I have to give it up for Paul Krugman today.
Revealing editorial from Joe Scarborough at POLITICO, based on an appearance by Paul Krugman on Scarborough's MSNBC show, excerpt:
Mr. Krugman's view is that Americans would be better off if its government ran deeper deficits and ignored its longterm debt. That, of course, runs counter to conventional wisdom across the Western world, which is exactly why the New York Times columnist believes Spain and Great Britain are suffering through endless recessions.
His argument also runs counter to what I have been saying in Congress and in the media since 1994. So it would be no surprise that the guy who wrote this, and this, and this and this over the past week would take exception to Mr. Krugman's words. But most of our viewers did not tune in to hear me talk over the Nobel Prize winner. They tuned in to hear Paul Krugman. So I did my best to give him space.
But maintaining calm was not as easy for Council on Foreign Relations president Richard Haass, who agrees with former Joint Chief chairman Michael Mullen, that longterm debt poses the greatest threat to America 's national security. Richard took exception to the suggestion that deficits don't matter and that longterm debt can be pushed to the side for years to come . Mr. Haass, Admiral Mullen and former Clinton chief of staff Erskine Bowles all believe that entitlements and debt are the most pressing challenges we face as a country over the next few decades.
You can add my liberal co-host, Mika Brzezinski, to that group. Mika let out a gasp when Mr. Krugman suggested Medicare and Medicaid shortfalls should be ignored. She compared Krugman's "head-in-the-sand" approach to the one taken by climate change deniers. Krugman took exception, saying that no one could predict the future of entitlements so there was no need to worry until the programs became insolvent. That response drew a spirited email from former Treasury official and “Morning Joe” regular Steve Rattner in defense of Mika's analogy, who wrote the following: "We are putting millions of tons of carbon in the air every day; we are also adding billions of dollars to our future entitlement obligations every day. We are borrowing (stealing?) from our children to pay far more in benefits to seniors than we are paying into the system.One thing I would say to Paul Krugman is "Paul, you are NOT alone. It is NOT you against the world".
There are many of us out here both within and outside the academe of economics, both from the political left
AND political right, that agree with your assessment on the nature of a federal budget deficit and government securities and understand the difference between REAL and FINANCIAL constraints; and we too do our best to combat this fiscal ignorance that has been foisted upon the western world and take our own hits in the process.
Hang in there Paul Krugman!
71 comments:
Naturally the editorial is full of appeal-to-authority and name-dropping with no logical criticism other than to repeatedly claim the end-result is financial catastrophe.
These kinds of media responses pretty much sums up the status quo strategy...they leave the ill-informed public to fill in the blanks...the very same people that they have been mis-informing for pretty much forever.
They keep us stuck in an endless-loop-of-stupid that we can't seem to break free from.
If Krugman doen't get his way it will be financial catastrophe.
"it was fascinating having Mr. Krugman on for the reason that his worldview runs counter to almost all mainstream economists"
Yea, and look at the condition of all the Western economies whose leaders are following their mainstream advice, numb-nut.
"his worldview runs counter to almost all mainstream economists"
Unintentional irony alert...this is a feature not a bug.
They're sounding desperate. Only hardcore ideologues in blind rage could mistake that rant for coherence. Krugman must have them rattled.
This is crazy. Now we are getting economic advice and lessons from the head of the Joint Chiefs?? Why would anyone with two bits for brains listen to what he has to say about the deficit. But I get it. He knows a lot about warfare (one assumes), so he must know a lot about anything he speaks on.
Joe has absolutely nothing to say of substance. Neither does anyone else. This is an exercise in name dropping and school yard bullying. Hang in there Paul.
How sad that the media is so loaded up with these know nothings that refuse to do anything but cling to their destructive dogma. Believe me, I know how Krugman feels. I took this crap for 10 years at Fox.
Mike I'd like to see you AND Krugman on vs whatever 2 morons they could bring on against you TWO...
They typically try to gang up against one person on the side of truth in this.... so I dont think Ive ever seen TWO of our side on anywhere vs the morons...
And I saw PK on Maddow a bit last evening and he looked a bit rattled imo and probably needs some bucking up if anyone knows him and has his email....
