Saturday, June 11, 2016

Cullen Roche — MMT Again


Cullen Roche clarifies his views in response to comments here at MNE.

Monetary Realism
MMT Again
Cullen Roche | Founder of Orcam Financial Group, LLC

42 comments:

Bob said...

Me personally, I am focusing on the same stuff I’ve always been doing – helping people build and maintain low fee diversified portfolios and financial plans. I’m trying to fight off all those bad guys in the financial space that we don’t like so much – you know, the high fee hedge fund guys, mutual fund guys and other high fee types who I don’t believe add much value.

Mike Norman is helping people too!

Greg said...

I think some of you are missing the point in regards to Cullens comment about unemployment. He's saying UN-regulated capitalists will leave some people unemployed because it is always in their interest to have as few people working as possible. Most business owners wouldn't hire a single person if they could do all that needed to be done by themselves. I dont think that is controversial. This is why privatizing everything is a sham and why tax cut for business owners dont help unemployment. Just because a business owner keeps more at the end of January doesn't mean he will hire someone in February. He makes his employment decisions based on his needs to move the amount of product or services that he has been promised to be paid for, not on the amount of money he has available after tax. If he isnt doing it for those reasons he is a silly business man. This is why there needs to be a public sector that uses a different calculus for employment decisions AND that doesn't feel the need to tighten the belt when private sector employment is negatively affected by deteriorating private credit conditions.

He's on our side guys.

Ryan Harris said...
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Ben Johannson said...

No one on my side tweets about poors trying to schnorrer free stuff. MR folks are conservatives; their differences with MMT are political.

Kristjan said...

"I think some of you are missing the point in regards to Cullens comment about unemployment. He's saying UN-regulated capitalists will leave some people unemployed because it is always in their interest to have as few people working as possible."

That's what he is saying now. Not in the original piece that my comment was about. There he argued against ELR program saying that some involuntary unemployment was natural for capitalism. MMT-ers and Post Keynesian have always said that system doen't reach full employment. What is he saying now? MMT-ers are right, he discovered it now? This little brat is so full of it. There is no monetary realism, it is his ego stupidity.

Kristjan said...

"No one on my side tweets about poors trying to schnorrer free stuff. MR folks are conservatives; their differences with MMT are political."

Yes but Cullen is claiming he has discovered something.

Cullen Roche said...

I have always argued that capitalism is at odds with the idea of full employment. If you misunderstood that then perhaps I didn't explain it well.

And whats up with all this angry name calling? Sounds like you need a hug. If you're ever in San Diego I'd be happy to provide one. :-)

Andrew Anderson said...

This is why there needs to be a public sector that uses a different calculus for employment decisions AND that doesn't feel the need to tighten the belt when private sector employment is negatively affected by deteriorating private credit conditions. Greg

Yes, but neither should the public sector abandon bulldozers and hand people shovels (or teaspoons as someone quipped) or start building Pyramids to make sure everyone has a "job".

But yes, why the heck we aren't engaged in massive infrastructure building and upgrading is beyond me unless the goal is national/cultural suicide which I don't put beyond some.

Cullen Roche said...

This just isn't true. MR is just what we call our operational description of the monetary system. You can understand MR and have differing political agendas utilizing those understandings. Personally, I'm very socially liberal and have been very fiscally liberal for the last 7 years, but I wouldn't necessarily always advocate a permanent liberalism on the fiscal side. In this sense, I am much closer to Keynes and his original countercycial view. But it would be flat out wrong to call me a "Conservative".

Andrew Anderson said...

but I wouldn't necessarily always advocate a permanent liberalism on the fiscal side. CR

Why not? Shouldn't the amount of fiat always increase to keep up with and fuel economic growth?

In this sense, I am much closer to Keynes and his original countercycial view. CR

That the monetary sovereign should increase taxes and/or cut spending (destroy private sector purchasing power) during the boom? But:

1) Why do we have a boom-bust cycle to begin with?
2) Is it possible to level out that cycle or will attempts to do so trigger the bust?
3) Whose ox should be gored with the new taxes or decrease in spending? And will those increase unjust wealth inequality even if they do level out the cycle?

Shouldn't we rather focus on preventing unsustainable booms by, say, eliminating all government privileges for private credit creation?

Bob said...

There is disagreement between "what is", "what must be" and "what should be".

Tom Hickey said...

Let's all play nice. Everyone is welcome to their say and we are very liberal here about commenting, but I will delete comments I deem insulting or out of order.

Kristjan said...

