The oldest trick in the book is for conservatives to create hysteria over something so they can swoop in with right-wing solutions.AlterNet
Don't Fall for the Right's "Fiscal Cliff" Hysteria
Thom Hartmann
It would be nice if Thom Hartmann got up to speed on monetary economics. Then he could spell out exactly why the hysteria is not only fear-mongering but also bonkers. No fiscal deficit and no public "debt" implies no ability for nongovernment to "net save" in the MMT sense.
46 comments:
Of course, only a lunatic would worry about the "nongovernment" and its alleged ability or inability to "net save". In fact, only a lunatic would think in terms of a "nongovernment" or even use the preposterous term "net save" at all.
There is a fiscal cliff. But it has nothing to do with the deficit. Why have the two issues been confused? The term "fiscal cliff" refers to the upcoming mandated contraction of the deficit. And that contraction can and probably will cause another recession. There is nothing hysterical about that.
There is a fiscal cliff. But it has nothing to do with the deficit. Why have the two issues been confused? The term "fiscal cliff" refers to the upcoming mandatedcontraction of the deficit. And that contraction can and probably will cause another recession. There is nothing hysterical about that.
The "fiscal cliff" results from failure to arrive at a grand bargain. It was artificially imposed with the idea that with a sword of Damocles hanging over Congress, a grand bargain would be arrived at. No one actually expected that the ploy would fail and a new problem would be created. Those who want a grand bargain are fine with the resulting hysteria because it forces either repealing the fiscal cliff, which would be unpopular politically, or arriving that the grand bargain. As a sign of good faith, the president has lead with the outcome he wants, which is a naive negotiating strategy unless his real objective is much more in line with the GOP's agenda of reducing entitlements.
The DINO's, led by the president, are anxious to prove to the country that they are Very Serious People who are socially liberal but fiscally conservative. "Coincidentally," this also aligns with the agenda of the big donors, who want to see taxes on "job creators" reduced and entitlements more than cut to "pay for" it.
This is not lost on people like Thom Hartmann, Naomi Klein, and Bernie Sanders.
Everyone who understands monetary economics knows that the push for deficit reduction and a balanced budget leading to a reduction of public debt is a recipe not for recession but for depression. It's not just theory. The lesson of history is clear on this.
Very few people see this side of the story. For example, even most progressives want to see taxes raised to "pay for" entitlements.
Dan Kervick
I believe the panic created around fiscal cliff is to implement austerity in order to avoid austerity.
Same with debt limit hostage taking; Lets stop spending so that others would not stop it instead of us.
The austerity they want to implement instead austerity of fiscal cliff is about prefered way it is distributed. They want to force austerity onto SS and Medicare recipients instead defense budget and all Americans from expiration of tax cuts.
Panic around fiscal cliff is created to switch to preffered victims.
I think you meant to say all this but i do not find it.
This clip from Thom Hartman interview is much better
http://rdwolff.com/content/will-eu-nations-turn-over-tax-and-spending-sovereignty-germany
My bad, in stuff i did not express.
Panic is real and for good reasons. But solutions that are presented are equally bad or worse. So the set up about panic is made up, administration and congress made up the construct of fiscal cliff to force austerity upon the economy either way.
Only good solution is to cancell the fiscall cliff and extend all tax cuts and spending.
I would preffer to raise taxes on marginal income and lower spending on defense and to use savings on doing solar and wind projects. Add more spending on huricane recovery and more spending on transfers to states.
bob, get lost. nobody else wants you here with you're BS, why do you troll here if everybody thinks you're a crank? and you are, btw.
Wow Bob
Now we shouldn't think in terms of non govt?
What terms should we think in as perfect little economic calculators?
Now you object to models which break things into "govt" and
"Not govt"? I guess it's all just one big common "we". Or is it 300 million I's? Or is it 7 billion I's?
"as perfect little economic calculators"
Greg,
Bob is a semantic.
Those of us who are comfortable with 2 sector (govt and non-govt) closed system analysis of these operations are mathematical to the required extent.
We are also perfectly comfortable in making "calculation" (mathematical term) ourselves, because we can recognize the required math and thus do not possess the FEAR that someone like Bob has in this area.