We have to figure out how to get at least TWO of ours on vs the morons for a change.... it is unfair to think Krugman or anyone else can get on top of the conversation if they are alone in the encounter with numerous morons...
rsp,
Or we have to somehow convince the masses that the conventional wisdom is killing them…kill the CW brand.
Paul,
No math background wrt Scarborough (Journalism) or probably Haas (Poly Sci Id think) probably same for Mullen/Brezinski/Rattner/Bowles, etc... ALL non-math people...
All they have is appeal to authority as they cant understand the math...
Also, notice the use again of false metaphor (MORON METAPHOR ALERT!) with the equating to climate change (which Scarborough probably doesnt even believe...)
All very revealing... rsp,
PS all of this nonsense editorial while over the last 2 months govt has only run a 9B deficit!
They dont even know what the hell is going on!
"They dont even know what the hell is going on!"
…and if you showed the numbers to them in black-and-white their eyes would glaze over…or they would conclude that it's a good thing to starve the economy.
Mete out the punishment to the undeserving hordes!!!
If that's how it's going to be let's make sure no one can afford to watch TV…cut off the propaganda generators.
He does deserve credit for coming around to more realistic economics. But if he deserves credit, all of you guys in the MMT media machine have been banging on about this stuff for decades and deserve more than credit.
I posted this in a previous article, but it seems to fit better with this one. Whenever someone tells me that entitlements need reforming I hit them with this...
My child's school lunch costs $2.50 a day. Should the school project that due to increased costs, one day lunch will cost $4.00. To achieve "sustainability" I will now send my child in with only $1.00. Problem solved, right?
Whatever is driving the higher price of the lunch hasn't been addressed. The additional cost would not really harm my total bottom line... letting my child be hungry and perform poorly in school ultimately would. I may not like the higher cost, but I'll still have the ability to service the cost of the lunch if and when the prices should rise, so why would I cut back prematurely? Do I start an "8th grade lunch fund" at the expense of skimping on lunches from 2 grade through 7th? There's really no logic to it.
I really feel this scenario illustrates just what those in favor of entitlement reform are proposing.
Here's the video if you want to watch...
http://www.rawstory.com/rs/2013/01/28/krugman-schools-morning-joe-on-austerity-how-many-times-do-i-have-to-be-right/
It's like the guy in Jerusalem who has prayed everyday for 10 years at the western side of the Temple Mount. When asked how it felt to pray everyday, he said, "To be honest, I feel like I'm talking to a f-ing wall."
Krugman seems to be a mishmash. He mentions some MMT essentials, e.g. a country that issues it's own money, but then two sentences later says something like... 'if unemployment were at normal levels then I'd be a deficit hawk'
He's such an important megaphone for these idea though.
Krugman might have inconsistencies in his message that don't square too well with MMTers, but then there's Cullen Roche who's lately been claiming that the U.S. is actually in part a currency user. With semi allies like these sending mixed messages no wonder the MMT meme lacks clarity and thus substantial traction.
Good point. Krugman often says things like, we don't have to address the debt "now." Then the other side just picks that up and says, well, you're kicking the can down the road, then. You admit there is a problem, so why don't we just fix the problem now?
And I don't understand Brezinski's ridiculous carbon analogy. While excess carbon in the atmosphere may not be virtuous or desirable, more state money is, especially if taxes are being increased and we're gonna need to accumulate more $NFAs for retirement purposes.
Krugman litters these mainstream conversations with nuggets of nonsense presumably either to not sound 'too far out in left field' … or, because he still has an elementary understanding of modern money.
Clearly he's been exposed and absorbed some modern money ideas. I'm happy that he's come around this far. But if he ever becomes a Deficit Owl, WATCH OUT!
This is crazy. Now we are getting economic advice and lessons from the head of the Joint Chiefs?? Why would anyone with two bits for brains listen to what he has to say about the deficit. But I get it. He knows a lot about warfare (one assumes), so he must know a lot about anything he speaks on.
When I was a young man I had a friend that worked in a bank trust department. He was telling me one day in frustration that in the market drop then going on, as the market dropped, the junior people like him would be moved aside and a more senior person put in charge of trading. As the market dropped further, a more senior person would be brought in until a senior VP was sitting in the place he had been sitting, making the calls. He said that the more senior the person was the further removed from recent experience the person was and the results showed worse and worse performance.
