Xu Gao's case for stimulus—Chief Economist of Bank of China International tears apart the opposition — Yuxuan JIA and BU, Xiaoqing

 MMT without naming it.

Xu Gao, the Chief Economist and Assistant President of Bank of China International Co. Ltd., and an adjunct professor of the National School of Development (NSD) at Peking University, has been featured on The East is Read several times.

On August 19, 2024, Xu published a new essay on his personal WeChat blog 徐高经济观察 Xu Gao Economic Observation. This long essay, essentially making a case for Beijing to adopt stimulus measures, will be rolled out in three parts.

Amid cautious signals from the Chinese government and the widespread belief in saving policy "ammunition," Xu Gao calls for a shift to macroeconomic thinking. He contends the government shouldn't be tethered to the belief that money spent is money lost, as a company might. The government revenue isn't fixed or exhaustible but "endogenous," says he, driven by government spending, which boosts private income, consumption, and investment. Unlike individuals and businesses who see income as beyond their control, the government, following Keynesian principles, can step in when demand falters. By increasing fiscal spending and liquidity, it can generate demand where the private sector won't, matching purchasing power with the willingness to spend.

Xu argues that the real limit on stimulus isn't money supply—it's supply capacity. Rising inflation and trade deficits mean domestic supply can't keep up with demand, making further stimulus risky. But when inflation is low and there's a trade surplus, it signals excess supply, making stimulus "not only feasible but also essential."

The East is Read

Xu Gao's case for stimulus—Chief Economist of Bank of China International tears apart the opposition
Yuxuan JIA and BU, Xiaoqing

Wholesale Payments Systems and Bank Reserves — Brian Romanchuk

Some of the nity-gritty involving payments systems that underlies some institutional arrangement needed to understand MMT's analysis.

Bond Economics
Wholesale Payments Systems and Bank Reserves
Brian Romanchuk

The Myth That the US is Rapidly Approaching Bankruptcy — Michael Hudson

 Yves Smith's introduction

Yves here. It is frustrating to see a normally solid YouTuber almost go off the rails by getting outside his area of expertise, geopolitics, and fall for libertarian scaremongering. We’ve commented before on the tendency of certain schools of commentary to fall into belief clusters, so anti-globalists are anti-dollar hegemony (and often crypto fans) to the degree that they have not bothered understanding how a currency issuer like the US operates. A currency issuer can never suffer an involuntary bankruptcy. They can always create more currency. What they can do is generate too much demand compared to the real resources of their economy, as in inflation.

In the discussion below, Micael Hudson has spend [spends] a significant portion of the interview debunking US budget myths to Nima of Dailogue Works. Hudson not only got Nima to agree to a more accurate title but also Hudson starting by laying out MMT basics in his extended opening discussion. As Hudson said via e-mail:

Nima had a sensationalist title, “Is the US rapidly approaching bankruptcy.” I showed that this is a myth and the US can’t go bankrupt.

We pre-arranged that I would give a 25-minute lead-in discussing just whom the US Treasury debt is owed to, and why most of it has no intention of being paid (paper currency, debts to foreign central banks and to the US Fed), and as for debts to bondholders, US Treasury debt continues to be a flight to safety, not to risk...

Naked Capitalism
The Myth That the US is Rapidly Approaching Bankruptcy
Michael Hudson

Modern Monetary Theory: Economics for the 21st Century – MOOC – now available via MMTed.org — Bill Mitchell

I am travelling all day tomorrow so I am bringing forward the normal blog post to today. I am pleased to announce that from today the MMT MOOC which we ran through the University of Newcastle’s edX facility over the last few years is now available through MMTed on an on-going basis. Read on to get the full details and access. 