Well, Tom didn't post the link that my comment was about and Cullen didn't either. I am too lazy to look for it. There is nothing but circular reasoning in Cullen's "work" any way.

"There is disagreement between "what is", "what must be" and "what should be"."

Not really, It started when his "colleague" disapproved him. So it is not like he was enlightened all of a sudden or if he was then this enlightment started with that disapproval.
I can see how ELR could have been hard to swallow already before that. MMT basically says there is no morality in a political system called capitalism. I have asked this question myself from many people that if MMT becomes mainstream then how do you justify inequality for example. Nobody seems to have an answer to that question. now the poor are asking from a politician to take away some from that rich guy on top of the hill but in the back of their heads they think he is so rich because he is smart, is working hard, is doing something really usefull for society. But if it comes out that income distribution is a political choice then how do you maintain this system? I can't see how. Poor people to politicians after MMT revolution: you are not helping me with that rich guy money, you are the reason why I am poor and he is rich-thast is statistically, It could have been me rich and he poor.

Cullen Roche said...

I'm fairly certain you have no idea what I actually think or have written on this subject....

I don't reject the ELR. I've NEVER rejected the ELR. I've rejected MMT's explanation of unemployment and the use of this rationale for the ELR. An ELR could make sense in certain circumstances. I'm open-minded to it, but I'd like to see more than theory about its efficacy. I'm not sure why that's viewed as such an unreasonable position....

andy blatchford said...

"I'd like to see more than theory about its efficacy."
Not unreasonable but we will never know unless we try it but there have been trials (and also UBI trials) Belgium runs a JG for artists for example which seems to work well.

In the end it comes down to is unemployment avoidable so forget anything else and yes it is.

Kristjan said...



"Well, this is where we differ. You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today. Maybe it’s just personal entrepreneurial experience speaking here, but I know what it means to hunt and kill for ones dinner. Very little, aside from great parenting and education, was handed to me in life. My psychological development through having to earn things has been a building block that no govt program can ever provide. Ever."

You see need for unemployment and yet you are saying you are not against ELR. To most MMTers you are IMO. If a person says kill the niggers to make room for white people then we define him as racist. One could say that no, he is not a racist at all and he loves blacks really. This is sophism that you present really. ELR is about getting rid of unemployment, yet you think unemployment is desirable.

Cullen Roche said...

Yikes. Let's be a little more careful with our words here. Throwing around N bombs isn't a good way to prove your points....

My point is that it depends. You're generalizing in a potentially dangerous way. Yes, that quote was based on anecdotal experience and not well thought out. Oh the danger of internet comments....even when I delete and correct them it seems as though ill meaning people archive them for nefarious purposes....sigh.

That said, the general point isn't wrong. Yes, I would support a ELR in the USA, but I might not in other circumstances. For instance, an ELR won't solve Argentinas economic crisis. In fact, it might exacerbate it. So, we need to be more specific and thoughtful when explaining these points. There's no one size fits all.

Regardless, MMT'S explanation for unemployment (lack of nfa) is just wrong. And that was the main point I've always focused on....

Kristjan said...

I was not trying to throw a bobm at you, I still remembered that comment and I was looking for It. I didn't know you have changed your views. To be honest I stopped reading you just around that time. So I might not know youur newer stuff. NFA makes perfect sence to me. It is a good way of explaining It. I think Minsky and other Post Keynesians have said that deficit spending and economic growth will not solve unemployment problem. That is why ELR program is needed, not to mention that it is anti inflationary stabilizing measure.

One size will never fit all. I was lucky enough to meet Randy recently, He was a lecturer in Estonia . He said that during FDR 13 million jobs were created by government and there was not a single major corruption issue with the program, now It would be different and the program would have to be decentralised probably. So the same doesnüt fit even America today in his opinion. I don't see why Argentina canõt have full employment and ELR program.

Andrew Anderson said...

"Well, this is where we differ. You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. CR

Irrelevant. Injustice is not permissible despite whatever (questionable) good it may accomplish in the victim's character.

What you should aim for is justice and ask why people should be so desperate as to need to slave for others in the first place?

Not that an ELR is justice either since it subsidizes (via worker training/disciplining) and supplements private sector wage slavery with public sector wage slavery.

Cullen Roche said...

Yes, as I stated above, that quote was anecdotal and a dangerous generalization. It does not reflect my actual view.

Kristjan said...

"Not that an ELR is justice either since it subsidizes (via worker training/disciplining) and supplements private sector wage slavery with public sector wage slavery."