Looks like he is ignorant of the math and that is creating a FEAR within. This is the same emotion the Producer at RT revealed in a comment to Mike at the other thread... He said "the thought of ... blah blah.. 'TERRIFIED him'".
It looks like at core some sort of FEAR is operative here with these others among us.
As a semantic, all he has is 'appeal to authority' and he cannot discern truth in this area thru math (like we can).
Having no alternative, he has no choice but to submit himself to the 'authority of Mises' or Rothbard or whatever moron he is all caught up by.
Being "lost" in this regard, he has to "throw in with somebody", he has no choice ... he throws in with Rothbard or whoever..
That said, I still believe perhaps someone like Bob is still "up for grabs"...
rsp,
I understand why the fiscal cliff was pre-engineered last year, the disaster capitalism, etc. That still doesn't tell anyone what should be done about it.
Tom alluded to what will be done regarding the fiscal cliff. There will be this marvelous "grand bargain". Obama has made it clear that this is his baby from conception to its ultimate birth and implementation. He campaigned for it enthusiastically as we all know, so there isn't a read my lips moment for his detractors to pounce on. Entitlements will be cut where possible or altered in such a fashion as to disguise said cuts. Taxes will rise for everyone, not just the wealthy. All of these acts into the throws of an already devastating deflationary spiral. And as Tom intoned we will then commence our entrance into a death spiral leading to a depression, only with no means to help many of those affected because of the austerian limits set by our overlords with their "grand bargain". And where will the left be when the dust settles? What left?
Mal,
Maybe they will come up with something like this:
They want to "cut the deficit", which has been running about 100B/mo or 1.2T per year...
So they have the moron Simpleton-Bowels target of say half that so $50B/month...
So they raise the "debt ceiling" by 6 months worth by $300B and say "ok hit that and we'll raise it again"
then we know it will be hit in like TWO months and then what????
rsp,
This is the real reason you want to delete my comments: Murray Rothbard had a degree in math from Columbia. Austrian Robert P. Murphy has a PhD in Economics (the Keynesian variety) from NYU (2002). They certainly can "do math". Instead, they insist that math is unsuited to economics because human action is basically determined by the unpredictable whim of the actor unlike, for example, water that always freezes in exactly the same manner when impacted by external factors.
Mathematical equations are uniquely suited to depicting a state of mutual determination of factors, rather than singly determined cause and effect relations. Hence, again, mathematics are singularly suitable for physics…..
[I]n economics, the cause is known from the beginning — human action using means directed towards ends. From this we can deduce singly determined effects,not mutually determined equations. This is another reason that mathematics is uniquely unsuited to economics.
http://mises.org/daily/3638/A-Note-On-Mathematical-Economics
I've been prodding you people for years trying and failing to get you to engage these issues. And to explain your tortured use of language and labels ("net save" for example). Instead, you respond with infantile attacks claiming that Austrians can't do math. The fact is that you guys cannot and will not engage these matters in a calm manner and generally end up with name calling. Thus, Mr. Norman's response to Lauren Lyster consisted of name calling with no substance whatsoever and was par for the course. That's what you people do.
No matter how many of my posts you delete, you guys are still wrong about most everything and everyone seems to know it. Deleting my posts won't change that.
The key parameter is what they do with the "debt ceiling"...
if they throw another $1T+ on it then at least the automatic stabilizers can work and it may be back to "muddle through"....
but if they dont, and actually are demented enough to use the "debt ceiling" as a club of some sort, we might end up in worse shape even than Europe...
Anyone who comes across any data on what exactly they are going to do with the "ceiling" please post that here...
Bob,
"Murray Rothbard had a degree in math from Columbia."
More "appeal to authority".
You have to know how to apply math... this cannot be taught in the academe.
Cognitive researchers are on it:
"Mathematical maturity is an informal term used by mathematicians to refer to a mixture of mathematical experience and insight that cannot be directly taught..."
http://en.wikipedia.org/wiki/Mathematical_maturity
Suggest you re-evaluate your allegiances.
rsp,
@Bob
Finances work on accounting which works on math.
Treasury manages finances of the country.
FED is accounting manager.
Can not understand finances without math.
