Note to progressives:
Growth is the outcome of optimization of available real resources including human resources. The aim should be optimizing available real resources rather than growth per se. Optimizing available real resources involves limiting the idling of resources including human resources, which are the most valuable resource a society and its economy have.
Aim for full employment as a job offer for all willing and able to work and the output gap will be minimal and growth maximal.
This means replacing the conventional monetary policy that uses unemployment as a tool to control inflation with a buffer stock of unemployed with fiscal policy based on functional finance and a buffer stock of employed using a job guarantee with the currency issuer acting as the employer of last resort with respect to funding. A currency sovereign always has the fiscal ability to employ all available real resources by creating the funding.
Bond Economics
The Case Against Growth And Stimulus
Brian Romanchuk
Bond Economics
The Case Against Growth And Stimulus
Brian Romanchuk
15 comments:
Well Said, eloquent even, Tom:
"Growth is the outcome of optimization of available real resources including human resources. The aim should be optimizing available real resources rather than growth per se. Optimizing available real resources involves limiting the idling of resources including human resources, which are the most valuable resource a society and its economy have.
Aim for full employment as a job offer for all willing and able to work and the output gap will be minimal and growth maximal."
It's a really important point that can't be applied trivially or partially. This is essentially what differentiates a progressive from a liberal, conservative, libertarian or other ideology.
But how do we build a government that can optimize? Be flexible but not corrupted. Held accountable but not risk averse.
Building systems is not easy when everyone has these brains poorly suited to anything besides surviving in small groups. We repeat the same errors over and over again.
Aim for full employment as a job offer for all willing and able to work and the output gap will be minimal and growth maximal. Tom Hickey
Et tu, Tom?
What we should aim for is the ability of people to do useful WORK, not to be debt and wage slaves to someone else - including power hungry Progressives desperate to impose their vision of life on the rest of us.
So what is needed to do useful work? Obviously, economic freedom; e.g. two parents having to work means the children are neglected or left to strangers. So why is it in the 21th century in the US that relative few have economic freedom? Short answer: Because of economic injustice, including welfare for the rich*.
It's very odd that even in post-Christian America that justice should be considered dispensable though not so much among "pragmatic" Progressives.
*e.g. interest paying sovereign debt and other subsidies for private credit creation.
The hard part is in the details Andrew.
If you think about great mistakes recently in keeping people employed, I think it is illustrative. We thought trade would lift all boats but failed to anticipate large groups of people should become impoverished. The political system should have worked to slow the process and allow foreigners labor markets to close the gap before opening domestic labor markets. Why that happened? Simplistic orthodox models dismissed the problem as a temporary equilibrium that would be quickly eliminated in markets.
If you look a current iteration, Obama came up with a plan to eliminate the coal industry but didn't have a plan on what he was going to do to help all the people he was hurting. Why can't the government look at the losers in a policy decision and figure out more sophisticated ways of helping beside "get another degree". There should be local, state and regional development plans to create a more harmonious society where we can agree on goals and not fear one another. In the current environment, the more vicious a democrat can be to a repub or vice versa, the more excited their adherents become. It's a problem with the design of the two-party system.
Thanks, Ryan.
Neoclassical economics (marginalism) assumes rational optimization and general equilibrium, that is, that an economy based on a free market tends to employ all available resources effectively and efficiently in order to maximize return on capital investment. Not doing so would be to waste resources and that would not be rational.
Keynes contested that assumption.
MMT shows that the sweet spot of optimizing available real resources can be managed to achieve and maintain "general equilibrium," however, by effective central planning in the form of functional finance and a JG.
Central planning, you say?
The current neoclassical view employs central planning in the form of monetary policy (interest rate setting) based on NAIRU, which idles available resources to control inflation by using unemployment as a policy tool.
The hard part is in the details Ryan Harris
We can start by eliminating subsidies for the rich, i.e. the first rule of being in a hole is to stop digging.
