero, we are living in the former. Nonsense! That's why you missed the entire housing market bubble blow up right in front of your face and you were laughing all the way to youtube stardom. Wake up! There is such a thing as malinvestment, and we are living in a world struggling to liquidate it. No, that's not austrian talk. I'm not an austrian! it's just freak'n real life dude. Not all investments are profitable, and making money cheaper only makes otherwise unprofitable investments profitable for the short term. What an economy you have created!!
It's so frustrating listening to your nonsense. What makes this all the more funny is that you porport to be this messenger for MMT because Wray and the rest of the gang are "poor at promoting the cause" according to you and your video rants. Because you are really charming at doing it right? I'm sure the MMT crowd loves you charisma.
"What on earth gave you the idea that a lack of money and credit is the reason why we don't have sustainable growth? This is nuts!"
Lack of income, not lack of money or credit. Incomes create the sales that drives investment.
Actually Mike's statement has some merit (the one you got all pissy about): that's what the multiplier is all about. A small targeted increase in NFA can drive bigger increases in investment.
There are issues with all MMT'ers when they say that we have inflation constraints when we approach full capacity...since that almost never happens that isn't the biggest driver of inflation anyway. What can drive it is if wages increase and enterprises have a targeted rate of return (hence increasing their prices to maintain that return). But even this isn't really bad inflation, it very well could be a sign of a healthy economy if firms are actually paying workers the higher wage. Credit can also drive inflation, absolutely. He doesn't have to mention every possible thing that can cause inflation that doesn't have anything to do with what he's trying push per say. But really you're just being a dick, let Mike have his word because his end goal and our end goal is to have all members of society working. If you feel so strongly against what Mike is saying that you want to write a 10 page rant, then there's something wrong with you, not with Mike. I also have no idea what you're trying to say regarding bankruptcy, you've totally lost me.
"you forgot about the money created by the banking system which doesn't require government expansion in order to increase loans and thus create deposits which are MONEY for all practical purposes)" - Demetri
Demetri, this is not an accurate statement.
When a bank makes a loan, it creates both an asset and a liability. This nets to zero within the system. No matter where the asset goes after the initial loan is made, the liability remains with the borrower.
When the government deficit spends, it creates an asset within the system. Cash is created, no liability.
Which would you rather have,.. $1000 cash or a $1000 loan?
I have news for you and anyone else that may be reading this...dollar liabilities are just as big a deal as dollar assets. They can't be waved away, and too many of them place a huge burden on the system, mainly through households.
2. Appropriate government deficits to maintain full employment, with price stability, without unsustainable levels of private debt.
3. Abandonment of current forms of monetary policy for regulating the economy.
With a reformed banking/financial sector, sustainable private debt levels, and an end to current central bank policies, debt-fueled 'malinvestment' would not be the problem it is today.
(For any given size of government, the budget deficit can be increased by reducing taxes).
Warren Mosler's specific (basic) proposals for getting out of the current situation are:
1. A full FICA suspension.
2. $150 billion one time distribution by the federal govt to the states on a per capita basis.
3. An $8/hr federally funded transition job for anyone willing and able to work to assist in the transition from unemployment to private sector employment.
4. An energy policy to help keep energy consumption down as we expand GDP, particularly with regard to crude oil products.
Mike, I thought the video was great, but I'm not sure about the part near the end when you said that "the only way for us to get dollars is for the govt to run deficits". What about all the money created by the banking system, aka horizontal money?
I think this video would be confusing for anyone who doesn't already know a bit about MMT.
For example you say that the government doesn't take money from some people and give it to others, but then you say that the government takes money from people when it taxes, and gives money to people when it spends. I think what you mean is that the govt doesn't take a dollar note from one person, and then hand that same dollar note to someone else. But that distinction might seem confusing or meaningless to someone who doesn't know what you're on about (people might also simply disagree that the distinction is truly valid).
Another potentially confusing point is the statement that the government always spends by "printing" money. To someone who hasn't read any MMT this might seem like a totally incomprehensible claim. Even many people who know about MMT still don't get this basic idea.
Most people think that "printing money" is necessarily more inflationary than "borrowing". It's taken to be common sense, so you have to be very clear in what you say when challenging this assumption. Just saying that "the government doesn't need to borrow it's own money" and can just "print" it, won't overcome the belief that "printing" is necessarily more inflationary than "borrowing".
You also state that inflation is "impossible" if output increases in response to increased "money supply", or more accurately, spending. This is confusing again, as it sounds like you're saying that inflation is currently "impossible", whilst in actual fact inflation does currently exist (officially 2.2%). So why is that?
You briefly mentioned the "velocity" of money, which I think is almost more important than the "increase in output" point. Rather than talking about "velocity" it might be easier to understand if you explain 'saving desires' and their effects.
"I also have no idea what you're trying to say regarding bankruptcy, you've totally lost me. "
I most likely lost you because you never think about value, like Mike and many other people on this blog. Does anyone who prescribes to MMT as an economic ideology understand or care about value creation? You all keep talking about deficit spending until unemployment hits zero. This is why I could never finish a book by Wray. This premise is so absurd. A job is a means to an end. An employer hires someone as part of an attempt to become wealthier. Wealth is generated through investment. What you invest in matters though. Just because there may be a factory in new york that produces handbags that is working below full capacity, and just because there may be 20% unemployment in the area around the factory DOES NOT MEAN that it would be a good idea to subsidize the employment of some of those people so that they can work at the factory in order to create more handbags. You are skipping SO MANY steps. You just assume that if you produce something, society will be better off with it than without it. But this just isn't true. There is something called "value-adding" activities as well as "value-subtracting." The crazy part is, all you have to do is look at the soviet union to see what a value-subtracting economy looks like. At the end of the soviet period, the government was actually creating negative value goods. That is, they were creating goods, manufactured goods, that were worth LESS than the raw materials that made them. They were worth more as scrap metal than as finished goods, because the materials were needed elsewhere at prices greater than the finished product in order to build a new product that would cover the entire cost!
