Thursday, November 3, 2016

Bill Mitchell — The penny drops – WSJ acknowledges UK government can never run out of money

When a News Corp newspaper starts writing articles that reflect the insights provided by Modern Monetary Theory (MMT) you know that progress in the dissemination of those ideas is being made. Even if they don’t get things exactly right. The Dow Jones & Company (owned by News Corp) daily, the Wall Street Journal carried an article last week (October 31, 2016) – Message from the Gilt Market: U.K. Can Never Run Out of Pound – which leaves no room for doubt. The London-based journalist Jon Sindreu wrote that “Among facts that take a stubbornly long time to sink in, here’s one: Countries that borrow in their own currencies never have to default on their debt”. So never again allow a person in your company to suggest otherwise. There are many like facts that seem to evade the understanding of journalists, politicians and others who desire to push the neo-liberal line. I say ‘seem’ because it is certain that many of these neo-lib banner carriers know full well they lie when they make claims about currency-issuing governments running out of money and the like. They are ideological warriors after all and in war, anything seemingly goes.
The main thesis entertained in the Wall Street Articles is as follows:
Bill Mitchell – billy blog
The penny drops – WSJ acknowledges UK government can never run out of money
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

36 comments:

Bill said...

"The farthing falls" is at least alliterative. ;)

Matt Franko said...

The WSJ guy is just parroting the Trump statement related to the 'debt', the guy says here:

"The London-based journalist Jon Sindreu wrote that “Among facts that take a stubbornly long time to sink in, here’s one: Countries that borrow in their own currencies never have to default on their debt”

Trump said:

"Trump told CNN's Chris Cuomo on "New Day." "First of all, you never have to default because you print the money, I hate to tell you, OK?"

So the WSJ is right and Trump is right so he just parrots what the US right candidate recently said about the narrow issue of the "debt"... and its just one guy who picked it up via rote from Trump...

No epiphany here...

Ignacio said...

Well, what we know about rote types (90% of humanity?) is that they very hardly drop something when they memorize it just so they "cannot be wrong".

So is a good development if some rote types change to the meme "we cannot run out of money and therein cannot default" from the "national debt will crush our grandchildren" meme.

Probably there is an outcry in the comments saying "hyperinflation!" and "banana republic" though, when the comments sections of those news items and sites like Zero Hedge die will be a sign that most population has swapped memes and parroting the new "common knowledge" (never mind what they said in the past for most of their life).

Ignacio said...

Saddening though this is an other demonstration that there is no stronger force for humans than tribalism. Even the almighty economic bullshit memes parroted by media 24/7 as gospel truth can be beaten by tribalism.

Matt Franko said...

Yes but here is what the guy does with his rote information from Bill:

"The WSJ article asserts plainly (and correctly) that:

Countries that borrow in their own currencies never have to default on their debt.

But then it goes on to claim that the “last few months have tested this notion again”.

Really? How?

Apparently, in the period leading up to the Brexit vote, “investors and analysts” (that lot!) warned that “scared foreigners could dump British sovereign bonds, driving the government’s borrowing costs to skyrocket.”


So lets look at a more basic rote learned statement like

12 x 12 = 144

Which probably everybody learns thru rote when we are made to memorize the multiplication table from 1 x 1 = 1 up to 12 x 12 = 144...

ok so this is what the guy is saying then:

"12 x 12 = 144 but the “last few months have tested this notion again”

?????? where is he getting THAT????

"dont step off a 10 story building because gravity will slam you into the sidewalk below and kill you but the “last few months have tested this notion again”

???????

They're stupid....

Ignacio said...

Didn't say they were smart ;)

IMO they find this idea 'strange and entertaining' so it has to be 'proved' and put on test continually, so it's not yet engraved in their memory, now it's being doubted, tested (by 'trial and error': "UK bond yields haven't skyrocketted, proved again!").