William Mitchell — Modern Monetary Theory
Modern Monetary Theory: Economics for the 21st Century – MOOC – now available via MMTed.org
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Trump 3% Mortgage Policy

 

Trump promising a return to 3% mortgages if he can get back in…

He’ll have to tell his Central Bank to lower the policy rate down to at least 2% to hope to get his 30-yr fixed back to 3%…

Donald Trump says his plans to slash regulations will get mortgage rates 'back down' to 3%, per FORTUNE

— unusual_whales (@unusual_whales) September 9, 2024

Episode 5 of the Smith Family Manga (Season 2) is now available – the Finance Report hots up Bill Mitchell

Today (September 6, 2024), MMTed releases Episode 5 in the Second Season of our Manga series – The Smith Family and their Adventures with Money. Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit …

William Mitchell — Modern Monetary Theory

Episode 5 of the Smith Family Manga (Season 2) is now available – the Finance Report hots up
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Short term interest rate characteristics…

Some concern by Monetarists out there that current short term risk free rate of interest compared to the average of a past period of the short term risk free interest rate is a cause for serious concern wrt equity prices…

Think of financial asset prices as a function of the equation P = (A-L)/A where A and L are Depository system Assets and Liabilities…

At point 1 the fiscal surpluses were being saved in the TTL accounts at Depositories increasing system L by $100Bs … at point 2 the Fed increased Depository system A by hundreds of billions in September 2008, causing credit provision to cease and the GFC …. and at point 3 they again did the same thing as 2 establishing over $1 trillion of A in March 2020 causing the credit function to again cease until this regulatory function was suspended …. 

Today Treasury no longer utilizes TTL accounts and we are in large fiscal deficit anyway, and no where have I seen currently is the Fed proposing to increase A at this time rather their stated policy is to continue to gradually “normalize” system A at much lower levels…

“Correlation is not causation” etc… 

Some debriefing on continuous fiscal deficits and debt issuance — Bill Mitchell

A government cannot run continuous fiscal deficits! Yes it can. How? You need to understand what a deficit is and how it arises to answer that. But isn’t a fiscal surplus the norm that governments should aspire to? Why frame the question that way? Why not inquire into and understand that it is all about context? What do you mean, context? The situation is obvious, if it runs deficits it has to fund itself with debt, and that becomes dangerous, doesn’t it? It doesn’t ‘fund’ itself with debt and to think that means you don’t understand elemental characteristics of the currency that the governments issues as a monopoly. These claims about continuous deficits and debt financing are made regularly at various levels in society – at the family dinner table, during elections, in the media, and almost everywhere else where we discuss governments. Perhaps they are not articulated with finesse but they are constantly being rehearsed and the responses I provided above to them are mostly not understood and that means policy choices are distorted and often the worst policy decisions are taken. So, while I have written extensively about these matters in the past, I think it is time for a refresh – and the motivation was a conversation I had yesterday about another conversation that I don’t care to disclose. But it told me that there is still a lot of work to be done to even get MMT onto the starting line.... 

William Mitchell — Modern Monetary Theory
Some debriefing on continuous fiscal deficits and debt issuance

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Austra…

Episode 4 of the Smith Family Manga (S2) is now available — Bill Mitchell

Today (August 23, 2024), MMTed releases Episode 4 in the Second Season of our Manga series – The Smith Family and their Adventures with Money. Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit …

William Mitchell — Modern Monetary Theory

Episode 4 of the Smith Family Manga (S2) is now available
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Chartbook 310 The shock of the new: Dollar dominance and modern monetary macro in the 1920s. — Adam Tooze

Not MMT but relevant historically. How the world got here ((to dollar hegemony), as well as to monetarism, the accounting identity that is, as the basis of macro.  

Adam Tooze is a historian rather than an economist, so he is able to shine a different light on the subject.

Chartbook
Chartbook 310 The shock of the new: Dollar dominance and modern monetary macro in the 1920s.
Adam Tooze | Shelby Cullom Davis chair of History at Columbia University and serves as Director of the European Institute

NDX100 EPS

 

Something happened after the 2022 Biden unprecedented rate increases to really crush (-32%) the EPS of the NDX100… 🤔

With the implication that this one time discount after the unprecedented Biden rate increases in 2022 might be reversed if those said rate increases were to be reversed…

An Economic program for Kamala that will benefit everyone, and win the Presidency in November! — John Rudden

MMT.

