C. Wright Mills: As the administrative liberalism of the Thirties has been swallowed up by economic boom and military fright, the noisier political initiative has been seized by a small group of petty conservatives, which on the middle levels of power, has managed to set the tone of public life. Exploiting the American fright of the new international situation for their own purposes, these political primitives have attacked not only the ideas of the New and Fair Deals; they have attacked the history of those administrations, and the biographies of those who took part in them.…
On the one hand, we have seen a decayed and frightened liberalism, and on the other hand, the insecure and ruthless fury of political gangsters.FireDogLake
C. Wright Mills Explains the End of Liberalism
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20 comments:
"At the same time, our knowledge class, which passes for an intellectual class in the US, has nothing to offer. One need only look at Larry Summers to see our pretend intellectuals for the courtiers they are. See, e.g., his defense of his Harvard colleagues Kenneth Rogoff and Carmen Reinhart, which I discussed here. The few relatively independent economists have little to offer but ideas from the past, worked over until they are an incoherent pudding, and even then they get no traction in the public discourse. Just look at the fate of the new ideas of the Modern Money Theory economists; reduced to jokes about the Trillion Dollar Coin."
The few relatively independent economists have little to offer but ideas from the past, worked over until they are an incoherent pudding, and even then they get no traction in the public discourse. Just look at the fate of the new ideas of the Modern Money Theory economists; reduced to jokes about the Trillion Dollar Coin.
This is the point that Randy is making in calling for a new meme or memes that are embedded in an appealing narrative. We've got the economics right and also the policy for prosperity, but the present narrative is proving insufficient to provoke interest, let alone ignite enthusiasm. This aspect of the presentation needs work.
The problem imo is too much of this libertarianism Tom, it exists in extremely high measures on both the political left and right.
It's reached levels of pure lawlessness.
Look at the reaction to 'the coin' from the left: "the government cannot just do THAT...." it's basically the same as the reaction from the right save the level of animated expression and same as from the metal-lovers... ie rejection of lawful authority (ie 'The Coin' was LEGAL! HELLLOOOO libertarians! Earth to libertarians!!!).
We're either going to be civilized or not; it starts with our monetary system.
We have a President of the left who has said "We're out of money!" and the last opposing candidate from the right said "We're borrowing from the Chinese!" ... these are not people who can easily recognize authority.... and it flows downhill from there...
imo 'the meme' or whatever should include drawing this sharp distinction and calling out people to decide which side they are truly on... no "fence sitters" allowed...
rsp,
I can agree with Randy that MMT may need to do a better job of packaging this. But he packaging is only to convince the left that we are not running out of money. But in the end you have to face the nonsense head on. As Matt says, we have a President who says we are running out of money and we have to do what households do and tighten our belts. No amount of packaging is going to change it. Mr President: You are wrong as wrong as you can be.
As Matt says, we have a President who says we are running out of money and we have to do what households do and tighten our belts. No amount of packaging is going to change it. Mr President: You are wrong as wrong as you can be.
The problem is that even when one convinces some people that the MMT position is correct, the response is that it would be morally wrong to use it.
This is not just an economic argument, but look at how even that is going when pretty much just facts of describing the monetary system are involved. This is chiefly a political argument when it comes to policy and politics is heavily laden with moralizing.
"The problem is that even when one convinces some people that the MMT position is correct, the response is that it would be morally wrong to use it."
Morally wrong or not, convince people that their incomes (and well-being) will decline if we promote austerity, balance Federal budgets, reduce spending and they will find some way to overcome their objection.
Another 10 years or so of the current nonsense, err…policies should do it.
the real fear which mmt doesn't address well enough is the fear of currency collapse via the exchange rate. Even if you can demonstrate that bond vigilantes aren't going to turn the us in greece, the next question is something like "what about the fx vigilantes?"
"fear of currency collapse via the exchange rate"
That seems like an irrational fear to me…right up there with fear of the Sun burning out.
99.999% of the population (including most economists) wouldn't understand the meaning of the phrase, so that equates to…
"lets manufacture something to be afraid of".
I am curious though what sequence of events you (or anyone) think might lead to an exchange-rate caused currency collapse for the US (or UK et al).
Or do you think we are always teetering on the ledge?
The problem is we hear so many things like this and hyperinflation that almost never happen except under special circumstances and then we apply them to the general case.
Economists are virtually never right about anything so how do we choose what parts to be wary of?
If it's always "about price not quantity" then the CBs set the exchange rates too... so this is directly under the control of the CBs...
MMT has to decide if it is ALWAYS "about price not quantity" when monopolists are involved... if it is not "always about price not quantity" then when does this principle not apply and why?
rsp,
Look at this spreadsheet:
http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
At the bottom, there are Foreign Official Holdings... what exchange rate did the CBs of these foreign countries exchange out the exporters for their USDs? What exchange rate did these foreign CBs/Treasuries use and why?