And I saw PK on Maddow a bit last evening and he looked a bit rattled imo and probably needs some bucking up if anyone knows him and has his email....
RAchel Maddow is a smart lady but her PhD is in poli sci rather than econ (which may actually be a good thing). Need to have Chris Hayes get to her and introdluce her to the heterodox economists and MMT especially. I'd love to see Stephanie on her show with the Kelton seesaw up on the white board.
Krugman is moving but he is also doing so cautiously so as not to blow his creditability. He knows that for traction he has to look like he is playing the game rather than lobbing grenades. The latter is the job of the heterodox economists and their allies.
Richard Haass on @Morning_Joe: "You're asking me to speculate on something I don't know anything about."
Joe:"Well, that's what we do here."
Tweeted by Brad DeLong
Krugman needed to yell out, "The Fed sets the interest rate! The BOJ sets their interest rate."
Malmo - your call on Cullen is unfair. It really comes down to using a model of the FED inclusive of the govt or a model of the FED exclusive of the govt. MMR guys use the latter because they are into precision to bloster credibility to advance the basic same message of MMT. We need to get over that; much bigger fish for all of us to fry.
Tom, you are exactly right about Krugman's caution as evident by the reaction to his much milder presentation. He and Mark Thoma did recently however take Larry Summers to task for the latter's editorial of the debt/deficit being a low-priority issue but using the first two paragraphs to establish his debt/deficit "very serious person" credentials. PK pointed out that the Wash. Post only reported on his first two paragraphs and completely ignored the main point of Larry's pieces. PK asked how could we expect Congress critters to drill down more than the Post? PK is certainly aware of the balance; it's instructive as to where a Nobel winner and someone thick in the political pundit game draws the line
There's something inherently disingenous about that chart on the Politico piece provided by Rattner of total entitlement obligations at 58T whild GDP at 15T. Can someone comment on that here and there?
Cullen's own words:
The point MR makes is that the govt is a currency user in some capacity because it must be able to USE pvt money via the procurement of tax receipts. This is a point that MMT totally misrepresents and even abuses.
More from Cullen:
." A sovereign currency issuer (though that concept doesn’t even apply to the USA) can run into very real times when it literally cannot procure funds via taxes and therefore cannot afford to just print money. But the abuse of the term “always” is just as abused as the concept of “currency issuer”. It’s an extremist generalization that makes an oversimplified point on the way to totally mistaking how the system is actually arranged."
There's virtually nothing the Fed does that affects the level of $NFA, so I don't see why any time should be wasted bringing it into a discussion re MMT or functional finance.
Either dollars get spent into the economy through the Treasury or they don't...it's that simple...who cares what happens prior to that?
Do we care how the power company gets the power to us?
Bob,
Rattner is mixing stocks and flows...
iow mathematically, it's like he is claiming you cannot take a 100 mile trip in a car that can only go 55...
So, if we have a 15T GDP PER YEAR (ie flow, ie per unit time), then, over the 30 year term of the projected entitlement spending, straight line estimate puts that at 450T of gdp over that entire time...
This is like saying if we drive a car at 55 mph for 10 hours, we will drive 550 miles.
So what Rattner is saying is mathematically equivalent to claiming one cannot drive a car on a 200 mile trip "if the car can only go 55"....
He is a complete disgrace and a moron.
His own numbers here: 58/450 = 12.88% which is less than what we spend on healthcare in this country as a % of annual gdp... this is a mathematical tautology about our healthcare industry and is not a problem...
Simply, these morons want to kill off our aging seniors, just like they have the unborn... Rattner wrote a NYT editorial last fall: "why we need death panels" I kid you not....
rsp,
" A sovereign currency issuer (though that concept doesn’t even apply to the USA)..."
Does this statement find itself in legal agreement with Treasury's legal ability to order minted platinum coins?
rsp,
Thanks, Malmo, I've missed that nuance of the govt having to use pvt money through tax receipts. On the surface that doesn't make MMT sense to me. If Cullen said that, I need to research that more and figure out why he would. Is there a dialogue somewhere on this specifically? I've followed the earlier S-I stuff earlier but did get a little bored with it and may have not gotten to this wrinkle. Thanks in advance.