You guys NEVER think about this stuff, which is just mind boggling. It's like sticking a constant into an equation that doesn't work the way you want it to, and I know from having dealt with ideologues for long enough, that no one can convince you otherwise. This is why I hardly ever argue with fundamentalists. Mike's videos were always inane babble, but lately he became a rude old grouch, and it made pointing out this out worthwhile.
By the way, Mike has consistently declined coming on my show to debate his "archnemesis" Peter Schiff, who also makes claims about inflation and the monetary system that are incorrect, at least in my view. Despite this, he is still afraid to debate him. He is afraid to debate people that he can't shout down. If he actually had intellectual capital, he could debate. But he doesn't. He also wants attention so he screams. It happens to a lot of former talking heads from Fox. They miss the platform of being rude and grabbing attention.
Examine that statement and tell me how government spending doesn't do the same thing. (roads, electrical grid, high speed internet, research & development, renewable energy...)
You haven't rested any case. I just told you, the soviet union was building railroads and infrastructure and goods that were value subtracting as one example of how you can destroy an economy. What makes today's bureaucrats smarter?
No mmter ever said to subsidize pvt sector employment at a handbag store or any other pvt sector setting. That example is a complete non starter and isn't even close to the actual policy proposal. Every mmt economist would largely agree with you in that particular point you are trying to make, in fact.
It's obvious mike and mmt have gotten under your skin. Might be better to give it a rest. You are critiquing something, but it bears little resemblance to mmt.
Demetri, I really don't think you understand at all.
For people to buy the goods that they want they need some money to do so, right?
If you reduce taxes without reducing or increasing the level of government spending what happens?
The government deficit increases and people keep more of their own money, which they can then use to buy the things they want, to save or to pay down debt.
If you have high unemployment and high levels of private debt, don't you think this would be a good idea?
"just because there may be 20% unemployment in the area around the factory DOES NOT MEAN that it would be a good idea to subsidize the employment of some of those people so that they can work at the factory in order to create more handbags"
Again, you haven't understood. If you increase the govt deficit by taking less money away from people through taxes, or by spending more on public services or infrastructure etc, there will be more money circulating in the economy.
People can choose to use their own money as they wish. If they want to buy those handbags, they can. If no one wants those handbags, then the factory will close.
It's not about subsidising businesses no one wants. It's about not pointlessly destroying the businesses and jobs people actually DO want.
1. Providing sufficient money so the capitalist economy can function and maintain full employment.
2. Central planning of a socialist economy.
Yes, MMTers advocate government spending on certain things, such as public services and infrastructure (etc), and advocate a transitional job guarantee program as the most efficient way to attain and maintain full employment along with price stability.
No MMTers do not advocate soviet-style central planning of the capitalist economy.
Your Straw Man Argument is a thing of beauty. Nice job. Comparing what I said to Soviet Russia and Central Planning of an economy is of course EXACTLY the same. Since Government investment in infrastructure that allows private business to efficiently bring goods to the market is clearly the same thing...I guess you win that argument.
"Your Straw Man Argument is a thing of beauty. Nice job. Comparing what I said to Soviet Russia and Central Planning of an economy is of course EXACTLY the same. Since Government investment in infrastructure that allows private business to efficiently bring goods to the market is clearly the same thing...I guess you win that argument."
BS. You guys are arguing running deficits until unemployment goes to ZERO. You can't then turn around and say that you are not asking for central planning and that all you want is infrastructure that allows business to efficiently bring goods to market. If that was the case you would say run deficits until all infrastructure projects are complete. You aren't saying that. You are saying run until everyone has a job. Why are you changing it around?
Again, NO SENSE of value creation. You guys completely ignore thousands of years of basic business practice.
Mathematical insight? LOL...dude...you guys are off the charts NUTS! It's a good thing you have these insights about money creation and allocation of that money and credit to businesses. I'm sure your know more than the billions of people who would be decimating this information through the price mechanism.
I do understand very well. Contrary to what you think, you ARE subsidizing businesses to produce goods and services that people don't want. Yes, you may want a flat screen tv, but you would rather have something else if it were available for the same price. You may WANT a house, but you may not want a house that is as big as the one you bought if it didn't cost so little. The housing boom is a great example. Easy money made that bubble worse. Who says that we needed all these multi bedroom homes? Yes, its good for everyone to have a home who needs one, but who decides how big, what amenities, etc.? You guys want those decisions distorted through expansion of the money supply which is absolutely reckless and can only end badly, as experience shows.
"Contrary to what you think, you ARE subsidizing businesses to produce goods and services that people don't want"
So if, for example, the government reduces taxes (thereby increasing its deficit) so people keep more of their own money, those people are then going to go and spend that money on things they don't want?
No, they won't. They will spend it, or save it, or invest it, or use it to pay down debt, as they choose.
Similarly, if the government increases spending on the proper functions of government (as decided by the electorate) such as public services, infrastructure, etc, that will money will enter into the economy and find its way into people's wallets. They will then be able to spend it, save it, invest it or use it to pay down debt as they choose.
If this additional economic activity leads to full employment, without unwanted inflation, then you will have an economy which is fully utilising its current resources in accordance with people's desires, instead of stupidly tearing itself apart.
Firstly, MMT is not an economic ideology. It is first and foremost, a fact-based outline of how the modern monetary system works and the levers and mechanisms within the system that one can use for developing stable monetary policies. Monetary policies derived from this understanding are designed to create a stable platform and environment for businesses. Therefore, the focus is not on 'value creation' - that is for the private sector - public policy is focused on moderation, score-keeping and referee-ing.
Maybe you should stop shooting from the hip and develop a basic understanding of purpose of MMT before throwing up your own 'strawman' arguments about value creation.
Rsp.
Mike & Matt - feel free to correct the above if you feel I've described the framework erroneously
"The housing boom is a great example. Easy money made that bubble worse."
This is why Steve Keen and MMTers argue that you need to reform the banking/financial sector, and get back to sustainable levels of private debt (not leveraged against ponzi asset bubbles (or insane derivative labyrinths).
That is, you need the domestic private sector to be in net surplus:
Mike, I thought the video was great, but I'm not sure about the part near the end when you said that "the only way for us to get dollars is for the govt to run deficits". What about all the money created by the banking system, aka horizontal money?