It will reach a status of not being doubted when it achieves the status of "common knowledge" as acknowledged by at least 51% of the population or at least most of the tribe, then you will be able to say it in public (or in the tribe) without risk to your health, being ignored or laughed at (not happening yet, probably only have to look at the comments in the news item).

This is bold from the WSJ, going against the VSP consensus can put you at risk, so I'll give them that, but they probably feel reinforced due to tribalism, just parroting what the tribe leadership (or part of the leadership) is saying (if the an opposing tribe was saying it, then it would probably stated as false).

Very uncivilized, but this is how most humanity operates.

franco said...

But Matt isn't there a difference between 12 x 12, which can only be a fact and the " currency issuing government cannot run out of money", which is objective/operational fact but can be discounted due to ideological blinders?

Matt Franko said...

franco I dont see a difference except that the one concept is a bit more complex than the other...

which maybe we could say the same thing about 2 x 2 = 4 vs. 12 x 12 =144

iow you could figure out 2 x 2 on your fingers avoiding rote while maybe not 12 x 12... so if we couldnt do rote and had to actively learn everything, we could get 2 x 2 a lot easier than if we had to derive 12 x 12 every time...

So maybe like you say, someone starting out would say 2 x2 =4 was a objective/operational fact but then they might back off on 12 x 12 and say that could be discounted due to ideology .... when the issue would not be ideology but rather they hadnt developed their knowledge enough to that point...

To be clear when Bill says they are "lying" I have a big problem with that... I think this is a severe misunderstanding of the cognitive problem... Bill is probably too caught up in "Lecture" methodology in pedagogy via his membership in the academe.... so he would "flunk" this person if he was in his course or since he is not, then Bill says he is "lying"...

The first thing we need is a correct diagnosis of the problem then we can operate against it...

franco said...

Matt

I think you're right, few people contest that the government can borrow as much as it wants further than central bank independence, most people refer immediately to hyperinflation meaning that they accept the initial premise.

Rather than work from 2 x 2 to 12 x 12 they've accepted a previous derivation without assessing whether it holds true because it comes from authority as well as in this case relating to their daily lives through household spending.

Together the derivation holds up but as we've learned it collapses under inspection but the act of inspection itself is not easy. I dont think I could have learned MMT on my own, I'm still relatively young with little responsibility, I can't imagine trying to learn this, work full time, manage a family etc... So in some ways the faksederivation maintains itself by creating conditions that don't give the chance for us inspection.

I agree that calling them liars or even further, as much of the left likes to do with the right wing, evil, does any good. These are the same people who's mind's we need to educate. Most people who thought the earth was flat weren't liars, they just weren't told any better.

Having said that it is pretty depressing, a read of the comments under any economics news article regarding government spending shows how far we have to go. People literally sign off reductions in their quality of life...

franco said...

Matt

I think you're right, few people contest that the government can borrow as much as it wants further than central bank independence, most people refer immediately to hyperinflation meaning that they accept the initial premise.

Rather than work from 2 x 2 to 12 x 12 they've accepted a previous derivation without assessing whether it holds true because it comes from authority as well as in this case relating to their daily lives through household spending.

Together the derivation holds up but as we've learned it collapses under inspection but the act of inspection itself is not easy. I dont think I could have learned MMT on my own, I'm still relatively young with little responsibility, I can't imagine trying to learn this, work full time, manage a family etc... So in some ways the faksederivation maintains itself by creating conditions that don't give the chance for us inspection.

I agree that calling them liars or even further, as much of the left likes to do with the right wing, evil, does any good. These are the same people who's mind's we need to educate. Most people who thought the earth was flat weren't liars, they just weren't told any better.

Having said that it is pretty depressing, a read of the comments under any economics news article regarding government spending shows how far we have to go. People literally sign off reductions in their quality of life...

franco said...

So in some ways the *fake derivation maintains itself by creating conditions that don't give the chance for *its inspection.


Matt Franko said...