Ironically, MMT only requires addition and subtraction to keep up with the monetary flows.
The hard part, if one can call it hard, is recognizing the constraints inherent in closed systems where the aggregates are fixed in quantity and the only movements or flows possible within are zero-sum. It becomes a matter of tracking distributions, flows and stocks.
Economic activity can't change the aggregates. This must come from the fiscal authority.
One could do this with an abacus.
I made no "appeal to authority". I was responding to the ad hominem implication that Austrians' hostility to the use of math in economics is due to a lack of mathematical ability or understanding. And, of course, no Austrian denies that one must use math when doing accounting, studying sales data or preparing balance sheets. Again, you do not even understand the nature, application or context of the Austrian objection to the use of math in economics. And you don't want to know.
I understand why the fiscal cliff was pre-engineered last year, the disaster capitalism, etc. That still doesn't tell anyone what should be done about it.
The solution is obvious. The "fiscal cliff" was created politically and it can be resolved by a simple vote canceling it. The same with the push for fiscal austerity. The representatives of the people should all just read Warren's 7DIF and explain to the people that mainstream economists had mislead them with unrealistic model.
Lacking that the people have to send a strong message that imposed austerity will be dealt with in the next election, and primary challenges by knowledgeable progressives that what read and digested 7DIF should be mounted in the midterms in campaigns that explain the reality of the situation.
Just to be clear...
You guys oppose the tax increases, right? Because (among other reasons) the deficit is not a problem and is, in fact, the solution.
If you oppose the tax increases, you aren't being clear about it. If you don't, I do not understand.
Bob,
We are NOT monetarists...
We are simply using mathematics to reveal the truth of how our current monetary system is optimally operated... not showing "how to run the economy" thru math...
and showing thru math how the current morons who are in charge of this system are out of their gourds demented and disqualified...
... and you have to possess the adequate level of mathematical ability to be able to understand this in the first place which most like yourself apparently dont.
Suggest unhitch your wagon from the Rothbard train... it looks like your only option.
rsp,
Matt,
Subsequent to the election, Obama has been clear that he will not support any temporary budget measures. He will not knuckle under to Boehner this time around. The only sticking point will be regarding the taxing the wealthy part of the negotiations. But even on that, Obama has backed off.
The players at this point are merely working out the details, but on the larger points of higher tax revenues and entitlement cuts/"reforms" they all agree. And as I've pointed out several times, the left wing of the Democrats in the House and Senate are virtually non existent.
So here's what's likely to happen. There will be a grand bargain before year's end. It will be back loaded, with most of the tax changes and entitlement cuts being gradually phased in. The technocrats from both parties will gloss over the more damaging parts of the deal, while praising the newly minted mechanisms in place to reach the hard deficit targets. It will be billed by these Pols and the MSM, including the stooges at MSNBC, as a model of bi-partisan cooperation. Those on the far left and right who protest this agreement will be lumped together as extremists. We'll all, in the end, be boiled frogs.
Keynes was also rather dismissive of econometrics even through his background was in math rather than economics. MMT is based on SFC macro models using sectoral balances, i.e., it is accounting based. As paul has pointed out the math used is pretty much basic algebra and arithmetic.
Accounting-based models are "exact" after the fact (all books must balance), and they are not predictive before the fact. What they tell us is what will happen given changes in the behavior of the various sectors. This is a useful guide in political economy wrt to economic policy.
Using the MMT approach there is no way to appeal to fancy math models showing how expansionary fiscal austerity will lead to prosperity. Rather MMT shows how fiscal austerity is likely to lead to debt-deflation instead if nongovt saving desire is elevated at a time of elevated domestic private debt.
but if they dont, and actually are demented enough to use the "debt ceiling" as a club of some sort, we might end up in worse shape even than Europe...
It's not just the US, UK, EZ, etc. that are involved individually. This is a global system in which there is feedback and knock-on effects. If the US and the EZ were to tank simultaneously, it would take the rest of the world down, too. Could end up in war as the employer of last resort.
You guys oppose the tax increases, right? Because (among other reasons) the deficit is not a problem and is, in fact, the solution.