Thanks Matt; now that you laid that out, it should have been obvious to me. At least I could smell that something wasn't quite right about it. The Politico piece already has over 400 comments so it doesn't do much to add a note on the disingenuous chart. Krugman did a blog on his Morning Joe appearance and that has nearly 200 comments already. His post was done before Scarborough’s hatchet attack so Krugman will likely response - that may be when to point out Rattner's stupidity in commenting – if Krugman doesn’t do it himself.
salsabob, in the comments at this link:
http://pragcap.com/koo-the-balance-sheet-recession-is-not-over
Malmo, whoa, I found it. WTH??? I think we all agree that the primary purpose of central govt taxing is to establish the currency (with the monopoly on violence backing that up). That, however, is a far cry from Cullen stating that pvt money has to be used by the govt or else. At a minimum, he is confusing a rather simple tenet. However, I don't see him using this to actually undermine MMT; just a dig that MMTers should never say never. I caulk it up to those earlier heated arguments, i.e. pretty silly stuff compared to the task before all of us of dismantling the neo-liberal elitist propaganda machine that Scarborough piece is exemplary.
Malmo, I may have been mistaken. I just noticed the Cullen piece is only 4 days old. I still don't see how (even if correct; it's not) his "user statement" has much to do with anything other than the 'never say never dig.' I'd say he needs to get over the MMT/R split, but I realize he's trying to carve a niche out so I think the advice would fall on deaf ears.
Oh well, I think bashing Rattner is more productive right now anyway. ;-)
I'm not bashing Cullen. I mentioned him because I know PK reads PC. It helps in part to explain why PK isn't an MMT convert--or only a partial one, if that.
Salsabob,
Cullen's disagreement with MMT isn't minor. He essentially rejects MMT out of hand. Is PK far behind?
Cullen prefers economic growth via money creation done through the private sector via investment. I think his "pragmatism" comes from the political difficulty of fiscal stimulus.
Malmo/Chewitup. I'm in complete agreement.
He's a great analyst, however, and my sense has much more positives than negatives. While not in agreement with a lot, I like his more exact model of FED exclusive of govt. and I think his philosophical leanings putting emphasis on private sector investment gives at least some food for thought; MMT has to be able to show a solid consideration of that to survive the neo-liberal attacks so maybe Cullen tweaking will prove eventually helpful.
"Cullen prefers economic growth via money creation done through the private sector via investment" - Chewitup
Chewie, this statement is problematic.
Private investment doesn't create any net "money" in dollars or anything else.
What it does is produce a temporary flow (a pulse really) of spending in one direction (to households) that results in a bigger flow back assuming the investment returns a profit.
The net result is a further redistribution of funds upward.
The funds to make the payments on the debt used to create the initial flow haven't been printed yet.
Where will those funds come from?
Cullen thinks the funds come from an expansion of credit.
Who expands their debt? Households or businesses?
Businesses don't need to expand theirs because the payments are included in their gross profit.
So it must fall to households.
I'm sure banks will lend us money to buy stuff (up to a limit) but I'm also pretty sure they won't continuously loan us the money to cover the payments too.
Cullen is hopelessly confused, take what he says seriously at your own peril.
Credit is only useful if the government can be counted on to create the funds necessary to make the payments.
Credit on it's own will inevitably lead to failure of the banking system.
With that in mind it begs credibility to make the claim that credit drives the system. Credit leverages a portion of the deficit and most of the asset side of all of the private debt ever issued is held by a tiny subset of folks that will never share it with us.
On the other hand we working stiffs are stuck holding a significant portion of the liabilities.
The funds we need to make our payments will not be coming from the 0.1%, nor will they be coming from other people's (the ones that still have credit) borrowing.
The only trump card the 99.9% hold is that for the 0.1% to make their payments they need us to buy their products or they will have to draw down on their vast accumulation of wealth.
I say fuck 'em...buy local...live simply.