Mike is like a lightning rod for morons and he was the focal point of what he observed as the worst moron strike he ever experienced just LAST WEEK when he got one of his missives at the top of Yahoo...

so yes we have a long way to go... but we really have to break this down and correctly understand what we are up against from the stand point of human cognition...

Ignacio here is pretty well trained in cognition....

btw you guys that WSJ guy looks like he might be from Espana:

https://www.facebook.com/public/Jon-Sindreu-Larra%C3%B1aga

Ignacio said...

"So in some ways the *fake derivation maintains itself by creating conditions that don't give the chance for *its inspection."

That is a good short way to put it something I wrote over here an other day regarding it. It's a feedback loop where the environment reinforces falling in line with the tribal group thinking.

Bill is confronted with his own ideas regarding this, moving between "group thinking" and "lying" as an explanation why this happens. Having wrote a book about group thinking in the Eurozone I think he may be in the end comfortable with the idea that is lack of knowledge.

It's a matter of reaching a critical mass where something becomes "common knowledge" and can be acknowledged as certain in public without any sort of retaliation and fear.

Tom Hickey said...

Bill is confronted with his own ideas regarding this, moving between "group thinking" and "lying" as an explanation why this happens. Having wrote a book about group thinking in the Eurozone I think he may be in the end comfortable with the idea that is lack of knowledge.

I don't think that ignorance and lying are mutually exclusive, although it might seem so. For example, a lot of what is believed, said, and written is the result of groupthink, which is a form of ignorance that is not necessarily culpable ignorance but rather ideology. However, psychological findings show that when people are confronted with facts questioning or refuting their position, they double down. Surprisingly, the more intelligent, the greater the doubling down. This passes from excusable ignorance to culpable ignorance and promoting can be seen as a form of lying, or, euphemistically, being "disingenuous" or "mendacious."

Groupthink generally exists for a reason — to promote the interest of the group as well as the interests of its members. It is therefore entirely "rational" to double down to protect one's interest and, as they say, "do what it takes." That is how people stay in power — "doing what it takes." This game is high stakes and not beanbag.

Tom Hickey said...

"High stakes" here means control of the world as in global hegemony. The TPTB know this and aren't playing beanbag is shown by the placement of the US military strategically and tactically around the world. This is obviously not to promote freedom, democracy, and the American way, but to promote the political and economic interests of the American elite.

Ignacio said...

Yes both are not mutually exclusive, but when something wrong is generally acknowledged as true (by the majority of the population) is an ignorance problem, regardless of some individuals lying on purpose to prolong that ignorance.

I think the ones lying are on the minority, but they exist for sure, the reasons why they lie though are usually more convoluted, I believe peer pressure and tribalism is a strong force on why they lie, rather than an special interests conflict (which i won't deny it exists sometimes, see CATO promoting privatizing social security below, it's obvious why they do that).

Matt Franko said...

Well if they were not this stupid they would make even more munnie so I dont see how you can say this is in their best interest to be going all around saying stupid things on purpose...

Matt Franko said...

"see CATO promoting privatizing social security below, it's obvious why they do that)."

Yeah and its because they are libertarian ie anti-authority...

Tom Hickey said...

Yes, symptoms of groupthink.

BTW, I don't mean to imply that groupthink is exclusive to the network of elites. A significant cohort of the US population is under the spell of it also and promote it among themselves even though it often runs counter to their best interests overall. "Rationality" is strange that way.

Think Trump's "Make American great again." And HRC's liberal internationalism to impose the American way for the good of all. "Manifest Destiny" has been extended to apply to the world as included in American exceptionalism and America as the indispensable nation.

Of course the American people know that oil is involved in MENA and that Zionism, oops, I mean "democratic Israel," is a focal point there.

Matt Franko said...

CATO wants us to go back to the gold standard so they are not our audience...

they have a competing idea...

Matt Franko said...

We want to edify the people that are not involved directly with any interest groups...

ie people who are just advocates for socio-economic justice in general...

franco said...

"Well if they were not this stupid they would make even more munnie so I dont see how you can say this is in their best interest to be going all around saying stupid things on purpose..."