Banks cannot create dollars (US currency). They can create loans-deposits (net zero) that are denominated in dollars (unit of account in dollar zone).
You haven't rested any case. I just told you, the soviet union was building railroads and infrastructure and goods that were value subtracting as one examp
Has nothing to do with the argument. As a matter of fact, The Soviet Union invested fairly wisely in public investment given their priorities. So does the Chinese govt. The Soviet Union fell for political reasons and so will the Chinese govt.
Again, NO SENSE of value creation. You guys completely ignore thousands of years of basic business practice.
You are ignoring demand as the driver of investment and demand come from several sources, income being only one of them. When demand lags,unplanned inventory mounts sending a signal to business to reduce production and therefore investment until the inventory is sold down. If this doesn't clear the market quickly enough and labor expense mounts, then businesses lay off workers and unemployment climbs.
I do understand very well. Contrary to what you think, you ARE subsidizing businesses to produce goods and services that people don't want. Yes, you may want a flat screen tv, but you would rather have something else if it were available for the same price. You may WANT a house, but you may not want a house that is as big as the one you bought if it didn't cost so little. The housing boom is a great example. Easy money made that bubble worse. Who says that we needed all these multi bedroom homes? Yes, its good for everyone to have a home who needs one, but who decides how big, what amenities, etc.? You guys want those decisions distorted through expansion of the money supply which is absolutely reckless and can only end badly, as experience shows.
You want to decrease options when freedom is defined in terms of ability to exercise options, with more choice equaling a greater degree of freedom. Some Libertarian you are.
Easy money was not the reason for the housing bubble. The FBI warned of massive mortgage fraud in 2005. Greenspan shrugged it off. The rest of the story is all downhill and it involves a criminal conspiracy in banking and finance. This has been set forth in detail by experts in the field such as Bill Black and Janete Tavakoli. Without the "criminogenic environment" and "control fraud" (Black) there would have been no housing bubble. Because this was not addressed, most of the participants are still in the game and a repeat is baked in without actual reform.
Yes, we could have a different monetary system but we don't. But the fact is that there were plenty of restraints in the system designed to prevent this that were not observed.
The same kind of thing could happen with just about any other monetary system but a bullion system, and going to bullion system would so severely restrict credit as to impede growth. Bt that it totally hypothetical since the chance of the world ever going on a bullion system is about as close to zero as one can get.
Further, without the government money printing and bank fiat credit system, there would have been no inflation and no reason to purchase housing in the first place as an inflation hedge.
Average inflation during the 1990's/2000's was roughly 2.5% during a spending boom. There was no monetary inflation driving mortgage lending.
"Banks cannot create dollars (US currency). They can create loans-deposits (net zero) that are denominated in dollars (unit of account in dollar zone)." - Tom
Thanks for your reply, Tom. I understand that horizontal money nets to zero, but I still think it is confusing to say that the only way for us to obtain dollars is if the govt runs a deficit. Alternatively, one could say that the only way for us to "net save" is if the govt runs a deficit, but even that would likely be confusing to most. How many people know what "net save" means? And how many people realize that when Mike says "us" he means the entire private sector, including corporations and banks. A layman would likely assume the term "us" means you and me (aka the household sector). We can (and do) save without the govt, through claims against businesses and/or banks.
Geoff, I agree it is confusing but it is more complicated than most people are used to.
The fact is that reserves are used in the settlement system and reserves are created either through deficits or cb lending. Many people want zero "public debt," no cb (no lender of last resort) and a balanced budget. Where is the currency (rb) going to come from to clear in the payment system, and where is the currency (cash) going to come from for settling spot transactions?
Bob lives in a imaginary parallel universe in which permanent deflation is great. Reality is irrelevant in Bob's make-believe world.
Rothbardian ideologues like to point to the 19th century's Long Depression as evidence that deflation works, but they, like Rothbard, fiddle the figures (Rothbard was a liar as well as being a thoroughly repugnant right-wing bigot). During that period deflationary episodes were associated with recession, high unemployment, mass bankruptcies, stagnant real wages, social unrest and financial crises. The period also saw a massive consolidation and centralization of financial power, and ballooning wealth inequality.
None of these facts exist within Bob's world, where reality is the enemy.
Bob believes that a 'free market' would choose a deflationary gold specie money system in the absence of government-issued money, that 'fractional reserve lending' wouldn't exist in a 'free market', and that financial crises, depressions and high unemployment wouldn't occur in a 'free market' without government. There is absolutely no evidence to support any of these beliefs - they are simply ideological assertions and nothing more.
The fact is that the gold standard was imposed by government, banks have engaged in 'fractional reserve lending' since their inception, financial crises have repeatedly occurred in the absence of central banks, and unemployment often reached very high levels during the 19th century "laissez faire" period.
The whole austrian/libertarian thing is really just another front in the right wing's cynical war on reality. The Confederate sympathisers at the Mises Institute and big business shills at the Foundation for Economic "Education" are basically just propagandists on a par with Fox “News”. They have helped to construct a parallel fantasy world in which deluded right-wingers can attack and denounce the real world without offering any real solutions whatsoever.
Reserves definitely seem critical to "grease the wheel" so to speak.
Paul, I used to think the same way regarding vertical vs horizontal money. A $1000 check free and clear from the govt is certainly better than a $1000 loan from the bank. The former has added to my net worth (and I guess could be called "equity") while the latter has not.
But beyond the balance sheet effect, money is money, regardless of the source. Given that banks are not reserve constrained, and that loans create deposits, bank money can be created virtually out of thin air (in an endogenous way).
Of course, bank money creation will not be for public purpose, but that is another story. :)
I think it is is confusing to say that govts can create money and banks can create money in the same breath. "Money" means very different things here. In the first case, "money" is currency, and in the second it is debt. One can respond by pointing out that both are liabilities. But the govt liability is an accounting liability and the private liability is not only an accounting one but also an obligation to repay with interest. Even if it is objected that govt's issue currency by issuing corresponding debt, they still have the ability to service their debt with further issuance as currency user. Private debts must be serviced by currency users from revenue. Therefore, there is only the vaguest of comparisons.