Daily Kos
An Economic program for Kamala that will benefit everyone, and win the Presidency in November!
 John Rudden

Major macroeconomic policy reform is needed to reduce the reliance on monetary policy — Bill Mitchell

There is some commentary emerging that is finally starting to question the reliance on monetary policy (setting interest rates) as the primary macroeconomic policy tool with fiscal policy forced into a passive role. In Australia, this debate has intensified in the last week following the hubris from the new Reserve Bank governor, who thinks her role is to sound like a ‘tough guy’ dishing out threats of ever increasing interest rate rises even as inflation falls. There was an Op Ed in the Sydney Morning Herald today (August 12, 2024) – Maybe only a recession will fix macroeconomic management – by the Economics Editor Ross Gittins, which challenges the current macroeconomic consensus. Some of this argument is acceptable. But when he advances his alternative proposal of “a new independent authority” to set monetary and fiscal policy, the reality is that this would be as bad as we have now. More on that later....

William Mitchell — Modern Monetary Theory

Major macroeconomic policy reform is needed to reduce the reliance on monetary policy
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Episode 3 of the Smith Family Manga (S2) is now available — Bill Mitchell

Today (August 9, 2024), MMTed releases Episode 3 in the Second Season of our Manga series – The Smith Family and their Adventures with Money. Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit …

William Mitchell — Modern Monetary Theory

Episode 3 of the Smith Family Manga (S2) is now available

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

US labour force data provides no basis (yet) for recession panic — Bill Mitchell

The financial markets around the world have over the last week demonstrated, once again, that they are subject to wild swings in irrationality despite mainstream economists holding out the idea that these sorts of transactions exhibit pure rationality. Some of the capital movements are explained by a shift in the interest rate spread between Japan and the US as the former nation decided to increase interest rates modestly. That altered the profitability of financial assets in each currency and so there were margins to exploit. But the big seings came when the US Bureau of Labor Statistics (BLS) released their latest labour market data last Friday (August 2, 2024) – Employment Situation Summary – July 2024 – which showed payroll employment increasing by only 114,000 (well down on expectation) and the unemployment rate rising by 0.2 points to 4.3 per cent. Suddenly, the headlines were calling an imminent recession in the US and that triggered a flight into safer assets (government bonds) away from shares etc, which drove down bond yields (as bond prices rose) and left some short-run carnage in the share markets. A few days later the panic subsided and one has to ask what was it all about. In this blog post, I examine the labour force data and add some new extra ‘recession predictors’ to see whether the panic was justified. The conclusion is that it was not....

William Mitchell — Modern Monetary Theory

US labour force data provides no basis (yet) for recession panic
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

The Bank of England does not need a tiered reserve system for the Government to avoid austerity — Bill Mitchell

There is an interesting debate going on in the UK at present about the concept of tiered bank reserves. The concept is now being used by commentators to argue that the new British government does not need to inflict the austerity that the Chancellor has now announced (even though she is denying that is what the government is up to) because the government can simply reduce outlays to the commercial banks in order to meet the fiscal rules. The discussion is rather asinine really and features all the missteps that commentators make when trying to appear progressive but falling into the usual mainstream macroeconomic fictions....

William Mitchell — Modern Monetary Theory
The Bank of England does not need a tiered reserve system for the Government to avoid austerity
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Trump: No tax on tips, no tax on Social Security

If he can get back in, would be substantial fiscal stimulus… Trump at least talking about economic proposals Dems just talking about all the transgender and climate nutter stuff while prices for real items remain elevated, unemployment rate keeps rising and rate of job creation keeps falling…

Trump telling Powell at the Fed not to modify the policy rate before the election if he wants to finish his term if Trump gets back in…. Prediction markets now 100% probability of a cut in September so looks like Fed is going to reduce the rate before the election…

Trump will then claim “election interference!” and will probably then get in front of it by promising to fire Powell on day one and guarantee a new Fed chairman who will immediately lower the policy rate to a point where the 30-year mortgage rate immediately goes back to 3% where it was when he left…

