Tuesday, July 30, 2013

Randy Wray — MMT and Main Street vs Wall Street


Here’s a pretty good piece on MMT, by a “retired career PhD scientist” who has recently “become a serious student of macroeconomics and the role of government in our economy.” What I’d like to know is why this is so hard for PhD macroeconomists? Why can’t heterodox macroeconomists–who studied most of the same economics literature that Stephanie Bell, Scott Fullwiler, Eric Tymoigne, Bill Mitchell, Mat Forstater, Ed Nell, and I (and a handful of others)–get this? I realize that it is a bit easier for those who come straight out of financial markets–like Warren Mosler–to understand the details of monetary operations, or those like Charles Goodhart who saw the monetary ops first hand. But after a quarter of century of hundreds of published articles, thousands of blogs, and far too many conference presentations to count, why is this still so difficult for most PhD economists?
Economonitor — Great Leap Forward
MMT and Main Street vs Wall Street
L. Randall Wray | Professor of Economics, UMKC

23 comments:

F. Beard said...

why is this still so difficult for most PhD economists?

Why is it so hard for you guys to admit that purchasing power (loosely "money") can be issued as shares in Equity (common stock)? And not just as Liabilities (debt)?

And many of you are Progressives who believe in "sharing" and "equity" - except not literally apparently.

The short answer is probably that many are literally worshiping Mammon - whether they know it or not. One cannot serve two masters, ya know?

Matt Franko said...

'why is this still so difficult for most PhD economists?"

Lack of a certain form of "Mathematical Maturity" imo... they lack a form of mathematical cognitive ability...

"Mathematical maturity is an informal term used by mathematicians to refer to a mixture of mathematical experience and insight that cannot be directly taught. Instead, it comes from repeated exposure to mathematical concepts...."

http://en.wikipedia.org/wiki/Mathematical_maturity

I'm not saying these people are "inferior" or something, but we all have to acknowledge our limitations and defer to others who we can see have the required expertise that we ourselves dont possess... we have to be honest with ourselves as well as with others....

rsp,

Matt Franko said...

F.

I look at USD balances of $NFA as "shares" in our nation... so there you go...

rsp,

F. Beard said...

Franko,

So you don't believe in "one man or woman, one vote?"

That kinda makes you a fascist, no?

Any relation to the General?

Matt Franko said...

F.,

No, no relation it is spelled differently btw....

Are you related to the drummer in ZZ Top?

F.,

"1 "For like is the kingdom of the heavens to a man, a householder, who came out at the same time with the morning to hire workers for his vineyard.
2 Now, agreeing with the workers for a denarius a day, he dispatches them into his vineyard...." Mat 20

F.,

Looks like you may be using the equivalent of state currency in "heaven" if that is the way you look at things, dont see any signs of distributed "equity" here in the Lord's parable...

rsp,

F. Beard said...

Franko,

I've never said that fiat should be abolished so why do you drag that red-herring across the trail? Who's your master?

Matt Franko said...

F.,

So then its ok to use state currency?

Which is the way I personally prefer, which is the way I think is a better policy.... so what is the problem again?

You can use common stock to do deals already so why dont you and yours just use the stock shares and me and mine will just use the state currency and all is well no?

rsp,

Matt Franko said...

F.,

I'm directly under Apostle Paul's teaching...

rsp,

F. Beard said...

. so what is the problem again? Franko

Oh, just the little matter of a government-backed counterfeiting cartel, the banking system.

And who's gonna share when they can legally steal? Hmmm?

F. Beard said...

Franko,

You do realize that Paul requested the Hebrew Scripture to be brought to him in prison? Ya know, the Scripture you ignore?

Matt Franko said...