I submit that the exchange rate these CBs used are the exchange rates... monopolists setting prices... either this principle applies or it doesnt...
rsp,
If it's always "about price not quantity" then the CBs set the exchange rates too... so this is directly under the control of the CBs...
The big buyers and sellers of gold are the cb's. They don't do so to back their currencies as some think at ZH. They do this to influence the fx rate.
"If it's always "about price not quantity" then the CBs set the exchange rates too..."
Not sure about that.
The point, I think, is that currencies can fall low enough and fast enough in fx markets to create the sort of high inflation which MMT considers to be the real constraint on spending. At that point the government would have a choice: either allow the depreciation/inflation to continue unabated, or else (a) start borrowing foreign curreny to shore up your domestic currency's value, (b) start cutting spending/raising taxes to stop outflow and increase currency demand, or (c) raise interest rates to attract buyers to your currency.
The MMT idea is that foreigners will immediately start buying the currency when it falls low enough - but the question is whether you might have to go through an extreme depreciation before this happens.
Also the idea that floating exchange rates solve everything appears to contradict some other ideas within MMT. For example, MMTers argue that even with flexible prices, you might still not have enough buyers to clear markets. Yet at the same time they argue that flexible exchange rates (fx prices) mean that there will always be buyers for the currency at some price.
This appears to be somewhat contradictory, as if there is a deficiency in global aggregate demand, then thereis no guarantee that there will be sufficient buyers of the currency in fx markets at all.
Instead of haveing a perfectly self-adjusting fx market, you could potentially end up with a currency in free-fall (everyone selling, no-one buying) and increasing inflation (depending on your dependence on imports), with no end in sight.
This potential problem, I think, could be exceptionally acute for countries that have limited resources and limited ability to rapidly adapt to changing circumstances.
Bill Mitchell has mentioned this potential problem before. His proposed solution was that countries should always be prepared for a sudden change in their fortunes - by ensuring that they can always replace imports with domestically-produced goods if need be. However, not all countries have the ability to do this, and as things stand, most countries are simply not ready to do this.
sorry for the typos.
@y
I don't believe you mentioned that many countries keep a stock of foreign reserves on hand in case of a currency crisis wrt their currency. It's a big reason that Asian countries save in USD, for instance.
Secondly, cb's intervene on each others' behalf to stabilize the fx market.
Currency crisises can usually be traced to adopting a fixed rate, borrowing in a foreign currency, or officials not understanding their options
It's pretty far-fetched that the US would have either hyperinflation or a currency crisis wrt the USD anytime in the foreseeable future, unless the crazies decide politically to default.
I dont see how a "foreign exchange" transaction can take place at any level without the CB allowing the Depository Institutions to enter into these transactions at a CB agreed upon price for the foreign currency collateral...
Back in 2008 the Eurosystem got caught short USDs that they allowed their institutions to create liabilities in... so the Fed and ECB got together and agreed to do UNLIMITED swap lines between the Fed and the short European Institutions at $1.30 and guess what the exchange rate ended up being?
y, If things worked out like you describe here, I might be right now:
... sittin' on the dock of the bay... watchin' the tide roll away...
So these CBs are ultimately the price setters which seems to me should be MMT 101....
Right now the Yen is being devalued to over $1.00 again by the CBs imo because they are allowing the institutions to value the foreign currency at those levels...
rsp,
Tom,
I dont think you need a stock of foreign currency if your CBs agree to provide UNLIMITED swap lines to each other at a mutually agreeable exchange rate...
Like the Fed and ECB did back in 2008... they just set the exchange rate at about $1.30 and there was no crisis at all... the thing just blew over...
rsp,
Matt, the Western cb's hung the Asian Tigers out to dry in the Asian currency crisis and they learned their lesson from that experience.
"currencies can fall low enough and fast enough in fx markets to create the sort of high inflation..."
How low would the dollar have to fall before foreigners start buying so much if our (the US) stuff that it caused inflation?
What would they buy from us...do we even make anything of quality anymore?
Further, the dollar holdings are mostly by governments aren't they? What are they going to buy?
Foreign economies are the beneficiaries if our spending...will their economies be able to suddenly forego our consumption...who will take up the slack?
I just don't see it happening. People have been betting against the dollar for decades...and losing on balance...just like gold bugs that have been taking it in the shorts over the same period.
Matt
"... sittin' on the dock of the bay... watchin' the tide roll away..."
Ha ha!
Pau;, I was thinking more about the prices of imports rising rapidly.
Anyone know of any MMT-related papers on this particular subject?
I was thinking more about the prices of imports rising rapidly.
Some materials perhaps. Finished goods, not so much.
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