Paul,
I try to live simply but I'm a sucker for a good bottle of wine and single malt scotch, neither of which are local products. Otherwise we're in agreement.
When Krugman says:
'if unemployment were at normal levels then I'd be a deficit hawk'
He is not necessarily contradicting MMT.
In a situation of full employment aggregate demand is presumably at very high levels so there is no need for further deficit spending to stimulate the economy.
Krugman talking about his transformation into a deficit hawk under said conditions is presumably just a shrewd way for him to get a bit closer to "respectability" and thus keep his influence among mainstream circles.
In a word: wise politics.
Private investment doesn't create any net "money" in dollars or anything else.
Great point!
Money creation by commercial banks is always a process of matching an asset on one side and a liability on the other side of a balance sheet.
Only government deficit spending creates NFAs for the private sector.
"In a situation of full employment aggregate demand is presumably at very high levels so there is no need for further deficit spending to stimulate the economy." - Jose
And we would expect that with the higher tax revenues commensurate with higher output from higher employment that the deficit would shrink naturally.
A healthy economy fixes a lot of things.
Money creation by commercial banks is always a process of matching an asset on one side and a liability on the other side of a balance sheet. Jose G
Mere balance sheet sophistry. The "assets" are typically healthy only during the boom and the "liabilities" are only virtual for the banking system as a whole since the public has no place to store and transact with their fiat risk-free outside the banking cartel; hence the liabilities of the banking system as a whole are almost never redeemed for any significant length of time.
Let's PLEASE at some point try to recognize that MMT has never, ever been "against" growth via pvt sector investment. Randy's written more on that subject than probably anyone, but all those debates happened in the Post Keynesian literature prior to the 2000s, so everyone assumes we don't have anything to say about it. Minsky wrote an entire book in investment spending.
The MMT point about NFA is PURELY about financial stability, NOT about growth. There is nothing contradictory about supporting permanent deficits of 2% or so and also recognizing that the driver of economic growth is investment spending (though govt investment spending in infrastructure, etc., is important, too).
Further, how do you get stable investment growth in investment spending over the long run? One thing (not the only one, mind you) you do is promote a full employment economy via appropriate levels of NFA (again, usually via increases in NFA of about 2-5% of GDP, which leaves a whole lot of room for private "money" creation, by the way--also completely consistent with MMT).
Both MMT detractors and supporters have gotten this whole debate wrong over and over again. Please try to get MMT right--again, MMT detractors AND supporter--so we don't have these silly debates about a complete caricature of MMT.
I think frlbane has an important point about banking, though I don't agree with all your ideas fr.
What do you think of these proposals, by the way?:
What Should banks Do? (L.R.Wray)
http://www.levyinstitute.org/publications/?docid=1301
STF,
If I had a particular question about your position on something, I would either try to ask you directly somehow, or else try to find something relevant that you had written. But some critics simply aren't interested in getting the facts.
What do you think of these proposals, by the way?: y
A monetarily sovereign government itself should provide a risk-free storage and transaction service for its fiat that makes no loans and pays no interest. That removes any need for government deposit insurance and a legal tender lender of last resort which are philosophical abominations in our so-called "free market."
As for the banks, they should be entirely private businesses with their owners and depositors taking all the risk of credit extension.
Jose, on Krugman: "He is not necessarily contradicting MMT.
In a situation of full employment aggregate demand is presumably at very high levels so there is no need for further deficit spending to stimulate the economy."
The words he chooses matter. Had he said 'full employment' instead of 'normal levels' then we'd probably be close to agreement. Or if full employment was normal, but its not. So the distinction here matters.
Ill add a layer of nitpickyness that I absolutely don't expect Krugman to mention on a show like that: even if we were at full employment, that isn't in and of itself grounds to become a deficit hawk. What is: undesirable inflation AS A RESULT OF too much aggregate demand. Otherwise, what's the problem that requires become a deficit HAWK?
...
Tom Hickey says that Krugman is being strategic. That may be the case. My point earlier is that he's either being strategic (i.e. trying not to sound 'to far out in left field'), or that his understanding of modern money is still elementary. It's one or the other because his comments are a mishmash.