I don't think there is monolithic agreement among MMT proponents on this because as far as MMT is concerned, what maters is the size of the deficit wrt the drag of saving (taxes, domestic private saving desire, i.e., saving rate, and the KAS). Therefore, the balance of taxes and spending should be looked at in terms of objectives and multipliers. Different parties might approach this differently in a way that is MMT-consistent.
Taxes also function as a negative incentive and this has be to taken into account in setting tax policy also. I would prefer that gains from economic rent be taxed higher than activity that is productive. But that is my personal stance, although I am certainly no alone in holding it.
Bob,
I think any tax increases, entitlement cuts or reductions in government spending are all bad at this point in time.On the other hand I think, however, that we need a single payer health care system in place of Obamacare. I also believe that we are ripe for part of the federal budget to be redistributed away from defense and geared to acute domestic needs. We can still spend on defense, but those expenditures need to be pared down significantly. In short I want government spending that empowers the citizens not the corporate fascist fat cats. But I do want government involved in a big way. What I don't want is government by another name--libertarianism.
My prediction on fiscal cliff Brand Betrayal is that they will agree on another fiscal cliff for the future.
Both sides hope to remove Bargain once they get majorities in all three houses.
They will agree on things as Malmo's ghost predicted, it will be back loaded and gradual phase in, so that it can be reversed once they get the votes to do it. Democrats hope for seat gains in 2014 and reps in 2016 which can simply erase all previous Bills.
Simply, kick the can down the road.
Mal,
Then the "back loaded" aspects look good... this is positive...
But how "hard" are the "hard deficit targets" going to be?
As long as fiscal cuts and tax increases is "back loaded" and they crank up the debt ceiling by $1T+ then at least the global non-US-govt sector can continue to save the minimum amount of $NFA as it desires (approx $110B/mo) at least for a pretty long time... and we should be back to at least "muddle through" for quite a while...
Again, key is the "debt ceiling" variable in this equation imo...
rsp,
This is the real reason you want to delete my comments: Murray Rothbard had a degree in math from Columbia. Austrian Robert P. Murphy has a PhD in Economics (the Keynesian variety) from NYU (2002).
I am not an economist and have no qualification to assess either Rothbard or Murray as economists. I assume that they know how to "do economics" as well as most economists.
But economic reasoning is not the issue. The issue is the starting point, that is, assumptions. The kerfuffle is over both substance (assumptions) and procedure (methodology).
Just as many Austrian and neoclassical economists disagree with many "Keynesian" assumptions, so too Keynesians of all stripes disagree with many of the assumptions of Austrian economics and neoclassical economics.
The basic disagreement is not scientific, that is about facts that can be decided by observation, or logical/mathematical that can be decided by application of syntactical rules. It is basically philosophical and therefore undecidable for lack of agreed upon criteria.
We have been through details of this many times. No use repeating it again.
Right Tom,
here is "The Monty Hall Problem" where PhD mathematicians do not agree and it looks like disagreement is based on as you point out 'assumptions':
http://en.wikipedia.org/wiki/Monty_Hall_problem
The key is getting correct the "how" to apply math... which to the extent that Bob indicates here that "we cannot run our economy on math" I agree with him there imo he is correct in this assertion....
ie human exchange is not a mathematical relationship but somehow he thinks that is what MMT is asserting... but again looks like he is limited in his math cognition...
rsp,
Ive never understood how there can be so much disagreement with the Monty Hall problem. It should be obvious if explained correctly
When you first choose it is clear that you have a one in three chance of being right.
Once the other wrong door has been shown, it SHOULD be clear that anytime you chose the wrong door first (2/3 chance) you will win by switching.
Its baffling that math Phds have trouble with this
Tom said: "The basic disagreement is not scientific, that is about facts that can be decided by observation, or logical/mathematical that can be decided by application of syntactical rules. It is basically philosophical and therefore undecidable for lack of agreed upon criteria.:
The three P's: Philosophy leads to Politics, which leads to Policy. The problem, if it is that, in a country of 300 million people is that POLICY in the end, to make all sides a little bit happy, becomes muddled/diluted. Everyone, or those that even bother to think on these matters, in theory wins a little and loses a little.
MMT is a wonderful tool that helps shed light on the various relationships and effects of fiscal policy. But since MMT is not a philosophy, it is limited in its ability to build a consensus towards action. It can say if A then B, but says little if anything about the objective good with A or B.