I dont ignore it, I just look at it as none of it applies to me directly so to speak... (Again suggest read Galatians and see what happens... if nothing, then respectfully suggest you may be an Israelite or something, one of the still faithful remnant of Israel...still zealous for the Law, the OT, etc... )

Look, F, if the Fed were to just set the overnight rate at zero and keep it there, and stop this QE nonsense, rates would collapse to near zero for credit on the "big ticket" items that most households need and often finance as they dont have enough balances to be able to buy them outright when the household is initially established...

ie, a primary residence and an auto to drive to work and to travel for purposes of household provision...

Suggest such loans made at zero/near-zero interest may not qualify as your "usury" that the Law sometimes forbid ...

This is the overwhelming use of bank credit, ie its not like people take out bank loans to buy food, pay HVAC bills, etc... (or at least they shouldnt/shouldnt have to if govt was running fiscal policy correctly)

You are over-estimating the requirement for "money lending" in our current economy... its mostly for property and autos, and if the monetarist morons would just go away in disgrace finally, rates for financing these 2 items would collapse to near zero which should be good enough...

couple that with a fiscal policy that fully recognizes our govts absolute fiscal authority to spend for public purpose and we would soon have a true full employment policy implemented...

It may not meet your "letter of the Law" but imo that law does not apply anymore anyway ,it was nullified by the cross of Christ...

"if righteousness is through law, consequently Christ died gratuitously." Gal 2:21

and certainly never did apply in the nations in the first place (which is where we are btw... we are NOT in Israel F.,...).

We dont have 'the Law', we have "the action of the Law" (Romans 2:15) here in the nations... Paul termed we of the nations 'ignorantly devout', etc...

We can get this done justly and righteously without "the Bible" if we can expose and purge the morons out of current positions of authority...

rsp,

PS this will only help we humans economically, not in many other real terms... but in any case our experience here on earth will not be as bad imo but still far from perfect... it is at least something for us to use to "lessen the blows" so to speak...








F. Beard said...

0% loans?! How big of you when the population DESERVES debt-free RESTITUTION!

And dropping interest rates hurts retires but it wouldn't if they had a nice chunk of new fiat sent to them every month at least until all demand deposits are 100% backed by reserves.

Matt Franko said...

F,

No doubt some sort of transitional adjustment period with "one time" policies would be required... yes this is interesting to think about but you are kind of jumping the gun here...

We still have people in the highest positions of govt authority who think "We're out of money!" and "We're borrowing from the Chinese!"... so we have to get that straightened out first F., then start to discus certain transitional policy details...

rsp,

F. Beard said...

If large increases in deficit spending get the economy going again, as they should, then Mosler and Co better know how to reign in the banks to keep them from causing severe inflation and thus discrediting that deficit spending. And no, raising interest rates won't necessarily work.

So then (Horrors!!!) you'll consider credit rationing and what an argument that'll be as to who is so-called credit-worthy.

Matt Franko said...

F,

Primary residence finance limits are already locked in at I believe $417k nationally...

So as long as govt doesnt raise this limit, and is careful about what prices the govt itself directly pays for housing related items and how much they buy, the price of housing wont go up above that level....

rsp,

Matt Franko said...

F.,

Warren always says 'all prices are necessarily a function of what prices the govt directly pays for things and what prices they let their banks lend against things..."

So he knows how this all works... if the regulators increase the allowable price levels of collateral, then prices go up... so you can regulate the banks and review their collateral prices and either approve or disapprove these prices.... its all under govt authority...

rsp,

y said...

F. Beard,

"Why is it so hard for you guys to admit that purchasing power (loosely "money") can be issued as shares?"

I don't think many people have a problem with the idea, it's just that your ideal of everyone paying for everything by issuing shares in their property has many theoretical and practical problems, which have been explained to you before.

As Matt says a state currency can be thought of as a form of equity, and this is a good argument against some of Wray's theories - given that he describes it as a 'debt (which isn't really a debt)'. But in reality you could think of if in either way.

You're right that the banking/financial system is majorly fucked-up and it has to be changed.