Maybe it's not just about an increase in nominal wealth but also relative wealth. You can still become richer if everyone becomes poorer. What better way than to leech off of society through unearned rents and in the process use the funds to acquire even more wealth?

No effort, all the gain.

jrbarch said...

I think the difference between lying and ignorance is self-will, but boundaries blur. Self-will can employ ignorance, lying, honesty; the full gamut of personality expression: – the salient feature is direction - set by self-interest or its reverse, other-interest. Even ignorance is something we choose (Glasser).

This is the battleground. When self-will is intense, human beings repulse and compete with each other; the ‘law of the jungle’ prevails. When self-will learns cooperation, selfishly, because the collective brings rewards beyond the reach of the individual, the ‘law of civilisation’ attraction and repulsion, gregariousness, prevails. The family unit, social unit, national unit are the school ground.

The ‘deep state’ is temporary, collective sociopathy.

When self+social will learns the secret of the human heart, it becomes self+social+’inner will’, which unfortunately is just a label until we experience it. It cares for all and sees all as one. It is a voice within the human being that says ‘do no harm – all must live, grow, learn, flourish’; attraction and repulsion quieten down and harmony prevails.

The battle ground for human beings is not between individuals or nation states: - it is internal, between greed and generosity; that spills out into the individual or nation. The first sign of maturity it is said, is responsibility.

Matt Franko said...

"Even ignorance is something we choose "

jr dont think so... what if the person doesnt have the ability to learn in an active learning methodology, and have to rely on rote?

Then the teacher who teaches via rote tells the learner the wrong thing?

The learner stays ignorant and has not made a choice....

This dichotomy between active methodology and rote methodology characterizes the whole "Peter vs. Paul" thing in Christendom where you have Paul using rote ("have a pattern of sound words" Tim) and Peter using active learning ("go and disciple the nations")

So it is a big deal within mankind (or at least in the Christian west) ... it involves the correct usage/application of both language and math....

We need to be basically PERFECT in application/use of both language and math to get around this division within mankind 100%... we may not ever reach 100% but even an improvement from here would be good...

Matt Franko said...

btw we all got here via an active methodology ... not rote...

Those we are against are stuck with rote and have little to no ability for active learning...

And those stuck in rote are being taught incorrectly by their rote teachers.... and they have very little ability to get out...

jrbarch said...

@Matt
”jr dont think so... what if the person doesnt have the ability to learn in an active learning methodology, and have to rely on rote?”

Agree Matt, but ‘tweak’ the context.

I think Glasser recognised that there is (to some degree) a conscious entity behind every personality. An idiot (id – iota) is a personality absent that entity – a human animal.

The learning methods for the personality are fear, rote, comprehension – of which comprehension is the most enjoyable and lasting. But in each case, it is the self which makes the decision whether or not to accept the teaching. A developing power of discrimination is at work here.

In the human being there is a power to choose and it is always at work. One person may accept the multiplication tables he learns at primary school as a ‘truth’. Another may question why doesn’t 2x2 = 8? Later on in life he may excel in higher mathematics and come up with a proof. :-)!

The essential insight is that we ‘choose’ everything. This makes us responsible.

For Glasser, people can even ‘choose’ mental illness; because sometimes the clouds part and sunlight shines through, in even the craziest of personalities. The human will is the prime factor in health. The personality is a reflection of choices ('karma').

So we choose; but changing the established pathways in the brain is hard work when we choose something else. We become hypnotised by our own thought-forms in which there is also a heavy emotional investment – central to this ‘cloud’ is the ‘I’.

So, once again, we get back to an entity that chooses. What do you think?

Matt Franko said...

A developing power of discrimination is at work here."

Power means ability... imo not all possess this ability...

Matthew Franko said...

jr this might be coming from the "all men are created equal" falsehood...

those would assert a quadrapelaegic is equivalent with LeBron James..

Not everybody is the same or "equal" ... we all have different abilities...