Well you could argue that state with its violence is not justice. Once you get passed that then you have to ask: if one of the goals of taxing is to create unemployment then why not provide work for everyone.

Philippe said...
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Ben Johannson said...

Yoi attack the poor, you're a conservative. You advocate pain for others' own good, you're a conservative. End of discussion.

Ben Johannson said...

MMT's explanation for unemployment is functionally identical to Keynes'. In both Knightian uncertainty resulting from monetization tends toward a sub-optimal and unstable level of resource utilization.

Andrew Anderson said...

if one of the goals of taxing is to create unemployment then why not provide work for everyone. Kristjan

Give people a BIG and assets such as land and they'll find their own, by definition, meaningful work to do, much as they used to before they were dispossessed by the government-privileged* banks of their farms, businesses and the commons. Or they can volunteer to work for others or for government if they need to be ordered around.

*including implicit privileges such as the lack of a fiat accounting and transaction service for all citizens provided by the monetary sovereign. This has left the citizens to the mercy of private banks.

Cullen Roche said...

I attack the poor? How, by consistently advocating for a trillion dollars in annual deficit spending for the last 7 years? At some point your baseless name calling and blatantly misleading comments become tiresome....

Ben Johannson said...

Here you are with the now standard "grifters" meme.

https://mobile.twitter.com/cullenroche/status/739590855497895936

Andrew Anderson said...

https://mobile.twitter.com/cullenroche/status/739590855497895936 Ben Johannson

"Free stuff", Cullen?

Or restitution* for legalized theft by the government-privileged banks and the most so-called creditworthy, the rich?

If you want to attack socialism, the place to start is with socialism for the rich and special interests such as usurers. And then guess what? Less socialism will be needed for the rest of the population.


*Though it's more like amelioration on the cheap than true restitution.

Salsabob said...
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Salsabob said...

Cullen has made a major contribution to the field with his insights of the monetary sovereign having "outsourced" 'money printing' to the banking system. The fundamental tweak he needs is with what he calls the hierarchy of money within that mechanism. His metric is the relative size of spending/credit creation in the economy, and the federal government, although the largest single entity, pales against all non-federal spending/credit creation. The real power, however, of federal spending/credit creation within the endogenous banking system is that it cannot be refused by the system and it does not need to be paid back, on net, but rolled over indefinitely. No non-federal entity has this power within the endogenous money-printing system that has been outsourced to the private sector.

When the capitalist system drives toward unemployment, it is the monetary sovereign that can address that by spending, even without further taxation (that would be counter productive), and not be constrained by any borrowing limits within the banking system, but only by inflationary concerns within the economy. That is unique and powerful.

Cullen knows all this and could connect the dots within the banking system mechanism he has elegantly laid out; it just that he is perhaps too concerned with those who can't seem to accept his basic framework because it looks like it threatens the power of the monetary sovereign when it actually does not.

Andrew Anderson said...

The real power, however, of federal spending/credit creation within the endogenous banking system is that it cannot be refused by the system ... Salsabob

Of course it can be refused but who would be silly enough to do so, especially if they have unavoidable taxes to pay?

Or if you mean that fiat is largely trapped within accounts of the usury cartel at the central bank and that thus interest rates in fiat can be driven to near zero by federal spending, the solution to that is not IOR or other welfare for the banks and the rich but to allow everyone to have inherently risk-free accounts at the cb and abolish government provided deposit insurance.

Btw, brilliant comment otherwise.

Andrew Anderson said...

but only by inflationary concerns within the economy. Salsabob

Which is why the MMT crowd should seriously address deprivileging the banks so as to maximize the amount of new fiat that can be injected into the economy for a given amount of price inflation.

Not to mention that said privileges loot the poor for the benefit of the rich.

Tom Hickey said...

Which is why the MMT crowd should seriously address deprivileging the banks so as to maximize the amount of new fiat that can be injected into the economy for a given amount of price inflation.


See Warren Mosler's proposals on banking.

http://moslereconomics.com/proposals/

Andrew Anderson said...

Fixing the Small Banks

The Obama administration has been preaching the importance of fixing the small banks and getting them lending again. This will review what I see as the critical issue and how to fix it.

First, the answer:

1. The Fed should loan fed funds (unsecured) in unlimited quantities to all member banks.

2. The regulators should then drop all requirements that a % of bank funding be ‘retail’ deposits.

Yes, it is that simple. This simple, easly to implement ‘fix’ will immediately work to restore small bank lending from the bottom up by removing unnecessary costs imposed by current government policy.
from http://moslereconomics.com/2009/12/26/fixing-the-small-banks/

So what Mosler wants to do is eliminate any dependence of the banks on retaining depositors and make them pure counterfeiters for the benefit of the rich, the most so-called credit worthy - eliminating any pretense of loanable funds?

