Friday, January 11, 2013

Moron Metaphor Alert: The Platinum Coin is "the first cousin of default"


Now WaPos Ezra Klein joins in the continuous MSM barrage of false metaphors, this is getting tedious and pathetic.
But there’s nothing benign about the platinum coin. It is a breakdown in the American system of governance, a symbol that we have become a banana republic. And perhaps we have. But the platinum coin is not the first cousin of cleanly raising the debt ceiling. It is the first cousin of defaulting on our debts. As with true default, it proves to the financial markets that we can no longer be trusted to manage our economic affairs predictably and rationally.
Would these people just give up already they are embarrassing themselves.  TIP:  Do yourselves a favor and salvage any reputations you have left.

I can't add a thing to what Joe Firestone writes up in response to Klein's diatribe at NEP; other than to say that perhaps Klein is running interference for Bob Woodward who is also 110% invested in debt doomsday... and now may be intellectually exposed as incompetent on economic matters concerning the federal government ... and Klein  is trying to desperately spin the historically common practice of coin seignorage by the monetary authority of a civil government into a very in fact radical Austrian view as "default".

Yes you heard that right, "default", even though the USD balances credited to the Treasury's account by deposit of the coin would actually allow the Treasury to redeem ANY US Treasury security dollar for dollar.

This imaginary "default by redemption" assertion is usually only made by the typical anarcho-libertarian Rothbardian nutjobs we often encounter here at MNE, but Klein here is at the Post, what a disgrace.

Let's learn a big lesson from this at least.  I think we can see by now that in any situation we may face, when someone can only respond to a serious inquiry with metaphor and NO FACTS, our internal anti-fraud detectors should be going off at high decibels.

41 comments:

Peter Drubetskoy said...

Though I will always be grateful to Ezra because it is thanks to his blog that I got exposed to MMT - after his awesome interview with James Galbraith in 2010 (http://voices.washingtonpost.com/ezra-klein/2010/05/galbraith_the_danger_posed_by.html), I feel that he never made the necessary intellectual leap to really understand that deficits are not a bug but a feature of modern monetary regimes. One always gets the feeling that he's on the way but never quite there yet. But he is one of the good guys, despite all that, so, don't be so down on him.

Peter Drubetskoy said...

Also, in this case you need to really give him some slack: he's not meaning that it is in any way similar to operational default - and I think he understands that default int he case of a sovereign currency issue can only happen by choice - but he means default on the predictable management of fiscal and monetary affairs. I agree that the metaphor is confusing but don't lump Ezra with all the rest of the "legitimate" morons out there.

Tom Hickey said...

I would agree with Ezra, however, when he says this whole thing makes the US look like a banana republic that actually might default. The reason that banana republics default is that they are dysfunctional and the US political system is becoming dysfunctional. I said several years ago that I would advise younger Americans to think seriously about expanding their horizon beyond US borders. This place has gone wacky.

Anonymous said...

Klein takes the lead from his sources in the administration, I think. So if he is arguing this, it is probably because people in the administration want liberals to pipe down about the coin.

He's all wrong on the economics - but on the politics and optics he has a point. The fact that the US treasury has to undertake unusual and extraordinary measures like exploiting seigniorage loopholes to make its payments does show that the government is dysfunctional, and really sends a bad message domestically and abroad.

In a well-functioning country, we also wouldn't be hung up on the deficit and debt, and wouldn't have a debt ceiling. But we would be doing the things we need to do through the ordinary means of democratic government and the legislature. The executive branch wouldn't have to mint special coins just to tread water.

Matt Franko said...

Peter & Tom,

What is he so concerned about?

The Chinese won't 'lend us any more money'?

C'mon... This wouldn't be embarrassing for the country it would be revealing... And we could finally move forward in REAL terms... And set an honest global example...

Yes SOME may be embarrassed, but they will get over it with full pensions I'm sure, and the academe of economics will still have micro which will then become the focus, as it should be...

This is 'sour grapes' from Klein here...

RSP,

mike norman said...

Klein's freakin' 28 years old. What the hell does he know? He's a little dude who's thinks he's a lot smarter than he is, because he has such high media visibility. But remember...it's THE MEDIA, which means that it's pretty much garbage.

mike norman said...

He doesn't know shit about economics. He spews all the mainstream talking points: we got problems...no one is going to lend to us...banana republic, blah, blah, blah. These people are sickening already.

Matt Franko said...

And Peter all Klein has to do is call Mike or any other Mgmt economist if he has questions on how this all works instead of going off half-cocked like this....