I'm not giving up, and I'll keep arguing for social justice but I'm also a realist. It's just too damn balkanized here in the US to achieve a Robert Bellah type consensus. Hopefully we'll accidentally fall into to something that threads the proverbial needle and keeps us from strangling each other. In the meantime I'm anticipating the art of compromise to piss me off, and then eagerly waiting for the fallout and the midterm elections to shake everything out.
But since MMT is not a philosophy,
All knowledge is based on ontological and epistemological assumptions. It should be clear by now that there are basic philosophical differences between Austrian (Mises)-Libertarian (Rothbard) economics and Keynesianism, Post Keynesianism, and MMT, such as fundamental ontological and epistemological principles, key values, and decision criteria. These differences are reflected in different attitudes toward the role of government and policy priorities such as the relation between employment and price stability, for example. These are neither factual nor logical issues, but rather ideological ones having to do with different worldviews defined by different norms. It is unlikely that the respective parties will ever come to agreement over these issues, which proponents regard as definitive. So why waste time rehashing this?
"MMT is a wonderful tool that helps shed light on the various relationships and effects of fiscal policy. It can say if A then B, but says little if anything about the objective good with A or B. "
How's this…if we don't do A, B can't possibly happen. That tells us a lot.
It also gives us great insights into what won't work policy-wise.
The problem MMT solves is demonstrating that the government must spend for the economy to function at any level whatsoever.
If the government doesn't follow through with the needed spending, no other solution the brainiacs in Congress come up with have any chance of success. It's spending or Thunderdome.
It's a binary choice that must be made before the system can even move forward.
Choices about where or how we spend the money are secondary, and don't have any relevance whatsoever if we don't make the first choice on the timeline…spend the funds necessary to maintain full employment.
Otherwise we are just bargaining…taking what we can get, deciding who wins and who has to lose as a consequence.
Re: It would be nice if Thom Hartmann got up to speed on monetary economics.
Why not write him, Mike? You could send the link to Stephanie Kelton's presentation at C-Span.
Tom, or anyone who cares to jump in, I'm not privy to this rehashing so would you help me out here? MMT does not tell us to spend x amount on the safety net or y amount on the military or does it? It doesn't promote perma-culture or a green energy policy or does it? In other words it's not a belief system such that it offers a specific plan on what and where exactly is the best way to spend dollars to fulfill the social contract and steer us to a general living arrangement, correct?
The problem MMT solves is demonstrating that the government must spend for the economy to function at any level whatsoever.
a. There's no problem that needs to be solved with "money printing", which Mr. Norman in his video described as the government spending fiat money into existence. The problems are caused by the money printing itself.
b. The government spending money it creates out of nothing can do nothing but illicitly transfer purchasing power to those getting the new money first from those holding the existing money.
c. Such a process of "money printing" distorts the price, investment and capital structure. It may or may not also lead later to price inflation but that is but a secondary effect.
d. The fact that MMT allegedly describes the various squirtings of fiat funny money into the economy says absolutely nothing about its impact upon the lives and hopes of the economic actors in the economy, something MMT completely ignores.
e. MMT presents no evidence whatsoever that the government must spend anything at all.
MMT is committed to full employment as a policy goal. Mises-Rothbard, not so much. Mises-Rothbard economics is committed to "sound money". MMT, not so much. This are a philosophical differences.
@Bob
Concerning a)
Imagine economy in equilibrium with constant everything, and everything is fine, but oops
150,000 thousand babies born each month (thats how many new entrants to job market in US) and they need to feed, cloth and rest of it, so it needs much more products and services but ammount of money is constant.
What will happen to prices if there is much more products each month but same ammount of money??
Malmo;
Right, MMT merely recognizes the existing monetary framework and utilizes specific relationships, which are related to the conservation of energy and mass and govern us all, to determine how flows are related to economic activity.
Bob,
"There's no problem that needs to be solved with "money printing""
All "money" no matter what form, must be "printed" into the system. We have added an accounting requirement to keep track of the amounts…nothing can "magically" appear in the system. It must either be spent into the system or left lying around on the ground for people to find. How else would it enter the system?