Well, at least it should shut Krugman up and make it obvious that the rich loot the poor, the least so-called creditworthy, and that there are no such things as patient lenders funding loans for impatient borrowers wrt banks.

But, of course, it's 180 degrees the wrong approach. The correct approach is to gracefully reduce the banks to 100% private businesses with 100% voluntary depositors. And that requires the allowance of accounts for all at their respective central banks and the abolition of government-provided deposit insurance and other privileges for the banks.

In Warren's defense, the allowance of accounts for all at their respective central banks is a new wrinkle that is nearly unthinkable for most. Probably because it smacks of "666". Nevertheless, it is logically an inherent duty of a monetary sovereign to provide a risk-free storage and transaction service in its fiat for all citizens otherwise it condemns them to relying on private banks, historically a scourge on mankind.

Cullen Roche said...

Ben, that Tweet was a joke. The follow up was:

Sanders supporters are either geniuses buying super cheap out of the money options or they're pissing money down a hole....

In retrospect, it wasn't very funny, but I'm not a very funny person.

Andrew Anderson said...

Disciplining banks on the liability side has been tried repeatedly and always and necessarily fails. First, it’s fundamentally impractical to the point of ridiculous to expect anyone looking to open a checking account or savings account, for example, to be responsible for analyzing the finances of competing banks for solvency, when even Wall Street analysts can’t reliably do this. Warren Mosler

Agreed except for the "necessarily fails" parts since bank liabilities are largely virtual wrt population except during runs on the banks when even the mattress beats a bank deposit and when bank liabilities become crushingly real and largely unmeetable. So how can there be liability discipline with largely virtual liabilities?

So how about we make bank liabilities real at ALL times by allowing all citizens to have inherently risk-free accounts at the central bank and by abolishing government-provided deposit insurance and other privileges for the banks?


The US leaned this the hard way when the banking system was closed in 1934, reopening with Federal deposit insurance for bank deposits for the sole purpose of removing this responsibility from the market place. Regulation and supervision on the asset side then became the imperative. And while we have seen periodic failures due to lax regulation and supervision of the asset side of the US banking system, and it’s a work in progress, the alternative of using the liability side of banking for market discipline exposes the real economy to far more disruptions and far more destructive systemic risk. Warren Mosler [bold added]

The allowance of inherently risky-free accounts for all at the central bank means we would have TWO payment systems: One dependent on the banks and one NOT dependent on the banks. Do you think that might reduce systemic risk, Warren?

Andrew Anderson said...

And while we have seen periodic failures due to lax regulation and supervision of the asset side of the US banking system, and it’s a work in progress, ... Warren Mosler

That work in progress included redlining* at one time so I'm sure Warren Mosler will be happy to learn he was wrong about liability side discipline since we've never really tried it.

*which still exists in a more inclusive form since the deposits of the poor of all colors are still trapped within the banking/credit union cartel yet they are the least or non so-called creditworthy.

Andrew Anderson said...
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Andrew Anderson said...

To answer the question as to why US citizens would want to give up government-provided deposit insurance in exchange for non-interest-paying risk-free accounts at the Federal Reserve I just did a simple calc:

Assuming $5 trillion* in insured deposits in the US were transferred to inherently risk-free accounts at the Federal Reserves means that about $20,400 should** need to be distributed equally to every adult US citizen (about 245 million) to finance the transfer.


*Anyone know what US insured deposits total? $5 trillion is an old approximation and I don't find the FDIC site helpful, perhaps because I loath government-provided deposit insurance and perhaps because they're ashamed of what they do.

**Should instead of would because the Federal Reserve would also have to sell assets to mop up most of the reserves it lavished on the banks. This is to prevent a net increase in MB + M1 by the new fiat distribution so inflation hawks can't complain.

Salsabob said...

No, primary dealers have to accept the bid

Salsabob said...

The money would still need to be spent into the economy. See current Congress - not going to happen

Andrew Anderson said...

So you think Congress could resist voters who would receive about $20,000 each without increasing total purchasing power?

Of course the voters are not yet aware of the bonanza they would receive with the proper abolition of government-provided deposit insurance.

Still it's just a matter of time before the idea spreads sufficiently. I shall be curious to see how the MMT crowd responds. Some better than others, no doubt.