The proposals put forward by MMT economists range from various sorts of 'narrow banking' proposals, to outright nationalization (esp. Mitchell). Other heterodox alternatives include the full-reserve banking system of the Chicago Plan, described in detail by Jaromir Benes and Michael Kumhof. There's also things like the Positive Money plan (based largely on the work of Richard Werner), and the proposals of Dirk Bezemer.

Then there are your ideas, which compete with endless other amateur opinions floating around online.

If you want the world to take your particular ideas seriously and to perhaps, at some point in the future, put them into action, then you'd better start doing more than just repeating them every other day in the comments section on MNE...

F. Beard said...

it's just that your ideal of everyone paying for everything by issuing shares i y

Nice straw man there since private debts could be paid with fiat too, if both parties agree.

My point is this: If endogenous money creation is important (and I think it is), we don't need a government-backed credit cartel for that purpose.

has many theoretical and practical problems, which have been explained to you before. y

Such as volatility? That's driven by the government-backed credit cartel which should be abolished anyway.

The proposals put forward by MMT economists range from various sorts of 'narrow banking' proposals, to outright nationalization (esp. Mitchell). Other heterodox alternatives include the full-reserve banking system of the Chicago Plan, described in detail by Jaromir Benes and Michael Kumhof. y

Nationalization was tried with the Soviets. Full reserve banking MIGHT work but I tend to think we DO need endogenous private money creation.

There's also things like the Positive Money plan (based largely on the work of Richard Werner), and the proposals of Dirk Bezemer. y

Thanks. I'll check the above out.

then you'd better start doing more than just repeating them every other day in the comments section on MNE... y

Obviously some repetition is necessary since at least you and Franko think I want to do away with fiat!

As iron sharpens iron, so one man sharpens another. Proverbs 27:17

Brian Romanchuk said...

Returning to the original topic, it's not clear that it's easy even for a lot of financial market participants to accept MMT. The principles of "sound finance" have not changed since the 1920s, and so to fit in, you have to espouse the party line.

As for the mainstream economists, I think much of the lack of acceptance of MMT can be explained by the dysfunctional trends in academia that have been in place across almost all fields since the 1960s. To be accepted in academia, MMT has to be forced into a format that can thrive amonsgt this dysfunction. For example - how will it be possible to produce thousands of slightly different papers every year so that doctoral students and people on the tenure track can advance in their careers? At least with DSGE models, you can tweak them to keep churning out the papers.

y said...

F. Beard,

I know that you don't want to do away with 'fiat' money.

THe point of my comment was really twofold:

1) there are many ideas out there about how to reform the money system, your's is just one of them, and just posting your ideas on MNE probably won't get you anywhere because other people are more organized

2) I think there are some basic problems with your theories, but discussing them over and over again on MNE isn't really going to achieve anything

Anyway, please do whatever you want, but at the same time please don't think that by trying to convert us to your theories here in the comments at MNE you will actually achieve much

The comments are interesting and provocative, but they need to go further if you want to have any real impact.

y said...
This comment has been removed by the author.
Matt Franko said...

F.,

The word "money" does not appear in Scripture, so is it a good idea to try to use the Scriptures to attempt to determine "ethical forms of money" when the word never appears in Scripture in the first place?

The scriptures only mention weight measures of the metals, or counted numbers of nomisma; and these two systems are never conflated or referred to via metonymy...

http://en.wikipedia.org/wiki/Metonymy


The English word "money" is a metonym... by definition it is imprecise. So is it a good idea to go all around trying to precisely define what is an imprecise term in the first place?

Wray spends some time in this endeavor ("What is money?", etc...) and I dont know how appropriate a use of time this is... I guess some people do crossword puzzles...

F.,

How can you look into "money" via the scriptures when the word itself does not appear there? The scriptures only speak of weighed measures of specific metals in the east and counted quantities of state currency in the west... there is never any conflation of these disparate systems...

rsp,



F. Beard said...

Thanks y,

I'm gonna take a break. The ideas are now out there, I think they're sound and good and I have other things to do anyway.

And I suspect this is a spiritual battle anyway.

adios