The Sun "prints" energy into our Earth system, otherwise we would die. If we use the energy incorrectly, we might die anyway.
Gold must be "printed" into the system, otherwise, how would the unit monetary value of it get on balance sheets?
You seem to be advocating a system where there is no money, only real assets. How would the value of such things be measured? How would commerce take place?
"MMT presents no evidence whatsoever that the government must spend anything at all."
MMT doesn't "say" that, arithmetic and system theory "says" that. I say it also, because I fully submit to the authority of arithmetic.
Spending = income.
But, lets assume you are right…where will the spending medium come from that is needed for an economic system (monetary economy) to function? How will the accumulation of that medium be entered on balance sheets (through what mechanism)? Who will have the "authority" over these operations?
Production growth will be limited by the money supply available to monetize it so how will growth in monetary units be managed?
Mal,
The rehashing is that Bob and those folks he looks to as an authority (Rothbard or whoever) dont want any government....
so that's a tough one to hash out scientifically/mathematically...
MMT starts out with an assumption that there is a civil government and laws... some dont agree with that assumption... or I guess think that is taking things too far from the "git go"...
rsp,
Jure,
Bob has often hinted at a policy for the elimination of all the customers in the "adult diaper changing industry" so perhaps he and Dr Kervorkian have a plan up their sleeves for population control in order to provide "sound money"...
rsp,
What will happen to prices if there is much more products each month but same ammount of money??
Prices will gradually fall. Everyone will be richer because their money will buy more. Diluting the money supply just robs poor and middle class people of purchasing power in favor of those getting the new money first, the financial elite. That’s called Cantillon Effects, something you MMTers refuse to understand. MMTers clearly hate poor and middle class people. Of course, the primary problem with fiat funny money dilution is the distortion of the price, investment and capital structure. Hayek won the Nobel Prize for explaining that and I can take solace in knowing that you MMTers don’t even know what I’m talking about.
Bob has often hinted at a policy for the elimination of all the customers in the "adult diaper changing industry" so perhaps he and Dr Kervorkian have a plan up their sleeves for population control in order to provide "sound money"
What a pitiful and pathetic thing to say. What I’ve said is that you pro government nuts have made false promises to the citizens of $200 trillion in services which do not and will not exist. The fact that the government can never run out of fiat funny money is not going to create those promised services. You guys can call names all day long, but you cannot explain where those promised services are going to come from and everyone knows that.
Prices will gradually fall. Everyone will be richer because their money will buy more.
ROFL.
More demand (more bidders) and same amount of money, so price will fall and quantity will increase to supply the increased demand at the lower price. Really? Is that how your draw supply-demand curves in your crazy world?
Diluting the money supply just robs poor and middle class people of purchasing power in favor of those getting the new money first, the financial elite. Bob R
Not necessarily. If the banks were not allowed to create any more credit (a form of counterfeiting) then massive amounts of deficit spending by the monetary sovereign would be needed just to prevent the money supply from disappearing since the repayment of credit destroys it and over 90% of the money supply is credit.
Also, while bank credit at the lowest rates and the highest amounts goes to the rich, Federal spending is more justly distributed. In many cases the poor are the first to receive the new money.
@Bob
So in constant deflation, would nominal kredit amounts also fall, or would principal also fall in order to reflect real value of money, or principal vould allways grow in real term.
Would wages fall?
_In deflation, woul companies sell products cheaper then input, since by the time of input and sale the real values would go up and nominal would go down.
In deflations there is no new kredit or profits
"over 90% of the money supply is credit" - fribane
It is more descriptive (better semantics) to say that over 90% of dollar assets in the economy are offset by a liability to the banking system (actually it's something like 95%).
MMT considers NFA (vertical money) as money, as in persistent money.
Credit involves splitting zero's into an asset and liability so one can spend the asset part and get stuck with the liability part.
The difference between these two types of money is huge and I think we do a dis-service using the term "money" for both of them. It implies that they are similar and clouds the big picture.
As I said, MMT focuses on flows of vertical money. When we say money we mean NFA.
Credit is like a 4-wheel drive vehicle...it helps us get stuck in harder to get out of places.
Post a Comment