So Trump proposals will be: no tax on tips, no tax on Social Security, and a return to the 3% 30-year mortgage rate…

British Chancellor fails the basic test – language is meant to impart meaning — Bill Mitchell

Language is meant to bring meaning to discourse. That means we want to use terms that convey information that is of use to us in making our way in the world. The problem is that economists have perverted that process and introduced a metaphorical language that is intended to persuade the reader/listener to accept a particular view of the world but which undermines their ability to actually understand the phenomenon in question. Marx knew long ago how language could be constructed to advance the interests of the ruling class. The mainstream economics commentary that is also used by politicians falls into this category. Terms are used that have no meaning in an elemental sense but provide support for ideological agendas. We, the public, allow that to happen because we are ignorant about the context. It becomes a vicious cycle of lies and fictions which undermine human and environmental sustainability but certainly transfer income to the top-end-of-town. A recent path setting address to the House of Commons by the new Chancellor is a classic example of this reality denial....

William Mitchell — Modern Monetary Theory
British Chancellor fails the basic test – language is meant to impart meaning
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Trump Embraces the “Bitcoin-Dollar”, Stablecoins to Entrench US Financial Hegemony — Whitney Webb

Where all this may be going is anyone's guess. Wherever, it looks like down the rabbit hole. The UK is "broke." The USD is being crushed under "a mountain of debt." De-dollarization is "in full swing."

The Alternative World
Trump Embraces the “Bitcoin-Dollar”, Stablecoins to Entrench US Financial Hegemony
Whitney Webb

MMT and international trade–some further considerations in a degrowth context— Bill Mitchell

One of the undercurrents at the recent UK MMT Conference in Leeds was the apparent unwillingness of MMT economists to acknowledge their mistake in dealing with international trade. In our new book – Modern Monetary Theory: Bill and Warren’s Excellent Adventure (published July 2024) – we devote a chapter to this issue. There are various strands to the criticisms we receive ranging from claims we are simply wrong at the most elemental level to others claiming trade has no part in the MMT framework. All miss the point and I am surprised people have tried to make a ‘career’ (or advance their egos) on this issue. As I have noted several times in the past, the issue is nuanced but the elementary facts are not. I am now working on a section for my new book (with Dr Louisa Connors) on ‘degrowth’ and system viability from an MMT perspective and so I am linking the trade aspects of MMT with this narrative to provide further clarification of how nuanced this area of discussion can be. Here is a little glimpse of that work....

William Mitchell — Modern Monetary Theory

MMT and international trade – some further considerations in a degrowth context
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Episode 2 of the second season of our Manga – The Smith Family and their Adventures with Money — Bill Mitchell

 Today (July 26, 2024), MMTed releases Episode 2 in the second season of our Manga series – The Smith Family and their Adventures with Money. Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit …

William Mitchell — Modern Monetary Theory
Episode 2 of the second season of our Manga – The Smith Family and their Adventures with Money – available now
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

In the latest episode of our Of Interest podcast, Steven Hail gives the MMT perspective on the monetary system, inflation, climate change & more — Gareth Vaughan

Audio and summary of talk.

interest.co.nz
In the latest episode of our Of Interest podcast, Steven Hail gives the MMT perspective on the monetary system, inflation, climate change & more
Gareth Vaughan

Currency Hierarchy — Eric Tymoigne

In Stabilizing and Unstable Economy, Minsky noted that “[a]n economy has a number of different types of money: everyone can create money; the problem is to get it accepted” (p. 228). While governments and banks usually get the spotlight, tens of thousands of monetary instruments have been issued by localities, ecclesiastic domains, local seigneurs, taverns and other private agents in many periods of monetary history, worldwide, up to the present [see Burn (1853); von Glahn (1996); Fletcher (2003); Blanc (2017)]. All these instruments are part of a “hierarchy of money” (Bell, 2001), “debt pyramid” (Olivecrona, 1957), “pyramid of credit” (Murad, 1954), or “scale of credit” (Wilson, 1811); a concept used to categorize the variety of monetary instruments available in a given area common to all of them, and the extent of the operation of a payment system and its integration within other, usually broader, payment systems. While the given common area is often the domestic economy, the international scale can also be considered (see de Conti et al., 2013; Palludeto and Abouchedid, 2016).