"But beyond the balance sheet effect, money is money, regardless of the source. Given that banks are not reserve constrained, and that loans create deposits, bank money can be created virtually out of thin air (in an endogenous way)."
Geoff, it's true that once spent into the economy the dollars from debt and the dollars from fiscal are identical, but I never forget about the liabilities and who ends up with them. It's all about the nets, the total number of dollars doesn't tell us much. That's one reason the Quantity Theory of Money is useless (at least in my view)..
At the end of each spending cycle the assets associated with debt tend to accumulate at the top and the liabilities at the low-to medium range of households.
Progressive taxation is how the balances are shifted back but this only partially does the job. Businesses retain profits, currently about $1.5 Trillion.
We should also be aware that for all practical purposes all debt payments ie those that fund business investment and those that fund consumer purchases are paid for by consumers, either directly or through sales revenue which funds the cost of investment. All $54 Trillion plus interest in domestic private debt will be paid by consumers.
Finally, and this is only an observation based on empirical evidence, the ratio of private debt to public debt (less the foreign component) appears to be limited to about 9 or 10 to one, and we are there.
Good points, Paulie. I don't mean to make light of the private sector debt situation. It certainly is a problem, at least in the Household sector. The Corporate sector seems in very good shape, balance sheetwise.
The 9-10x private/public debt ratio is interesting. Where did you see that?
Finally, and this is only an observation based on empirical evidence, the ratio of private debt to public debt (less the foreign component) appears to be limited to about 9 or 10 to one, and we are there.
Yes, needs to be much higher. As you say, it's a sort of debt to equity ratio and that amount of leverage is way to high for either safety or comfort. As a result, system risk is high and there is not much of a net in case of a misstep walking a tightrope like this.
"The 9-10x private/public debt ratio is interesting. Where did you see that?" - Geoff
I divided the approximate level of NFA in the domestic non-government ($11T minus $5T) into $54T total private debt from the z.1 Flow of Funds report.
54/6 = 9
If you look at a FRED graph of total private debt you will see that credit expansion has hit a ceiling after rising geometrically for 30 years.
In my view the level of debt won't increase until NFA increases or until households pay their debt down some.
Also, there are millions of people whose credit rating was ruined by the GFC.
Most of my argument is based on the idea that debt (credit) is functionally the act of spending savings before it has been saved, so the question is...what is the point from a consumer standpoint?
One can only finance consumption to a point, and then you are done until you pay it down or your income increases.
Incomes (in the aggregate) can't increase unless NFA increases.
Makes sense, Paul. The only caveat that I might note is that you seem to be emphasizing consumer debt, which I agree is a big problem. But as I mentioned above, Corporations still have plenty of room to increase debt. And that is the good type of debt that will hopefully be used for productive purposes.
Yes, I know. Corporations are reluctant to relever without stronger demand, which isn't likely to come from consumers.
Enter govt spending :)
Anyway, thank you for the stimulating conversation and have a great weekend.
"The only caveat that I might note is that you seem to be emphasizing consumer debt, which I agree is a big problem. But as I mentioned above, Corporations still have plenty of room to increase debt."
Geoff, yes I alluded to that. Corporations have plenty of headroom.
The fly in the ointment is corporate debt is ultimately settled by consumer spending…the cost of debt service is rolled into the cost of products.
Consumers don't have enough spending capacity to chase for corporations to expand investment spending.
54 comments:
http://www.youtube.com/watch?v=iyCoLvjwI4o
Mike Norman: "no, that doesn't happen either. In fact, the opposite happens...when the money is paid to people and firms to create more goods and services the supply of goods, services, and real assets increases along with the money supply and prices don't rise...as long as the supply of stuff increases at a rate equal to or faster than the growth in the money supply there cannot be inflation."
Congratulations. You just erected another straw man mike. What a leap you just made. Indeed, if money (and by the way, your definition of money is incomplete as you obsess over money created by the Fed, and not by the banking system) is financing the creation of more goods and services that people want and need and the growth in the supply of these exceeds growth in the supply of money, all other things being equal, you would have deflation.
Problem is Mike, you live in la la land. Like any ideologue, you had a "come to jesus" moment with MMT where you apparently realized that base money is created through government deficits (too bad you forgot about the money created by the banking system which doesn't require government expansion in order to increase loans and thus create deposits which are MONEY for all practical purposes), and after that you decided to skip every other rational step in economics and business and arrive to the conclusion that running deficits until unemployment hits zero is the way to go. All these factories sitting idle, all these hands fidgeting about without a shovel... No problem! Deficits to the rescue baby!!
Have you thought this through at all? Are you completely incapable of understanding the difference between monetary mechanics and value creation? Yes Mike, you can run deficits forever in nominal terms, and the government will never run out of dollars. Forget inflation. I don't even CARE about that. I'm talking about sustainable businesses Mike. You know, the kind that ACTUALLY CAN GO BANKRUPT? You ever heard of those? Those businesses are the ones that hire the workers that you are talking about, and those businesses have to invest in plant and equipment, train and hire labor, and create goods and services that will pay them back enough money to make it worth their while. They have to run a profit in other words Mike. Running a profit is HARD. You can't just make a profitable investment by spending money willy nilly. What on earth gave you the idea that a lack of money and credit is the reason why we don't have sustainable growth? This is nuts! Yes, there are times in a business cycle when credit availability is sub-optimal, just like there are times when credit is excessive. You seem to think that, as long as unemployment is above zero, we are living in the former. Nonsense! That's why you missed the entire housing market bubble blow up right in front of your face and you were laughing all the way to youtube stardom. Wake up! There is such a thing as malinvestment, and we are living in a world struggling to liquidate it. No, that's not austrian talk. I'm not an austrian! it's just freak'n real life dude. Not all investments are profitable, and making money cheaper only makes otherwise unprofitable investments profitable for the short term. What an economy you have created!!
It's so frustrating listening to your nonsense. What makes this all the more funny is that you porport to be this messenger for MMT because Wray and the rest of the gang are "poor at promoting the cause" according to you and your video rants. Because you are really charming at doing it right? I'm sure the MMT crowd loves you charisma.
- DEMETRI
"What on earth gave you the idea that a lack of money and credit is the reason why we don't have sustainable growth? This is nuts!"
Lack of income, not lack of money or credit. Incomes create the sales that drives investment.
Actually Mike's statement has some merit (the one you got all pissy about): that's what the multiplier is all about. A small targeted increase in NFA can drive bigger increases in investment.
There are issues with all MMT'ers when they say that we have inflation constraints when we approach full capacity...since that almost never happens that isn't the biggest driver of inflation anyway. What can drive it is if wages increase and enterprises have a targeted rate of return (hence increasing their prices to maintain that return). But even this isn't really bad inflation, it very well could be a sign of a healthy economy if firms are actually paying workers the higher wage. Credit can also drive inflation, absolutely. He doesn't have to mention every possible thing that can cause inflation that doesn't have anything to do with what he's trying push per say. But really you're just being a dick, let Mike have his word because his end goal and our end goal is to have all members of society working. If you feel so strongly against what Mike is saying that you want to write a 10 page rant, then there's something wrong with you, not with Mike. I also have no idea what you're trying to say regarding bankruptcy, you've totally lost me.
honestly
"you forgot about the money created by the banking system which doesn't require government expansion in order to increase loans and thus create deposits which are MONEY for all practical purposes)" - Demetri
Demetri, this is not an accurate statement.
When a bank makes a loan, it creates both an asset and a liability. This nets to zero within the system. No matter where the asset goes after the initial loan is made, the liability remains with the borrower.
When the government deficit spends, it creates an asset within the system. Cash is created, no liability.
Which would you rather have,.. $1000 cash or a $1000 loan?
I have news for you and anyone else that may be reading this...dollar liabilities are just as big a deal as dollar assets. They can't be waved away, and too many of them place a huge burden on the system, mainly through households.
Demetri,
MMT economists advocate:
1. Reform of the banking/ financial sector.
2. Appropriate government deficits to maintain full employment, with price stability, without unsustainable levels of private debt.
3. Abandonment of current forms of monetary policy for regulating the economy.
With a reformed banking/financial sector, sustainable private debt levels, and an end to current central bank policies, debt-fueled 'malinvestment' would not be the problem it is today.
(For any given size of government, the budget deficit can be increased by reducing taxes).
Warren Mosler's specific (basic) proposals for getting out of the current situation are:
1. A full FICA suspension.
2. $150 billion one time distribution by the federal govt to the states on a per capita basis.
3. An $8/hr federally funded transition job for anyone willing and able to work to assist in the transition from unemployment to private sector employment.
4. An energy policy to help keep energy consumption down as we expand GDP, particularly with regard to crude oil products.
Mike, presentation-wise, I'd say leave out the "hi" at the beginning and just go straight into it.
Mike, I thought the video was great, but I'm not sure about the part near the end when you said that "the only way for us to get dollars is for the govt to run deficits". What about all the money created by the banking system, aka horizontal money?
I think this video would be confusing for anyone who doesn't already know a bit about MMT.
For example you say that the government doesn't take money from some people and give it to others, but then you say that the government takes money from people when it taxes, and gives money to people when it spends. I think what you mean is that the govt doesn't take a dollar note from one person, and then hand that same dollar note to someone else. But that distinction might seem confusing or meaningless to someone who doesn't know what you're on about (people might also simply disagree that the distinction is truly valid).
Another potentially confusing point is the statement that the government always spends by "printing" money. To someone who hasn't read any MMT this might seem like a totally incomprehensible claim. Even many people who know about MMT still don't get this basic idea.
Most people think that "printing money" is necessarily more inflationary than "borrowing". It's taken to be common sense, so you have to be very clear in what you say when challenging this assumption. Just saying that "the government doesn't need to borrow it's own money" and can just "print" it, won't overcome the belief that "printing" is necessarily more inflationary than "borrowing".
You also state that inflation is "impossible" if output increases in response to increased "money supply", or more accurately, spending. This is confusing again, as it sounds like you're saying that inflation is currently "impossible", whilst in actual fact inflation does currently exist (officially 2.2%). So why is that?
You briefly mentioned the "velocity" of money, which I think is almost more important than the "increase in output" point. Rather than talking about "velocity" it might be easier to understand if you explain 'saving desires' and their effects.
Thanks..
DaRkJaWs
"I also have no idea what you're trying to say regarding bankruptcy, you've totally lost me. "
I most likely lost you because you never think about value, like Mike and many other people on this blog. Does anyone who prescribes to MMT as an economic ideology understand or care about value creation? You all keep talking about deficit spending until unemployment hits zero. This is why I could never finish a book by Wray. This premise is so absurd. A job is a means to an end. An employer hires someone as part of an attempt to become wealthier. Wealth is generated through investment. What you invest in matters though. Just because there may be a factory in new york that produces handbags that is working below full capacity, and just because there may be 20% unemployment in the area around the factory DOES NOT MEAN that it would be a good idea to subsidize the employment of some of those people so that they can work at the factory in order to create more handbags. You are skipping SO MANY steps. You just assume that if you produce something, society will be better off with it than without it. But this just isn't true. There is something called "value-adding" activities as well as "value-subtracting." The crazy part is, all you have to do is look at the soviet union to see what a value-subtracting economy looks like. At the end of the soviet period, the government was actually creating negative value goods. That is, they were creating goods, manufactured goods, that were worth LESS than the raw materials that made them. They were worth more as scrap metal than as finished goods, because the materials were needed elsewhere at prices greater than the finished product in order to build a new product that would cover the entire cost!
You guys NEVER think about this stuff, which is just mind boggling. It's like sticking a constant into an equation that doesn't work the way you want it to, and I know from having dealt with ideologues for long enough, that no one can convince you otherwise. This is why I hardly ever argue with fundamentalists. Mike's videos were always inane babble, but lately he became a rude old grouch, and it made pointing out this out worthwhile.
By the way, Mike has consistently declined coming on my show to debate his "archnemesis" Peter Schiff, who also makes claims about inflation and the monetary system that are incorrect, at least in my view. Despite this, he is still afraid to debate him. He is afraid to debate people that he can't shout down. If he actually had intellectual capital, he could debate. But he doesn't. He also wants attention so he screams. It happens to a lot of former talking heads from Fox. They miss the platform of being rude and grabbing attention.
To Arty Produssa
"Wealth is generated through investment."
Examine that statement and tell me how government spending doesn't do the same thing. (roads, electrical grid, high speed internet, research & development, renewable energy...)
"What you invest in matters though."
I rest my case...
1whoknu
You haven't rested any case. I just told you, the soviet union was building railroads and infrastructure and goods that were value subtracting as one example of how you can destroy an economy. What makes today's bureaucrats smarter?
No mmter ever said to subsidize pvt sector employment at a handbag store or any other pvt sector setting. That example is a complete non starter and isn't even close to the actual policy proposal. Every mmt economist would largely agree with you in that particular point you are trying to make, in fact.
It's obvious mike and mmt have gotten under your skin. Might be better to give it a rest. You are critiquing something, but it bears little resemblance to mmt.
Demetri, I really don't think you understand at all.
For people to buy the goods that they want they need some money to do so, right?
If you reduce taxes without reducing or increasing the level of government spending what happens?
The government deficit increases and people keep more of their own money, which they can then use to buy the things they want, to save or to pay down debt.
If you have high unemployment and high levels of private debt, don't you think this would be a good idea?
"just because there may be 20% unemployment in the area around the factory DOES NOT MEAN that it would be a good idea to subsidize the employment of some of those people so that they can work at the factory in order to create more handbags"
Again, you haven't understood. If you increase the govt deficit by taking less money away from people through taxes, or by spending more on public services or infrastructure etc, there will be more money circulating in the economy.
People can choose to use their own money as they wish. If they want to buy those handbags, they can. If no one wants those handbags, then the factory will close.
It's not about subsidising businesses no one wants. It's about not pointlessly destroying the businesses and jobs people actually DO want.
You're confusing two things:
1. Providing sufficient money so the capitalist economy can function and maintain full employment.
2. Central planning of a socialist economy.
Yes, MMTers advocate government spending on certain things, such as public services and infrastructure (etc), and advocate a transitional job guarantee program as the most efficient way to attain and maintain full employment along with price stability.
No MMTers do not advocate soviet-style central planning of the capitalist economy.
To Arty Produssa
Your Straw Man Argument is a thing of beauty. Nice job. Comparing what I said to Soviet Russia and Central Planning of an economy is of course EXACTLY the same. Since Government investment in infrastructure that allows private business to efficiently bring goods to the market is clearly the same thing...I guess you win that argument.
y,
"You're confusing two things:
1. Providing sufficient money so the capitalist economy can function and maintain full employment.
2. Central planning of a socialist economy."
Your #1 requires mathematical insight to be able to understand...
#2 is a purely semantic description...
D is having trouble with the math just the same as all who cannot understand MMT ...
rsp,
1whoknu
"Your Straw Man Argument is a thing of beauty. Nice job. Comparing what I said to Soviet Russia and Central Planning of an economy is of course EXACTLY the same. Since Government investment in infrastructure that allows private business to efficiently bring goods to the market is clearly the same thing...I guess you win that argument."
BS. You guys are arguing running deficits until unemployment goes to ZERO. You can't then turn around and say that you are not asking for central planning and that all you want is infrastructure that allows business to efficiently bring goods to market. If that was the case you would say run deficits until all infrastructure projects are complete. You aren't saying that. You are saying run until everyone has a job. Why are you changing it around?
Again, NO SENSE of value creation. You guys completely ignore thousands of years of basic business practice.
Matt,
Mathematical insight? LOL...dude...you guys are off the charts NUTS! It's a good thing you have these insights about money creation and allocation of that money and credit to businesses. I'm sure your know more than the billions of people who would be decimating this information through the price mechanism.
y,
I do understand very well. Contrary to what you think, you ARE subsidizing businesses to produce goods and services that people don't want. Yes, you may want a flat screen tv, but you would rather have something else if it were available for the same price. You may WANT a house, but you may not want a house that is as big as the one you bought if it didn't cost so little. The housing boom is a great example. Easy money made that bubble worse. Who says that we needed all these multi bedroom homes? Yes, its good for everyone to have a home who needs one, but who decides how big, what amenities, etc.? You guys want those decisions distorted through expansion of the money supply which is absolutely reckless and can only end badly, as experience shows.
D,
$NFA can only exist in the non-govt sector if the govt spends more than it taxes.
Bank loans dont do that, bank loans create both an asset and liability in the non-govt sector (they offset)..
We in the non-govt sector have to use these $NFA for settlement of transactions and $NFA savings...
Try to think it through...
rsp,
D,
It's like this:
govt spends 10
govt taxes away 3
non-govt left with 7
Can you see this????
rsp
Arty Produssa: I think reading mosler's description of the ukmc buckaroo might be helpful:
http://www.huffingtonpost.com/warren-mosler/the-umkc-buckaroo-a-curre_b_970447.html
In this model, the taxing authority does not cause involuntary unemployment no matter what size they want the public sector to be.
"Contrary to what you think, you ARE subsidizing businesses to produce goods and services that people don't want"
So if, for example, the government reduces taxes (thereby increasing its deficit) so people keep more of their own money, those people are then going to go and spend that money on things they don't want?
No, they won't. They will spend it, or save it, or invest it, or use it to pay down debt, as they choose.
Similarly, if the government increases spending on the proper functions of government (as decided by the electorate) such as public services, infrastructure, etc, that will money will enter into the economy and find its way into people's wallets. They will then be able to spend it, save it, invest it or use it to pay down debt as they choose.
If this additional economic activity leads to full employment, without unwanted inflation, then you will have an economy which is fully utilising its current resources in accordance with people's desires, instead of stupidly tearing itself apart.
Trying to have a discussion with Demetri is pointless...he exhibits no curiosity, ie no desire to try to understand how the system or MMT works.
Demetri knows what he knows (something he heard somewhere from someone else), and those that disagree with him are idiots.
The fact that his beliefs are based on a flawed understanding of operations and require suspension in the laws of arithmetic will never occur to him.