That is called 'researching a story' as opposed to propaganda... Rsp

Matt Franko said...

'MMT economist'

(I'm on a gd tablet...)

Unknown said...

Well c'mon now, that's a little harsh don't you think? Be as condescending as you want to lost causes like Rick Santelli (what a nutcase) or Rush Limbaugh (again, what a nutcase). But your interests are aligned with liberals like Ezra, and I think you're best served to join forces in some way, and in doing so correct his thinking. He's only human, so he's bound to make mistakes, and I'm sure there are liberal policies on which he knows more than us.

Matt Franko said...

Alan,

I am not a liberal.

I am not "anything" with the letters l-i-b-e-r in the word...

My view is for fiscal policy to support such things as vouchers for parochial schools, increased force protection for our warriors, new energy systems to end reliance on foreign petroleum, support for expectant mothers, adoption, earlier retirement pensions for our seniors, guaranteed access to robust healthcare, full employment/income guaranty, etc...

Ive never voted for a Democrat in my life, I'm a GOPer in the Lincoln tradition.

Klein is still young and needs to decide if he is going to be a professional journalist or a dispenser of nonsense...

rsp,

Anonymous said...

Mike, being young is no excuse for his level of ignorance. I'm 31 and I get MMT and frankly if we had a proper educational system I believe first graders could have a conceptual understanding of the operational facts that Klein doesn't seem to grasp.

Bill Mitchell's "A Kindergarten Guide to MMT" was my first intro to MMT.

Alan, I with Matt as follow Lincoln progressive-Conservative.

MMT is about understanding institutional and operational reality and has nothing to with hating capitalism.

As a conservative, I want to have a real debate about what kind of energy projects we will invest in and changing taxation to promote re-industrialization but instead we are constantly subjected to these false debates about debt and default.

Real Conservativism is understanding what kind of progressive investments are needed to combat social, cultural, and ecological entropy and thus preserve a future for our children that in line with classical concept of the "good life." It has nothing to do with making an idol of "human liberty."

Matt Franko said...

"Real Conservativism is understanding what kind of progressive investments are needed to combat social, cultural, and ecological entropy and thus preserve a future for our children that in line with classical concept of the "good life." It has nothing to do with making an idol of "human liberty."

Sept, you've got a gift... rsp

Tom Hickey said...

@ Alan

Wonkblog has done pieces on MMT previously, and there is no doubt that Ezra has been deeply exposed to it. There is no excuse for getting the facts and math wrong. Of course, he is welcome to his own political views. But not to incorrect assertions or arguments based on erroneous premises or logic.

If he just said that this entire scene is making the US look bad globally and undermining US soft power in the world, as well as resulting in dysfunctional domestic politics and policy, We could just argue it based on our opinions. But monetary economics and economic policy is at the base of it, so it's not just an uninformed opinion.

Politically, there are two factions in opposition to a stance based on correct monetary economics — neoliberalism and liberalism-progressivism that is based on incorrect monetary economics and neoclassical synthesis macro.

Tom Hickey said...

MMT is about understanding institutional and operational reality and has nothing to with hating capitalism.

The problem is not so much with "capitalism" but with neoliberalism based on managerial capitalism, monopoly capitalism, and finance capitalism.

But there is a fundamental flaw in "capitalism" indicated by the term used to determine the character of the system based on the idea that capital is the dominant factor that the other factors serve.

It will not be possible for humanity to attain the good life under this system, since socially it is a "bad" system and it is very difficult to be a good person in a fundamentally bad society.

Malmo's Ghost said...

"Real Conservativism .... has nothing to do with making an idol of "human liberty."

An idol of human liberty is a bad thing? Forget the silly idol part you've added to the proposition; human liberty is the sine qua non of the good life, especially for us non sectarian folks.

Tom Hickey said...

"Real Conservativism is understanding what kind of progressive investments are needed to combat social, cultural, and ecological entropy and thus preserve a future for our children that in line with classical concept of the "good life." It has nothing to do with making an idol of "human liberty."

Yes, and it is the basis of real liberalism, too. The difference between conservatism and liberalism politically is that conservatism believes that some are better than other and the "meritocracy" is the proof of who is "deserving" regardless of institutional issues that favor some over other. Liberals disagree and attack those institutional issues, called for reform and restructuring.

Tom Hickey said...

BTW, real liberalism doesn't make a fetish of liberty. That's Libertarians, who by and large self-identify as on the conservative side of the political spectrum.