STF, I notice you said "investment" but I think the question (and I say question rather than issue because I'm here to learn) is "investment based on bank credit." I, for one, believe that there is efficiency in bank credit that is positive if properly regulated. And, I have no problem with the financial sector making a reasonable profit off of offering said credit. We obviously have had a decade or more of this going horrible wrong and lessons hopefully learned, but we should now assume that bank credit is fundamental evil and needs to be tossed into the trash bin of history? Seems extremely reactionary to me. Clarification would be much appreciated.
Scott,
It seems Cullen's contention of government monopoly of dollars is the issue. Because private banks create dollars, and NFA facilitate the exchange of those dollars, the MR argument is money creation is for the most part private. The Fed monkeys around with reserves so all the checks clear and they can hit their interest rate target.
But when it comes to stability, MR doesn't like the idea of government spending (other than automatic stabilizers) to pick up the slack in a downturn. Just government facilitating private investment, so our entrepreneurs can step up and create. I think they MR guys prefer the good old American know how brand. Correct me if I'm wrong.
Chewitup, that sounds right to me. , he would also be in favor of govt expenditure for public goods (e.g. bridges), right? If so, then it's a question of "in for a penny, in for a pound." It's not a question of if govt investment, but how much and that changes with circumstances - so how does he draw the line?
Chewitup: "MR doesn't like the idea of government spending (other than automatic stabilizers) to pick up the slack in a downturn."
That's not correct.
MR, in it's ideal, does not advocate what 'should' be done at any time, be it a downturn or otherwise. They're states goal purpose is accurate operational description.
[I'd add: the nature of language and the interconnectedness of things, as well as institutions (!), makes description partly a prescriptive action. The way we choose to describe operations "shapes" our conception of how things work and what's possible and not possible.
For example, we choose to call the Head and the Neck different things. But they could be one thing called a Nead or a Heck. Choosing the make them one thing or two things "shapes" our conception. For our purposes here: MMT conceives of Treasury and the Fed as one entity, MR conceives of them as seperate entities. This distinction "shapes" each conception i.e. each description]
Also, my sense is that Cullen is not opposed to government spending to pick up slack during a downturn. Ask him though.
"MR doesn't like the idea of government spending"
The TC Rule Screams Lower Taxes and More Spending (M. Sankowski):
http://monetaryrealism.com/the-tc-rule-for-fiscal-policy-screams-lower-taxes-and-more-spending/
Back to Krugman. He was on NPR this afternoon. He made a couple of points he was not able to on Morning Joe.
"So one of them is the notion that we are vulnerable, that what if the Chinese decide not to buy our bonds. What you want to bear in mind is the United States is not going to default. We're not going to run out of cash because we print the stuff. So the - what that means in turn is that the interest rate that people are going to demand on U.S. long-term bonds, you know, that's related closely to the interest rates that you expect that the Fed is going to set on short-term interest rates, which, you know, the Fed controls.
Unless you give me a reason why those are going to rise, and that's not going to happen until the economy recovers. But as long as those short rates stay low, the long rates in the stay low. So you say, what if the Chinese or somebody, what if people decide that U.S. bonds are not such a great investment? Well, that would cost a dollar to fall, and that that's a good thing."
And about the household metaphor-
" It's misunderstanding the way an economy works. When lots of people are cutting back, you want somebody to spend more, otherwise you have depression. We saw how stupid that is, but then a few months later, President Obama started using the same metaphor which us shows how we can let a homely household metaphor which turns out to be totally inappropriate nonetheless can end up dominating the way we talk about things in public policy spheres."
OK NPR land. Who's buying this Krugman propaganda?
Chewitup,
Great find. that sounds like MMT.
I'm not so sure about this though: "what if people decide that U.S. bonds are not such a great investment? Well, that would cost a dollar to fall, and that that's a good thing."
This is not necessarily true. It depends. If there were to be a rush toward government bonds of other countries, then I see what he's saying, i.e. investors want out of dollars and into other currencies, thereby leading to a shift in exchange rates.
But, if globally there is a move away from government bonds and into equities, including in the U.S. but also elsewhere worldwide, this tells us nothing about an effect on the exchange rate.
Right?