And of course he's mad at Mike so MMT can't possibly be true.
D,
Firstly, MMT is not an economic ideology. It is first and foremost, a fact-based outline of how the modern monetary system works and the levers and mechanisms within the system that one can use for developing stable monetary policies. Monetary policies derived from this understanding are designed to create a stable platform and environment for businesses. Therefore, the focus is not on 'value creation' - that is for the private sector - public policy is focused on moderation, score-keeping and referee-ing.
Maybe you should stop shooting from the hip and develop a basic understanding of purpose of MMT before throwing up your own 'strawman' arguments about value creation.
Rsp.
Mike & Matt - feel free to correct the above if you feel I've described the framework erroneously
"The housing boom is a great example. Easy money made that bubble worse."
This is why Steve Keen and MMTers argue that you need to reform the banking/financial sector, and get back to sustainable levels of private debt (not leveraged against ponzi asset bubbles (or insane derivative labyrinths).
That is, you need the domestic private sector to be in net surplus:
http://www.levyinstitute.org/multipliereffect/wp-content/uploads/2011/11/US-Sectoral-Balances_Berlin.png
http://www.economonitor.com/lrwray/files/2012/11/kalecki-profit.png
http://www.economonitor.com/lrwray/files/2012/11/kalecki-profit-fiscalchart1.jpg
http://www.economonitor.com/lrwray/2012/11/08/ratings-agencies-still-clueless-threaten-to-downgrade-uncle-sam/
'Modern Monetary Theory' - 'Monetary Circuit Theory': Fields Institute Joint Seminar (2012).
http://www.youtube.com/playlist?list=PLE08CAD5D63F36D49
Mike, I thought the video was great, but I'm not sure about the part near the end when you said that "the only way for us to get dollars is for the govt to run deficits". What about all the money created by the banking system, aka horizontal money?
Banks cannot create dollars (US currency). They can create loans-deposits (net zero) that are denominated in dollars (unit of account in dollar zone).
You haven't rested any case. I just told you, the soviet union was building railroads and infrastructure and goods that were value subtracting as one examp
Has nothing to do with the argument. As a matter of fact, The Soviet Union invested fairly wisely in public investment given their priorities. So does the Chinese govt. The Soviet Union fell for political reasons and so will the Chinese govt.
Again, NO SENSE of value creation. You guys completely ignore thousands of years of basic business practice.
You are ignoring demand as the driver of investment and demand come from several sources, income being only one of them. When demand lags,unplanned inventory mounts sending a signal to business to reduce production and therefore investment until the inventory is sold down. If this doesn't clear the market quickly enough and labor expense mounts, then businesses lay off workers and unemployment climbs.
I do understand very well. Contrary to what you think, you ARE subsidizing businesses to produce goods and services that people don't want. Yes, you may want a flat screen tv, but you would rather have something else if it were available for the same price. You may WANT a house, but you may not want a house that is as big as the one you bought if it didn't cost so little. The housing boom is a great example. Easy money made that bubble worse. Who says that we needed all these multi bedroom homes? Yes, its good for everyone to have a home who needs one, but who decides how big, what amenities, etc.? You guys want those decisions distorted through expansion of the money supply which is absolutely reckless and can only end badly, as experience shows.
You want to decrease options when freedom is defined in terms of ability to exercise options, with more choice equaling a greater degree of freedom. Some Libertarian you are.
Easy money was not the reason for the housing bubble. The FBI warned of massive mortgage fraud in 2005. Greenspan shrugged it off. The rest of the story is all downhill and it involves a criminal conspiracy in banking and finance. This has been set forth in detail by experts in the field such as Bill Black and Janete Tavakoli. Without the "criminogenic environment" and "control fraud" (Black) there would have been no housing bubble. Because this was not addressed, most of the participants are still in the game and a repeat is baked in without actual reform.
Yes, we could have a different monetary system but we don't. But the fact is that there were plenty of restraints in the system designed to prevent this that were not observed.
The same kind of thing could happen with just about any other monetary system but a bullion system, and going to bullion system would so severely restrict credit as to impede growth. Bt that it totally hypothetical since the chance of the world ever going on a bullion system is about as close to zero as one can get.
Further, without the government money printing and bank fiat credit system, there would have been no inflation and no reason to purchase housing in the first place as an inflation hedge.
Average inflation during the 1990's/2000's was roughly 2.5% during a spending boom. There was no monetary inflation driving mortgage lending.
"Banks cannot create dollars (US currency). They can create loans-deposits (net zero) that are denominated in dollars (unit of account in dollar zone)." - Tom
Thanks for your reply, Tom. I understand that horizontal money nets to zero, but I still think it is confusing to say that the only way for us to obtain dollars is if the govt runs a deficit. Alternatively, one could say that the only way for us to "net save" is if the govt runs a deficit, but even that would likely be confusing to most. How many people know what "net save" means? And how many people realize that when Mike says "us" he means the entire private sector, including corporations and banks. A layman would likely assume the term "us" means you and me (aka the household sector). We can (and do) save without the govt, through claims against businesses and/or banks.
Geoff, I agree it is confusing but it is more complicated than most people are used to.
The fact is that reserves are used in the settlement system and reserves are created either through deficits or cb lending. Many people want zero "public debt," no cb (no lender of last resort) and a balanced budget. Where is the currency (rb) going to come from to clear in the payment system, and where is the currency (cash) going to come from for settling spot transactions?
Bob lives in a imaginary parallel universe in which permanent deflation is great. Reality is irrelevant in Bob's make-believe world.
Rothbardian ideologues like to point to the 19th century's Long Depression as evidence that deflation works, but they, like Rothbard, fiddle the figures (Rothbard was a liar as well as being a thoroughly repugnant right-wing bigot). During that period deflationary episodes were associated with recession, high unemployment, mass bankruptcies, stagnant real wages, social unrest and financial crises. The period also saw a massive consolidation and centralization of financial power, and ballooning wealth inequality.
None of these facts exist within Bob's world, where reality is the enemy.