The ideological basis of real liberalism is liberty (freedom of thought, expression, choice, and association guaranteed in human and civil rights), equality (no institutional privilege), and fraternity (solidarity, community).

PeterP said...

septeus,

Kindergaten guide to MMT was not by Mitchell, but by Ashe right? Or we are thinking about a different thing?

Malmo's Ghost said...

The Libertarian As Conservative

http://www.inspiracy.com/black/abolition/libertarian.html

Tom Hickey said...

A Kindergarten Guide to Modern Monetary Theory (Days 1-3) by Frank Ashe

Matt Franko said...

Paul in his letter to the Galatians uses the Greek word 'eleutheria'... which has been translated as both 'liberty' and 'freedom'...

Perhaps we should seek the revelation of what this word 'eleutheria' really means... I suspect it may not currently be fully understood via the modern context of the English words 'liberty' or 'freedom'...

rsp,

Malmo's Ghost said...

The short version from the link above: Libertarians are conservatives.

Tom Hickey said...

There is a vast difference between spiritual freedom and material freedoms.

See Only Spiritual Freedom Is Absolute And Unlimited — Meher Baba

Tom Hickey said...

Something to think about. Conservatism and liberalism differ in their approaches to ethics and value theory. Conservatism tends to be based in deontological ethics, where the criteria are traditional values and performance of duty, whereas liberalism is generally based on consequentialist ethics, particularly utilitarianism, where the criterion is outcome.

I would suggest that these can find agreement in virtue ethics, in which the criteria are transcendental values. I see the difference between the two approaches as largely an argument over prioritizing virtues in the absence of an overarching criterion. In the West the overarching criterion is more or less agreed upon as "reason," so this is the subject of rational debate.

Malmo's Ghost said...

Freedom and liberty are positive goods. They aren't fetishes to anyone I've ever known, and I'm not exactly a spring chicken at 51. I think most people would take the ideal view surrounding the notion of liberty and do good to others with it. In other words they would do good unto others absent compulsion of any kind, save where their liberty infringes on another's.. I don't see people as intrinsically evil. Rather I see many people as unloved and thus psychologically damaged in a brutally over managed and disconnected world. The idea that liberty somehow breeds pathological self reliance seems to me a rare condition. It certainly was a rare condition in pre civilization. Far worse than liberty loving is the prevailing zeitgeist in modern society inculcating a rank materialist mindset of conformity, consumption and obedience, which is to my mind anathema to the good life, and I reject it out of hand. At the least, the good life, whatever that is, should not be brought to us at the barrel of a gun.

Tom Hickey said...

Freedom and liberty are positive goods. They aren't fetishes to anyone I've ever known, and I'm not exactly a spring chicken at 51. I think most people would take the ideal view surrounding the notion of liberty and do good to others with it.

Even über-Libertarian Murray Rothbard distinguished between liberty and licence, and freedom that recognizes responsibility and freedom that does not. So I would agree that it is difficult to draw a fine line. Again, it is more about prioritizing values.

But there are many people who use the liberty as an idol or fetish and argue for an absolute right to do as they please. There are many others who don't conceptualize this but act as such. That is why we have laws. It's for those that missed the socialization process and are stuck in a state of arrested development. Other people know better and choice to do bad things because they think that can get away with it.

Malmo's Ghost said...

Tom,
I read, regrettably, a lot of Russell Kirk back in my formative years. I understand that a person's liberty ends when his fist meets my nose, so I'm very aware of the tension between liberty and order. I also acknowledged that people do bad things and some form of force is required to maintain the peace. On the other hand I think way too many questionable actions are deemed "bad things" and for me that's where the rub comes in. But I know what you're driving at and I largely agree with you larger point here

Tom Hickey said...

On the other hand I think way too many questionable actions are deemed "bad things" and for me that's where the rub comes in.

Right, a lot of moral and moral political issues are about where to draw boundaries. Here 'conservative" means narrower and more rigid boundary conditions, and "liberal" wider and more flexible, since conservatives give more weight to order than to liberty and and liberals give to liberty than to order.

As in economics, choices involve trade-offs.

Tom Hickey said...

Generally speaking, conservatives and liberals compete within the status quo, each attempting to move the Overton window to the right or left respectively. Radicals and reactionaries work to substantially change the status quo rather than jus to shift it along its spectrum of potential. Radicals wishing to move things forward as quickly as possible to take advantage of potential and to meet emerging challenges engage social and political experimentation. Reactionaries wishing to move things backward generally favor some form of restoration, whether it is socially, politically or religiously based.

Tom Hickey said...