Chewitup,
I have no idea what MR's position is on any of that. Notice that we don't write anti-MR pieces. Bigger fish to fry, as some have said here already. For instance, though not coordinated in the least, the joint effort with the coin was outstanding and I give huge props to the MR folks for banging on that one. One can't ever let any of these minor issues (relatively speaking) get in the way of what both groups view as improvements in the direction of policy. Thankfully, and to their credit in particular, that's exactly what happened, even if the coin didn't happen.
Salsabob,
"STF, I notice you said "investment" but I think the question (and I say question rather than issue because I'm here to learn) is "investment based on bank credit.""
Yes. How else would it happen if companies are borrowing?
"I, for one, believe that there is efficiency in bank credit that is positive if properly regulated."
Absolutely. Anyone who thinks MMT has ever said differently hasn't read MMT. Warren owns a bank for heaven's sake. Yes, Bill would nationalize, but he's the only one in the gang that would. Someone already linked to Randy's piece on what banks should do. You might check it out. Note that at Levy MMTers like Wray, Tymoigne, and Kregel have written as much as anyone out there on re-regulating and not once has nationalization been mentioned in any of that. Wray wrote several pieces in the early 1990s on community development banks, too.
"And, I have no problem with the financial sector making a reasonable profit off of offering said credit."
Same here, again.
"We obviously have had a decade or more of this going horrible wrong and lessons hopefully learned, but we should now assume that bank credit is fundamental evil and needs to be tossed into the trash bin of history? Seems extremely reactionary to me. Clarification would be much appreciated."
Hopefully the above clarifies. We've never said anything remotely like the things suggested in your post. That frankly confuses us with the AMI folks, with whom we have strong disagreements and very little in common when it comes to talking about how banking works. Sounds to me like someone has a personal stake in spreading misconceptions about MMT if anyone has actually started to believe those things about MMT. Go read the stuff at Levy on re-regulating and see if it sounds to you like anyone wants to get rid of private money creation.
Hope that helps!
JK,
Krugman went on to give Japan as an example where BOJ bonds have become less attractive and the yen has devalued. PK thinks that is a good thing for them.
His main objective now is jobs. If China and others we import from are no longer interested in selling us stuff, they won't have any need to buy our bonds. Perhaps that will put more Americans to work.
"...that bank credit is fundamental evil..."
Bank credit to households, promoted by policy-makers and executed by institutions of public trust while at the same time not following through with the implicit promise of $NFA creation, is fundamental evil.
For the record, personally I do not claim to speak for MMT...I'm sympathetic to it, whatever it is but all I really know of it is sectoral balances.
Anything I say (write) is based on my own thinking...much of which seems to be in harmony with what I see MMT folks promoting.
Hopefully no one in the future will mistake anything I say for official MMT...I don't really know what that is.
STF, thanks, that helps a lot and does align with my sense of MMT.
Honestly, what's throwing me off a some is what Paul has written (not PK, but ours here). He's a thoughtful guy so I don't just toss his thoughts off.
My intuitive sense is he's hitting that seam between MMT and S. Keen.
With a node to JK, I just need some time to get my "nead" around what our Paul is saying.
Just to note. While it is fairly easy to observe that the comments here are light years ahead of those found on Scarborough's Politico article, I find the commentary here also surpasses that found on Krugman's. (And yes, I understand my own vulnerability to "Incestuous Amplification" but what the hey, I'm human too.) This is good stuff; thanks, Mike Norman!
Krugman is down here in DC tonight. His venue is 5x bigger than his last appearance, but unfortunately for me, it still sold out.
Maybe the top village people are shielding there ears, but a lot of people in this town are listening more and more.
Here's his venue -
http://sixthandi.org/
I still rather see STF on the Maddow show one night. ;-)
@ Salsabob
"Our" Paul is an engineer, not an economist. He is looking at monetary economics in the light of the way engineers treat dynamic system in terms of stock and flow. While not an accountant either, he is picking up on that fast.
So his not knowing much about economics is actually a plus in "following the money" as a hydraulic engineer would follow fluid dynamics in a system or an electrical engineer the flow of electricity in an electrical grid.
Somewhat similar to Keen's approach.
Some really smart commenters on this blog. What a pleasure to read.
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