Bob believes that a 'free market' would choose a deflationary gold specie money system in the absence of government-issued money, that 'fractional reserve lending' wouldn't exist in a 'free market', and that financial crises, depressions and high unemployment wouldn't occur in a 'free market' without government. There is absolutely no evidence to support any of these beliefs - they are simply ideological assertions and nothing more.
The fact is that the gold standard was imposed by government, banks have engaged in 'fractional reserve lending' since their inception, financial crises have repeatedly occurred in the absence of central banks, and unemployment often reached very high levels during the 19th century "laissez faire" period.
The whole austrian/libertarian thing is really just another front in the right wing's cynical war on reality. The Confederate sympathisers at the Mises Institute and big business shills at the Foundation for Economic "Education" are basically just propagandists on a par with Fox “News”. They have helped to construct a parallel fantasy world in which deluded right-wingers can attack and denounce the real world without offering any real solutions whatsoever.
Geoff,
My concern with referring to horizontal money on the same plane as vertical money is that there is a huge difference.
The liabilities introduced along with debt money is a big deal, and it isn't possible to continuously expand credit to keep the system moving.
In most discussions of horizontal money the liabilities are not even mentioned
It would require a system with 100% efficiency, meaning perfect settlement and no saving or profit. This if for all practical purposes impossible.
Good points Tom and Paul.
Reserves definitely seem critical to "grease the wheel" so to speak.
Paul, I used to think the same way regarding vertical vs horizontal money. A $1000 check free and clear from the govt is certainly better than a $1000 loan from the bank. The former has added to my net worth (and I guess could be called "equity") while the latter has not.
But beyond the balance sheet effect, money is money, regardless of the source. Given that banks are not reserve constrained, and that loans create deposits, bank money can be created virtually out of thin air (in an endogenous way).
Of course, bank money creation will not be for public purpose, but that is another story. :)
I think it is is confusing to say that govts can create money and banks can create money in the same breath. "Money" means very different things here. In the first case, "money" is currency, and in the second it is debt. One can respond by pointing out that both are liabilities. But the govt liability is an accounting liability and the private liability is not only an accounting one but also an obligation to repay with interest. Even if it is objected that govt's issue currency by issuing corresponding debt, they still have the ability to service their debt with further issuance as currency user. Private debts must be serviced by currency users from revenue. Therefore, there is only the vaguest of comparisons.
Thanks, Tom. It is crazy that after all these thousands of years, money is still so mis-understood!
BTW, I very much like your point that I've seen you make here many times, that money is better thought of as a "credit" than "debt".
"But beyond the balance sheet effect, money is money, regardless of the source. Given that banks are not reserve constrained, and that loans create deposits, bank money can be created virtually out of thin air (in an endogenous way)."
Geoff, it's true that once spent into the economy the dollars from debt and the dollars from fiscal are identical, but I never forget about the liabilities and who ends up with them. It's all about the nets, the total number of dollars doesn't tell us much. That's one reason the Quantity Theory of Money is useless (at least in my view)..
At the end of each spending cycle the assets associated with debt tend to accumulate at the top and the liabilities at the low-to medium range of households.
Progressive taxation is how the balances are shifted back but this only partially does the job. Businesses retain profits, currently about $1.5 Trillion.
We should also be aware that for all practical purposes all debt payments ie those that fund business investment and those that fund consumer purchases are paid for by consumers, either directly or through sales revenue which funds the cost of investment. All $54 Trillion plus interest in domestic private debt will be paid by consumers.
Finally, and this is only an observation based on empirical evidence, the ratio of private debt to public debt (less the foreign component) appears to be limited to about 9 or 10 to one, and we are there.
Good points, Paulie. I don't mean to make light of the private sector debt situation. It certainly is a problem, at least in the Household sector. The Corporate sector seems in very good shape, balance sheetwise.
The 9-10x private/public debt ratio is interesting. Where did you see that?
Finally, and this is only an observation based on empirical evidence, the ratio of private debt to public debt (less the foreign component) appears to be limited to about 9 or 10 to one, and we are there.
Yes, needs to be much higher. As you say, it's a sort of debt to equity ratio and that amount of leverage is way to high for either safety or comfort. As a result, system risk is high and there is not much of a net in case of a misstep walking a tightrope like this.
Should read "Yes, needs to be much higher" in favor of more public debt.
"The 9-10x private/public debt ratio is interesting. Where did you see that?" - Geoff
I divided the approximate level of NFA in the domestic non-government ($11T minus $5T) into $54T total private debt from the z.1 Flow of Funds report.
54/6 = 9
If you look at a FRED graph of total private debt you will see that credit expansion has hit a ceiling after rising geometrically for 30 years.
In my view the level of debt won't increase until NFA increases or until households pay their debt down some.
Also, there are millions of people whose credit rating was ruined by the GFC.
Most of my argument is based on the idea that debt (credit) is functionally the act of spending savings before it has been saved, so the question is...what is the point from a consumer standpoint?
One can only finance consumption to a point, and then you are done until you pay it down or your income increases.
Incomes (in the aggregate) can't increase unless NFA increases.
Makes sense, Paul. The only caveat that I might note is that you seem to be emphasizing consumer debt, which I agree is a big problem. But as I mentioned above, Corporations still have plenty of room to increase debt. And that is the good type of debt that will hopefully be used for productive purposes.
Yes, I know. Corporations are reluctant to relever without stronger demand, which isn't likely to come from consumers.
Enter govt spending :)
Anyway, thank you for the stimulating conversation and have a great weekend.
Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916.
I wasn't referring to that period, Bob.
Bob argues that big business corrupts government therefore we should get rid of government and sell everything off to big business.
Bob's imaginary anarcho-capitalist dystopia is as ridiculous and preposterous as it is vile.
It's a false ideology based on junk economics, circular reasoning, and pseudohistory.
"The only caveat that I might note is that you seem to be emphasizing consumer debt, which I agree is a big problem. But as I mentioned above, Corporations still have plenty of room to increase debt."
Geoff, yes I alluded to that. Corporations have plenty of headroom.
The fly in the ointment is corporate debt is ultimately settled by consumer spending…the cost of debt service is rolled into the cost of products.
Consumers don't have enough spending capacity to chase for corporations to expand investment spending.
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