What we should aim for is the ability of people to do useful WORK, not to be debt and wage slaves to someone else
The basis of liberalism is threefold: 1) individual freedom, 2) egality including equality before the law and equality in determining the law, and 3) solidarity in community.
based on this what humanity should aim for is a fully automated and robotized world economy that sets everyone free from work. The economic ideal is to increase prosperity along with leisure in order to maximize freedom socially under government of the people, by the people and for the people.
But there are many steps along the the way of getting there. We aren't close to the ideal yet, but it is in sight in the coming digital age.
The first priority economically is to eradicate poverty globally.
The second priority economically is to provide welfare globally.
The third priority economically is to increase prosperity globally.
The fourth priority is to increase leisure globally.
Neoliberalism, neo-imperialism, and neocolonialism are obstacles to achieving this.
Liberalism generally promotes this but only if the paradoxes of liberalism are addressed.
The current neoclassical view employs central planning in the form of monetary policy (interest rate setting) based on NAIRU, which idles available resources to control inflation by using unemployment as a policy tool. Tom Hickey
Interest rates should be set by fiscal policy, including equal fiat distributions to all adult citizens into their individual accounts at the central bank should interest rates be deemed too high. Then no one can complain since the means to lower interest rates will equally benefit them.
As for the central bank, it should only be a fiat accounting and transaction service - unable to create fiat except for the monetary sovereign.
Andrew,
The central bank has a committee that administers a discount rate. That discount rate becomes the benchmark for interest rates in that currency. There's no way for that benchmark to be set by market forces, or "fiscal policy."
There's no way for that benchmark to be set by market forces, or "fiscal policy." Brian Romanchuk
And how does the central bank do so?
1) By paying Interest on reserves (IOR)? That's welfare proportional to account balance since account balances at the central bank are risk-free.
2) By selling positive interest paying sovereign debt? That's welfare for the rich too since the rich have no more right to be protected from price inflation than those who can't afford to save.
3) By buying assets from the private sector? That's more welfare for the rich since the poor don't have assets.
Perhaps then, if interest rates can't be precisely controlled without resorting to welfare for the rich then that precise control isn't needed anyway?
As for pensioners and others who need interest to live, a better solution is welfare proportional to need, not account balance.
Brian, thanks for your comment ta August 13, 2016 at 12:41 PM.
Andrew Anderson, once again you make no sense.
But as for more ethical and thus less precise interest rate control:
1) Let's allow all citizens to deal with their nation's fiat via inherently risk-free accounts at the central bank itself and abolish government-provided deposit insurance and all other privileges for depository institutions.
2) To lower interest rates, increase deficit spending including by equal fiat distributions to all adult citizens into their individual citizen accounts at the central bank. More fiat means more fiat for lending and thus lower interest rates.
3) To raise interest rates, decrease deficit spending and wait for the economy to catch up or increase taxes by the monetary sovereign since these remove fiat from the economy. Less fiat means less fiat for lending and thus higher interest rates.
But how do we build a government that can optimize?
We do, but just when there is a major social goal driven the agenda. Unfortunately this does not come easy in democracies without huge amounts of distress (total war scenario). And then we do not come to the 'non-corrupt' and 'accountable' parts.
One of the reasons why, probably, FDR did everything he could to get USA into WWII actively.
Is pretty sad, almost determines that we won't get anywhere unless we live in absolute dictatorships or in a state of total war. Both of which directly or indirectly will probably push us into extinction, worst case, or at least huge civilisation set backs.
We have technologically outpaced our social and cultural evolution.
We have technologically outpaced our social and cultural evolution.
Precisely.
Kids playing with matches in a dry forest.
Imo stop hiring morons to do important work in economics...
AA how do you then explain that the policy rates in Eurozone are negative yet the deposit rates at banks over there are positive?
AA how do you then explain that the policy rates in Eurozone are negative yet the deposit rates at banks over there are positive?
See the Marin Armstrong post I just put up.
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