Keynesianism is considered liberal or "left" on the political spectrum in that it is willing to let price level float more than conservatives would like in the interest of maintaining full employment. Neoliberalism and the economics on which it is based is considered to be conservative or "right" on the political spectrum in that is willing to let employment float in the interest of maintaining price level.

Malmo's Ghost said...

Good points, Tom. That's why I'm a hard guy to pin down. I'm composed of an ideological mixture- some conservative/libertarian tendencies, some very liberal, some radical and some reactionary. They war with each other too. Not sure what label that puts me under?

Matt Franko said...

Mal,

" I don't see people as intrinsically evil. Rather I see many people as unloved and thus psychologically damaged in a brutally over managed and disconnected world."

good stuff here.. i think the same way... that's why I go with the "moron" explanation vice "evil conspiracy" type thing... with all of the economic injustice foisted upon the population out there how can we "blame" people for acting out....

to Tom's point I come at this from the "fairness" side and our fiscal policies are simply NOT FAIR...

iow I understand how our system operates mathematically (btw many morons on the political right do not) and hands down it IS NOT FAIR...

rsp,

Tom Hickey said...

Good points, Tom. That's why I'm a hard guy to pin down. I'm composed of an ideological mixture- some conservative/libertarian tendencies, some very liberal, some radical and some reactionary. They war with each other too. Not sure what label that puts me under?

Most people are multi-faceted. This is OK, if a person has thought through his or her position and acknowledged the issues that a multi-faceted position involves. But if one has not, then one will discover that one's stance is inconsistent, sometimes inconveniently so.

Tom Hickey said...

Matt, I see a lot of the moron factor as stemming from institutional factors, where people buy into an institutional framework and get intellectually and emotionally captured. Then there are the sociopaths. Finally, there are the people that consciously and intentionally make "bad" choices. Some of this is due to a conflict between reason and passion, where the person gives in to passion, and some of it is just willful pursuit of narrow self-interest

Anonymous said...

Quote from Tom Hickey: "The difference between conservatism and liberalism politically is that conservatism believes that some are better than other and the "meritocracy" is the proof of who is "deserving" regardless of institutional issues that favor some over other. Liberals disagree and attack those institutional issues, called for reform and restructuring."

I disagree that this is the conservative position.

Conservatives would argue that hierarchy is the result of functional reality some are better than others and we should try to organize society with the realization of this truth.

The argument for hierarchy as opposed to anarchy is long and complex and is an analog to Plato's argument for why the strongman should lead a moral life rather than one of domination and license afforded by his strength.

Confucius I believe also makes a similar argument.



Conservatives have often been critical of institutions that create a faux meritocracy that departs from natural law ala Vitter.

I find it interesting that you are claiming that leftist position is reformist because my understanding is that leftist position is typically revolutionary i.e. "after capitalism" and "the system has to be destroyed."

Conservatives are generally suspect of revolutionaries claiming to have all the answers what will turn society into some kind of utopia without hierarchy so I believe the reformist position is rather conservative as reform implies evolution of form as opposed to the creationism of the left i.e. the creation of egalitarian culture ex nilo after the "revolution."



Tom Hickey said...

Confucius I believe also makes a similar argument

Yes, Confucianism is opposed by Taoism, and I identify with Taoism.

Tom Hickey said...

Plato's division of society is very smilar to the Indian caste system, as is his theory of historical ages and cycles. Buddha was a liberal.

Tom Hickey said...

my understanding is that leftist position is typically revolutionary i.e. "after capitalism" and "the system has to be destroyed."

That is similar to characterizing the rightist position as monarchist or leader-fascistic. Those are extremes of the range.

Tom Hickey said...

BTW, it is mistaken to think of "anarchism" as being all liberty and no order. What anarchists hold rather is that when people are truly free the natural order spontaneously manifests. Otherwise it is imposed artificially and must be maintained artificially.

Unknown said...

Look, whatever you political affiliation you ascribe to, Ezra and others at MSNBC and HuffPost largely share your goals including full employment and universal healthcare. And because of the sheepish behaviour of people when it comes to politics, in America pretty much half of the country is not amenable to facts and reasons. Not Ezra's half.

I don't think you'll get too far if you're so dismissive towards everyone who gets it wrong. Did Ezra make a mistake? It appears so. Do I agree with the neo-classical synthesis espoused by the modern left in the Western World? Hell no. But I don't think understanding the monetary system and its interrelationship with the macroeconomy is that easy to understand, and I'm sure there are plenty of things that he knows that you and I don't. He's a smart guy, and there's a good chance he'll come around.