Matthew Franko said...

"And HRC's liberal internationalism"

Tom her supporters dont even know what that is they are just supporting her because she is female.... they are biased for females...

Tom Hickey said...

Tom her supporters dont even know what that is they are just supporting her because she is female.... they are biased for females...

Interest politics.

Incidentally, this seems to be a phenomenon that extends beyond the US. We have a large Chinese contingent at UI and one of the students was asked to write an article for the global paper on the Chinese view of the election. He reported that not only are Chinese in the US interested in it but also mainland Chinese — and they have strong opinions. To summarize, he said that just about all the women are for HRC and all the men for Trump.

This is indicative of another paradox of liberalism that is coming to the fore as the world liberalizes.

Bob said...

"...just about all the women..."

Skeptical me says I need a source for that.

Tom Hickey said...

Skeptical me says I need a source for that.

Anecdotal.

Fangren Yu, "A Chinese student's view of the election."
Iowa City Press Citizen, Nov. 5, p. 6A

Tom Hickey said...

BTW, voting based on identity is a well-known phenomenon. Where the questions arise if from intersectionality, owing to the intersection of identity groups.

The cognitive-affective priority tends to run from affect (emotion) to identity to rationality (issues, interests).

Fear is an especially powerful political motivator that can submerge identity and issues.

Until recently, white men never had to deal with identity in politics, since they owned it. Now both white and male identity are a big deal.

Female identity was previously not such a big issue since in "the good old days," women just said, "Paw, who are we voting for?"

That is now over for the most past, other than traditional families.

Political strategists game this out and based strategy and tactics on it. The policy objective is, of course, to elect their candidate, "whatever it takes." Positions on issues are not a big deal since voters realize that campaign promises regarding them aren't really promises meant to be kept.

Bob said...

I wouldn't question the claim that "a majority" of women support Hillary.
Sorry, but I suspect that anecdote was pulled out of someone's ass. It's part of the hysteria generated throughout this campaign.

jrbarch said...

Power means ability... imo not all possess this ability...

jr this might be coming from the "all men are created equal" falsehood... Not everybody is the same or "equal" ... we all have different abilities...


I thought Tom had a nice explanation of this a while back.

We shouldn’t stand things on their head just because we like to see things standing on their head (and we know that a lot of things in this world are upside down); but to put them the right way up, in context.

We don’t really see colour. When the light fades we see perhaps 30 shades of grey that merge to black. In daylight we see perhaps 10M unique colours – and this constrained to the visible spectrum roygbiv. We see reflected light and what that light bathes in accordance with its intensity, qualities, and place in the spectrum. Now replace light with the word ‘understanding’ and understanding with the word ‘love’. Then in this ‘light of love’ all men are part of the one thing. Hence ‘equality’. Equality is incredibly deep and profound; not superficial. I think Christ said something like that in a few different ways. Personalities are different shells for the same pearl. But because of our position on the spectrum, and the energy we are using, we see only the differences and not what is within. Because we are not conscious of the pearl, we do not feel or use its energies – its ‘light’.

But level of ability is obviously true Matt. What seems important to me is - the personality chooses - no matter at what level of ability (power to discriminate). More ability hopefully better choices, less ability perhaps lesser choices. We might choose to pick up a burning stick, but only once. I think you call this “active learning”? There is also an ability to go within.

The beauty of this insight into choice is that it makes us responsible. The tricky bit is taking on the responsibility. Everyone wants the Govt. or someone else to fix things. That won’t happen. Everyone wants to take a free ride on each other’s shoulders.

Human beings are full of excuses: - consciously or unconsciously, we choose.

The power in this is that we can choose a path out of any mess we get ourselves into (usually involves tools down, stop doing what you are doing, retrace your steps if necessary, and do something sensible).

Bob said...

More white women voted for Trump:
https://mic.com/articles/158995/more-white-women-voted-for-donald-trump-than-for-hillary-clinton#.O8L7u5g8N