Monetary Policy Institute Blog #148

Currency Hierarchy
Eric Tymoigne, MMT economist
Associate Professor of Economics at Lewis & Clark College
Research Associate at the Levy Economics Institute of Bard College

UK MMT Conference 2024 – Slides available for download

Download PDF's of slide sets from the presentations at the recent UK MMT conference.

The Gower Initiative for Modern Money Studies
UK MMT Conference 2024 – Slides

See also

The National (Scotland)
Scotland needs its own currency ASAP after indy, say top economists

Scotonomics

MMT’s Leeds conference and disinvitations — Richard Murphy

For the record. Trouble in MMT-land.

Funding the Future
MMT’s Leeds conference and disinvitations

Funding the Future (formerly Tax Research UK)

Richard Murphy, Tax Research LLP

The Bank for International Settlements (BIS) as ideological fortress for monetary technocrats — Vadym Syrota

 Not MMT per se, but it explains something of the tenacious hold that neoliberalism has on economic and monetary policy owing to the Bank of International Settlements ((BIS).

Monetary Policy Institute Blog #146
The Bank for International Settlements (BIS) as ideological fortress for monetary technocrats
Vadym Syrota, Ph.D. in economics, independent banking expert, contributor to the specialized blog of the Kennan Institute Woodrow Wilson Center (USA)

See also

The development of BRICS and its expansion in the Global South speaks to this issue internationally. In this view, it is not possible to reform the existing system. Another system this is based on different assumptions needs to be developed instead.The failure of heterodox approaches to reform or replace neoclassical economics also argues for this.

Developing Economics — A CRITICAL PERSPECTIVE ON DEVELOPMENT ECONOMICS

Is It Possible to ‘Decolonize’ Economics?*

Eiman Zein-Elabdin | Professor of Economics at Franklin & Marshall College, USA

Season 2 of our Manga – The Smith Family and their Adventures with Money — Bill Mitchell

Today (July 12, 2024), MMTed releases Episode 1 in the Second Season of our Manga series – The Smith Family and their Adventures with Money. We have spent the last several months developing the storylines and graphics and Season 2 will run from today to December 6, 2024 with episodes appearing on a fortnightly basis.

Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit …

William Mitchell — Modern Monetary Theory

Season 2 of our Manga – The Smith Family and their Adventures with Money – available now
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Thinking back 50 years to Nixon's resignation.

Thinking back to President Nixon's resignation in 1974 due to the Watergate scandal, it almost seems juvenile by today's level of scandals. Nevertheless, Nixon resigned. (He would have been impeached by the Senate anyway, most likely.)

Now we have a geriatric, senile old man who can't find his way off a stage or put intelligible sentences together and who is under pressure from his own party but won't step down for the good of the country. The total collapse of integrity and accountability from 50 years ago. No surprise.

Today, we lack leaders like Nixon. None of the current figures would make the same decision he did, especially for an issue that would be considered minor by today's standards.

Warren Mosler Says US Is Spending Too Much — Bloomberg

Bloomberg
Odd Lots Podcast: Warren Mosler Says US Is Spending Too Much

MAEIL BUSINESS NEWSPAPER Korea's No. 1 Economic Media

Warren Mosler warns of snowball U.S. fiscal deficit "There's no guarantee that high interest rates will bring down inflation".

Yoon Wan Sup

Machine Translation

Modern Monetary Theory: Bill and Warren’s Excellent Adventure (video)–Promo — Bill Mitchell

Here is a short video about our new book – Modern Monetary Theory: Bill and Warren’s Excellent Adventure – which will be published on July 15, 2024.

William Mitchell — Modern Monetary Theory
Modern Monetary Theory: Bill and Warren’s Excellent Adventure – Promo
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia